Recession leads to backup at anchorage

The vessels - some nearly two football fields long - are headed to the Port of Baltimore to unload and pick up cargo, or waiting for orders on where to go next.

Either way, the presence of these massive ships is a stark reminder of the area's inextricable link to a disrupted supply chain that has left manufacturers with excess inventory after a large drop-off in demand.

"It's deflationary effects spreading across the supply chain," said Sandor Boyson, professor and co-director of the Supply Chain Management Center at the University of Maryland's Robert H. Smith School of Business. "It's making hundreds of thousands of suppliers on the brink of financial insolvency. You start to see them doing very extensive audits for their supplier base, trying to understand which of their suppliers are in financial stress."

Normally, only two or three ships would be sitting at the Annapolis Anchorage, a rest stop for ships before heading to their first port of call.

But Coast Guard officials said they have spotted a growing number of container vessels at the anchorage over the past month.

"This is an unusually high number," said Lt. Cmdr. Amy Beach, chief of the waterways management division at Coast Guard Sector Baltimore. "It's not uncommon for them to be sitting there given the current economy."

For Annapolis, the recession already has taken a firm hold, with double-digit drops in the number of homes sold, rising unemployment and failing businesses.

But these hulking ships sitting idle in the water is tangible evidence of how the economy has been affected on a global scale.

The Hoegh Trekker, for example, is a nearly 200-yard-long ship that arrived in the Annapolis Anchorage ahead of schedule because "she didn't have as many vehicles coming out of the Far East as we had thought," said James Perduto, vice president of marketing for Hoegh Autoliners. "We're not loading as much cargo as we're used to."

Just 10 to 15 months ago, the shipping company was turning business away, he said.

"Now our salespeople are back out in front of our customers again," Perduto said.

The Trekker isn't carrying cargo, but is standing by to load up vehicles at the Port of Baltimore before departing for Africa in mid-April, Perduto said.

Driving across the Bay Bridge, the Trekker and other ships look more like Legos. But flying 600 feet above the Chesapeake Bay in a Cessna, the collection of bright red, orange and light blue vessels looms massively in the channel.

Richard Scher, spokesman for the Maryland Port Administration, said there's no question that the current economic climate is playing a significant role in the number of ships waiting at the Annapolis Anchorage for their next move.

Some of the ships are headed to Baltimore to unload cargo at private terminals handling bulk items such as sugar, coal and coffee, he said.

Meanwhile, the Port of Baltimore is storing 57,000 cars, about 10,000 more than before the recession, Scher said.

"People are not purchasing cars at the rate they were pre-recession, which means that dealers are not selling cars," he said. "There's not the demand to retrieve those cars at ports like Baltimore."

To store additional cargo and possibly cars, the port administration, which oversees Baltimore's six public marine terminals, recently purchased 14.6 acres across from the Dundalk and Seagirt marine terminals. It has not needed to use that land yet, he said.

Despite the increased number of vehicles on its lots, the Port of Baltimore has not turned away ships that carry cars, Scher said.

Chain reaction

Economists said the backup in the anchorage is linked to a drop-off in demand that took shipping companies by surprise. Manufacturers made decisions about what to produce weeks ago, and now those goods are piling up.

"All of a sudden, the volume that they were once used to has gone down dramatically," said Daraius Irani, director of applied economics for the Regional Economic Studies Institute at Towson University.

Boyson of the University of Maryland said evidence of the unbalance can be found from the overloaded Shanghai ports to the Long Beach port in California where cargo volume has dropped off. Thailand also has seen a 30 percent decline in assembly line and finishing work for goods sent from Chinese factories, he said.

"So much capacity is being taken out of the system because of the failure of companies that are linked," he said. "The chain is trying to find a new equilibrium."

A tighter inventory environment may mean less product, or less selection, on the shelves of everything from fashion retailers to grocery stores, said Jock Menzies, principal of The Terminal Corp., a transportation and warehousing business that loads and unloads cargo at the Port of Baltimore.

"It's a domino kind of thing," he said. "People lose confidence, people stop buying."

Still, there may be retailers and businesses that will pay more to keep a wider selection of goods in their stores, he said.

Menzies said problems in the supply chain could also mean great bargains for consumers.

But for now, "I think we're all sharing in that great pain," he said.