By Erik Potter, Post-Tribune staff writer
epotter@post-trib.com
With the economy as a whole slowing down -- and the steel industry in particular -- shipping along the Great Lakes could be in for a rough season.
While tonnage moving through the Port of Indiana Burns Harbor has been strong in 2008, up 9.5 percent in the first nine months versus the same period last year, prospects for the near future aren't looking so bright.
"The outlook is not rosy," said Ports of Indiana spokesman Jody Peacock. "The bottom is falling out of steel. In the future we could see a downturn (in tonnage)."
The port is insulated somewhat from declines in any particular area of the economy since the goods that pass through it are from a wide range of sectors, including agriculture and construction. In fact, limestone, used in pollution control equipment and elsewhere, has been the biggest commodity passing through the port this year.
But the shippers and workers who are more dependent on steel are starting to feel the pinch.
Central Marine Logistics, based in Hammond, runs a fleet of four lakers -- ships that service the Great Lakes -- and is primarily based at the Indiana Harbor port in East Chicago, which services the ArcelorMittal plant there. Great Lakes shipping shuts down about three months over the winter, but Central Marine has decided to lay up one of its lakers early because of a decrease in cargo.
As steel demand has fallen, Tom Wiater, president of Central Marine, said he's seen a "slight throttle" of shipments into the port.
'Softening in the market'
Jim Sheppard, senior director of commercial operations for Indiana Harbor Belt Railroad, a short-line railroad that operates between O'Hare International Airport and the Burns Harbor port, said he's noticed the same throttling back.
"We have seen a softening in the market occurring over the past four to six weeks compared to the year prior," he said. "Definitely we've had a little bit of a slowdown."
In its quarterly financial report released this week, ArcelorMittal said it plans to cut steel production by 30 percent, but didn't specify which mills would see those cuts.
The international steel conglomerate operates two mills in Northwest Indiana, one in Burns Harbor and one in East Chicago.
"We've seen a stagnation locally, but we haven't seen it at the rate they're predicting (internationally)," Sheppard said.
That slowdown is already evident at Burns Harbor. Steel shipments in and out of the port are down 4.6 percent this year from 2007.
"When the economy is in a downturn, the (steel) inventories that have been built up won't be used, so (the mills) won't be replenishing those inventories," said Peacock.
The drop-off in steel tonnage particularly affects employment at the port. When a steel ship docks at the port, it takes a whole gang of longshoremen to unload it. When a ship comes in loaded with limestone, it takes one person to oversee the self-unloading process.
Longshoremen affected
Local 1969 of the International Longshoreman Association, the union representing dock workers at the Burns Harbor port, has seen about half as much work this year than during a typical year.
Longshoreman work on a daily contract basis. Companies put in a request to the union for the number of workers they'll need the next day. At the end of that day, those workers are essentially laid off.
Ian Hirt, general manager for Fedmar International, which operates four shipping berths at Burns Harbor, said their orders for longshoreman labor have been down.
"Yeah, definitely. ... The number of guys we order out has been low this year," he said.
Hirt said 75 percent of the company's business is in imported steel. When the domestic steel business was strong in the first half of the year, a weak dollar and high shipping costs kept imports expensive, so business struggled. Now that the dollar has gained strength and imports are cheaper, the economy has tanked, demand has fallen and business still struggles.
Another complicating factor is steel prices have seen wild fluctuations this year, much like the price of gasoline. And now that prices are fast declining, steel users are tempted to sit back and see how far they fall before buying.
"All the companies are slow and with the market it's a slow year. The way steel is running, everybody's holding on. Nobody wants to do (any)thing," said Richard Ponda, business agent for the longshoreman's Local 1969.