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The Lockout's Ripple Effect:
Well-Prepared Alaska, Hawaii Take Halt in Stride
By Jim Carlton in San Francisco, Susan Essoyan in Honolulu and Allen Baker in Anchorage, Alaska
 
10/04/2002
The Wall Street Journal
Page A9
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Alaska and Hawaii are heavily dependent on goods being shipped in from the West Coast docks currently shut down, and yet few people in the 49th and 50th states seem to be significantly affected so far.

That is because, this time around, Alaskans and Hawaiians appear to be well-prepared. Having endured dock shutdowns over the past half-century that have hindered commerce -- along with storms, volcanoes and the Sept. 11, 2001, attacks -- businesses in both states have made sure to either stock up on goods or take other protective measures.

Hawaii officials say as much as a five-week supply of toilet paper, rice and other essentials has been built up, giving the state some breathing room as federal mediators try to settle the dispute. "There is no panic buying or anything going on right now," said Glenn Okimoto, harbors administrator for the state. "We've been through this before."

Alaskans haven't done as much stockpiling because, unlike the island state, they have more transport options: shipping goods via barges, which are unaffected by the labor dispute, or by truck up the Alaska-Canada Highway. Already, officials at Anchorage-based Carlile Transportation Systems Inc. say they are running nearly 40 truckloads this week over the highway linking the lower 48 states with Alaska, compared with a normal schedule of six. Barges are also taking on bigger loads. For instance, officials at Neeser Construction Inc. in Anchorage say they opted to switch their order for steel (for a new high school in Anchorage) from steamship carriers to the barge lines.

But those alternatives aren't considered optimal because barges, while cheaper than ships, take as long as 10 days to reach Alaska from the West Coast, or about twice as long. And while the trucks can make the trip in less than three days, they are more expensive than the ships. For example, officials of Burger King of Alaska say they decided yesterday morning to bring an 18-wheeler-load of french fries over the road from Idaho, at a cost of six cents a pound more than the price for sea shipping, or about $2,600 more for the load.

"And we won't be able to charge more for those french fries," said Larry Baker, president of the 20-store Burger King franchise operation in Alaska.

Indeed, both Alaska and Hawaii could feel more of an impact from the docks shutdown if it continues for a long time. Already in Hawaii, some produce sellers are feeling a pinch. For example, officials of Armstrong Produce Ltd., a top Hawaii distributor, say they have flown in some fruit and vegetables that were stranded on the mainland, and are booking air-cargo space to bring in more of the perishables. But air freight costs 2 1/2 times what the company pays to ship its goods by sea -- a cost that could eventually be passed on to Hawaii's consumers.

"It's just sad that the situation is like this," said Mark Teruya, Armstrong's president.

Hawaii is particularly vulnerable, given its isolation in the Pacific. That is why many businesses, and residents, started stocking up on goods when they began hearing about the dockworkers problem last summer, and continued this week. "When I visited Costco today, I noted that toilet paper was flying off the shelves," Rob Kay, a freelance publicist based in Honolulu, said Wednesday.

Hawaii has spent much of the past decade trying to recover from a sharp falloff in tourism from Japan, one of its most vital markets. Now economists say Hawaii's recovery, led by a resurging construction sector, could be imperiled if the docks remain shut down for many weeks. They point out that builders have relied on the shipping lines to transport bulky construction materials.

"The basic threat to Hawaii from the shutdown is that it risks stalling the one aspect of growth in the economy -- construction -- which has held things up after `9/11'," said Paul Brewbaker, chief economist at the Bank of Hawaii.

However, Hawaii's linchpin industry, tourism, isn't likely to be affected too much no matter what happens. "Tourists consume R&R, not durable goods," said Mike Sklarz , chief evaluation officer for the Honolulu branch of Fidelity National Information Solutions, a real-estate consulting firm based in Santa Barbara, Calif.