Fitch upholds Port of Los Angeles' AA rating despite cargo leakage fears

FITCH RATINGS, one of the top three rating agencies with Moody's and Standard & Poors, has decided to uphold the Port of Los Angeles stable AA rating, despite expressing fears of cargo leakage through Panama and to other ports.

"Cargo leakage will be an ongoing and perhaps increasing risk as the Panama Canal expansion project reaches completion in several years," said Fitch, but added that the port had created a financial cushion including revenue from its clean-truck tax.

Despite the downturn in 2008 and 2009, cargo volumes remain healthy although its exposure risk comes from its reliance on Far East imports, amounting to 45 to 50 per cent port volume, said Fitch.

Its terminal facilities remain modern and efficient with excellent access to intermodal facilities including an on-dock rail, near-dock rail, and direct connections to the national rail network, it added.

Fitch said LA benefits from steady revenue sources in long-term lease agreements with most tenants providing revenue guarantees that help weather the downturn in container trade.

But the port's reliance on discretionary cargo, accounting for half of its shipping volume, is a concern, said Fitch.

Terminal expansion is modest at just over US$1.4 billion in projects for China Shipping, TraPac and the World Cruise Centre, which are likely to increase revenue growth at the port, it said.