California Ports - The rebound is well underway

By: | Issue #624 | at 10:00 AM | Channel(s): Ports & Terminals  

California’s ports are rebounding as volumes passed pre-recession levels.

Steamship lines lined up in Oakland, CA
Steamship lines lined up in Oakland, CA

Port of Oakland
The Port of Oakland is hoping to build container volumes on a three-month surge in exports. The Port of Oakland announced the 2016 containerized export volume is up 19.9% over the same period in 2015. March exports were up 9.9%, the third-straight monthly increase in Oakland.

Port officials attributed the gains to a recent decline in the strength of the dollar. U.S. goods are more affordable overseas when the dollar’s value declines. Export volume declined for most of 2015.

“It’s too soon to declare this a trend, but we’re encouraged by recent signs,” said Port of Oakland Maritime Director John Driscoll. “Exports are a critical component of our business.”

The Port of Oakland is an unusual case where exports can often outrun imports and for that reason are closely monitored. They comprise more than half the port’s total 2016 cargo volume.

Oakland is the leading gateway for Central Valley growers exporting to China, Japan and other Asian destinations.

The port said total containerized cargo volume - imports, exports and empty containers - is up 18.9% this year. Total volume for the month of March declined 14.5%, the result of a drop in imports. The port linked the decrease to an unfavorable comparison with extraordinary March 2015 volumes. That’s when the floodgates opened at West Coast ports following a protracted waterfront contract dispute. The port also said that March volume was limited by a seasonal post-Lunar New Year slowdown in imports from Asia.

Port of San Francisco

The biggest news in the Port of San Francisco is the proposed $62.9 million budget to address overdue issues with the port’s infrastructure, ranging from bathrooms, electrical problems, sprinklers, security and fencing to larger studies of the usage of port space and assets.

Elaine Forbes, interim executive director of the Port of San Francisco, wrote in a memo to the Capital Planning Committee, “While the level of capital investment is relatively large compared to historical spending, the port is well aware that our proposed funding only begins to address the port’s $1.1 billion capital backlog.”

According to reports, $13.4 million will go toward dredging Piers 27, 35, 80, 94/96 and other berths to ensure they are suitable for maritime uses.

San Francisco Mayor Edwin M. Lee appointed former Port Deputy Director Elaine Forbes as interim director, following the resignation of longtime Director Monique Moyer effective March 1st.

The timing is good. Besides the well-documented activity such as tourism and cruise ships, the port posted 1,501,838 tons of cargo in CY 2015. On the cargo side, the port has five deep-water berths, on-dock rail, cranes capable of working both break bulk and containers, 145 acres of paved cargo staging and over 550,000 sq. ft. of covered storage.

The catch is that nearly all the facilities need upgrading and maintenance.

Fitch Ratings gave an ‘A’ rating for the Port Commission of the City and County of San Francisco’s (the port) $55.2 million revenue bonds but said of the aging infrastructure, “The port is more aggressively working to address its sizeable backlog of deferred maintenance needs by designating $93.7 million to capital projects across fiscal years 2016 - 2018. The nature of the capital plan prioritizes revenue-generating assets, and identifying non-revenue generating assets that could be shut down if needed, thereby reducing capital needs. The port estimates that over the next 10 years its facilities require approximately $1.6 billion to maintain a state of good repair, and $476 million for conditional seismic work.” The port is proposing to spend $9.7 million on a continued seismic study to ensure its sea wall will withstand a major earthquake.

Port of Stockton

The Port of Stockton was awarded a rating upgrade by Moody’s in recognition of improved revenues and lower debt on March 28th.

Moody’s Investors Service says it “has upgraded to A3 from Baa1 the rating on the Port of Stockton’s (CA) Series 2007 A&B revenue bonds, outstanding in the approximate amount of $23 million.”

Richard Aschieris, Port of Stockton port director, told AJOT, “We are delighted by the news that Moody’s has upgraded our bond rating and recognizes the tremendous infrastructure investments that the port has made in the last several years.”

Aschieris noted that there have been major investments in road, rail, bridges and in the modernization of the ‘Rough and Ready’ terminal at the port that was originally built during World War II.

In addition, Aschieris noted major private sector investments, “Over the last few years, since the ’08 – ’09 recession, we have seen a private sector investment of close to $2 billion in the port. This is over and above the investments we have made in infrastructure.”

Moody’s said, “The upgrade reflects resumed growth in net operating income emerging from the recession, additional stability provided by a growing share of revenues represented by fixed rental payments over the past decade, and the elimination of expenses related to the marine highway project which was suspended in August 2014.”

Aschieris says that the strength of the port has been in its diversity of product so that it is never dependent on just one cargo. For example, he noted, “Coal exports have been in decline. They were, last year, over 1 million tons. However, as a result of the high dollar, sales continue to decline and we expect that in 2016 (coal) exports to be 25% of that (2015 tonnage).”

On the other hand, Aschieris believes there could be a revival of wind turbine imports into the port from foreign producers. New demand may be coming from planned new wind investments in Northern California. He noted that the port has a large amount of space for importers of wind turbine parts to assemble and ship by rail, “Our rail connections can take these parts to anywhere in the United States. We have shipped wind turbines to states as diverse as Texas, Kansas and Wisconsin.”

In recent years, the growth of water hyacinths has caused an infestation along the San Joaquin River leading to the port and creating navigational problems for ships.

Aschieris says the port is working with the State of California to reduce the infestation, but is also acting unilaterally, “We are looking at a new system for herding the hyacinths onto a conveyor belt that will transport the plants onto land in a massive way.”

Aschieris said the port is looking to turn the plants into a fuel for an ethanol plant, “We are looking to use the water hyacinths as fuel to be burned as ethanol. This project is being done in partnership with Pacific Ethanol, which is a tenant of the port’s and is looking at burning the plants as a fuel to drive their power plant. So we may have an innovative way of dealing with the problem.”

Port of Hueneme

Kristin Decas, port director and CEO of the Port of Hueneme, says car shipments passing through the port continue to rise. The port projects processing 340,000 cars from Europe and Asia in 2016 compared to 320,000 cars in 2015.

Decas said the port is moving to improve its infrastructure to support refrigerated containers, “Chiquita already ships its bananas in containers but Del Monte still ships bananas in break bulk ships. We are adding more reefer plugs for refrigerated containers which require more electrical capacity so that we can handle more reefer cargoes as they develop.”

“The refrigerated cargoes require shore power for ships when they tie up at Port of Hueneme,” Decas said, “because of California air quality requirements.”

She said, “The installation process took two and a half years: We got Phase I completed in 2015 where two berths were upgraded with shore power and we have just completed the third phase in 2016, so all three berths have shore power.”

Decas said the “new Shore Side Power capabilities can contribute a total of 4 MW. We assume the current maximum power draw from a ship is 1 MW. Please note that this is based on the latest Southern California Edison interconnection agreement. In addition, the Battery Energy Storage System (BESS) derives from Tesla as a supplemental power source for peak shaving purposes. It is rated at 2MWh (2 MW of load for one hour).”

The port raised $14 million in grants to finance the shore power installations. Car carriers are not currently required to have shore power, “An average Roll On Roll Off vessel is in port for eight hours and it takes three hours to install shore power. So it is not practical. It is practical for a ship carrying refrigerated cargoes that will be in port for several days.”

However, regulations continue to change and Roll On Roll Off vessels could be required to be shore powered in the future, she said.

The port is making major infrastructure investments:

Deepening the port’s ship channel to a 40-foot depth allowing higher capacity vessels to berth.

Support cargo operations with modern, high performing support facilities, such as climate controlled warehouses, cargo treatment, and gates.

Implement efficient cargo handling and vessel support systems, including shore power infrastructure, environmentally conscious equipment, fuels and lighting.

The port has financed infrastructure investment by the following:

• $6 million – $8 million from US Army Corps of Engineers and $2 million from the port to deepen the ship channel to 40 feet. Following permit approvals, the port expects dredging to begin in the latter part of 2017.

• $12.3 million in dockside operations, including excavations, will complement the dredging project. The funding has come from a federal TIGER grant.

• $1.5 million in an Economic Development Administration grant to upgrade the road surfaces within the port.

The port developed a 2020 plan to develop partnerships with adjoining communities in Ventura County including police, fire and transportation agencies to build support for transportation improvements and security improvements. It is looking at new business growth possibilities. It is making environmental investments, such as in shore power, so that vessels arriving at the port reduce emissions.

Port of Los Angeles

“Back to back record months to start 2016 indicate consumer confidence in the U.S. economy and strong shipper confidence in our terminal and supply chain partners to deliver on speed and efficiency,” said Port of Los Angeles Executive Director Gene Seroka.

The Port of Los Angeles handled 713,721 Twenty-Foot Equivalent Units (TEUs) in February 2016, a remarkable increase of 42% compared to the previous year. It was the busiest February in the port’s 109-year history and comes on the heels of its best January volumes.

February 2016 imports surged 46.6% to 372,744 TEUs compared to the previous year. Exports increased 11.1% to 146,488 TEUs in February. Total loaded imports of 519,233 TEUs increased 34.5% compared to the previous year. Empty containers increased 66.7% to 194,487 TEUs. Combined, February overall volumes totaled 713,721 TEUs, a 42% increase compared to last year.

February volumes were buoyed in part by U.S. importers bringing in products from Asia ahead of the Lunar New Year, which began Feb. 8 and slowed production for several weeks in China. The surge in February deliveries will result in softer import volumes in March. The relatively high value of the U.S. dollar continues to slow U.S. exports due to their relative higher costs abroad.

Port of Long Beach

On January 21, 2016 in his “State of the Port Address” Port of Long Beach CEO Jon Slangerup said, “Today, thanks to everyone here, the Port of Long Beach just delivered its biggest year since 2007—taking us back to pre-recession volume levels! Our port handled about 7.2 million TEUs, which is only the third time in our 105-year history that we’ve exceeded 7 million TEUs. Through December, our year-over-year volume growth was 5.4% - nearly double that of the U.S. economy in 2015. During July and August, Long Beach achieved record cargo volumes resulting in the port’s biggest quarter in its history—more than 2 million TEUs moved through the port in the third quarter alone. Although we saw record volumes through our peak season, we experienced no chronic congestion problems. In fact, trucking queues and turn-times dropped by a third and rail fluidity and velocity reached record levels of performance. And perhaps most satisfying was the fact that in the back half of the year, we began gaining market share after losing share for four years in a row. At the same time, the media began retracting their obituaries of Long Beach as our performance kept accelerating and the East Coast ports began reversing their earlier gains.”

Slangerup in his remarks noted, “the agreement reached in February 2015 between the ILWU and PMA, which was helped along by Labor Secretary Tom Perez, opened the door to the rapid recovery of our congested terminals. While we were predicting it would take three months for operations to recover, it actually took half the time - just six weeks - to clear the backlog of ships at anchor and begin to approach pre-congestion levels of through-put and system fluidity.”

Secondly, “Terminal operations and longshore labor delivered extraordinarily high levels of productivity, with record-setting gains that continued throughout the entire year. It took only months, not years, for our terminals to regain their status as the most productive container terminals in the world.”

There was also the improvement in chassis supply, “As the labor negotiations were going on, we had already been working for several months with the three primary chassis providers—DCLI, Flexi-Van and Trac—to create an interoperable chassis ‘pool of pools.’ This was a joint effort with the Port of Los Angeles.”

Finally, the port developed a new supply chain initiative, “At the same time, Long Beach engaged a sweeping new initiative called Supply Chain Optimization or “SCO” for short. Los Angeles agreed to participate in this joint-port initiative and together we sought and received authority from the Federal Maritime Commission to launch our SCO initiative. Last April, Gene Seroka and I conducted our first SCO meeting with stakeholders throughout the supply chain, most of whom are represented here with us today. I want to thank the FMC, the Port of Los Angeles, and all our stakeholders for being great partners in our SCO initiative. Our SCO mission is to create a marine supply chain that provides end-to-end visibility and time-certain delivery of containerized cargo from origin to destination.”

Port of San Diego

The Port of San Diego inked a key deal to continue building the cargo business at the port. In June 2015, the port entered into an agreement with Mitsubishi Cement Corporation (MCC), one of the largest cement companies in California, for potential future operations at Tenth Avenue Marine Terminal.

The Port entered into this agreement to facilitate MCC’s potential development, lease and operation of a marine transfer and storage facility for the importation, distribution, exportation, handling, and storage of bulk cement, cement-related bulk products, and concrete aggregate.

Mitsubishi Cement Corporation manufactures all of the major types of Portland and specialty cements used in California and Nevada. The company was formed in March 1988, with the acquisition of the Cushenbury cement plant in Lucerne Valley, California.

The agreement envisions contributions by MCC toward modernizing the marine terminal and the company’s participation in development costs for long-term improvements.

“Our maritime business capacity is a core strength of the Port of San Diego, and that’s why we are committed to maximizing our cargo facilities,” said Port Chairman Dan Malcolm. “We look forward to working with Mitsubishi Cement Corporation. By harnessing the power of partnerships to invest in this terminal, we reinforce our status as San Diego’s maritime cargo gateway to the world.”

“The agreement with Mitsubishi Cement Corporation is a key step in the long term redevelopment and modernization of the Tenth Avenue Marine Terminal and helps us build momentum for increasing volume in one of our three core cargo areas: Break Bulk, Refrigerated Containers and Bulk,” said Maritime Director Joel Valenzuela.

The Port also received important funding for the project through a TIGER grant for $10 million. The grant is to provide funding to help modernize the Tenth Avenue Marine Terminal by removing obsolete transit sheds and constructing a new laydown area for temporary equipment storage with on-dock rail improvements.

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American Journal of Transportation