Mega-container arrivals will benefit California ports

By: | Issue #647 | at 08:00 AM | Channel(s): Ports & Terminals  Ports  

MSC recently increased its transPacific services to the fast-growing Port of Prince Rupert.
MSC recently increased its transPacific services to the fast-growing Port of Prince Rupert.

In an interview, Jock O’Connell, Beacon Economics’ international trade advisor, told AJOT that the growing number of mega-container ships that are being delivered to ocean container carriers in 2017 and beyond are bound to benefit West Coast ports, including Long Beach, Los Angeles and Oakland, because “there are no ports on the East Coast and Gulf, at present, that can handle ships of this size.” Despite the fact that California ports have lost market share to ports such as Houston, New Orleans, Charleston and Savannah, “this is partly a function of the increased location of manufacturing in Southern States by global manufacturers. In the long-term, container volumes are going to continue to rise at California ports, especially with the arrival of the mega-container ships.”

Another contributing factor is the expanded Panama Canal that is encouraging larger ship sailings to U.S. Gulf and East Coast ports. However, the Panama Canal does not have the capacity to handle container ships over 14,000 TEUs.

Houston, O’Connell noted, has seen a major increase in container volumes as a result of increased manufacturing and the Panama Canal widening.

Nevertheless, O’Connell emphasizes that “ports are at the mercy of the ocean carriers,” and “as these ocean carriers have to utilize more of the 18,000+ TEU container ships that they have been ordering, then more and more of these ships are going to find themselves on the Asia to West Coast trade.”

This view is shared by Alphaliner’s Tan Hua Joo speaking at this year’s Trans Pacific Maritime (TPM) conference in Long Beach. Tan said that a flood of new 18000+ container ships are being delivered in 2017 and 2018 and that this will flood the international container market with new excess capacity.

The response by ocean carriers will be to continue scrapping smaller vessels to accommodate the larger ones.

The new ships will be restricted to ports that have sufficient infrastructure to accommodate them.

Ports such as Long Beach, Los Angeles, Oakland, Seattle, Tacoma and Prince Rupert in Canada will be the beneficiaries of these mega-container ship sailings in North America.

Tan estimates that peak season growth in 2017 will see West Coast ports in North America enjoy substantial increases. In a PowerPoint presentation to TPM conference attendees, Tan made the following predictions:

US West Coast and North Europe will see the largest capacity increases.

During 2017 peak season vessel deployment, regional growth will improve over 2016:

• Far East-West Coast North America will see a 4.9% increase

• Far East-East Coast North America will see a 2.1% increase

• Far East-Northern Europe will see a 3.8% increase

• Far East-Mediterranean will see a 1.2% increase

Lytle Hails Port of Oakland’s Turnaround

Port of Oakland Executive Director Chris Lytle said in his “State of the Port” address, “We are on a roll,” as the Port racked up 2.37 TEU million in 2016, a 4% increase from 2015.

Containerized exports were up 10.5% in 2016, despite the high value of the U.S. dollar. Exports accounted for 52% of the Port’s loaded container volume in 2016. Imports accounted for the rest.

Loaded container volume rose to 1.83 million TEU, an increase of 7.6% over 2015.

Lytle is predicting a 3-4% increase in total volume for 2017, and a 10% increase in exports.

Lytle says that the Port had come a long way since 2016. At that time, the Ports America terminal bankruptcy resulted in the shutdown of Oakland’s Outer Harbor terminal. At the same time, continued truck congestion problems slowed pickups and deliveries at terminal gates, causing major delays and dislocations.

Lytle said he did not panic because the Outer Harbor capacity was re-directed to Oakland’s other container terminals - Oakland International Container Terminal (OITC) and TraPac - with the result that “we not only retained the business but added volume.”

Lytle ascribed the 2016 success to the following factors:

• A new appointment system for trucks improves efficiency of pickups and deliveries of containers.

• A new nighttime service for truck pickups and deliveries reduces congestion during the day.

• A GPS system identifies truck congestion at terminals and allows for terminals to better deploy resources.

• A cooperative labor environment fostered by the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) has improved productivity.

Another success for the Port of Oakland is that the Port’s revenue bonds have been upgraded by Fitch, the bond rating firm. Fitch increased the Port’s ratings to an A from A-. Fitch has also affirmed the A+ rating on the Port’s senior lien revenue bonds. Lytle noted that, “Fitch did this because things are going right.”

Port of LB’s Kenagy Optimistic About 2017

The Port of Long Beach reports “a modest boost in cargo during the first quarter of 2017, with overall throughput increasing 1.5% compared to the same period a year ago. All segments of containerized cargo grew year-over-year in the opening quarter of 2017, as imports climbed 2.1%, exports 0.4% and empties 1.5%.”

“We’re happy to see these gains during the traditionally slow period of the year,” said Long Beach Harbor Commission President Lori Ann Guzmán. “We see a lot of upside for the remainder of 2017 as we expand our partnership with the world’s second-largest line, Mediterranean Shipping Co., add new business and strengthen our relationships with our partners.”

“The rise in imports coming through Long Beach shows that consumers are feeling optimistic,” said Port of Long Beach Interim Chief Executive Duane Kenagy. “Since their spending drives more than two-thirds of the economy, this is a great indicator for the jobs that depend on our Port as we head into the busiest trading months of the year.”

In an AJOT interview, Kenagy said the new automated Long Beach Container Terminal has been operational for a year and will be a major draw for ocean carriers as the larger 18,000 TEU begin to arrive.

Kenagy is hopeful that the plans for a new on-dock rail facility at Pier B will substantially increase the Port’s ability to consolidate on-dock rail moves, reduce truck traffic, and speed container rail deliveries to customers in the Midwest and at other destinations.

Kenagy also told AJOT, “Community organizations will be the major beneficiaries of the new on-dock rail project because it will lessen truck traffic and emissions.”

Kenagy said the Port will continue to be fiscally prudent in its operations and expects that its $4 billion capital investment will generate major improvements and revenues in the future and, “our continued high bond rating backs that up.”

Port of LA Hopes to Top 9 Million TEUs in 2017

A spokesperson for the Port of Los Angeles told AJOT, “POLA had its best year ever in 2016 with 8.8 million TEUs. As I understand it, we are projecting low single-digit growth for 2017 in the 1-2% range. We would be very pleased to eclipse 9 million TEUs in 2017.”

Cargo volumes at the Port of Los Angeles reached 8,856,782 TEUs in 2016, marking the busiest year ever for a Western Hemisphere Port. The previous record was set in 2006, when the Port of Los Angeles handled 8,469,853 TEUs.

The Port finished the year strong with December volumes of 796,536 TEUs, a 27% increase compared to the same period last year. It was the Port’s busiest December and fourth quarter in its 110-year history. Overall in 2016, cargo increased 8.5% compared to 2015.

“I salute our industry stakeholders and thank Mayor Garcetti and the policymakers and agencies at the state and federal level that have supported our various Supply Chain Optimization initiatives over the past year,” said Port of Los Angeles Executive Director Gene Seroka. “To handle this much volume with minimal issues is an extraordinary accomplishment and demonstrates our capability-building efforts here in the San Pedro Bay complex.”

“We’re proud to be the backbone that makes the San Pedro Bay port one of the world’s leading trade gateways,” said Bobby Olvera Jr., President of the International Longshore and Warehouse Union (ILWU) Local 13. “Longshore workers played a critical role in this milestone and we look forward to doing our part to process more cargo through the port complex in 2017.”

“The San Pedro Bay port complex is unmatched in North America when it comes to speed, efficiency and reliability, and these record numbers are proof,” said John McLaurin, president of the Pacific Merchant Shipping Association (PMSA). “Along with the increase in cargo, we’re particularly proud that we’re seeing increased efficiencies at our terminals, specifically with decreases in the amount of time it takes to pick up a container after it’s been unloaded from a ship.”

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American Journal of Transportation