While East and Gulf coast ports deepen their harbors and expand container terminals to prepare for the mega-ships expected to call when the Panama Canal is enlarged in 2014, the challenge for West Coast ports is to get more out of the facilities they already have.
According to a recent report by Germany’s DVB Bank, about 25 percent of the vessels operating in the trans-Pacific market to the West Coast are super-post-Panamax vessels with capacities of 8,000 to 10,000 TEUs. That percentage is projected to increase to 40 percent by the end of 2013.
Although most West Coast ports have harbors deep enough and terminals large enough to accommodate the larger ships, loading and unloading multiple strings of these vessels each week will require levels of productivity the ports have yet to achieve.
West Coast terminals should strive for an average of 150 container moves per hour in order to turn a post-Panamax ship efficiently, Frank Baragona, president of CMA CGM America, told last month’s annual Pulse of the Ports seminar in Long Beach, Calif., That would involve working a vessel with five cranes, with each averaging 30 moves an hour. Current lift-per-hour levels generally average in the mid-20s.
West Coast ports are beginning to take such advice seriously as cargo volume approaches pre-recession levels.
During the rapid growth years from 2001 to 2007, the ports were getting dangerously close to reaching their physical capacity. Under the operating conditions in effect back then, the ports could reach their design capacities by 2015, industry analysts warned. But the 20 percent plunge in container volume during the 2008-09 recession erased any port capacity concerns for the immediate future. Still, after a stellar 2010 during which container volume rebounded 14 percent, according to the Pacific Maritime Association, returning to the peak levels of 2007 shouldn’t take long.
Industry analysts at The Journal of Commerce’s Trans-Pacific Maritime Conference in Long Beach last month projected 6 to 9 percent growth this year in U.S.-Asia trade. Another year of similar growth in 2012 would bring West Coast ports back to their pre-recession levels.
Several factors, however, should push back by at least a decade the deadline when West Coast ports reach their physical limits.
For one, terminal operators are becoming more adept at squeezing extra productivity out of existing facilities. Terminals in Los Angeles and Long Beach, for example, have been running four to five night and weekend gates each week since 2005, and the PierPass program has pushed about half of the truck traffic to off-peak hours.
As a result of productivity enhancements and vigorous expansion projects in recent years, the northern ports of Oakland, Portland, Seattle and Tacoma now are running at about 50 to 60 percent of their physical capacity. If container volume increases rapidly, those ports could expand handling capabilities even further on their existing footprint by adding a second shift as Los Angeles and Long Beach did.
And the ports may find an overhaul of shipping services adds some capacity. The decision by shipping lines in the U.S. to cease supplying chassis to their customers will free up hundreds of acres at West Coast ports if the chassis are moved to off-terminal locations. Chassis storage can take up 15 to 20 acres at a marine terminal. Terminals that store containers on chassis also would shift to stacking operations. Container throughput per acre should increase significantly as terminal operators stack the containers four or five high.
So, like a ship or truck that uses better loading techniques, West Coast ports will face the future with plenty of physical capacity, something considered unthinkable five years ago.
The space is only half the capacity battle, however. The ports still will have to increase the productivity of vessel, gate and yard operations in order to efficiently turn the big ships that are becoming increasingly common on the West Coast.
Because the post-Panamax ships disgorge thousands of containers in a single call, improving truck turnaround times will be crucial to avoiding marine terminal congestion, Ed DeNike, chief operating officer at SSA Marine, told the Pulse of the Ports meeting.
SSA is working to improve gate efficiency by automating in-gate operations. Truckers are expected to electronically file their cargo booking number before reaching the terminal. That allows the terminal to prepare the container for pickup as the truck approaches the facility. Out-gate operations are automated already, he said.
Improving efficiency of yard operations also will be necessary. A typical transtainer serves eight or nine trucks per hour, but the equipment operator must move 30 to 40 containers around in order to pick the appropriate boxes out of the stacks because containers are stacked five high, DeNike said.
Terminal operators also are installing global positioning satellite systems to track container movements within yards and optical character readers on cranes to lift containers on and off the vessels more efficiently.
The average vessel size in trans-Pacific trade lanes now is more than 5,000 TEUs. As those vessels are replaced by 8,000- to 10,000-TEU ships, terminal operators will be pressed to improve efficiency through automation. The contracts employers negotiated with the International Longshore and Warehouse Union in 2002 and 2008 give the terminals the flexibility they say they need to implement technology in cooperation with the union.
The Pacific Northwest ports have completed their major terminal expansion projects for the time being, so they are concentrating on improving connectivity between marine terminals and the inland transportation networks. They are constructing roads and grade separation projects to smooth the flow of truck and rail traffic into and out of the harbors.
Although those ports were completing harbor dredging and marine terminal expansion projects over the past decade, Los Angeles and Long Beach were unable to commence a major construction project for seven years because of environmental challenges. Finally, in 2006, the ports completed their Clean Air Action Plan, and in 2008 they introduced clean-trucks plans. Those programs have given the ports a template for terminal expansion projects. The Southern California ports this past year received environmental approval for several key infrastructure projects.
Long Beach Executive Director Dick Steinke, in his state of the port address on Jan. 31, said the port would spend $4 billion over the coming decade on expansion projects. Los Angeles has budgeted $1.2 billion over the next five years.
Long Beach projects include an $850 million expansion of Pier G that will almost double the capacity of that terminal. The $1 billion Middle Harbor project will double the container capacity there. The port also intends to construct a $650 million container terminal at Pier S on the last greenfield site at the harbor. And Long Beach will spend $1 billion to replace the aging Gerald Desmond Bridge with a modern span. The port will receive some state and federal money for that project of national significance, Steinke said. About 15 percent of the containerized imports that enter the U.S. cross over the bridge, he said.
Los Angeles, meantime, is engaged in a $127 million expansion of the TraPac container terminal, which will expand its size to 226 acres and add an on-dock railyard to the only Los Angeles terminal that does not have on- or near-dock rail capacity. Los Angeles also is doubling the capacity of the China Shipping Container Line terminal to 142 acres and plans to add 56 acres to the APL terminal.
Executive Director Geraldine Knatz said the port staff is talking to Yang Ming Line and Yusen Terminals about an expansion project in that section of the port. Los Angeles also intends to analyze land-use procedures on Terminal Island to determine if changes could achieve better utilization of the acreage there.
With these multibillion-dollar projects in the works, and improved operational efficiencies from programs such as PierPass, Los Angeles and Long Beach should have sufficient physical capacity to carry them well into the next decade.
West Coast ports also intend to market the logistical advantages they enjoy in handling high-value, time-sensitive imports from Asia. Shipments from Asia save one to two weeks in transit time to interior hubs such as Chicago, Dallas and the Ohio Valley by moving through West Coast ports rather than on all-water services to the East and Gulf coasts.
In his most recent port and modal elasticity study of containerized shipments moving from South China to 21 regions of the U.S., Robert Leachman, professor of industrial engineering and operations research at the University of California, Berkeley, concluded the delivered cost of freight is most often the key determinant in routing decisions and choice of gateways. Delivered cost is based upon ocean rates, port fees, rail rates, inventory carrying costs and related factors.
For high-value, time-sensitive consumer items moving to the interior of the country, West Coast ports have a clear advantage, Leachman said. For example, in the high-volume trade between South China and Chicago, a container moving intact through the West Coast costs the shipper about $1.50 per cubic foot.
A shipment transloaded into a 53-foot domestic container in Southern California costs about $1.60 per cubic foot. The same shipments moving through ports such as Houston, Savannah, Norfolk and New York-New Jersey would cost about $1.72 to $1.99 per cubic foot. Penny differences are significant because an increase of 5 to 10 cents per cubic foot translates to an increased shipment cost of $135 to $270 for a 40-foot marine container and $200 to $400 for a 53-foot domestic container, Leachman said.
Contact Bill Mongelluzzo at email@example.com.