The March 16 arrival of the massive ship Fabiola at the Port of Long Beach serves as a wake-up call to West Coast ports: The old ways of handling container ships are over.
To maintain their market share in the competitive trans-Pacific trades, West Coast ports will have to offer deep channels, large marine terminals, the latest in computer technology and automated cargo-handling systems to minimize the time the big ships remain in port. They’ll also have to streamline the transfer of containers from vessels to intermodal trains.
Mediterranean Shipping Co.’s Fabiola, capable of carrying 12,500 20-foot containers, is the largest container vessel to call at a North American port, and a harbinger of the types of ships expected to dominate the Asia-U.S. trade in the coming years.
“Mega-ships are a mega-trend,” Erxin Yao, president of Orient Overseas Container Line (USA), told the annual Pulse of the Port seminar in Long Beach last month. Calls by 12,500-TEU vessels and larger will be common at West Coast ports within the next few years, Yao said.
A quarter of the vessels engaged in the trans-Pacific trade to the West Coast are 8,000 TEUs or more, and that number will grow to 40 percent by 2013, according to a 2011 study by Germany’s DVB Bank.
The vessels already are fostering change at West Coast ports. The Fabiola, for example, couldn’t call at the MSC terminal because the ship was too tall to pass under the Gerald Desmond Bridge and too large to navigate the turning basin at the terminal. Instead, the vessel called at the Total Terminals International facility.
Long Beach will correct those hindrances, with a new bridge scheduled for construction and a wider turning basin and deeper berth also scheduled for development. The message to West Coast ports is clear: Container lines will deploy ever-larger ships in their trans-Pacific fleets, and ports must offer the physical capacity to handle the vessels, and the technology and automation to turn them quickly.
The message is equally important for East and Gulf Coast ports, because they will have to deal with mega-ships when the widening of the Panama Canal is completed in less than three years. East and Gulf Coast ports are building larger terminals and intermodal rail connectors, and some must deepen their harbors to 50 feet to accommodate the giant ships.
The major West Coast gateways of Seattle-Tacoma, Oakland and Los Angeles-Long Beach are ahead of the East and Gulf Coast ports in many respects. They already have 50-foot channels, and some are even deeper. Many of the terminals have been enlarged to handle the mega-ships. Canada’s west coast ports of Vancouver and Prince Rupert also are equipped to handle modern container vessels.
The main challenge West Coast ports face is productivity. The ports have been handling 8,000- and 10,000-TEU ships for several years, but as the newer, 12,500- to 13,000-TEU ships begin sailing in the trans-Pacific, a new level of productivity will be required. The mega-ships cannot sit at berth as long as five days, as some vessels do now.
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To handle the giant ships, terminal operators must put five cranes against each ship, and the cranes each must average at least 30 moves an hour, industry executives say. Average crane productivity at West Coast ports today is in the mid-20s.
West Coast ports are building new terminals, enlarging existing ones and combining adjacent facilities to achieve the footprint needed to handle the mega-ships. The facilities also are being redesigned to accommodate the technology and automation that will achieve the productivity needed to turn the vessels quickly.
Chris Lytle, executive director of the Port of Long Beach, told the Pulse of the Port seminar that the redesigned Middle Harbor terminal under development would handle more than twice the cargo volume, and emit half the harmful emissions, as the current facility. It also will be one of the nation’s most automated terminals, he said. A new, highly automated terminal also will be constructed at Pier S after the environmental review process is completed.
At neighboring Los Angeles, expansion projects at the TraPac and China Shipping Container Line terminals also will result in more efficient operations designed for the new generation of container ships.
West Coast ports have an advantage in that recent contracts between waterfront employers and the International Longshore and Warehouse Union have addressed technology and automation. The technology agreement in the 2002 contract allows for the free flow of information via computers, and the automation agreement in the 2008 contract allows employers to introduce modern machines into the cargo-handling process.
On the East and Gulf coasts, waterfront employers and the International Longshoremen’s Association still must resolve some of those issues in contract talks that began in late March in Tampa. The ILA contract is set to expire on Sept. 30.
East and Gulf Coast developments are of great importance to West Coast ports with the Panama Canal expansion project getting closer to completion. West and East Coast ports in recent years have engaged in a fierce battle over market share, and that battle will intensify when big ships are able to transit the canal in 2014.
West Coast ports had a 72.5 percent share of U.S. containerized imports from Northeast Asia last year, down slightly from 72.9 percent in 2010, said Mario Moreno, economist with The Journal of Commerce and its sister company PIERS. The East Coast’s share last year increased to 25.8 percent from 25.6 percent, with Gulf Coast ports handling 1.7 percent of the trade, up from 1.5 percent in 2010.
Efficient intermodal rail is one of the greatest advantages West Coast ports have in competition for market share. Containerized imports from Asia that move through West Coast ports via rail can reach many destinations east of the Mississippi River seven to 10 days quicker than if the cargo is routed via all-water services to the East Coast.
That’s why West Coast ports dominate important inland markets such as Chicago, Kansas City and Dallas, and why they have a significant share of markets even farther to the east in the Ohio River Valley and down to Atlanta.
Gill Hicks, director of Southern California operations at consulting firm Cambridge Systematics, told a competition seminar in March at California State University, Long Beach, that 38 percent of the containerized imports in Los Angeles-Long Beach moves intact via rail to destinations in the eastern half of the country. Another 26 percent of the marine containers are transloaded locally into domestic 53-foot containers and leave the area via rail.
Seattle and Tacoma are even more rail-dependent, with more than 70 percent of the containerized imports moving inland on intermodal trains.
The western railroads have invested billions of dollars in intermodal lift capacity and in mainline capacity and inland rail logistics hubs. Union Pacific and BNSF railroads each invest more than $2 billion a year in capital improvements, a significant portion of which is geared toward intermodal traffic.
Transportation interests in Washington state in 1998 began investing in the FAST Corridor to build grade separations and improve the velocity of trains moving to and from the ports of Seattle and Tacoma. Since then, the region has spent more than $600 million, which includes public and private money, on the FAST Corridor.
The 20-mile-long Alameda Corridor in Southern California has functioned since 2002 as an expressway for intermodal rail in Los Angeles County. Work continues on the Alameda Corridor East, which begins at the terminus of the Alameda Corridor and continues 40 miles eastward. Individual grade separation projects are addressed as funds are raised.
Canadian and Mexican ports also are striving to grab a bigger piece of the trans-Pacific trade. Prince Rupert, located 500 miles north of Vancouver, British Columbia, has had a noticeable impact on U.S. West Coast ports since it began operations in late 2007. Last year, containerized imports at U.S. West Coast ports declined 2 percent, while imports through Prince Rupert increased 21 percent from the year before.
Imports at Port Metro Vancouver, Canada’s largest Pacific Coast gateway, increased 2 percent last year. More than 95 percent of Vancouver’s containerized imports remain in Canada, but the port is targeting the U.S. as its largest potential growth market.
Prince Rupert last year handled 419,000 TEUs, port spokesman Michael Gurney said, putting the port close to the listed capacity of 500,000 TEUs at the Fairview Container Terminal. Through operational adjustments, however, the existing facility could handle up to 750,000 TEUs, he said.
Prince Rupert plans to add 15 acres and a second berth to the Fairview terminal, and to increase its capacity in stages to 2 million TEUs a year. Environmental studies are nearing completion, and Prince Rupert plans to begin construction later this year. The first phase of the expansion project should be completed in 24 to 36 months.
Mexican ports account for only 7.8 percent of the container volume in North America, but the country’s booming trade with Asia has made its ports the fastest growing on the continent. The Pacific Coast ports of Manzanillo, which increased its container volume 31 percent last year, and Lazaro Cardenas, which increased 34 percent, were the fastest-growing ports.
Almost all of the growth at those ports has involved trade between Mexico and Asia. However, Kansas City Southern de Mexico has a line running from Lazaro Cardenas to the U.S. border, with continuing service via KCS from Texas into the interior United States. Lazaro Cardenas intends to become a gateway for Asian cargo moving to the U.S. market.
Mexican authorities also had planned to build a port at Punta Colonet in Baja California, about 160 miles south of San Diego, but those plans were put on hold because of the 2008-09 economic recession and the excess capacity that has developed at U.S. West Coast ports, according to a U.S. consultant who worked on the project.
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Industry executives, while cautious, expect 2012 to be a better year for West Coast ports. Total West Coast container volume in January and February, however, was down 1 percent compared to the first two months of 2011, because of a 4 percent decline in imports. Exports were up 4 percent, the Pacific Maritime Association said.
Nevertheless, it appears the economic recovery in the U.S. will continue, and that should result in growing imports. OOCL’s Yao projects imports from Asia will increase 4.2 percent this year. Moreno looks for imports to increase 2.4 percent, with exports growing 4.2 percent over 2011.