With only moderate growth projected in the global container trades for at least two more years, and overcapacity keeping a lid on rate increases, carriers must take innovative steps to reduce the cost of their operations.
APL, for example, will reduce its ocean, terminal and logistics costs by $500 million in the coming years without compromising service levels, Gene Seroka, president of the Americas, told the annual conference of the Agriculture Transportation Coalition Friday in San Francisco.
U.S. trade with Asia got off to a slow start in the first quarter of 2012, with imports increasing 1 percent and exports up 1.8 percent, Seroka said.
At the same time, the global container fleet is predicted to grow 7.3 percent this year and 9.1 percent in 2013, French economist Philippe Hoelinger says.
Because carriers will find it difficult to implement general rate increases in this environment, they must find ways to take cost out of their operations.
APL’s AIM program is designed to reduce container repositioning costs throughout its system by matching import shipments moving to inland destinations with export or domestic loads from the same region. “Early returns show APL is pointing in the right direction,” Seroka said.
At the marine terminal level, carriers are using computerized systems to increase cargo velocity and eliminate redundant moves within the container yard. Terminals are also turning to automation to increase container lifts per hour.
At its Pier 300 terminal in Los Angeles, APL has increased the average container lifts per hour to 27 from 22. The company intends to achieve even higher productivity numbers in its Middle East operations through the use of tandem-lift cranes that can lift two containers simultaneously.
Dealing with unsafe refrigerated containers is an issue facing all carriers in the trans-Pacific. Last year, several reefer containers that were serviced in Vietnam exploded because of the use of contaminated refrigerants, resulting in two deaths at overseas ports.
The International Longshore and Warehouse Union on the U.S. West Coast won an arbitration ruling that stipulates strict safety measures for the handling of any reefer containers that passed through Vietnam over the past year. There are now 862 distressed containers that could help to reduce the shortage of reefer containers that exists in some locations if they could be certified as being safe, Seroka said.
Carrier and ILWU representatives recently tested a mechanism for detecting contaminants in the refrigerants. If further testing proves the new tool is effective, it will help carriers achieve a better balance of reefer containers during the fall and winter peak export months in the trans-Pacific, Seroka said.
Labor issues on the East and West coasts have the potential of disrupting cargo handling this year, so carriers are developing contingency plans to minimize interruptions in the supply chain. Employers at East and Gulf Coast ports are involved in difficult negotiations with the International Longshoremen’s Association to replace the existing contract that expires on Sept. 30.
Employers in Southern California are attempting to reach an agreement with the Office Clerical Unit of ILWU Local 63, whose members have been working without a contract for two years.
Seroka said APL has developed contingency plans to reroute cargo to other ports if contract negotiations should break down on either side of the country. APL owns many terminals at which its vessels call, and its new contract with the Union Pacific Railroad should provide access to sufficient intermodal capacity if cargo must be diverted, Seroka said. APL is also looking at the possibility of routing some shipments through Canada.