West Coast ports are preparing strategically for the new normal. Gone are the days of 10 percent annual growth in container volumes. A new era of 3 to 5 percent annual growth is here, and ports throughout the U.S. are competing fiercely for their share of this modest growth.
The ports have developed business plans to enhance their competitiveness, with the common theme being construction of port and transportation infrastructure that will make the West Coast the most efficient gateway for international intermodal cargo.
Chris Lytle, executive director in Long Beach, spoke for his port, but the message applied to all of the West Coast gateways, when he said his goal is to build “an infrastructure second to none.”
Ports around the world are being pushed into this era of frenzied competition by the container shipping industry, which is flooding the global trade lanes with mega-ships. Industry consultant and research analyst Alphaliner in December said ports must do more to get “very large container ship ready.”
Globally, there are now 20 weekly strings of vessels with capacity of at least 10,000 20-foot containers. Sixteen of these strings serve the Asia-Europe trade, and two are in the Asia-U.S. West Coast trade. Container lines by the end of 2015 will enter another 110 ships ranging from 10,000 to 18,000 TEUs.
Asia-Europe is saturated with big ships, and attendees at The Journal of Commerce’s TPM Conference in March learned that capacity growth in the Asia-North America trade would outstrip growth in the Asia-Europe trade this year.
In many ways, West Coast ports are already big-ship ready. Seattle, Tacoma, Oakland, Los Angeles and Long Beach have at least 50-foot channels and large, modern terminals with ample room for container handling.
The greatest need for West Coast ports is for more efficient terminal operations, and improved connectors to speed the movement of containers from the ports to the rail and highway networks serving the nation’s interior.
West Coast ports depend heavily on intermodal rail to attract discretionary cargo. The need for greater efficiency in port and intermodal rail operations is illustrated by the rapid growth of Canada’s Pacific Coast port of Prince Rupert. Since the opening of its Fairview container terminal in late 2007, Prince Rupert’s annual container volume has increased 32.7 percent.
By contrast, containerized imports at all U.S. West Coast ports in 2012 increased 3 percent, and exports decreased 1 percent, according to the Pacific Maritime Association.
Explaining the success of Prince Rupert, Anne Landstrom, principal adviser at the commercial group of engineering firm Moffatt & Nichol, told the California Maritime Leadership symposium in Sacramento that the Canadian port “built a better mousetrap” with its efficient terminal and on-dock rail operations.
Terminal operators such as SSA Marine are aggressively adopting automation to improve the efficiency of their facilities. Chief Operating Officer Ed DeNike told the TPM Conference his company is computerizing crane operations at its three Southern California terminals, with the goal of increasing container moves to 40 per crane per hour from 30 now. SSA intends to replicate that model at its Oakland and Seattle terminals.
Orient Overseas Container Line’s Middle Harbor terminal in Long Beach will spend $1.5 billion to automate the 305-acre facility. Dual-hoist cranes, automated guided vehicles and automated stacking cranes are expected to double the terminal’s annual throughput capacity to 3.1 million TEUs.
APL’s Eagle Marine terminal in Los Angeles is adding 41 acres and automating its operations to increase capacity on the 347-acre site to 3.2 million TEUs. The TraPac terminal in Los Angeles is automating its yard operations and will automate the movement of containers from the vessel to the on-dock railyard.
Deepening the main channel to 53 feet and working with marine terminal operators to develop world-class cargo-handling are critical components of the port’s business plan, Geraldine Knatz, the port’s executive director, told the Harbor Association of Industry and Commerce on Feb. 28.
Oakland completed most of its terminal expansion and harbor deepening work as part of its Vision 2000 program, and the Northern California port now is looking to logistics to enhance its competitive advantage. The port is working with its private sector development partners and the city to turn the former 366-acre Oakland Army Base into an import-export center for warehousing and transloading operations.
Lawrence Dunnigan, manager of business development and international marketing, said Oakland is one of the few U.S. gateways that can devote hundreds of acres “in the heart of the port” to industrial real estate and logistics operations.
Construction is under way to provide rail access to the site for domestic manifest, grain, lumber and bulk traffic. Oakland already has two international intermodal container yards in the port.
Oakland is a major export port serving California’s fertile San Joaquin Valley, and it’s looking to the Army base to attract more import cargo. By marrying the unloading of inbound marine containers with the arrival of bulk commodities by rail, Oakland will have more containers to feed its booming export trade, Dunnigan said.
The ports of Seattle, Tacoma and Portland are looking to industrial real estate hubs to attract more imports to complement their already strong export operations. Seattle and Tacoma have naturally deep harbors and are served regularly now by big ships. All three ports have modern container terminals that are underutilized.
The ports are therefore looking inland for growth opportunities. “Our CEO charged us in 2013 with strengthening our competitive position,” said Tong Zhu, Tacoma’s chief commercial officer. Tacoma is adding rail connectors to improve intermodal flow, and is working with the state Legislature and the Port of Seattle to enhance roadway access to the ports. “It’s nice to see the effort has been regional,” she said.
The Kent Valley in Washington is the main distribution hub serving both ports, and interest among cargo interests in establishing import distribution centers remained high even during the 2008-09 economic recession, Zhu said. Tacoma also is developing Parcel 14, which is on port property, with 80 acres earmarked for industrial real estate.
Seattle scored an important victory last year by negotiating a lease extension with Hanjin Shipping and its terminal operator, TTI. A local developer, with the support of the city, wants to build a basketball arena nearby. The port retained Hanjin as a tenant by committing to plan for and mitigate any traffic congestion that might result if the arena is built, said Bari Bookout, Seattle’s marketing manager.
Port executives relentlessly detail for city and county officials, and the local community, the importance of the good-paying jobs the Port of Seattle generates in the region, Bookout said.
Portland, a river port, completed its deepening project to 43 feet in 2010, and investments in the region since then have exceeded $1 billion, said Sebastian Degens, general manager of marine business development. Much of the investment is geared toward grain export facilities.
BNSF Railway and Union Pacific Railroad, meanwhile, have invested heavily in grain transload facilities in the Midwest and shuttle train services to the Pacific Northwest ports. With grain exports on the Mississippi River hampered by drought-driven draft restrictions, the Pacific Northwest has become a preferred gateway for exports to Asia, Degens said.