West Coast ports must seek a balance as they prepare for the onslaught of big ships carriers are bringing into the trans-Pacific. On the one hand, they need larger terminals to handle the big ships, but on the other, they don’t want to build too much capacity.
The Port of Long Beach is grappling with that problem right now as it decides what to do with its Pier S site. The final environmental impact report should be out in the next two months, said Chris Lytle, outgoing executive director.
Pier S is the last greenfield site Long Beach-Los Angeles harbor will see in many years. The EIR was many years in the making, and until now, it was assumed that once the environmental clearances were received, construction would begin on a container terminal.
However, Long Beach is having second thoughts about rushing into a $500 million project that may be unnecessary at this time, Lytle said this week in an interview as he finishes up his work in Long Beach before moving to Oakland next month to take over as executive director.
Looking at the Long Beach-Los Angeles harbor as a single complex, it is obvious that there is excess capacity. That is due to a spate of construction that is already under way, a drop in cargo volume during the economic recession and improved productivity through initiatives such the PierPass extended gates program.
Terminal operators estimate there is 20 to 30 percent overcapacity at the two ports, and the inventory could expand further as construction proceeds on the Middle Harbor container terminal in Long Beach. At full build-out, Middle Harbor will have an annual capacity of 3 million 20-foot container units, or 50 percent of the total container volume Long Beach handled in 2012.
The overcapacity is forcing down the rates that terminals charge to shipping lines in a highly competitive port environment. While having enough capacity to immediately handle an unexpected surge in cargo is good, it also indicates to port executives that major projects once considered to be essential to port growth should be put on the back burner.
Looking at ports in China, which expanded rapidly over the past 10 years with the belief that the explosion of cargo would never end, Lytle said there are facilities in that country that are operating at less than 50 percent capacity. “We don’t want that here. We must manage growth,” he said.
When the Pier S EIR is completed, Lytle said port staff will probably recommend to the harbor commission that it approve the document, but only pursue construction of certain environmental and safety features in the plan.
For example, the Pier S channel is too narrow for today’s biggest ships, so the plan is to widen the channel in places. The material that is cut away will then be used to fill in old slips at the Middle Harbor terminal, thus saving Long Beach millions of dollars from not having to bring material in from a distant location. After that, construction should be put on hold until the market determines there is a need for another terminal, Lytle said.
In the meantime, existing terminals will focus on automation, which will not only improve efficiency and reduce cargo-handling costs, but also expand the port’s capacity on its existing footprint.
Lytle said that in his conversation with terminal executives, he heard that most terminals will be automated, although they probably will not pursue full automation such as Middle Harbor is planning. Each terminal will automate those operations that need improvement, but only to the extent that an adequate return on investment is produced, he said.