Barely a year ago, marine terminal operator SSA Marine vacated the 50-acre Howard Terminal in Oakland and moved into a new 150-acre facility nearby. But when the Howard Terminal became available again last month, SSA snapped it up. With space tight at West Coast ports, the company considered itself lucky to have secured even a small 50-acre site.
The shortage of port property is already at a crisis stage in Los Angeles-Long Beach. Now terminal operators at other West Coast ports are scrambling to secure whatever land is available to prepare for what they believe will be a bonanza of cargo diverted from Southern California. "We think that Southern California will be saturated in another year or two," said Ed DeNike, chief operating officer at SSA Marine.
Marine Terminals Corp., another West Coast terminal operator, figures it will be five or six years before West Coast ports reach capacity, but Doug Tilden, its chief executive, said that by 2010, the ports of Los Angeles and Long Beach could be "turning away as much as 8 million TEUs at existing utilization rates."
The space crunch results from seemingly unstoppable growth in imports. Container volume through the ports of Los Angeles and Long Beach jumped to 11.8 million TEUs last year, an increase of 1.2 million TEUs from the previous year. Much of the increase comes from a shift in global production to China, and development of import distribution centers totaling an estimated 360 million square feet of space east of Los Angeles.
Southern California ports, meanwhile, are facing a backlash from community groups and environmentalists. "We're concerned, especially with the constraints on growth being discussed," said Don Wylie, director of trade and maritime services at the Port of Long Beach.
The space squeeze in Southern California could benefit Oakland, Seattle and Tacoma, which have lost market share to Los Angeles and Long Beach. The northern ports are pitching their available capacity to carriers as the lines prepare to add new services. "They (the carriers) are not tying their growth here directly to Southern California. They're saying, 'We have growth plans, and Tacoma is in them,' " said Doug Ljungren, director of business planning at the Port of Tacoma. "Land on the West Coast that is on deep water is very hard to come by."
Tacoma was the first port to benefit directly from capacity constraints in Southern California. Evergreen Marine Corp. reached capacity at its Los Angeles terminal more than a year ago. When it came time to start another service from China, Evergreen introduced it in the Pacific Northwest. The China cargo helped Tacoma increase its container volume last year by 18 percent to 1.7 million TEUs.
Evergreen anticipates continued rapid growth in the Pacific Northwest. Early next year, it will move to a new 171-acre terminal. That facility will eventually be expanded to 237 acres, making it the region's largest single-user terminal.
Tacoma in mid-February announced an agreement with a local Indian tribe that will open to development a 300-acre site on the Blair Waterway. Ljungren estimates that Tacoma can accommodate its existing tenants until 2020, while the addition of the 300-acre facility will allow it to attract a new carrier or carriers.
The Port of Seattle has little land available for development, but it has 500 acres of existing container facilities that could immediately accommodate more cargo. The port last year handled 1.5 million TEUs, but can handle 3 million TEUs at the existing three terminals, said Charley Sheldon, managing director of the seaport division.
Seattle, like Tacoma and Portland, Ore., depends heavily on intermodal rail service. As much as 75 percent of the imported cargo moves on to destinations in the eastern half of the U.S. The ports responded to these market demands by constructing on-dock and near-dock rail transfer yards. On-dock rail diverts thousands of container moves each week from trucks, thereby relieving congestion at terminal gates and allowing faster flow of containers through terminals.
Portland also has terminal capacity that is immediately available for new services. The port's Terminal 6 handles about 350,000 TEUs a year, well below its 500,000-TEU capacity, and can be expanded, said Sam Ruda, marine director at Portland. Import volume at Portland increased 40 percent last year, and Ruda anticipates additional growth as retailers expand distribution centers in the region. The port is also looking ahead to the scheduled 2007 completion of a project to deepen its access channel to 43 feet from 40 feet.
Ruda sees Portland's advantages such as a lack of congestion, on-dock rail and readily available berthing windows as reasons enough to attract carriers. "We're definitely seeking more liner services, but we're not basing our marketing on the imminent demise of Southern California," he said.
Oakland's marketing pitch is that because 60 percent of its volume is exports, it has a surplus of railcars. Railroads sometimes must transport empty cars to Los Angeles-Long Beach where they are needed to carry import loads east.
Until last year, Oakland had trouble convincing carriers to use Northern California as their first inbound port of call. The port's box terminals, built in the 1970s and 1980s, were mostly 50 acres or smaller, and Union Pacific was the only rail with direct access to the port.
By late 2002, Oakland opened terminals of 120 acres and 150 acres and extended Burlington Northern Santa Fe Railway tracks into the port. Last year was the first full year that Oakland offered large terminals and direct intermodal service by two railroads, said Clement Chin, senior manager of business development and marketing. The result was 12 percent growth in container volume to 1.9 million TEUs.
Oakland's Achilles' heel is draft restrictions that prevent the largest container ships from calling fully loaded. Oakland cannot wait for the federal government to come through with its share of the cost of deepening the harbor to 50 feet, so the port has divided the project into two phases. By the end of this year, Oakland will dredge the access channel to 46 feet from 42 feet. It will then work with the government to fund completion of the project to 50 feet.