A mixed picture

A mixed picture

It is a question on the minds of thousands of shippers this time of year. How bad will U.S. port congestion be during this year's summer-fall peak importing season? Will the industry see a repeat of 2004? That year, skyrocketing volumes made a mockery of forecasts and the insufficient supply of West Coast longshore labor that caused ships to stack up by the dozens in the waters off Los Angeles-Long Beach. Or will it more resemble 2005? Then, despite strong growth, cargo moved fluidly through ports but encountered rail delays.

Speakers at The Journal of Commerce's 6th Annual Trans-Pacific Maritime Conference in Long Beach last week seemed to agree that the latter scenario is the more likely of the two to occur this year. Barring a terrorist incident that shuts down the ports, they said, do not expect headlines in 2006. But neither should shippers expect a congestion-free system, especially when rail is involved. "The day of event-driven port congestion is probably over," said Doug Tilden, chief executive of Marine Terminals Corp. "Port congestion is more likely to be systemic."

"I think this year looks a lot like last year," said Ron Widdows, chief executive of APL Ltd. "You don't see another year with ships stacking up in the harbor. That would be a surprise."

The sense that the ports, for their part, can handle the volumes likely to come their way from Asia this year is based on a number of factors. In Southern California, the PierPass system has performed better than anyone expected, shifting 40 percent of all the containers moving through Los Angeles-Long Beach to off-peak hours and causing terminal operators to wonder if 45 percent can be achieved. "PierPass was a major change in the way we do business. It created system capacity," Tilden said.

Also, as the wave of new 8,000-TEU ships begins to be deployed this year, smaller vessels capable of transiting the Panama Canal will be freed up, giving carriers the ability to add all-water services and thereby divert cargo to ports on the East Coast with more capacity. The lack of such ships has prevented lines from adding all-water capacity over the past two years. Also, speakers said, Seattle and Tacoma have taken some of the pressure off Los Angeles-Long Beach. And following the experience of 2004, hundreds of new dockworkers have been hired in Los Angeles-Long Beach, to the point that there is now an excess supply of longshore labor.

But the picture is not uniformly positive. The rails will remain a challenge this year, Widdows believes. He said it takes time for rails to recover from washouts of rail track and other disruptions, and intermodal terminals get backed up quickly. When a delay occurs in one part of the rail system, it can quickly back up the entire system. In other words, Widdows said, it's not the full picture to simply describe congestion at the ports as manageable this year.

"In spite of local terminal operators saying things are going real well, from a customer's standpoint, they will continue to see delays, and those delays will get longer, especially for people moving cargo into the interior U.S. or the East Coast," he said.

There are other dark clouds on the horizon. Speakers said they believe Seattle and Tacoma, which have absorbed much of the volume diverted from Los Angeles-Long Beach over the past two years, may be limited in how much more cargo they can handle. Oakland has capacity, but the Central Corridor rail route needs to be opened for intermodal traffic.

And issues in which the ports have tried to make progress, such as curbing excess free time for containers to sit on terminal grounds, may be poised to head in the reverse direction. Tilden said that with ocean carriers entering a buyer's market, given the new vessel capacity coming on line, the lines will become more lenient on free time - containers will sit on terminal grounds longer and clog up terminal operations at a time when terminals need to achieve more, not less, productivity. "I'm very concerned about free time," Tilden said. Overall, a mixed picture.