LA-LB project to boost velocity attracts $130 million

LA-LB project to boost velocity attracts $130 million

Port of Los Angeles.

Beneficial cargo owners and truckers in Los Angeles may experience improved cargo velocity and reduced gate congestion if a large container drayoff facility to be piloted at the Port of Los Angeles (above) proves to be successful. Photo credit: Shutterstock.com.

A project that could eventually accommodate more than 3,500 container drayoffs each day from marine terminals in Los Angeles-Long Beach has attracted $130 million in funding, confirming to North American ports that investment capital is interested in projects that increase cargo velocity.

The pilot project, known as the Harbor Performance Enhancement Center (HPEC), which is undergoing the required California Environmental Quality Act (CEQA) review and permitting process, is expected to be launched by early summer on a 110-acre site that once housed the now defunct Los Angeles Coal Terminal. The pilot project will begin with 400 slots for temporary staging of wheeled containers that have been trucked from the 12 container terminals in the port complex. If the pilot is successful, the intention is to expand to 3,500 slots.

With mega-ships generating as many as 15,000 container exchanges per vessel call, terminal operators seek to reduce container dwell time to 24 hours or less in order to prevent gridlock in their yards. A quick and effective way to reduce dwell time, and, by extension, reduce port congestion, is to dray imported containers to an off-dock facility as soon as they are discharged from the vessel. The major impediments to implementing this strategy are to locate available near-dock sites for the drayoffs and securing financing for these projects on costly harbor real estate.

Jonathan Rosenthal, managing partner at Saybrook Capital, said Macquarie Principal Finance, one of the largest international investors in port-related infrastructure, has agreed to be the lead investor in the public-private partnership at the Port of Los Angeles. He views Macquarie’s participation as a vote of confidence in the largest North American gateway. “This is where the cargo is. This is where the opportunities are,” he said.

Port-related infrastructure as an asset: higher risk, higher return

Rosenthal explained that unlike toll roads and bridges, which investors view as low-risk, low-return projects, port-related infrastructure is a higher-risk endeavor given the vagaries of international trade and shifting logistics patterns, but “they offer a better return.”

This willingness to invest in port-related infrastructure projects that enhance cargo velocity comes at a time when ports are looking to repurpose harbor parcels, even relatively small parcels, for activities that relieve marine terminal gate and yard congestion. These activities could range from container drayoffs, peel-offs, and chassis storage to the repurposed Oakland Army Base as a port logistics center.

The HPEC is intended to prove that costly harbor real estate can be converted to container drayoffs and peel-offs by giving beneficial cargo owners (BCOs) a close-in location to temporarily stage their wheeled containers so they can be retrieved, mostly within 24 hours, by truckers who will transport the containers to distribution centers. Marine terminals were designed to operate as a buffer between the “batch system” of vessel operations and the “continuous flow” operations in which BCOs send their trucks to the terminals to take delivery of containers, Rosenthal explained. The system is breaking down at North American ports, however, due to the huge container exchanges taking place from today’s mega-ships, he said.

If it works as intended, the enhancement center, coupled with information technology systems, will enable BCOs to request block stowage of containers in Asia so their containers can be immediately trucked from the terminals upon discharge to the near-dock site. The yard would be open round the clock and would be managed by a third party with experience in operating truck-served facilities.

Phillip Sanfield, a spokesperson for the Port of Los Angeles, which is partnering with the private-sector developers, said the project is undergoing the CEQA environmental review process. The intention is to run the pilot for one year until May or June 2019 to determine if it is feasible. If so, it will be expanded to 3,500 slots. Depending upon how quickly the containers are retrieved, the slots can potentially be turned over twice in each 24-hour period, doubling the effective capacity of the facility.

Harbor truckers view the center as another measure, such as establishing near-dock, stop-start  locations for chassis storage, as a way to improve cargo velocity. “HPEC’s innovative approach will relieve congestion throughout the region, increase cargo velocity through the port, lower handling costs, reduce emissions, and dramatically improve freight flow efficiencies in the San Pedro Bay complex,” said Alex Cherin, executive director of the California Trucking Association’s intermodal conference.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.