The chief executives of the ports of Los Angeles and Long Beach are looking beyond their current congestion problems to resume what they see as their ports’ rightful role as leaders of the U.S. port industry, and it will all be about infrastructure and processes.
“The brand is tarnished,” Gene Seroka, executive director of the Port of Los Angeles, told the Harbor Association of Industry and Commerce Thursday in Long Beach in reference to the congestion and labor problems all West Coast ports have experienced since November.
However, when cargo velocity returns to normal next month, Los Angeles and Long Beach will enhance their superior marine terminal and inland infrastructure connectors with improved cargo-handling processes that will offer a financially-compelling reason for cargo interests who diverted shipments to other ports to shift back to the largest U.S. port complex, Seroka said. Los Angeles-Long Beach handles more than 15 million 20-foot container units a year, or almost three times the second busiest port, New York-New Jersey.
The added cost of diverting shipments to East and Gulf Coast ports is already evident, said Jon Slangerup, chief executive of the Port of Long Beach. The spot rate for shipping a 40-foot container from Asia to the East Coast via the Panama or Suez canals peaked recently at about $4,200. The freight rate to Los Angeles-Long Beach dipped below $1,700. Even with the intermodal rail cost to eastern destinations added on, it is cheaper and certainly faster to ship through the West Coast, Slangerup said. The ocean transit time to Los Angeles-Long Beach is 12 days, versus 26 to 27 days to the East Coast. For shipments to interior hubs such as Chicago and Columbus, Ohio, the additional inland transit time from East Coast ports puts them out of the market for time-sensitive shipments, he said.
The first order of business for the Southern California ports, however, will be to win back the trust of beneficial cargo owners and shipping lines that led to a huge cargo diversion to East and Gulf Coast ports. Both port executives have been road warriors of late, visiting customers in Asia and Europe and throughout the U.S. Slangerup said he is confident that the International Longshore and Warehouse Union is on board with this trust-building effort.
In fact, Bobby Olvera, president of the largest ILWU local on the West Coast, told a recent meeting of the Long Beach Board of Harbor Commissioners his membership is ready and able to consistently deliver 35 container moves per crane, per hour. Port managers and terminal operators will continue to remind the union of this promise.
The Obama Administration’s secretaries of labor and commerce were instrumental in facilitating the Feb. 20 tentative contract agreement between the ILWU and Pacific Maritime Association, but Seroka said the secretaries made it clear that once the agreement is finalized, attention must turn to the greatest challenge facing the entire U.S. port industry, which is the inability of the existing port and inland transportation infrastructure to handle the cargo surges generated by today’s big ships, Seroka said.
This is where the Southern California port directors said their gateway has established a clear lead. Los Angeles and Long Beach are the only two U.S. ports with the commercial demand and physical capacity to accommodate fully-loaded vessels with capacities of 13,000 TEUs or greater, Seroka said. He noted that the APM terminal in Los Angeles recently turned three ships of 13,000-TEU capacity, setting a new North American record of generating 34,000 container moves at one facility in a single week..
Long Beach regularly receives calls by 14,000-TEU ships, vessels that will be too large to transit even the enlarged Panama Canal when that project is completed in April 2016, Slangerup noted. Vessels of 13,000-14,000 TEU capacity have a 60 percent lower slot cost than today’s Panamax vessels, according to Alphaliner.
The port directors noted that their gateway also has a running start on future marine terminal and infrastructure development. The two ports are well into a 10-year, $6 billion expansion project that involves a new $1 billion bridge, at least two automated marine terminals, more on-dock rail facilities on top of their industry-leading on-dock rail capacity and inland rail and highway connectors. “No other port in North America comes near us in what we’re spending,” Slangerup said.
Beyond infrastructure development, the Southern California ports have several projects in motion to improve cargo-handling processes so that when the congestion is gone, the new normal will be an elevated normal, Slangerup said. The goal is to benchmark cargo velocity and port productivity not on U.S. best practices but on world best practices, he said.
The ports, working with the three major chassis-leasing companies, on March 1 rolled out a neutral or gray chassis pool that is correcting the chassis shortage and dislocation problem that plagued the ports even before the labor disruptions began last November, they said. Both parts are developing near-dock sites for the dray-off of imported containers as soon as the containers are unloaded from vessels, thereby relieving congestion on the marine terminals and expediting truck moves in the harbor. A new peel-off terminal pilot is also contributing to improved cargo velocity by segregating containers for individual trucking companies so the drivers can go right to the stack where the equipment operator peels off the first available container.
In the longer term, the ports intend to revisit projects that had been contemplated in the past but were never implemented because of cost and logistical issues, such as using short-haul rail to deliver hundreds of imported containers to inland port sites in Southern California’s Inland Empire in a single move. Slangerup said this past year’s experiences with port congestion offer a compelling argument that it is time to revisit these visionary concepts.
Annoying roadblocks must also be overcome to improve supply chain fluidity in Southern California. While the decade-long planning continues for expansion of the main truck route to the harbor, the I-710 freeway, a project that could remove 1 million truck trips a year from the I-710 is being delayed by litigation. Seroka said it is crucial that approval be granted for construction of BNSF Railway’s Southern California International Gateway intermodal transfer yard, to be located adjacent to Union Pacific’s successful ICTF less than five miles from the harbor.
While the port directors acknowledge that some of the cargo diversion that resulted from four months of labor disruptions and almost a year of port congestion will be permanent, they are confident that as the new normal of world-class infrastructure and improved processes settles in over the next few years, the ships of 14,000 to 18,000-TEU capacity that will be deployed in the trans-Pacific trades by then will be calling at their gateway.
First, though, the ports have a trust issue that needs rebuilding and a cargo-velocity problem that needs correcting. “We’ll fix it,” Slangerup said.