US West Coast ports drill down on rail efficiencies to protect share

US West Coast ports drill down on rail efficiencies to protect share

A BNSF train travels near the Port of Long Beach.

Above: A BNSF train travels near the Port of Long Beach. By improving connectivity in the harbor through more on-dock rail, smoother hand-offs from the vessel to rail, and more timely and accurate data flow, West Coast ports will offer shippers a more attractive package for shipping discretionary cargo through their gateways to the eastern half of the United States, Los Angeles and Long Beach port executives agree. Photo credit: Shutterstock.com.

In order to retain and even grow their share, US West Coast ports must mitigate the burdensome intermodal costs shippers face at their gateways by making rail connectivity more efficient because western railroads won’t make their pricing more competitive.

The East Coast’s $400 to $600 discount

West Coast ports may never be able to totally erase the estimated $400 to $600 additional cost beneficial cargo owners (BCOs) incur compared with shipping through Vancouver or Prince Rupert in Canada to major hubs such as Chicago, the port directors in Los Angeles and Long Beach said Thursday. Nor will the western railroads reduce their intermodal pricing to make the combined ocean and intermodal rates from the West Coast cheaper than all-water rates from Asia to the East Coast. The West Coast share of laden containers entering and leaving the United States has fallen to 44.9 percent in 2017 from 50.5 percent in 2010, according to PIERS, a JOC.com sister product.

However, by improving connectivity in the harbor through more on-dock rail, smoother hand-offs from the vessel to rail, and more timely and accurate data flow, West Coast ports will offer BCOs a more attractive package for shipping discretionary cargo through their gateways to the eastern half of the country, said Mario Cordero, executive director in Long Beach, and Gene Seroka, executive director in Los Angeles.

Cordero said the $400 to $600 per container cost differentials with Canadian ports, first cited in a 2015 study by Ocean Shipping Consultants, are real numbers. The spread was reconfirmed earlier this year in a study by the Northwest Seaport Alliance of Seattle and Tacoma that broke down the all-inclusive cost into its various components. “We have to ask ourselves, how do we mitigate that number? The UP [Union Pacific] and BNSF [Burlington Northern Santa Fe] benefit from intermodal cargo, so they will help us help them,” Cordero told the Harbor Association of Industry and Commerce.

West Coast ports depend on intermodal rail to move 30 percent to 50 percent of their containerized imports to the eastern half of the country. Seattle-Tacoma recently has viewed its efficient on-dock rail operations as a competitive advantage. Michael Reilly, director of business development, intermodal services, at the Northwest Seaport Alliance, told JOC.com in 2015 the first eastbound intermodal train regularly leaves the port while the vessel is still working. The Port of Oakland does not have any first-call inbound services from Asia, although it is developing a logistics hub on the former Oakland Army Base that could attract inbound services. However, the port has completed development of an intermodal yard and has extensive cold-storage outbound on-dock rail operations.

Improving on-dock rail and lowering the cost of the intermodal transfer is the way to go for West Coast ports. Badgering the UP and BNSF railroads to lower their intermodal rates is not the approach to take, Seroka said. “We have met with the railroads at the highest levels. Knocking on their door and telling them to lower their rates is not going to work,” he said.

Port of Long Beach’s rail goal

Long Beach, which now handles about 27.5 percent of its container volume via on-dock rail, has set a goal of 50 percent. Cordero noted that this week’s harbor commission approval of an $870 budget for the Pier B rail support facility is a major infrastructure initiative in that effort. The facility will enable the building of longer trains without the need to shuttle containers from the terminals by truck, thereby reducing the time and costs in the intermodal transfer. Building a mile-long train in this way can eliminate 750 truck trips. This is a long-term project, however, with phase one completion scheduled for 2024.

The ports are also working with GE Transportation and their supply-chain partners to improve shipment visibility by as much as 38 days on imports from Asia, Seroka said. The Port Optimizer product aggregates shipment data from Customs and Border Protection, the carriers, terminals, BCOs, truckers, and railroads. Having accurate data well in advance of vessel arrival will help the railroads to better plan and manage crew and equipment costs, he said. Los Angeles piloted the optimizer last year, and this year expanded it portwide. Three terminals in Long Beach began using it this year.

Los Angeles and Long Beach hold high hopes for using technology to reduce costs and improve efficiency throughout the port-related supply chain. “We are looking at technologies that are in their nascent stages today,” Seroka said. With total port complex volume of about 17 million TEU a year, Los Angeles and Long Beach can bear the risk that comes with developing and implementing new technologies, he said. Also, the container exchanges from each vessel call are unmatched by any port, providing BCOs and other port users with the largest port logistics laboratory in the world to test the products, he said.

Mega-ship era likely to require more intermodal use

Los Angeles, which handles about 33 percent of its container volume on dock, and Long Beach at 27.5 percent, generate sufficient intermodal traffic from each mega-ship to support increased on-dock rail usage. Seroka cited an occasion when three 13,000-TEU vessels were worked on simultaneously at the APM terminal, and one of those vessels generated 24,800 TEU in that particular call.   

Seroka added that with 100 train arrivals and departures each day in the port complex, and more intermodal rail coverage throughout the national network than any other gateway, the ports already have the traffic density the railroads need to enhance their intermodal offerings from Southern California. In order to attract more discretionary cargo, the ports are turning to process improvements and the use of technology to improve efficiency and lower intermodal costs. “We have to do everything perfectly,” Seroka said.

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