What Business Leaders Need To Know About: Pacific Maritime

Two thousand four was a critical year for West Coast ports in general and southern California in particular. Record volumes of cargo slowed the system, caused delays in peak season and raised specters of a permanent gridlock. Shippers dependent on Asia supply chains feared the worst.

But a year later, things look a lot better. Ports were able to handle record volumes of cargo in 2005 without a repeat of the congestion that plagued 2004. Thanks to significant increases in the longshore labor pool, improved rail service, longer hours at marine terminals, and modifications in terminal operations, the ports of Los Angeles and Long Beach handled 14.2 million container units with hardly a snarl.

Nevertheless, memories of congestion from peak season 2004 influenced many importers to divert at least some of their cargo from Southern California to Oakland and the Pacific Northwest.

“Companies and shippers were willing to look at new options, perhaps options they hadn't considered before,” said Marilyn Sandifur, spokesperson for the Port of Oakland. Cargo diversions-combined with overall growth in international trade-boosted Oakland's 2005 container volumes to just over 2 million units last year-an 11 percent increase over 2004.

Officials at the Port of Tacoma also credited cargo diversions for part of their 2005 success. Container volumes in Tacoma passed the 2 million mark for the first time in the port's history, representing a 15 percent hike, said spokesperson Mike Wasem. Seattle also moved more than 2 million container units last year-about 20 percent more than 2004.

Yet, Pacific Northwest ports are not so smug to assume that congestion could not happen to them. That is why both Tacoma and Seattle are investing heavily in terminal enhancements and improved rail access. Oakland is doing the same. Meanwhile, Southern California and San Diego ports continue to invest millions of dollars in expansions and improved infrastructure.

Given capacity concerns, it is appropriate that environmentalism is becoming equally important in how West Coast ports are preparing for the next phase of world trade. Future growth will take a decidedly “greener” turn as West Coast ports adopt innovative programs to balance growth with environmental protection.

Last year, more than 54 ships plugged into shore side electrical power at the Port of Los Angeles, rather than burning diesel fuel while at berth. A second “alternative marine power” terminal will open in Los Angeles this year. Long Beach is providing economic incentives to ocean going ships to encourage them to reduce their speeds-and harmful air emissions-while approaching the port.

Marine terminals in both Long Beach and Los Angeles have retrofitted yard equipment with catalysts to reduce exhaust emissions, and the two ports will spend more than $10 million to replace aging harbor-area locomotives with cleaner running engines. The port of Oakland is providing qualified truck owners with up to $25,000 each to replace their old diesel rigs with newer, cleaner models. In Seattle, the SSA terminal will begin using biodiesel in container handling equipment this year, and Evergreen shipping has already switched to low sulfur diesel fuel at its terminal in Tacoma.

Resource Guide: West Coast Ports

Ports of Los Angeles and Long Beach

The real estate axiom, “location, location, location,” epitomizes the reason for Southern California's dominance over Pacific Rim trade during the past decade and a half.

With a consumer base of 17 million regional residents, a complex web of freeways surrounding the ports, and rail connections to the rest of the nation, Southern California has been the leading choice for many U.S. importers.

But the ports of Los Angeles and Long Beach are not relying on their geography. They are making operational and development decisions to foster their West Coast dominance. Each port has spent more than $1 billion in terminal expansions and infrastructure improvements during the past 10-plus years, and they now operate some of the largest container terminals in the world.

Officials at both ports hope to regain some of the cargo they have lost to diversions. To handle increased volumes, the longshore labor force was increased by more than 5,000 workers last year.

The BNSF and Union Pacific railroads have improved their communications with marine terminals and have made better use of the on-dock rail yards within both ports, said Don Snyder, Long Beach's director of trade and maritime services. Terminals have become more efficient by reducing the amount of “free time” given to importers before paying terminal storage fees. The result has been quicker turn-around of cargo and less congestion, Snyder said.

Perhaps the most important change made in Southern California during 2005 was the opening of terminal truck gates at nights and on weekends. Off-hours traffic has more than doubled since the implementation of the program, reducing congestion on area freeways.

Snyder is confident that Southern California ports will be able to handle double digit increases in cargo again this year. A newly formed “harbor talking group”-consisting of importers, terminal operators, customs brokers and ocean carriers-is identifying ways to move cargo more smoothly through the ports. “Different parties in the supply chain are willing to work together to keep us fluid.”

The Port of Los Angeles

The Port of Los Angeles holds the title of the nation's busiest container port after handling more than 7.5 million 20-foot container units in 2005. Nevertheless, its 2.2 percent growth last year was modest compared to other major West Coast ports.

Growth may have been hampered by LA's current water depths. Only the Global Gateway South terminal operated by APL, and the APM Terminal operated by Maersk Sealand can fully accommodate the latest generation of containerships that carry the equivalent of 8,000 20-foot container units. A dredging program to lower all berths to minus 50 feet will be completed this year, enabling the port's five other container terminals to handle the larger ships, as well, port officials say.

Los Angeles devotes 1,700 acres to containerized cargo, with the largest terminal of 484 acres operated by Maersk Sealand. A nearly 300-acre terminal is operated by APL. In addition, Los Angeles is home to other major ocean carriers including China Shipping, Evergreen, Yang Ming, NYK and Mitsui OSK. Plans are underway to give P&O Nedlloyd a dedicated terminal in the near future.

Most of Los Angeles' container terminals have on-dock or near-dock rail. Port officials plan to enhance their intermodal facilities with a 153-acre container transfer facility on port property. The facility will allow containers to be transferred from truck to train and will be operated by BNSF Railway. Union Pacific operates a similar facility for Los Angeles and Long Beach.

One of two warehouses located on port property is operated by California Cartage Company. The 600,000-square-foot facility provides consolidation, deconsolidation and distribution of cargo.

The Port of Long Beach

The Port of Long Beach handled 6.7 million container units last year, representing 18 percent growth over 2004. Long Beach's growth can be attributed, in part, to the sheer size of the container ships now calling the port. With water depths of minus 50 feet, and at least 20 super post-Panamax container cranes, Long Beach has hosted more than 200 vessels that carry 8,000 container units.

Long Beach devotes more than 1,300 acres to containerized cargo, with the largest terminal operated by Hanjin Shipping Co. That terminal-which individually handled more than 1 million container units last year-will soon be expanded from 345 to 375 acres.

During the past few years, Long Beach officials have implemented a “mega-terminal” program to expand the size of all container terminals. Stevedoring Services of America operates a 256-acre terminal for China Ocean Shipping Co. (COSCO) and a 170-acre terminal for Mediterranean Shipping and Zim. International Transportation Service operates a 246-acre terminal for “K” Line and several other lines.

Plans are underway to combine terminals used by OOCL and Hyundai into one 350-acre terminal, and to build a 160-acre container terminal on land formerly used for oil production.

China trade has contributed significantly to Long Beach's growth, and most of the port's carriers have direct service into China. In February, Matson Navigation Company-which traditionally has provided domestic service between the West Coast, Hawaii and Guam-entered the international arena by launching the China-Long Beach Express. The weekly service provides service from Ningbo and Shanghai into Long Beach.

The Port of Oakland

With San Francisco focusing on tourism, the Port of Oakland now commands 99 percent of the waterborne trade in Northern California.

Although Oakland has long been known for its strength in exports, imports are becoming increasingly important according to port officials. Imports alone grew by 21 percent last year, while total containerized cargo increased by 11 percent.

Diversions from Southern California played a role in the port's growth, but officials also point to their capital improvements program as a factor in their success. The port has added acreage and purchased 19 super post-Panamax cranes that are capable of offloading ships that are 22 containers wide. As a result, the port has welcomed numerous ships that carry 8,000 container units, in addition to ships in the 6000 to 6,500 container class.

To continue to accommodate the largest ships-even when they are fully laden with goods-Oakland has embarked on a massive dredging program to lower the depths of all marine terminals to minus 50 feet. Berths at most terminals are approaching that depth now, and the project should be near completion next year, port spokesperson Marilyn Sandifur said.

Oakland is home to eight container terminals. The Oakland International Container Terminal contains 150 acres of land and serves COSCO, China Shipping, CMA/CGM, Matson and several other lines. Maersk Sealand operates on nearly 158 acres, while Hanjin Shipping has a 120-acre facility, and APL controls an 80-acre terminal. Other container terminals average 50 acres in size and serve carriers including “K” Line, MOL, and Evergreen.

Intermodal traffic now represents 30 percent of Oakland's business, and port officials hope to grow that volume to 50 percent, Sandifur said. As a result, the port is planning a new intermodal yard, and rail lines within the harbor are being double-tracked to permit trains to move in and out simultaneously.

Projecting double or triple volumes during the next two and a half decades, Sandifur said, “We're just going to keep getting better.”

In the meantime, Pacific Northwest ports have traditionally marketed their chief advantage as being one-and-a-half days closer to Asia than Southern California, but today they also are pointing to terminal improvements and rail enhancements as reasons for their success. Both have profited from cargo diversions from Los Angeles and Long Beach, and both are rapidly expanding to keep up with double-digit growth.

Due to the smaller population of the Pacific Northwest, their ports may never grow as large as those in Southern California. As Tacoma's Executive Director Timothy Farrell said, “Our goal isn't to be the biggest West Coast port. Our goal is to be the most efficient.”

The Port of Seattle

The Port of Seattle celebrated a second straight year of 20 percent growth in 2005. Port officials attribute that growth to a general increase in trans-Pacific trade, and the port's investment of $1 billion in infrastructure during the past decade. Most cargo terminals have been doubled in size, said port spokesman Mick Shultz.

Seattle's Terminal 5, which serves APL, Hyundai and MOL, was expanded to 182 acres in 1998. Terminal 18-for Maersk, COSCO, China Shipping, “K” Line and several other carriers-was enlarged to 196 acres in 2002. Both terminals have on-dock rail facilities serviced by the BNSF and Union Pacific railroads.

Terminal 46, which serves Hanjin Shipping and others, was expanded to 88 acres in 2004. Both terminals 18 and 46 contain super post-Panamax cranes to offload ships carrying up to 8,000 cargo containers. Those cranes, along with water depths of minus 50 feet, have allowed Seattle to welcome some of the largest ships in the world.

Intermodal cargo has traditionally represented 70 percent of Seattle's inbound and outbound trade. Yet during the past five our six years, major retailers such as Wal-Mart, Home Depot, Target, Michael's and Pier I have established import distribution centers in the Puget Sound region. As a result, the percentage of cargo remaining in the region has increased to 35 percent, while intermodal cargo now represents 65 percent of Seattle's trade, Shultz said.

To handle intermodal cargo, BNSF is making improvements to increase capacity and efficiency at the Seattle International Gateway rail yard. Roadway improvements have been made to improve the flow of trucks within the port and to improve access to the freeway system.

The Port of Tacoma

The Port of Tacoma opened three new or renovated container terminals in 2005, contributing to the port's 20 percent growth in international trade.

The Pierce County Terminal is the port's largest at 171 acres. That terminal features 51-foot water depths and seven super post-Panamax cranes capable of offloading ships carrying 8,000 container units. Evergreen shipping calls at the terminal, and has a future option of expanding the facility to 237 acres.

Tacoma renovated its 74-acre Husky Terminal for “K” Line shipping last year, while opening a 54-acre Olympic Container Terminal for Yang Ming line.

Over the next five years, Tacoma plans to spend more than $430 million on terminal expansions and infrastructure improvements, said port spokesman Mike Wasem. The 135-acre AMP Terminals will be expanded for Maersk Sealand and Horizon Lines.

In addition, the port will add 20 acres to the 80-acreWashington United Terminals, which serves Hyundai Merchant Marine.

With 75 percent of its containerized imports heading eastward via rail, Tacoma has established a goal of becoming the most efficient and reliable intermodal gateway in North America, Wasem said. The port features four on-dock rail yards. Capital improvements include additional track and projects to minimize conflicts between roadways and rail lines. A new Tacoma Command Center-opened in May 2005-will permit better coordination of rail movements between the port, Tacoma Rail, Union Pacific and BNSF railroads, port officials said.

The Port of San Diego

The Port of San Diego is a multi-purpose niche commodity port specializing in breakbulk, bulk, project cargoes and niche container cargoes. The port has experienced over 160% volume growth in the last decade and continues to make substantive investments in capacity.

Over the past five years, the Port of San Diego has developed a 20-acre refrigerated container facility for Dole Fresh Fruits ($27 million), on-dock rail tracks improvement ($26 million), a wharf extension project ($25 million), and a berth-deepening project (to a depth of 42 feet).

It operates two state-of-the-art multi-purpose cargo facilities. The Tenth Avenue Marine Terminal, with 96 acres of capacity and 8 berths, includes over 1 million square feet of warehouse space and 300,000 square feet of on-dock cold storage. The National City Marine Terminal, with 7 berths, specializes in automobile importations and lumber.

Sidebar: West Coast Maritime Contacts

Major West Coast Ports:

Port of Los Angeles www.portoflosangeles.org

Port of Long Beach www.polb.com

Port of Oakland www.portofoakland.com

Port of Seattle www.portseattle.org

Port of Tacoma www.portoftacoma.com

Port of Portland www.portofportland.com

Port of San Diego www.portofsandiego.org

Major West Coast Ocean Carriers:

Maersk Sealand www.maersksealand.com

Hanjin www.hanjin.com

APL www.apl.com

COSCO www.cosco-usa.com

China Shipping www.chinashippingna.com

OOCL www.oocl.com

Hyundai www.hmm21.com

“K” Line www.k-line.com

Mitsui OSK www.molpower.com

NYK www.nyk.com

Evergreen www.evergreen-marine.com

Yang Ming www.yml.com

Matson www.matson.com

Zim www.zim.com

Mediterranean Shipping www.mscgva.com

Some West Coast Forwarders and Logistics Companies:

Fed Ex Trade Network: Offers customs brokerage, freight forwarding, export documentation and distribution services: www.ftn.fedex.com.

Nippon Express: Offers logistics, customs brokerage, warehousing and distribution services: www.nipponexpressusa.com.

Stonepath Logistics: Offers customs brokerage, warehousing, inventory fulfillment and distribution and other logistics services: www.stonepath.com.

Carmichael International: Offers customs brokerage and freight forwarding in addition to other logistics services: www.carmnet.com.

Western Overseas Corporation: Offers customs brokerage, freight forwarding, logistics management, warehousing and distribution: www.westernoverseas.com.

Maersk Logistics: Offers freight forwarding and integrated logistics: www.maersk-logistics.com.

Lynden Logistics: This Pacific Northwest company offers freight forwarding, consolidation, warehousing and distribution: www.llog.lynden.com.

OH Logistics: Offers more than one million square feet of warehouse space in Southern California and 19 million square feet of warehouse space nationwide: www.ohlogistics.com.

Links

• Maersk Sealand
• “K” Line
• Mediterranean Shipping
• Evergreen
• Hyundai
• Port of Oakland
• Zim
• Hanjin
• OOCL
• Port of Tacoma
• Stonepath Logistics
• China Shipping
• Port of Portland
• Western Overseas Corporation
• Carmichael International
• Fed Ex Trade Network
• Nippon Express
• Port of San Diego
• Matson
• OH Logistics
• Mitsui OSK
• Port of Los Angeles
• NYK
• Maersk Logistics
• Lynden Logistics
• Port of Seattle
• Yang Ming
• COSCO
• Port of Long Beach