Pacific Maritime Magazine - Marine Business for the Operations Sector

Regional Report: LA/Long Beach

 

A backlog at Long Beach caused by labor negotiations led to the opening of a temporary chassis depot and a proposal to reduce the amount of time containers can stay on the docks before they incur storage fees. Photo courtesy of the Port of Long Beach.

What a difference a year can make. Twelve months ago, the adjoining ports of Los Angeles and Long Beach were digging out of a backlog of cargo caused in part by a significant reduction in productivity.

There were differing opinions on the cause of the reduction, but the backlog – and it's eventual elimination – coincided with negotiations on a new labor contract between the Pacific Maritime Association and International Longshore & Warehouse Union.

As a result of the congestion, some shippers diverted cargo to elsewhere on the West Coast, as well as back East, and each port's monthly container volumes were down for a while as a result.

"Last January, we found ourselves in an epic struggle with severe congestion and gridlock," Port of Long Beach Chief Executive Jon Slangerup remarked during his 2016 State of the Port speech in January. "Cargo diversion to the East Coast last year cost our BCOs (beneficial cargo owners) millions of dollars per day."

Although an agreement on a new labor contract was reached in February 2015, it would be several weeks before the two ports would be able to eliminate the backlog through various means, which included opening a temporary chassis depot and holding regular public forums on how to relieve congestion. Later in the year, a proposal was also floated to reduce the amount of time containers can stay on the docks before they incur storage fees.

Although the first half of the calendar year was nothing to brag about for either port when it came to cargo volumes, the year's second half was a different story. During July and August, Long Beach achieved record cargo volumes resulting in the biggest quarter in the port's history, as over two million TEUs moved through the port in the third quarter alone.

"While we were predicting it would take three months for operations to recover, it actually took half the time – just six weeks – to clear the backlog of ships at anchor and begin to approach pre-congestion levels of throughput the entire year," Slangerup said.

By the time 2015 ended, the Port of Long Beach had delivered its biggest year since 2007, something that took the port back to pre-recession volume levels. Last year, the port handled 7.2 million TEUs, which was only the third time in its 105-year history that it exceeded seven million TEUs.

Through December 2015, Long Beach's year-over-year volume growth was 5.4 percent, nearly double that of the US economy last year.

"Although we saw record volumes through our peak season, we experienced no chronic congestion problems," Slangerup said. "In fact, trucking queues and turn times dropped by a third, and rail fluidity and velocity reached record levels of performance."

One piece of the puzzle was the periodic joint stakeholder meetings that the two ports begin conducting last April. More than 50 such meetings and conference calls have been conducted, Slangerup said, with peak period operations, chassis availability, terminal operation, rail capacity and trucking operations being among the topics discussed.

The mission, Slangerup said, has been to create a marine supply chain that provides visibility and time-certain delivery of containerized cargo from origin to destination.

Interestingly, although Port of Long Beach annual container volumes rose compared to the year prior, those at the Port of Los Angeles fell slightly. L.A. terminals saw a total of 8.1 million TEUs, which was a 2.1 percent decrease from the 8.34 million TEUs the port saw in 2014. But is also happened to be up from the 7.9 million TEUs shipped through the POLA in 2013.

Port of LA spokesman Phillip Sanfield said that the 8.1 million TEUs of 2015 is the fifth time the port has eclipsed the eight million mark. No other port in North America has even seen eight million TEUs in a single year.

"It's still a mark we're proud off, even though we were off a couple of percentage points," Sanfield said, "and we hope to build on that this year."

Port of LA Deputy Executive Director Michael DiBernardo remarked that 2.1 percent annual drop in container volumes wasn't a sign of decline at the port so much as it was an example of the consolidation of operations by shipping lines.

"With (shipping) alliances, it should be noted that San Pedro Bay volumes – the Port of LA, Port of Long Beach – should be looked at together to determine the strength of the market," said DiBernardo, who oversees the port's marketing and customer relations. "Shipping lines can ship services between terminals and ports as required."

"Because of the alliances, shipping line A could have some ownership in a terminal at a port in LA, but they're in an alliance with somebody that's at the Port of Long Beach, and then those ships could go back and forth, so that would affect the ports' individual volume performance, but not an indication of what really happened in the gateway," he explained.

DiBernardo did admit, however, that the protracted labor negotiations in 2014 and early 2015, did play a part in volume declines at LA last year. The port lost about 30 vessels to other ports, which amounts to 400,000 TEUs, he said.

But another factor, he said, was that 2014 volumes were higher than normal due to a lot of cargo being brought in during the first half of year due to expiration of the labor contract, and the inflation of 2014 volumes had a negative effect on early 2015 numbers.

He said the negative annual growth of 2015 isn't expected to become a trend.

"We're thinking anywhere from two percent to two-and-a-half percent growth," he said. "And a lot of that has to do with the mergers that are going to be taking place," he said referring to the December 2015 purchase of the APL container group by French shipper CMA CGM for $2.4 billion.

"We also have the March-April time period where China Shipping and Cosco are going to be merging," he said. "They have a terminal in LA and they have a terminal in Long Beach, so there's a lot of uncertainty over how those service switches and how those mergers will look in regards to volumes at the individual ports."

A look at the future of containerized shipping came to the Port of L.A. just after Christmas last year via a call by the CMA CGM Benjamin Franklin, a massive, 18,000-TEU vessel that's the largest to ever visit a US port. The ship, which is longer than the Empire State Building and wider than an American football field, was making its maiden voyage to the West Coast.

Up to this point, it's the largest of its size to ever visit LA, and as such, special plans had to be made to ensure everything went smoothly.

"We actually had a number of conference calls with CMA prior to the ship even hitting its first port in Asia," DiBernardo said, stating that the two sides talked about logistics and planning the ship's arrival.

"Since the vessel arrived the day after Christmas, there was a concern about the number of longshore labor that was going to be available to handle the volume that was coming in. Typically, because it was a Saturday, you would think that the longshoremen would take an extended weekend after the holiday. But what we did is we met with the ILWU, told them about the importance of this ship, and making sure that there was enough labor in place to handle the vessel when it came in," he explained.

"At the same time, we worked with the railroads to make sure there were enough railcars available to move that intermodal cargo out as quickly as possible," he said. "And the trucking community made sure there were enough truck drivers available to move the cargo to the local distribution centers."

"We're proud to say that it moved out quickly, it moved out smoothly, there were very minimal hiccups," he added.

Another thing that went smoothly for the Port of Los Angeles in 2015 was its efforts to reduce air pollution from port and port-related sources.

The port's 2014 Air Emissions Inventory, which was released in October 2015, showed that NOx emissions at the POLA are down 52 percent from the 2005 baseline, while diesel particulate matter is down an unprecedented 85 percent and sulfur oxides are bordering on total elimination, having plummeted 97 percent since 2005.

About a decade ago, the port set air emissions goals for the year 2023, and those goals are on track to be met, DiBernardo said.

"Our challenge will be to meet these emission levels while cargo throughput increases," he said. "We're confident that we'll be successful."

"We're now beginning to test even cleaner equipment, such as ultra-low NOx emission engines, hybrids and zero emission equipment," DiBernardo revealed. "We think as these equipment begin to evolve, they'll be implemented into terminals to test them and to put them in place."

Since 2005, the POLA has reduced diesel particulate matter by 85 percent and NOx by 52 percent, as of 2014.

And later in 2016, he said, LA and Long Beach will release a second update to its Clean Air Action Plan, a blueprint for reducing, and perhaps eliminating, harmful emissions.

"What we're going to do is implement a lot of the new technology that we're seeing out there, new ideas that are coming out, new rules from the California Air Resources Board, and even from the federal air resources board. Those things are all being incorporated in CAAP 3.0," he said.

"We firmly believe that economic and environmental sustainability are two sides of the same coin," Slangerup said, "and doing things right preserves capital and protects lives."

The CMA CGM Benjamin Franklin became the largest container ship ever to call a at North American port when it docked at APM Terminals Pier 400 in Los Angeles on its maiden voyage to the West Coast just after Christmas. Photo courtesy of APM Terminals.

He added that the opening of the first phase of Middle Harbor redevelopment in the second quarter of this year is expected to be a huge anti-pollution milestone. Middle Harbor, which has been under construction since 2011, is a $1.3 billion project that's expected to result in the world's first all-electric, zero-emission mega-terminal via the combining of two aging shipping terminals, Pier E and Pier F.

In April 2012, Orient Overseas Container Line signed a 40-year, $4.6 billion lease to operate the 300-acre green terminal along with a subsidiary.

"We firmly believe that economic and environmental sustainability are two sides of the same coin," Slangerup said. "I couldn't be more excited about the future, or more proud to be part of this extraordinary port community."

 
 

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