Ports of LA and Long Beach Looking Toward the Future
Both the Los Angeles and Long Beach sides of America’s largest port complex had their share of significant and noteworthy events in 2002, from highs in monthly container volumes to first-time visits by largest-ever container vessels to a labor strike that wiped out more than a week’s worth of productivity.
So it’s interesting that at least one leading figure at one of the ports thinks the most significant occurrence at the Port of Los Angeles during 2012 had more to do with the port’s future than its recent past or present: the adoption of a new five year strategic plan last April.
“Doesn’t sound like a big deal, but it really impacted us,” Port of LA Executive Director of Business Development Kathryn McDermott said. “The strategic plan really looked at the three key areas that we need to focus on for the next five years: customer relationships, our infrastructure and financial strength.”
“Strategic plans are rarely the highlight,” she says, but notes that in this instance, “In all our decision making – in our budget, in our prioritization within every group within this port – we look at that strategic plan and that guides us in how we make every decision.”
The strategic plan, which covers the years 2012 to 2017, maps out the port’s priorities, objectives and various initiatives for developing infrastructure, enhancing overall competitiveness, growing market share, optimizing land use, advancing maritime technologies and sustainability efforts. It includes about $1.2 billion for the port’s capital improvement program, with more than half of that to be disbursed this year and in 2014.
“It’s all about competition, competitiveness and our business, our facilities and how we make decisions, so we’re really excited about the strategic plan,” McDermott said. “It’s one that every person in this building can relate to: competitive operations, financial strength, customer relationships, and so we have initiatives within each of those key results areas.”
Over at the Port of Long Beach, managing Director of Trade Development and Trade Operations Sean Strawbridge has a very different answer regarding his port’s most significant event of 2012. He cited CMA CGM, the world’s third-largest container shipping line, buying a stake in the port’s Pier J terminal.
Pier J is the site of Pacific Container Terminal, which has been operated as a joint venture between global maritime services company SSA Marine and the China Ocean Shipping Co. (COSCO). Last November the Marseille, France-based ocean carrier became a partner in the lease and operations of the 256-acre terminal, thereby marking CMA CGM’s first investment in a port on North America’s west coast.
“From a business development standpoint, our biggest achievement would probably be their decision to invest in terminals at the Port of Long Beach,” he said. “All of their Southern California cargoes will be coming to the Port of Long Beach, so we’re proud of that accomplishment.”
One of the shipping lines with operations at Pier J is Mediterranean Shipping Co. (MSC), which was responsible for another of the more noteworthy occurrences at Long Beach in 2012: the first-ever call at a North American terminal by the MSC Beatrice, the second-largest capacity container ship in the world. The ship, which is more than 1,200 feet long and 167 feet wide, can be loaded with up to about 13,800 TEUs. On the morning of Sept. 30, the ship became the largest-ever container vessel to dock at the Port of Long Beach when it arrived at Pier T.
The MSC Beatrice, which was built in South Korea in 2009, is the latest of the new generation of big container ships to be put into service on U.S.-Asia trade routes. Until this year, the largest container ships serving North America had capacities of about 10,000 TEUs. Ships carrying up to 12,500 TEUs began calling at the Port of Long Beach in early 2012.
The MSC Beatrice's journey into the Harbor was aided by the fact that the Port of Long Beach’s main channel is 76 feet deep, the deepest in North America. The Port of Los Angeles, however, mostly finished the deepening of its own main channel in 2012. In September, the LA Harbor Commission approved the final phase of funding – $7.5 million – for the project, which included dredging of the channel and main basins to a 53-foot depth. The full project, which was begun 15 years ago, cost a total of $370 million.
“We are essentially complete,” port spokesman Phillip Sanfield said of the deepening. “We’re also working on a shallow habitat that’s going to extend into January and February, but for all intents and purposes, the actual dredging is complete, and the deepening.”
The project, McDermott said, is a testament to the foresight of the port’s leadership.
“It’s a credit in my mind to the Port of LA that we started this dredging project 15 years ago, when we didn’t know we were going to have 15,000 TEU ships coming here,” she said.” That’s kind of the theme: not just thinking about today, but thinking down the line.”
In addition to the channel dredging, the port saw several other construction projects move forward in 2012, particularly work at TraPac’s Berth 136 facility, which consists of 170 acres of container yard and three vessel berths.
“Our board has approved $127 million in contracts that will provide grade separated access to our TraPac terminal, and also involve building new buildings and gate entrances to TraPac,” McDermott explained. “It includes an EIR (environmental impact report) that was certified for APL’s expansion on Pier 300; we expect construction to start on that in 2013.”
Last June, the Harbor board approved a $196 million expansion of the 347-acre APL terminal on what’s commonly called Pier 300 and is operated by long-time tenant Eagle Marine Services. The Pier 300 expansion adds 1,250 feet of new wharf and 41 acres of backlands on existing fill. It’s expected to enable APL to handle nearly 58 percent more ship calls and accommodate more than 65 percent more cargo, increasing annual capacity to more than 3.2 million TEUs.
Also falling within the five-year span of the strategic plan is the completion of additions to LA’s China Shipping terminal; a second berth and additional backlands are being added to the China Shipping area.
“Our capital improvement program really is focused on expansion and modernization,” McDermott said. “TraPac is going to be the first terminal on the US west coast that will have automation as a part of the terminal operation. And we’re also going to build the APL terminal so that they also will have automation in their expanded area. We are going to see cranes that can pick up not one, but two boxes at a time.”
McDermott said 2012 marked the start of a renewed focus for the port.
“We’re seeing a new era start where we have to make sure our terminals are competitive and that they’re ready to handle the large vessels that are coming in,” she said. “We have the depth and now we’re making sure we have the backlands that can support these huge ships.”
Combined, LA/Long Beach is the largest, busiest port complex in North America, handling about 40 percent of all containerized imports in the US But separately, the LA side has typically handled larger cargo volumes than its competitor in recent years. Both sides had their ups and downs as far as month-over-month volumes compared to 2011, but while the Port of Long Beach particularly suffered losses during the first half of the calendar year, it began to rebound during 2012’s second half. Strawbridge attributed the losses to construction taking place as part of the nine-year, $1.2 billion Middle Harbor project, which consists of the upgrading of wharfs, water access and storage areas and the expansion of on-dock rail.
“We went from seven terminals to six while we’re doing the first phase of Middle Harbor,” he explained. “It’s like if you’ve ever remodeled your house and you’re redoing your bathroom, but while you’re living in the house you’re down a bathroom, you’ve got a little less capacity. That’s what our (container volume) numbers were reflective of.”
Strawbridge seems confident, however, that Long Beach has rebounded well so far and is poised to make even greater gains, thanks to various occurrences during the year. In April the port signed a 40-year, $4.6 billion lease with Orient Overseas Container Line (OOCL) for the new Middle Harbor terminal, and in July awarded of a $649.5 million contract for the design and construction of a replacement for Long Beach’s obsolete and deteriorating Gerald Desmond Bridge.
“In the second half of 2012, a lot of the business development initiatives that we had been working on started to really come to the fore. So what you’re seeing is significant growth even though we’re down one terminal,” he said. “But once Middle Harbor starts coming online you’re going to see a significant increase, and we actually think we’re positioned to overtake Los Angeles as the nation’s No. 1 container port, and we think that’s clearly a result of the investments that we’re making in our infrastructure today.”
But no matter how strong an infrastructure is, it can’t succeed without an equally strong workforce, something both ports were reminded of in late November, when members of the International Longshore and Warehouse Union went on strike. During the labor action, cargo containers sat stacked on docks and cargo ships sat idle offshore for over a week, bringing nearly all terminals at the complex to a standstill.
Striking ILWU Local 63, which represents about 800 dockworkers at the port complex reached a contract agreement with the LA/Long Beach Harbor Employers Association eight days after walking off the job.
The strike, which began at noon on Nov. 27, was launched after more than two years of negotiations. The clerical staffers had been working without a contract since their previous three-year pact with management expired June 30, 2010. The dispute, which centered on technology and job outsourcing, was settled Dec. 4.
McDermott acknowledged that the strike may have had an impact on the ports’ image of reliability and dependability, but also said that after it was all over, all sides managed to put the dispute behind them quickly for the good of the port.
“I’m proud of how each side found a way to get enough of what they needed and then everybody went back to work,” she said.
Strawbridge said he believes the labor dispute won’t have a lasting negative effect on his port.
“I think it’s quite the contrary. The strike, I think, was more of an anomaly,” he said.” I’m glad it came to a head at the time that it did, because most of our (holiday) seasonal shipping had already occurred.”
He said the labor issues at ports elsewhere in the US are more significant than those at LA/Long Beach, such as those between the International Longshoremen’s Association and 15 ports from Maine to Texas that came to a head late in 2012.
“I think we have one of the best waterfront workforces in the country,” Strawbridge said, “and I think what’s happening on the East Coast and Gulf Coast will likely result in even more business coming our way.”