Regional Report: Los Angeles and Long Beach
The ports of Los Angeles and Long Beach may be adjacent to one another, but being next-door neighbors doesn't mean that their economic fortunes are completely intertwined. This was certainly the case in 2016, as the Port of LA set multiple records for cargo handling, while the Port of Long Beach suffered its share of challenges.
Last year, the POLA boasted not just the busiest year in its history when it comes to container movement, but the busiest year ever for a Western Hemisphere seaport, moving 8.8 million containers during the 12-month period. The Port of Long Beach, meanwhile, saw an annual cargo dip of nearly six percent compared to the year prior, falling to 6.7 million containers in 2016, behind Los Angeles, but still a sizable enough total to remain the second-busiest seaport in North America.
Long Beach's traffic decline has been attributed mainly to two things, one being new ocean carrier alliances that have consolidated, and in some cases diminished container transport between Asia and the US. The other major factor was the August, 2016 bankruptcy of Hanjin Shipping, a South Korean company and former majority stakeholder at the port's 381-acre Pier T, Long Beach's largest container terminal.
Among the alliances formed in 2016 were last summer's merger of shippers Hapag-Lloyd AG and United Arab Shipping Co. into what is now one of the top five container shipping companies in the world; and the formation of the Transport High Efficiency (THE) Alliance, comprised of the merged Hapag-Lloyd along with K Line, MOL, NYK and Yang Ming that went into effect last December.
Last summer also saw Hyundai Merchant Marine sign an agreement with the 2M Vessel Sharing Agreement (2M VSA) for providing joint service in the trans-Pacific area beginning in April 2017.
"This past year, quite frankly has tested us," POLB Harbor Commission President Lori Ann Guzman admitted during Long Beach's annual 'State of the Port' event for stakeholders in mid-January. "The impact of changing alliances, the Hanjin bankruptcy and declines in cargo volumes that have challenged us all."
However, she said, the port has addressed the issues head-on. One example she gave was how after Hanjin stopped calling at the port, Mediterranean Shipping assumed the lease last December and took over the 381-acre Pier T, where over a quarter of the port's container cargo is moved.
"It's a clear sign of our flexibility and our ability to adapt, even during difficult times," Guzman said.
Guzman also mentioned other positive events from 2016, including that the POLB managed to maintain its top-level bond rating, plus broke ground on new headquarters which will be located near an under-construction city hall in downtown Long Beach, and created a $46 million community environmental grant program.
Also, last May, the port partnered in launching the Academy of Global Logistics, which plans to offer a four-year global training and logistics education for up to 700 local high school students every year.
"This education program provides the industry with the workforce of tomorrow," she explained.
Interim POLB Chief Executive Duane Kenagy, speaking at the same 'State of the Port' event, echoed Guzman's optimistic viewpoint, while saying there was much more work to do in 2017 and beyond to strengthen Long Beach's market position.
"We saw mergers, changing alliances, and even bankruptcies (in 2016), and now we face uncertain trade policies. It is clear only the most efficient and strongest will survive," he said. "Looking back over the past year, there was much to celebrate, but there were many challenges too; both bright skies and rough seas."
Kenagy has been in the interim role since last November, after the port's chief executive, Jon Slangerup resigned after just two years to accept a position as head of an aviation technology company in Canada.
Among the pluses that Kenagy mentioned in his 'State of the Port' remarks was the port's new ability to handle ultra-large container vessels, which can carry 14,500 TEUs or more. Because of this, last February global shipper CMA CGM chose Long Beach to host the christening of its newest vessel the 18,000-TEU Benjamin Franklin, the largest container vessel to ever visit the Western Hemisphere.
The Benjamin Franklin, which is 1,310 feet long and 177 feet wide, can carry more than double the cargo of most container ships calling at terminals at west coast ports. 18,000 20-foot containers, if laid end-to-end, would stretch about 68 miles.
Kenagy said that in 2017, Long Beach is preparing for the eventuality of such massive ships calling becoming the norm.
"To ensure that our port can accommodate whatever vessels may come, there remains much to do," he said. "We need to raise more cranes, strengthen our berths, deepen our waters and upgrade our rail facilities and highway access to make our terminals even more productive."
"We've positioned ourselves well for at least modest gains in the coming year; still there may be more turbulence ahead," he continued. "The forecast for global trade growth is rather weak, the new carrier alliances launch in April and vessel operators are still deciding where their ships will call; with the opening of the expanded Panama Canal last year, competition for business growth among North American ports is even more challenging; the administration's trade policies and their impacts on the port are still unclear."
"But here at the Port of Long Beach, we are ready to compete," he said.
Another component in the port's competition plan is the proposed Pier B On-Dock Rail Support Facility, which would shift more cargo at Long Beach to on-dock rail, where containers are placed directly on trains at marine terminals. Long Beach released a draft environmental report regarding the project in mid-December.
The rail yard would be operated by Pacific Harbor Line, a switching railroad that has converted its fleet to clean diesel locomotives that reduce air pollution and save fuel.
"The proposed Pier B rail support facility would provide our terminals with a staging yard where they can join blocks of cars into full-length trains that would otherwise be moved by truck, to regional railyards of inland distribution centers. It is our goal to move as much as half our container traffic in and out of the port by rail."
"We are working on a demonstration project at our maintenance facility to store excess energy generated by solar panels during the day for use at night or during an emergency."
"Looking ahead, there is still much more to come. We'll take big steps in the replacement of the Gerald Desmond bridge, LBCT expects to ramp up its operations at the first two berths at Pier E, full operations will resume at Pier T and we expect gains in cargo volume that will continue to grow our business. And of course, more big ships will come."
Meanwhile, at the adjoining Port of Los Angeles, you'll see none of the issues that hampered Long Beach. POLA CEO Gene Seroka said that the port's record-setting 2016 was due to a team effort that built upon several months of gains in container traffic throughout the year.
"Our container terminal customers, longshore workforce and our supply chain partners have been on an absolute roll," he said in January during his annual address to staff and stakeholders. "The work that we have done created the best January in the port's history, the best February and the best first quarter in the history of the Port of LA. Then the best May, the best October, and in November, we not only did ourselves proud, but we set a record for monthly throughput at a container port all-time for a Western Hemisphere port complex."
Additionally, the POLA set new vessel tonnage records with 338 ships calling the area in 2016 with more than 23 million tons of cargo.
"We wrapped up 2016 with not only our best December and our best fourth quarter in 110 years, but we set the annual record for container volume of any port in the history of our Western Hemisphere," Seroka bragged. "And that's the momentum that we take into year 2017."
Among the initiatives that he detailed during an hour-long speech were ones aimed at increasing efficiency and reducing air pollution.
In the coming year, he said Los Angeles will continue moving in the direction of creating a bay-wide reservation system to help balance the ebb and flow of container traffic moving through the port.
"I am also particularly excited about our information portal project with General Electric Transportation where we will digitize the same important cargo data that we've had collected manually for so many years," he said. "This project will demonstrate the benefits of expanding the line of sight on our inbound containers from two days to as much as two weeks in advance of ships calling here at the Port of LA."
He confirmed that LA, in conjunction with the Port of Long Beach, has been working to update their Clean Air Action Plan, a multilayered approach to reducing port-generated pollution that went into effect in 2006, that has exceeded expectations.
Over the past decade, emissions here in the San Pedro Bay have been reduced dramatically, including diesel particulate matter being down more than 84 percent, nitrogen oxide, or NOx, by 50 percent and sulfur oxide (SOx) by 97 percent. Additionally, greenhouse gases have also been reduced by 12 percent since 2006.
Remarkably, this has all occurred as cargo throughput has increased at the port complex.
After the original pollution reduction goals were met, the ports decided to set new goals and take advantage of advancements in technology. Among the ideas under consideration, Seroka said, are more zero and near-zero emissions trucks and cargo-handling equipment; new freight infrastructure and technology to improve supply chain efficiency; and a more comprehensive energy plan to expand programs to reduce ship emissions.
"Ultimately, our goal is to create a new plan for significant, ongoing emissions reductions over the next two decades, but it must also be a plan that carefully balances economic growth with strategies to eliminate harmful air pollution from port-related sources," Seroka said. To that end, it's imperative that the 2017 CAAP update include input from our industry partners, community, environmental stakeholders as well as others."
So, while the Port of Los Angeles is looking to continue its record-setting pace, the Port of Long Beach is trying to not only to gain ground on its San Pedro Bay neighbor and competitor, but also stay ahead of the other North American ports during what has become a time of uncertainty.
"We know that we're facing uncertain times and there's a lot of change in the industry and there's a lot of change also at the federal level, but we at the Port of Long Beach remain committed to making sure that we're constantly lobbying and advocating for our industry and what's best for us here and abroad," port board President Guzman said. "Our ambition remains nothing short of world leading, and we're confident that we're creating the premier seaport, as productive, as green and as responsive as any port in the world."