Is Bigger Better? Maybe?
Ships grow in size as Southern California ports struggle to handle a surge in container cargo
LOS ANGELES - 08/12/04 - Major ocean carriers like China Shipping Container Lines and Orient Overseas Container Line are introducing a new generation of mega-container carriers into the transpacific trades that have almost double the average capacity of the ships currently carrying the goods on the world's major shipping route.
In late June, the Orient Overseas Container Line containership OOCL Ningbo glided silently into the Port of Long Beach on her maiden arrival.
The mammoth, 25-knot, Korea-built ship - 1,056 feet long and 140 feet wide with a capacity of 8,063-twenty-foot-equivalent-units (TEU) - was credited with "leap-frogging a generation of 6,600-TEU ships that made their first calls in Long Beach only five years ago."
Its sister ships, the OOCL Long Beach called in Long Beach last summer, and the OOCL Hamburg made its first call at the Long Beach Container Terminal in March.
She was heralded as "the world's largest containership" and the biggest box carrier ever to call at the port since it began handling containers in the early 1960s.
It was a record that the OOCL Ningbo held for all of four weeks.
On July 24, a usurper to the crown slid into her berth at the TTI mega-terminal at Pier T on Terminal Island accompanied by the appropriate fanfare and another blizzard of superlatives.
The new reigning champion - at least for the time being - is the China Shipping Container Lines' 8,500-TEU CSCL Asia, the "largest of the world's largest container ships."
The newly built CSCL Asia outstrips the OOCL Ningbo by some 40 feet, measuring in at 1,096 feet in length and 140 feet in width, or about 30 feet wider than the Panama Canal.
According to her owners, fully loaded, the ship can carry enough cargo to completely fill a 1 million-square-foot regional shopping center with products eight feet high and she is the first of five 8,500-TEU vessels that China Shipping has ordered for delivery over the next five years from Samsung Heavy Industries of South Korea, curiously'the same builders of the deposed OOCL Ningbo and her 11 sister ships.
To add to the mix, three additional carriers - Mediterranean Shipping Company (MSC), CMA CGM, and China Ocean Shipping Company (COSCO) - already have put into service or are planning to call at the Port of Long Beach with 8,000-plus TEU ships.
But there are reports circulating that there may be more - literally - just over the horizon.
According to industry sources, A.P. Moller - parent of giant Maersk Sealand - is seriously considering plans to contract with its Odense Shipbuilding subsidiary to construct a multi-ship class of? "mega-Panamax" containerships with a capacity possibly approaching a staggering 11,000 TEUs.
Heady times to be sure, but this "Summer of the Mega-Ships" comes as a quartet of circumstances - some good, some bad, namely a shortage of trained dockworkers, an earlier-than-anticipated surge in containerized import shipments from Asia, an economy that's grown by 4% in the first half of the year, and a lack of rail capacity - have merged to cause an ongoing logjam of cargo at the overburdened Port of Long Beach and its neighboring Port of Los Angeles.
In fact, the average container now sits on the dock at either port for seven or eight days before being loaded onto a rail car or a truck chassis for transport to the interior of the country.
And now, with the coming of the "mega-ships," more containers are on the way with the most conservative forecasts predicting a doubling of container volume at the neighboring ports - which already rank as the country's first and second, respectively, busiest container ports - within the next ten years.
But some industry analysts don't see the influx of larger ships on an already-burdened port infrastructure as a problem in and of itself.
"Volume is volume no matter what," says Steven Sugarman, a spokesman for the Pacific Maritime Association, the San Francisco-based organization that negotiates the labor contracts between terminals operators and ocean carriers serving the US West Coast and the International Longshore & Warehouse Union (ILWU).
According to Sugarman, the ILWU's recent announcement that it would be hiring 3,000 new dockworkers to work the terminals at both Long Beach and Los Angeles "is a giant positive step in the right direction" to solve the problem in the medium and long-term, as are the introduction of new technologies to improve cargo handling capabilities, as well as the increased number of hours per week that terminals can remain open to work the ships at their berths.
"Whether the cargo arrives aboard a single ship or two, it's immaterial. The real issue is making sure that every component in the total supply chain is functioning smoothly and efficiently."
Christopher Koch, president and CEO of the World Shipping Council in Washington, DC, agrees.
While there's little question that the huge growth in the volume of import cargo is creating challenges Southern California transportation infrastructure, he said, "One could argue that port congestion is perhaps improved with one large ship rather than two smaller ships trying to unload the same volume of cargo in the same time frame at the same facility."
Both Long Beach and Los Angeles "have the deep channels that can accommodate these bigger vessels, but they're facing the same current import cargo growth challenge even if they could handle only 4,000-TEU ships," Koch said, adding that "the loudest voices of concern would be raised if the carriers weren't providing the capacity the very large cargo volume growth rates."
But, he told the CalTrade Report, there are no easy answers to the ongoing problem of cargo congestion at the two ports.
Importers, to whom the large bulk of the container cargo crush is consigned, "have to change their habits. They have to be willing to pick up cargo during longer working hours to stretch out the time frame during which these volumes are being delivered through the ports," Koch said.
But, at this point, the weak link in the supply chain, both Sugarman and Koch said, is the current lack of rail capacity.
"There are system-wide issues that the rail carriers need to address before we'll be seeing a break in the cargo logjam," said the PMA's Sugarman, particularly a chronic shortage of intermodal railcars and equipment, and too few trained personnel to man the trains linking Southern California to distribution points throughout the US interior.
According to the US Surface Transportation Board, the federal agency that regulates rail carriers, the inability of the Union Pacific Railroad - the largest rail carrier moving containers in and out of Southern California - to handle the increased cargo load is based in the carrier's moves last year to reduce employment and equipment purchases last year to cut costs.
As a result, the agency said, the railroad "hasn't been able to catch up with the fast-growing economy."
Business "is very strong, but the demand is more than we can handle at this point," a spokesman for the railroad said in late July.
In addition, the UPRR has said it plans to increase rates for intermodal shipments by 9.5% beginning August 17 with the region's other major rail carrier, the Burlington Northern Santa Fe Railway (BNSF), instituting a similar rate increase starting on the same date in part to help both carriers improve their service profile to handle the surge in container cargo.
In response, the UPRR said the Omaha-based railroad expects to hire 5,000 new train-service workers this year and is purchasing locomotives at an accelerated rate.
However, the new employees need four to six months of training before starting work.
The issue is so acute, says Koch of the World Shipping Council, "that some of the volume of mid-west destination cargo that importers direct be sent through Los Angeles or Long Beach may increasingly be sent to Oakland or Seattle/Tacoma."
Koch's comments come soon after reports that the ongoing difficulties at the two Southern California ports have compelled several ocean carriers to selectively divert ships bound for Los Angeles or Long Beach north to Oakland or south to Manzanillo, Mexico.
"We have to serve our customers," said an executive with a major transpacific carrier who spoke with the CalTrade Report only on condition of anonymity. "If diverting a vessel adds only two or three days to a delivery schedule instead of the cargo sitting on the dock for a week before it moves inland, that's what we'll do."
The situation "is going to take some time to sort out," said Sugarman of the PMA. "But the essence of a effective supply chain is maintaining flexibility and minimizing the bottlenecks that increase pressure on the whole system."
If anything good comes out of this, he said, "it's that we can now see in clear detail what issues need the greatest attention so that long-term solutions can be crafted and that this sort of thing doesn't happen again."
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