Pacific Container Port Congestion Intensifies
Terminals, infrastructures strain under labor problems, equipment shortages, and a staggering surge of box cargo
LOS ANGELES - 10/04/04 - One-by one, like a line of dominoes stretching from Long Beach to Vancouver to Port Kelang to Chittagong, major ports circling the Pacific Rim are struggling under a surge in container cargo and a combination of other disparate issues that have melded into a sludge clogging the most critical artery in the global logistics network - the transpacific ocean routes linking Asia and North America.
In Chittagong - the largest port in Bangladesh and the center of the Southeast Asian's country's export-dependent economy - labor problems, exacerbated by a severe shortage of rail cars, have cut the port's daily container throughput in half.
Malaysia's largest harbor, Port Kelang has been struggling with a devils-brew of infrastructure problems that could be compounded if a threatened work slowdown develops over the next week.
The dispute centers on who is responsible for the inputting of the seal and container booking reference numbers for export containers by shipping agents and carriers.
A major hub on Malaysia's west coast, Port Kelang - 12th busiest container port in the world - handled more than 4.8 million TEUs - 20-foot equivalent units - last year, up almost 7% from the 4.5 million in 2002.
According to Malaysian press sources, hundreds of millions of dollars worth of goods could be held up at the port with Malaysian exporters facing the possibility of substantial losses and possible lawsuits from their overseas clients.
The threat, said one shipping executive interviewed in The Straits Times, "is serious in view of the current peak shipping period as exporters rush to meet demand for the Christmas and New Year holidays."
According to David Lim, president of Singapore-headquartered Neptune Orient Lines Ltd (NOL) - one of the world's largest container carriers and parent of Oakland-based American President Lines - the problems at Pacific ports "could worsen as the world's shipping lines take delivery of new ships to handle sea traffic to China and booming exports continue to flow out of from the world's seventh-largest economy."
"In America, but also elsewhere, rail services that clear cargo from the ports that were downsized in recent years now find themselves stretched beyond capacity to cope with double-digit demand growth," he recently told The Straits Times. "More ports need to be developed, but local objections - from air and noise pollution to traffic congestion and the impact on wildlife - are slowing the building of new infrastructure."
In Canada, Vancouver, BC - the country's Pacific gateway port that handled 1.4 million TEUs in 2002 - is also having difficulty keeping pace with the eastward tidal wave of cargo.
"[Canadian] companies importing goods from China could face billions of dollars a year in extra costs as it becomes increasingly difficult to move fast-growing supplies of merchandise on time through a strained transportation system," one logistics industry source told the Toronto Globe & Mail recently.
Some companies "are even starting to reassess their decision to buy cheap merchandise from China, looking for alternative supply sources because of the clogged routes," said Jayson Myers, chief economist at the Canadian Manufacturers & Exporters Association.
The strains on the overseas transportation system are twofold, he said. "First, shipping from China to West Coast ports in North America, as well as shipping from those western ports to centers across North America. Second, the capacity to move goods from the coast inland is also lagging."
A senior executive at the Hudson's Bay Co., Canada's largest and oldest retail company, told the paper that the overloaded transportation corridor through Pacific Coast posts could become "a big headache" in the future.
Some companies, he said, "may even consider rerouting traffic through the Suez Canal and bringing in shipments via Halifax and Montreal because there is going to be a capacity issue, somewhere down the road."
If companies haven't created a stable and reliable network for shipping overseas supplies, "you have the potential of getting squeezed out," he concluded.
Closer to home, observers have said, the situation looks just as stark.
"The US cargo system has reached its maximum capacity and there has been a steady growth in imports, while there is no coherent expansion plan for transportation," a spokesman for the Los Angeles Economic Development Corp recently told the Los Angeles Times.
This is particularly true in California as the continuing influx of import containers from Asia to points throughout the US is taking a particularly marked toll on the state's California's already overburdened seaport and ground transportation infrastructure.
The growing concern about the state's capability of handling a surge in cargo with no end in sight is centering on California's big league container ports - Los Angeles, Long Beach, and Oakland - all of which rank high on the list of the world's most active container ports, as well as among the Top Ten busiest ports in the US.
At the Port of Oakland, officials there have been "irked" by the constant delays in getting an adequate number of the intermodal rail cars needed to move containers out of the San Francisco Bay Area to inland points.
According to a recent story in The Oakland Tribune, at one point this year, port authorities couldn't get either railroad serving the region [the Union Pacific Railroad and the Burlington Northern Santa Fe Railway] to deliver the cars needed to ship containers off port property."
As a result, "some shipping companies skipped their routine stops in Oakland and unloaded all containers in Southern California," while, at the same time, "port officials had hoped congestion in Southern California would lure shippers to Oakland."
"It created a backup for the ships, and then once the ships backed up you had a trickle-down effect," said Wilson Lacy, the Port of Oakland' maritime director. "It backed up terminals, and as a result some ships were cutting and running in Los Angeles and bypassing us."
The problem is increasingly acute in Southern California where the most recent figures show that the ports of Los Angeles and Long Beach, combined, handle 70% of the cargo moving between Asia and the US and a full 40% of the total ocean cargo shipped to the US every year from all over the world.
Last year, Los Angeles joined the "Seven Million Club" handling 7.1 million containers, up a full 17.6% over 2002's total of 6.1 million. The port - ranked No. 6 in the world - is home to the huge Maersk Sealand Pier 400 Terminal, the largest proprietary terminal in the world.
Neighboring Long Beach - the world's 13th busiest container port - saw 4.7 million in 2003, up 3% from the previous year and both ports are expecting to see a dramatic increase in container volume through the year 2020, according to a report by Wharton Econometrics Forecasting Associates.
Both ports, the report concluded, will see the number of containers moving through their terminals triple by the year 2020 - a surge of between 5% and 6.6% over their present levels.
At Long Beach alone, this would mean the port handling between 12.1 and 16.6 million TEUs annually.
Last week, between 75 and 80 ships was being worked at both ports' facilities, while about 30 more vessels ships were anchored offshore waiting for berths to clear.
The backlog of ships was the worst since the 2002 longshoremen's strike that crippled West Coast ports from Seattle to San Diego for almost three weeks.
According to the Los Angeles-Long Beach Marine Exchange, which monitors vessel traffic at both ports, the turnaround times for ships calling at Los Angeles or Long Beach is currently averaging four to five days, with some taking between eight and 10 days.
Over the last several weeks, long delays at container terminals at both ports caused mainly by a shortage of trained dock workers "have forced some independent truck drivers to stop serving the port, leaving some trucking firms hard-pressed to find replacements and further aggravating a cargo logjam at the ports," according to the Los Angeles Times.
The situation "is also costing some trucking companies business because some drivers refuse to take a job ferrying cargo containers" out of the ports.
"I cannot get enough drivers," said Patty Senecal, vice president of Transport Express Inc., a Rancho Dominguez-based harbor trucking and warehouse company. "I reduced my customer base. I can't take on any more business. Every day I'm turning down new business."
The drivers, who earn money based on how much they transport, not for the time worked, "are routinely forced to wait at the port terminals for several hours, their trucks idling, to pick up or drop off cargo containers," trucking industry officials told the paper.
Still, the Times reported, "measures to help alleviate the port congestion are in the works, though progress has been slow-going."
Last month, terminal operators at both ports and the International Longshore & Warehouse Union (ILWU) agreed to "fast-track" the training of 3,000 new dockworkers hired in August and to gradually begin extending operating hours by opening truck gates on weekday nights and during daylight hours on Saturdays in hopes shippers will move their freight in the evenings and on weekends and ease traffic at the ports.
But implementation of that plan has been pushed back from next month to at least the first quarter of 2005 because of a lack of dockworkers, according to Jon Hemingway, president and CEO of SSA Marine, the world's largest private marine terminal operator.
"We wouldn't have an adequate supply of labor to start in November," Hemingway told the annual meeting of the Association of American Port Authorities in Long Beach earlier this week.
According to sources, only about 800 of the 3,000 new hires have been trained so far, and only 100 of those are showing up for consistent shifts.
It was estimated that 550 part-time longshoremen, on top of the 3,000 new hires, would have to be added to make the off-hours system work, according to reports.
Almost two months ago, Hemingway said a coalition of 13 terminal operators in Long Beach and Los Angeles had agreed to shift port-related truck traffic from local highways - particularly the I-710 (Long Beach) Freeway - during peak traffic times by charging a fee for containers moved from 8:00 am to 5:00 pm weekdays.
The coalition, Hemingway said, was spurred by legislation authored by California State Assemblyman Alan Lowenthal (D-Long Beach) that would have charged $100 per container moved out of the ports during the day.
Lowenthal reportedly rescinded his bill when the terminal operators announced a plan to accomplish the same goals, but with a $40 per 40-foot-long container fee.
The $40 fee will be used to pay for the terminals' increased labor costs for operating at night.
Currently, both ports see some 35,000 truck moves every day with only about 5% to 10% of the containers handled at their terminals hauled at night to distribution centers and railheads in Los Angeles and Orange Counties, and the Inland Empire.
Port of Long Beach Executive Director Richard Steinke told the Long Beach Press-Telegram that moving cargo at night "might entice Congress to devote funds to improve infrastructure in and around local ports."
Until they see better use of our existing assets, he said, "the money won't come."
Despite the growing concern, Hemingway, who organized the coalition of terminal operators, is still cautiously optimistic.
"We don't want this to be practice," he told the Press-Telegram. "We want to see if it really reduces the amount of trucks during the day. "You don't take on changing the way 12 million [containers] are handled without interrupting the current flow of cargo."
Summing up in starkly simple terms with a local perspective that echoes across the Pacific, David Arian - president of Local 13 of the ILWU, which represents the dock workers at the ports of Los Angeles and Long Beach - recently told reporters, "Cargo has accelerated to the level that nobody expected."
The ports, he said, "have reached the saturation point."
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