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US Gulf, East Coast ports vie to attract container cargo and business from the once-Golden State

LOS ANGELES – 12/04/08 – The continuing global economic crisis, dreary retail sales, and increased efforts by US Gulf and East Coast ports to attract container cargo are severely impacting the volume of goods moving through California’s deep-water container ports, according to the monthly Port Tracker report released this week by the National Retail Federation (NRF). 
 
Overall, nationally cargo volume at the nation’s major retail container ports is expected to decline 6.5% in 2008 compared with 2007 as merchants carefully manage inventories in response to the nation’s slow economy.

Container cargo volumes moving through the West Coast ports fell again in October, and 2008 is now expected to be the slowest year since 2004, the report said.

Import and export container volume moving through the Port of Los Angeles, the nation's busiest box port, was off 3.9% for the 12-month period ending in October, while the Port of Long Beach, the nation's second ranked port, was down 7.7% during the same period.

Meanwhile, the Port Tracker’s congestion rating for the Ports of Los Angeles and Long Beach continues at medium because of new regulations that required trucking companies seeking to do business there to obtain a special concession license.

“Uncertainties remaining for implementation of the Clean Trucks Program at the Ports of Los Angeles and Long Beach are causing concerns,” said Paul Bingham, an economist at Global Insight, the consultancy that compiles the Port Tracker report.

Weak import demand, he said, “has relieved pressure on port capacity but doubts remain about whether enough trucks will be available.”

The Port of Oakland is seeing staggered volume with the number of import containers down 6.4%, while containerized export shipments grew by 4.4% during the period.

Long among the nation’s Top Ten container ports, Oakland was recently bumped from fourth largest in the nation to fifth by the Port of Savannah, Georgia, which saw more than 2.6 million TEUs (Twenty-foot Equivalent Unit containers) move through its terminal facilities in 2007, a 14.9% increase over the previous year.

A softening of port business on the West Coast is not only in part due to the precipitous downturn and increasing attractiveness of alternate cargo routes, but to financial challenges ocean carriers face at California ports, according to Jonathan Gold, vice president for supply chain and shipping policy at the National Retail Federation.

"People are looking at the business environment surrounding California right now," he said. "They're making decisions on whether to use California ports or other ports."

In August, Savannah's year-to-date growth rate was a full 10%, the highest among all the country’s major ports, and ahead of other ports that were also growing quickly at the time, New York-New Jersey at 5.7% and Norfolk, Va. at 6.5%.

The Georgia Port Authority (GPA), for one, is investing heavily in infrastructure to increase cargo-handling capability at the US Southeast port including the acquisition of four additional super post-panamax cranes that are expected to arrive in early February and will be in operation next May and the addition next year of 14 additional rubber-tired gantry cranes manufactured in Finland.

While some 33 states have launched marketing campaigns to lure business away from California, the GPA and the Georgia Department of Economic Development recently embarked on a unique program combining their efforts to attract cargo away from the ports of Los Angeles, Long Beach and Oakland to the Port of Savannah.

At the same time, both agencies are planning to increase their joint efforts to convince California-based businesses that Georgia’s positive business environment and efficient transportation infrastructure makes it a better place to locate all or part of their operations. A full-time person was hired in November to fill the California-based combination cargo sales and economic development position. 

Transpacific ocean carriers are also eyeing ways to remain competitive in an increasingly depressed market with some expanding as others contract.

Singapore-headquartered Neptune Orient Lines, Ltd., the parent of APL, its container shipping arm, recently said it would cut 1,000 positions from its worldwide workforce; close the APL office in Oakland, affecting 350 people, some of whom will relocate to an office in a more "cost-effective" location in another state; and “make other adjustments.”

Moving in a more positive direction, Mitsui OSK Lines (MOL), for decades a major player in the transpacific trades, has said it’s close to completion of its new 158-acre terminal at the Port of Jacksonville, Florida (JAXPORT).

The new facility will be operated by the Transpacific Container Service Corp. (TRAPAC), the carrier’s wholly-owned terminal operating subsidiary, and is scheduled to open January 12.

“JAXPORT’s optimal location affords shorter transit times between the US and Panama. TRAPAC’s ultramodern post-Panamax container handling systems, with an annual capacity of 800,000 TEUs, will position [Jacksonville] as a premier port of choice among shippers,” stated an MOL press release.

The Panama “connection” is a critical element in the changing logistics as the lure of lower shipping costs is finding a ready audience amongst shippers who are struggling to maintain market share in what is now officially recognized as a full-blown recession.

According to industry analysts, both US East Coast and Gulf ports, linked with Asia by both the Panama Canal and the Suez Canal, are sure to benefit even after the inevitable upturn in the global economy.

A third set of locks is to open at the Panama Canal by 2014. That means that the latest generation of containerships – some of which carry as many as 8,500 TEUs and have been unable to transit the canal because of their size – will be permitted to use the all-water route.

This is a critical element in the Gulf and East Coast ports’ game plan as shipping to destinations in the US Midwest and East by rail after goods arrive at either Los Angeles or Long Beach, for example, is now simply more expensive than moving the goods on the all-water route through the Panama Canal.

Some shippers are choosing an alternative route around California, "investing somewhere else,” said Michael Jacob, vice president of the Pacific Merchant Shipping Association (PMSA), also quoted in the San Francisco Chronicle.

The PMSA represents 60 maritime terminal operators and ocean carriers with operations along the US West Coast.

"We are actually on the front end of a long-term structural change of business models where people are building their supply chains around California" for goods not destined for California,” he said.

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