West Coast Ports 2010
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From: marad.cargo.assist@... [mailto:marad.cargo.assist@...]
Sent: Sunday, January 10, 2010 6:59 AM
Subject: News Watch - January 10, 2010
January 9, 2010
§ LA., Long Beach ports fight to stay dominant
§ Box Rebound on the Far Horizon
§ West Coast Ports 2010: The future of West Coast port productivity?
LA., Long Beach ports fight to stay dominant
The port complex has been handling less cargo as competitors in Mexico , Canada and other parts of the U.S. draw more traffic.
Southern California's twin ports make up the nation's biggest cargo container hub -- and they're launching an ambitious campaign to stay that way as they navigate a weak economic recovery and increasing competition from foreign and domestic harbors.
The ports of Los Angeles and Long Beach are aggressively advertising and giving customers discounts at a time when they and most other U.S. ports are wrapping up their worst ever year-over-year decline in shipping business.
In 2009, the two ports moved about 2.5 million fewer containers than the year before, the equivalent of shutting down the country's fourth-busiest seaport -- Savannah , Ga. -- for the entire year.
The decline has been felt by veteran longshoremen who are unable to find more
than two or three days of work a week and by part-timers who find none. It has meant thousands of furloughed railroad workers and idled trains, and warehouse staffers who have been forced to take temporary work.
Coming back from a year like that isn't the biggest concern of Southern California port officials. Their larger worry comes from new competitors in Canada and Mexico, not to mention U.S. ports on the Gulf of Mexico and the East Coast that have elbowed their way past smaller West Coast ports in the last decade.
That's a substantial change in just a few years. Trade at Los Angeles and Long Beach -- largely from Asia -- hit a high of 15.8 million containers in 2006, having more than doubled since 1998. The next year's total was close, at 15.7 million. But last year the two ports handled about 11.7 million containers.
"The days of Los Angeles and Long Beach being the one big river for trade, with just trickles for everyone else, are over," said Asaf Ashar, a professor at the National Ports and Waterways Institute inWashington . "Now you have as many as seven contenders vying for the same business, and each one of them has very big plans."
Los Angeles and Long Beach port officials say they are very aware of the threats.
Both ports are launching ad campaigns in trade publications to tout their efficiency in moving cargo, the presence of two national railroads, the huge local market for goods and one of the nation's biggest warehouse and distribution networks. Because the campaign is just getting started, port officials said, they couldn't yet give a total price tag.
The L.A. port also is giving customers nearly $26 million in fee and rent reductions.
"This coming year our main thing is marketing," said Geraldine Knatz, executive director of the Port of Los Angeles . "We have great advantages compared to other ports and we really have to make a point of emphasizing those."
Part of it, said Richard Steinke, her counterpart at the Port of Long Beach , is pointing out why the two ports are the biggest kids on the block.
"You may save some time or money going to someplace likeCanada , but the difference is that you will have a choice of one or two sailing arrivals and departures. Here, you'll have a choice of 45," Steinke said.
[Source: LA Times / By Ronald D. White]
Box Rebound on the Far Horizon
Drewrys latest Container Forecaster indicates that the momentum of the industry has entered a new phase as financial aspects and implications seem to have become even more important than poor global demand and over-supply of ships, although clearly all are very inter-related.
Neil Dekker, editor of the Drewry Container Forecaster, stated: Several large container operators would have gone to the wall in 2 009 if major benefactors or governments had not stepped in to bail them out.
There is a strong argument for thinking that if a major carrier had been allowed to fail, the market would have had a much better opportunity to correct itself and lay the foundations for a more profitable industry in the long-term. A fairly large chunk of capacity would have been taken out of the market, allowing load factors and freight rates to improve.
Drewry understands that at least ten one-ship KG owners have gone under recently and vessels have been sold, indicating that non-operating owners will continue to have an extremely tough time in 2010 given the propensity for carriers to return as much chartered tonnage as possible.
Many large banks are highly exposed to the containership sector and this is why they are taking so much interest in the financial re-structuring of CMA CGM which may eventually set new standards for how some companies are run in the future.
While a $500m credit line will address the short term issues, the company still needs to resolve the financial overhang of its enormous orderbook.
A number of companies have raised much-needed funds through rights issues, but how much longer will this persist?
Neil Dekker added: Even if the industry can secure the same amount of fresh cash in 2010 as it received from shareholders in 2009, it will not be sufficient cash to cover its needs. Another estimated $1.4 billion of cash may need to be found from other sources to keep the carriers trading. This may then prove to be the catalyst that leads operators to start selling assets such as their terminals.
What would happen if the banks or the shareholders refuse to inject more cash? There seem to be three scenarios: either the carriers are liquidated, causing financial harm to shareholders, suppliers and banks or carriers walk away from vessel orders with shipyards, causing damage to the shipyards or governments are forced again to rescue the carriers.
Drewry believes that the industry has seen the worst of the global recession, but we are forecasting a very cautious recovery in 2010 with global container traffic expected to increase by 3.4%.
Freight rate recovery in the core Asia-Europe trade also needs to be put clearly into perspective. Late 2009 westbound rates were in the region of $1,700 per 20 ft all in, but this is only just about reaching a break-even scenario.
It is important to fully appreciate that this has only happened because carriers have pulled so much capacity in the last 12 months by the beginning of 2010, headhaul capacity on this trade will be 11.6% less than one year ago.
In the long-term, carriers still have to successfully deal with a large increase in supply and slow-steaming strategies are only one part of the solution package.
Carriers have to substantially improve revenues in 2010 and this means that the transpacific rate negotiations with shippers this year are the most crucial ever.
There are no real signs yet of US consumers changing their spending habits and it will be very much a case of shippers bailing out the carriers.
The big question is how much will they acquiesce to the rate demands of carriers against a backdrop of tight supply?
Drewry is forecasting that all-in rates in the key east-west headhaul routes will improve by as much as 14.1% this year, but this also has to be set against a 2009 decline of 26.2%.
Our overriding message is that the industry still has a long way to go before it can be considered to have reached any kind of stability despite the fact that there are some encouraging signs to be found.
West Coast Ports 2010: The future of West Coast port productivity?
At Cargo Business News Port Productivity Conference in Long Beach, Calif. in early October, Bill Payne, the executive vice president and COO of NYK Line outlined what he admitted was a narrow comparison between the L.A.-Long Beach container port complexs vessel-handling productivity versus its East Coast counterpart in New York-New Jersey.
Payne said both ports container facilities have some fundamental similarities with regard to how the marine terminals are run with on-dock and near-dock rail, waterfront labor, large urban populations and what he said was high profile political interaction with local government.
However, Payne said that it costs NYK and its alliance partners $15 more per box per move on an 8,000-TEU vessel in LA. - Long Beach over New York-New Jersey, translating to 5,000 moves at $75,000 per call. At 52 calls annually, it is nearly $4 million more in labor cost, he said.
Paynes other suggested, competitive improvements for the Southern California box ports should include on-dock rail cars that are built by destination and dispatched sooner in order to reach markets quicker.
Real automation sooner than later?
Another fellow panelist, Ed DeNike, president of SSA Containers, the Seattle-based marine terminal operator, said: We feel the only way well survive is to cut costs, such as through technology applications like automation.
SSA looked at productivity opportunities including dual-hoist of containers, which has been utilized by some terminal operators in Asia . Wed love to be the first on the West Coast to do it but you need more people to do it, DeNike said referring to the cost of labor at the U.S. Pacific ports.
DeNike said SSA is planning, in part, to cut costs and improve container throughput productivity via centralized gate operations, and implementing an automated container-handling grid at the Port of Long Beach .
The terminal gate command center, or kitchen in marine terminal parlance, would be run from a centralized location, and would reduce the number of clerks required at desktop stations, according to DeNike.
You dont need clerks in every terminal, he said.
SSA is also working with the Port of Long Beach to install an electric grid where a container is offloaded from a containership and placed into a dock-side grid network, then shuttled via a network of electric trolleys to a receiving yard, and then onto on-dock rail.
Crane-and-trans-tainer operators would operate that yard equipment from a centralized office, rather than up in a cab.
When pressed on whether the West Coast labor force represented by the ILWU, would embrace these new automated and centralized business models, DeNike said employers on the Coast already won these concessions in the past two labor contract negotiations, especially after the highly contentious agreement signed in 2002.
Labor needs to be convinced, DeNike conceded, noting they are concerned over losing jobs, but he said it would be good for both parties over the longer term and that SSA would take the new technology advancements to arbitration if necessary.
If we can cut the cost $50-$60 per container, we can be competitive, he said.
[Cargo Business News / By Peter Hurme]
A seperate message but on the topic.Our United States Ports Threatened!
By Bill Lussenheide
The important ports of Long Beach and Los Angeles, are in danger of being replaced thanks to yet another implementation of the North American Free Trade Agreement (NAFTA).
Southern California's twin ports are the nation's biggest cargo container hub. These two ports are a national treasure. Their value for both inbound and outbound cargo is priceless, not just for the region, but for the entire nation.
Hit hard by the "Great Recession", in 2009, the two ports moved about 2.5 million fewer containers than the year before. Many longshoremen, railroad workers, warehouse workers and truckers have been idled. These represent working class American jobs that have been lost and diminished that will be difficult to replace.
Recovery will be a daunting task, but NAFTA is not helping. Thanks to the integrated giveaway that NAFTA has done to move our jobs to cheaper locations, like Mexico, and facilitating transportation networks to easily move these goods back to the United States, our ports are in serious trouble.
In Mexico, two ports -- Manzanillo and Lazaro Cardenas -- have emerged as real players, benefited by rail infrastructure improvements by lines such as Kansas Southern. Together, these ports in western Mexico handled millions of containers in 2009, most bound for the U.S. bypassing our workers either by rail, or by Mexican trucking companies. These trucking companies can now directly compete with U.S. drivers by being able to drive in this country, again because of the NAFTA treaty. (See my article at the above linked website titled "Fairness For America's Truckers")
Most shocking of all is the planned current building of a major port at Punta Colonet, located just 150 miles south of San Diego. The plan is to turn this into a multi-billion dollar deep water port able to handle next-generation vessels. Construction will be conducted in earnest over the next 10 years. This mega-port will be as large as the U.S. ports of Los Angeles and Long Beach combined! The projected multimodal maritime center would make Punta Colonet the third-largest in the world, after Singapore and Hong Kong.
Said Jack Kyser, an economist with the Los Angeles County Economic Development Corp., "We can't just sit back and assume that we will get rapid growth again at the ports when the recovery starts, we are going to have to sing quite hard for our supper."