Experts Predict Busier Peak Season For San Pedro Bay Ports

Importers ‘Optimistic,’ Exports To Grow, But Challenges Still Ahead

By Sean Belk - Staff Writer

April 10, 2012 – Shipping industry experts and port officials predict a boost in cargo activity at the San Pedro Bay Ports this peak season, which typically runs from mid-summer to fall, in contrast to last year, which brought less-than-expected growth.

With retail sales up slightly and employment continuing to improve, the United States economy is leading a global economic recovery, said Walter Kemmsies, Ph.D., chief economist for Moffatt & Nichol, the Long Beach-based international engineering firm. He said both import and export trade volumes should increase this year over 2011 at the largest seaport complex in the nation.

Predictions were made during the Port of Long Beach’s annual “Pulse of the Ports” forecast event on March 28 at the Hyatt Regency Hotel downtown. The event drew close to 400 attendees, with others watching via webcast.

“The key point here is that the bulk trade of both imports and exports are both doing very, very well,” Kemmsies said. “. . . We have some very positive near-terms with the U.S. leading the global recovery, and towards the end of this year, things should feel a lot better, barring any geopolitical tension events.”

He warned, however, about a “wall of worry” over inflation and potential supply chain shifts that may threaten Southern California cargo flows, particularly if trade were directed through Mexico. Others expressed concerns about regulatory challenges, freight policies, rate hikes and prolonged waiting times at marine terminals.

Daniel Wall, senior vice president of ocean and cargo management services for logistics provider Expeditors, said the twin seaports is in store for a “traditional” peak season this year, following the past three years of either “compressed” to “flat” peaks.

Importers are more optimistic about retail sales this year and should shift more import trade volumes to West Coast ports, he said. About 55 percent of shipments should ramp up from September to October, Wall said. “Importers are optimistic. They believe sales will increase this year and they’re fairly excited about that.”

Export Growth

While domestic housing formation is likely to stay quiet until at least 2018, Kemmsies said growth in U.S. exports to other countries is a key driver of the economic recovery and has a comparative advantage over emerging countries. Despite job losses in the public sector, about 4.5 million jobs per year were added to the American economy since 2010, mostly from private sector growth. Fast-growing fields in exports are “agriculture, energy, automobiles and construction-transportation equipment,” Kemmsies said.

Peter Friedmann, executive director of The Agriculture Transportation Coalition, said the potential for long-term job growth and viability in the export trade has attracted a rising interest in recent years. “Exports are our future,” he said. “ . . . The Port of Long Beach, unlike a lot of other ports and a lot of ocean carriers, has really understood the value of exports for quite a long time.”

Friedmann advocated for Southern California ports to build an “overweight” truck corridor from Central Valley to San Pedro Bay, in order to compete with other states and other countries. He also pushed for efficiency and accountability at terminal gates, and to cutback on “post-sailing documentation” regulations, a move he said that would aid the federal government’s export initiative.

Handling ‘Megaships’

Port of Long Beach Executive Director J. Christopher Lytle noted that the port is investing about $4.5 billion in new infrastructure to stay competitive with other ports and increase capacity and efficiency in the next decade. “Though our history [has . . . faced] big challenges, I see positive economic signs on the horizon, and we’re very optimistic about the port’s future,” he said.

To cut costs of vessel “bunker” fuel, shipping companies are shifting to larger “megaships” to fit more containers per trip, said Erxin Yao, president of Orient Overseas Container Line (OOCL), USA, Inc. The Hong-Kong-based shipper recently signed a 40-year lease with the Port of Long Beach for the nearly $1 billion Middle Harbor terminal redevelopment project, expected to enable the terminal to move twice as many shipping containers at half the pollution levels.

The forecast event was just a week after Mediterranean Shipping Company, or MSC, docked its massive 1,200-foot-long “Fabiola” vessel in Port of Long Beach waters. The humongous ship, almost the length the Empire State Building, is able to carry up to 12,500 twenty-foot containers (TEUs).

Yao said the Port of Long Beach is far ahead of other ports in terms of infrastructure and preparing to make the transition to newer ships. “Many terminals simply cannot handle these ships . . . But Long Beach really has an advantage and a great future,” he said.

Many shipping companies are still operating in the red or are barely breaking even since the downturn in 2009, which caused a $13 billion total financial loss to the shipping industry, Yao said. But he added that customers are “moderately optimistic” about the upcoming peak season and look forward to future growth prospects.

The 13 port terminals operating at the local ports are, meanwhile, working to reduce congestion and increase efficiencies this year, said Bruce Wargo, president and CEO of PierPASS and secretary of the West Coast Marine Terminal Operator Agreement. “Rest assured that terminals at both ports are preparing for possible peak season surge activity,” he said.

Bob Curry, Sr., president of trucking and transloading firm, California Cartage Company, however, said the local ports still have some kinks to work out, including issues over congestion and long waiting times, or “turn times,” at marine terminals.

The time spent waiting to pick up or deliver loads often causes needless delays and can lead to trucking companies and carriers facing fines over “hours of service” violations, he said. “We have enough power in the harbor to handle the peak season if we can move the turn times a little better than they are now,” Curry said. “The industry today, in our opinion, is not as efficient as it was 10 years ago.”

Railroad companies, on the other hand, are continuing to invest in increasing capacity at L.A.-Long Beach ports. John Kaiser, vice president and general manager of intermodal for Union Pacific Railroad, which handles about $6.6 billion in annual revenue, said the company is planning on building a “high speed” rail route through the Alameda Corridor and sees a bright future ahead. “If the demand is there, we will be able to handle it,” he said.