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U.S. West Coast Ports face dilemma…

By SwizStick • Mar 20th, 2007 • Category: Seafreight, Supply Chain Management

…come 2010 according to this editorial from CargoNewsAsia:

This is the dilemma facing US West Coast ports that are looking at the doubling of current container volumes by 2010. The port complex of Los Angeles-Long Beach is the gateway for 70 percent of US imports and to accommodate the more than 40 million TEUs cascading into its terminals in a few years, the ports must expand both capacity and productivity. Rail operators will also be required to invest heavily in infrastructure, although they have already said there will be no investment without guaranteed returns.
Handling more containers per acre is being addressed with some urgency, but it is unlikely the ports along the West Coast of North America will achieve the moves found routinely at Asia terminals any time soon.
Extensive and lengthy environmental deliberations and impact assessments are another delaying factor in the expansion of port capacity. LA-Long Beach may be the US gateway, but it has the most enlightened green regulations in the world and the people in the sprawling city are the immediate beneficiaries.
An admirable achievement, but what about trade? China will increase the number of containers being exported through its terminals by 42 percent to 160 million boxes in three years. We reckon about 35 million of those TEUs will steam across the Pacific Ocean bound for Southern California.

They predict that the traditional peak season will cease to exist as volumes are spread throughout the year to avoid bottlenecks and delays and Christmas orders are shipped ever earlier, despite increases in inventory. They also note that Mexico is seeing renewed interest as costs and delays from China continue to rise, but they feel that no one will readily replace China.

We’ve been talking about how port congestion and infrastructure can limit capacity growth and hinder cargo transportation for some time now. There are no easy answers and it will take a combination of solutions to keep cargo moving smoothly as trans-Pacific volumes continue to rise. While I feel that export growth in China will gradually slow as manufacturing is transitioned to other countries, for example Vietnam and India, it still means a glut of cargo coming across the Pacific. Renewed interest in Mexico and Central America will help some companies shore up stability in their supply chains but most likely the effect on the overall volume coming into West Coast ports will be minuscule.

As Los Angeles/Long Beach become more congested (and when I say Los Angeles/Long Beach I mean the intermodal/rail connections as well) and the impact of strict environmental regulations stymies port development and growth, more volume will shift to other West Coast ports who will also be challenged with increased demand. Expect more direct sailings to Oakland, Seattle, and Vancouver. I also expect demand for All-Water service to the East Coast to increase as well. Already carriers have introduced more All-Water service lanes to the East Coast, as well as service from India through the Suez Canal as opposed to crossing the Pacific. I expect trans-Pacific All-Water rates to the East Coast to rise as demand increases. Popularity for these routes will invariably increase in the future as further congestion in Southern California or other West Coast ports will only push shippers to direct East Coast sailings.

Equally important is improving the efficiency of container handling at the terminals so that they can handle more containers per terminal acre. But this will require technological and procedural changes that the unions will most likely resist in their contract negotiations, and any labor strike or work shortage will only exacerbate the problem.

Overall, it’s not a pretty picture, and there is no “silver bullet” that will make our problems go away. Each player in the transportation infrastructure will play a part in managing the growth in volume. It will require efforts across the board from shippers, carriers, terminals, and local governments to ensure trade continues to move smoothly while handling the increase of volume.

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