Tuesday, June 8, 2010

Ports Best Practices: Remaining Competitive in a Tough Economy

Development and Modernization

The Port of Long Beach has responded to the current economic difficulties facing its customers with incentives and delays of fees. In the long-term, the Port of Long Beach is also modernizing terminals and other infrastructure with roughly $3 billion worth of improvements.

In order to encourage more cargo through the Port of Long Beach, the port has developed an “Intermodal Container Rate Reduction Program,” which offers a 10 percent discount to the terminal operators on wharfage fees payable to the Port of Long Beach for all additional rail-hauled containers. This year, the incentive could amount to up to $5.8 million in fees that industry won’t have to pay.

Meanwhile, ocean carriers are offered the “Intermodal Ocean Common Carrier Incentive Program,” which gives a $20 per TEU incentive on each additional rail-hauled container over an established baseline.

The port also offers dramatic discounts on dockage fees to vessel operators in exchange for slowing down to 12 knots near the harbor.

In 2009, the Green Flag Program had been offering 15 and 25 percent discounts for ships that slow an entire year from 20 nautical miles and 40 nm, respectively. With the addition in 2010 of the “Green-40” program, ships that slow from 40 nm can earn up to a 50 percent discount on dockage. These incentives could add up to $5 million in 2010. In addition, the Port of Long Beach has also opted to postpone until at least 2012 the start of the “Infrastructure Cargo Fee,” which was first proposed to start in 2009.

The port’s 10-year, $3 billion modernization program includes projects such as the proposed replacement of the Gerald Desmond Bridge with a new $1.1 billion span. The new bridge would be higher to allow additional clearance for ships, and would also be wider, to ease the flow of cars and trucks that use the bridge.

The Middle Harbor Redevelopment Project would see the modernization of two aging shipping terminals, adding on-dock rail capacity and shore power hookups, and allowing the new terminal to move twice the cargo with half the air pollution. 

Groundbreaking on phase I construction is expected for late 2010. The Port is also modernizing the ITS container terminal, with construction underway on a new terminal administration complex, maintenance and repair facility and on-dock rail yard. Shore power facilities and additional dock space are also being added.

The US Army Corps of Engineers and the Port have begun a $40 million dredging project to aid navigation in and around the Port of Long Beach, safely contain contaminated sediments and recycle the dredge material as fill in the Pier G modernization project.

The port also will propose the Pier S container terminal – a new terminal at the Port of Long Beach on existing vacant land. The terminal would cost about $650 million to construct, and would be built with the latest in clean-air technology and cargo-movement efficiencies.

Also in the works is a proposed On-Dock Rail Support Facility, which would redevelop an existing rail yard and to remove rail bottlenecks in the Port. The facility would allow additional on-dock rail use at the Port, reducing truck trips. Port staff is currently developing the draft environmental impact report on the proposal.

The Port of Los Angeles: Incentives and Infrastructure

Throughout the economic downturn, the Port of Los Angeles has been expanding and upgrading infrastructure while also helping its customers weather the economic storm.

The port currently has half a billion dollars in construction projects underway, and collectively those projects will create more than 8,000 one-year equivalent construction jobs.

Among the highlights: The port has started construction on major terminal expansion projects for TraPac and China Shipping. China Shipping was a difficult container terminal expansion project to get approved, and after it’s completed, the Port of Los Angles promises it will be the world’s greenest container terminal, with 35 additional acres and a new wharf by 2014. TraPac is also in the midst of a major expansion/upgrade, with 60 additional acres, on-dock rail and a new wharf slated for completion in 2015.

Work is underway for the Environmental Impact Report to expand the APL Terminal by 40 additional acres and a new wharf at Pier 300. The Los Angeles Harbor Commission has approved a future supertanker terminal for Plains All American, and the final phase of a decade-long channel-deepening project promises to provide every container terminal at the Port of Los Angeles with clearance to accommodate the world’s largest container ships. With more than 1,600 acres of container terminal backland, 113 miles of rail on Port property handling more than 100 trains daily, the Port of Los Angeles moves more containers than any other port in the nation.

To address economic realities, the port is offering customers aggressive and creative discounts, incentives, rent price breaks and reduced fees. The discounts and incentives created in 2009 and this year mean the port will forego close to $42 million in revenue. The current program includes a temporary 6 percent rent reduction for container terminal operators as well as an empty container discount and reduced rates for containerized cargo transferred from one vessel to another within the Port.

San Francisco Initiatives

The Port of San Francisco has recently undertaken a number of initiatives to maintain and enhance its competitive position among West Coast ports.

On the passenger cruise side, the Port of San Francisco is moving forward with the development of a new modern Cruise Terminal to better meet the current needs of cruise lines and passengers as well as the expected increase in future cruise business.

The Port will convert the Pier 27 shed into a year-round Cruise Terminal and community facility that will meet the evolved security and passenger handling demands of the cruise industry while also being configured to allow recreation and special event uses when not occupied for cruise purposes. Shoreside power hook-up, gray and black-water connections, storm water management, and employee public transportation options will allow efficient and clean ongoing operations.

In an effort to grow its ship repair business, the Port of San Francisco, Princess Cruises, and the Port’s shipyard operator – BAE Systems San Francisco Ship Repair – completed a major upgrade of the Port’s larger drydock, making it the only commercial facility on the US West Coast able to accommodate post-Panamax ships. The $5 million enhancement project was completed in 2008, and the 13-day drydocking of the Star Princess at Pier 70 that fall was the first of expected regular visits by mega-liners, creating hundreds of jobs for the region’s ten maritime trade unions.

The Port of San Francisco is also improving its cargo infrastructure in an effort to attract new business. Last year the Port completed its Illinois Street Intermodal Bridge project, providing direct rail access to its Pier 80 general cargo terminal for breakbulk and project cargo commodities such as windmill parts that require rail transport. The Port is currently undertaking development of a bulk export facility at Pier 96 to take advantage of it 40-foot water depth and rail access for the export of iron ore and other bulk products destined primarily to Asian markets.

A New Model at Oakland

In response to the rapidly changing business climate, the Port of Oakland embarked upon a complete review of its construction model, operations and finances, including the structure of the Port itself. Where the port had a traditional role as a development agency responsible for financing, planning, and building major marine cargo facilities and infrastructure, it now will serve as an investment partner and landlord. This partnership development model is now being employed to redevelop the Outer Harbor Terminal area and the former Oakland Army Base (OAB) at Oakland.

The Port of Oakland is currently in an exclusive negotiating agreement with a private entity in redeveloping the OAB as a long-term concession for maritime support development and rail. Oakland is also considering adding transload facilities, which would allow importers the flexibility and cost efficiencies of sorting their international cargo and redistributing it domestically via rail or truck. Conversely, exporters can use these facilities to consolidate cargo from various origins via rail and truck and ship to overseas markets.

Improvements over the Donner Summit were completed in late 2009 creating the ability to send trains as long as 9,000 feet and double stacked over the Sierras. Similar rail improvements over the Tehachapis are very close to completion, and these improvements are expected to lead to greater opportunities for movement of Inland Point Interior cargo from Oakland into America’s heartland.

Another critical project has been the deepening of the Oakland harbor so that it can accommodate the newer, larger containerships. The project was substantially completed in September 2009.

Additionally, the Port of Oakland is among six US West Coast ports that are working together to encourage a national freight-movement program with dedicated funding; establishing the position of an assistant secretary for freight movement at the Department of Transportation; and guaranteeing ports access to existing funding programs that don’t currently allow ports to apply.

New Partners for Portland

Portland says its efforts to attract new service, upgrade infrastructure and reconsider the operating model for its container terminal are paying off. The Port is starting to see the “green shoots” of economic recovery — freight volumes are returning, tonnage is up, vessel calls are up, and the Port has announced some encouraging news in recent weeks.

In mid-May, Port of Portland Commissioners approved a 25-year lease of the Port’s Terminal 6 container and breakbulk facilities to International Container Terminal Services Incorporated (ICTSI), the fourth largest independent container terminal operator in the world. The company operates 18 terminals in 13 countries, and Portland will be their first in the United States.

The Port of Portland also restored business connections along with direct access to Japan, with last month’s announcement of a new container service offered by Westwood Shipping Lines starting on July 11. This monthly service provides direct access to five ports in Japan and one in South Korea, which answers an immediate need for regional exporters and especially those located upriver from Portland. A six-month initial agreement with an option to extend for an additional year provides potential to increase the frequency and capacity of the service.

Port officials say that both the ICTSI and Westwood announcements can be attributed, at least in part, to the pending completion of the long-standing channel improvement project in the Columbia River. The 20-year effort to deepen the navigation channel from 40 to 43 feet is now in the home stretch, and that project will be completed by the end of the year.

Several key infrastructure projects are also nearing the finish line, including more than $500 million in capital investments such as improvements to facilities and the roads, rail and runways that they depend on. These include crane modernization, berth improvements, road widening, new rail yards and overcrossings to improve velocity for trucks and trains. Completing these projects while business was slow yielded cost savings, minimized disruption to regular operations, and put the Port in a position to maximize its growth potential as the economy rebounds.

Vancouver (USA) Remaining Competitive

The Port of Vancouver USA has employed a variety of strategies to weather the economic storm, including the diversification of its bulk, breakbulk, auto, wind energy and project cargo base to mitigate fluctuations in the global and regional marketplace. Even with 100 fewer ship calls than the previous year, the port’s 2009 cargo mix managed record revenues by balancing supply and demand.

The port’s United Grain Harvest elevator exported 3.2 million metric tons (mt) as global droughts eased and the US dollar dropped. As the leading wind energy importer in the US, the port imported a record volume of more than 2,700 pieces of wind turbine components.

While the port’s liquid and dry bulk cargos fluctuated, they were balanced by increased scrap metal exports and biofuels.

As breakbulk cargos related to the construction industry substantially decreased in 2009, the port balanced revenues by handling increased variety of project cargo.

During the past 18 months, the Port of Vancouver purchased its second mobile harbor crane, increasing capacity for heavy project cargo lifts. The two Liebherr heavy lift mobile harbor cranes are the largest of their kind in North America, with a single crane capacity of 140 mt, and tandem picks up to 280 mt. The cranes have allowed the port to continue to diversify its cargo mix while building a niche as a premier heavy lift port and attracting large module projects. A key to the port’s future maritime growth is the West Vancouver Freight Access rail project.

This $137 million project will provide increased unit train capacity at the port, while directly increasing velocity and capacity on the class one mainlines in the Pacific Northwest. 

Competitive rail access is important to the port’s wind energy, bulk, auto and breakbulk customers, as they have increased their intermodal use. The port plans to grow its rail volumes from nearly 60,000 to 160,000 cars per year, and will complete construction this June on a loop track system capable of handling full unit trains. Once complete, the project will provide a 40 percent reduction in delay, while nearly tripling the port’s rail capacity. The project includes dual service from BNSF Railway and Union Pacific Railroad and is scheduled to be complete by 2017.

Another key asset to the port’s short and long-term success is the recent purchase of 218 acres of deep draft and unit train-served maritime and heavy industrial land, located on a former aluminum smelter site. Within two weeks of purchasing this key property, wind energy imports began to be stored at what is now the new Terminal 5. The port is working to attract bulk and other cargoes for the site, and the port’s longer-term development includes nearly 450 acres of maritime and heavy industrial reserves, called the Columbia Gateway property. 

Meeting Customer’s Needs at the Port of Longview

Business at the Port of Longview continues to thrive, with the port posting two consecutive record revenue years in 2008 and 2009.

“Our customer service is as important as our cargo handling services,” says Director of Marketing Valerie Harris. “We strive to exceed our customer’s expectations by supporting their business every way we can, which often includes creating new services and solutions to support unique situations.”

The Port of Longview’s cargo handling equipment has been augmented by the recent acquisition of a mobile harbor crane and reach stacker. The port’s ability to modify existing equipment, along with the versatility of existing cargo handling equipment, such as wind energy transporters that can be used for different types of components, offers the flexibility to meet diverse cargo demands. The port continuously evaluates equipment needs based on the existing fleet, current tonnages and cargo prospects.

Longview has embarked on facility improvements and expansion that allow the Port to work many types of cargo simultaneously, with optimal flexibility. Increased lay-down capacity enables the Port to offer temporary and long-term storage options, and recently added areas allow customers to perform retrofitting, maintenance and other value-added services offered by the port. These include connecting customers with local contractors and businesses that provide specialized products or services, and the employment of steady labor that specializes in trade-related services, such as welding and cutting. Other value-added services offered by the port include inventory management, Foreign Trade Zone/Customs, material inspections and testing, scrapping, cargo damage prevention and tarping, cargo cleaning and cargo preparation/packaging/container stuffing services.

Among other benefits the Port can now tout its location on the newly deep-draft Columbia River. The Columbia River Channel Improvement Project to deepen the navigation channel from 40 feet to 43 feet is nearly complete, and allows the port to make the best of its location near Interstate 5 and both Union Pacific and Burlington Northern Santa Fe main rail lines.

Increasing Efficiency at Tacoma

A series of recent container shipping line developments are helping give Tacoma’s container business a more positive outlook for 2010 and beyond. In March, Horizon Lines extended its agreement to call at APM Terminals in Tacoma for at least six more years. In April, “K” Line started bringing larger, 5,200-TEU ships to Tacoma for its K-PNW service. In May, Evergreen Line resumed its UAM service through Tacoma.

While Tacoma expects overall container volumes to be down again for 2010, Alaska volumes, which account for about a third of the Port’s container business, should outpace the Port’s international volumes.

Intermodal rail facilities play a key role in the port’s overall marketing strategy and its position as a gateway port for import containers. March was a record month for intermodal container traffic through Tacoma, with combined international and domestic volumes up 20 percent, the highest volume in 18 months.

Two of the major reasons for this increase are Union Pacific’s domestic intermodal service at the port’s South Intermodal Yard and the port’s short-haul rail incentive program, which offers incentives to shippers moving containers within a 400-mile vicinity of the Port.

On the real estate side, the Port is working to increase the utilization of existing Port land and warehouse space. In September 2009, the Port Commission approved a lease with The North West Company (NWC) for a 100,000-square-foot warehouse at the Port. NWC, which is based in Winnipeg, Canada, is the parent company of AC Value Center (AC), the largest retailer in rural Alaska. AC has 33 combination food, general merchandise and Quickstop stores In January, VersaCold Logistics Services started construction of a new 200,000-square-foot cold-storage facility, which will open in July in the Port area.

Cooperative Efforts at the Port of Seattle

In an effort to remain competitive during the economic downturn, Seattle put together a customer recovery program that reduced and deferred some fees terminal operators paid to the port. In exchange for near-term financial relief, the terminal operators agreed to help implement the port’s Clean Truck Program.

That program goes into effect January 1, 2011. On that date, only trucks with 1994 or newer engines will be permitted to enter Seattle’s container terminals.

From the From the Puget Sound Air Emissions Inventory, conducted in 2006 and the Northwest Ports Clean Air Strategy (unveiled in 2007) to the specific programs devised to reduce air emissions, the port has worked with customers and partners develop solutions that meet the needs of business while protecting the environment. The Port of Seattle has implemented these solutions without adding unnecessary fees or regulatory requirements. 

Seattle’s Clean Truck Program, for instance, is not funded by fees on containers. Instead, the port and the Puget Sound Clean Air Agency (PSCAA) partnered to provide drayage truck owners with $5,000 or blue book value (whichever is higher) to turn in pre-1994 trucks for scrapping. To date more than 170 trucks have been scrapped and over 150 have been replaced with trucks that meet the 2011 standard.

PSCAA also partners with the Port on the At-Berth Clean Fuels (ABC Fuels) program, which provides vessel operators with a $2,250 per call incentive to burn fuel with a sulfur content of 0.5 percent or less while at berth in Seattle.

More than 60 vessels, or about 35 percent of the ships calling regularly at the port, participate in ABC Fuels. Participating carriers have included APL, China Ocean Shipping Company (COSCO), Evergreen Line, Hapag Lloyd, Hamburg Süd, Maersk Line, Matson Navigation, Norwegian Cruise Line and Princess Cruise Line. ABC Fuels has eliminated more than 87 tons of sulfur dioxide since the program began in January 2009.

The Port of Seattle is extending its collaborative approach to partners up and down the West Coast through the West Coast Container Ports Collaboration. The group includes the ports of Seattle, Tacoma, Portland, Oakland, Los Angeles and Long Beach, as well as the BNSF Railway and Union Pacific Railroad. Together, the partners are working to market the West Coast to shippers in the face of growing competition and influence decision makers on funding for major transportation projects.

Everett Infrastructure

The Port of Everett continues to focus on making its facilities more marketable by investing in infrastructure. One of the projects underway is the construction of a new rail-loading ramp at its terminal facilities.

The 70-ton ramp supports cargo operations by aiding in the loading and unloading of wheeled cargo, such as military tanks, farming and mining equipment, onto and from rail cars. Certified welders on the Port’s Marine Terminals maintenance crew constructed the ramp to meet US Military design specifications.

The Port of Everett’s facilities handle a wide variety of ro/ro cargo, including heavy machinery for the construction and mining industry, as well as heavy equipment for the farming industry. 

A new rail line is also in the works, thanks to the port’s securing of $1.168 million in federal funds to construct 2,500 lineal feet of rail to help the region recover in the event of a disaster. The Port of Everett’s shipping terminals have been identified as a base of operations to directly support regional recovery and reconstruction efforts in the event of a regional man-made or natural disaster, due to its geographical location in the event of an eruption from Mount Rainier or a man-made disaster at the ports of Seattle or Tacoma. An eruption from Mount Rainier would essentially shut down the ports of Olympia, Tacoma and some of Seattle.

A $1.168 million Federal Transportation Appropriation, a $1.2 million Department of Homeland Security Grant and a Washington State Rail Bank Loan in the amount of $700,000 fund the rail project. The Port has already begun construction of the new rail line, which is expected to be ready for use later this year.

The Port of Everett is also pursuing funding opportunities to rejuvenate its 27-acre South Terminal shipping facility. The South Terminal facility was constructed in the 1970s to handle log exports, and weight restrictions prevent the facility from being used to its full potential.