International fruit shipper-producer Dole Food Company is reportedly considering shifting its United States shipping operations from the Port of San Diego to the Port of Hueneme.
Dole, based in Westlake Village, Calif., currently has a ten-year lease with the San Diego port that runs out in December 2012.
Dole has been evaluating the two ports' facilities and is currently in negotiations with both – either to stay in San Diego or move to Hueneme – according to comments by a Dole spokesperson to the Ventura County Star.
The fresh fruit firm's shipping arm, Dole Ocean Cargo Express, has been at the Port of San Diego since moving from the Port of Los Angeles in 2002.
Hueneme, which has grown as a niche port specializing in, among other things, fruit and vegetable imports and exports, is already home to Chiquita Fresh North America, Del Monte's US western distribution center.
Tuesday, April 5, 2011
SoCal Legislators Seek Resolution Urging USS Iowa to Los Angeles Port
A state resolution introduced by two Southern California state legislators is urging the United States Navy to transfer the famed World War II-era battleship USS Iowa to a group seeking to turn the warship into a floating museum at the Port of Los Angeles.
While the resolution is non-binding, it could help persuade the US Navy to support the Los Angeles plan. The resolution, AJR 8, was introduced by state Assembly members Warren Furutani, D-Gardena, and Bonnie Lowenthal, D-Long Beach.
The battleship, which remains in the Navy inventory in "on hold" status as part of a government program that donates vessels to museum groups, saw service in World War II, Korea, and served again as part of the US Navy's "big stick" policy from 1984 to 1989. It is the last remaining battleship in the world that has not been permanently placed as a floating museum.
Applications for the USS Iowa were submitted to the US Navy in late November 2010. Two groups are currently vying for the battleship, one in Los Angeles and one that is seeking to bring the vessel to Vallejo in the Bay Area.
In November 2010, the governing board for the Port of Los Angeles approved supporting a plan by the non-profit Pacific Battleship Center to acquire the battleship and ensconce the warship at the port as a floating museum.
Voting unanimously to support the PBC acquisition efforts, the port commission also approved the use of Berth 87 near the port's main cruise terminal as the future home for the battleship. The Los Angeles City Council backed the PBC plan in September 2010.
The resolution, which highlights the major points of the pro-Los Angeles plan, also states that the plan is supported by the port-area community, including the San Pedro-area neighborhood councils, San Pedro businesses, the City of Los Angeles, the Port of Los Angeles, as well as the past four governors of the state of Iowa.
AJR 8 concludes by stating: "...the Legislature respectfully memorializes the United States Navy to approve the application submitted by the Pacific Battleship Center to house the USS Iowa at the Port of Los Angeles."
The resolution is now in the Assembly's Committee on Arts, Entertainment, Sports, Tourism and Internet Media.
An economic feasibility study conducted by outside consultant AECOM estimated that attendance to the USS Iowa at the Port of Los Angeles would range between a low of 137,000 visitors a year to a high of 236,000 visitors a year, with a median of roughly 190,000 visitors a year from 2014 on. The analysis estimated that Southern California residents would make up roughly two-thirds of all visitors and the remaining third would be outside visitors.
However, the AECOM analysis estimated that even with these attendance numbers, the USS Iowa as an attraction would run a projected deficit of about $2.7 million a year. AECOM staff said this deficit would have to be addressed by other outside revenue such as fund raising, government support or philanthropic donations.
AECOM staff pointed out that the USS Iowa, as an attraction at the port, would have an earned income of just under 50 percent of its annual budget – a figure AECOM staff called "in line with other cultural attractions."
If the warship does come to Los Angeles, the port – while incurring some costs due to required shifting of cruise vessels – will not be providing money for the setup, operation and maintenance of the USS Iowa. These costs will be borne by the PBC.
While the resolution is non-binding, it could help persuade the US Navy to support the Los Angeles plan. The resolution, AJR 8, was introduced by state Assembly members Warren Furutani, D-Gardena, and Bonnie Lowenthal, D-Long Beach.
The battleship, which remains in the Navy inventory in "on hold" status as part of a government program that donates vessels to museum groups, saw service in World War II, Korea, and served again as part of the US Navy's "big stick" policy from 1984 to 1989. It is the last remaining battleship in the world that has not been permanently placed as a floating museum.
Applications for the USS Iowa were submitted to the US Navy in late November 2010. Two groups are currently vying for the battleship, one in Los Angeles and one that is seeking to bring the vessel to Vallejo in the Bay Area.
In November 2010, the governing board for the Port of Los Angeles approved supporting a plan by the non-profit Pacific Battleship Center to acquire the battleship and ensconce the warship at the port as a floating museum.
Voting unanimously to support the PBC acquisition efforts, the port commission also approved the use of Berth 87 near the port's main cruise terminal as the future home for the battleship. The Los Angeles City Council backed the PBC plan in September 2010.
The resolution, which highlights the major points of the pro-Los Angeles plan, also states that the plan is supported by the port-area community, including the San Pedro-area neighborhood councils, San Pedro businesses, the City of Los Angeles, the Port of Los Angeles, as well as the past four governors of the state of Iowa.
AJR 8 concludes by stating: "...the Legislature respectfully memorializes the United States Navy to approve the application submitted by the Pacific Battleship Center to house the USS Iowa at the Port of Los Angeles."
The resolution is now in the Assembly's Committee on Arts, Entertainment, Sports, Tourism and Internet Media.
An economic feasibility study conducted by outside consultant AECOM estimated that attendance to the USS Iowa at the Port of Los Angeles would range between a low of 137,000 visitors a year to a high of 236,000 visitors a year, with a median of roughly 190,000 visitors a year from 2014 on. The analysis estimated that Southern California residents would make up roughly two-thirds of all visitors and the remaining third would be outside visitors.
However, the AECOM analysis estimated that even with these attendance numbers, the USS Iowa as an attraction would run a projected deficit of about $2.7 million a year. AECOM staff said this deficit would have to be addressed by other outside revenue such as fund raising, government support or philanthropic donations.
AECOM staff pointed out that the USS Iowa, as an attraction at the port, would have an earned income of just under 50 percent of its annual budget – a figure AECOM staff called "in line with other cultural attractions."
If the warship does come to Los Angeles, the port – while incurring some costs due to required shifting of cruise vessels – will not be providing money for the setup, operation and maintenance of the USS Iowa. These costs will be borne by the PBC.
New China-Long Beach Box Service to Initially Skip Japan
The new trans-Pacific box service operated by COSCON Container Lines Co., Ltd., Hanjin Shipping Co., Ltd, Pacific International Lines and Wan Hai Lines, will initially bypass Japan when it kicks off on Tuesday, April 5.
The CLX (Central China-Long Beach Express) service, which calls at three Chinese ports before heading to the Port of Long Beach, will skip the Port of Yokohama in central Japan until mid-May, according to a statement by Hanjin. The first CLX service vessel is scheduled to arrive at the Port of Long Beach on April 20.
The CLX service, first announced on March 31, will utilize five containerships that range between 3,600 TEU and 3,850 TEU capacity.
The service rotation is: Fuzhou – Ningbo – Shanghai – (Yokohama) – Long Beach – Fuzhou. Yokohama calls will start in the middle of May.
The March 11 earthquake and subsequent tsunami which hit northern Japan on March 11 heavily damaged transportation infrastructure, shuttered factories, and led to a shortage of electrical power supply. The situation at the Fukushima nuclear power plant, which Japanese officials said may take months to bring under control, has also raised concerns.
The CLX (Central China-Long Beach Express) service, which calls at three Chinese ports before heading to the Port of Long Beach, will skip the Port of Yokohama in central Japan until mid-May, according to a statement by Hanjin. The first CLX service vessel is scheduled to arrive at the Port of Long Beach on April 20.
The CLX service, first announced on March 31, will utilize five containerships that range between 3,600 TEU and 3,850 TEU capacity.
The service rotation is: Fuzhou – Ningbo – Shanghai – (Yokohama) – Long Beach – Fuzhou. Yokohama calls will start in the middle of May.
The March 11 earthquake and subsequent tsunami which hit northern Japan on March 11 heavily damaged transportation infrastructure, shuttered factories, and led to a shortage of electrical power supply. The situation at the Fukushima nuclear power plant, which Japanese officials said may take months to bring under control, has also raised concerns.
Steinke to Retire from Port of Long Beach
Richard D. Steinke, executive director of the Port of Long Beach for the past 14 years, today announced his plans to retire from the Port, effective September 30, 2011.
“I have accomplished most of what I set out to do at the Port,” said Steinke. ”I’m pleased that I can move on knowing that I leave the Port a better place than when I came on board.”
Under Steinke’s leadership, the Port redeveloped the massive, former Long Beach Naval Complex, creating one of the nation’s largest container cargo terminals. He transitioned the Port, making it both a builder of modern cargo terminals and a leading environmental steward. Steinke implemented a pioneering Green Port Policy that included the successful Clean Trucks Program developed with the rival Port of Los Angeles.
Partnerships and collaboration are hallmarks of Steinke’s leadership style, enabling him to steer the Port through the complex process of winning approval for the $1 billion Middle Harbor Redevelopment Project, which will create one of the most efficient and greenest terminals in the world, and the $950 million Gerald Desmond Bridge Replacement Project, which will assure safe access in and out of the nation’s leading port complex. Steinke’s retirement comes as the Port is kicking off $4 billion in major improvements over the next decade to cement its position among the world’s leading ports.
“Dick has been instrumental in developing the Port of Long Beach into one of the top seaports in the world,” said Nick Sramek, president of the Long Beach Board of Harbor Commissioners, which governs the Port of Long Beach. “He led the Port out of the recent recession, keeping it strong financially, while guiding our major modernization and environmental projects. “
Sramek said the Board of Harbor Commissioners would begin the search for Steinke’s successor shortly, and Steinke has agreed to assist the Board in both the selection process and the smooth transition to a new executive director.
“Dick has helped us develop a great staff, a great team here at the Port, and we’re confident that we can maintain Long Beach’s world-class status,” Sramek added.
Steinke’s leadership extended throughout the U.S. port industry. He has been the chief spokesman for the U.S. West Coast Collaboration, a partnership of West Coast ports and the major western railroads. He has been chairman of the American Association of Port Authorities and the California Association of Port Authorities. Steinke serves as a member of the Board of Directors of the Alameda Corridor Transportation Authority, the Intermodal Container Transfer Facility Joint Powers Authority, the Harbor Association of Industry and Commerce, Intermodal Transportation Institute and St. Mary Medical Center in Long Beach, and he is a member of the Red Cross CEO Advisory Committee.
The Port of Long Beach is the second-busiest container cargo port in the United States, and part of the sixth-busiest port complex in the world. In 2010, more than $140 billion in trade moved through the Port of Long Beach, supporting 300,000 jobs throughout Southern California and 1.4 million across the country.
“I have accomplished most of what I set out to do at the Port,” said Steinke. ”I’m pleased that I can move on knowing that I leave the Port a better place than when I came on board.”
Under Steinke’s leadership, the Port redeveloped the massive, former Long Beach Naval Complex, creating one of the nation’s largest container cargo terminals. He transitioned the Port, making it both a builder of modern cargo terminals and a leading environmental steward. Steinke implemented a pioneering Green Port Policy that included the successful Clean Trucks Program developed with the rival Port of Los Angeles.
Partnerships and collaboration are hallmarks of Steinke’s leadership style, enabling him to steer the Port through the complex process of winning approval for the $1 billion Middle Harbor Redevelopment Project, which will create one of the most efficient and greenest terminals in the world, and the $950 million Gerald Desmond Bridge Replacement Project, which will assure safe access in and out of the nation’s leading port complex. Steinke’s retirement comes as the Port is kicking off $4 billion in major improvements over the next decade to cement its position among the world’s leading ports.
“Dick has been instrumental in developing the Port of Long Beach into one of the top seaports in the world,” said Nick Sramek, president of the Long Beach Board of Harbor Commissioners, which governs the Port of Long Beach. “He led the Port out of the recent recession, keeping it strong financially, while guiding our major modernization and environmental projects. “
Sramek said the Board of Harbor Commissioners would begin the search for Steinke’s successor shortly, and Steinke has agreed to assist the Board in both the selection process and the smooth transition to a new executive director.
“Dick has helped us develop a great staff, a great team here at the Port, and we’re confident that we can maintain Long Beach’s world-class status,” Sramek added.
Steinke’s leadership extended throughout the U.S. port industry. He has been the chief spokesman for the U.S. West Coast Collaboration, a partnership of West Coast ports and the major western railroads. He has been chairman of the American Association of Port Authorities and the California Association of Port Authorities. Steinke serves as a member of the Board of Directors of the Alameda Corridor Transportation Authority, the Intermodal Container Transfer Facility Joint Powers Authority, the Harbor Association of Industry and Commerce, Intermodal Transportation Institute and St. Mary Medical Center in Long Beach, and he is a member of the Red Cross CEO Advisory Committee.
The Port of Long Beach is the second-busiest container cargo port in the United States, and part of the sixth-busiest port complex in the world. In 2010, more than $140 billion in trade moved through the Port of Long Beach, supporting 300,000 jobs throughout Southern California and 1.4 million across the country.
City Hall to Receive $40M In Long Beach Port Oil Income
A 2010 Long Beach city charter amendment that stripped the Port of Long Beach of its control of port-area oil properties and was presented to voters as having no fiscal impact, could cost the port more than $40 million in 2011, according to port projections.
In addition to putting oil properties in the port area under City Hall control, the charter amendment also redirected all oil revenues generated in the port to the City Hall-controlled Tidelands Oil Revenue Fund (TORF). Known as Measure D, the amendment was passed by Long Beach voters in November 2010 by a 55.6 percent to 44.4 percent margin.
In the lead up to the November 2010 election both Mayor Bob Foster and City Attorney Robert Shannon repeatedly emphasized that the portion of Measure D related to oil properties was merely a clarification of charter language related to control of the port-area oil properties and not an attempt to divert port revenue to City Hall.
While City Hall has said that it will most likely return the FY2011 oil revenues to the port since the port had already included these projected funds in the port FY2011 budget prior to the passage of Measure D, the final disposition of the FY2011 oil revenues appears to be up in the air at the moment.
"I don't know that the city has made any firm and final decisions on oil revenues and what might be remitted to the port and what they will be retaining," Port Executive Director Richard Steinke told the Harbor Commission on Monday.
Members of the shipping industry have raised concerns with the State Lands Commission about the transfer of oil revenues from the port to City Hall, arguing that Measure D is shifting significant portion of the port's revenue to City Hall, threatening the financial security and competitiveness of the port. The SLC, which has oversight of the state's ports, has said in the past that they are carefully watching Measure D impacts on the port.
While no analysis was conducted by City Hall before placing the measure on the ballot, port financial staff estimated that Measure D would shift more than $100 million in oil revenues to the City Hall-controlled TORF over the next five years.
However, due to the rise in the price of oil, the latest projections are much higher.
"For the full fiscal 2011," Port Finance Director Sam Joumblat told the Harbor Commission on Monday, "I project that probably the net oil income would be over $40 million, if oil prices continue to be anywhere near their lofty present levels.
If oil prices remain near their current levels, this amount of oil revenue shifted to the control of City Hall could rise to more than $200 million over five years.
Nearly all the major stakeholders involved in the local international trade business community expressed opposition to Measure D, including: the Long Beach Chamber of Commerce; the Los Angeles Customs Brokers and Freight Forwarders Association; the LA/LB Propeller Club; the Pacific Merchant Shipping Association; the Harbor Association of Industry and Commerce; FuturePorts; and the California Marine and Intermodal Transportation System Advisory Council, or CALMITSAC.
A major concern raised by the PMSA and other opponents of Measure D is what the Tidelands Oil Revenue Funds are actually funding.
By state law, the funds can only be spent in the tidelands on oil production-related expenses. However, a caveat in the city charter allows the City Council to shift funds from the TORF to the general Tidelands Operating Fund (TOF). Monies in the City Hall-controlled TOF, which come from non-oil revenues generated in the city tidelands including port profits, must still be spent in the tidelands and then only on very specific uses such as maritime, navigation, recreational, environmental, fisheries and the promotion of maritime commerce.
In addition to putting oil properties in the port area under City Hall control, the charter amendment also redirected all oil revenues generated in the port to the City Hall-controlled Tidelands Oil Revenue Fund (TORF). Known as Measure D, the amendment was passed by Long Beach voters in November 2010 by a 55.6 percent to 44.4 percent margin.
In the lead up to the November 2010 election both Mayor Bob Foster and City Attorney Robert Shannon repeatedly emphasized that the portion of Measure D related to oil properties was merely a clarification of charter language related to control of the port-area oil properties and not an attempt to divert port revenue to City Hall.
While City Hall has said that it will most likely return the FY2011 oil revenues to the port since the port had already included these projected funds in the port FY2011 budget prior to the passage of Measure D, the final disposition of the FY2011 oil revenues appears to be up in the air at the moment.
"I don't know that the city has made any firm and final decisions on oil revenues and what might be remitted to the port and what they will be retaining," Port Executive Director Richard Steinke told the Harbor Commission on Monday.
Members of the shipping industry have raised concerns with the State Lands Commission about the transfer of oil revenues from the port to City Hall, arguing that Measure D is shifting significant portion of the port's revenue to City Hall, threatening the financial security and competitiveness of the port. The SLC, which has oversight of the state's ports, has said in the past that they are carefully watching Measure D impacts on the port.
While no analysis was conducted by City Hall before placing the measure on the ballot, port financial staff estimated that Measure D would shift more than $100 million in oil revenues to the City Hall-controlled TORF over the next five years.
However, due to the rise in the price of oil, the latest projections are much higher.
"For the full fiscal 2011," Port Finance Director Sam Joumblat told the Harbor Commission on Monday, "I project that probably the net oil income would be over $40 million, if oil prices continue to be anywhere near their lofty present levels.
If oil prices remain near their current levels, this amount of oil revenue shifted to the control of City Hall could rise to more than $200 million over five years.
Nearly all the major stakeholders involved in the local international trade business community expressed opposition to Measure D, including: the Long Beach Chamber of Commerce; the Los Angeles Customs Brokers and Freight Forwarders Association; the LA/LB Propeller Club; the Pacific Merchant Shipping Association; the Harbor Association of Industry and Commerce; FuturePorts; and the California Marine and Intermodal Transportation System Advisory Council, or CALMITSAC.
A major concern raised by the PMSA and other opponents of Measure D is what the Tidelands Oil Revenue Funds are actually funding.
By state law, the funds can only be spent in the tidelands on oil production-related expenses. However, a caveat in the city charter allows the City Council to shift funds from the TORF to the general Tidelands Operating Fund (TOF). Monies in the City Hall-controlled TOF, which come from non-oil revenues generated in the city tidelands including port profits, must still be spent in the tidelands and then only on very specific uses such as maritime, navigation, recreational, environmental, fisheries and the promotion of maritime commerce.
Friday, April 1, 2011
Expert Predicts Positive West Coast Trade Growth in 2011, Slower Than 2010
Joining the Port of Long Beach "Pulse of the Ports" industry panel on Wednesday to offer an economic perspective of the port industry, transportation expert Dan Smith of the consulting firm Tioga Group, predicted continued trade growth through 2011, albeit at a smaller pace than in 2010. At the same time, Smith tackled several long held myths about the future impacts of the Panama Canal expansion, railroad pricing and a predicted capacity crunch at the Southern California ports of Long Beach and Los Angeles.
Smith began by pointing out that not only was 2010 a strong initial recovery for the port industry after a historically dismal 2009, but that "the recovery happened a lot quicker than we thought it would."
Container traffic at the West Coast ports swung from being down 14 percent in 2009 to being up more than 19 percent in 2010.
Smith said that while West Coast ports have regained some of the minor volumes that had shifted to the East Coast since 2006, the regular players on the West Coast also lost some cargo to alternative West Coast ports such as Prince Rupert, Manzanillo and Lazaro Cardenas – though the shift has been subtle.
"So just as trade has always shifted a little bit back and forth between the West Coast ports, it continues to shift," Smith said.
Smith acknowledged that the completion of the Panama Canal expansion in 2014 was a source of considerable discussion within the industry, but in his opinion, "the reality is probably a lot less dramatic than the trade journals and speakers might imply."
While the new Panama locks will allow some of the largest container vessels to pass through, Smith believes "the trade volumes to fill those vessels is still many years away."
Smith said that the canal authority is planning its own financial future on much more modest rates of growth – about 3 percent a year – and thus it is unlikely that there will be the volume needed for 12,000-TEU vessels to utilize the new locks before 2020.
The canal authority, Smith said, is looking first and foremost at growing the volumes of the services already using the canal and only then will they look to building the capacity to fill the larger vessels.
Smith also shot down the idea that the US railroads have been pricing themselves out of the market as a myth.
"The business the railroads have now is the business they want, and they will fight to keep it," Smith said.
He pointed out that the railroads have an "unbroken record of providing the capacity and performance to keep the traffic that they really want to keep."
Smith said any shift to the East or Gulf Coast is likely to be small and gradual, taking one or maybe two decades.
While some customers will shift to take advantage of new all-water opportunities as new non-West Coast port capacity comes on line, Smith does not predict it will be a stampede.
As for the long-term outlook for the Southern California ports or Long Beach and Los Angeles, which combined make up the busiest container port complex in the Western Hemisphere, Smith predicted slower post-recession growth than that seen in the initial 2010 recovery, which he credited primarily to large scale inventory replenishment.
Smith predicts 5 percent growth at the Southern California ports in the third quarter of 2011 and 14 percent growth in the fourth quarter.
Even further down the road, Smith does not see a future capacity crunch at the two ports once the ports complete development projects currently under way. He estimates that the two ports will still have no capacity issues well beyond 2030.
Smith predicted that growth rates surpassing the 2006-2007 peak years at the two ports are now expected to occur somewhere around 2015 and the two ports can expect to grow at about 4.5 to 5.2 percent a year from there on out.
Smith began by pointing out that not only was 2010 a strong initial recovery for the port industry after a historically dismal 2009, but that "the recovery happened a lot quicker than we thought it would."
Container traffic at the West Coast ports swung from being down 14 percent in 2009 to being up more than 19 percent in 2010.
Smith said that while West Coast ports have regained some of the minor volumes that had shifted to the East Coast since 2006, the regular players on the West Coast also lost some cargo to alternative West Coast ports such as Prince Rupert, Manzanillo and Lazaro Cardenas – though the shift has been subtle.
"So just as trade has always shifted a little bit back and forth between the West Coast ports, it continues to shift," Smith said.
Smith acknowledged that the completion of the Panama Canal expansion in 2014 was a source of considerable discussion within the industry, but in his opinion, "the reality is probably a lot less dramatic than the trade journals and speakers might imply."
While the new Panama locks will allow some of the largest container vessels to pass through, Smith believes "the trade volumes to fill those vessels is still many years away."
Smith said that the canal authority is planning its own financial future on much more modest rates of growth – about 3 percent a year – and thus it is unlikely that there will be the volume needed for 12,000-TEU vessels to utilize the new locks before 2020.
The canal authority, Smith said, is looking first and foremost at growing the volumes of the services already using the canal and only then will they look to building the capacity to fill the larger vessels.
Smith also shot down the idea that the US railroads have been pricing themselves out of the market as a myth.
"The business the railroads have now is the business they want, and they will fight to keep it," Smith said.
He pointed out that the railroads have an "unbroken record of providing the capacity and performance to keep the traffic that they really want to keep."
Smith said any shift to the East or Gulf Coast is likely to be small and gradual, taking one or maybe two decades.
While some customers will shift to take advantage of new all-water opportunities as new non-West Coast port capacity comes on line, Smith does not predict it will be a stampede.
As for the long-term outlook for the Southern California ports or Long Beach and Los Angeles, which combined make up the busiest container port complex in the Western Hemisphere, Smith predicted slower post-recession growth than that seen in the initial 2010 recovery, which he credited primarily to large scale inventory replenishment.
Smith predicts 5 percent growth at the Southern California ports in the third quarter of 2011 and 14 percent growth in the fourth quarter.
Even further down the road, Smith does not see a future capacity crunch at the two ports once the ports complete development projects currently under way. He estimates that the two ports will still have no capacity issues well beyond 2030.
Smith predicted that growth rates surpassing the 2006-2007 peak years at the two ports are now expected to occur somewhere around 2015 and the two ports can expect to grow at about 4.5 to 5.2 percent a year from there on out.
BCOs, Retailers See Strong 2011, Warn of Potential Japan, Middle East Impacts
Offering up the perspective of retailers and beneficial cargo owners for the Port of Long Beach "Pulse of the Ports" panel on Wednesday, Jonathan Gold, the Vice-President of Supply Chain & Customs Policy for the National Retail Federation, began with a recap of the 2009 recession and the recovery of 2010.
The retail industry saw sales drop 2.7 percent in 2009, only to rebound 3.7 percent in 2010. In addition, Gold said, import volumes in 2010 jumped 17.4 percent and holiday sales, originally projected at 2.3 percent, actually came in at 5.7 percent – the largest jump since 2004.
Gold predicted that despite facing challenges such as high unemployment, continuing issues with the housing market, rising fuel and commodity prices and legislative/regulatory uncertainty putting pressure on consumers, retail sales will increase 4 percent in 2011 with single digit percentage gains in import volumes.
Cargo volumes at both East and West Coast ports will continue to grow in 2011, Gold said, but the situation in Japan and unrest in the Middle East could have an impact on the rest of the year.
Gold said that some of the consideration that retailers look at in making their port decisions include: proximity to distribution network, operational efficiency, workforce stability, the ocean services offered, and fees and regulations.
"Things such as the Clean Truck Fee, infrastructure fees, hour restrictions, and also the politics at both the local and state level also have an impact," Gold said.
In Southern California specifically, the ports of Long Beach and Los Angeles face their own challenges. Gold said that things such as the efficacy of the current night gate system, turn times, the Clean Truck Program, current chassis programs and how they will work, and a strained infrastructure are all consideration looked at by retailers.
"Even as I say these are operational challenges, I think they are also opportunities," Gold said. "Opportunities for every stakeholder to come together and work out a viable solution, so that we can make sure the supply chain remains efficient, and make sure that every participant in the supply chains remains viable and continues to grow."
The retail industry saw sales drop 2.7 percent in 2009, only to rebound 3.7 percent in 2010. In addition, Gold said, import volumes in 2010 jumped 17.4 percent and holiday sales, originally projected at 2.3 percent, actually came in at 5.7 percent – the largest jump since 2004.
Gold predicted that despite facing challenges such as high unemployment, continuing issues with the housing market, rising fuel and commodity prices and legislative/regulatory uncertainty putting pressure on consumers, retail sales will increase 4 percent in 2011 with single digit percentage gains in import volumes.
Cargo volumes at both East and West Coast ports will continue to grow in 2011, Gold said, but the situation in Japan and unrest in the Middle East could have an impact on the rest of the year.
Gold said that some of the consideration that retailers look at in making their port decisions include: proximity to distribution network, operational efficiency, workforce stability, the ocean services offered, and fees and regulations.
"Things such as the Clean Truck Fee, infrastructure fees, hour restrictions, and also the politics at both the local and state level also have an impact," Gold said.
In Southern California specifically, the ports of Long Beach and Los Angeles face their own challenges. Gold said that things such as the efficacy of the current night gate system, turn times, the Clean Truck Program, current chassis programs and how they will work, and a strained infrastructure are all consideration looked at by retailers.
"Even as I say these are operational challenges, I think they are also opportunities," Gold said. "Opportunities for every stakeholder to come together and work out a viable solution, so that we can make sure the supply chain remains efficient, and make sure that every participant in the supply chains remains viable and continues to grow."
Ocean Carrier Sees Increased Trade Growth, Warns of Constraints
Frank Baragona, president of CMA CGM (America), joined the Port of Long Beach "Pulse of the Ports" panel on Wednesday to offer up an industry view from the perspective of the ocean carriers.
While bullish on the continued growth of trade heading into 2011, Baragona offered warnings about issues such as container supply, landside infrastructure constraints, and rising bunker fuel costs that could damper the perceived recovery since the disastrous 2009 downturn.
"We do see continued [US] GDP growth – and that is a positive thing – in excess of 3 percent [in 2011] coming off less than 3 percent last year," Baragona said.
"This is a good signal that consumers' confidence is recovering and people are back transacting business in the marketplace."
Baragona said that the two biggest issues threatening a sustained economic recovery from his perspective are high unemployment and the housing/access to credit situation.
Despite this, Baragona said he is optimistic of a continued slow recovery.
Turning to capacity supply and demand, Baragona said that on a global level capacity has grown on average 10 percent per year over the past decade to a 2010 level of just over 14 million TEUs.
He predicted a similar 8 percent to 9 percent annual growth rate in global capacity for the next two years, ending 2012 at about 17 million TEUs.
Despite seeing a global 14 percent growth in demand during 2010, Baragona said that 2011 would likely come in at about 8 percent demand growth and 2012 would see about the same.
"So, yes there is ample global capacity. [Global] demand is tracking slightly below capacity, so this indicates that there should be adequate supply globally to meet the demand," Baragona said.
Specifically in the transpacific, however, demand continues to track well below capacity and Baragona predicted that the trend would continue in 2011, with transpacific eastbound capacity having about 3 million more TEUs than called for by estimated demand.
Baragona said that his firm had earlier predicted a more optimistic picture for demand in 2011, but the rise in bunker fuels prices, the disaster in Japan and the turmoil in the Middle East have all put a cloud on those projections, though he remains guardedly optimistic for a positive year.
Turning to issues on the landside, Baragona said that the key concern is efficiency at the ports to deal with the 12,000-plus TEU vessel classes that are now entering service.
"We would like 150 moves an hour, but we are not there yet. These ships cannot be laid up for three or four days. They only make money when they are out steaming," Baragona said.
He added that it is not just the dock, but also the rail networks, the highways systems, the port infrastructure that all play into the needed efficiency.
From a carrier operational perspective, Baragona said that bunker fuel costs, slow steaming and the Panama Canal are all major topics of internal discussion.
Baragona called his presentation chart of bunker fuel prices per ton over the past three years "scary," adding that in just over 26 months the price per ton of bunker fuel has almost tripled.
"If anyone in this room questions the logic of a bunker surcharge, this should explain it," he said.
Baragona said that a typical CMA CGM 8,200-TEU vessel on a roundtrip from South China to Long Beach and back burns about $3.5 million to $4 million in bunker fuel per trip.
"That number continues to go every day," Baragona said. "This is why the bunker formula is so important in our service contracts. It represents 60 percent of the costs of that service."
In addition to surcharges, another method to deal with rising fuel costs is slow steaming on the backhaul, where vessels on their return trip move at speeds well below standard ocean-going vessel cruise speeds. Estimates suggest that a vessel cruising at 17 to 19 knots instead of full speed at 23 to 26 knots, can save about 5 percent to 7 percent on fuel costs.
Baragona said that the industry has been quick to adopt backhaul slow steaming. Of the 45 service loops on the West Coast, for example, the number using slow steaming has risen from one service in mid-2009 to more than 15 in February 2010 and almost 25 as of today. Baragona pointed out that on the East Coast the rise of slow steaming has been even more pronounced, rising from two service loops out of 22 in mid-2009 to 12 in February 2010 to nearly 17 as of today.
As long as bunker fuel costs remain a sizable component of the costs of ocean transport, Baragona said slow steaming on the backhaul will remain a justifiable cost reduction strategy for the foreseeable future.
Turning to the opening of the $5 billion expansion of the Panama Canal in 2014, Baragona said that "It will provide an alternative. It is going to provide options to the supply chain that don't exist today."
The problem, he said, is that it is not yet known how much it will cost to transit the canal when the new larger locks open in 2014.
"The key to this," Baragona said, "is that it will change the dynamics on the East Coast. Today, we are unable to get any ship through the canal over 5,000 TEUs. And the only way we are currently able to operate larger ship efficiently [to the East Coast] is to bring them through the Suez."
Baragona said that there will be a shift from the West Coast to the East Coast, but he hesitated to describe it as a "fundamental" shift.
"You will see a shift because not everything that moves today is time sensitive," he said.
He predicted the canal opening will allow the industry to provide larger, more fuel efficient and more economical vessels to the supply chain. In the end, he said, it will provide the customer with a trade off: between cost and time to market.
The one caveat he offered, though, was the ability of infrastructure on the East Coast in 2014 to accommodate the larger vessels that will be able to transit the canal.
It is not the case today, Baragona said. "A lot has to be done on the [East Coast] infrastructure to capitalize on the opportunity."
Another constraint that Baragona said does not get a lot of discussion is the worldwide container supply. He pointed out that 96 percent of new containers are built in China and in 2008 and 2009 China almost shut off the construction. Supply dropped from 5 million new containers a year in 2007 to 300,000 in 2010. Add to this that new and larger ships continued to join the fleet and this led, in some part, to the situation last year where shippers began to experience a shortage of available containers.
Baragona said that worldwide container supply has continued to drop in relation to the number of vessels slots – from three boxes per slot in 2000 to about two boxes per slot today.
The ideal model, he said, is an equal container pool in Asia, on the vessels, and in the US, all cycling.
Baragona said the while there will be "adequate and reasonable" vessel capacity through the whole 2011 peak season, the concern he pointed to is whether there will be enough containers.
"My advice is this," Baragona said, "Be very judicious in your contracting. Equipment availability is going to be critical. I don't think any company is immune from it and I would certainly be cautious."
While bullish on the continued growth of trade heading into 2011, Baragona offered warnings about issues such as container supply, landside infrastructure constraints, and rising bunker fuel costs that could damper the perceived recovery since the disastrous 2009 downturn.
"We do see continued [US] GDP growth – and that is a positive thing – in excess of 3 percent [in 2011] coming off less than 3 percent last year," Baragona said.
"This is a good signal that consumers' confidence is recovering and people are back transacting business in the marketplace."
Baragona said that the two biggest issues threatening a sustained economic recovery from his perspective are high unemployment and the housing/access to credit situation.
Despite this, Baragona said he is optimistic of a continued slow recovery.
Turning to capacity supply and demand, Baragona said that on a global level capacity has grown on average 10 percent per year over the past decade to a 2010 level of just over 14 million TEUs.
He predicted a similar 8 percent to 9 percent annual growth rate in global capacity for the next two years, ending 2012 at about 17 million TEUs.
Despite seeing a global 14 percent growth in demand during 2010, Baragona said that 2011 would likely come in at about 8 percent demand growth and 2012 would see about the same.
"So, yes there is ample global capacity. [Global] demand is tracking slightly below capacity, so this indicates that there should be adequate supply globally to meet the demand," Baragona said.
Specifically in the transpacific, however, demand continues to track well below capacity and Baragona predicted that the trend would continue in 2011, with transpacific eastbound capacity having about 3 million more TEUs than called for by estimated demand.
Baragona said that his firm had earlier predicted a more optimistic picture for demand in 2011, but the rise in bunker fuels prices, the disaster in Japan and the turmoil in the Middle East have all put a cloud on those projections, though he remains guardedly optimistic for a positive year.
Turning to issues on the landside, Baragona said that the key concern is efficiency at the ports to deal with the 12,000-plus TEU vessel classes that are now entering service.
"We would like 150 moves an hour, but we are not there yet. These ships cannot be laid up for three or four days. They only make money when they are out steaming," Baragona said.
He added that it is not just the dock, but also the rail networks, the highways systems, the port infrastructure that all play into the needed efficiency.
From a carrier operational perspective, Baragona said that bunker fuel costs, slow steaming and the Panama Canal are all major topics of internal discussion.
Baragona called his presentation chart of bunker fuel prices per ton over the past three years "scary," adding that in just over 26 months the price per ton of bunker fuel has almost tripled.
"If anyone in this room questions the logic of a bunker surcharge, this should explain it," he said.
Baragona said that a typical CMA CGM 8,200-TEU vessel on a roundtrip from South China to Long Beach and back burns about $3.5 million to $4 million in bunker fuel per trip.
"That number continues to go every day," Baragona said. "This is why the bunker formula is so important in our service contracts. It represents 60 percent of the costs of that service."
In addition to surcharges, another method to deal with rising fuel costs is slow steaming on the backhaul, where vessels on their return trip move at speeds well below standard ocean-going vessel cruise speeds. Estimates suggest that a vessel cruising at 17 to 19 knots instead of full speed at 23 to 26 knots, can save about 5 percent to 7 percent on fuel costs.
Baragona said that the industry has been quick to adopt backhaul slow steaming. Of the 45 service loops on the West Coast, for example, the number using slow steaming has risen from one service in mid-2009 to more than 15 in February 2010 and almost 25 as of today. Baragona pointed out that on the East Coast the rise of slow steaming has been even more pronounced, rising from two service loops out of 22 in mid-2009 to 12 in February 2010 to nearly 17 as of today.
As long as bunker fuel costs remain a sizable component of the costs of ocean transport, Baragona said slow steaming on the backhaul will remain a justifiable cost reduction strategy for the foreseeable future.
Turning to the opening of the $5 billion expansion of the Panama Canal in 2014, Baragona said that "It will provide an alternative. It is going to provide options to the supply chain that don't exist today."
The problem, he said, is that it is not yet known how much it will cost to transit the canal when the new larger locks open in 2014.
"The key to this," Baragona said, "is that it will change the dynamics on the East Coast. Today, we are unable to get any ship through the canal over 5,000 TEUs. And the only way we are currently able to operate larger ship efficiently [to the East Coast] is to bring them through the Suez."
Baragona said that there will be a shift from the West Coast to the East Coast, but he hesitated to describe it as a "fundamental" shift.
"You will see a shift because not everything that moves today is time sensitive," he said.
He predicted the canal opening will allow the industry to provide larger, more fuel efficient and more economical vessels to the supply chain. In the end, he said, it will provide the customer with a trade off: between cost and time to market.
The one caveat he offered, though, was the ability of infrastructure on the East Coast in 2014 to accommodate the larger vessels that will be able to transit the canal.
It is not the case today, Baragona said. "A lot has to be done on the [East Coast] infrastructure to capitalize on the opportunity."
Another constraint that Baragona said does not get a lot of discussion is the worldwide container supply. He pointed out that 96 percent of new containers are built in China and in 2008 and 2009 China almost shut off the construction. Supply dropped from 5 million new containers a year in 2007 to 300,000 in 2010. Add to this that new and larger ships continued to join the fleet and this led, in some part, to the situation last year where shippers began to experience a shortage of available containers.
Baragona said that worldwide container supply has continued to drop in relation to the number of vessels slots – from three boxes per slot in 2000 to about two boxes per slot today.
The ideal model, he said, is an equal container pool in Asia, on the vessels, and in the US, all cycling.
Baragona said the while there will be "adequate and reasonable" vessel capacity through the whole 2011 peak season, the concern he pointed to is whether there will be enough containers.
"My advice is this," Baragona said, "Be very judicious in your contracting. Equipment availability is going to be critical. I don't think any company is immune from it and I would certainly be cautious."
Railroads Ready to Handle Predicted Record Peak Season
Bringing the perspective of the railroad sector to the Port of Long Beach "Pulse of the Ports" industry panel on Wednesday, Clarence Gooden, Executive Vice President and CCO for CSX Corp., forecast a record-setting fall peak in intermodal rail traffic and said the railroads are prepared with increased equipment and support.
Gooden predicted that 2011 will see a record-setting year in the number of intermodal shipments by the railroads, surpassing the industry peaks of 2006.
"Intermodal shipments in 2006 were about 3.7 million containers and trailers that we moved, [growing] to somewhere about 3.84 million containers [in 2011] in the intermodal business," Gooden said.
He predicted that intermodal rail shipments would increase 10.1 percent in the first quarter over the same period in 2010, increase 8.2 percent in the second quarter, 6.7 percent in the third quarter and 8 percent in the fourth quarter.
Gooden also predicted that the third quarter would see the largest volumes of intermodal rail shipments in 2011, with 2.14 million international TEUs and 1.7 million domestic and transload TEUs handled.
"It looks like we are going to have a very traditional peak this year, with goods and services beginning to increase somewhere around August – a very dramatic and traditional peak," Gooden said.
From a rail perspective, Gooden said that a successful peak revolves around three major components: container capacity, train capacity and the intermodal network capacity.
On the issue of container capacity, Gooden said that the drop in worldwide container-to-slot capacity from three-to-one to two-to-one over the past decade means that the existing containers will have to be turned around faster to maintain efficiency.
Gooden said that CSX expanded their national rail asset fleet last year to handle an extra 3,000 TEUs and will further increase this amount in 2011 by another 8,000 TEUs of capacity.
On the issue of train capacity, Gooden pointed out that CSX has added more than 400 additional locomotives to their asset fleet since the recovery began in early 2010, with plans to bring several hundred more online in 2011.
In addition to increasing the number of locomotives in the system, the rail industry has also drawn down the number of rail flatcars in storage to increase the number of flatcars in service at any given time. Gooden also said that 2011 will be the largest single-year increase in new double-stack railcars added to the network.
"We currently have the capacity to put on over 100-plus trains a day if the need arose," Gooden said.
On top of the predicted record-setting intermodal traffic this year, CSX is also beefing up their assets to deal with an ongoing boom in coal shipments, which require a great deal of rail assets due to the sheer tonnage being hauled, and an expected bumper harvest in grain which is also expected to require a large amount of rail equipment. CSX also handles about 88 percent of all the fertilizer shipments in the US, which require a great number of rail assets.
"We think we have a great balance of service in terms of being able to handle this traffic as we move forward," Gooden said.
Another factor to providing adequate service, Gooden said, is in providing enough crews to man the trains.
"In the unemployment numbers you continue to see, the rail industry has been an anomaly," Gooden said. The main reason for that, he said, is the massive turnover the industry has experienced in the past several years and the hiring needed to keep staffing at proper levels. He pointed out within the next several years, more than half of the 30,000 CSX employees will have been hired in the previous five years.
"At CSX we have about 13,000 train and engine service employees and this year we plan to hire over 3,000 [workers] to either replace those to cover attrition or in anticipation of where we have growth in our business," Gooden said.
A final factor, he said, was track capacity.
"All throughout the recession, in fact since 2004, we have been investing $1.5 billion to $2 billion a year in our company and its infrastructure," Gooden said, resulting in the addition of more than 600 miles a year of new track.
"We are working hard to keep that infrastructure up and to enable us to be able to serve our country and its transportation needs."
Gooden predicted that 2011 will see a record-setting year in the number of intermodal shipments by the railroads, surpassing the industry peaks of 2006.
"Intermodal shipments in 2006 were about 3.7 million containers and trailers that we moved, [growing] to somewhere about 3.84 million containers [in 2011] in the intermodal business," Gooden said.
He predicted that intermodal rail shipments would increase 10.1 percent in the first quarter over the same period in 2010, increase 8.2 percent in the second quarter, 6.7 percent in the third quarter and 8 percent in the fourth quarter.
Gooden also predicted that the third quarter would see the largest volumes of intermodal rail shipments in 2011, with 2.14 million international TEUs and 1.7 million domestic and transload TEUs handled.
"It looks like we are going to have a very traditional peak this year, with goods and services beginning to increase somewhere around August – a very dramatic and traditional peak," Gooden said.
From a rail perspective, Gooden said that a successful peak revolves around three major components: container capacity, train capacity and the intermodal network capacity.
On the issue of container capacity, Gooden said that the drop in worldwide container-to-slot capacity from three-to-one to two-to-one over the past decade means that the existing containers will have to be turned around faster to maintain efficiency.
Gooden said that CSX expanded their national rail asset fleet last year to handle an extra 3,000 TEUs and will further increase this amount in 2011 by another 8,000 TEUs of capacity.
On the issue of train capacity, Gooden pointed out that CSX has added more than 400 additional locomotives to their asset fleet since the recovery began in early 2010, with plans to bring several hundred more online in 2011.
In addition to increasing the number of locomotives in the system, the rail industry has also drawn down the number of rail flatcars in storage to increase the number of flatcars in service at any given time. Gooden also said that 2011 will be the largest single-year increase in new double-stack railcars added to the network.
"We currently have the capacity to put on over 100-plus trains a day if the need arose," Gooden said.
On top of the predicted record-setting intermodal traffic this year, CSX is also beefing up their assets to deal with an ongoing boom in coal shipments, which require a great deal of rail assets due to the sheer tonnage being hauled, and an expected bumper harvest in grain which is also expected to require a large amount of rail equipment. CSX also handles about 88 percent of all the fertilizer shipments in the US, which require a great number of rail assets.
"We think we have a great balance of service in terms of being able to handle this traffic as we move forward," Gooden said.
Another factor to providing adequate service, Gooden said, is in providing enough crews to man the trains.
"In the unemployment numbers you continue to see, the rail industry has been an anomaly," Gooden said. The main reason for that, he said, is the massive turnover the industry has experienced in the past several years and the hiring needed to keep staffing at proper levels. He pointed out within the next several years, more than half of the 30,000 CSX employees will have been hired in the previous five years.
"At CSX we have about 13,000 train and engine service employees and this year we plan to hire over 3,000 [workers] to either replace those to cover attrition or in anticipation of where we have growth in our business," Gooden said.
A final factor, he said, was track capacity.
"All throughout the recession, in fact since 2004, we have been investing $1.5 billion to $2 billion a year in our company and its infrastructure," Gooden said, resulting in the addition of more than 600 miles a year of new track.
"We are working hard to keep that infrastructure up and to enable us to be able to serve our country and its transportation needs."
