Friday, May 20, 2011

Proposal By Senators to Change Guam Development Raises Concerns

A proposal last week by three high-ranking US Senators that could threaten the scope of a $10 billion modernization of Guam's commercial port and local infrastructure is raising concerns by officials in Guam and Japan.

Senators Carl Levin (D-MI), John McCain (R-AZ) and Jim Webb (D-VA), from the Senate Armed Services Committee, issued a joint press release on May 11 proposing changes to the current Department of Defense plan to shift the structure of US forces in Asia. A key component of these realignment plans, first proposed in 2006 after years of negotiations between Japan and the US, is the shifting of at least 8,600 US Marines – including the entire III Marine Expeditionary Force – and their dependents and support staff, from Okinawa to Guam. To support this build-up on Guam, a nearly $2 billion revamp of the island nation's aging port facilities and local infrastructure has been slowly moving forward.

The senators called the current re-alignment plans, including the Guam build-up, "unrealistic, unworkable, and unaffordable."

Sen. Levin, chairman of the Senate committee, said that much has changed since the plans were first approved in 2006. He added that growth costs of the plans and the "projected times are totally unrealistic."
The three senators' proposal calls for scaling back the deployments on Guam, seriously reducing the number of troops shifted to Guam and thereby reducing the need for major development of the island nation's infrastructure.

Under the senators' proposal, Guam would only see a "permanently-assigned headquarters element bolstered by deployed, rotating combat units that are home-based elsewhere, and consideration of off-island training sites."

Guam Governor Eddie Calvo was informed May 13 that US Secretary of Defense Robert Gates is currently updating the Guam military build-up master plan to make it more cost-effective as the DoD faces up to $400 billion in cuts in the near future.

However, US Navy Under Secretary Robert Work assured Gov. Calvo that the Guam build-up is still on.

"Recently, there has been a lot of discussion about press released on proposed plans that have caused some concern in the community," Gov. Calvo said after talking with Work.

"I want to be clear: despite all the talk, there will be a buildup on Guam. The DoD is committed to it. No one knows for certain how the buildup plans will change – not Congress, not the Obama administration, not the military. To speculate at this point is misleading and misguided.”

Japanese Defense Minister Toshimi Kitazawa also expressed concern about the three US senators' proposal calling it "unrealistic," and that it would be rejected by the people of Okinawa who have long called for the departure of the US military presence on their island.

Kitazawa, noting the 2009 Guam Treaty between the US and Japan covering the relocation of the Okinawa forces, said that the US senators' proposal is "a domestic matter of the United States that should be settled between the US government and Congress. At the government-to-government level, the Japan-US agreement exists and there is no change."

The Guam commercial port, operated by the island government's Port Authority of Guam, is undergoing a rapid expansion as it prepares for the build-up, which is expected to increase traffic through the Guam port by more than 100 percent, an increase that many fear the aging infrastructure at the port will not be able to handle without the modernization efforts.

US military officials said on May 17 that the US 2011 fiscal year federal budget contains enough Guam build-up funds to cover work on Guam roads and the second phase of an upgrade to Guam's commercial port at Apra Harbor. However, the total FY2011 allocations of $131 million represents a $300 million cut over what had been proposed. The DoD is hoping to make up the cuts in the FY2012 budget.

In all the US federal government has pledged $4 billion to help prepare Guam for the build-up. Japan has also pledged just under $6.1 billion to support the transfer.

Since funding began in 2008 through 2011, the US government had allocated about $484 million and Japan has allocated about $834 million to the transfer. Japan has also approved an additional $420 million that is slated for pay out this year.

SoCal Ports Get High Ratings On Bond Issuances

Key bond and bond refunding issuances at the ports of Long Beach and Los Angeles have received top notch credit ratings from Fitch Ratings, one of the nation's three leading bond credit rating agencies.

Fitch has affirmed its long-term 'AA' rating and a rating outlook of "stable" on the Port of Long Beach's approximately $735 million outstanding harbor revenue bonds and harbor revenue refunding bonds issued by the city of Long Beach.
The Long Beach bonds are secured by a gross lien on port revenues, with a final maturity in 2027.

In explaining the rationale for the "AA" rating, the second highest of ten rating levels, Fitch cited the port's ability to rebound after the downturn in the maritime industry between 2008 and 2010.

Fitch also pointed to the port's "modern" terminal facilities and "excellent" infrastructure; a strong financial profile with a healthy liquid position (1,518 days cash on hand); and, the port's "experienced" and "proactive" management staff.

However, Fitch did mention several risk factors that were considered in rendering the rating, including: the size and scope of the port's 10-year $4.7 billion expansion program that could add to the port's currently moderate debt burden; and, risk to the port's throughput due to the volatile nature of international trade.

Across the harbor at the Port of Los Angeles, Fitch assigned an 'AA' rating to the proposed $110 million series 2011A and series 20011B Harbor Department of the City of Los Angeles refunding revenue bonds. Los Angeles port officials intend to refund $97.5 million of the outstanding series 2001 bonds in order to achieve level debt service savings of approximately 6 percent on a present value basis.

Fitch also affirmed the 'AA' rating to approximately $880 million of port parity revenue bonds.

Both ratings were assigned a rating outlook of "stable."

All the Los Angeles port revenue bonds covered by the Fitch ratings are secured by a senior lien on revenues of the port with a final maturity in 2040.

In explaining the reason for the Los Angeles ratings, Fitch cited: the "healthy return of cargo volumes" at the port following the 2008 to 2010 downturn; the port's "modern and well-invested" terminal facilities; strong and relatively stable revenue sources provided by long-term leases with the port's largest tenants; and, the port's "very strong financial profile that is highlighted by industry high debt coverage ratios, modest net leverage, and a very strong liquidity position."

Fitch pointed out that for fiscal year 2010, the port's debt service coverage ratio on the revenue bonds was 3.20 times, i.e., the port's revenue was 3.2 times the debt payments of the bonds. The port also had unrestricted reserves representing 769 days cash on hand, and the port's overall leverage was modest at 1.9 times net debt to cashflow available for debt service.

As with the neighboring Long Beach port's rating, Fitch cited Los Angeles' exposure to the volatility of the international trade markets as a risk factor for the port.

APL Parent to Partner on Major New China Box Terminal

Singapore-based Neptune Orient Lines, the world's seventh largest shipping line and the parent of ocean carrier APL, announced Thursday a joint venture to operate a two-berth container terminal at the Port of Qingdao. NOL will invest $25.8 million in the terminal, which when opened in the second half of this year, will be NOL’s first in mainland China.

“Today we’ve taken a significant step to strengthen our presence in China and participate fully in its unprecedented growth,” APL President for North Asia Kenneth Glenn said. “Terminal investment is a logical step for us after decades of supporting the nation’s trade on sea and land.”

The Qingdao joint venture will partner NOL with China-based logistics firm SITC International Holdings Company Limited and Qingdao Qianwan United Container Terminal Co., Ltd.

NOL said the fast-growing North China market is a strategic focal point for its liner shipping company, APL – a major reason for the terminal investment. Located on the Yellow Sea coast, Qingdao is China’s fifth-largest container port and the largest in the North China market.

According to NOL, its investment in the new terminal, where major construction is already complete, will ensure future access to terminal capacity as China’s trade growth accelerates. The NOL joint venture partnership has a 30-year concession at Qingdao.

NOL estimates that the new terminal will add 1.5 million TEUs of annual capacity at Qingdao, already the world's eighth busiest container port with just over 12 million TEUs handled in 2010.

The new terminal will be equipped with seven post-Panamax ship-to-shore cranes as well as 16 rail-mounted yard gantry cranes.

The terminal will primarily serve vessels operated by APL and SITC. APL said the dedicated container terminal will "help improve schedule reliability and guarantee high service levels to its customers."

APL currently operates marine terminals at Kaohsiung, Taiwan; Kobe and Yokohama in Japan; and in the U.S. at the ports of Los Angeles, Oakland, and Seattle, as well as Dutch Harbor in Alaska.

Mosquito Nets on the Mekong

In honor of National Maritime Day, Sunday, May 22nd, Louis Lemos has submitted an account of his participation in a unique project on the Mekong River.

By Louis Lemos

At the height of the Cambodian campaign in 1974, US military supply convoys en route from Saigon to Phnom Penh via the Mekong River consisted mainly of flat deck cargo barges towed by US-flag tugboats, operating under contract to the Military Sealift Command Far East (MSCFE). The Khmer Rouge Forces took a dim view of this traffic and set up bases at strategic points along the embankment from where they ambushed the unarmed convoys (pushing steadily upstream at five knots), with volleys of Chinese-made B-40 rockets. In response, MSCFE requested assistance from US Defense Attaché Office (DAO) Navy Division, Saigon, to devise a means of protecting the ammunition-laden barges from this bothersome weapons threat. Within a few days a US Navy Tiger Team flew into Saigon, proceeded to draw a crude sketch of what appeared to be a floating carport, presumably intended to protect the barges, and left town the next day, after leaving the following directions:

1 -Only material readily available-in-country may be used in this project. No material to be imported.
2 -Anti-rocket protection system must not interfere with the loading or unloading of barge cargo.
3 - Anti-rocket protection must not detract from minimum convoy speed of 5 knots.
4 - The "system" must be ready for the next convoy within 30 days.

Accordingly, the Engineering Design Group of the US DAO (NAVY) Logistics Department was given the assignment and a three-man project team was assembled consisting of a Project Leader, a US Engineer and a Vietnamese Engineer, none of whom had prior experience with rocket type weaponry. The initial directions were to evaluate the floating carport sketch for feasibility and if not found suitable to devise an alternative concept. It soon became evident that the carport structure, supported by two very narrow floats, would most likely collapse on top of the cargo barge if struck by a rocket and create a drag on the tow. Apart from the fact that the corrugated metal roof might keep the rain off the cargo, the structure itself offered no protection at all against the rockets. After considering several options and rejecting them all mainly due to the constraint against importing material, and the limited time factor, the configuration of the anti-rocket "system" was limited to, and entirely contingent upon, assets available in country. Having just completed an assignment with the Vietnamese Army Watercraft Transportation Command, as the Project Leader I arranged to "borrow" a number of flat deck 750 ton BC barges from ARVN W.T.C. with the promise that they would be fully restored to new condition before being returned. These barges were 120 feet in length, and of 35 feet beam, with a draft of 11 feet, fully loaded. Since there was no means of stopping the rockets, the best we could hope for was to intercept them at "safe distance". Theoretically, positioning two shield barges in-tandem, to the port and starboard sides of the cargo barge should provide a reasonably safe distance of 35 feet at each side, with the cargo barge secured in the middle. The next requirement was that of "interception". This was intended to be accomplished by the use of cyclone wire mesh fencing, erected in panels of ten feet long, by nineteen feet in height, erected on the port and starboard outboard edges of each shield barge, welded in place, and suitably braced with diagonal stiffeners.

Panel framing consisted of 2 inch by 2 inch by 1/4 inch angle iron, to which two panels of cyclone wire mesh were welded, one on each side, with the one inch square mesh staggered, thereby reducing the effect mesh to one half inch squares. However, before construction could begin, the feasibility of 'interception" had to be proven and this required (a) acquiring a number of B-40 rockets, and (b) firing them at a mock-up wire mesh panel to determine the effect. Since the Khmer Rouge was not likely to provide such weaponry willingly, a request was made to the South Vietnamese military commanders to whose custody the US military had entrusted several captured B-40 rockets prior to their departure from Vietnam. As a further precaution against the barges being hit below the waterline, alternate ballast tanks were filled with Styrofoam to provide reserve buoyancy if needed. Additionally, the cargo of ammunition would be surrounded by a six foot thick by six-foot high wall of sandbags. As a final safeguard, a test run was made up the river with a set of four shield barges and one cargo barge carrying a dummy load of comparable weight Upon completion of the trip up river, the U.S. test monitor called back to Saigon by radio to report that the 5-barge tow assembly had maintained the minimum required convoy speed of 5 knots successfully, on the basis of which, the order was passed to proceed with construction. A fleet of eight barges was brought into a small riverside boatyard and a large Diesel-powered welding generator was positioned to serve the welding crew, cutting and assembling the angle iron frames while other workers unrolled and cut the cyclone mesh wire into panel size pieces. At another nearby facility, hand-operated anchoring winches were being fabricated, four for each barge. In a move calculated to cut material costs, one of the Vietnamese contractors instead of buying rolls of cyclone mesh wire, opted to buy hundreds of coils of wire from which the fencing mesh is assembled by machine but lacking the machine, he hired a couple of dozen workers to stretch out the wire coils and weave the mesh panels by hand. Fortunately the finished product proved to be a neat orderly mesh that passed inspection. In the interests of fairness, two Philippine inspectors were brought over from Subic Bay Ship Repair Facility and kept a close eye on the work for production quality control. A week after the start of construction a Navy commander from MSCFE, Yokohama, arrived to determine how soon the first set of barges would be ready. He was advised that if the work pace was hurried, twelve to fifteen days might be possible, but he was insistent upon a convoy departure date within ten days that the contractors could not meet

In addition to running the gauntlet of B-40 rockets in the river, the ammunition barges were sitting ducks for sneak mortar stacks while the cargo was being discharged by manual labor at the T-headed jetty at Phnom Penh. To help expedite the unloading it was decided to provide a fleet of battery-powered fork-lift trucks and in due course the shipment arrived in Saigon and a further decision was made to load all sixteen fork-lift trucks on the same barge along with the cargo of ammunition, rather than splitting the fork-lift trucks into two shipments. The barge chosen for this trip was the largest cargo barge in all of Vietnam at that time, and rather than wait for the Shield Barges to be ready, the convoy departed on schedule. Khmer Rouge intelligence was apparently alerted and at a rather narrow stretch of the Mekong River the B-40's scored direct hits, exploding the cargo of ammunition and sinking the barge with what was left of the forklift trucks. This not only amounted to a serious loss of vital supplies but also resulted in blocking the channel for further riverine traffic in both directions. Eventually, the wreckage was further demolished enough to clear the channel for safe passage but details of this hazardous operation were not disclosed. By the time the first set of Shield barges was completed, orders came through to double the number of Shield Barges from the originally authorized level of eight barges, and in due course the modified vessels were all turned over to Military Sealift Command Vietnam and hurriedly placed into service. As can be expected, riverside dwellers were amazed to see what appeared to be floating tennis courts being towed upstream. A further safeguard was provided by stationing a Repair Barge at the mouth of the river loaded with rolls of cyclone wire mesh and angle iron, plus a Diesel-powered welding generator. Needless to say, the welding crew was kept quite busy patching up the gaping holes in the wire mesh panels and the twisted angle iron frames, but this was a small price to pay for delivering the cargo safely. The Khmer Rouge must have been quite red in the face seeing their B8-40 rockets hitting the Shield Barges, exploding and falling harmlessly into the river, leaving great holes in the wire mesh as the convoys continued on their way.

The Mosquito Net Project proved to be so effective that the Khmer Rouge eventually decided to lay acoustic mines to be actuated by the noise of the tugboat's propeller. The response was to drag a large anchor chain strung between two boats to free the mines from their anchors while a third boat following behind detonated the mines by gunfire. In all of South-East Asia the only anchor chain to be found was in a junkyard in Cholon, the China Town of Saigon. However, with a cargo plane ready to fly the chain to Phnom Penh, the transaction was delayed for three days while the Chinese merchant consulted his horoscope to decide on what day the chain could be sold.

In addition to several years’ service as engineering officer, British Merchant Navy and as Chief Engineer, US Merchant Marine, Louis Lemos is a US Navy certified Ship Superintendent (MINS); former Marine Engineering Advisor to the South Vietnamese Navy; a licensed Stationary Engineer; Commissioned Inspector of Boilers and Pressure Vessels; former Port Engineer with Military Sealift Command. Mr. Lemos can be reached at 415-897-9056 or

Tuesday, May 17, 2011

“Pulse of the Ports” Predicts 2011 Peak Season Growth

By Keith Higginbotham, California Contributing Editor

Six supply chain and logistics experts speaking at the Port of Long Beach’s 7th annual “Pulse of the Ports: Peak Season Forecast” on March 30 came to the same overall conclusion for the 2011 year ahead: international trade will continue to grow through the end of the year while structural changes will continue to transform the industry over the long run.

More than 400 members of the shipping, logistics and transportation industries attended the event, hearing representatives from the various sectors of the supply chain talk about the outlook for the 2011 peak shipping season.

This year’s industry panel featured speakers representing the retail, ocean carrier, terminal operations, railroad, and logistics sectors. An additional speaker offered an economic projection of the upcoming peak season. While the event is geared toward stakeholders in the Southern California supply chain industry, nearly all the speakers offered a local, regional and national perspective during their respective presentations.

Ocean Carrier Sees Increased Trade Growth

Frank Baragona, president of CMA CGM (America), offered up an industry view from the perspective of the ocean carriers.

While bullish on the continued growth of trade heading into 2011, Baragona warned 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,” Baragona said. “This is a good signal that consumers’ confidence is recovering and people are back transacting business in the marketplace.”

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, and 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.

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.

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.

Turning to the opening of the $5 billion expansion of the Panama Canal in 2014, Baragona said, “It will provide an alternative. It is going to provide options to the supply chain that don’t exist today.”
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.

The one caveat he offered, though, was whether the East Coast in 2014 would have the infrastructure to accommodate the larger vessels that will be able to transit the canal.

Baragona said that 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. 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.

“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.”

Terminal Turn Times a Key Challenge

Bringing the perspective of the terminal operators to the industry panel, SSA Containers president Ed DeNike said that a key issue for the continued efficacy of the terminals is turn time for drayage trucks.

DeNike said that the biggest concern related to turn times for terminal operators was what he called “traffic bunching.”

Due to the neighboring ports of Long Beach and Los Angeles PierPass system, which splits day/night drayage to lessen local traffic and charges per-TEU fees on daytime gate calls, DeNike said that truck traffic bunches up outside terminals around the lunch hour during the day and then again as the night gates prepare to open at 6 p.m.

“When we first started [PierPass], we thought as terminal operators that it would help us better than it is today,” DeNike said. “It’s probably serving the purpose as far as containers on the freeways and some other environmental concerns, but as a terminal operator it is not serving us near as well as it could.”

DeNike showed images of the approach road to the SSA operated terminal at Long Beach’s Pier A at various times of the day and night. At 9 a.m., no trucks are visible, however just two hours later the line of trucks clog the road for more than three miles. The massive queues form again, two trucks abreast for miles, at around 3:30 p.m. as the truckers await the opening of the night gates.

“They don’t want to come in before 6 p.m., because they would have to pay an extra $100 penalty for a PierPass fee,” DeNike said. “So what they do is line up an hour or two or three ahead of time to get into the terminal.”

The slow times at the gates during the day, he said, are causing tremendous extra expenses in labor, with each gate shift costing $1,000 per longshoreman per day. “We can’t man up in the daytime for truckers not to show up for [staffed] hours in the morning, then show up all at once and serve them properly,” DeNike said.

The same situation occurs at night, he said, pointing out that “we can’t man up at night to serve them between 6 p.m. and 10 p.m.,” if the truckers are going home at 10 p.m. while SSA is paying for longshore gate labor for a full eight-hour shift.

“We need to have dedicated day and night drivers,” DeNike said. “We need to work all day and all night if we are going to make this thing work.”

DeNike said that one of the potential solutions that all of the terminals are actively implementing is automation technology.

Besides the traffic bunching, the other main problem that slows down the gates is the tedious manual input of information from each truck into the terminal computer system by longshore workers.

DeNike said that while SSA has automated the out gate, automating the in gates has proved to be more of a problem due to the type of information required to be input, but he expects a system that dramatically reduces the manual input of information on the in gate will be up and running at the SSA terminal within several months.

DeNike announced that within the next several months, the SSA terminal in Long Beach will be home to what SSA believes is the first centralized gate system in the world. Using this system, clerks in a Long Beach control room will be able to staff the various SSA terminal gates throughout the nation, all through automation.

“What this means is that hopefully we are going to be able to utilize everyone a lot more than we are today,” DeNike said.

Longshore workers at the centralized control room, he said, will be able to shift from working one terminal’s gates to another’s at the flick of a switch as truck calls ebb at one terminal and increase at another.

BCOs, Retailers See Strong 2011

Offering up the perspective of retailers and beneficial cargo owners, 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 East as well as 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.

Railroads Ready for Predicted Record Season

Bringing the perspective of the railroad sector, 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 would see a record-setting year in the number of intermodal shipments by the railroads, surpassing the industry peaks of 2006.

“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. 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.

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.

Positive West Coast Trade Growth Predicted

Offering 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 assumptions 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 TEU 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. 

Oakland Port Up in April as Monthly Gains Slow

California's number three port started the second quarter of the calendar year with a minor increase in total container volumes in April, the fourth straight month of shrinking monthly increases.

The Port of Oakland reported handling a total of 191,490 TEUs in April, an increase of 2.8 percent over April 2010. In January, the port posted a 15.8 percent increase, a 12.9 percent increase in February and a 5.9 percent increase in March – all compared to the same months last year.

In the import column of the ledger, Oakland officials report handling 65,722 loaded inbound TEUs in April, a 4.8 percent increase over the year-ago period. In the export column, the port handled 84,705 loaded outbound TEUs, a 5.1 percent increase over April 2010.

For the calendar year, the port remains up 8.9 percent over the first four months of 2010, with imports up 4.7 percent and exports up 7.2 percent.

Seattle, Tacoma Ports Post Modest Gains in April

The major Puget Sound ports continued to gain cargo volumes in April, though total box volume increases were moderate compared to the same period last year.

The Port of Seattle reported handling a total of 170,666 TEUs in April, a modest 1.7 percent increase over April of 2010 and well off the double-digit monthly increase the port experienced for most of last year.

As part of the total, the port handled 62,914 loaded inbound TEUs in April, a 2.7 percent drop over the same month last year. In terms of exports, the port reported moving 48,449 TEUs last month, a 7.2 percent increase over April 2010.

Total TEU volumes are up 6.2 percent at Seattle for the first four months of 2011, with imports up 3 percent and exports up 12.6 percent compared to the January to April period in 2010.

Down the coast, Tacoma port officials reported handling a total of 112,908 TEUs during April, a 5.2 percent increase over the year-ago period.

In the import column, Tacoma handled 33,903 loaded inbound TEUs in April, an 11.1 percent increase over last April. On the export side, the port handled 29,213 loaded outbound TEUs In April, an impressive 15.8 percent increase over April 2010.

Total cargo growth at Tacoma through April remains 7.9 percent above the first four months of last year, with imports up 6.3 percent and exports up 17.6 percent for the same period.

Anchorage Port Project Faces Delays, Snags, and Shrinking Scope

The cost to fully complete a major dock replacement project at the Port of Anchorage in Alaska has ballooned from about $150 million in 2002 to about $1.2 billion with a pushed-back completion date from 2011 to 2021.

Proponents of the plan cite the age of the port's current docks, some dating to well before the Alaskan earthquake of 1964, and the fact that 85 to 90 percent of imported goods coming into the state move through Anchorage.

The full plan would see the replacement of the existing dock, the creation of 135 acres of new port land, two new barge berths and three ship berths and a rail extension for cargo and military use. Preliminary work on the project began in 2003, with actual construction starting in 2004. The first phase of the project, including the rail extension, was completed in 2006 and Phase II work began in 2007. Estimates now suggest that the full plan would require an additional $922 million in funds to complete.

City official now say that cost overruns, delays, and the shrinking availability of funds have made the full project untenable.

Port of Anchorage director Bill Sheffield released a scaled-back version of the full construction plan on May 6. Sheffield's new proposal calls for 65 acres of new port land to be created, the construction of two barge berths and one new ship berth. Construction on the scaled-back plan would begin in 2013 and run through 2016. It would also require an additional $397 million in funds on top of the $265 million already spent. Under a 2003 agreement, the port committed to raising the funds for the project while the federal Maritime Administration would oversee construction.

However, there is concern that even the scaled-back plan may be impossible to complete as envisioned.

More than a decade ago, the port began talking about replacing the aging dock at the Anchorage port.

The full plan was first proposed in 2002 with a price tag of $150 million and called for the creation of 85 acres of new port land, using a construction technique called Open Cell Sheet Pile instead of a traditional deck-on-pilings design. The scope of the project was later expanded to create 135 acres of new land and wharfage at a 2005 cost of about $360 million.

The open cell technique drives half-inch thick, 20-inch-wide by 90-foot-long interlocking steel sheets about a dozen feet into the seabed to construct large horseshoe-shaped bulkheads rising out of the water. These palisade-like structures extend about 400 feet from the shore. Once a bulkhead is complete, the voids behind the bulkheads are backfilled to create a surface onto which decking can be built. Where the arches of the side-by-side bulkheads meet, piles are driven to flatten out the waterfront face of the new structure and provide anchor points for vessel fenders.

When the open cell plan was first proposed by Sheffield, who was appointed to the port position in 2001, it was argued that the open cell technique would cut the cost of the project from an estimated $230 million for a traditional deck-on-piling construction, to about $150 million for the open cell project.

By the end of the 2009 construction season, more than 60 of the large horseshoe-shaped cells had been constructed. However, during the 2009 construction season, contractors driving the steel plates into the seabed encountered problems. Subsequent underwater inspections found that nearly half of the cells had steel sheets that were bent, twisted or pulled away from their neighboring sheets' interlocking mechanism.

According to inspection reports, almost a quarter of the roughly 2,600 sheets examined were damaged. An additional 5,400 sheets that have already been installed await inspection.

Many of the damaged sheets were replaced or repaired and replaced during the 2010 construction season. In fact, no new sheets were installed in 2010, with the entire season taken up largely by repairs to damaged sheets and further inspections. The new contractor, which took over in 2010 and pre-drilled the seabed before hammering in the sheets, has reported no additional problems with the sheet installations.

So far, no one has declared a reason for the structural problems that occurred in 2009, but the port has said that it is investigating. There have also been calls for an outside investigation of the structural problems, as well as urging by a community advisory commission to have an independent review of the entire design and construction aspects of the project.

Sheffield and other city officials, according to the Anchorage Daily News, which has reported on the port project in detail, have insisted that taxpayers will not be tapped to finish the project.

A large portion of the funds for the port project to date have come from federal earmarks, with the state contributing $10 million to $20 million a year. The city has put in $49 million for the project and has also approved the port borrowing an additional $75 million that will be wrapped into a revenue bond to be issued when the project is complete.

But the port is still far short of the nearly $400 million still needed to fund the scaled-back version of the project. Sheffield recently told the Anchorage Daily News that he had been in touch with U.S. Transportation Secretary Ray LaHood and hopes to get leftover federal stimulus funds for the project.

Alaskan politics have also affected the project. The late-2008 defeat of long-serving Alaska Sen. Ted Stevens, well known for his ability to channel huge amounts of federal dollars to Alaska projects, seriously damaged the state's ability to win earmarks in Congress. In addition, the rise of anti-pork sentiments in Congress in recent years, coupled with the recent Congressional attitude of fiscal restraint, has also made obtaining federal funds for the port project more difficult.

Sheffield, while proposing a scaled-back version of the plan, contends that he will be able to raise the $700 million needed to finish the project as originally envisioned. Sheffield told the Anchorage Daily News that he has been able to assemble $50 million to $60 million a year by a combination of federal earmarks, loans, port revenue, and state/federal grants.

SoCal Ports Report Solid Growth In April

Reversing tepid numbers in March, the Port of Long Beach swung sharply back into positive cargo growth territory last month and joined the neighboring Port of Los Angeles in reporting strong single digit percentage increases for April.

Port of Long Beach officials report handling a total of 531,090 TEUs in April, a 9.5 percent increase over April of last year.

On the import side of the ledger, the Port of Long Beach handled a total of 270,107 loaded inbound TEUs in April, a 12 percent increase over the same period last year. On the export side, port officials report handling a total of 143,683 loaded outbound TEUs, a 10.4 percent increase compared to April 2010.

Across the harbor, Port of Los Angeles officials reported handling a total of 617,272 TEUs in April, a 3.7 percent increase over the same period last year.

In the import column, the port moved a total of 312,359 loaded inbound TEUs last month, a 3.4 percent increase. On the export side, port officials reported handling a total of 167,448 loaded outbound TEUs in April, a 5.8 percent increase over April 2010.