NRF: National Retail Cargo Volumes Up 15% in 2010, Peak Month May Have Been July

Import cargo volumes at the nation's major retail container ports, which suffered through historic downturns last year, are expected to increase by 15 percent in 2010, according to a National Retail Federation report released Thursday.

“We aren’t back to where we were two years ago and consumers aren’t convinced that the recession is over quite yet, but 2010 is clearly going to finish better than last year,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold in the trade group's monthly Global Port Tracker report. “In the meantime, retailers are monitoring demand very closely and hoping to see increases in employment and other areas that will boost consumer confidence. Cargo numbers this summer are showing unusually high percentage increases, but that appears to be an indication of shortages in shipping capacity earlier in the year rather than sales expectations.”

Compiled in conjunction with consulting and research firm Hackett Associates, the NRF monthly report also predicted that based on summer container volumes the traditional September/October peak shipping season could already be in full swing several months early.

“There are indications that the shipping season may have peaked earlier than normal as the rush to re-stock inventories earlier in the year intersects with a combination of increased shipping capacity, consumer confidence levels not seen since August 2009 and the slowing growth of consumer spending,” said Hackett Associates founder Ben Hackett said. “The traditional peak season may be melting away.”

The large double-digit increases in June and July, said the report, appear to be the result of backlogs built up due to the lack of shipping capacity earlier in the year after ship owners took vessels out of service during the recession and were slow to return them as the economy began to pick up. With many retailers appearing to bring merchandise in early to avoid any further bottlenecks, July is likely to be the peak shipping month for 2010 rather than the traditional rush of holiday season merchandise in October.

The Global Port Tracker monthly report covers the U.S. ports of Long Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston and Savannah on the East Coast, and Houston on the Gulf Coast.

Crowley Takes Home Green Award From SoCal Ports

Crowley Maritime Corporation has been recognized by the ports of Long Beach and Los Angeles for the company's efforts to significantly reduce carbon emissions within the two Southern California ports.

Crowley officials were presented with the "Significant Early Action to Reduce Emissions Award" at the third annual San Pedro Bay Ports Clean Air Action Plan Air Quality luncheon held recently in Long Beach.

The Early Action Award is given to companies who have made great strides to reduce pollutant emissions at both ports. Nominations were reviewed by port officials, as well as representatives from several governmental agencies, including the South Coast Air Quality Management District, California Air Resources Board and the U.S. Environmental Protection Agency.

In naming the Jacksonville-based Crowley as this year's award winner, port officials cited the company's proactive initiative to conduct an extensive engine re-powering of its Harbor Class tugs that provide ship assist and tanker escort services in the Ports of Los Angeles and Long Beach.

"Over the past several years, the company has been involved in several emissions and energy-saving initiatives in this region, including the installation of shore-side power and four tug engine repowers," said Crowley's director of engineering Bill Metcalf, who accepted the award on behalf of the company. "Those initiatives will reduce carbon dioxide emissions by more than 486,180 pounds, particulate matter emissions by 3.24-tons and mono-nitrogen oxides by 109.52-tons this year alone."

The Crowley tugs Admiral, Leader, Scout and Master were reintroduced to the fleet earlier this year following the installation of Tier II compliant engines. The project was partially funded by the Port of Los Angeles Air Quality Mitigation Incentive Program. The Crowley upgrades were completed nearly three years ahead of a regulatory deadline mandating Tier II emissions compliance.

Crowley also began using a ship-to-shore power system last year for its Long Beach and Los Angeles tugboats. Previously, the tugs tied up at the dock needed to run their generators to provide electrical power. By pulling power from shore-side sources, the tug generators could be shut off while at dock, significantly reducing diesel emissions.

Long Beach Approves $1.1B Bridge Replacement

After more than a decade of planning, wishing and hoping, the governing board for the Port of Long Beach on Monday approved a $1.13 billion plan to replace the aging Gerald Desmond Bridge.

Described as one of the port-area's most critical infrastructure needs, the new bridge will be taller, wider and safer than the current bridge.

The 156-foot-tall Gerald Desmond Bridge, which is named after a former City official, links the port-area Terminal Island to Long Beach proper. The 40-year-old steel and concrete structure is a main egress point for trucks into the port. Upwards of 60,000 vehicles a day cross it's five-lane, 1,200-foot-long span over the port's main channel.

According to port officials, more than 15 percent of the nation's seaborne cargo moves over the bridge each year.

Port commissioners on Monday lauded the effort of port staff to get the project going before unanimously voting to approve the final environmental impact documents that were the last impediment to starting construction.

When opened in 1968, the Gerald Desmond Bridge was estimated to have a 50 year life span in terms of both capacity and engineering.

However, by the 1980s as containers volumes exploded at the port, and the adjacent Port of Los Angeles, the bridge became stretched well beyond its original capacity. It also began to deteriorate rapidly.

Concrete falls off the underside of the bridge at such a regular pace that port officials, first in 2001 and then again in 2004, were forced to install two nets, referred to by locals as a diaper, to catch the wayward missiles – some the size of baseballs.

In late-2003, the California Department of Transportation, or Caltrans, found the bridge to be in such poor shape that it rated the bridge in the agency's "to be replaced" category – the same rating given the Minneapolis roadway bridge which collapsed in 2007. Despite state and local officials’ claims the bridge remains safe for traffic, the Caltrans rating for the Gerald Desmond Bridge has fallen even further since 2003. A recent $1 million upgrade raised the Caltrans rating of the existing bridge's road deck from "critical condition" to "satisfactory," despite the ongoing issue of concrete falling from the underside.

The new bridge, which has yet to be given an official name though suggestions of keeping the same name have been floated, will be built just south of the current bridge. When the new bridge – which will feature a cable-stayed design – is completed, the old bridge will be demolished.

The new bridge would also feature three traffic lanes plus an emergency lane in both directions, compared to the two lanes in each direction on the existing bridge. The span of the new bridge would also offer a 200-foot mean high water level clearance underneath, as opposed to the 156-foot MHWL clearance of the existing bridge, to allow for the newest generation of cargo ships to pass underneath.

The replacement bridge will be funded by a combination of federal and state funds, with the port providing between 10 percent and 15 percent of the total cost in what port officials call "matching funds."

Of the total $1.13 billion in estimated costs for the replacement project, about $900 million from various sources have been earmarked, including: about $570 million from federal sources, $250 million in state funding, $29 million from Los Angeles County sources, and $55 million from port funds. According to port documents, just under $200 million in federal funds have yet to be identified.

Barring any legal actions against the project, preliminary work on the new bridge could begin within a few months, though an actual ground breaking on construction could be more than a year away. Construction is expected to take at least six years.

Los Angeles Port Email Warns Against Proposed Shipyard

The Port of Los Angeles, concerned about a proposed plan to build a ship repair facility at the port, sent out an email Monday to roughly 250 local, state and federal government officials criticizing the plan and making the argument that any further consideration of the proposal could seriously delay an Army Corps of Engineers channel deepening project and ongoing terminal development at the port.

Gambol Industries, Inc. has been working for more than a year to move forward with the $50 million plan to re-develop the shuttered South West Marine shipyard along the main channel of the port into a modern ship repair facility. The Long Beach-based firm, which claims it has a solid business plan that would create hundreds of jobs at the proposed facility, has faced stiff criticism from the port, shipping industry, and longshore unions.

The port email warned that the Gambol plan threatens to delay the port's Main Channel Deepening Project, a major navigation project by the port which would provide access for the largest of modern container vessel to areas deep within the port's channels. The MCDP is also key, according to the email, to an ongoing $350 million expansion and redevelopment of two port container terminals.

The main conflict with the MCDP is that the port has already identified the area of the abandoned South West Marine facility as the dumping area for the material to be dredged by the Army Corps.

"In the face of Gambol's proposal, the Army Corps has said they would shut down our project while a 24 to 36 month supplemental EIR/EIS is done," said the port email. "Staff of the California Coastal Commission has advised Gambol that the changes it has proposed to date to our contaminated sediment fill are not feasible or environmentally optimal. The Los Angeles Area Chamber of Commerce and ILWU also oppose Gambol's plan because it would delay our channel deepening project."

For it's part, Gambol has received the support of at least one key area politician – Los Angeles City Councilmember Janice Hahn. Daughter of famous City Councilmember Kenneth Hahn and brother of former Los Angeles Mayor James Hahn, Janice Hahn currently represents the port area. She also chairs the City Council's Trade, Commerce and Tourism Committee, which oversees the Port of Los Angeles, the Los Angeles International Airport and the city's Convention & Visitors Bureau.

Earlier this month, Hahn wrote an op-ed piece for the port-area Torrance Daily Breeze newspaper in which she supported the Gambol Industries proposal, citing the $50 million investment in the hard-hit port-area economy and the creation of hundreds of union jobs as main reasons for her support.

Another supporter of the Gambol plan is the Los Angeles County Economic Development Corp. (LAEDC), a local economic think-tank who was commissioned by Gambol to study their shipyard proposal. LAEDC found that the Gambol facility would be "a welcome addition to a city that has struggled to create employment opportunities for its growing population."

The LAEDC estimated that "When the [Gambol] shipyard reaches full capacity, it [could] generate total annual economic activity of over $219 million and sustain 2,040 full-time jobs in Los Angeles County with [payroll] earnings of $79 million."

The port argues in Monday's email that Gambol's business plan is "highly speculative" and in a play on the firm's name, a "gamble."

Port officials point to the fact that major shipyard employment in the United States has fallen precipitously in the past 30 years and that there is simply not enough work to support the Gambol facility.

"Nationwide, over 70 percent of shipbuilding revenue and over 75 percent of ship repair revenue comes from the U.S. Navy," the port wrote. "There is no such patron to fuel a rebirth of shipbuilding in the San Pedro Bay. In fact, other shipyards have announced layoffs and eliminations, including 560 jobs eliminated recently at NASSCO in San Diego."

The port's five-member governing board is expected to officially reject the Gambol plan at their Aug. 19 board meeting.

Arrow Launch Service Celebrates 20 Years

The year 2010 marks a 20 year business milestone for Jack and Terri Harmon, owners and operators of two busy and vibrant marine businesses – Arrow Launch Service, Inc. (ALS) a water taxi service in Puget Sound ports offering marine transportation to deep draft ships at anchor or underway; and Victoria Rapid Transit, Inc. (VRT) which provides foot passenger ferry service between Port Angeles, Washington and Victoria, British Columbia, Canada as well as service between Victoria and Friday Harbor on San Juan Island, Washington. Both companies are headquartered in Port Angeles.

The water taxi business has become a complicated and demanding 24-hour a day operation that requires having all the necessary resources. The state also tightly regulates the industry to make sure companies stay financially healthy, but within a limited profit margin to avoid taking advantage of customers.”

Today, Arrow Launch Services and its associated companies have more than 40 employees. In addition to administrative offices in Port Angeles, they maintain permanent moorage and storage facilities in Tacoma, Seattle and Anacortes. Along with the Victoria Express and Victoria Express II passenger ferries, Arrow’s fleet has a total of ten 40 to 65-foot vessels stationed throughout Puget Sound ports, including a 60-foot USCG-certified landing craft and two 40-foot by 15-foot flat-deck barges.

Shore-Based Services

Having to maintain a growing fleet spread throughout the region led to the establishment of a complementary company in Arrow Marine Services, a repair facility on land providing equipment and work space for sandblasting, painting, welding, fabrication and all types of marine mechanical, plumbing and electrical repair.

Having a staff of certified welders, electricians, and mechanics, as well as a land-based fleet of 10 trucks and related equipment, has enabled Arrow to provide other customers with a variety of mobile repair services 24 hours a day. They may range from towing and repairing broken down smaller pleasure boats or commercial vessels to responding to shipboard emergencies on a supertanker.

Ship supply and service has become an important part of Arrow’s business. One of the least desirable but necessary services is the removal of sewage from vessels that normally discharge their accumulations at sea. It is a messy and tightly regulated process because of the environmental issues involved. Arrow has found the best way to do it is to put a sewage truck on board a landing craft certified for sewage. They use trucks supplied by quality companies familiar with the marine industry and experienced in removing sewage from vessels at anchor.

Pacific Warehouse and Freight is yet another side of Harmon’s business, developed as a supplement to Arrow’s ship services. It’s a stevedoring warehousing division of the company that maintains storage facilities with up to 10,000 square feet each in Port Angeles, Tacoma/Seattle, Anacortes and Bellingham.

“Sometimes equipment or supplies show up before the ship receiving them enters port,” says Harmon. “In fact, we receive owner’s materials every day in every port. So we have facilities with a couple of forks at each one to unload and store it until the vessel gets here. Then we load the cylinder liners, paint, chemicals or whatever it is onto our boats, transport it out to the ship and stow it onboard.”

In addition, Arrow provides a procurement service for shipping companies having difficulty finding particular items of equipment. “For example, a ship owner called and said he couldn’t find through his normal vendors a specialty ice maker he needed,” recalls Harmon. “But our guys who deal with the local suppliers located the ice maker in five minutes. They had it aboard the ship before it sailed. Without someone to fill that kind of niche for them, the ship would have gone without it.”

According to Harmon, the various facets of his business are all fairly well balanced, with the water taxi business, the hauling of passengers and freight, and the warehousing being about equal in revenue.

“A report presented to the Port of Port Angeles several years ago showed that as ships get larger and cargoes become more consolidated, fewer ships will be coming into Puget Sound,” Harmon adds. “That is a concern for our water taxi and other ship services, and one of the reasons we are growing our ancillary businesses – repair, storage, and the ferries. The same study showed vessels under 300 gross tons and yachts are on the increase, so we want to capture some of that market.”

Harmon’s wife Terri, who maintains an active role in the administrative end of the business, says her husband has always been a hard worker, and his track record clearly demonstrates a drive to look for niche opportunities in the marine business and move into them. His company philosophy – “One call does it all – anytime, anywhere, any repair” – also indicates a service-oriented attitude that helped him succeed, even in uncertain times.

Victoria Rapid Transit, Inc. (VRT), the Harmons’ passenger-only ferry service, was born in 1990 using the 105-foot Victoria Express to provide as many as four round trips daily during seasonal summer sailings between Port Angeles, Washington and Victoria, British Columbia. In 2004, the 125-foot Victoria Express II was added to the mix, allowing the company to provide expanded service for passengers visiting Victoria, as well as to add service to Friday Harbor on San Juan Island.

During the 2010 sailing season, in recognition of its 20th anniversary, VRT is offering special reduced fare pricing to both Victoria and Friday Harbor as well as a 50 percent discount for active and retired military personnel.

With the increase in fuel prices and the newer engine technology available, VRT repowered the passenger ferries by replacing their older two-cycle 12-cylinder Detroit engines with new HE (High Efficiency) four-cycle six-cylinder Detroit/MTU engines. “The power upgrade was completed 100 per cent by our staff and vessel crew which affords our crews firsthand knowledge of how the components work together,” says Harmon. “The new technology will afford us more power, significantly improve fuel consumption and allow us to use bio-diesel. We have also completed installation of an electronics package upgrade on both vessels that overlays all systems onto one monitor, plus an online passenger reservation system.”

“The ferry service is a piece of the total operation,” says Harmon, “but one that faced difficult challenges in the post-911 days of proposed regulations of the Western Hemisphere Travel Initiative (WHTI) regarding identification for cross-border tourism.” To that end, the Harmons spent a good deal of time over a period of three years working with other international carriers from Washington State and around the country and with state and federal delegations in helping to craft workable rules in a timely fashion.

According to Harmon, the various facets of his business are all fairly well balanced, with the water taxi business, the hauling of passengers and freight, and the warehousing being about equal in revenue.

In April of this year, Jack Harmon announced the sale of the original Victoria Express vessel to the Port of Kingston. Both of the current vessels (Victoria Express and Victoria Express II) will remain in service for the 2010 Express sailing season. At the end of the season, the Victoria Express vessel will be transferred to the ownership of the Port of Kingston for use in foot passenger service between Kingston and Seattle. When asked about the future of the company, Harmon replied, “We’re excited about what the next 20 years has in store for our company. We plan on continuing our services from Port Angeles and are continuing to explore new and exciting ventures for our marine transportation companies.”

CUT to Move From Long Beach to Los Angeles

As first reported in PMM Online yesterday, California United Terminals will be moving from their home of more than 30 years at the Port of Long Beach to the neighboring Port of Los Angeles sometime around the end of the year.

On Thursday, the Port of Los Angeles governing commission approved an amendment to their lease with APM Terminals Pacific that provides for a CUT sublease of up to 200 acres on the APM property located on the Los Angeles port's Pier 400. According to port documents, the new Los Angeles facility for CUT, though physically on Pier 400, will be known as Pier 500.

The future Los Angeles CUT facility will be located on portions of the nearly 500-acre APM facility on Pier 400 which is home to Maersk. Ironically, Maersk was also a defector from Long Beach, moving to the then-recently completed Pier 400 in the early 2000s.

The current 130-acre CUT terminal in Long Beach is the epicenter of the Long Beach port's ongoing Middle Harbor Redevelopment Project and according to port officials, the CUT operators felt that the facility was no longer a good fit based on construction schedules, land configuration and berthing space limitations.

The CUT terminal in Long Beach, which opened in 1979, currently services calls mainly from Hyundai Merchant Marine as well as APL and MOL. The terminal handled just under 390,000 TEUs last year.

The move came as no surprise to Long Beach officials, who report that they have already been talking with potential replacement customers for the departing CUT.

"The departure of Hyundai Merchant Marine will not impact construction of the Middle Harbor Project," said Port of Long Beach Deputy Executive Director Chris Lytle.

"The Middle Harbor Redevelopment Project was designed to modernize and upgrade aging port infrastructure, regardless of the shipping company leasing the facilities. In fact, the timing of this departure allows us to entertain a variety of leasing opportunities that may ultimately result in a more effective use of this property and shorter construction times."

Lytle said demand for terminal space in Long Beach remains high and that new cargo coming to Long Beach will offset the loss of Hyundai’s trade volume.

"New vessels have or will shortly begin calling at the Port of Long Beach, with an additional 1 million or more TEU’s a year," said Lytle. "At SSA’s Pier A facility alone, the recent addition of two services will result in an additional 550,000 TEUs. Matson’s new China service will add about 234,000 TEU a year."

City Vote on Increased Long Beach Port Transfers Exposes Divisions

The Long Beach City Council on Tuesday agreed to allow city voters in November to decide if the Port of Long Beach should contribute more to city coffers each year.

The amendment to the City Charter would require the port to contribute 5 percent of its annual gross revenue to the city each year. Currently, the port contributes 10 percent of its net earnings. The change could wind up sending millions more to the cash-strapped city each year---at the expense of the Port of Long Beach.

The City Council meeting also offered a rare glimpse of the increasingly fractious relationship between Long Beach City Hall leadership and officials of the city's semi-autonomous Harbor Department charged with overseeing the port’s management. The Port of Long Beach commission consists of five port commissioners who are nominated by the mayor and confirmed by the city council. On Monday, the port commission voted unanimously to oppose the ballot item.

Tuesday's meeting turned contentious when Harbor Commission President Nick Sramek asked the council to reconsider its vote on the charter change. Sramek pointed to more than $300 million dollars the port has transferred directly to City Hall, paid in taxes for city redevelopment, and/or spent on city projects in the past 15 years.

"We have always been a friend of Long Beach," said Sramek, "Especially in times of need."

He then criticized City Hall for not communicating with the port on the transfer issue.

"Mayor Foster, why don't you just call me if the city needs help?" asked Sramek. "You know my number."

Sramek also questioned City Hall's urgency in bringing the ballot item to a vote without a proper vetting; stating that language to the ballot language was still being changed by City Hall the day of the council meeting.

"There has been no discussion on these issues or even back-up material for you to read," said Sramek. "Why are you in such a hurry that you don't take the time to make sure the items are clearly written?"

Sramek went on to opine that the ballot item was simply another way for the city to get money from the highly profitable port.

Long Beach Mayor Bob Foster in turn criticized some port leadership actions since the start of the global economic meltdown in late 2008, including a decision in late 2008 to give port employees raises while other city workers' wages were frozen. He also chastised the commission for not meeting in a timely fashion on the issue with the city auditor--a move Foster perceived as a lack of courtesy to the auditor.

"[The port is] a subset of the city," Foster said, reminding Sramek that the council’s duty was to focus on the interests of the entire city. "[The port is] not an independent entity. [The port] is just one part of the city. The council has a right to look at what is good for the entire population and not just what may be good for one business."

Port commission vice-president Susan Wise also asked the council to hold off on voting for the ballot measure, stating that the measure could tarnish the port's image with its customers as a fiscally secure operation.

"What it looks like from the outside is that the city is taking more money [from the port] off the top and [the city] does not have respect for the port as an economic entity," said Wise. "I think that risks our reputation."

"The image of the port around the world may be important--it may be important to the port and maybe even the port's business conduct--but this is not about that," said Foster. "This is about the relationship between the city and the port...and that relationship needs to be strengthened."

Foster reiterated his criticism of the commissioners for not meeting with the city auditor. "I don't understand that," said Foster. "This is just a different method of calculating this. No one is trying to gouge the port or do anything untoward to the port."

City Attorney Bob Shannon also blasted Sramek and the other commissioners for refusing to meet with the city auditor prior to Tuesday's vote to discuss the possible charter amendment.

According to Shannon, in response to a request by the auditor to schedule a meeting with the commission, Sramek sent a letter to the City Attorney's office stating his belief that a meeting between the commission and the city auditor may violate state open meeting laws. Shannon went on to say: "I indicated to [Sramek] that in my opinion [such a meeting] was not a violation”.

According to Shannon, Sramek then demanded this opinion be provided to the port commission in writing with legal citations supporting the city attorney’s position. "That is an 'us' versus 'them,' and that is a dysfunctional position to take," responded the clearly irritated Shannon.

Sramek countered that he was told by an attorney that meeting with the auditor could be an open meetings law violation and was merely seeking clarification.

Shannon’s retort was heated: "Who told you that? Was it your attorney? Look at the portion of the [City] Charter that says I am your sole and exclusive legal adviser."

After the mayor called for calm in the chambers, Sramek explained that once the city attorney confirmed there would be no violation he immediately told the other commissioners to meet with the city auditor.

"You refused to meet with [the auditor] without staff [present], didn't you?" challenged Shannon.

"No, no, no," exclaimed Sramek. "That's a lie. That is a lie."

In an apparent attempt to defuse the situation, Mayor Foster offered that Shannon's dialogue with Sramek may have been a misunderstanding. Sramek took exception to this, and brief verbal sparring ensued between the mayor and Sramek before Sramek stepped down from the podium.

Michele Grubbs, vice-president of the Pacific Merchant Shipping Association, also spoke, raising concerns about the financial burden the change in the transfer calculation would place on the port and how this may affect future port business decisions.

Don Wylie, senior vice-president of terminal operator Ports America, also raised concerns about the transfer issue during a time of growing competition from other ports.

"In order for the [Long Beach] port to remain competitive, they must have the funds to develop infrastructure," said Wylie. "If the port is not allowed to continue to invest in infrastructure, then it is going to lose its competitive edge and all the jobs that go with it."

Foster took issue the idea of the increased transfer have a negative impact on the development of the port, stating that "even if we were talking about $2 or $3 million, this is nowhere near the significance" of other port capital projects.

"Let's not use scare tactics about the port's competitiveness," said Foster. "This isn't going to make the port less competitive and it isn't going to touch the port's ability to invest in itself. This is not about investing in the port; this is about a culture that needs to change."

Several other council members expressed a sense of surprise at the back and forth before the item went to a vote.

Council member Suja Lowenthal said she was stunned to hear the comments of the commissioners, adding that she was deeply disturbed "by the disdain" afforded by the port to the city auditor.

Despite the rancor, the ballot item passed 7-1, with Patrick O’Donnell dissenting and James Johnson absent.

In addition to changing the terms of the financial transfer the ballot measure will also ask voters to change separate charter language related to control of oil production property in the port area.

The charter change would strip the port commission of its power to control oil production within the port area and transfer this authority directly to City Hall.

It remains unclear whether City Hall will directly collect the revenue from port-area oil properties if the ballot measure is passed in November. In 2008, when oil prices were high, revenue from oil production in the port-area brought in more than $30 million to the port.