Dominant themes on the transpacific are larger vessels cascading into the trade, the impact of the US-China trade war and growth of southeast Asia
Dominant themes on the transpacific are larger vessels cascading into the trade, the impact of the US-China trade war and growth of southeast Asia. Ports on the trade explain how they are handling these demands and challenges
US transpacific ports have seen strong container volume growth and are ramping up their facilities to handle the cascaded vessels heading their way as well as dealing with challenges from the US-China trade war.
UK consultants Drewry said in their latest quarterly ports update that overall volume growth in North America was strong in Q4 2018 versus Q4 2017, at 7.9% versus a global average of 4.3%. One factor however was the front loading of imports to try and beat tariff deadlines.
Port of Long Beach – the US gateway of the transpacific – is riding high: it is beefing up its infrastructure and rail capabilities and has just enjoyed its second-busiest Q1 ever.
Port of Long Beach executive director Mario Cordero says “We have had a good domestic economy in the last couple of years and the global economy is fairly good – that is a major reason, when both economies are at a very good pace, that brings resiliency to the international trade.”
He singled out how the port had a “record-breaking” calendar year for 2018, when volumes of 8.1M TEU were moved. He comments “There is a factor regarding trade discussions between China and the US – in Q4 2018 there was the sense that there was a percentile of expediated cargo to meet the 1 January tariff deadline that did not come into play.”
The rush of cargo in Q4 contributed to the successful volumes the Port of Long Beach saw last year.
The port saw container volumes grow in excess of 7% in 2018, leading to 8.1M TEU, up on the 7.5M TEU recorded for 2017, which represented a growth of 11% compared to 2016.
The forecast for US container volumes is for moderate growth this year, at 1.8%, although Mr Cordero says the port expects to “do a little bit better than this”. The growth forecast for Port of Long Beach is 3-3.5%. He says the reason for the moderate growth forecast for the US is that “we are seeing the potential for the reduction in economy numbers, not just in the US but globally. Leading economists feel that the growth we have had for a number of years will diminish and that is just the nature of the cycle of economics”.
Speaking about potential upcoming challenges, he says “The challenge for the container market and port is the ongoing uncertainty in the industry because of the trade tariff discussions (between China and the US). But he comments “On the other hand the administration has not placed the most recently announced tariffs, the deadlines have been extended with no sign they will be implemented. The good news is that there appears there may be agreement here soon and once that happens, that will bring stability to the industry.”
The port is very much on track with its facility and infrastructure investment – a very important factor when it comes the larger vessels plying the transpacific. Mr Cordero says “Years ago we decided to invest US$4Bn in infrastructure. This places us in a very good position to receive 12,000, 13,000 and 14,000-TEU ultra large container ships without disruption or obstruction.
“We are in the position to receive 20,000-TEU+ vessels, so we are not only a deepwater port but are big-ship ready.”
This is important as larger vessels have cascaded on to the transpacific as ever-bigger ones are placed on the Asia-Europe. This is a trend expected to continue.
Mr Cordero comments “We are seeing larger vessels. If you go back to 2011, the largest vessel was 8,000 TEU, but three or four years later the vessels were larger. We foresaw this years ago, which is why we invested in our Middle Harbour project… I think in years to come cascading will be at the tune of 16-18,000-TEU vessels. One thing I am absolutely sure of is that we are able to service those vessels.”
The port is continuing its capital improvement projects with an emphasis on investing in rail. One specific project that could be a game-changer is the Pier B rail enhancement project, estimated to cost US$870M, that will allow the port to stage trains in the harbour.
Mr Cordero says “Not only are ships getting larger, which we are in a good position to receive, but trains are getting longer. Some are 3,000 m long and Pier B ondock rail will allow us to do that in a more efficient and faster manner. On the US west coast, we have the most advanced rail infrastructure of any part of the country and with ondock we are in a very good position to be a leader in container moving.”
The port is focused on making the most of the opportunities on the transpacific. Speaking about strategies for the year, Mr Cordero says “Strategy one is to enhance operational excellence, that will continue to place Long Beach as the port of choice and in addition focus on increasing the export market and attracting export commodities. There are plastic resin export commodities opportunities for us here [on the transpacific] in the short term. Enhancing export possibilities is also a strategy and we will continue exploring expanding markets in southeast Asia and Latin America.”
China makes up 70% of Long Beach’s import market but Mr Cordero singled out that while Vietnam currently only accounts for 5%, he saw potential for growth in this area. Mr Cordero comments “The market drives this, people look at the outsourcing of manufacturing that has been in China and with all the discussions at a geo-political level, this has enhanced potential other markets in terms of outsourcing.”
Change is taking place at the Port of Long Beach as Orient Overseas (International) Limited (OOIL) is to sell Long Beach Container Terminal to a consortium led by Macquarie Infrastructure Partners (MIP) for US$1.78Bn.
OOIL’s subsidiaries, OOCL and Long Beach Container Terminal (LBCT LLC), have entered into a sale and purchase agreement to sell 100% of LBCT LLC to a consortium led by MIP. LBCT LLC operates Long Beach Container Terminal in Port of Long Beach in the US.
As part of the sale, OOCL will also enter into a container stevedoring and terminal services agreement with LBCT LLC for a 20-year period.
The completion of the sale will be subject to approvals from regulatory authorities and other customary conditions.
Mr Cordero says “We welcome a new partnership with the consortium. It is a premier terminal for us, we have much invested in it and we feel very confident that our investment is very much protected for the life terminal lease (which ends in 2052). We are very optimistic regards our roadmap, we are optimistic for growth at this terminal’s third and final phase of construction of Middle Harbour, which will culminate in 2021.”
‘Growth with care’
The Port of Oakland’s overall strategy is growth with care, says Port of Oakland maritime director John Driscoll. He explains how that is being implemented in the transpacific trade, which accounts for more than 90% of Oakland’s business, with expansion, customer service, market diversity and differentiation being key components of this.
The Port’s second-largest terminal, TraPac, doubled its size last year after a two-year construction project. The largest terminal, Oakland International Container Terminal heightened four ship-to-shore cranes and purchased three new ones to handle the biggest megaships calling North America.
In terms of customer service, the Port has added night gates, appointment systems and up-to-the-minute online turn-time metrics to completely transform operating performance. Truckers now get in and out much more quickly.
For market diversity, Mr Driscoll says “While China remains the port’s largest trading partner, significant inroads have been made in other key Asian markets. This month the port announced a new service connecting Oakland to Vietnam.”
“The Port is setting itself apart from competitors by introducing unrivalled logistics capabilities. The first step was the 2018 opening of Cool Port, a 26,000 m2 temperature controlled distribution centre adjacent to Oakland marine terminals. Construction will begin this year on the first 43,000-m2 building in the Seaport Logistics Complex adjacent to the Port’s US$100M rail yard. No other port offers such comprehensive logistics facilities in close proximity to vessels and rails.”
Oakland’s trade is growing due to the “vibrancy of the northern California market and the demand in Asia for northern California agricultural exports”, says Mr Driscoll. Oakland reported record cargo volumes in each of the past two years. Its total volume is up 4.2% again this year.
Mr Driscoll says that markets in Japan, South Korea and Vietnam are growing as US exporters “seek new markets in the wake of trade tensions with China”.
Explaining the impact of the China-US trade war on Oakland, he says “Export volume has moderated since the rise of trade tensions. However, that could also be the result of a strong dollar making US goods more expensive overseas. We’re waiting to see what happens this year and are hopeful that China and the US reach a trade accord.”
Like other ports on the transpacific, Oakland is also seeing larger vessels cascading into its terminals. The result, says Mr Driscoll, is “more cargo than ever before is being handled here, but on fewer, larger ships. This is good for the environment and helps ease crowding at berths”.
He sums up “Our growth with care strategy requires us to minimise the impact of containerised trade on neighbouring communities. This year we will adopt new air quality and truck management plans, developed in conjunction with the community, to ensure cargo growth is not a negative.”
This year, the port will have its first full year of operating Cool Port, which could generate more than 50,000 TEU of beef, pork and poultry exports annually.
Elsewhere, at another important transpacific gateway, the cargo operating partnership between the ports of Seattle and Tacoma, Northwest Seaport Alliance has authorised construction on the Terminal 5 Modernisation Programme.
“Terminal 5 will be able to handle the largest marine cargo vessels now being deployed in the Asia-Pacific trade route quickly and efficiently, providing a critical link for Washington state exports to Asian markets, both for agricultural products such as hay, apples and potatoes, as well containerised cargo for customers such as Paccar and Starbucks,” said Port of Tacoma commission president and co-chair of the NWSA Clare Petrich.
Mario Cordero has been executive director of the Port of Long Beach since 2017. In 2003, Mr Cordero served as a member, vice president and president of the Long Beach Board of Harbour Commissioners for eight years, before resigning to accept President Barack Obama’s appointment to the Federal Maritime Commission (FMC) in 2011. He was FMC chairman from April 2013 to January 2017. Mr Cordero was named vice chairman of the board for the American Association of Port Authorities in October 2018. He has practiced law for more than 30 years, specialising in workers’ compensation cases.