Last month’s announcement that
Mediterranean Shipping Co., the second-largest container carrier in the
world by capacity, had invested as a minority partner with Hanjin’s Total
Terminals International to operate Pier T at the Port of Long Beach could have
ripple effects at the Port of Oakland and one of its main terminal operators,
Ports America.
MSC, by purchasing a stake in the long-term leasehold at Pier T, is essentially making the Port of Long Beach its primary West Coast gateway and now has a financial incentive to bring its inbound cargo through the port.
In 2009, independent terminal operator Ports America signed a 50-year concession and lease agreement with the Port of Oakland in a joint venture with Terminal Investments Ltd., a company affiliated with MSC, to operate the multi-berth Outer Harbor Terminal. The deal is potentially worth $2.5 billion to the port in rental payments, revenue sharing and capital improvements paid for by Ports America.
Oakland is the fifth largest container port in the United States, handling 2.3 million TEUs per year.
In 2009, the year before Ports America took over management, the Outer Harbor Terminal processed about 250,000 TEUs. Ports America handled 385,000 total TEUs in Oakland last year, according to information forwarded by the company through its public relations representative. Ports America officials four years ago said they envisioned eventually reaching a throughput of 2 million TEUs.
Ports America made its investment in Oakland with the expectation that MSC would be its anchor tenant and shippers would shift a large share of intermodal cargo from Southern California to Oakland to avoid congestion and gain a day in sailing time from Asia.
MSC’s interest in the Oakland facility was driven by its need to find an alternative terminal for intermodal cargo due to vessel-size restrictions associated with the Gerald Desmond Bridge and limited on-dock rail capability at the Pier A terminal its ships primarily used in Long Beach, according to a confidential Ports America business plan that was inadvertently posted online for a short period by the Port of Oakland during the bid process. Transferring its intermodal cargo for inland locations was intended to give MSC more space to handle cargo destined for the Los Angeles metropolitan area.
“The main drivers of growth for this venture will be MSC’s business,” the business plan said. It noted that MSC has had to use other carriers’ facilities and even off-dock container yards at significant extra cost, and is subject to higher trucking fees to shuttle intermodal boxes to downtown rail yards because of the lack of on-dock rail.
In 2012, MSC was the Port of Oakland’s third largest carrier in terms of volume throughput, port spokesman Robert Bernardo said. The Swiss liner company moved slightly more than 140,000 TEUs through the port, a 6 percent increase from the prior year. In addition to the Outer Harbor Terminal, MSC vessels also call at the Oakland International Container Terminal operated by SSA Marine.
“We do not believe that this recent development with the Port of Long Beach will have any negative impacts on MSC’s current container volumes here in Oakland,” Bernardo said in an e-mail.
MSC was Oakland’s 10th largest carrier in 2009, when its volume increased 140 percent, Oakland spokeswoman Marilyn Sandifur added. In 2010, MSC rose to 4th in the port’s container line rankings as its volume grew 65 percent. MSC’s volume grew 18 percent in 2011 before slowing to 6 percent last year.
Officials at Ports America declined to comment on on whether MSC had changed its West Coast strategy or its commitment to Oakland. The company representative did confirm that MSC was the Outer Harbor Terminal’s largest customer in 2012, but added that distinction now belongs to Taiwanese carrier Yang Ming.
About 80 percent of Oakland’s import and export volume is local cargo and the remainder moves by inland rail. More than half the cargo handled in Oakland is for export. Sixty-two percent of containers moved by the Ports America terminal are outbound, according to the company.
Executives at MSC and Highstar Capital, the investment fund that owns Ports America, did not respond to requests to explain the reasoning behind, or impact of, MSC’s Long Beach decision.
MSC began calling at Pier T with some of its mammoth 13,000-TEU vessels last year.
Total Terminals has seen its throughput at Pier T drop in recent years to about 1 million TEUs with the recession and the departure of China Shipping to the adjacent Port of Los Angeles. Total Terminals estimates at least a 50 percent increase in volume from MSC’s business, which could help put the nation’s second largest container port over 7 million TEUs, Long Beach spokesman Art Wong said.
Last year, the Port of Long Beach handled 6.05 million TEUs. – Eric Kulisch
MSC stake in Long Beach could affect Oakland TEUs
