Port, private-sector spending expected to boost rail, warehousing, and agriculture facilities.
The Port of Oakland is planning to spend hundreds of millions of dollars over the next few years on near-dock warehousing and increased rail infrastructure for both containerized and bulk commodities.
The massive “Oakland Global” project “is an exciting story for us for sure; this is one of the things that kind of attracted me,” said John C. Driscoll, who became director of maritime at the port in January. Driscoll came from liner carrier CMA CGM (America) where he was vice president of export sales.
He is now part of the new leadership team at the Port of Oakland, headed by Chris Lytle, who became executive director last summer after leaving a similar post as head of the Port of Long Beach, another California port.
Without improvements to alleviate congestion, Driscoll said the port might have difficulty growing above 3 million TEUs.
The Port of Oakland is almost entirely a container port. (Matson takes on automobiles and roll-on/roll-off cargo moving to and from Hawaii and a private terminal operated by Schnitzer Steel handles scrap metal.)
The northern California port handled 2,346,528 TEUs in 2013. Unlike many ports, it had more loaded outbound containers, 1,014,796 TEUs, in 2013 than loaded inbound containers at 803,298 TEUs, in part because of heavy exports of agricultural products. Including 528,434 TEUs in empty containers, Oakland was the fifth largest container port in the nation in 2013 after Los Angeles, Long Beach, New York/New Jersey, and Savannah.
Volumes at the port have been flat at about 2.3 million TEUs since 2010. This year they are up 1.6 percent through the first five months with a 5.3 percent increase in imports offsetting a 1.9 percent decrease in exports.
(Oakland is the sixth largest port if only full containers are counted, as the Virginia Port Authority handled 1,932,961 TEUs of loaded containers compared to Oakland’s 1,818,094 loaded TEUs in 2013. Interestingly, Oakland handles substantial numbers of both inbound and outbound empties — 270,515 TEUs inbound and 257,919 TEUs empties, respectively, in 2013. Many of those inbound empties — 105,292 TEUs — were shipped from Hawaii, and some are moved north from the ports of Los Angeles and Long Beach by companies seeking to reposition equipment. Empty containers are not subject to the cabotage requirements of the Jones Act, and some carriers reposition boxes to Oakland because of the high demand for them among agricultural shippers.)
“Agricultural products are a critical part of our business,” Lytle told attendees of the Agriculture Transportation Coalition’s annual June meeting in San Francisco.
The port’s location in Northern California, close to the Central Valley and all the different commodities that are grow nearby, make it a natural gateway for agriculture products, Driscoll said.
The value of agricultural exports from Oakland was $6.2 billion or about 45 percent of the port’s total exports of $13.9 billion.
Many of the commodities originate nearby; others arrive from the Midwest by rail or truck.
Major agricultural commodities exported though the port include fruits like grapes and raisins; nuts such as walnuts and almonds; meats like pork and beef; rice and other cereal crops, such as dried distiller grains with solubles (DDGS) which is a byproduct from ethanol production that’s used as animal feed; cotton; vegetables; wines and spirits; and dairy products.
A facility operated by Pacific Coast Container that opened in the port this summer is expected to transload upwards of 115 to 120 containers a day of commodities such as DDGS from rail hopper cars. Lytle said the port is also negotiating with Pinnacle Ag Service for a facility to handle hopper cars.
Refrigerated commodities are an important part of the port’s cargo portfolio. In addition to Unicold and PCC Logistics, a facility operated by Preferred Freezer recently opened in San Leandro and Lytle said the port is holding discussions with two companies — Lineage Logistics and Agro Merchants Group, which recently purchased the Oakland-based company Deans Services, about building new facilities in the port.
Oakland Global involves redevelopment of the former Oakland Army Base which was in use from 1941-1999 by ships transporting soldiers and supplies during peacetime, World War II, the Korean War, and Vietnam War.
On the 241 acres the port owns, it is developing 185 acres in a public-private partnership with a local Oakland firm called California Capital and Investment Group (CCIG), as well as the international industrial property developer Prologis.
The City of Oakland also owns a 228-acre tract it is developing.
In the first phase of the project, the port will spend about $500 million. Much of that is for utilities such as water, electric and sewer, as well as rail improvements that will include both storage tracks for large unit trains of single commodities and manifest tracks designed for shippers moving smaller quantities. These tracks are in addition to the large rail yards that both the Union Pacific and Burlington Northern Santa Fe railroads have today at the port for double-stack container trains.
Driscoll explained the rail improvements are needed to support future warehouse development, as well as bulk facilities.
On its section of the former Army base, the city plans to build a bulk terminal near the foot of the San Francisco-Oakland Bay Bridge that would be able to accommodate bulk commodities such as iron ore. That terminal would be operated by another local company, Oakland Bulk and Oversize Terminal.
The port is dismantling older warehouses, some of which date back to World War II, to free up land for both rail and newer logistics facilities. (Many were built with old-growth lumber, so the wood is being salvaged for reuse.)
The second phase of the project could result in another $700 million in public-private spending, Driscoll said, including a grade separation from rails for trucks traveling along 7th Street in Oakland.
He said for the port to grow above 3 million TEUs improvements are needed to alleviate potential congestion.
More than 2 million square feet of warehouse and distribution space is being planned on either port or city property.
Driscoll said a major goal for the facilities is to create good jobs for city residents. The port authority estimates the first phase of Oakland Global will generate an estimated 1,500 on-site construction jobs, with 220 jobs already created by the construction of the rail yard which began in July 2013. It’s further estimated that 1,800 permanent operations jobs will be created once Phase I of the facilities are completed. An additional 3,142 regional jobs are expected to be generated from the resulting economic output.
The port’s marine terminals have also seen a major consolidation in recent years. In 2008, the port’s commissioners approved the selection of Ports America and Terminal Investments Ltd. to operate a large swath of the Outer Harbor that now includes Berths 20-26, while more recently Stevedoring Services of America has consolidated several terminals and now operates berths 55-59 as the Oakland International Container Terminal (OICT) and berths 60-63 as the Matson Terminal.
The OICT extends across 270 acres. Driscoll said there were “definite growing pains, it took time to work the kinks out, but I can tell you SSA has done a fantastic job of engaging the community, sticking to their guns and being able to create efficiencies where they can.”
As at other ports around the country, Oakland is adjusting to the new, larger shipping alliances that carriers are creating and the fact that some carriers may have cargo arriving at multiple locations.
The fact the P3 alliance of Maersk, Mediterranean Shipping Co. and CMA CGM will not move forward because of non-approval by Chinese regulators should have minimal effect on the port, he said, noting the services the P3 was planning were not significantly different from what the carriers had in place.
Oakland is unusual in that a single chassis pool, the Bay Area Chassis Pool managed by Flexi-Van, has about an 80 percent market share, but Driscoll said both DCLI and TRAC also have substantial pools. He said the port would be even more efficient if it had a single gray fleet. The port has spoken with the chassis leasing companies, truckers, and terminals to see if that can be accomplished. Those groups have been in discussion to see if they can receive approval from the U.S. Department of Justice to work together on the chassis issues.
“We don’t have major issues with chassis, but wherever you can make it more efficient that is what we are trying to do,” he said.
In 2013, a barge operator began offering a “marine highway” service, hauling containers between the Port of Oakland and nearby Stockton.
“It has had a very slow start,” Driscoll said. “We’re still cautiously optimistic that that will continue to grow, because it’s something that several customers are asking for. It’s just they don’t have the volumes to be able to call it a success at this point.”
The barge operates once or twice per week between the two ports, and is attractive to shippers of heavy cargo because the containers do not have to meet highway weight restrictions. The service can also help reduce air pollution.
Stockton’s Record newspaper reported in June the barge service brought in only $1.1 million in revenues instead of $15.1 million as originally forecast. It said the Port of Stockton “has forged an agreement with MSC to have the company possibly take over the barge service by Sept. 1.”
Lytle said while a senior executive from a large Oakland terminal told him that their facility in the port was their most productive on the West Coast, including facilities in Mexico, doing 33 moves per hour, “we’re still falling behind ports such as Savannah and Charleston.”
He said the port is looking at the possibility of extended hours, adding “we know we can’t do all the business in a very tight single extended day time frame,” especially when that time is reduced by workers taking lunch and coffee breaks.
Driscoll said the decision on whether to extend hours is “really up to the terminals and something the market is going to
drive.”
This article was published in the August 2014 issue of American Shipper.
