Stuck in the middle
Long Beach pursues many terminal, infrastructure developments as it finds its way after the recession.
By Eric Johnson
A decade ago analysts were projecting cargo volumes moving through the ports of Long Beach and Los Angeles would triple by 2020, to about 30 million TEUs.
Halfway through that 20-year projection, it's probably safe to assume those projections will fall short of the mark.
The two ports handled 9.7 million TEUs in 2001, while in 2010, combined throughput reached 14 million TEUs. That's pretty substantial growth, but it would take a brave person to suggest volume will more than double in the next decade.
There are reasons why the projections are off. The economic recession knocked 2009 cargo levels back to pre-2004 levels. Strict environmental regulation at the state and local levels have made expanding, or even improving, terminals in the ports a tedious procedure. Congestion in the mid-2000s forced shippers to consider alternative paths for cargo, and some haven't completely returned.
In the coming decade, it's hard to see the ports reaching that 30 million-TEU level by 2020 due to some of the same factors. There's more competition from other North American ports as shippers seek to diversify the gateways in which they use to route cargo to inland points. A widened Panama Canal will inevitably draw some discretionary cargo now moving through Southern California to U.S. East Coast and Gulf Coast ports. And environmental checks on growth will remain.
Amidst these changes, the ports have had to shift their way of thinking, from single mindedly gearing up for a predicted avalanche of cargo, to growing at a steadier pace while allaying environmental concerns.
'In the last couple of years, we've gone from full speed ahead to shutting down everything and rethinking the whole business, to then ramping everything up again,' said Port of Long Beach spokesman Art Wong.
He was specifically referring to the menu of projects Long Beach is trying to complete and how the economic downturn affected the timetable for completion of those projects. But he may as well have been referring to the way the ports have had to rethink their development philosophy.
Long Beach, in particular, is a port in transition. The port has three major terminals in various stages of redevelopment ' Pier G, Pier S, and the so-called Middle Harbor Redevelopment Project. Taken together, the three projects could augment the port's handling capacity by several million TEUs.
The Middle Harbor project will join two oddly shaped older terminals into one, contiguous, rectangular terminal, more than doubling its annual container capacity from 1.3 million TEUs to as much as 3.3 million TEUs.
The project speaks to how the sum can sometimes equal more than the individual parts. The two existing terminals the Middle Harbor project will replace are both about 100 acres, but don't come close to meeting the port's aim of an annual 10,000 TEUs per acre. That's because the odd shapes of the existing terminals prevents storage, truck flow and on-dock rail usage from being at their most efficient.
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| 'In the last couple of years we've gone full speed ahead to shutting down everything and rethinking the whole business, to then ramping up again.' | |
| Art Wong spokesman, Port of Long Beach |
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Both the Pier G and Middle Harbor projects will include significant on-dock rail components, allowing the port to increase the percentage of intermodal movements for inland-bound cargo. The port estimates that half of the increased throughput at the Middle Harbor terminal will move by on-dock rail. The existing terminals had little space to handle rail shipments.
One hurdle to cross for the redeveloped Middle Harbor terminal will be finding a tenant. The previous terminals were operated by two different terminal operators ' the Hyundai Merchant Marine-affiliate California United Terminals (CUT) and the OOCL-affiliate Long Beach Container Terminal (LBCT).
CUT and Hyundai left Long Beach for Los Angeles in October, taking a sublease on a 91-acre parcel at APM Terminals' mammoth Pier 400 facility in the Port of Los Angeles.
'We originally planned to see if the existing operators wanted to lease it or jointly lease it,' Wong said. 'But CUT migrated to POLA, so now we're focusing on LBCT. I don't know how far we are on talks or if they will seek another partner or if they will commit to this. We're assuming someone will eventually take on the lease.'
Wong said CUT's departure has actually expedited the project.
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'With one of the terminals vacated, it's been easier to get the project started,' he said. 'We can get some first phase work done without interrupting cargo operations. It takes so long to get these projects going. This started before the recession hit, and it was approved at the height of the recession, so it's an ongoing thing. If the economy rebounds as quickly as it did last year, I assume we'll get the lease signed more quickly. If the economy flattens out, it could take us a little longer.'
The port timed the project to coincide with the end of long-term leases with both CUT and LBCT
'We've been planning this for a number of years, knowing the clock was ticking on the leases,' Wong said. 'We just about met our deadlines and then the economy crashed. The lease we would have been expecting has just taken longer.'
The Pier G redevelopment will see a berthing slip filled in the current terminal, creating more yard space and nearly doubling capacity, to around 3 million TEUs. The terminal, operated by the 'K' Line-affiliated International Transportation Services, serves a wide range of carriers, from the CKYH Alliance members to CSAV, Maersk Line and Hamburg S'd. The project is set for completion in 2013.
Pier S is a 160-acre former oil field that is, as Wong put it, 'the last large undeveloped property within either of the ports.' The port will likely issue its draft environmental review of the project in the next couple months. A previous environmental review of the site was scrapped because 'with our new environmental protocols, we decided to redo the whole (environmental impact report),' Wong said.
The timeframe for the project is somewhat up in the air, given demand isn't necessitating the capacity it would bring. The terminal, as envisioned, would have capacity for about 1.5 million TEUs, though no specific operators or lines are yet attached to the project.
Another major project due to begin soon is replacement of the Gerald Desmond Bridge, an aging span that links container terminals on Terminal Island and the Port of Los Angeles to the key Long Beach (710) Freeway. The four-lane bridge is not only insufficient to handle truck traffic emanating from the ports, it's also too low to allow the biggest containerships calling at Long Beach to enter the port's back channels. And from a safety perspective, chunks of concrete sometimes shake loose from the underside of the 40-year-old bridge, forcing the port to hang netting underneath it to catch the debris.
The port has secured nearly $1 billion in state and federal funding to build a new bridge. Wong said Long Beach will go out with its construction requests for proposal around September. The port has narrowed its list of bidders to four companies.
Work would likely begin early in 2012, and with a five-year construction schedule, the new bridge would be ready sometime between late 2016 and early 2018. The new bridge will be built alongside the existing one, which will remain in operation until the last stage of the project, when existing roadways are connected to the new bridge.
Long Beach, while realizing the need for outside funding sources for such a major project, was keen to keep some sense of control of the new bridge construction. An estimated 15 percent of all containers entering U.S. ports transit the bridge.
'When we fund projects, we have a lot more control than when we get funding from the state and federal government,' Wong said. 'Because we're working with so many partners, we have to be careful to maintain our budget. If we have to go over budget, how long would it take us to complete this?'
Another long-discussed terminal upgrade project is Pier J, operated by SSA Marine and host to two CKYH services and one from Hainan PO Shipping and TS Lines. The terminal, even more oddly shaped than those in the Middle Harbor project, has long been mooted as one due for redevelopment. Two attempts to do so failed in the last decade, and now the operator isn't making redevelopment a priority, Wong said.
'After the project was stalled, they've never picked it up,' he said. 'We periodically ask them, but I think it's a product of the economy. There's not the urgency for them. It's not clear they're ready to do anything.'
Indeed, there's a lot happening in Long Beach, but the pace of development has slowed considerably from the breakneck pace envisioned a decade ago.
'There were things we were racing to do that now we've put the brakes on,' Wong said. 'We're still feeling our way along. At the same time, you have the Panama Canal (widening project). There's still is some urgency.'
