News / It’s raining containers in LA - and the long view remains cloudy

09/09/2021

Operators at the premier US maritime gateway in Los Angeles are pulling out all the stops to cope with peak volumes in the coming months, but the longer-term outlook remains a headache.

The port complex of Los Angeles and Long Beach is visibly struggling, as performance metrics are pointing down. The number of ships at anchor has risen steadily in recent months, while rail dwell times climbed to a record level last month.

This is ominous, as a rising number of ships are headed for southern California, with import volumes predicted to remain strong in the coming months. The port of Los Angeles projects 10.5m teu for this year. Between them, Los Angeles and Long Beach could handle nearly 20m teu, according to some predictions.

The ports and terminal operators are scrambling to make sure they can handle the onslaught. Already the terminals at Los Angeles are operating at 105-107% of capacity, noted Gene Seroka, CEO of the port.

Terminals are extending gate hours, and a surge yard expansion at Long Beach is boosting capacity to hold containers. Arguably the biggest boost comes from the Long Beach Container Terminal (LBCT) expansion project, which is adding one million teu in annual capacity.

Armed with these, officials have expressed cautious optimism that traffic will remain fluid through the peak season, but some clients are sceptical. Craig Grossgart, senior vice-president global ocean of Seko Logistics, expects the situation to get worse in September and October before it improves.

The longer-term outlook remains the bigger concern, though. Executives of both ports have said that they expect to see traffic remain at elevated levels beyond the coming peak season. Given the strain on the system, this means that further measures are necessary to manage anticipated volumes in the coming years.

There are positive signs besides the LBCT project. Terminal operator Fenix Marine Services at Los Angeles recently signed a $50m order for four ship-to-shore cranes, which are due for delivery in the third quarter of next year. It had acquired four cranes in 2019.

“Since taking over Fenix in 2017 we have invested more than $130m of our own capital in upgrading the terminal to handle bigger ships and increased volumes. We have increased the terminal capacity by over one million teu, helping alleviate the cargo congestion on the West Coast,” commented Fenix president and CEO Sean Pierce.

The company has indicated that the crane purchase could be the beginning of a more extensive capacity upgrade that could see the pier expand beyond its current boundaries, with new wharves and an expanded rail yard.

According to one source, a large terminal at Los Angeles that changed hands a few years ago is currently the object of negotiations for a sale at about three times the former selling price.

The source noted that another large terminal operator is for sale, adding that the increase in valuation is likely to drive investment in container terminals. Together with anticipated federal money pouring into infrastructure, this could fuel capacity expansion.

Mario Cordero, executive director of the port of Long Beach, has floated the idea of adding a third shift as a step towards coping with projected volumes in the coming years. Mr Grossgart noted that the terminal operators are not very keen on this idea, but even if this went ahead, it would only work if the railways and distribution centres followed suit and added a shift as well, he argued.

Port officials have stressed that the congestion problems cannot be solved by unilateral action, calling on the other parties to work together. Mr Grossgart sees little inclination from the various players to join hands, though.

“Every part of the supply chain is operating in their best interest. They often have conflicting interests,” he remarked.

This would leave digitalisation as a common interest that should facilitate the flow of data between the different players, a mantra that is repeated at every industry event these days.

Noting that at this point terminal operators, stevedores, rail and truck operators have no insight into what is on an incoming ship, digitalisation could help the industry make better forecasts, Mr Grossgart said, but he doubts that this would be a game changer.

“I don’t see anything on the horizon that’s going to make a big difference,” he said.

At least the ports of Los Angeles and Long Beach are not faced with the prospect of unrelated business getting in the way of cargo. In Oakland the local baseball team wants to establish a new ballpark at the port on the site of a former terminal that is currently used for container storage. The plans are fiercely opposed by the California Trucking Association and the Harbor Trucking Association, who fear significant interference with port operations.