DEFENDING THE CASTLE
In a mid-February interview with DC VELOCITY, Lytle said
that Prince Rupert and Lázaro Cárdenas represent “critical
threats” to Long Beach and acknowledged that shippers and
beneficial cargo owners have more choices than ever before.
Yet he believes Long Beach remains the prime location for
those seeking to get international cargoes from Asia to their
destinations in a cost-effective manner.
In Lytle’s view, no other North American port provides
shippers and BCOs with so many options to get their goods
to multiple U.S. markets. “You need a gateway that gives you
the ability to get to other inland destinations,” he said. In a
jab at Prince Rupert, Lytle added, “there’s a lot more to
goods movement than the ocean transit times and to get to
Chicago.”
Long Beach has 96 weekly ship calls—about 19 of those
being containerships—and operates 60 train departures a
week. It is also surrounded by a population of between 25
million and 40 million, and one of the world’s great distri-
bution rings: the so-called “Inland Empire” directly east of
Los Angeles. The Inland Empire is home to 1. 7 billion
square feet of warehouse and distribution center space, and
currently has a 2-percent vacancy rate.
Lytle said the port is in the second year of a multibillion
dollar program to upgrade its facilities. It is spending $1 billion to expand and improve its on-dock rail capabilities. It
is nearly two years into a nine-year, $1.2 billion project
known as the “Middle Harbor” container terminal,
designed to renovate and combine two aging container terminals into one modern facility. Last April, Hong Kong-based ship line Orient Overseas Container Line (OOCL)
signed a 40-year, $4.6 billion lease to be the terminal’s sole
service, he said.
A lift is defined as a trailer or container being lifted onto
or off of a railcar. One intermodal movement can consist of
multiple lifts depending on how many transportation
modes handle a piece of equipment.
The initiative would capitalize on attractive pricing for
westbound container movements off the southern
California coast, according to Spencer. He said about half of
the containers leaving the ports for Asian destinations
depart empty. Most of the equipment sailing westbound
heads for Asian ports to be loaded with import cargoes
returning to the U.S.
Because of the demand imbalance, westbound container
space is priced inexpensively, according to Spencer. He estimated it is cheaper to load an export container at Los
Angeles or Long Beach than at Oakland and
Seattle/Tacoma, ports that have a better balance between
imports and exports.
occupant. It is the largest deal of its kind in seaport history,
according to the port. The terminal will also have the most
sophisticated IT system ever installed at any port, according
to Lytle.
Lytle said the U.S. supply chain is undergoing a subtle yet
profound change that bodes well for both Southern
California ports. About three-quarters of all containerized
imports entering Long Beach are bound for points outside
the region. However, fewer containers are being loaded on
intermodal trains at the port for direct transit to markets
like Chicago. Instead, more shipments are being trucked to
a DC in the Inland Empire, where they are eventually transferred from a 40-foot ocean container to a 53-foot domestic box for delivery to a local DC, and then onward distribution to the store or the customer.
As this trend intensifies, it will be a boon to a port like
Long Beach that enjoys direct access to a leading distribution network, Lytle said.
Howland said Long Beach and Los Angeles benefit from
the economies of scale afforded by their geography. It is
very cost-effective to build full truckloads at the ports,
deliver goods locally in the Southern California region, and
continue on with cargo to interior points in the U.S.
Southwest and Midwest, Howland said. The ability to commingle local and regional shipments is a value proposition
that’s “very hard for any other port to match,” he said.
As for competition from an expanded Panama Canal,
Lytle seems unconcerned. Every week, Long Beach handles
ships with a 13,500-TEU carrying capacity, vessels too wide
to transit through even an expanded canal. “People ask me
all the time if we’re afraid of the canal taking our business,”
he said. “The answer is no.” ;
Spencer said the so-called “match-back” process at the
heart of the initiative appeals to ocean carriers because it
helps offset container repositioning costs that can run into
the hundreds of millions of dollars. If properly executed,
the project will allow empty containers to be placed near
an area with revenue-producing cargo instead of returning
empty to the ports, he said.
According to Spencer, the project will save the ports
money by reducing the number of empty containers in
their environs and will give exporters access to equipment
at a local container yard rather than at a port 150 to 450
miles away. Additionally, the program will benefit the environment because truckers won’t have to burn fuel driving
empty miles returning the containers to port.
The fact that the program is being considered speaks to
the growing popularity of converting export traffic historically moved in bulk shipments to containerized loads,
which are easier and less expensive to handle.
