Port of Oakland Sees Upside in Losing Giant Tenant
To hear Port of Oakland, California, officials tell it, losing terminal operator Ports America — a major tenant — is a blessing in disguise that will create a leaner, meaner seaport. But some maritime experts say the fallout could hurt the port, a vital economic engine that supports tens of thousands of jobs related to overseas cargo.
“We see this long term as a very positive thing,” port Executive Director Chris Lytle said during a State of the Port speech Jan. 21. Lytle said the same amount of cargo should flow through Oakland despite Ports America abruptly ditching a 50-year lease for the Oakland Outer Harbor Terminal with 44 years to go. The port expected to receive $35.7 million from Ports America for fiscal 2015-2016 — a quarter of its maritime income.
“We are going to do absolutely everything in our power to make sure there are no disruptions to cargo in any way, shape or form,” Lytle said, adding that the port already had found a home for 90% of the goods handled by Ports America, which plans to cease terminal operations by March 31. “We don’t want any vessel diversions.”
The port’s four other terminal operators have plenty of excess capacity to take up the slack, he said, and need the additional work for their own profitability. Lytle said that loading and unloading work would expand to nights and weekends to handle the increase. He plans to ask port commissioners to fund transition costs, such as performance incentives to make sure the migrated cargo is handled swiftly.
The port is eyeing new uses for the 210 acres Ports America is relinquishing that could make it more competitive, Lytle said. The seaport now focuses on containerships. It could attract revenue if it retooled to handle other cargo, such as automobiles or loose cargo such as steel girders.
One port commissioner floated the idea of the Oakland A’s or Raiders building a stadium at the terminal property. “This could be our own chance to have a ballpark on the waterfront,” said Commissioner Bryan Parker. Nearby Howard Terminal had been considered as a possible stadium site, but A’s owner Lew Wolff rejected it as too far from BART and too dogged by environmental issues.
But some experts are skeptical that the loss will create more efficiencies.
“Customers fear that congestion will come back to the port,” said Kevin Bulger, chief operating officer of Apex Maritime Co. in Burlingame. The third-largest ocean freight forwarder for cargo from Asia to the United States, Apex moves significant volumes through the Port of Oakland.
While Bulger doesn’t expect significant delays like the industry experienced after last year’s labor dispute, any delays could be a problem. “If it gets too jammed, customers will divert cargo to other ports,” he said. “The overall volume of trade won’t be affected, but where it flows could be.”
For instance, agricultural exporters might pay to truck a perishable commodity such as lettuce to the ports of Los Angeles or Long Beach if congestion returns to Oakland.
Longshore workers operate out of a hiring-hall system rather than being employees of terminal operators. Theoretically, if the same amount of cargo continues to flow through Oakland, their incomes would stay the same. But quietly, union officials worry that the port’s rosy projections may not be realistic — meaning Ports America’s move could result in less work.
“The Ports America decision will have a real impact on many port workers, and those kind of good-paying jobs that support working families are hard to replace,” said Melvin Mackay, president of International Longshore and Warehouse Union Local 10, which represents more than 1,000 dockworkers.
Ports America, the nation’s largest terminal operator and stevedore, said it left Oakland to concentrate on operations in other ports, such as Los Angeles, Long Beach and Tacoma, Washington. Experts said that decision reflects shifts in the shipping industry that could erode Oakland’s business.
“We’re seeing consolidation take place in the industry,” said John McLaurin, president of the Pacific Merchant Shipping Association, a trade group for ocean carriers and terminal operators on the West Coast. “Times are difficult, rates are down. All West Coast ports face tremendous competition from other gateways.”
Still, McLaurin said, the outlook could be upbeat. “One door closes, another one opens,” he said. “This presents an opportunity for Oakland to see what they can do differently with the terminal.”
Ports America recently formed joint ventures with steamship lines, said Peter Hall, a professor at Vancouver’s Simon Fraser University who studies ports and logistics. He thinks its move may show that those carriers don’t want to be tied to the Bay Area port.
“This might signal that Oakland is becoming more a discretionary port that steamships visit when times are good but that carriers’ long-term commitment is less firm,” he said.
Michael Nacht, a professor of public policy at the Goldman School at UC Berkeley and a former assistant secretary of defense for global strategic affairs, said Ports America’s move could rattle other port customers and tenants, even while Oakland continues to struggle with structural issues, including fewer rail connections than other ports, environmental concerns and recent labor strife.
“This is another sign of the narrowing market and lessening interest of others in using the port,” he said. “Oakland has to come up with innovative ways to compensate: better technology, new markets, more aggressive marketing.”
Complicating matters is that the Panama Canal is due to be dramatically expanded any day now, allowing much larger ships to use it as a route from Asia to the East Coast — possibly skipping a call at Oakland.
Currently, the Panama Canal can handle ships carrying 5,000 shipping containers. After being widened, it will accommodate ones with up to 13,000 containers.
“If you have a ship [from Asia] that previously couldn’t get through the Panama Canal and so would have visited three or four ports on the West Coast, now it might just stop at one West Coast port and then go through the canal,” Hall said. “If you’re only going to stop at one California port, it ain’t Oakland. It will be L.A. or Long Beach. Even it’s it two, it won’t be Oakland, either.”
But Oakland has been working hard to stay competitive with the bigger rivals to the south, preparing for the new age of megaships.
Oakland spent millions to dredge berths and channels to accommodate bigger ships. The Benjamin Franklin, a quarter-mile-long and holding 18,000 containers, docked in Oakland last month — at the Ports America terminal.
