Southern California Ports Are Losing Cargo to Other Facilities, Supply Chain Execs Say

This story appears in the April 12 print edition of Transport Topics.

The ports of Los Angeles and Long Beach, Calif., are losing discretionary cargo to other West Coast facilities and face increasing competition from East Coast locations, as well as Canada and Mexico, supply chain executives said.

Jeff Siewert, director of international logistics for The Home Depot, said that in 2009 his company made a conscious decision to move fewer containers through the San Pedro Bay ports complex, partly because of the uncertain business climate created by the imposition of clean trucks and other fees.

“Southern California is a great place to land freight,” Siewert said at the Port of Long Beach’s annual “Pulse of the Ports” meeting. “It just seemed that there was always something going on here that would take shippers by surprise.”

Siewert said Home Depot is currently looking at options to bring some of its future discretionary cargo back to the Southern California ports but remains concerned that “terminal turn times are still lagging.”

Wolfgang Freese, president of liner shipping company Hapag-Lloyd America, agreed, noting that in the past few years “interesting and cheaper alternatives have popped up.”

Ports in Canada and Mexico are among those interesting alternatives, Freese said. At the same time, other West Coast ports have improved their infrastructure and some East Coast ports are becoming attractive for shippers, as well.

“The Southern California ports need to make a strong statement to the industry in regard to the future of container fees,” Freese said at the March 31 event.

Ocean carriers just went through the most difficult year in shipping history, losing an estimated $22 billion, Freese said.

But ocean carriers certainly haven’t been the only segments of the supply chain hurt by cargo declines. A 24% drop in container traffic at North American ports resulted in a loss of 50,000 jobs in Southern California’s logistics industry in 2009, said California State University, Long Beach, economist Joe Magaddino.

The good news, Magaddino said, is that port container traffic is expected to increase in 2010, although not enough to put a significant dent in unemployment numbers. 

Magaddino said he expects unemployment nationally to hover around 8.3% in 2011.

“During good economic times, we tend to take these ports for granted” Magaddino said. “But during bad times, we’ve got to recognize that there is increased competition for this business.”

To stay competitive and remain “preferred ports,” the ports of Los Angeles and Long Beach need to invest in terminal infrastructure and increase productivity on the dock and throughout the supply chain, he said.

Although Magaddino said he expects retail sales to increase by 2.5% in 2010, consumers remain conservative in their spending habits because of persistent unemployment, little or no income growth and tight credit markets.

The bottom line is that the recession is over, but the recovery remains weak, he said.

Frank Capo, vice president of customer service and sales for Total Terminals International, said West Coast terminal operators are discussing adopting an appointment system to speed the movement of containers through the ports.

“But my concern, personally, is unemployment,” Capo said. “The idea of a jobless recovery boggles my mind.”

Drayage operators at the ports of Los Angeles and Long Beach have spent more than half a billion dollars in private funding to purchase newer, cleaner trucks since the two ports implemented their diesel emissions reduction plans in 2008, said Matt Schrap, director of environmental affairs for the California Trucking Association.

Costly new emissions requirements in California and a 30% to 40% decline in freight volumes have challenged the trucking industry, causing widespread employee layoffs, Schrap said.