Delays at U.S. Ports May Push Nippon, Maersk to Canada, Mexico

Jan. 13 (Bloomberg) -- Shipping companies such as Nippon Yusen K.K. are searching from Alaska to Mexico for ports able to handle goods from Asia because bottlenecks in Southern California are delaying cargo by as much as a week.

Nippon Yusen, Japan's biggest shipping line, is considering sending goods through Prince Rupert, on the Canada-Alaska border, and Manzanillo, on Mexico's Pacific Coast. The harbors are being sought as alternatives to Los Angeles and Long Beach, the biggest U.S. port complex, where a record of almost 13 million standard- sized containers crossed the docks in 2004.

Trade with Asia surged 15 percent last year amid a boom in Chinese goods, delaying merchandise to retailers such as Sharper Image Inc. Drewry Shipping Consultants in London forecasts a 14 percent increase in 2005. Idling a ship in the harbor costs as much as $300,000 a week, for expenses such as salaries and fuel.

"With the lack of significant capacity expansion anywhere on the West Coast, everyone is looking to any alternative," said Peter Keller, chief operating officer of Tokyo-based Nippon Yusen's North American unit, who toured Prince Rupert in December. "Prince Rupert has some viability. They have deep water, which is good. They have a very viable railroad."

Neptune Orient Lines Ltd., the sixth-biggest cargo company, also is considering alternatives to Southern California, said Scott Dailey.

MaerskSeaLand, the world's biggest cargo line, is reviewing routing choices and might consider Prince Rupert, Anne Kappel, a spokeswoman for the Copenhagen-based company, said in an e-mail.

Mexican Ports

More than 5,000 ships passed through Los Angeles last year, including a record 94 on Oct. 12. The harbor is designed to handle 30 to 50 vessels daily. A total of 118 ships were diverted, including 11 to Manzanillo, said the Southern California Marine Exchange, which tracks ship arrivals.

The ports aren't experiencing delays right now. Demand slows in January, after peaking in October and November ahead of the holiday season.

The Los Angeles and Long Beach ports are hiring 1,300 workers to handle rising Asian imports this year. The addition of 3,700 dock workers last year was inadequate to process the extra loads, port director Jim McKenna said. The ports will also extend working hours and handled cargo on weekends.

The delays forced retailers to carry more inventory to keep products on store shelves, said Robin Lanier, director of the Waterfront Coalition, a Washington-based trade group whose members include the 10 biggest importers.

San Francisco-based Sharper Image said Jan. 6 that shortages of "key holiday items" and higher shipping costs linked to the delays will reduce profit for its year ended Jan. 31 to as little as 90 cents a share, down from $1.65 a year earlier.

Manzanillo

Last year, shares of shipping lines surged amid the increased demand. Evergreen Marine Corp. rose 15 percent, while Neptune Orient climbed 39 percent and Nippon Yusen gained 14 percent.

Manzanillo, Mexico's biggest port, may handle 1 million standard-sized containers this year, a 20 percent increase. The port is negotiating with Wal-Mart Stores Inc. and Target Corp., the two biggest U.S. discount retailers, said Alfonso Perez Martinez, the port's marketing vice president. Nissan Motor Co. ships auto parts from Japan to a Tennessee plant using Manzanillo.

"The smart companies are looking at Canada and Mexico for the longer term," said Lanier. "The big issue in Mexico is infrastructure. There are serious questions about the capacity of Mexico's rail network.''

Deep Water

Prince Rupert, aiming to handle 400,000 standard-sized containers by 2006, has a C$195 million plan to attract shipping companies, with C$75 million pledged by Canadian National Railway Co., to build tracks at the port, and Maher Terminals Inc. of Berkley Heights, New Jersey, to build the terminal. Persuading a cargo company such as Nippon Yusen might help win additional support from the government.

"A year ago I would have said they were nuts in Prince Rupert," said Theodore Prince, senior vice president of Optimization Alternatives, which sells transportation software. "Now it looks like they can make it. Canadian National and Maher are very serious about this."

Based on Neptune Orient's average revenue per load of $2,677 in the first nine months of last year, shipments through Prince Rupert would total about $535 million in annual revenue by 2006 if the planned capacity is reached. Nippon Yusen doesn't disclose revenue per load.

Prince Rupert has other advantages, including a 118-foot channel that's more than twice as deep as New York's, as well as some drawbacks.

Asia Proximity

"It's nowhere," said Prince, former North American chief operating officer of Kawasaki Kisen K.K., Japan's third-biggest shipping line. The community's small population of 15,300 might discourage investors and cargo lines that prefer ports with larger local markets such as Los Angeles or Vancouver, he said.

Travel time also is a factor, because of delays on the typical three-week trip between Hong Kong and inland points such as Chicago. The trip through Manzanillo to the U.S. interior takes about two days more by sea, Perez said.

Prince Rupert also is promoting its proximity to Asia. The port is 1,259 miles, or about two days sailing, closer to Hong Kong than Los Angeles.

Ensenada, just south of the U.S. border, is building up a cargo business that handled fewer than 50,000 containers last year. The port's distance, about 200 miles, from Los Angeles is an advantage, though Ensenada lacks a railroad to move cargo inland. The lack of trains is a drawback, Keller said.

Prince Rupert has attracted interest from five of the 10 biggest cargo lines, Port Director Don Krusel said. He declined to identify any of the companies.

American ports eye Asian trade
As Californian terminals struggle to cope, west coast rivals are boosting capacity to grab a share
20 January 2005
South China Morning Post

As the rising tide of container traffic from Asia swamps California's twin ports of Los Angeles and Long Beach, rival terminals from Alaska to Mexico - and even some as far afield as the United States east coast - have begun expanding to grab a piece of the action.

The ports of Seattle and Tacoma in Washington state are boosting their combined capacity in separate expansion programmes - from 3.8 million containers last year to 5.5 million by next year.

Down south, Mexican officials have hired Hutchison Port Holdings to conduct a feasibility study on transforming the small port of Ensenada into a deep-water facility.

In Alaska, managers at Anchorage's port are spending US$350 million to more than double its berthing space.

Meanwhile, Panama is building a US$1 billion mega-port on a man-made peninsula at the Pacific entrance to the Panama Canal.

The port expansions could give much-needed relief to shippers and exporters caught in the logjam at the Los Angeles and Long Beach ports, the main US entry points for cargo containers from across the Pacific.

Peter Powell, chairman of the National Customs Brokers and Forwarders Association of America, says 43 per cent of all 20-foot containers from East Asia enter the US through these two ports.

In the fourth quarter of last year, cargo volume at west coast ports rose 10 to 13 per cent from the previous year, when congestion was already a headache, Mr Powell said.

Since October, there have been numerous media reports about stranded merchandise as cargo ships are forced to wait up to 14 days to be unloaded.

The Vancouver Port Authority, itself beleaguered by the ever-growing flood of cargo from Asia, recently announced a US$1.4 billion expansion to triple its capacity by 2020.

"We now have an opportunity to serve as a transportation hub for all of North America," said its chief executive Gordon Houston.

Vancouver's port handled 56 per cent of the total volume of Canada's trade with China last year, Mr Houston said. "The shock waves from China's economic expansion have definitely reached our shores," he said.

Neighbouring Seattle also aims to cash in on the explosion of trade with China. The port's general manager for containers, Kent Christopher, said the facility had seen a "tremendous amount of direct importers" shifting from Los Angeles and Long Beach. Officials at the nearby Port of Portland are also eager to tap the rising trade.

Portland launched a marketing blitz and hired a shipping executive to manage liner development with a focus on Asia. As a result of these efforts and the congestion in California, South Korean shipping company Hanjin introduced a new rotation that included its first call at Portland on November 19. "We've had more interest from carriers in the last six months than we've had in the past two years," said Eileen Murche, the port's import marketing manager.

Places inland are also vying for a share of the flow of containers from Asia. Missouri is lobbying Mexico for a major trade route from the Mexican coast to the US heartland. The state plans to transform Kansas City and St Louis into inland ports that connect North America to Asia through Mexican sea ports and rail.

"This corridor is a viable alternative to Los Angeles," said David Eaton, the head of Missouri's office for commerce and agriculture in Mexico.

Even Houston's port, which handles about 65 per cent of all containers entering the Gulf of Mexico, wants to grab more Asian trade. Over the past two years, Houston has increased trade with Asia by 28 per cent.

One of the main drivers behind Houston's ambitions is the world's biggest retailer. Wal-Mart Stores will open a massive distribution centre near the port this year.

The retailer, regarded by many in the industry as a pace-setter in distribution, picked Hampton Roads in Virginia as its east coast port of entry, after logjams started to cause delays on the Pacific coast in 1998.

Ottawa backs away from Prince Rupert terminal
Marine Act blocks funds: B.C. government may increase its contribution
John Greenwood
29 January 2005
National Post

VANCOUVER - Ottawa is backing away from a $40-million funding request for a proposed container terminal at Prince Rupert, casting in doubt the future of a project that was supposed to reduce congestion at West Coast ports including Vancouver.

Don Krusel, chief executive of the Prince Rupert Port Authority, said the federal government may be unable to support his project because of legislation preventing Ottawa from making financial contributions to ports.

"The Canada Marine Act has created an impediment," he said in an interview. "If that impediment wasn't there we would be announcing funding."

A federal official close to the discussions who asked not to be named confirmed Ottawa may not be able to help out. Prince Rupert, on British Columbia's remote northern coast, wants to build a $530-million facility with a capacity of about 1.5 million containers a year when the second phase is completed in 2009.

The first phase is expected to cost about $180-million and most of the financing is in place, including $60-million from Maher Terminals Inc., the terminal operator, and $15-million from Canadian National Railway Co., which owns the rail link to the port.

But without additional government funding, the project can't go ahead, Mr. Krusel said.

Prince Rupert, which has seen its fortunes decline amid troubles in the resource sector in recent years, has been aggressively pushing its case for building the terminal, arguing that recent growth in West Coast container traffic will ensure the operation is profitable.

Driven by China's economic expansion, trade volumes have soared over the past few years, straining capacity at major ports such as Vancouver.

Prince Rupert and its supporters argue it is ideally positioned to take up some of the extra load, since its already a major deep-water port with significant bulk cargo handling facilities.

And in the event of an earthquake or other disaster in Vancouver, it would provide Canada with another way to keep its western trade links open.

Critics, such as Gordon Houston, chief executive of the port of Vancouver, maintain that if there was a real need for a new container terminal, Prince Rupert would not have to go asking for government grants -- the private sector would come in.

Mr. Krusel responds that many ports, especially in the United States, benefit from strong government funding. In order to compete, he said, Prince Rupert needs public funding too.

Fortunately for Prince Rupert, the provincial government seems to agree. It has already signed up to contribute $17-million to the project. With the possibility of a contribution from Ottawa looking increasingly remote, Mr. Krusel has asked the province to come to the rescue.

He wants British Columbia to hike its commitment to $30-million. That would give him $105-million in total commitments, enough to go to the bank for a loan for the remaining $75-million. Despite the heavy debt load, he believes the arrangement could work.

Dave Crebo, a spokesman for the provincial Transportation Ministry, confirmed the province is in discussions about increasing its commitment. He said the province is still considering the request.

Traffic jam on the high seas to America
11 February 2005
South China Morning Post

Congestion at shipping ports on the west coast of the United States is causing a chronic problem for Chinese exporters and other shippers from East Asia.

The authority that runs the Panama Canal, which provides a short cut for ships between the Pacific and Atlantic oceans, is gleeful. So are ports on the US east coast, where Asian business has boomed in the past few years.

The cargo delays that have occurred in southern California, especially in the twin ports of Los Angeles and Long Beach - which together handle 43 per cent of US containerised imports by sea from Asia - are changing transpacific trade patterns. At present, about two-thirds of US imports from Asia are shipped to California. Goods destined for the US east coast then travel overland by rail or truck. Until the congestion started to build, this was the cheapest form of delivery to America's retail and manufacturing industries.

But now, more shipping lines are bypassing the US west coast and, instead, going via the Panama Canal to east coast ports. The canal carries 4 per cent of world trade, and the authority has a long-term plan to enlarge the capacity of the waterway to enhance its strategic role in the global economy. Sea routes from Asia to the US east coast are as much as 50 per cent longer than to the west coast. But 70 per cent of the population in the world's biggest market live in the eastern half of America.

From Asia, the Panama Canal provides the critical short cut. Ships from northern China or Japan bound for US east coast ports save about 4,800km by going through the canal instead of round South America.

China is watching these developments carefully because it is by far the largest trader with the US using container ships. Asia-US container commerce grew by more than 14 per cent in the first nine months of last year. Nearly 57 per cent of that volume was shipped from China alone.

The elimination of global textile quotas from January 1 is expected to further increase clothing shipments from China to the US. The congestion on the US west coast in the third-quarter of last year, during the pre-Christmas rush of shipments, was the result of labour shortages, poor efficiency and overstretched port and inland infrastructure. Some fully laden container ships were delayed for up to a week, adding US$300,000 in expenses for fuel and crew salaries.

A number of shipping lines diverted vessels to ports on the west coasts of Canada and Mexico, despite longer overland transport times to the US east coast. Although extra workers have been hired in California's ports, many of the problems contributing to the chronic congestion and delays will take time and large amounts of money to solve.

Since a labour dispute closed all US west coast ports for 10 days in October 2002, there has been a surge in Asian shipping direct to major ports on the US east coast via the Panama Canal. Big US retailers have also built regional distribution centres near many of these ports. In Savannah, Georgia, for example, throughput has nearly doubled in five years, making it the second-busiest container port on the east coast, after the New York-New Jersey harbour complex.

But container ships are getting bigger, and many of the newest cannot fit through the Panama Canal. The canal authority is considering a plan for a new lane of locks that would be built alongside the existing six pairs. But this will take several years to build at an estimated cost of US$8 billion.

Meanwhile, the authority says that it can still arrange for more ships to pass through the canal, although it is working at around 93 per cent of capacity. More than 13,000 vessels currently transit the waterway each year.

Read the articles in my "Ports of Seattle and Tacoma" thread. A lot of the overflow from LA is now heading to Seattle and Tacoma.

Vancouver in Deltaport 3 green petition
By Keith Wallis
21 February 2005
Lloyd's List

PLANS to develop a C$272m (US$221m) third berth at Vancouver’s Deltaport container terminal have taken a step forward after the Vancouver Port Authority applied for environmental approval for the project last week.

The cost of building the third berth will be shared between the authority and Terminal System Inc, a wholly- owned subsidiary of Hong Kong’s Orient Overseas (International), parent company of leading liner, Orient Overseas Container Line.

TSI already operates the existing terminals at Deltaport and Vanterm, which together handled 1.24m teu in 2003.

The complex is part of a C$1.02bn expansion of container terminal facilities at Roberts Bank, about 35 km south of Vancouver, and is close to the Canadian-US border. Vancouver Port Authority is hoping construction of the third berth will start by the end of this year for completion in about July 2008.

Work includes the reclamation of about 20 hectares to create the single third berth plus an expanded container storage area.

Vancouver Port Authority president and chief executive Captain Gordon Houston said the public will be able to comment on the third berth project until April 25. The scheme will then be considered by the British Columbia environmental assessment office.

The third berth and the development of the three berth container terminal 2 will boost box volumes at Deltaport from 900,000 teu to 3.2m teu.

The port authority is expected to invite bids from potential operators for the operation of Terminal 2, but no date for the implementation of the C$750m Terminal 2 project has yet been agreed.

Plans call for the reclamation of 81 hectares plus the construction of a wharf for three berths which will be served by up to 10 gantry cranes and have container storage and intermodal facilities

The port authority said Terminal 2 is “completely independent of the Deltaport third berth expansion in all aspects including site location, terminal configuration, environmental study and impact assessment, construction, operation and development schedule”.

Vancouver Port Authority chairman David Stowe said: “The Roberts Bank container expansion programme is part of a broader Vancouver Port Authority initiative to expand container terminal capacity at the Port of Vancouver, and capture the increases in container volumes predicted over the next 20 years.“

The expansion of the terminal facilities will also require significant investment in the construction of the additional rail links.

This includes an extra 7.7km of track and other improvements to help boost rail traffic from the current 18 trains a day to 21 trains per day by 2012.

The cost of the work will be shared between BC Rail, Canadian National and CP Rail. The Vancouver Port Authority is advocating for private and public partnerships to plan and finance other related improvements such as road/rail crossings.

Import container curbs to ease Vancouver backlogs
Carriers cut shipments from Asia in a radical measure to eliminate persistent port congestion
28 February 2005
Lloyd's List

FROM today most transpacific container lines calling at Deltaport in the Port of Vancouver will be rationing the amount of import cargo they bring into Canada’s largest port amidst the continued, North American west coast boom trade with Asia.

The carriers have agreed to cut import cargo from Asia by 25% a week for four weeks starting today February 28 under a radical new measure to eliminate a persistent, large backlog at heavily-congested Deltaport.

Container traffic flows are working more smoothly at Vancouver’s two other box terminals in the inner harbour.

“The shipping lines were given the option of either dropping one call or reducing what they bring in by 25%, and most chose the latter,” indicated Morley Strachan, VP of business development and strategic planning at TSI Terminals Inc, which operates Vancouver’s Deltaport and Vanterm facilities.

“Not much dent has been made in a backlog of about 5,000 containers since we declared force majeure last month.”

He added that talks were continuing with Canadian National Railway on the shortage of railcars. CN recently promised to increase daily supplies of railcars from around 550 to 750. However, this has not been possible due to events outside of the railroad’s control, including bad winter weather and a recent collision between a passenger train and a truck that disrupted freight traffic. Thus the backlog will not be cleared by the end of February, as originally anticipated. “We hope the new measures will bring the backlog to something tolerable in three or four weeks,” Mr Strachan said.

In an interview with Lloyd’s List, Capt Gordon Houston, president and chief executive of the Vancouver Port Authority, reiterated the urgency of expanding infrastructures, including rail and road networks, to accommodate an anticipated tripling of container business by 2020.

Vancouver handled a record 1.66m teu in 2004 and container cargo growth over the next 15 years could average 7% annually, Capt Houston said.

“It could even reach 10% annually over the next two years as trade with Asia, China in particular, continues to soar,” he added.

The current corporate plan calls for capital expenditures of C$1.4bn (US$1.1bn) between now and 2020. The big ticket item is a planned fourth container terminal that would be situated at Roberts Bank, adjacent to Deltaport, and would go on stream in 2112 if all proceeds as scheduled.

In this regard, port officials welcomed the recent doubling by the federal government of the VPA’s borrowing limit to half a billion dollars.

Also welcomed was the provincial government’s launching of the formal environmental review proceedings for the new container terminal project.

Ottawa to offer ports funding for expansion: To ease bottlenecks
Peter O'Neil
4 March 2005
National Post

OTTAWA - The federal government will table legislation this spring that will help Canada's West Coast ports, facing surging traffic from China, gain access to about $2-billion in tax dollars and private capital for major expansions, Transport Minister Jean Lapierre said yesterday.

While the Canada Marine Act amendments will apply to all 19 national ports across Canada, the demand is being driven by the need to reduce bottlenecks at the Port of Vancouver and fund construction of a container port in Prince Rupert, B.C., he said.

"The real pressure is coming from the West Coast, because of the level of traffic, because of what's coming from China and Asia," Mr. Lapierre said.

"The pressure is there not only on the ports but also on the railways -- the whole infrastructure system is under pressure and we know that the level of trade is going to increase. So we've got to get moving."

The Canada Marine Act, passed in the mid-1990s to let independent authorities run federal ports, includes a provision limiting access to federal business subsidy programs.

Proposed amendments to be considered by Paul Martin's Cabinet would remove that obstacle, as well as make it easier for ports to borrow money in capital markets, Mr. Lapierre said.

"We want action and we don't want the legislation to prevent us from doing the right things, especially on the Pacific gateway."

Mr. Lapierre said he hopes the bill will reflect the thrust of a resolution to be debated at the weekend Liberal policy convention here.

The proposal, initiated by B.C. Liberal members, calls on Ottawa to remove legislated restrictions on access to public and private funding sources. It also proposes an amendment to the Income Tax Act to let port authorities offer tax-exempt bonds.

The Port of Vancouver, Canada's busiest port, wants federal help to fund part of a $1.4-billion expansion of a facility that already handles $29-billion in goods coming and going each year.

The Prince Rupert Port Authority, meanwhile, is lobbying heavily for $40-million from Ottawa to cover part of a $530-million plan to construct a container facility.

Vancouver Port Authority president Gordon Houston has called on the federal and B.C. governments to make major investments in ports, highways and rail facilities to facilitate China's thirst for Canadian resources and growing Canadian imports of manufactured Asian goods.

"The consequences of not addressing the growing capacity deficit across Canada's transportation network are dire," Mr. Houston said in a speech last month.

"Not only do we risk losing out on the tremendous economic opportunities associated with facilitating trade between North America and Asia, we also run the risk of undermining the competitiveness of the Canadian industries we serve."

The Port of Vancouver's initiatives include enhanced container-handling facilities, a third berth at one of its container terminals, the construction of a new three-berth container terminal at Roberts Bank, and possibly the conversion of an existing terminal to handle containers, he said.

The Prince Rupert Port Authority is lobbying for federal help to construct a container port, arguing the West Coast needs a second facility to deal with bottlenecks in Vancouver and offer an alternative in the event of major disruptions in the earthquake-prone Lower Mainland.

Both port authorities have hired lobbyists pushing their cause in Ottawa. One of Prince Rupert's lobbyists is Mark Marissen, campaign chairman for Mr. Martin's Liberals on the West Coast.

Lloyd's List
December 8, 2004
Hutchison mulls Mexico box port as alternative to west coast jams
Ensenada may threaten Long Beach/Los Angeles port status
Sam Chambers

HUTCHISON Port Holdings may have the solution to one of container shipping's great agonies.

Local government officials in Baja California, Mexico, are in discussions with the world's largest container terminal operator, as well as Union Pacific, about a $ 1.2bn Greenfield project at Ensenada on the Mexican west coast, where HPH already has a one berth facility.

HPH officials, while stressing they do not talk about future projects, did confirm "a feasibility study on a major intermodal development project" is under way.

The port will be a threat to California's Long Beach/Los Angeles dual port gateway status, which handles $ 200bn worth of cargoes annually.

HPH has four terminals in Mexico, three on the Pacific coast. As well as Ensenada, there is also Manzanillo and Lazara Cardenas on the west coast (which has been mooted as another US alternative with a rail linking to the American underbelly through Laredo, Texas), and Veracruz on Mexico's east coast.

Authorities are looking to boost Ensenada's throughput to between 1m and 1.5m teu, up from its current 60,000.

"It would be a world-class commercial port that could take away some of the pressure that now exists," said Sergio Tagliaprieta Nassri, Baja California's secretary for economic development.

The plan is to link the port to the US by rail through Mexicali to Yuma in Arizona, while an Ensenada airport has been floated for good measure.

Dredging has just commenced to take existing depths from 12 m to 14 m at Ensenada port and raise capacity at the former International Container Terminals Inc owned terminal to 250,000 teu.

There are three sites, all south of the city, that are being considered for the new complex, namely Santo Tomas, Punta China and Punta Colonet, the latter tipped as the favourite.

HPH, with 206 berths in 35 ports, is the world's leading port developer and operator, and Union Pacific is North America's largest rail operator.

John Meredith, group managing director at HPH has avoided investing in the US, as in Japan, Taiwan and northern China, because he is unable to gain full operational control of terminals in these places - a key concession HPH demands from any deal.

"Obviously, a billion dollar investment is a long-term investment, we're not going to change things straight away," said an HPH source.

Retail giants such as Wal-Mart and Costco Wholesale, chastened by West Coast delays and lockouts, have reportedly done test runs for distribution from Mexico and are likely to rejig their supply chain in response to HPH's Mexican manoeuvre. The slew of boxes heading over the Pacific from Asia this year has caught many North American ports unawares and substantial expansion plans have been announced up and down the coast.

OOIL to raise terminal capacity in Vancouver
Nicholas Zamiska
12 March 2005
The Standard

Orient Overseas International, a Hong Kong-based shipping firm controlled by Tung Chee-hwa's family, said it will expand capacity by nearly a third at two of its terminals near Vancouver to ease congestion that has plagued ports along the western coast of North America.

TSI Terminal Systems, a wholly-owned subsidiary of OOIL based in Vancouver, said that it will invest C$60 million (HK$389.5 million) to increase the capacity of its Vanterm and Deltaportterminals by 30 percent over the next three years.

"There is huge opportunity for containergrowth in Vancouver and this announcementfrom TSI shows that terminaloperators are ready and willing to do their part to ensure the supply chain can be as efficient and effective as possible," said Chris Badger, a vice president for the Vancouver Port Authority.As China's manufacturing industryhas grown, transportation links across the Pacific have struggled to keep pace, creating traffic jams at the major ports along the coast. The snarl of ships has caused ripple effects throughout manufacturers' supply chains, which have grown increasingly reliant on time-sensitive deliveries.

"In visits with several carriers this week we found that the congestion fears were generally less than advertised," said Citigroup analyst Charles de Trenck in a note.

"Many operators have increased effectivecapacity by various means [ie, longer operating hours], although we agree that the supply chain will remain congested further inland if shippers are not able to win certain requested changes from their inland transport providers," he added.

But as shipping lines move to expand capacity, by purchasing more vessels and expanding terminals, some industry analysts worry that shippers will be saddled with excess capacity once US ports successfully implement reforms aimed at easing congestion.

OOIL reported on Thursday that its earnings more than doubled to US$670 million in 2004, beating forecasts.

Vancouver operator plans container boost
By Keith Wallis in Hong Kong
14 March 2005
Lloyd's List

Terminal Systems, the Vancouver terminal operator owned by Orient Overseas (International) Ltd, will spend C$90m (US$74.6m) to expand container handling operations at the port.

The cash includes C$60m that will be invested in new port equipment to improve handling efficiency and increase the capacity of Deltaport and Vanterm by 30% in three years.

TSI vice-president of business development and strategic planning executive Morley Strachan said: “We will do everything in our power to maximise terminal efficiency and restore berthing predictability.”

The company has been badly hit by congestion in the past few months, caused largely by a shortage of rail cars to move boxes from the port to the Canadian hinterland.

Shipments have been delayed by at least two weeks since January. Mr Strachan believes the backlog of boxes could be cleared by the end of this month after Canadian National Railway deployed extra rolling stock.

TSI is also cutting the free storage of boxes from 14 to five days starting from April 11.

Container volumes at Deltaport and Vanterm grew to nearly 1.35m teu last year from 1.27m teu in 2003.

TSI will also develop a C$272m third berth at the Deltaport complex, 35 km south of central Vancouver, in association with the Vancouver port authority.

The port of Vancouver is responsible for obtaining all regulatory approvals, but will share the cost of building the complex with TSI, which will also operate the facility. Construction of the third berth could start by the end of this year for completion in about July 2008.

Work includes the reclamation of about 20 ha of land for a single berth and an expanded container storage area.

Plans to expand capacity at Deltaport and Vanterm coincides with comments made by OOIL chief financial officer Nicholas Sims, who suggested his company would invest in additional ports worldwide to combat port congestion.

Speaking during OOIL’s record results announcement last Thursday, Mr Sims said: “With the infrastructural problems there are in North America, Europe and Asia, as a container line it becomes ever more important to secure dedicated berths.”

Canada Trains Want To Move More China Exports To The US
18 March 2005

BEIJING (Dow Jones)--North America's West Coast ports and railways are choked by the exponential growth in China imports, but Canadian railways want to move more of these arrivals to the U.S. Midwest and East Coast.

West Coast ports are struggling to deliver the deluge of goods during what is usually the low season, with cargo from Asia expected to double by 2020.

China accounted for 37% of U.S. imports by weight in 2004, up from only 5% in 1989, with shipments for Wal-Mart Stores Inc. (WMT) accounting for 10% of the U.S. trade deficit with China, a report by Swiss investment bank UBS AG found.

The growing trade has prompted Canadian National Railway Co. (CNI) and Canadian Pacific Railway Ltd. (CP) to open offices in China to market their alternative routes to shippers.

"Exports going to the U.S. have another option that is shorter and cheaper," Canadian Pacific chief China representative Willy Wang told Dow Jones Newswires.

Northern ports in North America are a shorter distance from Asia and U.S.-destined imports arriving through Canada are not subject to additional duties at the U.S. border.

Canadian Rail Services U.S. Midwest, East Coast

Unable to service the western U.S. - whose rail tracks are owned by American rivals Union Pacific Corp. (UNP), the largest U.S. railroad, and Burlington Northern Santa Fe Corp. (BNI) - the Canadian companies want to move more Chinese exports to the U.S. Midwest and East Coast, Wang said.

They own tracks heading from Canada to Minneapolis and Chicago that connect onward to New York, Philadelphia and Baltimore and stretching as far south as Texas and New Orleans.

Their shipping gateway through the Vancouver Port Authority (VCV.YY) has the lowest fees on the West Coast, as U.S. operators have raised their own fees to try to stem the overload of goods.

Canada has lower port fees, union salaries and storage fees compared to the U.S., Port of Vancouver China Representative Jenny Yan said.

In addition, although security standards are the same at all ports, U.S. ports have greater concerns with stowaways and weapons smuggling and need more investments for technology. These concerns can result in goods being held up longer by customs.

UNP announced rate increases earlier this year after floods and mudslides in southern California forced it to cut its services by one-third.

It said increases are here to stay due to rising oil prices and a lack of investment in new rail cars, and with railroads moving away from signing multiyear agreements with set prices in favor of short-term contracts or spot-market tariffs.

The Los Angeles County Economic Development Corp. has even asked for financial help from the Chinese, South Korean and Japanese governments for infrastructure improvements at the Port of Los Angeles, calculating that delays caused by infrastructure constraints are costing Asian exporters $1.3 billion annually.

Foreign Competition For U.S. Ports

The Port of Los Angeles, the largest in the U.S., is aware of the competition it faces from ports beyond the West Coast and outside the U.S.

"It is a concern that other ports are growing, but there was a significant increase in volume last year and growth has been seen at all ports," Port of Los Angeles Director of Planning Mike DiBernardo told Dow Jones Newswires.

He added that L.A.'s problems last year were largely due to labor shortages from inaccurate projections given by shipping lines which have been rectified this year.

Other ports are moving in. Cargo traffic at the Port of Vancouver grew 11% year-on-year to 73.9 million metric tons in 2004, the largest gain in more than a decade.

Canada's largest port handled $C29 billion ($23.4 billion) in trade in 2004, with 56% of the total volume of Canada's trade with China passing through, Vancouver Port Authority Chairman David Stowe said.

Inland ports are also jockeying for a share of the growing Asian trade. Houston, which handles 65% of containers entering the Gulf of Mexico, saw incoming containers from Asia increase by 28% in two years and will be further boosted by the opening of a Wal-Mart distribution center near the port later this year.

Some shippers are already bypassing the West Coast entirely and heading straight to the East Coast by way of the Panama Canal to ports such as Halifax and Montreal, despite twice the travel time and a 35% increase in costs.

Congestion In Vancouver

But Canada's ports have their own problems. Despite a recent announcement that the Port of Vancouver will invest C$1.4 billion to triple its container terminal capacity by 2020, there are fears these improvements are not being made quickly enough.

"We get a bum rap for being congested, but the investments needed for infrastructure aren't being made," Stowe said.

TSI Terminal Systems Inc., the largest container terminal at the Port of Vancouver, asked shipping companies to reduce their containers by 25% for one month at the end of February in an effort to clear the backlog at the port.

CP's Wang warned that this sort of request is likely to happen again.

The port blames rail companies for not sending enough rail cars, but rail companies say terminals fail to load their cars fast enough.

"More business means more delays too. Business is too good right now," Wang told Dow Jones Newswires.

The two Canadian rail rivals combined their operations in Vancouver in October in an effort to alleviate congestion.

- By Vivian Tse, Dow Jones Newswires

Here's an interesting angle to this topic . . .

http://www.thestate.com/mld/thestate/business/11203637.htm

Posted on Tue, Mar. 22, 2005
Kansas City looking to become destination for Asian cargo
DAVID TWIDDY
Associated Press

KANSAS CITY, Mo. - Despite sitting more than 1,300 miles from the Pacific Ocean, Kansas City is looking to become a new U.S. gateway for Asian imports.

Representatives of the Mexican port city of Lazaro Cardenas on Tuesday pledged their support for the plan to develop an "inland port" in Kansas City, which would process cargo containers unloaded in Mexico and transported to Kansas City by rail.

The idea is to help shippers avoid the bottlenecks at the leading Pacific ports of Los Angeles and Long Beach, Calif., which are struggling to keep up with Americans' growing taste for goods made in China and elsewhere.

"If you look at the big picture, you have capacity issues, congestion issues, time delays - all these things are facing us," said Chris Gutierrez, president of Kansas City SmartPort Inc., a nonprofit organization pushing to establish the inland port. "What Kansas City offers is great infrastructure that is not at capacity and is directly connected to Lazaro Cardenas."

Lazaro Cardenas handles about 180,000 cargo containers a year, making it one of the smaller ports in Mexico. But experts say current expansion efforts could increase that capacity to 2 million containers annually within the next five years. By comparison, 9 million containers move through Los Angeles/Long Beach and that amount is expected to grow at least 10 percent this year.

Cargo now takes more than a week to move from Lazaro Cardenas to Kansas City by rail, but the company that plans to own those lines says it can speed that up as more freight moves through the system.

"Fortunately for us, (capacity) has not been a major problem," said Warren Erdman, vice president of corporate affairs for Kansas City Southern, which is in the process of buying the formerly state-owned Mexican rail line Transportacion Ferroviaria Mexicana.

The quest for an inland port began in the late 1990s as Kansas City leaders looked to take advantage of the city's historic role as a major transportation hub. It is the second-largest rail center in the country, and U.S. Customs agents already clear more than $9 billion in imports a year moving through the city.

Officials plan to build a processing center for breaking the containers into smaller loads to be taken to their final destinations by truck, plane or rail. Mexican officials also plan to build their own customs office to check shipments headed from the United States into Mexico, a move that could come this fall, Gutierrez said.

He added that the first pilot shipments for the inland port system could begin next month, although local leaders are working with the U.S. Department of Homeland Security to complete procedures to make sure containers can't be tampered with between the port and Kansas City.

Marc Hershman of the University of Washington School of Marine Affairs said shippers are increasingly interested in alternative shipping locations as a hedge against cost increases, labor shortages and delays.

"It's not just the congestion in the Los Angeles/Long Beach area," he said. "It's also to have as many options as possible."

Some are not yet sold on the idea, however. Ezra Finkin, a spokesman for The Waterfront Coalition, a Washington, D.C.-based group that represents retailers and manufacturers, said the system sounds slow. Mexican ports are farther from Asia than California, the Mexican transportation infrastructure is spotty in places and processing in Kansas City would take time, he said.

"You'll have a very hard time convincing the big cargo owners that they'll save any money doing this," he said.

Chris Kuehl of Kansas City-based international trade consultant Armada Corporate Intelligence said predictability of shipments is valuable too. He said resistance to the longer route will diminish as long as California ports continue to see delays of up to two weeks.

"Even though it may take a week to get to Kansas City, you know it's going to take seven days, not 10, not 15," he said. "You can plan on it."

West Coast import traffic soars
BY BILL MONGELLUZZO - THE JOURNAL OF COMMERCE ONLINE
17 March 2005
Journal of Commerce Online

LOS ANGELES -- Containerized imports were exceptionally strong in February, as volumes soared 40 percent to 60 percent at most West Coast ports compared to the same month a year ago.

The startling growth can be explained in part by the fact that exports dropped sharply on an early Chinese New Year, making February 2004 the weakest month of the year for most West Coast ports.

Chinese New Year fell on Feb. 9 this year, so allowing for the 10 to 15-day transit times across the Pacific, there was a rush of cargo in mid to late February. West Coast ports did not experience a drop in containerized imports until the end of the month.

Still, February's soaring imports for most ports equaled the volumes that moved in early summer of 2004, the beginning of last year's peak shipping season. This development indicates that the ports, railroads and trucking companies this year may once again have to contend with congestion and capacity constraints that hampered shipments.

Containerized imports increased 62.5 percent at Long Beach, the nation's second busiest container port. Long Beach is expected to have an especially strong year as there will be four or more strings of new-generation 8,000-TEU vessels calling each week.

Even Los Angeles, the largest U.S. container port, had a strong month in February with a 19.1 percent increase in containerized imports. Los Angeles had been experiencing month-on-month declines since mid-2004 because the port could not accommodate the mega-ships, which called instead in neighboring Long Beach.

Imports through Oakland increased 62.3 percent in February compared to a year ago. Last year, at least five vessel strings that had been serving Southern California as the first call inbound were re-routed to call in Oakland first so the intermodal shipments would avoid the congestion in LA -Long Beach. Most of those services remained in Oakland as the first-call inbound.

Seattle has been recording impressive gains since last summer due to diversions from Southern California, and more recently, from the congested Port of Vancouver, Canada. Imports increased 56 percent in February and are up 56.7 percent year-to-date. Strong growth is anticipated all year as carriers could start as many as five new services to the Pacific Northwest in 2005.

Imports also surged in Tacoma, up 41 percent, and the port is expected to have a big year in 2005 with the opening in January of a new terminal for Evergreen Marine Corp. "K" Line, which is moving into the former Evergreen facility, should also increase its volume. Yangming Line is moving into the former "K" Line terminal and will soon start its first-ever service to the Pacific Northwest with its own vessels.

Containerized imports from China show no sign of letting up. In fact, the lifting of U.S. quotas on textiles and wearing apparel on Jan. 1 should give an extra boost to imports, unless the domestic industry succeeds in securing safeguards. Chinese authorities reported that in January apparel exports to the U.S. increased 80 percent.

The increases in container volumes in March are expected to be less impressive than the February increases as West Coast ports feel the full impact of the post-Chinese New Year lull. However, industry analysts project that imports in the eastbound Pacific, the busiest U.S. trade lane, will increase at least 12 percent this year.

Traffic World
March 21, 2005
Vancouver Cuts Container Backlog

The backlog of containers at Vancouver's Deltaport terminal has been cut in half, and operator TSI Terminal Systems expects the jam to be cleared entirely by the end of this month.

The cleanup has only taken place in the past two weeks, when ocean carriers began reducing their import cargoes into the West Coast Canadian port by 25 percent a week for the four weeks beginning Feb. 28. The backlog of 5,000 TEUs has fallen to 2,500 TEUs since TSI in mid-January declared force majeure, citing a shortage of railcars to handle surging imports.

"We have cleared approximately 50 percent of the backlog to date and now are at around ... 2,500 containers," said Morley Strachan, TSI vice president, in an interview. "We expect to have the backlog cleared by the end of the month."

To keep the port cleared, TSI at its Deltaport and Vanterm terminals is reducing free container storage to five working days from 14 following complete unloading of a vessel, for both import and export cargo. TSI had not assessed storage fees at all for import cargo, although they were chargeable.

I'll also put this in the Seattle-Tacoma ports thread, but I think this is germaine to this topic as well. And some of the stuff in here is just unreal!

http://seattle.bizjournals.com/seattle/stories/2005/03/28/story1.html

Puget Sound Business Journal
From the March 25, 2005 print edition
Cargo surge: Jumbo ships will test region
Steve Wilhelm
Staff Writer

Puget Sound cargo ports are bracing for a surge in container traffic and ever-larger container ships, as evidenced by the recent arrival of the largest cargo ship ever to stop at the Port of Seattle.

Container projections are so robust that some officials are concerned about the ability of Puget Sound ports and railroads to keep up.

Port and railroad officials don't want a deluge of containers to overwhelm the region's docks and rails, leading to massive cargo bottlenecks on the scale of those experienced last fall in Southern California.

"We're strategizing to make sure we don't drop the ball like Southern California, that it is sustainable," said Mic Dinsmore, executive director of the Port of Seattle.

Port watchers may have gotten a good look at the future of container ships earlier this month, when the COSCO Vancouver arrived at the Port of Seattle.

The ship, the largest container ship to visit the port, stopped in Seattle only to drop off some empty containers. But the COSCO Vancouver is big, capable of carrying 8,000 20-foot-long container equivalents, or TEUs.

Not so long ago, a "big" container ship was one capable of carrying 6,000 TEUs.

Similar mammoth ships are expected to become increasingly common at the ports of Seattle and Tacoma, as ocean carriers switch to larger ships so they can manage the growing volumes of trans-Pacific trade.

The ships are getting special attention at the Port of Seattle, which is launching a project to expand the port's capacity to 3 million TEUs annually in five years or less. Much of that traffic will probably arrive on ships that are much larger than those used today.

Container ships are also being closely watched by officials of the two major railroads that serve Puget Sound container ports -- the Burlington Northern Santa Fe and the Union Pacific.

The two railroads have been spending money to increase their capacity on routes over the Cascades. Because of their investments, Puget Sound ports were able to handle the surge of cargo that was diverted to the Northwest when Southern California ports backed up.

But the railroads have a challenge ahead of them. They have to keep up with the Port of Seattle, which expects its cargo volume to increase 50 percent in the coming years. The Port of Tacoma expects a similar increase.

Currently, about 70 percent of the containers that arrive at the two ports move to eastern markets by rail. And container trains take one of two routes: through the Stevens Pass tunnel or along the Columbia River.

But Stevens Pass is already at capacity with about 25 trains daily. The Columbia River route has been expanded to about 40 trains daily, with capacity for 15 percent to 20 percent growth, said BNSF spokesperson Gus Melonas.

"We're confident we can meet the projected demands," Melonas said.

Meanwhile, the Port of Seattle has its own challenges. It is trying to handle more containers with an array of logistical and technological changes.

The only way the port can increase its cargo volume is to boost productivity, because it has no more land to expand its cargo terminals.

"We're seeing rapid growth here, and we can easily eat up our current capacity. That's why we're looking ahead," said Michael Burke, director of cargo and cruise services for the Port of Seattle.

Right now the port's three big terminals -- 5, 18 and 46 -- are handling about 4,000 to 5,000 TEUs per acre per year, which is below their current capacity. It is also below the West Coast standard of about 6,500 to 7,500 TEUs per acre, Burke said.

By comparison, some Asian ports achieve volumes of 10,000 TEUs per acre and beyond, partly by building garage-like container storage areas and by feeding the terminals from barges.

The port wants to increase volume with new, container-moving machinery that will allow containers to be stacked five high, as well as new staging areas at terminals 30 and 106, where containers can be held for later loading.

The port also wants to install new technologies, such as scanners, that can read information on the sides of containers as they're driven into the terminals, Burke said.

"If you can get the cargo moving more quickly through the terminal, you can increase the capacity of the terminal and get beyond that 7,500 TEU level," he said.

The bigger ships present their own challenges.

Their growing size, which creates certain economies of scale, is also generating a fierce debate in the industry about how big is too big.

The new ships are so large, with containers stacked 18 wide across their decks, that fully loading and unloading one can take up to three days, even with the fastest available cranes.

They're far too large to fit through the Panama Canal, and they ride so deep in the water they can't be handled at certain West Coast ports, notably the Port of Portland.

The cargo from just one ship, if it were unloaded all at once and 70 percent of that were destined for points inland, would fill up 16 standard, 350-container trains, or about two thirds of the daily capacity at Stevens Pass. :eek:

The Port of Seattle's Dinsmore believes the optimal ship size for many carriers will balance out at about 5,000 TEUs. He believes the large ships will be put to use mostly on major routes between the largest pairs of ports, which will lessen the effects of long loading and unloading times.

"You had better have the infrastructure on both ends of that to rapidly move that commerce," Dinsmore said.

But Mark Kadar, an analyst for Mercer Management Consultants in Boston, said he believes 8,000-TEU ships will become an industry standard, pointing out that many of the world's largest carriers have them on order.

"For those major arterial trades, there's pretty clear consensus that the 8,000-TEU ship will be the workhorse for next 10-plus years," he said, adding that anything larger may overwhelm other links in the routes and create "terrible bottlenecks inland."

The ports of Seattle and Tacoma have spent millions of dollars preparing their facilities for larger ships, which is partly why the COSCO Vancouver was able to show up on relatively short notice.

Observers don't expect regular appearances by 8,000-TEU vessels in Puget Sound soon, although some may be redeployed here if import cargo gets jammed up in Southern California during the fall holiday rush, as it did last year.

More likely: Carriers in the next year or so may start moving the next generation smaller container ships to Puget Sound. Most of those ships carry about 6,000 TEUs.

Ports take pressure off choked San Pedro duo
Pacific and Atlantic ports are stepping in to grab cargoes as Los Angeles and Long Beach fight gridlock, writes Janet Porter
30 March 2005
Lloyd's List

PORTS around the Pacific Rim experienced unprecedented growth last year as exports from China and other parts of Asia to the US increased beyond all expectations.

Never before had so many containers been shipped across the Pacific.

But while ports moving the outbound cargo seemed to handle the vast amount of freight with relative ease, their counterparts in North America struggled.

Los Angeles and Long Beach bore the brunt of the onslaught, with labour shortages and congestion on both the roads and railways adding to gridlock.

Both ports have put a number of initiatives in place to ensure, hopefully, that the 2005 peak season will be less of a nightmare than last year.

But ports right along the Pacific seaboard and beyond are gearing up to take some of pressure off the San Pedro duo and capture a larger share of the business bonanza for themselves.

All face competition from US Gulf and east coast ports that are working hard to persuade both importers and shipping lines to operate more all-water services from Asia via both the Panama and Suez canals.

And looking further ahead, shippers are even eyeing brand new options such as Prince Rupert on the Canada-Alaska border which has a Canadian National rail link and development plans in place, and Lazaro Cardenas in Mexico, as “last resort” alternatives. Pacific northwest ports expect to gain more business this coming year as importers do all they can to lessen dependence on the southern California gateways.

Vancouver, which had its share of congestion in 2004 as both container and breakbulk import volumes exceeded all expectations, is preparing for a further 10% growth this year and hopes its better productivity per acre compared with US competitors will attract new customers. In the longer term, the Canadian port plans to expand annual capacity to 5m teu by 2020.

In 2004, Vancouver handled nearly 1.7m teu against 1.5m teu in 2003.

Just across the border in Seattle where traffic volumes climbed 20% last year to 1.8m teu, the port has just completed a $72m enlargement of one of its terminals and reached an agreement to re-open another that was closed to 2002.

At nearby Tacoma which handled 1.8m teu in 2004 and expects throughput to reach 2m teu this year, extra space has been gained following the recent opening of Evergreen’s 171 acre 1.2m teu facility. Yang Ming and K Line are moving into the area vacated and freeing up land for further expansion.

Portland, on the Columbia River and already served by some deepsea container lines, is another muscling in on the bonanza, with three post-panamax cranes due to be ready next year.

Oakland is also taking delivery of more large cranes, with a pair of super post-panamaxes delivered at the beginning of March. The Californian port handled just over 2m teu last year, an increase of 6.2%, while January recorded a year-on-year rise of 22%.

Some lines have reconfigured sailing schedules to make Oakland rather than Los Angeles or Long Beach the first port of call on a number of services arriving from Asia.

Also after a share of the container overflow is Hueneme, a niche port handling mostly cars and fruit 60 miles north of Los Angeles.

The port is now pressing Washington for a return of land on the adjacent naval base that could be converted into terminals handling container, shortsea and ro-ro services.

Long Beach, which experienced slow growth in 2002 and 2003 after its biggest customer, Maersk Sealand, moved to its own terminal in Los Angeles, saw volumes leap ahead in 2004.

The port handled almost 5.8m teu in last year compared with 4.6m teu in 2003 and then topped that with 32% in January.

That partly reflected the arrival of some new services mid-year rather than genuine year-on-year organic growth, but nevertheless sets a marker for the coming year.

The switch of services left the port of Los Angeles with much slower growth last year of just 2%, but it still handled a record 7.3m teu.

Together, the two ports would rank number three in the world behind Hong Kong and Singapore, and both are now pinning their hopes on the hiring of several thousand more longshoremen, longer gate opening hours and new technology to improve productivity and avoid another summer of gridlock.

Meanwhile, more than 30 inland ports in the western US also hope to benefit from the focus of the coastal hubs on containers by picking up more bulk, breakbulk and ro-ro trade that finds itself squeezed out of the big boxports.

Typical is the port of Stockton, eight hours up river from Oakland, which sees plenty of new business opportunities in the non-containerised sector, as shippers of lower value commodities such as cement look for alternatives to the expensive coastal ports.

Just how fast events are moving is clear from the fact that the first 6,000 teu ship was only seen on the US west coast for the first time six years ago. None of the ports had big enough cranes or depth of water to handle, fully laden, what were then the biggest containers in the world.

Today, ships of 7,500 teu or more are becoming commonplace on the Pacific.

Yet the biggest challenge is to close the huge gap in productivity between the major US gateways and ports in Asia and Europe. For despite all their efforts, North American ports are still far from world class.

Shipping lines look to build Mexican port because of LA backlogs

AP - LOS ANGELES
April 09, 2005

A group of shipping companies says because Southern California ports have become too congested, they want to build a one (b) billion dollar port complex about 150 miles south of Tijuana, Mexico.

Plans were announced yesterday by Marine Terminals Corporation. The proposals include a complex of berths, warehouses and cranes that could handle nearly one-seventh the current volume at the Los Angeles port by 2012.

Company officials hope to connect the proposed Punta Colonet harbor, located on undeveloped farmland, to California with a new rail line. Construction would take at least five years.

The companies have begun lobbying the Mexican government. If approved, the facility would be one of Mexico's largest public works projects, requiring the construction of roads, housing, public buildings and other infrastructure where none now exists.

Major seaport proposed



BY CHRIS KRAUL AND DEBORAH SCHOCH/Los Angeles Times
April 12, 2005






A coalition of shipping and freight concerns announced plans last week for a US1 billion port on deserted seaside farmland about 150 miles south of Tijuana on the Baja peninsula. The coalition hopes to link the Mexican port to California with a new rail line connecting to Imperial Valley and compete with the Los Angeles and Long Beach ports for a share of the multibillion-dollar West Coast shipping business.

If it materializes, the Punta Colonet project would be one of the largest public works projects undertaken in Mexico, requiring the construction of roads, housing, public buildings and other infrastructure where none now exists.

The firms have begun lobbying the government, telling officials there would be enough cargo traffic and investment dollars to underwrite a major portion of the cost to build the port and a new city to serve it.

At stake is a share of the estimated US200 billion in revenue generated annually by shipping through California.

"We have to get Colonet developed," said Walter J. Romanowski, an executive with Los Angeles-based Marine Terminals Corp., a holding company owned by Evergreen and Yang Ming shipping lines of Taiwan, Hanjin of South Korea and China Shipping of Shanghai, all among the world's largest shipping firms. "There are no other viable West Coast options."

Punta Colonet as well as the nearby town, bay and cape are reputedly named after Captain James Colnett, a British sea captain who explored this section of the Pacific coast in the late 18th century.

Romanowski said he wanted the right to build a complex of berths, warehouses and cranes that by 2012 could be running 1 million standard container units a year, about one-seventh the current volume at the Los Angeles port. Construction of the proposed Mexican port would take at least five years, the shipping companies say.

Port officials in Long Beach and Los Angeles said Friday that the project was news to them, although rumors have circulated for months about potential new port developments in Mexico.

Traffic at the two ports is so backed up that as many as 50 ships are kept waiting offshore as long as a week at a time. Environmental and other restrictions limit the ports' expansion, and other West Coast shipping terminals are becoming just as crammed.

Shipboard container traffic out of China is growing at an explosive rate 15 percent or more per year overwhelming the Long Beach and Los Angeles port complex, the world's third-largest.

Tie-ups at the L.A.-Long Beach ports last year sparked international concerns when a flood of Asian cargo clogged docks, rail lines and highways, forcing giant container ships to idle offshore.

The logjam was blamed for delaying the delivery of holiday goods nationwide. Now, with January container traffic up 35 percent in Long Beach over last year, the shippers fear that such jams could become an annual problem, forcing freighters to less congested ports in Seattle and British Columbia.

Southern California port officials worry about losses in jobs and revenue if shipping traffic shifts to competing regions.

But there is little room for the ports to grow. Expansion of the Los Angeles-Long Beach complex also is complicated by mounting community opposition. The twin ports are the region's largest source of air pollution.

The shipping industry soon will have no choice but to expand out of the Los Angeles basin, and Mexico is the best alternative, said Al Fierstine, former Los Angeles port business development director who is now an adviser to Marine Terminals Corp.

Baja California Sen. Hector Osuna Jaime said the project would promote much needed growth in jobs and industry in Baja California. A new port, he said, would spur investors to build factories, possibly reversing a trend in recent years that has seen manufacturing jobs leave Mexico for China.

One political hurdle facing approval of the proposed port is the 150-mile rail link to connect with the United States. Mexican laws bar foreign ownership of such a line.

Also, officials traditionally authorize public works projects that they can see completed before their terms expire. President Vicente Fox leaves office at the end of 2006, long before the Punta Colonet project would receive its first ship.

The row over the California ports' environmental impacts spawned a proposal in Sacramento to limit emissions, as well as an ongoing initiative, launched by Los Angeles Mayor James K. Hahn, to slash Port of Los Angeles pollution to 2001 levels.

Last year's logjam of ships came just two years after the autumn 2002 lockout of dockworkers by the Pacific Maritime Assn., representing West Coast shipping lines.

At its worst, the 10-day lockout created a lineup of 129 ships waiting to deliver cargo at the Los Angeles-Long Beach complex.

Dockworkers' fears of losing jobs to automation helped spark the lockout, and some predicted a contract ratified by their union a few months later would mean a major drop-off in high-paying longshore jobs.

Instead, the number of jobs increased, with 3,000 added at the complex.

Kraul reported from Mexico City and Schoch from Los Angeles.

CP Rail sees profits triple: Company bullish on western expansion plans as Asia-Pacific demand soars
Scott Simpson
Vancouver Sun
29 April 2005

Canadian Pacific Railway expects an immediate payoff from its $160-million western expansion project because of soaring demand for commodities on both sides of the Pacific, CPR president and CEO Rob Ritchie said Thursday.

Ritchie said the project to expand the railway's carrying capacity in Western Canada will be completed "safely, on time, and on budget" later this year as CPR responds to a global trade market in the throes of unprecedented growth.

"We are pretty bullish on our western corridor," he said, adding that demand for the expansion was primarily, but not exclusively, driven by exports of bulk goods.

"It looks very strong, obviously into 2006, in bulks. I was just at a conference in Vancouver for the China trade. The whole West Coast of North America is seeing demand growing by 1.5 million [TEUs, or twenty-foot equivalent unit containers] a year. That is a lot of containers looking for a home."

CPR's expansion comprises a mix of track improvements calculated to boost capacity by 12 per cent, or the equivalent of 400 cars per day.

The railway has a longer-term plan for improvements that will total $500 million.

CPR chief operating officer Fred Green said this year's initiative should protect the interests of CPR and its customers through 2006.

"Trust me, it's not going to take many calls to fill that first train," Green said. "There is big demand right now."

The comments came during a teleconference as the railway announced net income of $81 million in the first quarter of 2005, more than triple the $24 million reported in the first quarter of last year.

Operating income was up 54 per cent to $179 million, and revenue was up 14 per cent to $1 billion, a first-quarter record.

"Revenue growth was strong across CPR's entire bulk commodity sector in the first quarter of 2005, led by coal and grain, which increased 44 per cent and 23 per cent, respectively," the company announced.

CPR said it expects revenue growth of between 12 and 14 per cent in 2005.

"April is just a busy, busy month for us, and across the board," Green said. "The export business on all of our commodities is strong, strong, strong. Merchandise for is a less major component of what we do, but even in that we are not seeing any softening of demand."

Vancouver Port Authority operations vice president Chris Badger noted that the VPA expects demand to grow by 10 per cent per year -- and the CPR initiative is right on target.

In fact, Badger said, the capacity created in CPR's longer-term $500-million expansion plan will be absorbed by year-over-year demand growth within three years.

The Port of Vancouver's largest terminal operator said the industry is in an unprecedented growth phase and that railways, terminals and ocean carriers have worked hard over the last year to respond.

TSI, for its part, has added new gantry cranes at its Deltaport and Vanterm operations and expects the new units to be operational in about eight weeks.

Morley Strachan, director of marketing and strategic planning for TSI Terminal Systems Inc., said those measures, and the ones being undertaken by CPR, will only allow them to keep pace with growth -- not exceed it.

"We won't get ahead of the curve. That's our dilemma," Strachan said. "What we are trying to do with the cranes and the improvements we are making at the terminal are intended to keep up, to try to match the rate of growth.

"The full $500 million CPR are looking at will help them get to the edge of the curve. But I think if you look at the long term curve, I don't even know that $500 million will be enough."

RUNAWAY TRAIN PROFITS:

Canadian Pacific Railway Ltd., the country's No. 2 railway, said profit in the first quarter tripled, bolstered by record traffic and rising freight rates:
Q1 2005 net income: $80.7 million
Q1 2004 net income: $23.5 million
Q1 2005 revenue: $1.01 billion
Q1 2004 revenue: $887 million

Vancouver and CPR unveil plan to harness Asia-Pacific trade surge
26 April 2005
Lloyd's List

VANCOUVER, Canada’s largest port, and Canadian Pacific Railway have agreed to co-operate on joint capacity development to capture expanding Asia-Pacific trade opportunities.

The agreement, which was announced last Thursday, encompasses marketing and domestic public policy advocacy programmes to enhance competitiveness, operational efficiencies and customer service at the Port of Vancouver.

Driven by surging trade with China, import container traffic has achieved record levels in tandem with rapid growth in commodity exports such as coal, grain and potash.

After handling 1.66m teu in 2004, Vancouver’s box throughput was up 5% at 405,426 teu in the first quarter of 2005 from a year earlier.

Container volumes at British Columbia seaports are expected to grow from the current 2m teu to between 5m and 7m teu by 2015.

“We are committed to leading the development of an integrated transportation system in western Canada that can drive trade and economic development throughout British Columbia and across the country,” said Gordon Houston, president and chief executive of the Vancouver Port Authority. “We have the opportunity to harness the tremendous growth of North America’s trade with Asia,” said Rob Ritchie, Canadian Pacific Railway president and chief executive.

Mr Ritchie recalled that CPR has already made a C$160m (US$128m) commitment this year to expand its western network into Vancouver.

Capt Houston and Mr Ritchie acknowledged the significant efforts that had been made already by the British Columbia government, notably property tax relief for port terminal operators and investments in infrastructure and port development.

$1-billion Deltaport expansion expected to begin this fall
Port authority officials hope to open a third berth by the summer of 2008
Bruce Constantineau
Vancouver Sun
28 April 2005

After three gruelling years of public consultation, Vancouver Port Authority officials hope to start construction this fall on a $1-billion expansion of Deltaport that will more than triple container terminal capacity at the Roberts Bank facility over the next seven years.

The first phase of the project -- establishing a third Deltaport berth at a cost of $272 million -- is going through an environmental review process now, with public comment being accepted until May 9.

Port officials are crossing their fingers that approval from the Environmental Assessment Office will come this fall, with construction beginning shortly thereafter, and a third berth opening by the summer of 2008.

The exact timeline hasn't been determined for the next expansion phase -- construction of a $750-million second terminal that would add three additional berths at Deltaport -- but a tentative opening date for that facility has been set for 2012.

"We're a unique gateway here and we can capture some of the economic opportunity that goes along with being a gateway by undertaking these expansions now," VPA vice-president Jim Cox said in an interview. "It creates jobs, it creates taxes and it creates economic wealth, and if we don't go after it, it's going to go to some other community."

Container traffic on the west coast of North America is expected to triple over the next 20 years and the Port of Vancouver plans to increase its annual container capacity from 1.8 million TEUs (twenty-foot-equivalent units) to five million TEUs by 2020. The third berth at Deltaport will increase container capacity from 900,000 TEUs to 1.3 million TEUs while the construction of a second terminal will take the capacity to more than three million TEUs.

Cox said two major trends are driving trans-Pacific container traffic higher -- more commodities like lumber, pulp and grain being moved in containers and the shift of more production to Asia, with the shipment of Asian-made goods back to North America.

The Third Berth Project will expand existing container operations with the construction of about 20 hectares of fill to create an expanded container storage area. The Terminal 2 Project would involve the construction of about 81 hectares of new land for new infrastructure development.

Environmentalists and local communities have expressed concerns about several issues relating to the port expansion, including possible damage to birds and shellfish and increasing truck and rail traffic. The Third Berth Project is expected to increase rail traffic to Roberts Bank from 18 trains a day to 21 trains a day, while truck traffic will increase from 1,800 trips a day to 2,400 trips a day.

The Port of Vancouver says it will pay $3 million to improve Highway 17, while the proposed $400-million South Fraser Perimeter Road, running east-west along the south side of the Fraser River from Port Kells to Deltaport, is expected to further relieve future truck traffic problems in the region.

The port expansion will take away resting and foraging areas for waterfowl and coastal seabirds, so the port proposes to add new sheltered foraging and resting areas for the birds.

Delta Mayor Lois Jackson said she's a "realist" about the port expansion, and expects it will likely proceed at some point.

"A lot of people think we should launch a full frontal attack and defeat the thing, but I'm not sure that is realistic," she said in an interview. "If a federal facility like this is going to go ahead, we just have to make sure that we end up with the best darn port in the world, the very best that science can give us."

DELTAPORT EXPANSION:

The container terminal expects to more than triple capacity by 2012 through a capital injection of more than $1 billion.

Total capital cost: $1.22 billion ($272 million for Third Berth project, opening 2008, and $750 million for Terminal 2 project, opening 2012.

Current capacity: 900,000 TEUs (twenty-foot equivalent units)

Added capacity: Third Berth project will bring capacity to 1.3 million TEUs. Terminal 2 project will increase capacity to more than three million TEUs.

Jobs: Third Berth expansion will create 640 person-years of employment during construction and 356 full-time equivalent employment positions during operations.

Government revenues: Third Berth expansion will increase annual property taxes at Roberts Bank by $2.2 million, rising from $6.3 million in 2004 to $8.5 million in 2009.

Source: Port of Vancouver, Vancouver Sun

New cranes 'proof' of trade growth: Port 'racing' to keep up with Chinese boom: Campbell
Joel Baglole
Vancouver Sun
27 April 2005

Premier Gordon Campbell pointed Tuesday to new state-of-the art container cranes purchased in Shanghai as proof of the explosive growth in trade between and B.C. and Asia.

"This is Canada's gateway to the Asia-Pacific world," Campbell said from the deck of a boat in the middle of English Bay, where the cranes are being modified so they will fit under the Lions Gate Bridge.

"These [cranes] will up our capacity to ship goods to the Asia-Pacific world," added Campbell, stressing that the port is racing to accommodate explosive trade growth with China, as well as other fast-growing Asian economies such as Japan and South Korea.

The cranes were purchased at a cost of $7 million apiece and each weighs 1,400 tonnes. Campbell said the cranes are part of the Liberal government's Gateway Strategy, which aims to expand and improve B.C.'s transportation corridors and enhance the province's trade flows.

Campbell said Tuesday his government is committed to spending a total of $3 billion over the coming 10 years to bolster highways, bridges and seaways across B.C. He added that the government's goal is to work with private sector partners to double the amount of container shipments passing through Vancouver's port within the next 15 years.

Two of the cranes will be located in Vancouver's port while a third crane has been sent to Deltaport.

The cranes will each be able to load or unload 25 shipping containers an hour. Vancouver's port has five other cranes. With the addition of the two new ones, the port will have the capacity to handle about 600,000 containers a year, said Norman Stark, chief executive officer of TSI Terminal Systems Inc., which operates the Vanterm container terminal and the Deltaport container terminal.

"These cranes are among the biggest in the world," Stark said.

The cranes could not have arrived at a better time, said Gordon Houston, chief executive officer of the Vancouver Port Authority, the government agency that operates the port.

"The growth in our port is stunning," Houston said Tuesday in an interview. "The faster we can unload the ships, the better," he added.

According to Houston, the volume of trade passing through Vancouver's port has risen 48 per cent in the past four years to $43 billion a year from $29 billion in 2001. There are currently 69,000 direct and indirect jobs tied to the city's port.

Asked to explain the rapid growth, Houston replied:

"China. Our resource products are being shipped to manufacturing centres in China, and then being shipped back to us as finished goods."

Last year, China surpassed Japan to become the Vancouver port's number-one trading partner. The amount of tonnage Vancouver's port shipped to and received back from China rose 57 per cent in 2004. Today, 21 per cent of all the tonnage of goods handled by Vancouver's port is connected to China, up from five per cent in 1997, said Houston, who noted that the port is forecast to handle 107 million tonnes of goods a year by 2020, up from 75 million tonnes a year currently.

"We need to improve our logistics chain and capacity" to keep up with the growth, he said.

Vancouver first, CPR chief pleads
Railways differ on port projects CN's Rupert plan said not a priority
Canadian Press
6 May 2005

CALGARY -- Efforts to expand Canada's West Coast shipping capacity should focus on turning Vancouver into a "mega-port" rather than enlarging the port of Prince Rupert, says the president of Canadian Pacific Railway Ltd.

Rob Ritchie told the railway's annual meeting yesterday that Vancouver provides the shortest and fastest routes between Canada and expanding Asian markets.

"We should not be distracted by imitators," said Ritchie. "The port of Vancouver is the real deal. It is the Pacific gateway for the present and the future."

Ritchie later said CP Rail believes a new container port in Prince Rupert should go ahead, just not at Vancouver's expense.

"Vancouver is a huge engine for the Canadian economy and it needs to be recognized as such," he said.

"And that's what's going to be the best for the Canadian industry and for jobs in British Columbia."

Prince Rupert is a deep-sea port in northwestern B.C., below the Alaskan Panhandle. Plans for a $170 million overhaul of the port were unveiled last week, in a move designed to lure some container ship traffic from Vancouver and congested ports on the U.S. coast.

Montreal-based Canadian National, Canada's largest railway and main CPR competitor, pledged $30 million for the Prince Rupert project. Some $60 million would come from the federal and B.C. governments.

CN has exclusive rail links to Prince Rupert, while both of Canada's main railways have access to the Vancouver port.

The Vancouver Port Authority reported last week that it moved $43 billion worth of goods in 2004, up 48 per cent from five years ago.

The port authority and its partners also said $1.4 billion is needed for expansion projects to more than double capacity in the next 15 years.

Last month, Canadian Pacific announced $160 million in track improvements between the Prairies and Vancouver to relieve bottlenecks. The work is expected to increase the railroad's capacity through Western Canada by 12 per cent, or 400 freight cars daily.

CPR and the Vancouver port also signed an agreement to work together on capacity development.

Ritchie said yesterday that CPR plans to soon increase its rolling stock of railcars and locomotives to match the increased line capacity and Vancouver port expansions.

Focus on Vancouver, CPR tells governments; Prince Rupert port expansion questioned
PATRICK BRETHOUR
6 May 2005
The Globe and Mail

CALGARY -- Vancouver is on its way to becoming a mega-port to rival Hong Kong this decade — so long as Prince Rupert to the north does not stymie its expansion, the head of Canadian Pacific Railway Ltd. warned yesterday.

“Dilution is no solution,” said Rob Ritchie, CPR's president and chief executive officer, speaking during the Calgary company's annual meeting yesterday. “We should not be distracted by imitators.”

Three weeks ago, the federal and provincial governments, along with Canadian National Railway Co., unveiled a funding package aimed at fashioning Prince Rupert into a major shipping gateway for Asian consumer goods. The federal government, British Columbia and CN each committed $30-million.

While CN uses both Vancouver and Prince Rupert, rival CPR's lines connect only to Vancouver.

Mr. Ritchie said Vancouver is already one of the most important ports in North America, but that it could soon become one of the most vital shipping hubs on the planet, in the same league as Hong Kong, Rotterdam or Long Beach, Calif. But for that ambition to be realized, governments cannot subsidize growth in Prince Rupert at the expense of Vancouver, Mr. Ritchie said.

Yesterday, Mr. Ritchie said CPR is not opposed to the already announced investments, but future government spending is a different matter. “We don't believe a huge amount of public money should go into Prince Rupert at the expense of Vancouver. We think Vancouver should get the same opportunities to grow with public funding. Because that would be money better spent,” he told reporters after the annual meeting.

Vancouver provides Pacific Rim importers and exporters the shortest and fastest routes to the B.C. Interior, Calgary, Edmonton and the U.S. Midwest, he added. And in transportation, “efficiency comes with density,” Mr. Ritchie said.

But CN rejected its rival's assertions, saying the growth in Asia-Pacific trade is steep enough that Prince Rupert and Vancouver can each benefit.

“Both of them will have a huge role to play,” said CN spokesman Jim Feeny.

He acknowledged that Prince Rupert, although a shorter trip by sea from Asia, is more distant from central North America.

However, Mr. Feeny said CN's railways running from Prince Rupert are not congested and with additional investments the capacity will grow still further.

Despite concerns over the fate of Vancouver, rising oil prices and currency fluctuations, Mr. Ritchie said CPR is experiencing strong growth.

Hedging programs, fuel surcharges and gains in energy efficiency have allowed CPR to avoid about 85 per cent of the impact of rising oil prices, said Fred Green, executive vice-president and chief operating officer.

With fuel prices on the rise, CPR has won some business from the trucking industry, but those gains have been limited so far, Mr. Green said.

Meanwhile, CPR increased its quarterly dividend yesterday to 15 cents a share, up from 13.25 cents.

The dividend is payable on July 25 to shareholders of record at the close of business on June 24.

From Choked Ports, Pricier Products
Backups at the nation's overburdened shipping centers mean higher costs for all
By Adam Aston in New York, with Michael Arndt in Chicago and Wendy Zellner in Dallas
9 May 2005
BusinessWeek

Dozens of container ships anchored for days outside the ports of Los Angeles, waiting to disgorge tons of toys. Freight trains snarled in Chicago's rail yards, delaying eastbound carloads of clothing. Idling tractor-trailers, stalled for hours outside Newark, N.J., trying to pick up thousands of flat-panel TVs.

These are scenes from last summer's peak shipping season, when America's overtaxed transport hubs choked on an unprecedented influx of imports for the coming Christmas season. Now it looks as if dire congestion is set to become an annual ritual. With maxed-out ports and insufficient road and rail capacity, the U.S. has little hope of opening the choke points in its transport network. Inbound containers this year are predicted to peak sooner, and the total will hit another record, up by 6.7% after surging by 16% in 2004, says Michael G. Fusillo, director of maritime research, at PIERS/Port Import Export Reporting Service. To this unprecedented volume, add high energy costs, and you get rising transport prices, longer shipping times, and fatter inventories. "We're at a turning point," says Robert E. Gallamore, director of Northwestern University's Transportation Center. After falling for the past decade, "logistics prices will rise for a while to come."

One obvious solution is bigger ports. Typically they can grow out, by annexing nearby land, or up, by stacking containers. At most of the nation's largest ports, stacking is already standard, and in many cases, cities have encroached onto once-remote port land -- leaving no room but the ocean to grow into. In effect, that's what happened last August and September in Los Angeles, when an early peak in shipping volumes caught the ports short on labor and caused a miles-long traffic jam at sea. The congestion turned huge freighters into "floating warehouses" for days on end, as David Lim, CEO of Neptune Orient Lines, said at an industry conference back in February.

Secondary ports can offer some relief, but they're not isolated from the traffic-jam problems. To get to the Atlantic Ocean, only smaller cargo ships can fit through the Panama Canal, and this route can add weeks to a journey. What's more, secondary ports tend to lack the high-capacity road and rail links that big transport centers demand.

Wal-Mart, for example, tries to avoid disruptions by shipping to nine major ports. More than half of its so-called direct imports -- rather than goods imported by its vendors -- go to East Coast and Gulf Coast facilities, says Christopher R. Easter, regional manager for direct import logistics at Wal-Mart Stores Inc. Last year, the Bentonville (Ark.) giant directly imported over $9 billion in merchandise from China alone.

As ports approach maximum capacity, costs multiply. Ship operators forced to hold their boats at sea are hitting end customers with surcharges. Ports are imposing new storage fees on containers left on the docks, and trucks are facing penalties for idling. "It means higher costs all around," says Joseph P. Magaddino, a transportation economist at California State University at Long Beach.

STALLED TRACKS

The pileup is compounded because trains and trucks can't haul the boxes out fast enough. In the past, ports had enough spare room to unload a whole ship, then dispatch the containers gradually. Today ships carry more than ever -- up to 3,400 tractor-trailers' worth of containers.

Since most containers leave by train, improving rail capacity would help. But that's difficult in the short term. "Railroads grow well if they do it slowly," says Robert Jankowitz, a rail analyst at Moody's Investors Service. "They can't handle sharp spikes in demand." Orders for both locomotives and additional cars are backlogged. And adding new track in port areas can take years. A private-public consortium in Los Angeles recently completed an 18-year effort to lower a 20-mile freight line into a trench so it would be uninterrupted by street crossings. The goal is to whisk containers away from the congested port areas to inland yards, where they can be sorted for their onward journeys. The cost: $2.4 billion, or $120 million per mile. Chicago is considering a similar $1.5 billion plan to untangle its freight yards, through which about one-third of the nation's rail freight passes.

Roads are also clogged, so trucks offer little hope for a short-run solution. A bigger problem: The industry has been short of drivers for years and is operating near full capacity. Independent owner-operators have been squeezed out by rising prices for insurance, tolls, and fuel, as well as federal limits on the number of hours they can spend behind the wheel. At bigger operators, turnover rates of 100% per year aren't unusual. To attract more drivers, Schneider National Inc. a $3.2 billion-a-year trucker in Green Bay, Wis., in February boosted drivers' average annual pay by $4,000. The move helped knock turnover down by 15%, and other players are following suit. All the same, truckers still earn less on average in real terms today than they did in the early 1990s. With rising salaries and stubbornly high fuel prices, "the industry is really being burdened with significant inflation," says Christopher B. Lofgren, Schneider's president and CEO.

For shippers, these rising costs are a big reversal. Since 1987 overall transport and warehousing costs have fallen from around 3.2% of gross domestic product to 2.9% in 2003. Thanks to transport deregulation and the push for "just in time" operations, the entire economy got leaner starting in the late 1970s, when trucking deregulation began, says Northwestern's Gallamore. But during the next decade, he predicts, congestion will push costs back up. And even though economists will argue that this is just what the capital-starved transport sector needs, the shippers, retailers, and factories will have to get used to holding a lot more inventory. Just-in-time may become a lost cause.

Carriers all at sea with small gains wrung from cynical shippers
6 May 2005
South China Morning Post

The annual liner ritual on the Pacific known as contract season all but drew to a close this week with the carriers eking out small advances in freight rates to the west coast of North America and as much as US$300 more per container to east coast ports.

The lines convinced cargo owners that their operational costs had grown since last year and that the massive number of vessels on order, which hangs over the industry's collective heads like the sword of Damocles, was actually a good thing given that port congestion was not allowing them to utilise the capacity fully.

The arguments were seen as a stretch by shippers and few bought the whole story.

With ample evidence that liner costs such as transit fees, storage and inland transport would rise this contract year (May to April), the biggest cargo owners reportedly conceded small increases even though more than 4.1 million 20-foot equivalent units (teu) in capacity, or 56 per cent of the existing fleet, await at the world's biggest shipyards.

"They [the carriers] put on a brave face but, behind closed doors, there was a lot of talk about capacity outstripping demand," an executive in charge of the Pacific trades for a global forwarder told Below Deck. "They'll make some good money this year, perhaps not as good as last year. But, next year, capacity will be a problem."

Reports vary, but it appears the transpacific lines secured US$75 to US$120 per 40-foot equivalent unit (feu) on the eastbound lane for this year, or 25 per cent to 40 per cent of their US$285 target.

To the east coast - where rises in Panama Canal transit fees and inland US trucking and rail charges made their higher costs more visible - the carriers may have achieved up to 70 per cent of the targeted US$430 per teu.

On a larger scale, they secured an average comparative raise of 5 per cent on the US$2,000 it cost to ship a 40-foot box to the west coast last year, and up to 9 per cent on the US$3,200 freight rate to the east coast.

What does all this mean to the average family in Mongkok or Wichita, Kansas? Not much. But it is big news to shareholders in the listed firms that transport their goods to market.

It is generally accepted that the transport cost of getting goods to market represents 2 per cent to 3 per cent of the products' retail price on a shelf for best-practice companies. So, if you are Fred Smith in Wichita buying a China-made toaster at Wal-Mart, this year's rise in freight rates may hold little sway on whether you buy the appliance.

Nevertheless, the carriers' gains were hard-fought. The "majors" - the Wal-Marts and Home Depots of this world - negotiated into the 11th hour.

"They were all waiting for the last moment. It was liars' poker," said a sales executive from a dominant line on the Pacific.

The negotiations this year were protracted due to several factors, not least of which were requests for greater visibility of delivery schedules for new vessels.

"There's been a lot of communication regarding our capacity injections into the trade," a Hong Kong-based executive from another major line said. "Last year, it was 100 per cent known out front and we were more compelling."

Shippers also waited to see what impact congestion at the Los Angeles-Long Beach port complex would have this year; the harbour queues for California's most coveted berths shrank as talks progressed, but landside bottlenecks continued to delay shipments even in the slow season.

The intensity of this year's ritual again led executives on both sides of the table to question why this is an annual event.

With margins on products and services continually squeezed by the need to tighten supply chains, cost certainty has become critical; it is a goal not aided on either the cost or revenue side by fluctuating freight rates.

There is growing acceptance that an annual shipper-shipping line relationship consisting of 10 months of lubricated camaraderie and two months of cut-throat negotiations benefits neither side. In fact, it breeds earnings volatility.

Longer-term contracts could smooth out the notorious boom and bust cycles of the industry and allow shippers to better utilise both assets and capital.

Until that level of commitment to partnerships is achieved, the container shipping industry is likely to remain all at sea from an investor's point of view.

CP urges Canada to support Vancouver port growth
By Jeffrey Jones Thu May 5, 2:42 PM ET

CALGARY, Alberta (Reuters) - Canada should concentrate on expanding Vancouver's port to put it on the same scale as the world's biggest facilities, not "dilute" the opportunity with major investments in another West Coast port, the head of the country's No. 2 railway said on Thursday.

With its access to both Asia and the U.S. Midwest, the Port of Vancouver could rival Rotterdam and Hong Kong if large sums of taxpayer dollars were not funneled into the expansion of the port at Prince Rupert, British Columbia, Rob Ritchie, chief executive of Canadian Pacific Railway said.

CP Rail's own expansion is predicated on booming trade with Asian countries through the Pacific port of Vancouver. The first C$160 million ($128 million) phase of that initiative began last month.

Prince Rupert is a much smaller Pacific Ocean port, 750 km (470 miles) northwest of Vancouver.

"We don't believe that a huge amount of public money should go into Prince Rupert at the expense of Vancouver," Ritchie told reporters after his company's annual meeting.

"We think Vancouver should get the same opportunities to grow with public funding that the Port of Prince Rupert has, because that would be money better spent."

The federal and British Columbia's governments said in April they will each spend C$30 million to help build a new container-handling facility at Prince Rupert. The facility is slated to begin operations in early 2007.

Proponents point out that Prince Rupert, which now handles limited volumes of coal, grain and other bulk commodities, is a day's sailing coaster to Asia than Vancouver is.

But CP Rail executives countered by saying Vancouver is 640 km (400 miles) closer to the Chicago transport hub via its network, and 400 km (250 miles) closer to Toronto.

"We think there's a lot of growth out there so other ports will have opportunities, but they should not be at the expense of Vancouver," Ritchie said.

His top rival, Canadian National Railway Co., is the only railway with lines to Prince Rupert, while Vancouver and the neighboring Fraser River Port is served by CN, CP Rail and U.S.-based Burlington Northern Santa Fe Corp.

CP Rail is now twinning tracks and adding sidings between Saskatchewan and Vancouver in its expansion's first phase, which will add 12 percent to its Western Canadian capacity.

It approved the project, aimed at curing heavy traffic congestion due to double-digit increases in trade with Asian countries, after Ottawa served notice that rival operators will not be given legislated access to its tracks.

The full expansion, which could cost C$500 million to C$600 million over several years, will be coupled with increases in capacity at Vancouver, Ritchie said.

"We're not going to be a 'Field of Dreams' -- 'Build it and they will come' -- but we can match the demands for containers and bulk at the Port of Vancouver on our rail line, and the port can match it," he said.

Shares in CP Rail were off 5 Canadian cents at C$45.09 on the Toronto Stock Exchange on Thursday.

(With reporting by Alan Dowd)

($1=$1.25 Canadian)

Hopefully they dont start using prince rupert there is only one two lane highway in and out. Plus they would have to develop quite a bit to handle all the new incoming cargo. Best bet would be to improve Vancouver.

^ Interesting that there is so much talk about Prince Rupert lately :

Forgotten port finds hope of life in northern exposure
Asia trade boom offers Canadian town chance to realise founder's vision
12 May 2005
Financial Times

It is easy to understand why Prince Rupert, near British Columbia's border with Alaska, has a depressing nickname.

The town is known as Hays' Orphan - after Charles Hays, the railway executive who founded the town in 1906, intending it to become a leading seaport for trade between North America and Asia.

By the time Hays' railway - the Grand Trunk Pacific - was completed in 1914, Hays and his grand plans had been lost in the Titanic's sinking in 1912. The railway later collapsed into insolvency and, the occasional boom from fishing or paper pulp production aside, the town never recovered.

But now there is hope for Prince Rupert. Booming trade with Asia has overwhelmed many of North America's west coast ports, forcing shipping lines to look for new harbours.

On April 15, exactly 93 years after Hays drowned, Prince Rupert's port authority announced it had raised CDollars 60m (Pounds 25.7m) in funding, half from British Columbia and half from Canada's federal government, for the first, CDollars 170m phase of a container terminal. The first container should be handled by early in 2007.

The facility will eventually be able to handle each year 2m 20ft equivalent units (TEUs) of containers, a standard measure of capacity, bound to and from east Asia. Vancouver, Canada's busiest container port, handled only 1.66m TEUs last year.

Prince Rupert has started to attract the interest of shipping lines since the summer when neighbouring ports of Los Angeles and Long Beach struggled to handle the huge volumes of cargo generated by China's trade boom.

At times, vessels were forced to wait up to a week before unloading at the ports, which handle more than 40 per cent of US container trade.

The difficulties arose partly as a result of the ports' failure to predict last year's 14 per cent jump in trade with Asia. But there are also longer-term problems with the ports' inefficient working practices and limits on the capacity of railways and truck companies to move containers onwards.

Shipping lines are hastily introducing services to the less-congested US east coast via the Panama or even Suez canals. Less busy west coast ports, such as Seattle, are also picking up business.

In March Tadamasa Ishida, executive vice-president of NYK Logistics, a Japanese shipping operator, backed Prince Rupert as a possible alternative, saying NYK was examining it for US-bound imports. Don Krusel, chief executive of Prince Rupert port authority, hints that others have shown interest.

He says: "We're sitting in the far corner of North America on a very small population base, so we really had to beat the drums here to get anyone to look at this idea. Because of all these (congestion) challenges, at least now they are willing to look."

At the heart of Prince Rupert's effort is its location. Because ships use Great Circle routes, which arc towards the north pole, Prince Rupert is 19 hours' sailing time closer to Asia than Los Angeles.

The project also benefits from the relative failure of Hays' railway. CN Rail, which now owns Hays' line and has agreed to spend CDollars 30m upgrading it, says the line could handle more than twice its current traffic. Other lines from North America's West Coast to the Midwest are already heavily congested.

The planned container terminal site still enjoys the deep, ice-free water that convinced Hays it was a natural port. Maher Terminals, the biggest container terminal operator in the port of New York/New Jersey, has agreed to invest in equipping and operating the terminal.

Yet success is not assured. Prince Rupert's population is too small to attract direct cargo. Mr Krusel says this means Prince Rupert will be able to put arriving containers straight on to a train without separating local cargo. Conventional shipping wisdom, nevertheless, says container ports need a big consumer centre to guarantee traffic.

Shipping lines using Prince Rupert will also be prevented from using a common method to cover the costs of shipping empty containers back to Asia - renting them out for domestic loads. The region's few consumers generate too little demand.

Instead, Mr Krusel hopes the Canadian exporters will fill Asia-bound empty containers with speciality grains, timber or wood pulp.

One sceptical shipping line dismisses the project as too remote, too dependent on one railway and too risky.

But Mr Krusel and others in Prince Rupert insist these doubts will disappear when shipping lines experience their congestion-free route to the Midwest -alegacy vindicating Charles Hays' vision.

Clogged transport arteries strain US
Under-investment and labour shortages add to pressure on a creaking distribution network
By ANDREW WARD
18 May 2005
Financial Times

To the casual observer, the port of Long Beach in southern California looks the perfect example of global supply chains in action. Towering cranes pluck containers off cargo ships, while trucks and trains stream out of the port loaded with goods destined for points across the US.

But take a closer look and the strains in America's creaking transport infrastructure become evident. Out to sea, several anchored ships are waiting for space to dock. Inland, trucks and trains become snarled on the congested highways and railroads of Los Angeles when they leave the port.

That was the scene in Long Beach for much of last year, as America's busiest port struggled to cope with a deluge of imports from Asia. The West Coast suffered the worst bottlenecks, but the congestion spread throughout the US transport system, disrupting corporate supply chains and inflating freight costs.

Now, with the economy continuing to grow, business leaders are predicting the chaos will be repeated during this year's peak shipping season between July and Christmas. They warn that without massive investment in infrastructure, the gridlock will persist for years.

"We have seen nothing to suggest there is going to be a fundamental improvement this year," says Mark Yeager, president of Hub Group, the freight manager. "Unless there is a sharp economic slowdown, the freight market is going to be tested to its limit again."

Executives from several of North America's largest transportation groups told a Bear Stearns conference in New York last week that, despite this year's more moderate rate of economic growth, many US ports and freight carriers were still operating at or near capacity. And they warned that rates continued to rise in response to tight supply, further increasing transportation costs already inflated by record fuel prices.

"Transportation will continue to be constrained," says Robert Knight, chief financial officer of Union Pacific, the largest US railroad operator. "The pricing dynamic is stronger than it has ever been."

The transportation crisis was sparked by the sharp increase in trade as the US economy recovered from its 2001 recession and rapid growth in imports as manufacturers outsourced production to low-cost countries, such as China.

There are two main reasons why the system failed to cope: first, under-investment in an ageing infrastructure not designed for the demands of fast-moving, global supply chains; second, an acute manpower shortage that has left truck companies, railroad operators and ports without enough crew.

Critics complain that truck and railroad operators have failed to increase capital spending enough since the steep cuts made during the last recession. Railroad executives responded at last week's conference by trumpeting a range of measures to ease congestion, including increased locomotive orders, double-tracking of single-track lines and expansion of freight terminals.

But Toby Kolstad, who runs Rail Theory Forecasts, a consultancy, says the investments are not enough to unclog the network. He calculates that the four biggest US railroad companies - Union Pacific, CSX, Norfolk Southern and Burlington Northern Santa Fe (BNSF) - have increased capital expenditure this year by just 1 per cent, despite enjoying average revenue growth of 20 per cent and profits growth of 40 per cent last year.

Railroad and truck operators, scarred by years of boom-to-boost cycles, are reluctant to increase capacity too sharply for fear of sending prices into decline. "We are very willing to invest," says Thomas Hund, chief financial officer of BNSF. "But the industry is insistent on earning adequate returns."

Expansion of ports is difficult because most are locked in urban areas with little room for growth. Critics blame the powerful dock workers' unions of limiting capacity by resisting the latest container handling technology and restricting hours of operation.

More voluntary overnight and weekend shifts are planned for this year's peak season in the Californian ports, and railroad operators are expanding dockside terminals. But with shipments into Long Beach and Los Angeles forecast to grow nearly 14 per cent this year over the record levels of 2004, more congestion is a near-certainty.

Solving the second main cause of congestion - labour shortages - might appear more straightforward. Railroads and ports have hired thousands more workers this year and truck companies have increased wages in a bid to attract and retain drivers. But quality of life is at least as big a factor as pay, with people balking at the long periods away from home.

Paul Bergant, chief marketing officer of JB Hunt, the trucking company, says solving the transportation crisis should be a national priority.

"The freight system is the circulatory system of our economy," he says. "And we all know what happens when you clog up an artery."

Chinese see Prince Rupert as key to clearing West Coast port clogs
GEOFFREY YORK
19 May 2005
The Globe and Mail

BEIJING -- Prince Rupert might be a remote northern outpost of just 13,000 inhabitants, but the small British Columbia town is beginning to gain fame in China's business community.

A newly planned container port in Prince Rupert could be the salvation for frustrated Chinese exporters who are trying to ship their goods quickly into crucial North American markets.

Traditional ports in California are choked with traffic from China's booming export industries, and even Vancouver's port is becoming congested. Faced with delays and uncertainties, Asian shippers are enthusiastic about Prince Rupert, where a $170-million container port is due to open in 2007.

Just a few weeks after the port's financing was confirmed by the federal and provincial governments, Chinese manufacturers and shipping companies are already clamouring to know when the port can open.

“If we had cranes there today, we'd be loading and unloading ships already,” said James Foote, executive vice-president of sales and marketing for Canadian National Railway Co., which is contributing $30-million to the first phase of the Prince Rupert port project.

Mr. Foote has been meeting Chinese business leaders in Beijing, Shanghai and Hong Kong over the past week.

“There is enormous interest in the port of Prince Rupert,” he said in an interview in Beijing.

“They are very keen on it. The No. 1 question I'm getting is, ‘When does it open? Can't you get it open sooner? Can't you get the cranes faster?'”

Some shipping companies are even asking whether they can unload cargo at Prince Rupert with cranes aboard their own ships. (The answer is no.) Prince Rupert is the closest North American port for Chinese shippers, since ships normally take a northern route across the Pacific Ocean. From there, cargo can be sent on CN's rail network to Chicago, Memphis and other key distribution points in the American Midwest. The Montreal-based company is investing $125-million in locomotives and rail cars to serve Prince Rupert.

Exploiting the woes of the overcrowded U.S. ports, Canadian transport executives are touring Asia this month to drum up interest in Canadian routes into the North American market.

In addition to the tour by the CN executives, Halifax port officials are also visiting China, Japan and South Korea this week. Asian traffic at the Port of Halifax has increased by 20 per cent over the past five years. Several major retail chains have asked shipping companies to travel to Halifax, through the Panama Canal, to avoid the traffic congestion at the West Coast ports.

There is “enormous potential” for growth at Halifax's port to serve Chinese and other Asian cargo, despite competition from East Coast ports in the United States, Mr. Foote said.

“There is a lot of available capacity at Halifax. It's a question of who will be aggressive enough to make this happen. The Chinese are interested in any port that can handle their products. They're looking more and more at East Coast routes, through the Panama Canal or even the Suez Canal.”

Gridlock at the California ports of Los Angeles and Long Beach forced more than 100 ships with $4-billion (U.S.) in cargo to be diverted to other ports last year.

Many ships had to anchor at sea for up to 10 days, waiting to enter the ports. Shipping volume at the two ports is forecast to rise a further 13 per cent this year, provoking more worries about delays.

“There's an enormous buzz in China about the congestion at California, Seattle and Tacoma,” Mr. Foote said. “We definitely see this as an opportunity for us.”

But he is also struggling to reassure the Chinese that the port of Vancouver will not be overwhelmed by similar congestion. Cargo at Vancouver increased by 11 per cent last year — the biggest jump in a decade. Bottlenecks and delays often occur at the port, although CN denies that its rail network is to blame. A major expansion of the port is being planned.

“Don't be afraid to come to this market,” Mr. Foote has been telling the Chinese. “CN doesn't have a capacity problem.”

While Chinese manufactured goods are pouring into Canadian ports at an increasing rate, Canadian commodities are flowing in the other direction. Coal, which had virtually disappeared as an export commodity, rebounded to generate $40-million in transport revenue for CN last year. That amount should double this year and could double again next year, Mr. Foote said.

LA-LB to Curb Free Time
3 June 2005
Traffic World

With the peak-shipping season drawing closer, the ports of Long Beach and Los Angeles are preparing to reduce free storage time to reduce congestion at marine terminals. Both ports intend to implement the new policy July 1.

The Long Beach Harbor Commission last month gave preliminary approval for a reduction in the time import and export containers can be stored on the docks for free. Also, Long Beach will change the method for calculating free time. Los Angeles was set to address the issues at its harbor commission meeting.

Both ports will reduce free time for storing import containers to four business days from five days. Free storage time for export containers will be reduced to six business days from seven.

Also, the ports will calculate the beginning of free time from the day after a container is removed from a ship rather than after the entire vessel has been unloaded. With today's 8,000-TEU vessels taking three to five days to unload, those containers unloaded first receive as many as 10 days' free storage time.

Financial Times
May 23, 2005 Monday
Poor southern neighbour could challenge US might
It would take hefty investment and patience but a new port in Baja could yield benefits on both sides of the border

The little container port at Ensenada, near the top of Mexico's Baja California peninsula, does not look like a serious challenger to the enormous ports of Los Angeles and Long Beach.

With a single berth for large ships and two quay cranes, in 2004 it handled only around 50,000 20 foot equivalent units (TEUs) of containers, against more than 13m at the two giant ports 200 miles to the north.

However, terminal operators at the southern Californian ports have been taking Mexican ports' prospects far more seriously since last year. Mexico was a significant beneficiary of the crisis at the southern Californian ports when labour shortages and other problems saw scores of ships waiting days to load and unload.

According to the Marine Exchange of Southern California, the Mexican port of Manzanillo was one of the biggest beneficiaries outside the US of diverted ships.

Those diversions could turn into a regular flow of traffic via Mexico if Hutchison Port Holdings, which operates Ensenada International Terminal, presses ahead with a plan to develop a container port in Baja California.

Hutchison is one of two big international container terminal operators in Mexico, alongside Seattle based SSA Marine, which has five sites in Mexico. Hutchison's proposed project is one of many alternative routes for cargo into the US to have gained attention following last year's problems at Los Angeles and Long Beach, which together handle more than 40 per cent of US containerised cargo.

Services from Asia to the US east coast via both the Panama and Suez Canals are increasing. Many services are also diverting to the US Pacific north-west, where the twin ports of Seattle and Tacoma are seeing sharply growing traffic. Canada's port of Prince Rupert is also set to build a container port to capture some of the cargo flow.

Yet according to Mike Power, Hutchison's director for Mexico, the main role of the company's existing ports - at Ensenada, Manzanillo and Lazaro Cardenas on the Pacific coast, and Veracruz on the Gulf of Mexico - remains serving Mexico's 106m population. The highest-capacity existing Pacific ports at Manzanillo and Lazaro Cardenas are at a geographic disadvantage in serving US markets, he adds. Because ships cross oceans on routes which arc towards the north and south poles, ships coming from Asia need an extra two-and-a-half days' sailing to reach central Mexico compared with southern California.

Better-positioned Ensenada last year gained little extra traffic because of its small capacity and because it could then handle only small ships - a problem since alleviated by dredging. Hutchison's existing Mexican ports might, Mr Power says, win some US bound cargo coming from South America.

They might also have a role handling what Mr Power calls just-in-case cargo - US-bound cargo diverted to Mexican ports during the peak shipping season in case it is caught up in congestion.

Ensenada is also capturing from Los Angeles/Long Beach an increasing proportion of traffic bound for the maquiladora foreign owned or duty relieved factories along the Mexico-US border, which were traditionally served by the US ports.

But Neil Davidson, container ports analyst for London based Drewry Shipping Consultants, says there are questions over the ability of Mexico's road and rail systems to handle significant US-bound traffic. "You would have to spend a lot of money on Mexican railroads to be able to make them really competitive," he says.

Tighter border security could also present problems - although Hutchison and SSA Marine are both efficient operators.

Mr Power says Hutchison is looking at three sites, although most publicity has focused on Punta Colonet, south of Ensenada. The port would benefit from the working practices common at Hutchison's worldwide ports, which are far more efficient than the antiquated methods of the US west coast. However, it would require Union Pacific, the US railroad, to build a railway to the new port at least 100 miles from a junction in Arizona, over the steep hills of Baja California's coast. There would also have to be improvements to the often rudimentary roads. Such work is likely to take at least 10 years - and John Meredith, Hutchison Ports' chief executive, stresses that the plan is currently only a feasibility study.

Manny Aschemeyer, executive director of the Marine Exchange of Southern California, which monitors vessel movements, says that by the time a new port opens Los Angeles and Long Beach would be under pressure from handling a projected 20m TEUs annually. A new Mexican port would be a welcome relief valve.

Los Angeles & Long Beach : Railways rally to avoid another port meltdown
4 July 2005
Lloyd's List

LAST year’s peak season meltdown in Los Angeles and Long Beach, which together account for 40% of the import containers entering the US, was popularly blamed on an early retirement programme at Union Pacific, one of two railways serving the ports.

A change in federal law meant that rail workers aged 60 or higher, or with 30 years of service under their belts, could opt to retire. Many people took advantage of this rule on the eve of the peak season, leaving the company short-handed as ships started arriving in droves.

The transport chain never recovered from the initial blow, port officials claimed as cargo started piling up.

The situation this year will be different, the two railways serving southern California have claimed.

Union Pacific claims to have taken on 5,500 people for train service last year and says it is still hiring. The other company, BNSF, says it has added 1,500 people to its workforce.

Both operators claim to have addressed the issue of insufficient locomotives, with Union Pacific having added 700 and BNSF 200.

They have also invested time and money in double-stack platforms and on infrastructure issues such as double-tracking access lines so that loaded trains do not have to wait for trains going the other way.

These measures may indeed prevent a repeat of last year’s peak season fiasco. However, port aficionados in southern California agree that the railway network serving the region is a somewhat strange animal.

Trains offer the perfect solution to congestion as well as pollution, as they represent a direct route for containers out of Los Angeles or Long Beach without involving trucks. The Alameda Corridor has been visualised with this in mind and now accounts for about 18% of the total containers moving through the ports.

However, there are bottlenecks. Some on-dock tracks in Los Angeles and Long Beach are not long enough to accommodate trains of 5,000 to 8,000 ft, a fact that may come back to bite BNSF following its decision to wait for some trains to reach 7,500 ft before allowing them to leave.

The latter factor, however, goes to the heart of another issue that concerns the port.

Once a train leaves the Alameda Corridor and comes on to the mainline track it becomes a long-distance train, which ideally ought to have a common destination for all wagons.

BNSF’s decision to send longer trains out of the ports is dictated by this operational reality.

Long Beach sees 58% rise in February

http://www.tdctrade.com/shippers/img/vol28_3.jpg
Shippers Today, Hong Kong Trade Development Council
May / June 2005

In another sign of the year-round strength of Asian imports, shipping terminals at the Port of Long Beach reported a 58.2% jump in total container shipments in February, compared with the same month a year ago.

The monthly percentage increase was the Port's biggest in at least 17 years. In the past, imports peaked during the summer and fall because of heavy Christmas shipments of clothing and toys, then dropped sharply during the winter. Not this year.

February's import gains might have been even greater, but the Chinese lunar New Year festivities beginning Feb. 9 slowed shipments arriving in Long Beach at the end of the month. In 2004, the lunar New Year was Jan. 22, which slowed shipments arriving in Long Beach at the beginning of February.

The number of cargo containers shipped through Long Beach in February climbed to the equivalent of 497,925 TEU, the Port's best February ever.

With Chinese manufacturers now producing such a broad range of products, imports rose 62.5% to 250,245 TEU Exports increased 18.1% to 90,867 TEU. The number of empties, nearly all headed overseas, leaped 87.1% to 156,813 TEU.

The Pacific Maritime Association, the group that negotiates and oversees the labor agreements with the International Longshore and Warehouse Union, has projected that West Coast ports will see a 13.67% increase in cargo in 2005.

Meanwhile, Orient Overseas Container Line's newest 8,000TEU vessel, the OOCL Atlanta, made its maiden call on March 22 at Long Beach Container Terminal's Pier F facility.

The Atlanta is the fourth 8,000TEU vessel deployed on OOCL's Super Shuttle Express (SSX) service between Long Beach and the Far East. In May, OOCL will deploy a fifth 8,000-TEU vessel on the service, making LBCT the first Port of Long Beach container terminal to have a service made up of all 8,000TEU vessels.

In all, 14 different 8,000TEU ships have called in Long Beach since 2003, making a total of 52 calls at the Port. Others in Long Beach's mega-ships club include China Shipping Container Line, China Ocean Shipping Co., CMA CGM and Mediterranean Shipping Co.

Key U.S. ports in West extend hours: Imports surge
Andrew Ward
Financial Times
25 July 2005

Located next to each other in San Pedro Bay, Calif., the ports of Los Angeles and Long Beach are arguably the world's most important trade gateways. They receive about 40% of all cargo shipped into the United states and 80% of imports from Asia.

Yet, despite their central role in the global economy, the ports have traditionally opened for business only between 8 a.m. and 5 p.m. on weekdays. Any trucks arriving after the gates closed each afternoon had to wait until the next morning to deliver or pick up goods.

That changed on Saturday, when the ports introduced regular night and weekend shifts, more than doubling the time their gates are open to trucks each week.

The step is a breakthrough in efforts to make the two ports -- known for their powerful unions and rigid labour practices -- more flexible and efficient.

Limited opening hours, together with a surge in imports from China, were among the causes of severe congestion at the ports last year, with ships left offshore for days waiting for cargo backlogs to clear. The bottlenecks caused delays throughout the U.S. freight transport system, leaving some retailers and manufacturers short of goods.

Art Wong, spokesman for the port of Long Beach, says extended opening hours should help prevent a repeat of last year's congestion. In addition to increasing the ports' cargo-handling capacity, night-time and weekend shifts will also relieve stress on surrounding roads and railways during peak hours.

Under the new scheme, called OffPeak, gates will stay open until 3 a.m. from Monday to Thursday and during Saturday daytime.

A surcharge of US$40 to US$80 will be levied on containers leaving the ports during peak hours to encourage use of the extended opening.

Dock workers, whose strike in 2002 brought West Coast ports to a standstill, have cautiously accepted OffPeak because of the jobs it will create and the realization that increasing cargo volumes made the change unavoidable.

Bruce Wargo, president of PierPass, the organization set up to administer the scheme, says the aim is for 20% of cargo to be moved off-peak within a year, reaching at least 40% by the third year.

OffPeak is one of several measures to alleviate congestion. The Pacific Maritime Association, which oversees port employment, has hired thousands of additional workers.

The railways that serve the ports have also tackled labour shortages.

Last year Los Angeles and Long Beach were surprised by the pace of growth in imports from Asia, with container traffic up nearly 9%. Numbers have risen by a further 5% so far this year but the ports are better prepared.

Port users are also changing by spreading shipments more evenly, easing pressure in the peak months close to Christmas. "Instead of spikes and troughs, we're seeing cargo volume smooth out -- but at a very high level," says Theresa Adams Lopez at the Port of Los Angeles.

Meanwhile, importers are diversifying their entry points to reduce reliance on Los Angeles and Long Beach.

Hong Kong ignores fast track
Mexican ports along the Pacific coast can give quick access to key US markets such as Texas, Chicago and New York
Michael Taylor
16 September 2005
South China Morning Post

BUSINESSMEN IN Hong Kong have been overlooking Mexico's potential for far too long. While many firms in other Asian economies have long been exploiting the country's lengthy border with the United States, Hong Kong's investment in the country is confined to a handful of small and medium-sized enterprises, according to Mario Leal, Consul-General of Mexico.

The fastest way to the world's largest economy was through Mexico, he said. With container ports at Ensenada, Manzanillo, Mazatlan and Lazaro Cardenas along the Pacific coast, the country offers closer access to many parts of the United States than the major US West Coast ports at Long Beach, Los Angeles, Portland, Oakland and Seattle.

"Mazatlan and Lazaro Cardenas are the most convenient, with direct rail links to Texas," he said.

"Ships sometimes have to wait five to 10 days at the ports in Long Beach and Los Angeles because of the congestion. It would be more convenient for shippers to use one of these Mexican ports, which give easy access to such US markets as Texas, Chicago and New York.

"I am convinced that more Hong Kong companies should establish operations in Mexico," Mr Leal said.

"We believe it would be good if companies here and in the mainland did the same thing that Japanese and Korean companies are doing. By setting up factories along the border, they are able to serve the US market better. It has been good for them and it has been good for us."

As Latin America's largest economy, Mexico has established free trade agreements with 33 countries around the world. Since the North American Free Trade Agreement was signed with the US and Canada in 1994, annual exports have grown from US$35 billion to almost six times that.

"We are very dependant on the US market, which accounts for 90 per cent of our exports," Mr Leal said. "One of our goals is to attract more people from Hong Kong and China to Mexico by making them aware of how beautiful the country is and what it has to offer them. We believe it is through cultural friendship that people can get closer and afterwards they can do business together as well."

A key step towards boosting ties between Mexico and Hong Kong has been a branding campaign designed to boost the country's profile in the city. Launched eight years ago, Mexican September brings an array of artists, musicians and dancers to the city each year, with venues ranging from the Hong Kong Cultural Centre to Sha Tin's New Town Plaza and the Fringe Club in Lan Kwai Fong.

A Latin American festival, with the participation of countries such as Argentina, Chile, Colombia, Cuba, Peru and Venezuela, grew out of the celebration last year. Following the success of a Mexican beach party at last year's festival, the Leisure and Cultural Services Department decided to launch a Latin Passion Festival.

The two events will run concurrently from October 20 to November 20. Included will be Latin dance classes, salsa parties, theatre productions adapted from Latin American literature, and a fiesta in Victoria Park.

Ties between Mexico and Hong Kong were strengthened following the signing of a visa-free agreement last year. They are set to be further enhanced when a code-sharing agreement between Cathay Pacific and Mexicana comes into effect, making direct air links between the two markets possible. This will facilitate travel to Mexico and other Latin American destinations as well.

"My colleagues in Latin America tell me it would be great for them," Mr Leal said. "They could bypass customs in the United States, connecting in Mexico to flights going direct to Santiago, Chile, or Buenos Aires, Argentina."

Billions Needed for California Ports
BILL MONGELLUZZO - JOURNAL OF COMMERCE
17 November 2005

ANAHEIM, Calif. -- The economic health of the U.S. depends on billions of dollars of investment needed to expand Southern California's port and intermodal capacity, speakers at an annual transportation conference said.

The Los Angeles-Long Beach port complex handles 34 percent of the U.S. container trade, including 43 percent of all containerized imports.

Despite a significant diversion of cargo this year to Oakland, Seattle and Tacoma, and the growth of all-water services from Asia to the East Coast, Southern California will remain the dominant gateway for the growing Asia trade, said transportation consultant Gill V. Hicks, the former general manager of the region's Alameda Corridor Transportation Authority.

Hicks was among speakers at the annual meeting Wednesday of the National Industrial Transportation League, the Intermodal Association of North America and the Transportation Intermediaries Association.

He said existing Southern California ports, rail lines and highways can accommodate projected growth in cargo over the next three or four years through operational improvements, but that eventually, more infrastructure will be needed.

Robert C. Leachman, professor of industrial engineering and operations research at the University of California-Berkeley, said that many rail lines in the region must be double- or triple-tracked, and that some three-track segments will require yet another line to handle projected traffic.

These projects also involve grade separations between tracks and streets, an ongoing project known as the Alameda Corridor East. Leachman also said BNSF Railway and Union Pacific Railroad must expand their near-dock rail transfer capacity. Union Pacific, the nation's largest rail carrier wants to double the size of its existing Intermodal Container Transfer Facility, and BNSF is seeking permission to build a 1 million-lift per-year hub adjacent to the ICTF.

Even if the railroads complete these projects, as planned, by 2009, intermodal cargo volume will exceed lift capacity in the region just one year later, Leachman said. Other costly projects include truck lanes along the I-710, 60 and 15 freeways that serve dozens of distribution centers; a taller bridge in Long Beach harbor to clear 8,000-TEU vessels, and expansion of the Terminal Island freeway to serve the near-dock rail yards.

But work has yet to begin on many of these projects, and Leachman said the public and private sectors must begin immediately to address the multi-billion dollar funding issues. "We're spending less than half of what we should to keep up with growth," he said.

China syndrome aids Port of Halifax
Shipments of Chinese goods via Suez Canal are boosting business
PETER MOREIRA
SPECIAL TO THE GLOBE AND MAIL
12 December 2005
The Globe and Mail

HALIFAX -- The Port of Halifax is looking at a banner year and a brighter future for the most unlikely of reasons: Chinese goods have started arriving in North America by way of the Suez Canal.

The prospect of record volumes this year and next is something Karen Oldfield, chief executive officer of the Halifax Port Authority, could hardly have envisaged early in the year, when Danish shipping line Maersk Sealand, one of the port's biggest customers, stopped calling.

Halifax is now starting to capture some of the China trade for the first time since the boom began in the early 1990s. Port executives and analysts say this growth is being abetted by retailers and importers looking for alternatives to congested West Coast ports and a global container fleet that is increasing the number of large container ships.

“For the first time in many, many years, the stars and the moon are lining up to favour the Port of Halifax,” said Ms. Oldfield, sitting in her office looking out on George's Island in the middle of Halifax Harbour.

Container traffic at the Port of Halifax has been stagnant in recent years, while Vancouver and other West Coast ports have undergone double-digit annual growth. Halifax's traffic looked certain to decline last February when Maersk Sealand, part of A.P. Moller-Maersk Group, which had used Halifax since the early 1980s, announced it would stop calling at the port as of May.

The gloomy outlook began to brighten in June when a group of retailers including Sears Canada Inc., Sony of Canada Ltd., and Reitmans (Canada) Ltd. said they would begin to use the port. They planned to ship goods from Southeast Asia and the Indian subcontinent that were destined for Central and Eastern Canada to avoid sole dependence on Vancouver.

Then in August, the port learned that China Shipping (North America) Holding Co. Ltd., a Chinese carrier, would include Halifax in its around-the-world service. Those vessels began calling in October.

A month later, Maersk announced it would return to the port, because its recent acquisition of Royal P&O Nedlloyd NV gave it a larger fleet and therefore broader geographic coverage.

The port authority expects to finish 2005 with a total traffic of between 540,000 and 550,000 twenty-foot equivalent units, or TEUs, up from 525,000 TEUs in 2004. It is forecasting 585,000 TEUs for 2006. The record volume was 548,000 TEUs in 2000, and the authority has a mid-term target of 600,000 TEUs a year.

But more important, the recent announcements vindicate the authority's efforts to promote the Suez Canal as an alternative route for Asian trade. The authority hired Drewry Shipping Consultants Ltd. of London to study the feasibility of the route, believing the Suez route might be attractive, given the sporadic congestion at West Coast ports and the fact that the Panama Canal is operating at 94 per cent of capacity.

“Both the Suez Canal and the East Coast of North America need to position themselves for more problems [in the West Coast and Panama Canal routes] down the line,” said Mark Page, a principal with Drewry Shipping Consultants Ltd. “The congestion problem has gone away in 2005, but I don't think there's any question it will come back again.”

The Suez Canal traffic is expected to rise as the global fleet of larger ships — carrying more than 5,000 TEUs each — will more than double in the next three years. There were 322 such ships in existence as of June. Their numbers are forecast to grow by 343 by the end of 2008, Mr. Page said.

These ships are too large to move through the Panama Canal but can use the Suez Canal. Their growing number is expected to reduce shipping costs, making it more economical for China traffic to use the Suez Canal to reach the East Coast.

Mr. Page said the success of the route will depend largely on the ability of New York, the largest East Coast market, to dredge its harbour to allow the large ships to call there. The current dredging operation is slated to be complete in 2007. Halifax has no problems with water depth.

Once New York is attracting these ships, Halifax could piggyback on the increased traffic because it is a deepwater port only one hour from the main shipping routes, has abundant capacity and can deliver Chinese goods to Montreal, Toronto and Chicago faster than can other eastern ports, Ms. Oldfield said.

“Halifax wouldn't have to get 100 per cent of that [Suez Canal] trade, but if it can get part of it they can move on to a growth profile,” Mr. Page said.

Though bullish about prospects of the Suez Canal route, Brian Lee Crowley, president of the Halifax-based think-tank Atlantic Institute for Market Studies, said the main threat to the Port of Halifax's growth is what happens to the containers once unloaded. Shippers prefer ports to be served by two rail lines, but Halifax is served only by CN Rail. Shippers also like at least 30 per cent of a port's cargo to be distributed locally, but more than 80 per cent of the containers that come into Halifax leave Atlantic Canada.

“Halifax faces very significant challenges on the infrastructure side, though they're not insurmountable,” Mr. Crowley said.

With this in mind, the port authority is negotiating with various trucking companies about setting up a distribution park in Halifax. Ms. Oldfield said the authority plans to announce a site, within 20 kilometres of the two terminals, where containers can be opened, sorted and their goods distributed within Atlantic Canada.

Right now, Atlantic Canadian importers receive their goods only after containers are opened in Montreal or Toronto.

Ms. Oldfield added that the port authority wants more flexibility to finance infrastructure projects, so it is in the process of asking the federal Transport Department to increase the port's borrowing limit to more than $100-million from the current $25-million. She said bankers have told the port authority its cash flow would cover loans of up to $100-million.

Boom times

The Halifax Port Authority is forecasting banner years for 2005 and 2006 with Asian goods coming to North America via the Suez Canal.

Container traffic
(in twenty foot equivalent units or TEUs)

1999 461, 000
2000 548,000
2001 542,000
2002 524,000
2003 542,000
2004 525,000
2005* 540,000-550,000
2006+ 585,000
*Estimate
+Forecast

SOURCE: AMERICAN ASSOCIATION OF PORT AUTHORITIES

Mexican transhipment hub to compete with Manzanillo
9 January 2006
International Freighting Weekly

Guaymas in north-west Mexico is poised to handle overflow cargo from Los Angeles/Long Beach port.

Proposed expansion of the port could see it become a transhipment point for the maquiladoras, northern Mexico's export assembly plants, and for the south-western US states. It is situated only 350km south of Nogales, Arizona, a major freight crossing point.

But Mexican forwarders have differing opinions about whether Guaymas can compete with Manzanillo for Far East freight.

"Manzanillo is in the centre of Mexico and all the cargo goes and comes from this area. Guaymas will be for the factories located in the north, so this will be a different market, " said Edgar Calderon, MD of Guadalajara-based TRC Cargo Internacional.

But Nicolas Medina Trujillo, CEO Aire Mar Logistics in Mexico City, said congestion in other ports could act as a catalyst.

"Manzanillo is our gateway for the Far East, but other ports in Mexico are too small to handle the container traffic increases, " said Medina Trujill. "In Manzanillo sometimes it takes five days to clear one consolidated container."

Wal-Mart, Li ka-Shing seen key to Mexico port expansion
By Nick Carey

KANSAS CITY, Mo., Feb 12 (Reuters) - Top retailer Wal-Mart Stores Inc. and Hong Kong magnate Li ka-Shing are key players in a $300 million expansion of Mexico's Pacific port of Lazaro Cardenas aimed at ensuring goods reach U.S. shelves, according to the U.S. railroad that serves the port.

"Wal-Mart and other retailers are looking for backup routes so that even if some ports face stoppages they have reliable backups," Michael Haverty, chief executive of Kansas City Southern , told Reuters at KCS headquarters here in a recent interview.

As part of current plans, he added, Wal-Mart may build a major distribution center in Kansas City.

When asked about the plans for Lazaro Cardenas and Kansas City, Wal-Mart declined to comment. "It is premature for us to discuss details of this project," said Marty Heires, a spokesman for the world's biggest retailer.

But stoppages in 2004 at the largest U.S. container port complex in Los Angeles-Long Beach and concerns over capacity crunches at U.S. ports have led Wal-Mart and other retailers such as Target Corp. and Home Depot Inc. , to seek backup routes for a vast tide of imported merchandise.

With U.S. imports seeing double-digit volume growth over the past three years and set for further gains, the search for backup routes has become more urgent, Haverty said.

Analysts have questioned how much business Lazaro Cardenas can bring to KCS. But Haverty said expansion plans by Hutchison Whampoa Ltd. -- the flagship of Hong Kong magnate Li ka-Shing and operator of the world's top container port in Hong Kong -- include Lazaro Cardenas.

Haverty said an initial $300 million development phase for Lazaro Cardenas planned with Wal-Mart and Hutchison participation, with more investment seen possible, has "the potential to transform our company."

In Hong Kong, Hutchison spokesman Anthony Tam said the company did not wish to disclose plans for Lazaro Cardenas.

But Haverty said most of the $200 million Kansas City Southern has earmarked for investment in Mexico in 2006-2007 will be for track from Lazaro Cardenas.

AVOIDING BOTTLENECKS

Lazaro Cardenas already annually handles 100,000 20-foot equivalent units (TEU), or containers. But Hutchison will add capacity equivalent to 700,000 TEUs a year by 2008, with the option to increase that to 2 million, Haverty told Reuters.

Long Beach handled 14.2 million TEUs in 2005, up 8 percent from 2004 -- much of that driven by shipments from China, which has seen a steadily expanding trade surplus with the United States.

Ports on both coasts of the United States are expanding to catch some of this extra business as big retailers "continue to diversify their port policies," John Lanigan, chief marketing officer at the No. 2 U.S. railroad Burlington Northern Santa Fe Corp , told Reuters in a separate interview.

Prince Rupert in British Columbia, long the second Pacific gateway for Canada after Vancouver, now touts itself on its Web site as "North America's closest port to Asia."

But via its rail links, Kansas City also hopes to benefit from and promote what Chris Gutierrez of local nonprofit company Smartport describes as an "inland port."

Kansas City Southern Chief Financial Officer Arthur Shoener said a trip from Mexico to Houston or Atlanta on KCS rail lines was 300 miles shorter than for containers from Long Beach.

Lazaro Cardenas would also be cheaper and less likely to suffer labor disruptions than at unionized U.S. facilities.

Shoener said another port-building company besides Hutchison was in talks with the Mexico authorities to build a separate facility at Lazaro Cardenas. He did not name that company.

Haverty said KCS has also discussed Lazaro Cardenas with both Target and Home Depot, but only through intermediaries.

Using Lazaro Cardenas was not what KCS planned in 1995 when it bought a minority stake in Mexico's largest railroad, gaining access to Lazaro Cardenas. At that point, KCS planned to ship goods between manufacturers in Mexico, the United States and Canada in what it touted as the "NAFTA Railway."

After 2004 Long Beach delays, the strategy was reviewed.

Hutchison, encouraged by Danish shipping and oil group A.P. Moeller-Maersk -- Wal-Mart's largest shipper -- studied the U.S. coast and Mexico to find additional entry points to the U.S. market, Haverty said. Hutchison has already expanded a facility at the eastern end of the Panama Canal.

"It wasn't until the major delays on the West Coast in 2004 that the potential of Lazaro Cardenas became apparent," Haverty said. "We're not looking to compete with Long Beach because we never could. But there is plenty of additional business to go round."

It makes sense for Wal-Mart to consider moving goods through Lazaro Cardenas because its Mexican unit Wal-Mart de Mexico is the largest retailer in the country, Standard & Poor's analyst Andrew West said.

(Additional reporting by Emily Kaiser in Chicago)

Shipping experts see heavy cargo season, few disruptions in SoCal
By ALEX VEIGA
29 March 2006

LONG BEACH, Calif. (AP) - The U.S. can expect record levels of cargo from Asia this year, but the nation's largest port complex should be able to handle the volume without major disruptions, a panel of shipping industry experts said Tuesday.

The panel of executives from ocean shipping lines, terminals, trucking firms, railways and labor struck a mostly positive note in presenting its outlook for the peak cargo season from late spring to October.

"We're going to be hitting new record levels of trade in a few months as we enter the peak season," said Paul Bingham, an economist with the research firm Global Insight Inc. "But we don't expect any significant disruption in 2006."

Cargo levels have boomed during the past decade as Asian economies became key manufacturing centers for U.S. companies. West Coast ports and trucking and railway networks have come under increasing strain as they worked to move the cargo.

Some people on the panel warned that infrastructure improvements would be necessary in coming years for the ports to handle what is expected to be an unabated onslaught of cargo from the Far East.

"If we don't get better infrastructure and better facilities, there's no way we can move more cargo," said Roger Clarke, president of L.A. Customs Brokers Freight Forwarders.

Brian Griley, president of the Southern Counties Express trucking firm, added that more drivers will be needed to move cargo from the docks to warehouses around the region.

"As the port is growing in double digits, we're almost losing drivers in double-digits," Griley said, adding that the industry needs to increase pay rates so more drivers will work the ports.

Drivers have worked extra shifts to take advantage of extended port operating hours. That gave the appearance that there were enough drivers last year, Griley said.

Longer hours "gave us a temporary bubble in our capacity," Griley said. "That bubble is shrinking."

The adjacent ports of Los Angeles and Long Beach are the main hub for cargo to and from the Far East. The complex handled more than $200 billion in trade last year.

Along with the extended hours, terminal operators and the union for dockworkers agreed to bring on thousands of new hires.

Those steps, plus a move by some large shippers to divert cargo to other major ports, resulted in a peak season at the Los Angeles-Long Beach complex that was virtually free of congestion.

Some panelists believe this year should be no different.

"We don't foresee any problems this year, or even next year," said Peter Leng, president of the ocean carrier OOCL (USA) Inc.

Shipping Experts See Heavy Cargo Season
By ALEX VEIGA
29 March 2006

LONG BEACH, Calif. (AP) - The U.S. can expect record levels of cargo from Asia this year, but the nation's largest port complex should be able to handle the volume without major disruptions, a panel of shipping industry experts said Tuesday.

The panel of executives from ocean shipping lines, terminals, trucking firms, railways and labor struck a mostly positive note in presenting its outlook for the peak cargo season from late spring to October.

"Were going to be hitting new record levels of trade in a few months as we enter the peak season," said Paul Bingham, an economist with the research firm Global Insight Inc. "But we don't expect any significant disruption in 2006."

Cargo levels have boomed during the past decade as Asian economies became key manufacturing centers for U.S. companies. West Coast ports and trucking and railway networks have come under increasing strain as they worked to move the cargo.

Some people on the panel warned that infrastructure improvements would be necessary in coming years for the ports to handle what is expected to be an unabated onslaught of cargo from the Far East.

"If we don't get better infrastructure and better facilities, there's no way we can move more cargo," said Roger Clarke, president of L.A. Customs Brokers Freight Forwarders.

Brian Griley, president of the Southern Counties Express trucking firm, added that more drivers will be needed to move cargo from the docks to warehouses around the region.

Drivers have worked extra shifts to take advantage of extended port operating hours. That gave the appearance that there were enough drivers last year, Griley said.

Longer hours "gave us a temporary bubble in our capacity," Griley said. "That bubble is shrinking."

The adjacent ports of Los Angeles and Long Beach are the main hub for cargo to and from the Far East. The complex handled more than $200 billion in trade last year.

Along with the extended hours, terminal operators and the union for dockworkers agreed to bring on thousands of new hires.

Those steps, plus a move by some large shippers to divert cargo to other major ports, resulted in a peak season at the Los Angeles-Long Beach complex that was virtually free of congestion.

Mexico, top private interests look to revamp Pacific ports south of the border
By WILL WEISSERT
27 March 2006

MEXICO CITY (AP) - Mexico and major shipping interests are bolstering Pacific ports south of the border, hoping to catch future runoff as an increasing tide of Asian cargo sails toward already clogged ports in California.

Mexican officials in coming weeks plan to study the feasibility of turning Punta Colonet -- a sparsely populated, wind-blown bay on the Baja Peninsula 150 miles (240 kilometers) south of the U.S. border -- into a super-port on par with twin facilities at Los Angeles and Long Beach, the largest western port complex in North America.

Farther south, Hutchison Port Holdings, the world's largest independent port operator, plans to pump about $200 million (euro166 million) into expanding container ship capacity at Lazaro Cardenas, Mexico's deepest port.

"We are ready. The port is ready. The infrastructure is ready for anything shipping companies need," said Hector Carranza, business director for the port at Lazaro Cardenas.

Private companies have approached ports in this country looking for backup routes in case of work stoppages in California. A dispute between shipping lines and dock workers led to a shutdown of all major western U.S. ports in 2003, sending thousands of container ships steaming south.

"The world's biggest retailers want to have more options open," said David Eaten, a spokesman for Kansas City Southern de Mexico, the U.S. railroad that serves Lazaro Cardenas.

Los Angeles-Long Beach handles 40 percent of all the cargo shipped into the United States and 80 percent of U.S. imports from Asia.

Last July, officials began unloading cargo 24 hours a day while giving shippers financial incentive to move cargo during evening and weekend hours so trucks hauling it could avoid the long lines at peak hours.

But, officials concede, problems remain.

"As far as congestion goes, that definitely is an issue here," said John Pope, a spokesman for the Long Beach port.

Mexican authorities say lower port fees, as well as jitters about terrorist threats on U.S. soil -- newly fueled by controversy over a plan where a state-owned United Arab Emirates company would take over East Coast ports -- may also push business their way.

Expansions at Lazaro Cardenas are focused on goods bound for the Mexican market. But with the amount of cargo steaming into the American West Coast expected to outpace the capacity of ports there in coming years, Mexico wants to be ready for the surplus.

Lazaro Cardenas' "business model is not to take business away from the U.S. West Coast ports but rather to absorb a significant percentage of projected growth," Kansas City Southern said in a statement prepared for this story.

Officials in Kansas City want to build a $3 million (euro2.5 million) inland border facility staffed by Mexican customs inspectors.

Leaders from both countries are still negotiating the details of the plan, which seeks to allow trucks carrying U.S. goods bound for the Mexican market to be inspected and sealed in Kansas City, then head into Mexico without delays at the border.

American cities, including Kansas City and San Antonio, Texas, also are competing to eventually be hubs for goods shipped to Mexican ports and driven north for the U.S. market.

Last year, Los Angeles-Long Beach handled 14.2 million TEUs -- 20-foot (6-meter) equivalent units used to measure container traffic.

The new development at Punta Colonet could handle 1 million TEUs annually after its first phase of construction and more than five times that amount in the longer term, said Carlos Jauregui, executive director of the Ensenada port, a facility 50 miles (80 kilometers) south of the U.S. line that would likely administer the project at Punta Colonet.

Mexico plans to offer long-term contracts to private interests who would build and manage the port.

Jauregui said preliminary estimates put the cost -- including a rail link to the U.S. border -- as high as $5 billion (euro4.2 billion). Work is not expected to begin until at least 2008, and would likely take four years. "By then, we should see a major overflow in containers that Los Angeles-Long Beach won't have the capacity to handle," he said.

Pope said officials at Long Beach are working to increase efficiency so as to better keep up with demand.

"No one has really given a prediction saying this is going to be the year Los Angeles-Long Beach can't accept more cargo," he said.

Long Beach's port is deep enough to receive huge ships carrying 8,000 containers. Whether the project at Punta Colonet would by deep enough to handle container ships that large is unclear.

Proponents say major global shipping interests have supported the plan. It would be good news for top retailers like Wal-Mart Stores Inc., Mexico's largest retailer, and others who want their goods delivered faster.

But approval could depend on who replaces President Vicente Fox, who leaves office in December. Major Mexican government initiatives often fall apart after an administration change.

More immediate expansion is planned at Lazaro Cardenas, on the coast of the central state of Michoacan, 900-plus miles (1,400-plus kilometers) south of Laredo, Texas, the busiest U.S.-Mexico commercial border crossing.

Hutchison expects to begin work on a new Specialized Container Terminal next month, with the first phase to be completed by the middle of next year. Four phases in all, the facility will be the largest of its kind in Mexico, spanning nearly 300 acres (120 hectares), the company said in a statement for this story.

Lazaro Cardenas handled 139,000 TEUs last year and would like to increase that number to 190,000 by the end of 2006. The first phase of the new terminal should handle 300,000 TEUs, pushing capacity at the entire port up to around half a million, Hutchison said.

Hutchison Port Holdings is a subsidiary of Hong Kong-listed Hutchison Whampoa Ltd., which is owned by the territory's richest man, Li Ka-shing, and offers telecommunications, retail and port services on five continents.

Carranza, the business director at Lazaro Cardenas, said the Hutchison project should complement a $47 million (euro39 million) internal port plan to build a new bridge and expand docking facilities and customs stations.

"It is well documented there is an ever-increasing demand for port services on the Pacific Coast of North America," Hutchison said. "This growth presents an important opportunity for Mexico."

Retailers See Trouble on Ports' Horizon
Despite smooth sailing in the U.S. now, firms brace for a logjam as trade pushes capacity.
Ronald D. White
24 July 2006
Los Angeles Times

It was a SigAlert at sea that lasted for months. Two years ago, an offshore traffic jam of historic proportions paralyzed the ports of Los Angeles and Long Beach.

Shipping lanes were clogged. Giant cargo vessels sat idle outside the ports, and their goods -- electronics, clothing, toys and furniture -- waited as long as a week to be unloaded. And frustrated importers scrambled to get their goods to market on time.

The congestion's cost to the U.S. economy was estimated by former U.S. Transportation Secretary Norman Y. Mineta to be as much as $70 billion.

Today, the nation's two largest cargo ports are handling another record pace with aplomb. But memories of the congestion remain.

"Everyone paid a price in 2004," trade economist Paul Bingham said. "CEOs told their supply chain people not to let this happen again. Shareholders said this cannot continue if these assets are going to make us money.

"There was too much money lost by too many players," he said.

As a result, some of the nation's biggest shippers have been working to prevent similar problems in the years ahead.

For now, the buzz is back. Cargo shipments at Los Angeles and Long Beach are outpacing all competitors on both coasts.

Business lost in 2004 has come back to Southern California. Dockworker shortages are a thing of the past, and the ports remain the only major harbor in America where the terminal gates are open for business at night and on weekends.

"Things are looking good this year. The railroads are prepared. Labor is prepared, and that's reflected in the volumes we are seeing," said Geraldine Knatz, executive director of the Port of Los Angeles, adding that "there is a new level of confidence out there about San Pedro Bay in general."

The two ports are smoothly unloading and sending ships back on their way within 35 to 50 hours of arriving at their berths, said Richard B. McKenna, deputy executive director of the Marine Exchange of Southern California, which tracks port traffic.

But nobody at the massive harbor is ignoring 2004. Nor have the nation's retailers forgotten an even more costly labor contract fight between shipping lines and dockworkers in 2002 that idled all West Coast ports for 11 days.

Unfortunately, experts say, other problems are on the horizon.

"We see this as the lull before the storm," said Erik Autor, vice president and international trade counsel of the National Retail Federation.

With trade increasing faster than the capacity of ports, rail lines, and highways to handle it, he said, "we know at some point we will be back into a very tight scenario."

The retail federation is a consortium of some of the nation's biggest retailers that depend on the nation's ports to ship and receive goods. It commissioned a continuing study of the nation's major ports by economist Bingham's firm, Global Insight Inc., a Boston-based economic forecaster.

The retailers receive a detailed report every month from Global Insight -- called Port Tracker -- on the harbors they rely on most, including those in Los Angeles, Long Beach, Oakland, Seattle and Savannah, Ga.

As part of that, Global Insight also created the Congestometer. It rates each of the ports and their supporting labor pools, rail lines and truck corridor infrastructures using a Department of Homeland Security-like risk assessment system.

The meter rises when complications surface.

Pacific Northwest ports, for example, rose from "low" to "medium" last summer, when a seven-week port trucker strike in Vancouver, Canada, diverted cargo to Tacoma, Wash., and Seattle.

With more detailed port information available more quickly, businesses can better monitor their product shipments, said Greg Johnson, executive vice president for marketing at Alameda, Calif.-based GT Nexus Inc.

Johnson's company provides a Web-based platform to help customers such as Evian North America, Williams-Sonoma Inc. and Celanese Corp. track deliveries along their high-volume supply chains.

That means they are more quickly able to shift shipments, if necessary, to different shipping lines and to different ports.

"It's a different world," Johnson said. "Everyone is trying to get better and more nimble and react more quickly. If you can't be nimble, you will be left behind."

Currently, all nine ports reported on in Port Tracker are rated as low risk for congestion. But Autor of the retail federation and others point to the U.S. economy's continuing reliance on imports, double-digit increases in trade and the massive buildup overseas in facilities designed to move larger amounts of cargo to the U.S. and Europe as indicators of problems to come.

"You look at what China and India are doing, the amount of infrastructure being built there, new roads and new rails and new ports," Autor said. "The last time we did that here was in the 1950s. These problems will cost the U.S. economy as a whole and hinder the competitiveness of U.S. businesses."

John Bowe, president of the Americas for shipping line APL Ltd., a subsidiary of Singapore-based Neptune Orient Lines Ltd., warned that "you will begin to see backups, increased costs to businesses as they try shipping freight by air, none of which is good in the long term for the U.S. consumer."

"You will see a slowing down of the system as it reaches capacity, and the unavailability of goods when customers want them and expect them," he said.

Rising fuel costs might also force more truck drivers out of the business, exacerbating an already nationwide shortage, a Port Tracker report said. Pending labor contract negotiations between shipping lines and union dockworkers in 2008 could also result in problems.

"Longer term, there are some real worries," Global Insight's Bingham said.

"The view is that this gets tougher and tougher to keep up with." Bingham said. "To say we are fine because we have gotten through two years would be insane."

W-O-N-D-E-R-F-U-L

More investment in Mexico!

It's location, location, location.

BtW... While you are at it please bring down some nice chinese restaurants from HK....the ones here are awful.

INTERVIEW-CP Rail skeptical of Prince Rupert expansion -CEO
By Nick Carey

CHICAGO, July 26 (Reuters) - Canadian railroad Canadian Pacific Railway Ltd.'s top executive on Wednesday criticized "subsidies" for a port expansion involving rival railroad Canadian National Railway Co. and questioned the project's viability.

"Funding provided by federal and local governments for this project has amounted to subsidizing our competitor," chief executive Fred Green told Reuters in a phone interview.

"We have expressed the view (to the government) that enough is enough," and no further subsidies have been offered, he added.

Green also said Canadian Pacific is looking to capitalize on congestion on U.S. railroads and move more goods from Asia into the Midwest via Vancouver.

Apart from volatility in its lumber business as the U.S. housing market cools and a downturn in the paper industry, he said he has seen few signs the U.S. economy is slowing.

Rival Canadian National is touting the container port project at Prince Rupert, British Columbia - hundreds of miles north of Vancouver - as an alternative route to bring goods from Asia into the United States and avoid the congestion that can affect the giant port of Los Angeles - Long Beach.

Green said because the northern port is 400 miles further from Chicago than Vancouver and because there is no population center near Prince Rupert he was skeptical of its potential.

"If someone wants to invest their own commercial money under those circumstance that is their affair," he said.

Green said Vancouver is a better route into the U.S. market using Canadian Pacific lines with the congestion or bottlenecks affecting the U.S. railroads.

"We believe this port can play a significant role in moving goods into the U.S. market," he said.

Green became chief executive of Canadian Pacific in May. It is the smallest of the major North American railroads - the others are Canadian National, Union Pacific Corp. , Burlington Northern Santa Fe Corp. , Norfolk Southern Corp. and CSX Corp. .

The company has around 13,500 miles (21,600 km) of track in Canada, the U.S. Midwest and northeastern states. The company reported second-quarter net income July 25 of C$378 million, compared with C$123 million a year earlier.

Green said Canadian Pacific was working to improve its operating ratio - 75.1 percent in the second quarter - under pressure to compete with Canadian National, which reported a far better second-quarter ratio of 58.6 percent.

"When the analyst community sees a railroad operating in a similar environment with a better operating ratio then the challenge is for us to bring ours down," he said. He said the company will cut costs and grow its business to do so.

Long-term, some analysts have wondered whether Canadian Pacific will need to acquire some regional U.S. railroads in order to compete with it larger competitors.

Green said long term acquisitions may happen, but Canadian Pacific sees "plenty of upside through organic growth."

"At some point our plans may have to include expansion beyond that, but not in the immediate time frame," he said.

Green also said that the company's long problematic operations in the northeastern U.S. states - the Delaware & Hudson lines it took over at the start of the 1990s - are now "no longer hurting us but have begun to help us" as Canadian Pacific has focused on partnerships with the other major railroads to boost the line's business.

"We are going to focus on ramping that business up further in the next couple of quarters," Green said.

Canadian ports compete fairly for U.S. cargo: trade minister
17 October 2011
Reuters Excerpt

WASHINGTON (Reuters) - Canada's new international trade minister vowed on Monday to defend Canadian interests in a U.S. investigation into why ports in British Columbia are luring U.S.-bound container traffic away from American ports.

Ed Fast, in his first official visit to Washington, said he told U.S. Trade Representative Ron Kirk that any protectionist measures would hurt both the U.S. and Canadian economies.

The U.S. Federal Maritime Commission earlier this month decided to launch an inquiry into disparities that are driving U.S.-bound containers from Asia to Canadian and Mexican ports. A key focus of the study is on the Canadian ports of Prince Rupert and Vancouver, which are luring an increasing share of container traffic away from American West coast ports.

The containers are being shipped by rail into the United States and according to some analysts, arrive at Midwest destinations days faster than via Long Beach, California,

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Fast said the Canadian ports are competing fairly. They do not charge a harbor tax, as U.S. ports do, and that the Canadian ports have been modernized with $1.4 billion in new investments for road and rail connections.

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The study was first requested by U.S. senators Patty Murray and Maria Cantwell of Washington and eight other lawmakers, who said the harbor maintenance tax could be reducing U.S. competitiveness in the face of new West Coast ports in Canada and Mexico.

Some lawmakers have suggested the tax be imposed on container cargoes entering the United States via Canadian or Mexican ports in order to level the playing field.

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