OAKLAND, Calif. — With a bitter battle over a dockworkers’ contract tentatively resolved, West Coast ports and their terminal operators are back dealing with an even bigger challenge — the mega-ship.
Bulked up like weightlifters on steroids, the new container vessels have set off a competitive scramble by the ports, which are dredging new channels, buying equipment and planning vast additions to warehouse space to accommodate the mega-ships, with the price tag for improvements running into billions of dollars.
“There are monsters out there, and unless we learn how to deal with these monsters, we’re going to lose business and tremendously affect the economies of the ports and the regions around them,” said Jock O’Connell, international trade adviser for Beacon Economics.
Staying competitive with ports elsewhere is crucial for this region’s economy. The West Coast ports handled 43.5 percent of U.S. containerized imports in 2013, down from 50 percent in 2002, according to the Pacific Maritime Association. The good news is that the recovering economy has increased the flow of goods across the Pacific as retail sales bounce back in the U.S.
For ocean carriers, building bigger ships is a matter of economics: The larger vessels are, the lower the cost of moving a container. The trend began as the industry recovered from the recession, which had hammered revenue and profits. Experts say the message from the shipping lines to the ports is this: Get ready for us or we’ll find a port that is.
West Coast ports returned their attention to mega-ships after a nine-month labor dispute that bogged down the flow of cargo, sending some shippers to ports on the Gulf and East Coast and forcing some importers to ship by air express. Although they’re working through a two- to four-month backlog of cargo, the ports are wooing importers to return. The West Coast is still the fastest route to the inland U.S., and Los Angeles boasts a local market of 13 million people.
To prepare for the big ships, berths at the Port of Oakland have been dredged to a depth of 50 feet. Cranes have been raised by terminal operators to reach over taller, wider loads. Railroads that operate out of the port have increased their capacity to deliver imported products across the U.S. A $1 billion project for new warehouses and a facility to ready imported goods for domestic shipment is planned on port property and the old Oakland Army Base.
The new warehouses will be a selling point the port can use to convince shippers to unload more of their cargo in Oakland rather than Long Beach, Calif., and Los Angeles, said Chris Lytle, the port’s executive director. “We think it’s a great advantage for shippers,” he said.
The ports of Los Angeles and Long Beach are each spending $1 million or more a day on ambitious plans to get ready for all but the biggest of the mega-ships. Long Beach plans to spend $4 billion over 10 years on improvements.
“The challenge for Los Angeles and Long Beach and the terminals around the country is adjusting to this new reality, these larger ships,” said Phillip Sanfield, spokesman for the Port of Los Angeles.
The terminals were built to handle smaller ships, he said. Although the port has dredged deeper channels and raised its cranes, “the logistics of the terminals are a work in progress.”
In the past, shipments at the port might peak a couple times a year, said Noel Hacegaba, chief commercial officer at the Port of Long Beach. “Now, it’s happening every time one of these big vessels arrives.” Also, he said, unloading cargo has become more complex as alliances of ocean carriers pool their loads on a single mega-ship. The port has 4,000 vessel calls a year, with about two mega-ships a week, a frequency that is expected to increase in the coming years.
“The emergence of the big ships, the mega-vessels, comes down to simple economics,” said Hacegaba. “Ocean carriers will continue to invest in larger and larger ships in years ahead to reduce cost per container and to reduce costs to customers. It’s good for them and their customers, but the terminals and the ports where these big vessels call have to make drastic changes to be able to accommodate the surge in volume.”
Container ships have grown from those capable of carrying 8,500 20-foot-long containers in the early 2000s to one on the drawing boards today expected to haul almost 24,000 containers. Anything exceeding 10,000 containers is considered a mega-ship. Regardless of the vessel’s size, shippers want them unloaded quickly, so they can return to Asia for more cargo. And they just keep growing in the number of containers they can carry.
The 1,191-foot-long MSC Sola, which berthed at the Port of Oakland last week, was one of the largest when it was built in 2008. It is just 14 feet short of the maximum length the port’s berths can handle.
Able to carry 11,660 containers, MSC Sola has since been outstripped by newer vessels, including the recently launched 1,300-foot MSC Oscar. The Oscar can carry 19,224 20-foot-long containers, and will, like the largest of the mega-ships, ply the route from Asia to Europe trade via the Suez Canal.
But as vessels grow ever larger, the Oscar conceivably could be diverted to the Asia-Pacific routes served by California ports, O’Connell said.
“It’s not going to be tomorrow,” said O’Connell, adding half-seriously, “but in the fullness of time, which in the maritime industry seems to be about a year and a half.”
