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Port Chases New Business as Cargo Logjam Worsens by Shelly Strom, Business Journal staff writer Portland Business Journal, November 19, 2004

West Coast port backups present opportunity

Port of Portland officials are aggressively courting new business as severe congestion threatens to cripple ports in Southern California.

At the Southern California ports of Los Angeles and Long Beach, vessels reportedly have spent a full week waiting to unload goods at the dock. The delay -- caused primarily by an inundation of goods from China -- can cost more than $300,000 and cause importers to miss out on their holiday-retail selling window.

The situation is of special interest for Port of Portland officials, who hope the incoming tide of Asia-made goods will boost maritime trade here -- if not now, at least in 2005.

"As carriers are looking for relief valves from what is happening in Southern California and elsewhere along the West Coast, Portland is available. We can be an access point to service the northern interior of the U.S.," said Eileen Murche, import marketing manager for the port.

The port's marketing blitz has included wooing an L.A.-based shipping line executive to take over as manager of liner development, trekking to Asia to call on carriers and responding as competitively as possible to bid requests.

"We've had more interest from carriers [and related industry players] in the last six months than we've had in the past two years," Murche said.

Although Murche doesn't expect ships to be diverted here at the last minute, she is optimistic that growing congestion will boost service to Portland in 2005.

"Some people in the industry are saying that we could be looking at a year-round peak season on the West Coast. Maybe even the Port of Portland would benefit from congestion," said Peter Hurme, editor of Marine Digest and Cargo Business News, an industry trade publication based in Seattle.

Although the volume of containerized cargo imported via the Port of Portland hit a record in 2003 of 247,430 TEUs -- which refers to the equivalent of cargo that fits into a 20-foot container -- that represents only about half of the port's container-handling capacity.

Partly due to congestion, South Korean shipping line Hanjin instituted a new rotation that included its first call at the Port of Portland on Nov. 19, said Jeff McEwen, a Portland-based manager for Hanjin.

"We had a larger ship come to the Pacific Northwest and sent a slightly smaller one to Southern California," McEwen said.

A relatively small ship can be unloaded in about 16 hours, compared with a larger ship, which could take as long as three days.

McEwen said Hanjin vessels have been delayed in California recently, which causes disruptions and additional costs.

"When a ship has to sit in line with zero commercial utilization for seven days, that's $300,000 down a sink hole," he said.

A mess in Southern California
At Southern California ports, seasonal imports are to blame for a traffic boost causing snarls in recent weeks. However, import volumes in general have built to levels unprecedented just a few years ago.

The crush is expected to continue.

Cargo volumes being projected for L.A. and Long Beach docks alone would overwhelm not only those ports but much of the additional container facilities on the West Coast, say Murche and others in the industry.

In 2003, those two California ports received containerized cargo roughly equal to 11.8 million TEUs. The number is expected to grow to 16.7 million TEUs by 2010 and to 35 million TEUs by 2020, according to a 2001 study by the Los Angeles and Long Beach ports. Actual growth rates are outpacing that now-dated study, officials say.

"It caught the industry off guard because no one foresaw the spike in cargo activity coming this soon. They had projected it to come a little farther down the line," said Hurme.

Industry insiders warn that the situation could be compounded in the very near future.

"What is not understood is the impact of congestion on carriers' ability to deploy new capacity in 2005," said the CEO of international logistics provider APL Ron Widdows, according to a report Nov. 17 by The Journal of Commerce Online.

Most of the world's liner companies are set to deploy in 2005 new 8,000- and 9,000-TEU vessels -- among the largest ships ever built -- which would deliver loads of cargo expected to worsen terminal backups, according to the report.

"All the work of the last 15 years on building global supply chains is beginning to become unwound," Widdows said.

What this means for the Port of Portland remains unclear. Inherent challenges historically have prevented the port from building a bigger maritime business.

The relatively scant population of the state -- about 2.3 million people, compared with the 23 million surrounding L.A. and Long Beach -- isn't very attractive to shipping lines.

In addition, the port's geographic location 100 miles inland makes it a little farther than ocean ports, which adds time and cost. The relative shallowness of the Columbia River shipping channel also means large vessels can't reach the Port of Portland.

The port suffered a blow earlier this year when two trans-ocean carriers halted service to its terminals.

However, the recent congestion snafus may mean Portland's shortcomings probably won't be such an issue for importers and shipping lines, Murche said.

"Taking eight hours to go upriver 100 miles to call on the Port of Portland, unload without a wait and taking six hours to get back to the ocean, seems like nothing. Calling on Portland suddenly becomes risk management," she said.