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West Coast Needs New Strategy to Recoup Business by Lloyd's List Logistics Management, November 21, 2005

There is no congestion on the US west coast. Let us repeat, there is no congestion on the US west coast. Point taken, thank you very much. Now may we wonder aloud whether the growth in all-water services to the east coast experienced in recent years will continue.

Port officials in southern California have shouted themselves hoarse since July, trying to draw the world's attention to the fact that there are more berths available than there are containerships waiting to unload. The fact that mainstream US media articles continued to report "congested" west coast ports did nothing to help. The message, however, finally appears to be coming through.

Let us get facts and figures out of the way. While containerised imports through Los Angeles and Long Beach grew 12.9% in August month-on-month over a year earlier, the port congestion that was widely feared did not materialise.

Terminal operators and the International Longshore and Warehouse Union teamed up to hire thousands of new workers, while night and weekend gate opera- tions at terminals due to PierPass' OffPeak programme smoothed out some of the cargo flow. Railways largely kept pace with demand.

So far, so good. But what of the business that was lost?

As nearly 100 ships waited in line outside the southern California ports last year several developments took place. Some carriers added calls to Oakland, Seattle and Tacoma.

Retailers and importers who built distribution centres on the east coast and in the US Gulf started shipping on all-water services from Asia directly into these hubs. The Panama and Suez canals came into play.

With southern California no longer congested, the question now is whether Los Angeles and Long Beach - which together account for 40% of US containerised imports - can recoup some of the lost business this year and next.

Proponents of southern California's cause insist that they can. Long Beach's ability to absorb ever-bigger containerships of 7,500 teu and more is advanced as one reason as carriers seek to fill these ships by cutting rates.

Shippers using west coast intermodal ports can still save at least a week to eastern and hinterland destinations as compared with all-water services to the east coast, the argument goes. However, this assumes a host of factors.

Railways are a prime element. The Alameda corridor is said to be designed with the needs of the coming decades in mind. However, equipment and wagon availability at the two main railways serving southern California is not always a given.

Furthermore, the burgeoning distribution centres on the east coast are now complemented by the nascent Heartland corridor project, which would make Norfolk as attractive an intermodal destination for containerised imports as New York is now.

Maersk, never known to waste its time barking up the wrong tree, is already entrenched in the area thanks to its coming Portsmouth terminal.

Will price be an issue? An argument can be made both ways. As carriers struggle to fill ships bound for the west coast, rates have been dropping. Hong Kong and south China to southern California, for example, is down to about $ 1,850 per feu from $ 2,250 a year ago.

Meanwhile, rates on all-water routes bound for the east coast from Asia are on the rise and the "premium" enjoyed by the west coast for alleged time-saving has been shaved to a minuscule $ 150 per feu from a differential of $ 500 or more only a year ago.

Are rising prices on the all-water services a sign that southern California is poised to recapture lost business or do they speak of an irrevocable shift away from Los Angeles and Long Beach?

Well-informed proponents of southern California insist it is the former while intelligent voices elsewhere believe it to be quite the opposite.