After its best-year ever in 2017, momentum at the Port of Long Beach is full steam ahead – the port recently announced that it closed out the best first quarter in its history this year. Executive Director Mario Cordero believes the port should continue growing cargo volumes passing through its terminals this year, despite the specter of a trade war with China.
Mario Cordero, executive director of the Port of Long Beach believes cargo volumes should continue to increase this year, despite the threat of a trade war with China. The port just closed out its best first quarter ever for cargo throughput. (Photograph by the Business Journal’s Pat Flynn)
Cordero estimated that the port could expect a nearly 7% increase in cargo volumes in 2018. “Comparatively speaking, last year the growth for the Port of Long Beach was estimated as we began the year at 4% to 7%. . . . We ended up at 11% growth,” he noted, adding that he hopes a similar outcome will occur in 2018.
“Here at [the Port of] Long Beach we’re very comfortable that, despite the concerns that are being raised at the political level, international trade continues in a way that’s not only important to this country but important to the global community,” Cordero said. “At the political level, there are certainly some discussions regarding issues related to international trade that need to be resolved. I am confident that at the end of the day we will continue with a very balanced approach as it relates to international trade.”
Cordero explained that he did not intend to be dismissive of the potential impacts of tariffs being instituted on Chinese-American trade. “The uncertainties certainly have an impact on when you talk about investment – those people who are the investors of international trade and goods movement,” he said. “It is worrisome with regard to that discussion.”
Still, Cordero was confident that both countries would ultimately realize the importance of globalization to their economies. For many countries, international trade is a major component of their gross domestic product, he said.
There are a number of factors that played into the port experiencing its highest-ever cargo volumes last year. As always, business shifts back and forth between the ports of Long Beach and Los Angeles. Last year, the four major shipping alliances consolidated into three, which resulted in some changes to which terminal ships were directed to within the dual port complex.
The consolidation of shipping alliances was a move to help reduce cost burdens on the ocean carrier industry, which has been contending with low rates for services due to an abundance of capacity – i.e., too many large ships and not enough cargo to fill them. Low shipping rates spurred the bankruptcy of Hanjin in 2016, as well as the merger of three Japanese shipping lines this month.
“The carriers have had a challenge since the 2008 recession with regard to having sustainable rates,” Cordero said. “What’s different today in 2018 as opposed to just a couple of years back is there’s definitely light at the end of the tunnel. It’s a combination of the global economy getting better and also the fact that this endeavor that the carriers underwent a few years ago under the concept of economies of scale . . . puts them in a better position on the profit margin with these larger vessels.”
Cordero noted that cargo growth at Long Beach exemplified customer confidence in the port’s operations. “It’s safe to say for the Port of Long Beach, the three major alliances are represented at this port,” he said. “Our growth numbers, when you talk about our success for 2017 . . . it basically indicates that the carriers and the BCOs [beneficial cargo owners] feel confident in terms of what we’re able to provide here as a port.”
The Port of Long Beach’s $4 billion-plus capital improvement program is another reason the port is benefiting from cargo growth, according to Cordero. “We are big ship-ready,” he said, noting that the average vessel calling the port holds about 13,000 to 14,000 twenty-foot equivalent units (TEUs) of cargo. In 2003, the average sized vessel coming to the port carried only 3,600 TEUs, he pointed out. “We’re ready to receive 18,000-TEU vessels. And in the future, because of our capital improvement investment, we will be ready to receive 20,000- to 25,000-TEU vessels.”
The port’s ability to handle such large ships is attributable to its investments in Long Beach Container Terminal, which is currently in the third phase of redevelopment to handle ships of this size, and the replacement of the Gerald Desmond Bridge. Currently, 8,000-TEU ships can fit under the bridge only when the tide is low, Cordero explained. When the new bridge is complete in 2019, 18,000-TEU ships will be able to fit beneath it. “As you look forward in terms of what the Port of Long Beach may look like in the next decade or two, we’re going to have continued projects to make sure that these large vessels, which are going to get larger in the future, are going to be able to come to the Port of Long Beach and navigate in a way in which there will be minimal obstruction,” he said.
The port is also investing $1 billion in rail infrastructure as part of its commitment to increase the velocity and efficiency of goods movement while reducing emissions. These investments demonstrate the port’s commitment to customer service, Cordero explained.
When it comes to maintaining the port’s market share, Cordero has his eye on customer service, infrastructure investment, and the efficiency and reliability of cargo movement. “Being able to make sure that the container moves faster at this port – that is, from ship to shore and from out the gate to inland connectivity – those are the things we need to do to make sure that we continue to be the port of choice,” he said.
Cordero pointed out that the passage of the new Clean Air Action Plan for both ports in 2017 caused many to question whether the cost of implementing the plan would lead to a reduction in the ports’ market share. The plan calls for all cargo handling equipment to operate at zero emissions by 2030, and for all trucks coming into the ports to operate at zero emissions by 2035. The same questions were asked with the passage of the original CAAP in 2007, and the ports have grown abundantly since then, he noted.
“We have been able to prove to people that we could undergo the kind of corporate responsibility as it relates to reducing emissions from port operations and continue to be an attractive gateway,” Cordero said. “Ten years from now, people are going to look back and they are going to see electric trucks as commonplace here at this port. They are going to see [the number of] containers continue to grow. . . . If anybody doubts we’ll be able to get there, just look to see what we’ve done to this point. I think it’s a great success story, and it’s going to continue to be a success story here at this port.”