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Agreements could impact the long-term flow of container cargo moving through California ports

WASHINGTON, DC - California ports could be directly impacted in the long-term by Memoranda of Understanding (MOUs) drawn up between the Panama Canal Authority and seven major US East Coast and Gulf?ports to increase trade on the all-water route linking Asia and the eastern seaboard and the gulf, via the Panama Canal.

According to the Panama Canal Authority, the MOUs will be signed over the next few weeks between the agency and the ports of New York / New Jersey; Norfolk; Savannah; Charleston; Miami; New Orleans; and Houston.?

The Authority said the signings are an "example of all parties' desire to work together to promote economic development, generate jobs, and increase trade."

The MOUs will continue for one year, and will be renewable annually.

More than 60% of the Canal's annual traffic currently originates from or travels to the US eastern seaboard, according to the Authority, which is an autonomous entity of the government of Panama.

The agency is responsible for the administration, operation, and maintenance of the Canal. The Authority replaced the old Panama Canal Commission, which came into existence in 1979. That commission operated the Canal during a 20-year transition period that passed full control of the Canal from the US to Panama in 1999.

The new partnership, said Canal Authority Administrator Aleman Zubieta, "will provide joint marketing activities to generate new shipping business. The activities will include promotions, advertising, and data-sharing to allow for forecasting of future trade flows and market trends; market-studies exchange that could benefit the parties in future product development or business ventures; and technological interchange to spur cutting-edge programs in the shipping and maritime community."

"There will be real, tangible benefits from these agreements. It's a win-win for our customers, the ports, and the [Panama] Canal," he said. "The joint marketing, exchange of ideas, and shared modernization projects demonstrate that we will execute solutions for the long-term growth needs of the shipping community and international trade."

"This could well have a impact on what we do here in the long-term," said Capt. Manny Aschemeyer, executive director of the Marine Exchange of Southern California, which monitors shipping activity at the ports of Los Angeles and Long Beach, which, when combined, form the busiest container load center in the country.
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"Fully half of all containerized cargo moving through Southern California ports is destined for distribution centers back east by rail," he said.

According to Aschemeyer, the MOUs "seem to suggest moving more - or most - of their cargoes via 'all water routes' as opposed to using 'land-bridge' operations via such ports as Seattle / Tacoma, Los Angeles / Long Beach, and Oakland."

But, he said, there are several major factors that could lessen the impact of the combined Canal-port trade development effort, at least in the short-to-medium term.

"A port isn't only a place to land cargo," says Aschemeyer. "An effective port has to have the infrastructure to move the cargo through to its ultimate destination. The ports on the Gulf and East coasts don't have the capability - the rail and highway links - to do that in the volume that they anticipate generating from these agreements."

The key "is the ability to move cargo efficiently and economically and those ports simply don't have the wherewithal to handle anything even close to the container volumes moving through Long Beach, Los Angeles, and Oakland," he said, adding that the state's rail infrastructure and its links to virtually every part of the country are "unsurpassed."

According to the American Association of Port Authorities, California's three major container ports currently handle about 50% of the nation's total ocean borne container cargo.

While the Port of Long Beach saw this year's container volume through May drop by some 4% to 1.8 million, the port remains one of the two busiest in the nation and, partnering with neighboring Los Angeles, the third busiest "container load center" in the world.

Virtually all of the two-way containerized cargo moving between Northern California and Asia is handled at the Port of Oakland, ranked as the fourth busiest container port in the US. The port loads and discharges more than 99% of the containerized goods moving through the region, the nation's fourth largest metropolitan area with about 59% the port's total container volume originating in Asia.

Oakland's terminals handled almost 440,000 twenty-foot containers (TEUs) during the first quarter of 2003, an increase of 18% compared to the same four-month period last year.

In 2002, the port handled a total of 1.7 million TEUs, a 3.9% increase over 2001.

"While we're sure that East Coast ports will share in the growth of container volume moving in the transpacific trades, we're convinced that they'll see only a marginal amount of cargo from that market," says Marilyn Sandifur, a spokeswoman for the port.

"We're forecasting significant volume growth in our transpacific business and we've taken major steps to prepare," she said.

Most significant, she added, is the dredging of the port to handle the latest generation of "post-Panamax" container ships, most of which will carry up to 8,000 TEUs and be too large to transit the Panama Canal.

In addition, Sandifur said, several of the Oakland's larger terminals have already equipped themselves with container cranes capable of handling the new ships, and the development of the port's on-dock rail capability is continuing on schedule.

"Everything we see tells us that the future of the transpacific trades belongs to the ports capable of handling large volumes of containers carried on the newest generation of containerships, and most of those ships will be making direct calls on the US West Coast," she said.
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Echoing Sandifur and Aschemeyer is a high-level source at a major Southern California port who spoke with the CalTrade Report on the condition of anonymity.

The Port of Los Angeles alone, he told the Report, saw a twenty-four percent growth surge in container volume during the first five months of this year over the same period in 2002.
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"If they [the Gulf and East Coast ports] took just a small fraction of that away, their terminals would be swamped," he said, alluding to the problems seen at the ports of Charleston, Miami, and Houston last fall after shippers and carriers diverted a significant number of containers to those ports via the Panama Canal during the West Coast port lock-out.
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"They simply don't have the infrastructure to handle it," he said. "The lockout left a negative image that West Coast ports are finally seeing dim because shippers are realizing that the grass really wasn't greener, so to speak."

According to Aschemeyer, the future competition for container cargo moving through California's ports?may well be to the south, not the east.

"In the long term, we need to be on top of what's developing closer to home," he said, alluding to plans at the Port of Manzanillo, Mexico, to build a major container facility that could, in the not to distant future, prove to be a drain on California ports, particularly Los Angeles and Long Beach.

"If Manzanillo gets the capital to invest in the equipment it would need to develop a modern, efficient port and a rail link is developed between the port and Guadalajara, it could be a real issue for us because Guadalajara is, in turn, connected by rail to the whole underbelly of the US."

This, he said, "should be of real concern."

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