Photos courtesy of Port of Long Beach.
Congestion at the Ports of Long Beach and Los Angeles, a topic one might expect the Chief Executive to skirt around, in the hopes of painting Long Beach’s temporarily sputtering economic engine in a more positive light, was a main theme of this year's State of the Port address. Jon Slangerup confronted the issues caused by continuously-growing container ships, the shortage of chassis and the ongoing negotiations between the PMA and ILWU, head on. The picture painted by Slangerup's address was one of a promising future for the Port, with bold moves being made by a forward-thinking Harbor Commission, the City of Long Beach and their participating stakeholders, toward environmental- and overall-sustainability, and a more efficient and modernized port.
Slangerup was introduced by a long line of city and port officials. Dr. Noel Hacegaba, Managing Director of Commercial Operations and Chief Commercial Officer, told the audience that this day, Thursday, January 29 will be remembered as the first day of a “new vision and a new direction for our port.”
Mayor Robert Garcia spoke of the annual event as a method to bring everyone together to discuss “our most important economic engine in the city of Long Beach,” while mentioning that although the work ahead will be difficult, “the port is moving forward in a positive direction.”
After a comprehensive look into the POLB’s history, Doug Drummond, President of the Harbor Commissioners, said “it’s critical that our current board of harbor commissioners can build on this past, to address present and future challenges and opportunities. The team I serve with now is a remarkable group. Working in sync, each contributing to his or her particular strength, leading to unified solutions.”
Slangerup, who was named the POLB’s Chief Executive in June 2014 based on his extensive experience with aviation, logistics, clean technologies and building global businesses, has taken an innovative approach to developing clean energy technology, including the treatment of marine ballast water, while serving as CEO, board director or investor in multiple technology companies focused on developing state-of-the-art products. One of the most impressive feats on Slangerup's resume was an eight-year assignment in Toronto, when he was tasked with transforming FedEx Canada from a small courier operation into Canada’s leading international express logistics company.
Rich Dines, Vice President of the Harbor commissioners, said “[Slangerup's] 34 years of experience in both global logistic and environmental technologies singled him out from other candidates, and he understands the complexities of running a large operation... In just under seven months he's made a major impact on our operations and our organization and we couldn't be more pleased with his bold direction.”
Slangerup began by stating his excitement over the fact that during the first few months on the job, “... we have significantly increased the diversity of our senior management team. Nearly half of our team is now women and minorities.”
Slangerup continued by breaking down where the POLB stands currently, and explaining that a full one-third of the port’s revenue comes from crude oil, petroleum coke and other non-containerized freight, while the number of shipping containers or 20-foot-equivalent units (TEUs) that cross its docks is the primary metric for measuring how busy the port is. TEU volumes have recovered to pre-recession levels, however, the year-to-year growth has been roughly two percent.
“In total we've moved nearly seven million TEUs and with the U.S. economy continuing to improve, with unemployment going down, gas prices heading down, resurgent manufacturing and higher consumer spending, we expect economic gains this year,” he said. “And the strengthening of the U.S dollar will mean that our imports will be growing faster than our exports again this year.”
Such gains are expected to create more jobs at the port and throughout the region. Today, the POLB supports one out of every eight jobs in Long Beach, for a total of 30,000 jobs, while more than 300,000 jobs are provided in the Southern California region and 1.5 million countrywide, according to Slangerup. The POLB is uniquely self-funded from leases on terminal operations and cargo fees, while most other ports are subsidized by taxpayers. Every year the port gives millions of dollars to the City’s Tidelands Fund, which is funneled into community and beachfront projects like the recently-completed Bluff Park.
The POLB’s $4 billion capital improvement program, the largest among all U.S. ports, according to the Chief Executive, will employ up to 5,000 additional construction workers, with most of those jobs and dollars going toward the replacement of the Gerald Desmond Bridge and the Middle Harbor redevelopment project.
Larger container ships are a huge part of the current congestion, but are also the catalyst to the port’s long list of improvements, with billions being invested in more efficient port operations, including the development of terminals, roadways, bridges and railroads. The replacement of the Gerald Desmond Bridge, to be the city’s tallest structure, will increase port container capacity by a third and will improve truckers’ commutes to and from the port. About a billion is also being spent on improvements to the port’s railroad system, which will increase on-dock rail and will improve truck and overall terminal congestion. Lastly, the Middle Harbor Project will transform two aging container terminals into an all-electric, advanced and sustainable operation that will increase the port’s capacity by 20 percent.
“If it was a stand-alone port,” said Slangerup, “it would rank as the country’s fourth-busiest port.”
To give the audience an idea of the increased size of the shipping containers, he said, “Our current projects will allow us to handle the 20,000 TEU vessels that are currently on order by our customers. Now to put this in perspective, a 14,000 TEU vessel is as long as the Empire State Building is tall, and it’s also as wide as that 405 freeway out there, both northbound and southbound lanes combined.”
While the POLB regularly handles 14,000 TEU vessels, said Slangerup, the current congestion is largely because of them. While they lower the cost of transporting ocean freight by reducing fuel and crew costs, alliances made by formerly competitive ocean carrier companies in an effort to fill the ships, decided that owning and managing their own chassis was not a priority. The chassis were sold to leasing companies, a decisions that has led to major consequences.
“First let me explain. In the good ol’ days, which is about 18 months ago,” he voiced to a chuckling audience, “when ships were a bit smaller, ocean carriers employed a method of loading containers called block stowage.”
Block stowage means that shipping containers were grouped in blocks at the origin port based on where they were to be taken and whether they were to be transported by truck or rail. This method allowed for efficient offloading, referred to as "velocity of freight." Slangerup explained that as ships have increased in size, more alliances have been formed, compromising the entire block stowage process.
“Now, containers are being loaded by various carriers and multiple origin ports, resulting in a more random loading pattern. According to one of our terminal operators, his load plan looked more like a basket of easter eggs, than organized blocks of colors,” he said.
When offloading containers from large ships, operators now stack them on the tarmac randomly, then have to go back and organize the containers into a block-based pattern. Having to hunt for the individual containers and having to handle them between one and five more times than would be considered the most efficient, has driven costs sky-high and “dramatically changed the game,” said Slangerup.
The unplanned shortage of chassis during peak demand, a shortage of rail cars and the ongoing negotiations between the ILWU and PMA in the fall, placed the West Coast ports in a situation Slangerup described as “the perfect storm.”
“Everything went sideways very fast,” he said.
And while the Chief Executive spoke very optimistically of the PMA and ILWU reaching an agreement by Super Bowl Sunday, one missing piece of the puzzle to the aforementioned “perfect storm,” the port can only hope that its strategy of implementing a gray chassis interoperable fleet and a peak relief fleet, to be tested starting next week, will at the least, begin to solve one of its more pressing strategic issues.
“We simply cannot and will not let chassis contribute to congestion again,” he succinctly expressed.
“Taking all of this together,” he continued “this entire perfect storm together, in my view we must completely rethink and reorganize the way the supply chain works. Today its very fragmented, in many cases it's silo driven and it doesn't share information, it simply does not function as an integrated system, so we have a choice. We can watch our business go elsewhere or we can really come together as an entire team and industry to change the way our supply chain works.”
He credited the City and Mayor Robert Garcia for working with the POLB, as well as the POLA, so closely. While ports are often seen as separate entities from their immediate surroundings, Slangerup said both he and the Mayor have worked hard to integrate the two as much as possible in an effort to move the port forward.
“The biggest prize of all in this effort,” he said “is that we will drive enormous cost out of the entire supply chain, so we've already begun bringing together our stakeholders, with both ports working independently and as soon as the Federal Maritime Commission approves our request to collaborate on a joint San Pedro Bay initiative, the POLB will in fact work with Los Angeles to make this happen.”
The security division was heavily commended for its virtual port system, implemented in June, which combines data from several sources and then generates a comprehensive visual plan of activity that supports said operations, faster incident response times and business recovery within and outside the harbor complex. On the near horizon, two new fire boats that are over 100 ft. long and are much more powerful than previously-used models will be utilized to protect today’s larger vessels.
According to the Chief Executive, diesel emissions have dropped over 80 percent since the Green Port Policy was adopted 10 years ago, while last year the POLB was named the World’s Greenest Seaport. The port has invested nearly $200 million to install Shore Power at each terminal, allowing docked vessels to shut down on-board engines and then access dock-side electrical outlets, a process called cold-ironing that greatly reduces emissions. According to Slangerup, harbor commissioners approved an incentive program in December of 2014 to reward shipping lines for testing alternative technologies. One such technology being tested directly connects to the smoke stacks of container and cargo ships and has the potential to reduce air emission as must as cold ironing.
As for the POLB’s future, Slangerup says it’s a bright one. Cleaner air, new technologies and overall healthier, more sustainable and efficient practices have the potential to render the City and surrounding regions a better place to live.
“Now the POLB is evolving, as you can see, along with our industry, it is no longer enough for us to just be a landlord port collecting rent, or building infrastructure—which we do so well—or facilitating solutions just for our direct customers, the terminal operators,” said Slangerup. “We are now looking at the entire supply chain process and building relationships with every stakeholder in that chain. As a port authority, we are in a critical and perfect position to drive major improvements throughout our entire industry. No one else can do it. The port authority can, and that's exactly what we're going to do.”
Future plans for a new program—code name “Energy Island”—will involve building a zero-emission environment using the latest technology, such as a network of solar panels, fuel cells, clean fuel depots and wind turbines to harness the sun, wind and sea to create a self-sustaining, reliable energy system. The POLB plans to be able to provide emergency power to critical city operations, such as hospitals, and also to provide clean drinking water through seawater desalination facilities.
According to Slangerup, Energy Island will allow the port to use self-generated power to provide energy security and business resiliency, a reduced demand on grid power and a return of surplus green power back to the grid, stable energy costs for terminal operators and lastly, cost-effective fueling options throughout port operations.
Slangerup concluded his address emphatically, stating that “Our port has long demonstrated our ability to deliver economic growth and environmental stewardship. These are two faces of the same coin. Energy Island will continue that legacy. We are committed to working with all of you, our customers, our stakeholders, to change the way the POLB does business, and indeed the way our entire industry works together. Your port, your POLB, is well on its way to becoming the port of the future and together, our future starts now.”