A panel of industry experts discuss the potential threat that Panama Canal expansion will have on the ports of Long Beach and Los Angeles. From left: Paul Bingham of Wilbur Smith Associates, Dr. Mary Brooks of Dalhousie University and Todd Thomas of Expeditors International.
3:00pm | A panel of experts said on Wednesday night that the Ports of Long Beach and Los Angeles are very well equipped to maintain or increase their levels of imported volume in the near future, and that they are likely not at risk of losing business when the Panama Canal expansion is completed in 2014.
“The shortest distance between two points is a straight line and that won’t change,” said Todd Thomas of Expeditors International, a panelist during the discussion. “Los Angeles and Long Beach is always going to be a vibrant, relevant port.”
Thomas began his presentation by openly offering his bias towards west coast ports. But his optimistic outlook may do more damage than benefit to local ports that have spent the last few years painting themselves as victims that must undergo massive expansions or lose business when the Panama Canal expands in 2014.
Shipping companies in Asia, the dominant export market, will use the expanded Panama Canal to bypass the west coast completely and sail into Gulf and east coast ports in Houston, New Orleans, Jacksonville, Norfolk and more. Or so the worry goes. West coast ports have used this theory to approve massive infrastructure expansions. But panelists during the Wednesday night discussion said that Long Beach and Los Angeles have little to fear.
“You’ve got the cargo, but are you going to lose it?” asked Dr. Mary Brooks of Dalhousie University. “You’re closer to Asia and faster to market. But it is yours to lose.”
The discussions were part of a panel presentation on the campus of California State University Long Beach (CSULB) on Wednesday, entitled Panama Canal Expansion: The Battle For Jobs And Cargo. The event was well attended and nearly filled the 1,074-seat Carpenter Center. It was hosted by the university’s Center for International Trade and Transportation (CITT).
Panelists predicted that massive capacity, advanced environmental standards and close proximity to the Asian market would leave the ports of Long Beach and Los Angeles in excellent position until at least 2020 and likely beyond. This contradicts the idea that the expansion of the Panama Canal in 2014 will lead Asian shipping companies to bypass the west ports and sail into the Gulf Coast or upper east coast harbors.
That’s unlikely, said the panelists, because while some eastern ports may benefit from the Panama Canal expansion, most simply do not have the infrastructure or capacity to draw customers away from the west coast.
“Just because the Panama Canal is going to be widened does not make [ports of Long Beach and Los Angeles] irrelevant,” said Thomas.
If business does shift toward the east coast, the west coast ports may lose some of their 36.5% market share. But their volume of business will almost certainly increase as the economy improves, so the east coast may increase their business but will not cut into business on the west coast.
The ports of Long Beach and Los Angeles, they said, are safe.
While this is good news, it contrasts what the Port of Long Beach has said in recent years as they’ve approved and moved forward with massive, costly infrastructure improvement projects designed with the fear that reluctance to move forward will cost them business when the Panama Canal expands in 2014.
An official Port of Long Beach report from the March 2010 “Pulse of the Ports” event warns that infrastructure must be improved or business will be lost.
“And the planned expansion of the Panama Canal could divert cargo to East Coast ports,” the port article states. “It is important for the ports to invest in infrastructure and have consistent regulations if they want to remain leaders, the panelists said.”
In an article earlier this year, then-Port employee Alex Cherin told AARP Seaport magazine that the Panama Canal expansion creates a problem for west coast ports that can be solved at least in part with infrastructure.
“Our best way to compete against the Panama Canal and the all-water route is to invest in our infrastructure projects,” Cherin said.
While panelists on Wednesday night said that the ports of Long Beach and Los Angeles are already far and away more advanced in both infrastructure and capacity than east coast ports, this warning of losing business and the necessity to expand had become a mantra in recent years. If we want to keep our business, they said, we need to build. So they did.
The Port of Long Beach in 2009 approved a ten-year, $750 million expansion of their Middle Harbor facility that will essentially double the handling capacity of a harbor that is already more than ten times larger than ports in Jacksonville and others on the east coast.
Recently, the Port approved plans to rebuild the Gerald Desmond Bridge in a five-year, $1.1 billion project that adds emergency lanes, improves traffic flow and will allow modern, massive supertanker cargo ships to pass underneath.
The local Joint Powers Authority (JPA) is currently weighing a proposal from the Intermodal Container Transfer Facility (ICTF) to implement massive expansions to the railyard that runs through west Long Beach and carries cargo out from the South Bay and across the nation.
Under the surface – or up in the air – of all these projects is the environmental aspect. Long Beach and the South Bay already suffer from the worst air quality in Southern California and while all three projects promise to reduce pollution, they are designed to handle much greater traffic and use. The Port of Long Beach has stated that the Middle Harbor expansion will reduce emissions by 50% once fully operational. The ICTF made an even stronger statement and said that their expansion will run 75% cleaner once fully operational.
However, in the future, larger ships allowed through a new Gerald Desmond Bridge will be able to bring a massive increase of goods into the Middle Harbor, which will be able to handle a massive increase of cargo volume and send them out to expanded railyards and possible new lanes on the 710 Freeway which will send more trains and trucks and their emissions out into the air than ever before.
One audience member mentioned environmental concerns and inquired about the plausibility of environmentally-friendly alternatives such as magnetic levitation (MAGLEV) railways. Industry expert Paul Bingham (pictured at right) of Wilbur Smith Associates said that the delay in transferring to cleaner transportation is not because of difficulties in technology, but rather funding.
“It’s not that we don’t have the scientists and engineers,” he said. “We need to come up with actual capital to make the leap in future technologies.”
The argument of funding shortages seems to hold little weight, however, as the Port of Long Beach alone committed to more than $1.85 billion in expansions over the next ten years.
Local ports have without a doubt reduced their environmental emissions with recent programs such as the Clean Air Act and Clean Trucks Program, as well as increased use of on-dock or near-dock loading and electric “cold ironing” stations for docked ships. The ports have been praised throughout the industry for their environmental efforts, which is another key reason that experts say they will not be threatened by Panama Canal expansion.
Very strict environmental shipping regulations could be on the way for ports nationwide in the next few years, the federal government has hinted. If they are enacted, most east coast ports would be forced to accelerate their “green” efforts and invest huge sums of money. How will they pay for it? Likely with raised fees and tolls to shipping companies, which will make those ports less attractive as the costs increase.
“[Shipping companies] are always concerned with additional fees,” said Thomas. “No one wants to pay more, that’s for sure.”
Since advanced environmental measures are already in place and paid for in Long Beach and Los Angeles, shipping companies will be more likely to do business here.
But while the ports of Long Beach and Los Angeles have certainly made strides to clean their operations and therefore remain attractive to shipping companies, will their future ability to handle massive increases of cargo offset this progress?
All recent infrastructure projects have moved forward under the threat that Panama Canal expansion will draw business to the east coast and facility expansions must be made in order to survive. Panelists on Wednesday night, however, repeatedly said that the Ports of Long Beach and Los Angeles aren’t threatened by the expansion.
If anything, east coast ports will regain some of the market share that they once held. But the west coast ports like those in Long Beach and Los Angeles will retain and even increase their business.
“If you have a declining market share but volume is increasing,” said Dr. Brooks, “Then you shouldn’t be worried.
In this graphic, Dr. Mary Brooks shows that while roughly 25% of imported goods are bound for the western half of the U.S. (above), the ports of Long Beach and Los Angeles handle a whopping 36.5% of the nation’s incoming cargo (below).
In 2008, the ports of Long Beach and Los Angeles handled nearly triple the cargo of any other harbor region in the United States.
In his presentation, Todd Thomas made a strong statement in support of the ports of Long Beach and Los Angeles, pointing out that the harbors have more than ten times the handling capacity of most east coast ports – even before the recently-approved Middle Harbor expansion that is estimated to double the Port of Long Beach’s handling facility. This graphic was met with cheers from the crowd.