Imagine a world where advances in drones and electro-magnetics mean cargo ships can sit a mile offshore as flying machines pick up the containers and carry them to waiting rail cars and trucks.
Not these days, when nearly nothing is out of reach in the realm of technology and transportation.
It took 410 years to get from Leonardo DaVinci’s drawings of a helicopter to 12 seconds of sustained flight by the Wright Brothers. Jet technology arrived 36 years later. An aircraft broke the sound barrier 18 years after that. The first orbit of the earth came 14 years later. It took eight years to get from there to the moon.
And that was before the internet.
Now hold that thought and imagine what the Port of Long Beach might do if the Committee on Foreign Investment in the United States prohibits China Overseas Shipping Co.’s proposed $6.3 billion deal to buy Orient Overseas International Ltd.
China Overseas Shipping, or Cosco, is based in Beijing and state-owned. Orient Overseas is privately held with headquarters in Hong Kong, a Special Administrative Region of China – status that ostensibly means less government involvement in business.
CFIUS, meanwhile, is a secretive body with broad powers to prohibit deals between domestic enterprises and foreign counterparts, with a duty to act in the best interests of the U.S. Various reports have the body looking hard at the Cosco-Orient Overseas deal, which would include the 34 years left on a lease for a container terminal at the Port of Long Beach’s Pier E.
It’s arguable whether Cosco poses a genuine threat to U.S. interests, but let’s set that aside for now.
Imagine instead that Cosco and Orient Overseas respond to the purported concerns by carving the Long Beach terminal out of the larger deal. Such a move would seem to leave Orient Overseas with several options, including a search for a buyer acceptable to the U.S. government or negotiating a way out of the lease at the port.
The Port of Long Beach expects operating revenue of about $380 million on a total budget of $748 million this year.
Orient Overseas agreed to pay $4.6 billion over the course of 40 years on the lease, with about $50 million due in rent this year.
That’s a big gap to fill, and will make it tempting to look for a tenant to take up where Orient Overseas leaves off if the Long Beach leasehold is sold separately from the Cosco deal.
Now let’s go back to the science fiction stuff – the super drones unloading ships parked offshore. Could that change the game at the port by reducing the need for terminal capacity or causing other shifts that can’t even be conjured up at this point?
We suggest port officials keep their imaginations alight and stay away from 40-year deals for terminals, in any case.
The Chinese language uses two characters to form the word “crisis” – one for “danger” and the other for “opportunity.”
Perhaps an apt point to consider amid this latest flap over trade with China.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Long Beach Container Terminal Sold for $1.8 Billion
- Cosco Shipping to Put Long Beach Terminal in U.S. Trust
- Chinese Company's Impending Control of L.B. Terminal Prompts Concern
- Deal Takers
- Twin Ports, Two Records
- Terminal Consolidation Could Bring Sea Change
- Sharp Split at Ports Amid Consolidation
- SHIPPING---China Shipper Nears L.A. Deal