A major South Korean shipping company, fed up with delays at the Port of Long Beach, will begin diverting its biggest freighters to Portland, Seattle and Vancouver as shippers continue searching for alternatives to congested facilities in Southern California.
Hanjin Shipping Co. Ltd. will cut the number of containers it sends to the complex and begin diverting its ships, which carry up to 5,500 20-foot containers (TEUs), later this month.
The immediate impact of Hanjin's decision is a loss of 3,600 TEUs unloaded per week. Company officials would not comment on the relative costs. More broadly, the move underscores a growing impatience among shippers about the ongoing jam-ups at both ports that results in lost business and higher costs.
Port docking fees run from $17.50 to $25 for each TEU, depending on the value of the cargo, plus additional wharfage and demurrage charges for storing containers on-site. At those rates, Hanjin's decision could cost Long Beach as much as $90,000 per week.
"There are still delays," said Bill Rooney, Hanjin's New Jersey-based vice president of sales and marketing. "I don't know if I would use the word 'mess' but it's a problem for us as carriers, our terminal operators and most importantly, our customers. When the ship is sitting in one place, rather than actively carrying cargo, it becomes a more expensive proposition. You're paying for the ship while it's effectively not moving cargo."
Hanjin's move is adding to the lost business resulting from backlogs that have approached those during the October 2002 lockout that shut ports down for 10 days.
Hyundai Corp. has stopped sending its 2,800-TEU ships to Long Beach in favor of Tacoma, Wash. And the company's massive 6,000-TEU vessel that calls on Long Beach each week is now discharging 500 fewer TEUs than usual, containers that are now being offloaded in Oakland.
The diversions underscore the growing frustration with the major labor and equipment shortages the local ports have yet to resolve.
"It is a controlled chaos," said Dianne Gunn, national logistics manager for Hyundai's Dallas-based subsidiary, Hyundai America Shipping Agency. "I do not see it improving for quite some time."
Los Angeles effects
Julia Nagano, a spokeswoman for the Port of Los Angeles, said that so far no steamship lines had made permanent diversions away from L.A. But the facility has been losing cargo volume as vessel operators make last-minute decisions to divert ships elsewhere.
Together, the ports lost 64 vessels in temporary and permanent diversions from July through Nov. 8, including 10 cancelled calls so far this month.
Since July, 115 vessels have been diverted to other ports, including 30 scheduled to arrive at the L.A.-Long Beach complex this month and 22 in December.
Although congestion has put a crimp on operations at all vessel lines, they are not suffering equally.
Mediterranean Shipping Co., which has a joint agreement with SSA Terminals - Long Beach LLC, has yet to see the need to implement a diversion plan because it accepts very little cargo from other vessels.
"There are carriers on the West Coast that operate their own terminals and there are carriers that are just tenants of their terminals," said Allen Clifford, Mediterranean's senior vice president. "The (SSA) terminal wants to run efficiently, so its tenant list is limited."
NYK Line announced last week it will suspend all calls to Long Beach until the congestion has abated next year. It has 12 calls scheduled on Long Beach in December.
Zim Integrated Shipping Services Co. Inc. is diverting on a ship-by-ship basis to avoid the additional costs of unloading cargo elsewhere and having to bring it back to Southern California.
"Metropolitan Los Angeles has a large consumer base and much of our cargo is for local consumption," said Phillip Wright, Zim's vice president of West Coast operations. "This is not going to be a permanent situation. Local efforts are being made to resolve the situation."
The diversions have done little to alleviate the congestion. On a given day last week, there were still twice the usual 35 to 40 vessels docked at or just off the ports. (No less than 84 vessels, including 45 container ships, at or off the ports on Nov. 8.)
That's down slightly from this year's peak of 94 ships in early October.
"I don't know whether that means it's improving or it's just a temporary drop," said Dick McKenna, deputy executive director of the Marine Exchange of Southern California, who oversees vessel traffic control at the L.A. and Long Beach ports.
Many of the diverted vessels have gone to Manzanillo, Mexico or ports in the Pacific Northwest, where port operators said they have the capacity to handle more cargo.
"There is still growth potential in the (Pacific Northwest)," said Sam Ruda, marine director at the Port of Portland. "As the situation in Southern California is assessed, the carriers will say, 'Gee, we need alternatives.'"
The Port of Seattle posted a monthly container traffic record in September when it handled 161,620 TEUs, some of which was originally destined for Southern California.
While labor shortages on the docks and at Union Pacific Corp. and Burlington Northern Santa Fe Corp. have been blamed for many of the problems in L.A. and Long Beach, there are other explanations.
Even as the two ports invested in massive expansion in the 1980s and 1990s, maritime officials underestimated how much imported cargo would come through the region to be transported by truck. The resulting freeway congestion also slowed the flow of cargo.
"I wouldn't characterize this industry as having a great track record of forecasting," said Ruda. "The issue didn't evolve overnight. (But) the industry tends to look at things very simplistically."
Long Beach, which lost its status to L.A. as the nation's top container facility in 2000, has grown at a much faster rate this year, handling 4.1 million TEUs from January through September, a 20.5 percent jump over the first nine months of 2003. L.A.'s 5.5 million TEUs represented a 3.4 percent increase over the same period in 2003.
Long Beach officials blame the labor shortage, not the overall trade growth, for the diversions, because that port and L.A. draw from the same labor pool.
"It's not like there is a competition for labor or that we have a separate hiring hall," said Don Snyder, the Long Beach port's marketing manager. "The demand for labor has outstripped the supply. Therefore, that's what's causing any decisions on cargo diversions."
The Pacific Maritime Association, which bargains for the steamship lines, has thus far trained and placed more than 2,500 of the 5,000 new casuals it hired last summer, with 300 to 350 new employees entering the workforce each week.
The last of the 1,250 existing casuals who became registered members of the International Longshore and Warehouse Union will be trained for their more skilled positions sometime next month.
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