Expanded Chinese Business to Buoy Long Beach

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There are increasing indications that Southern California is holding on to its position as the leading gateway for Asian trade, despite fears that the region was losing its edge.

The most recent case in point: last month’s announcement by Oakland’s Matson Navigation Co. that it is adding a “second string” of vessels providing service from the ports of Hong Kong, Shenzhen and Shanghai, China, to the Port of Long Beach. The five added ships – which could bring an additional 234,000 container units annually into Long Beach – will boost the company’s total number of local ships to 10.

Dave Hoppes, a spokesman for Matson, said the expanded service stems from demands from customers who want goods brought into the port complex.

“It is a direct response to the exceptionally positive support we’ve received from customers,” he said.

Matson’s move came on the heels of a similar announcement this year by a small Norwegian shipping startup called Containership Co. that it was launching weekly service from China to the Port of Los Angeles with the potential of adding 250,000 container units a year. The announcements are significant in light of both ports’ recent history of losing business to competitors due to operational issues.

“It wasn’t that they didn’t have the capacity,” said Paul Bingham, managing director of global commerce and transportation for IHS Global Insight, an economic consulting and analysis firm in Washington, D.C. “The problem was that the cargo wasn’t being handled efficiently.”

As a result, he said, many importers – reacting to what they perceived as insurmountable problems causing congestion and delays – began turning away from Southern California amid the boom in international trade in favor of ports such as Norfolk, Va.; Charleston, N.C.; and Savannah, Ga.

“The congestion was the poster child, but what was happening was that the importers were deciding, based on their experiences, not to put all their eggs in one basket,” Bingham said.

The Southern California ports responded with a series of aggressive changes that seem to have eased the problem. Among other things, they increased terminal operating hours through the joint Pier Pass program and improved their efficiency in loading trains. The worldwide recession, of course, eased trade volumes – and problems – sharply.

Recently, trade has been bouncing back despite the weak economy. July was the busiest month of the year for both ports, with Los Angeles handling 730,745 container units, a 26.8 percent increase over a year ago. Some 587,880 units passed through Long Beach, a 35.8 percent increase.

While not all old shippers are coming back, Bingham said, new Chinese importers are trying Southern California first.

“Congestion is no longer a problem, and if you’re entering the Asia-to-U.S. container shipping business for the first time, you’re most logical market is going to be Long Beach-Los Angeles. It’s still the biggest gateway and the place where you’ll find the most customers,” he said.

Shifting Quarters

In other port news, California United Terminals – the terminal operator for Seoul, South Korea-based Hyundai Merchant Marine – is moving from the Port of Long Beach to avoid a redevelopment project that could take a decade.

The company, which handles about 350,000 container units a year, will sublease 98 acres at Pier 400 in the Port of Los Angeles from APM Terminals, which operates the facility primarily for the Maersk shipping line.

The main reason for the move is to avoid potential disruptions during the Long Beach port’s planned Middle Harbor Redevelopment Project expected to begin construction in 2011, said Hyundai spokesman Jeff Sprawls.

“We think this will allow us to maintain the same level of service to our customers during the construction,” Sprawls said.

California United Terminals now occupies a 100-acre facility in Long Beach next to a terminal leased by Orient Overseas Container Line. Under the planned project, the facilities will be merged and expanded into a single 350-acre terminal.

“We were negotiating to have the two companies share the consolidated facility,” said Art Wong, a spokesman for the Port of Long Beach. “We were hoping to keep them both.”

The move was approved this month by the Los Angeles Board of Harbor Commissioners. Port of Los Angeles spokesman Phillip Sanfield said Hyundai should bring “potentially more volume in years to come” for Los Angeles.

Staff Reporter David Haldane can be reached at [email protected] or at 323-549-5225, ext. 225.

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