US west coast faces major containership size upgrade

6/6/2017

The number of containerships of 13,000 teu or above deployed on the Asia-US West Coast trade has nearly doubled since the start of 2017, according to container analyst Drewry, posing questions about how well terminals will cope and how long it will be before the trade is regularly served by ‘mega-ships’.

Back in late 2015, French carrier CMA CGM trialled a single 18,000 teu Ultra Large Container Vessel (ULCV), CMA CGM Benjamin Franklin, on one of its Asia-US West Coast services to the port of Los Angeles. But despite backtracking on a later plan to make the move permanent, CMA CGM and its rival carriers are increasingly trusting West Coast ports with bigger ships, Drewry observed.

Drewry research suggests that the number of 13,000+ teu containerships has risen from 21 units in January to 36 in May.

“At the time of the CMA CGM Benjamin Franklin trial-run, we questioned the ability of West Coast ports such as the Los Angeles-Long Beach complex to handle the 18,000 teu ULCVs on a regular basis, citing concerns over infrastructure, labour and the ability to efficiently move cargo to and from the port complex via truckers and intermodal railroad,” Drewry noted in its latest Container Insight Weekly briefing. “It would appear that carriers share some of the same fears as, thus far, they have resisted the urge to introduce mega-ships, limiting their ambitions to 14,000 teu units for the time being.”

Drewry said the recent influx of 13,000+ teu ships into the Asia-WCNA trade coincides with the 1 April alliance restructuring that reduced the number of weekly services in the lane by one to 37.

“As more cargo is squeezed onto fewer weekly services, terminals have to prepare for much greater peaks in container activity,” Drewry noted. “This problem is exacerbated on the USWC as ships often only call at a couple of ports, unlike in Europe, meaning those US ports have to handle a higher ratio of boxes per ship call.

“Having a big import bias, as Los Angeles-Long Beach does – there were 2.4 times more loaded imports than loaded exports in 2016 – adds to the complexity as import moves require more exchanges between various equipment types, requiring more time, and more container terminal choreography than loading export containers.”

Drewry said a swifter rise in exports of late will have helped smooth operations somewhat, but imports remain dominant. “After four months of 2017, total port handling at Los Angeles-Long Beach has thrived, growing by 8% to 5.1 million teu,” the analyst noted. Loaded exports (1.14m teu) increased by 9%, while loaded imports (2.54m teu) were up by 6%, and empties (1.41m teu) rose by 10%.

The container shipping analyst predicted that ULCVs will eventually become a feature of the Asia-USWC container trade, “but the time is perhaps not now. While the sheer scale of the concentrated container moves generated by the mega-ships at the highly-fragmented Los Angeles-Long Beach complex may appear daunting under ‘normal’ circumstances, conditions are currently less than perfect with major construction projects ongoing.”

Road closures and detours linked to the $1.5 billion Gerald Desmond Bridge replacement project are also affecting traffic flows on California’s highways to and from the Terminal Island facilities and will do so until completion, not expected until next year, Drewry added. “At the same time, work continues in Long Beach on the $1.3bn Middle Harbor Terminal Redevelopment Project that will eventually combine two existing terminals (Piers D, E and F) into an all-electric, fully automated facility able to accommodate 24,000 teu ships when the second phase of the project opens in 2019, when it will have an annual capacity of around 3.4 million teu.”

Drewry said there hasn’t yet been any significant disruption caused by the big construction projects, according to the Harbor Trucking Association (HTA), which records the time it takes trucks to exit from any of the 14 Los Angeles-Long Beach terminals from when they first queued outside the gates. HTA reported that the average truck turnaround time in April was 80 minutes, 4 minutes slower than March but faster than either January (88 mins) or February (89 mins).

“However, the HTA did point towards mixed results among the terminals, with better turn times at more automated facilities, such as Long Beach Container Terminal Pier E that recorded an average visit time of 41 minutes,” Drewry noted. “Terminals that saw increased business from the new alliance services worsened in April, according to HTA. For example, a doubling of weekly container volume at the Total Terminals International (TTI) facility in Long Beach contributed to its average visit time extending to 106 mins in April, from 87 mins in March.

Drewry said the overnight alliance re-shuffle of services had once again changed the terminal landscape in Los Angeles-Long Beach, forcing importers to carefully consider their carrier choice if they have a preferred terminal.

“Alliance terminal calls are clearly skewed by the member carriers’ equity holdings in certain facilities,” it added. “Inevitably, carriers want their alliance to call at their affiliated terminal, but with so many competing lines wanting the same thing that means the calls are spread out across the complex so that different strings of the same alliance call at different terminals.

“Therefore, shippers regularly importing from Asia to Los Angeles-Long Beach will one week have to collect cargo from String 1 calling at Terminal A; the next week the cargo is on String 2 calling at Terminal B.”

Analysis by Drewry shows that 2M + HMM has five weekly services from Asia to Los Angeles-Long Beach spread over three terminals; Ocean Alliance has nine services calling at four different terminals; and THE Alliance eight loops over four facilities.

“While the revised alliance set-up appears not to have disrupted operations significantly at the outset, that doesn’t mean there is no risk of future congestion,” it added. “A combination of bigger ships, high-intensity terminal activity and construction work, particularly in the upcoming peak season summer months, could create some obstacles for importers delivering goods to their final markets.|

Drewry concluded: “ULCVs will come to the USWC in time, but carriers should wait until the ports are completely ready for them − in the case of Los Angeles-Long Beach, when most of the disruption surrounding the construction works is over. Until then, importers would be wise to monitor the productivity of the various terminals and consider their terminal preference when selecting carriers.”