April 3, 2015

Long Beach's Slangerup: Port "far ahead of schedule" in recovering from congestion

Says new thinking on productivity, operations, and infrastructure will be needed to prevent another crisis.

By Toby Gooley

The Port of Long Beach is moving faster than expected to shrink the container backlogs that built up during the recent impasse between West Coast waterfront labor and management, and should resume normal operations within four to six weeks, the port's chief executive said on April 1.

Jon Slangerup told the Northeast Trade & Transportation Conference assembled by the Coalition of New England Companies for Trade (CONECT), in Newport, R.I., that the port was "far ahead of schedule" in recovering from the vessel congestion that developed over several months while the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) battled over a new contract. During the impasse, PMA accused ILWU of deliberately triggering a work slowdown by withholding the services of skilled crane drivers tasked with moving containers around. A tentative five-year pact was reached Feb. 20. Delegates of the ILWU caucus voted today to recommend the proposal. It now goes to the rank-and-file for ratification. A final tally is expected to be announced May 22.

At another industry conference in early March, both Slangerup and Gene Seroka, head of the adjacent Port of Los Angeles, set a three-month timetable for the ports to have all backlogs cleared and to resume normal operations.

In Slangerup's view and that of several other speakers, the union's actions, while an obvious and troubling contributor to the backlog, exacerbated a longer-term and more challenging problem: The volume of cargo arriving on increasingly larger container ships has outstripped shoreside infrastructure and handling capacity. Moreover, the giant ships are being stowed in a way that slows discharge and makes it difficult to move inbound containers off dock quickly enough. Rather than stowing containers in discrete discharge blocks for each of the steamship lines in an operating alliance—depending on the alliance, up to six separate carriers—load ports have been stowing containers randomly; to get at specific carriers' containers, stevedores had to seek out individual containers all over the ship, a practice Slangerup and others liken to hunting for Easter eggs. That meant handling containers on board and on the ground five to eight times instead of the usual one to three "touches," Slangerup said.

Long Beach, a "landlord" port that leases out its facilities, has invested heavily in new port infrastructure. Slangerup said he expects that the $1.2 billion "Middle Harbor" container terminal project, designed to combine two aging container terminals into one modern facility, will go far toward alleviating the imbalance between volume and handling capacity. The facility, occupied exclusively by Hong Kong-based carrier Orient Overseas Container Line Ltd. (OOCL) under a 40-year lease signed in 2012, is expected to have one of the most sophisticated IT systems ever assembled at a port.

But to prevent another meltdown, the port must attack congestion on multiple fronts and "completely rethink the role a port like us has to assume," Slangerup said. "We have to be more agile, more strategic, and more customer-focused"—the customer being the importer and exporter, not the steamship line, as is the usual mindset at ports, he said. "If we don't do what we can to benefit the BCO (beneficial cargo owner), then we will be putting all of our investments at risk."

Strengthening on-dock rail service and convincing Union Pacific Corp. and BNSF Railway Co., the two main western railroads, to permanently shuttle containers off-dock to inland handling facilities will be critical, Slangerup said. A new "gray" shared chassis pool has made a difference, but on average 18 percent of chassis around the port have been unavailable for service due to maintenance and repair issues, he said. To improve chassis availability, Long Beach is purchasing more equipment it can put into service at times of peak demand. The port also will hold talks with carriers and terminals in Asia about restoring block stowage.

The port authorities of Long Beach and Los Angeles will soon begin discussions on ways to improve operations and to prevent a similar congestion crisis, Slangerup said. The first formal meeting is scheduled for later this month and will bring together all stakeholders, including labor, to identify immediate opportunities to improve container throughput and velocity. The Federal Maritime Commission has green-lighted the discussions.

Time is of the essence; Slangerup expects the ports, which compose the largest port complex in the United States, will host 18,000-TEU (20-foot equivalent unit) ships by the end of this year. At least three carriers that call at Long Beach have 20,000-TEU ships on order, he said.

For 11 years, Long Beach was ranked the country's second-busiest port, according to data from research consultancy Zepol Corp. However, the declines in containerized volumes in the past two months—most of it caused by the labor unrest as goods either sat on ships at anchor or were diverted to East and Gulf Coast ports, Canada, and Mexico—recently caused Long Beach to drop to third, behind the Port Authority of New York and New Jersey.

Mark Solomon contributed to this article.

About the Author

Toby Gooley
Contributing Editor
Contributing Editor Toby Gooley is a freelance writer and editor specializing in supply chain, logistics, material handling, and international trade. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.

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