The mood at the FuturePorts "Clearing the Air" event Tuesday in San Pedro was relatively upbeat with speakers noting the bounce back of container traffic coming through the Port of Los Angeles and Port of Long Beach, but warning that competition for future cargo will be intense.
Economist John Husing said that even if the year-to-year increase in container volumes slows down some later this year, it could still represent the largest single-year hike in cargo ever for the two ports. That still will not bring the ports back to their peak, but it will regain some lost ground. The increase is also adding jobs to the economy, he said.
The increase in volume is not just driven by empty shelves, he said. Some of it is driven by manufacturers, who have not been investing in tools and equipment during the recession. Although consumer confidence is also coming up, it is still not back to normal levels, Husing said, and many young consumers have "learned a new word - saving."
The vacancy rate in the Inland Empire, a region that serves as a logistics hub for cargo coming through the ports, is also coming down, with leases signed for 8.3 million square feet of industrial space during the past six months, he said.
Pilar Hoyos of the Watson Land Co. said that the litigious environment, the political uncertainty, and the hostile regulatory climate in California discourages companies from locating in the state. The state is burdened by a disconnect between policy and outcome, she said.
Even within the state, there are differences. Her company has a policy not to build projects where they are not welcome. The company divested itself of property in the Los Angeles community of Wilmington to invest in Chino, where they were welcomed with open arms. The political, environmental, and permitting process in Los Angeles discouraged development there, she said.
Peter Peyton, president of ILWU Local 63, said that the key to being competitive is to look at the supply-chain system as a whole, rather than just the individual links. He suggested establishment of a logistics "think tank" that would bring together academics and industry leaders to figure out how to make the ports work better.
He talked about the various competitive threats, including the Port of Prince Rupert and the expansion of the Panama Canal, which could shift West Coast cargo to the East and Gulf coasts. Prince Rupert, he noted, has four ship-to-shore gantry cranes. Los Angeles and Long Beach have 140. The Panama Canal will open the door for shippers to employ an all-water route, but that doesn't mean there has to be a huge market shift from the West Coast to the East, he said.
"It's ours to lose, but it's also ours to win," he said. "We will beat the Panama Canal if we do it right."
Patty Senecal of the Western States Petroleum Association noted that there were 26 refineries in California in 1988. Today there are only 13 and that 60 percent of the crude oil for those refineries comes through the state's ports.
She said that the environmental regulatory atmosphere in the state makes it hard to plan because it changes so often that companies end up investing in technology and then have to make new investments before amortizing their previous upgrade - resulting in stranded costs.
Other speakers echoed similar themes. Lanny Schmid of Union Pacific Railroad noted that not all technology pans out. Before investing in technology, the railroad wants to make sure it is safe, technologically feasible, consistent will local requirements, operationally feasible and cost effective. LaDonna DiCamillo of the BNSF Railway said that even though business has been down during the recession, the company has continued to invest in infrastructure.
Rick Cameron of the Port of Long Beach said that working toward environmental goals is like playing Chutes and Ladders. Just when you think you are almost there, you hit a chute and you are back where you started. Mike Christensen of the Port of Los Angeles said that after eight years of being completely shut down for new development, the port is now spending about $1 million-a-day on construction and generating about 6,000 construction jobs.
Hasan Ikhrata of the Southern California Association of Governments urged the various stakeholders to collaborate. SCAG is a regional planning body that represents six Southern California counties with more than 19 million residents.
The debate should not be between one side saying do it or else and the other side saying we will just take our business and move somewhere else, he said. It's time to end all the studies and start working to build infrastructure and clean up the air, he said.
-- The Cunningham Report
