Port Of L.A. Races To Prep For Panama Canal Expansion
At the Port of Los Angeles, two barges take turns to open their underbellies, depositing onto the sea floor enough mud to fill an Olympic-sized swimming pool.
The massive dredging operation, which runs 24 hours a day, seven days a week, is part of the port’s race against time to retain its economic vitality. The $378.7-million project will deepen the port's main shipping channels in order to prepare for a new generation of larger ships, some which have already hit the high seas.
A delay in the dredging could have drastic consequences for the nation’s busiest port, which handled nearly 8 million containers last year and according to its website, generates 919,000 regional jobs. Los Angeles currently has a lock on much of the cargo that is shipped from Asia and then loaded onto trucks or trains that distribute it across the U.S. But come 2014, a long-awaited expansion of the Panama Canal will allow larger ships to head directly from China and other Asian countries to ports on the East Coast.
If the Los Angeles port doesn’t make improvements by then, it could see a significant amount of its traffic drift eastward.
“The dredging project is our lifeline,” said Phillip Sanfield, director of media relations at the port. “We need to have the best facilities, so any ship that is calling this part of the world can call at the Port of L.A. We want to have as deep water as anywhere you can go for years to come.”
The $5.25-billion Panama Canal upgrade is expected to prompt a dramatic shift in global trade routes by enabling massive cargo volumes to flow more freely between the Pacific and the Atlantic. Today, many large ships simply can’t fit through the canal.
That possibility has set off a flurry of activity among East Coast ports eager to glean off ships from their West Coast brethren. The Georgia Ports Authority hopes to deepen its Savannah port’s channel to 48 feet from 42 feet, allowing it to take in ships now too large to transit the Panama Canal. The Port Authority of New York and New Jersey is working to deepen important channels to 50 feet. And the Port of Miami is also seeking to hit the 50-foot mark.
But resources to modernize the nation’s economic powerhouses are scarce, especially in a time of heightened deficit fears.
President Barack Obama’s 2012 budget earmarked $600,000 for studies to move the Savannah deepening project along, prompting Gov. Nathan Deal to issue a news release, urging Washington to “carry its weight here to strengthen American competitiveness.” The state hopes to receive $105 million from the federal government to begin construction on the $600-million project. The president’s budget sets aside $65 million for the New York/New Jersey deepening, which is expected to finish in 2014. Savannah’s project has a target date of a year later. Further south, Florida hoped to receive $75 million for its Miami dredging project. It received nothing. However, Gov. Rick Scott recently announced plans to allocate $77 million in state funds for the project.
“There is a lot of battling on the East for some of that East Coast dredging (money). We’re already there,” Sanfield said. Los Angeles’ project has received $60.7 million in federal funds.
David Arsenault, vice president of Hyundai Merchant Marine, a Korean shipping giant, which has eight weekly calls at the LA-Long Beach port complex, said Los Angeles’ dredging project is “absolutely critical” to the port. But the canal expansion will still have an impact, he said, especially because an all-water route to the East Coast would cost less.
“I think it’s going to force West Coast ports to have to compete to hold on to what they got,” he said. “The West Coast is going to be playing defense.”
Diversion is a constant worry for the port, Sanfield said. “We are doing everything we can to maintain our market share and keep our infrastructure better than anybody else’s.” The port expects to finish dredging its navigation channels and berths to 53 feet in 2013, thus preempting Panama’s canal expansion. The project will allow ships carrying 13,000 container units to consistently call the port, and also allow for even larger vessels, Sanfield said. The largest ships calling the port today carry on average 8,000 to 10,000 container units.
But it’s not just ports that are being forced into a face-lift.
The opening, which is scheduled to coincide with the canal’s 100th anniversary, will also put pressure on all who benefit from the current system, including the railroads and unions, Arsenault said, forcing the myriad of partners to increase efficiency.
Because of those pressures, The Port of L.A. is also expanding two major cargo terminals and updating its rail and road infrastructure, Sanfield said.
“It’s not just about the water. It’s about the entire picture, and it kind of starts with the dredging,” he said.
But as companies move to larger ships in order to shave costs by making fewer runs with more cargo, the industry is not unanimous that bigger is better, said Marc Levinson, author of The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.
“While there may be economies of scale at sea, it’s not clear that there are economies of scale on land,” Levinson said. “So many people are concerned that once these very big ships get into port, it’s going to result in a lot of congestion and delays, and the ports are not going to be able to handle vessels at these sizes.”
And industry forecasts show traffic rising, however not as high as predicted before the recession. By 2030, container volume at the L.A.-Long Beach complex is expected to more than double, according to a 2009 report prepared for the ports by Tioga Group, Inc and IHS Global Insight.
Arsenault said the Los Angeles and Long Beach ports are making progress to handle increased capacity, but that as early as 2007, West Coast ports and transportation networks were already under strain from massive trade volumes.
“China, which is kind of the manufacturer of the world these days, can pitch more than we can catch,” he said, adding U.S. environmental impact reports can take twice as long as it takes China to construct a new port--and get it up and running.
Due to higher traffic forecasts, an expanded canal “is not an obvious drain on the ports,” said Jerry Nickelsburg, a senior economist at UCLA Anderson Forecast, adding other factors such as the price Panama will charge to transit the newly revamped canal will impact what route companies choose.
“Some traffic will be diverted. But that diversion may just show up in a slower growth rate in traffic for the ports of L.A. and Long Beach. It’s really a competition for growth,” he said.
The massive L.A. dredging project almost hit a snag when Long Beach-based Gambol Industries sought to place a $50-million shipyard at the shuttered Southwest Marine yard on Terminal Island, where the port planned to dump contaminated dredging material. The proposal could have pushed back the dredging project years, officials said, endangering L.A.’s competitiveness as the larger ships come online and the Panama Canal expansion opens. In February, the Los Angeles City Council squashed the plan.
“The main channel is on schedule,” said port spokesman Sanfield. “All of the dirt has a home, both the clean and contaminated.”
As U.S. ports race to increase their capacity in anticipation of 2014, Levinson said shipping lines have a “vested interest” in pushing expansions so they can take advantage of decreased scarcity, which would mean lower prices. He said there is a possibility officials have overestimated the boom or that there will be a dramatic shift toward East Coast ports.
“It’s not clear which way this is going to go,” Levinson said.
Reach reporter Andrew Khouri here.
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