Source: Journal of Commerce
The Ocean Alliance is set to restructure four global vessel sharing alliances into three larger and more powerful alliances effective April 1. This means that the Ocean Alliance will hold more leverage over beneficial cargo owners and ports, holding a market share of 41 percent and controlling 91 percent of the vessel capacity in the Trans-Pacific. If the alliances match supply with demand, higher freight rates will take effect in the new service contracts in the eastbound Pacific starting May 1. Improved carrier profitability will not be gained by cutting costs by container lines, but rather, increased freight rates, which have already begun to take place with the normal seasonal peak associated with the Chinese New Year.
The restructuring of vessel alliances will raise US port costs, as taller cranes, more yard space, expanded gate capacity, and longer hours of operation will likely be required in response to the ever-increasing size of container ships with increased volumes of cargo. These challenges adds stress to all US ports, but none as much as West Coast ports. The West Coast ports handle at least 30 percent of total laden containers moving through US ports. The West Coast also services the largest vessels in US trades, as larger vessels do not have the same limitations as they do in the East and Gulf Coast ports due to the Panama Canal and/or bridge-clearance issues.
In planning for the coming year, Port directors will give their state-of-the port addresses with tenets this January, as these topics of big ships, carrier alliances and the how impact of these developments affect port performance. The Port of Oakland is expected to grow faster than the 3-4 percent increase in container volumes projected for West Coast ports in 2017 and has been making gains to modernize and improve their operating systems. Vessel alliances will be concentrating Northern California calls in Oakland. Due to its location as the export gateway for the rich agricultural region of California’s Central Valley, Oakland handles more exports than imports each year, accounting for about 52 percent of the port’s laden container volume.
In response to this continued growth, the Port of Oakland has introduced an extended hour’s program to help ease the handling of container volumes. This program implements a $30 flat fee on all containers to support extended-hours, which echoes the PierPass program in Los Angeles and Long Beach ports.
The main accomplishment of the Los Angeles and Long Beach port PierPass program has been to cut the traffic of roughly half of the incoming cargo to off peak hours, allowing continued growth for the largest and most important US container artery. While PierPass has been a success, some alterations are needed to ease the handling of terminal operations. The cost of PierPass has been steadily increasing to meet the demand of these extended gate hours. However, frustrations amongst truckers and beneficial cargo owners from long truck lines and inconsistent gate hours are issues that must be addressed by terminals in order to allow the PierPass program to healthily function.
With all of these coming changes and the challenges new alliances and bigger vessels present to US ports, West Coast terminals are working to unify handling with operating hours, expanded gate capacity, and larger equipment.
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