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Mar. 03, 2014

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52 THE JOURNAL OF COMMERCE www.joc.com MARCH 3.2014 TRANS-PACIFIC MARITIME SPECIAL REPORT M EG A -S H I PS A N D C A R R I E R a llia nces could prove to be the fi nancial savior of the container shipping industr y, but they're straining the operations of marine terminals and motor carriers. Take, for example, a weekly trans- Pacific service to Los Angeles-Long Beach with vessels capable of carrying 10,000 20-foot-equivalent units. A ves- sel-sharing alliance of several carriers probably operates that service. In the past, the same container volume would have moved via two separate services by individual carriers deploying 5,000- TEU vessels. The concentration of container vol- ume into a single weekly vessel call taxes the capacity of the marine terminal to work the ship. Truck and rail carriers must handle twice the volume of cargo from one vessel that used to be carried in two separate vessel calls each week. "This puts much more strain on the supply chain," David Arsenault, vice president of Hyundai Merchant Marine, told the California Maritime Leadership Symposium in Sacramento on Feb. 19. Ocean carriers' decision to order 8,000- to 18,000-TEU vessels was driven by environmental requirements in Europe and North America, and by the severe fi nancial losses carriers expe- rienced after the 2008-09 recession, Arsenault said. When Europe and North America established Emission Control Areas, reducing the maximum sulfur content of bunker fuel to 0.1 percent from 1 percent, carriers had to decide whether to retrofi t existing vessels or to order new ships. After comparing the cost of retro- fi tting older, less-effi cient vessels with the savings inherent in today's large, fuel-efficient ships that offer a per- slot savings of $400 to $500, ordering new vessels was the right decision, Arsenault said. Reducing vessel costs is crucial because the average freight rate in many trade lanes hasn't changed over the past decade. Big ships, by themselves, didn't reduce operational costs enough to put carriers in the black, so the next logi- cal step was to reduce costs further by banding together in alliances of three to six lines, with each carrier contributing vessels to the alliance. Despite these measures, carriers in Mega-ships and vessel-sharing agreements, though benefi cial to carriers, strain port terminal operations aggregate lost $15 billion over the last three years in their global operations, Arsenault said. Now they're shedding assets, including marine terminals and chassis, in order to "right the ship," he added. These changes have had a big impact on terminal operators and motor carriers. Each vessel call in Los Angeles- Long Beach, for example, can generate 5,000 to 10,000 container moves, which strains vessel, yard and gate operations. The cargo surges take a big toll on gate operations. Truckers in Southern California, New York-New Jersey and Virginia must contend with gate con- gestion and turn times that can take several hours on busy days. Vic LaRosa, president and CEO of port logistics company TTSI, said the Harbor Trucking Association of Southern California is addressing this issue with a truck mobility study that seeks to zero in on the chokepoints at each of the 13 Los Angeles-Long Beach container terminals. "There's a lot of waste in the sys- tem," he said, referencing the eight-hour work shifts at the terminals that really total only six hours when breaks and other work practices are included. The complexity of terminal opera- tions has intensifi ed in recent months as carriers transition from owning and maintaining chassis to a new regime in which equipment lessors and chas- sis pool operators control the chassis. This has resulted in chassis shortages and dislocations in the harbor, he noted. Events that occur in other parts of the country also can affect marine terminals. The recent series of winter storms in the Midwest and along the East Coast forced railroads to hold their trains longer in Southern Califor- nia, Arsenault said. This threw train departures out of sequence and caused containers to back up at Los Angeles- Long Beach. Borrowing an ancient adage from China to describe the current chaotic conditions at the nation's container ports, LaRosa said, "These are really exciting times." JOC Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him at twitter.com/billmongelluzzo. A TAXING A TAXING SITUATION SITUATION By Bill Mongelluzzo

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