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Apr.3, 2017

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TRADING PLACES 54 THE JOURNAL OF COMMERCE Peter Tirschwell APRIL 3.2017 GE TRANSPORTATION IS partnering with the Port of Los Angeles to deploy reams of data in pursuit of a smoother flow of containers through marine terminals. Meanwhile, Ron Widdows sees a n oppor t unit y to conver t cha ssis into sma r t transmitters of milestone data to put powerful new information into the hands of importers. And US western railroads are seeing lackluster growth in international intermodal, i.e., ocean containers. T y ing t hese development s together is the changing nature of the Los Angeles-Long Beach gate- way, where goods arriving from Asia are increasingly strategic for shippers, meaning they're high-value, fast-moving, and demand max- imum f lexibility in routing. The largest container gateway by far in the Western Hemisphere, like New York and New Jersey, will always have a large local and regional com- ponent to its cargo base. But because it's among the fastest and most viable routes to any destination east of the Mississippi, considering both transit time and frequency of services, LA- Long Beach is the gateway of choice for many of the highest-priority car- goes arriving into the US from Asia. Goods arriving at the Southern California ports as of roughly a year ago were 34.4 percent more valuable, kilo per kilo, than goods moving through New York-New Jersey based on trade data, according to Ca lifornia-based economist Jock O'Connell. That means more iPhones and fast fashion being pointed toward LA-Long Beach with the expectation it will move quickly through the ports. With the US economy gaining streng th — IHS Markit Senior Economist Mario Moreno at TPM projected nearly 7 percent growth in imports from Asia this year — the focus of supply chains is increasingly turning toward supporting revenue growth. That orientation, reminiscent of the pre-financial crisis heyday of the trans-Pacific, places a premium on faster, reliable transit times that get goods quickly in front of the consumer, and supports reduced overall product lead times. That explains the growth in transloading of import cargoes at LA-Long Beach into the domestic system, whether long-haul trucking, less-than-truckload, or domestic intermodal. Transloading enables shippers to gain control of goods and make decisions as their onward routing faster than if the marine container were loaded onto a train at a terminal and sent from there to Dallas, Chicago, or other inland markets. Such IPI moves add days to the date when shippers can gain control over onward movements. Volu mes t ra n sloade d i nto domestic intermodal containers from 2010 through 2016 grew at a compound annual rate of nearly 5 percent, while intact international containers moving via rail grew at a CAGR of 0.28 percent. Total imports through LA-Long Beach grew at a CAGR of 1.97 percent, according to the Alameda Corridor Transportation Authority. Viewed another way, the percentage of total LA-Long Beach imports moved intact by rail fell from 39 to 33 percent between 2011 and 2016, while the percentage transloaded to domestic rail rose from 30 to 34 percent during the same period, according to ACTA. It was less than a complete surprise when Union Pacific said its fourth-quarter 2016 pricing gains of 1 percent were "offset by challenges, predominantly in our energy-related and international intermodal businesses." Few could reca ll the last time a western railroad made such an admission. All of that underscores shippers' need to control imports as soon as possible, which by necessity means they need to get them liberated from marine terminals without undue delay — hence the intense focus on technology to help accomplish that. Other developments also are oriented around supporting LA- Long Beach importers' "need for speed," a long-ago quote from "Top Gun." Container lines have the most leverage over terminals, and thus the service they provide to BCOs, when they own them. That's part of the rationale Maersk announced last September to become an "integrated transport and logistics company" that ties closer together its liner, terminal and logistics business, and why other major carriers, sensing a new competitive battleground, are acquiring terminal assets or a piece thereof at an aggressive pace. It also helps explain faster trans- Pacific transits promised by the new alliances taking effect April 1. Although US importers from Asia will have fewer sailings and port pairs via the new networks, they will see faster transits on nearly half of all services — at least on paper, according to analyst SeaIntel. For example, APL's existing service as part of the G6 Alliance offers t ra nsits f rom Ca i Mep to Los Angeles in 20 days, whereas its service via the new Ocean Alliance network promises a 16-day transit — a four-day improvement. Similarly, APL says it will offer a 13-day transit from Yantian to Seattle via the network, five days faster than what it offers now via the G6. For LA-Long Beach, facing long- term loss of market share to the East and Gulf coasts, a history of longshore labor unrest, and threatened further by the expanded Panama Canal, relying on its legacy gateway position is a recipe for long- term decline. Leveraging tech-nology and investment to focus on the niche of serving the needs of fast-moving cargo, which clearly still heavily relies on the gateway, is a positive direction for the ports to pursue. JOC Contact Peter Tirschwell at and follow him on Twitter: @petertirschwell. NEED FOR SPEED AT LA-LB

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