West Coast Intermodal Update: Mario Cordero
By Joseph Keefe
POLB Executive Director Mario Cordero weighs in from his new West Coast chair, on the most pressing issues of the day. Arguably the industry authority from both the regulatory and commercial sides of the equation, his opinion carries weight and, sometimes, surprises.
It has been a busy year at the port of Long Beach, Calif. Lou Anne Bynum, Harbor Commission President at the Port of Long Beach, declared in early October, “Simply put, we are having the best trade months in port history.” Indeed, the port moved more containers last month than in any September in its history. The 701,619 twenty-foot equivalent units (TEUs) processed in Long Beach for September — up 28.3 percent — resulted in the port’s best quarter ever. In the third quarter, the Port of Long Beach handled 2,114,306 TEUs, as volumes swelled 15.9 percent over the same period last year.
Imports increased 29.5 percent in September to 366,298 TEUs. Exports rose 4.1 percent, to 125,336 containers. Empty containers moving out of Long Beach to be refilled with goods overseas totaled 209,985 TEUs, up 46.4 percent. But, says the port, the huge jump in cargo last month relative to a year ago is only partly due to the Hanjin bankruptcy that hit West Coast ports in September 2016. But, there’s much more than that to report.
In April, the nationwide search for the Port of Long Beach’s Executive director ended, when the Long Beach Board of Harbor Commissioners voted to name Cordero, former chairman and member of the Federal Maritime Commission (FMC), as the Port of Long Beach’s new Executive Director. Cordero brings to Long Beach considerable experience, both in terms of global commercial savvy, and as someone who knows his way around the Hill.
Cordero, a Long Beach resident and attorney, served previously as president of the Long Beach Board of Harbor Commissioners. His tenure at FMC stretches back to 2011, where he served as chairman from April 2013 until January 2017. Today, he oversees the nation’s second-busiest seaport, leading the port’s Harbor Department staff of more than 500 people with an annual budget of nearly $800 million.
In October, Cordero sat down with MLPro Editor Joseph Keefe at the annual AAPA Conference for a one-on-one discussion that ran the full gamut of local port issues; from local chassis issues, all the way to global market drivers.
Many economists insist that the economy is “in a sweet spot right now.” Projections are for the global economy to grow more than 3 percent in next year. On the other hand, in order to plan, port executives need to know what’s going to happen a decade from now. What are you planning for?
In the latest panel here [at AAPA], I gave the report of what’s been forecasted. In 2040, you’re looking to the tune of maybe 40 million TEU’s. In 2025; somewhere in the neighborhood of 27 million TEUs. So it is significant growth, and when I say ‘significant,’ these weren’t the expectations that were made early on. And, to be more specific, 2030 we’re projecting to 28.3 million TEU’s, in 2040, 41 million. This year, we’re seeing growth – at least for the calendar year – to the tune of 6.4 percent, so our projection is 7 percent.
Your predecessor told me in March that you [Long Beach] are nowhere near capacity and you could do a lot more with what you have. Where do you see your capacity at right now? If you had to go to maximum capacity right now inside these terminals that you have, what do you think you could handle?
Let me give you a good example of that question. Our latest development of our terminal is the Long Beach Container terminal. After Phase 3, and we’re entering the last phase of that project, after Phase 3, it was scheduled to be completed late 2019. That terminal alone will be able to move 3.5 million containers. So it actually will be double of what that container terminal was able to move in years past, prior to this development.
So, that’s just around the corner?
That’s just around the corner. We have six terminals on the Long Beach side, container terminals; four of which I think will have capacity that will be significant, given that those terminals will have the ability, in the case of Long Beach Container Terminal, of receiving a vessel as large as a 22,000 TEU capacity. I think that we’re prepared for this cargo growth and I feel very optimistic that we will have that capacity.
One of the issues that the Northwest Seaport Alliance [Tacoma and Seattle] struggles with is when and how and how to pay for opening up for night operations. They’d love to open up for night operations, but they need to figure out who’s going to pay for it. How many hours a day are your ports open right now?
Presently, we do have night gates here at the Port of Long Beach. And we have it, that being facilitated by way of the Pier Pass program, which as you know, involves a traffic mitigation fee to address this issue about paying for that night gate. So having said all that, what we need is night gates that are predictable. I’m talking about something that’s sustainable and predictable. So the good news is we do have night gates now that we have been moving forward, but it’s not at the point that I believe has been maximized in order to prepare us to move the kind of volume that we’re expecting. How you measure the success of a night gate is in the truck turn time. Right now this is a challenge for many gateways, and we’ve made some movement on that, but at the end of the day, I think to your point, the real question is “Who’s going to pay for it?” Here in Long Beach and this greater port called LA/Long Beach, Pier Pass was an answer to that. But again, we still have to fine tune that so that, again, we have night gates that are predictable and true night gates, because you’re not going to be able to move this cargo between 8 and 5.
Let’s shift gears a little bit. When you think about chassis, on the surface, it might not be the most interesting topic in the world. But, on the intermodal docks, it is one of the most important. Tell us about your ideal chassis pool and why it works best.
Sometimes, there’s a misperception that we don’t have enough chassis. For example, in the Southern California Port Complex, I think we have somewhere in the neighborhood of from 90 to 100,000 chassis. When a problem does occur, it’s not because of not enough chassis, it’s a misallocation of chassis assets. That mutual manager – what we call a ‘gray pool’ – would have the ability to have chassis at like a staging area where people could pick up and return them. That creates efficiency and that maximizes productivity. In this country, we have three major equipment operators. So if we get those people together to find a common ground, then I think we’ll make some real productive steps.
You said that your goal is, in the very near future, to go to 50 percent rail off the dock.
Our goal is 50 percent – in the near future, 35 percent and then, ultimately 50 percent. It’s absolutely paramount to have an inland connectivity.
Let’s talk about CAAP – the California Clear Air Action Plan. The ports have already done a remarkable job and I think the record speaks for itself. All the low-hanging fruit is gone. And the last 3 to 4 percent is going to be 5 times as expensive as the first 95 percent. Can you get to this zero percent [port emissions] in 2030?
I believe we can. I think, in fact, the question is in terms of whether or not the technology is available by that time. If you look forward to 2030, which is the goal that is set for cargo handling equipment, and the 2035 goal for zero-emission trucks, technology is moving so fast that I’m very optimistic that option will be there. The question is what will be the cost and who’s going to pay for it. Those are fair questions. So, for us, it’s a full court press to seek government funding to achieve this goal. That is the option that we are seeking, because again, this whole issue of the environmental push to reduce emission is a politically-captured event. It’s not just happening in California – it’s happening throughout the nation, in various forms, of course. It’s happening throughout the global community. I just came back from China, in Shanghai, and in that city of millions and millions of people, scooters are all electric. I was amazed. I think the point I’m trying to make is that the political will is there to get to zero emissions. The Clean Air Action Plan is a living document – I want to make that clear, it’s not something that’s set in stone. The goal is to get to zero emissions and right now my colleague on the [AAPA] panel, Mark Sisson, was quoted in a recent maritime article that in his view, you could get to 82 percent zero emission cargo handling equipment at the cost of 1 billion dollars. That’s a lot of money. But, there is a debate: is it going to cost 1 billion dollars or is it going to cost far in excess of that? I think the market ultimately will answer that question, but what I want to make clear, what my message is, what our message is as ports, is that this is all dependent on government funding, because I believe government funding to do this is very realistic.
International Trade Economist and Advisor Jock O’Connell gave a very good talk on trade economics. In that talk, he said, “Pulling out of TPP was incredibly disappointing
for California.” Would you agree?
I agree, because again, international trade and the globalized concept, there’s no back-step to that. Nothing’s going to change. The Trans-Pacific Partnership agreement involved 12 nations that together, made up as much as 40 percent of the world’s GDP. When people ask me this question, I would suggest that we just step back and say, ‘What’s our competition doing?’ Like President Obama would say many times, do you want to set the tone of your own destiny or do you want somebody else to do that? So I think for California, specifically, it was unfortunate that this didn’t move forward because it would have been very, very important to the West Coast because the middle class of the world is going to be a great opportunity for the American export market. By 2050, just China alone is forecasted to be the largest middle class in the world. I think that’s an opportunity for the United States – particularly for the agrarian and agriculture sectors. You saw that China now is accepting American beef exports. What it means to our economy and for that particular commodity is in the billions. So going back to your question, I think, yes, that was a mistake.
What can you bring from the experience at FMC to the Port of Long Beach that’s going to improve things here? And, what can the Port of Long Beach teach FMC about what they could be doing better?
I was at the right place at the right time as it relates to the FMC. Why? Because I was able to, as chairman of the FMC, navigate the filing of the P3, the first of what I call the New Generation of Alliances, these major carriers who were coming together with vessel sharing agreements. The P3 eventually was withdrawn, but I was there to navigate that, until the last filing. So, I think that through the experience in understanding alliances, and understanding the importance of those relationships that I was able to gather from those discussions, I believe that I bring value to the Port of Long Beach Based on that experience, it’s a new day in terms of the maritime port authority industry. When you’re no longer negotiating or dealing with just one carrier, you’re dealing with an alliance that represents four carriers; in this case we’re down to three alliances. The second and last answer to that part of the question rests in the understanding of the supply chain. At the FMC we studied that. It was a national study: the movement towards this inland connectivity and moving a container not just when it arrives, unloading and loading, or even within the terminal – but also following the movement of that container throughout the supply chain. At the end of the day, that’s important at Long Beach because our market share is also dependent on it. Because of our proximity to Asia, we could get that container to Chicago and the Ohio Valley 11 days quicker than the direct water route from Shanghai to the East Coast. Now, what can FMC learn from Long Beach? Long Beach is part of the nation’s largest port complex. When you talk about the movement of cargo – and the mission of the FMC is to foster the efficient and reliable movement of waterborne international cargo – what better place to start than to look at the nation’s largest port complex? I think what the FMC needs to learn from Long Beach is “how does this work or not work?” Anytime you’re part of the nation’s largest port complex, collectively moving 340 billion dollars’ worth of cargo, it’s a case study that will benefit any business plan, especially in terms of how we move the cargo and how we address efficiency in the supply chain.