Port of Oakland Sees Upside in Losing Giant Tenant

To hear Port of Oakland, California,Ìęofficials tell it, losing terminal operator Ports America â a major tenant â is a blessing in disguise that will create a leaner, meaner seaport. But some maritime experts say the fallout could hurt the port, a vital economic engine that supports tens of thousands of jobs related to overseas cargo.
âWe see this long term as a very positive thing,â port Executive Director Chris Lytle said during a State of the Port speech Jan. 21. Lytle said the same amount of cargo should flow through Oakland despite Ports America abruptly ditching a 50-year lease for the Oakland Outer Harbor Terminal with 44 years to go. The port expected to receive $35.7 million from Ports America for fiscal 2015-2016 â a quarter of its maritime income.
âWe are going to do absolutely everything in our power to make sure there are no disruptions to cargo in any way, shape or form,â Lytle said,Ìęadding thatÌęthe portÌęalready had found a home for 90% of the goods handled by Ports America, which plans to cease terminal operations by March 31. âWe donât want any vessel diversions.â
The portâs four other terminal operators have plenty of excess capacity to take up the slack, he said, and need the additional work for their own profitability. Lytle said that loading and unloading work would expand to nights and weekends to handle the increase. He plans to ask port commissioners to fund transition costs, such as performance incentives to make sure the migrated cargo is handled swiftly.
The port is eyeing new uses for the 210 acres Ports America is relinquishing that could make it more competitive, Lytle said. The seaport now focuses on containerships. It could attract revenue if it retooled to handle other cargo, such as automobiles or loose cargo such as steel girders.
One port commissioner floated the idea of the Oakland Aâs or Raiders building a stadium at the terminal property. âThis could be our own chance to have a ballpark on the waterfront,â said Commissioner Bryan Parker. Nearby Howard Terminal had been considered as a possible stadium site, but Aâs owner Lew Wolff rejected it as too far from BART and too dogged by environmental issues.
But some experts are skeptical that the loss will create more efficiencies.
âCustomers fear that congestion will come back to the port,â said Kevin Bulger, chief operating officer of Apex Maritime Co. in Burlingame. The third-largest ocean freight forwarder for cargo from Asia to the United States, Apex moves significant volumes through the Port of Oakland.
While Bulger doesnât expect significant delays like the industry experienced after last yearâs labor dispute, any delays could be a problem. âIf it gets too jammed, customers will divert cargo to other ports,â he said. âThe overall volume of trade wonât be affected, but where it flows could be.â
For instance, agricultural exporters might pay to truck a perishable commodityÌęsuch asÌęlettuce to the ports of Los Angeles or Long Beach if congestion returns to Oakland.
Longshore workers operate out of a hiring-hall system rather than being employees of terminal operators. Theoretically, if the same amount of cargo continues to flow through Oakland, their incomes would stay the same. But quietly, union officials worry that the portâs rosy projections may not be realistic â meaning Ports Americaâs move could result in less work.
âThe Ports America decision will have a real impact on many port workers, and those kind of good-paying jobs that support working families are hard to replace,â said Melvin Mackay, president of International Longshore and Warehouse Union Local 10, which represents more than 1,000 dockworkers.
Ports America, the nationâs largest terminal operator and stevedore, said it left Oakland to concentrate on operations in other ports, such as Los Angeles, Long Beach and Tacoma, Washington.ÌęExperts said that decision reflects shifts in the shipping industry that could erode Oaklandâs business.
âWeâre seeing consolidation take place in the industry,â said John McLaurin, president of the Pacific Merchant Shipping Association, a trade group for ocean carriers and terminal operators on the West Coast. âTimes are difficult, rates are down. All West Coast ports face tremendous competition from other gateways.â
Still, McLaurin said, the outlook could be upbeat. âOne door closes, another one opens,â he said. âThis presents an opportunity for Oakland to see what they can do differently with the terminal.â
Ports America recently formed joint ventures with steamship lines, said Peter Hall, a professor at Vancouverâs Simon Fraser University who studies ports and logistics. He thinks its move may show that those carriers donât want to be tied to the Bay Area port.
âThis might signal that Oakland is becoming more a discretionary port that steamships visit when times are good but that carriersâ long-term commitment is less firm,â he said.
Michael Nacht, a professor of public policy at the Goldman School at UC Berkeley and a former assistant secretary of defense for global strategic affairs, said Ports Americaâs move could rattle other port customers and tenants, even while Oakland continues to struggle with structural issues, including fewer rail connections than other ports, environmental concerns and recent labor strife.
âThis is another sign of the narrowing market and lessening interest of others in using the port,â he said. âOakland has to come up with innovative ways to compensate: better technology, new markets, more aggressive marketing.â
Complicating matters is that the Panama Canal is due to be dramatically expanded any day now, allowing much larger ships to use it as a route from Asia to the East Coast â possibly skipping a call at Oakland.
Currently, the Panama Canal can handle ships carrying 5,000 shipping containers. After being widened, it will accommodate ones with up to 13,000 containers.
âIf you have a ship [from Asia] that previously couldnât get through the Panama Canal and so would have visited three or four ports on the West Coast, now it might just stop at one West Coast port and then go through the canal,â Hall said. âIf youâre only going to stop at one California port, it ainât Oakland. It will be L.A. or Long Beach. Even itâs it two, it wonât be Oakland, either.â
But Oakland has been working hard to stay competitive with the bigger rivals to the south, preparing for the new age of megaships.
Oakland spent millions to dredge berths and channels to accommodate bigger ships. The Benjamin Franklin, a quarter-mile-long and holding 18,000 containers, docked in OaklandÌęlast monthÌęâ at the Ports America terminal.
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