The Port of Los Angeles did not become the United States’ top container port overnight. Many millions of TEUs had to come and go through the port for it to learn over time how to make the best of every situation. Larger ships, a competing close-by port, carrier alliances; all constituted obstacles that the Port of LA had to overcome in order to not only maintain its status, but to also learn and grow from each experience.

Established in 1906, the Port of LA has been handling container cargo for more than 100 years. Together, the Port of LA and Port of Long Beach handle 40% of the United States’ container cargo, of which 2/3 goes east via the Alameda Corridor rail system. With 13 container terminals, the Port of LA also handles cars, break bulk and metals ore, among other types of cargo. 

Chilean ports are currently facing an important challenge to adapt their operations to the industry’s new needs: updating infrastructure accomodating larger vessels, improving land interconnectivity, digital support systems and optimization of cargo service by port, among others. Achieving these goals will not be an easy task, as there is much to do and time is catching up with the slow modernization process. 

To share the knowledge and field expertise on how to optimize port operations, the Port of LA Cargo Marketing Manager Marcel Van Dijk shared exclusively with MundoMaritimo the best practices the port applied to become “the Nation’s #1 Container Port and the Global Model for Sustainability, Security and Social Responsibility.”

A unique business model

One of the key issues Chilean ports face when it comes to modernization, building infrastructure and other improvements is the finance aspect. In the slowed-down current market it is difficult to come across the needed cash, and the fiscal wallet is not deep enough either.

Van Dijk explains that the Port of LA’s unique business model comes from being “a propriety department from the City of LA. We (the Port of LA) do not receive any tax revenue to operate our port. We improve and maintain our port by receiving revenue from our terminals in the form of lease payments on the land, wharfage on the cargo and dockage of the ship.” The self-sustained business model reports some US$375mn a year for the port.

Another interesting initiative the Port of LA uses for self-funding is that “as a city department we can acquire additional funds by issuing commercial papers (bonds) to the financial market. Those bonds are running for 25 years, but also our terminal leases are running for 25 years, so we have a guaranteed income from the terminals to pay the interest on the bonds.”

Every dollar is reinvested in the port, to further develop infrastructure. Certainly a different approach to funding operations.

Cooperation v/s competition

The port of LA and the Port of Long Beach operate in the same market due to their geographic location, service the same shippers, have the same cargo mix (containers, bulk, break bulk, etc) and service the local market and hinterland; a familiar situation to some of Chile’s leading ports. But instead of competing, the ports devised a system of cooperation to optimize their operations.

Cooperation is key: “logistic challenges, transportation infrastructure, environment. These are all related to the two ports. We, however, compete when it comes to new cargo, shipping lines that need a new terminal and on market share,” explains Van Dijk the difference between cooperation and competition. 

Community, industry & environment

Being socially responsible and caring about the community that surrounds highly industrialized areas –such as ports- is a must nowadays. Currently, no industrial activity can overlook this aspect, no matter how large the business has become. “The Port of L.A. had in the past only responsibility for the maritime aspect of the port. Containerization and the increase of trade made us expand the terminals, which made us encroach closer to residential areas. Under pressure of the local politicians, environmental groups and the residence, we have now also the duty to become a good neighbor. The port has created parks and landscaping to form a buffer between the residential neighborhood and the industrialized part of the port,” Van Dijk explains about how the port adapted to the existing community and not the other way around as it was before, when ports did not take into consideration the social impact of their operations.

Another challenge the port has had to face is the increasing size of container vessels, which have reached enormous capacities of up to 18,000 TEUs. “With our commercial partners, terminal operators and shipping lines, we are working to accommodate the larger container vessels. We have dredged our channels up to 18 meters and adjusted our wharfs to accommodate that depth. To move all this cargo from those bigger ships we need to increase efficiency on the terminals. The Port of L.A. is actively coordinating meeting between maritime stakeholders (union, rail, stuck, terminals and shipping lines) to improve processes to facilitate the increase of cargo at the terminals.” Chilean ports could certainly look into automated terminals as a solution to the increasing cargo volumes in an eco-friendly way.

“Automated terminals are a necessity in the Transpacific market. Cargo volumes are growing and terminals cannot always be expanded because of environmental restrictions, and cost of new landfills. The solution is to densify existing land with automated terminals, so you can increase the volume of containers on an existing footprint,” says Van Dijk.

But if the money’s enough and the operations are smooth, then it’s time to think about the environment. The Port of LA’s Clean Air Action Plan targets reducing emissions and was put in action in 2007, resulting in the banning of all trucks that did not meet the 2007 Federal Clean Truck Emissions Standards. When the program was fully implemented in 2012, port truck emissions were reduced by more than 80%.

No one says it will be easy, but at least this recipe has been tried and has reported excellent results for the Port of LA. Maybe the time to try it in Chile is now.

By MundoMaritimo