OOCL inks $4.6 billion Long Beach terminal lease

   Hong Kong’s Orient Overseas Container Line has tentatively agreed to pay $4.6 billion over 40 years to lease the Middle Harbor property currently being redeveloped by the Port of Long Beach to handle more ocean containers, Christopher Lytle, the port’s executive director, announced Thursday in his first “State of the Port” address since taking the helm in September.
   The deal, which must still be approved by the Board of Harbor Commissioners, would be the largest ever involving a container terminal operator and a U.S. port. The largest long-term contracts or sales of operating rights at ports among terminal operators since the boom in container terminals last decade have been for about $1 billion per terminal. In 2006, Orient Overseas International Ltd., OOCL’s parent, sold four terminals in the United States and Canada for $2.6 billion.
   The Port of Long Beach is investing $1.2 billion to consolidate and modernize two existing terminals into a single, more efficient terminal. The project will join two aging, oddly-shaped terminals into one, contiguous rectangular terminal, more than doubling its annual container capacity from 1.3 million TEUs to as much as 3.3 million TEUs, and bumping usable acreage from about 200 acres to more than 300 acres with better access for trucks and on-dock rail. The nation’s second largest container port last year began work on the $125 million-first phase of the project, which involves demolishing old berths, filling in an existing slip, installing electrical infrastructure to power cranes and ships at berth, and doing other site preparation. The entire project is expected to take nine years to complete.
   News that OOCL will be the likely tenant in the Middle Harbor facility is not a surprise given that the port authority in Long Beach had been negotiating with the container line for more than a year. The two existing properties were separately operated by OOCL’s U.S. subsidiary Long Beach Container Terminal and by Hyundai Merchant Marine’s California United Terminals. CUT vacated its property at the end of 2010 to sublease a 100-acre parcel at APM Terminals’ Pier 400 facility in the adjacent Port of Los Angeles, which plans to build a new terminal for the carrier.
   CUT’s departure left OOCL as the first option to take the lease and made it easier to begin redevelopment work, but it also significantly contributed to a 3.2 percent decline in container volumes at the port in 2011 versus 2010. The 6.1 million containers moved through Long Beach is equivalent to the amount handled by the port in 2004. Hyundai’s container volume represented about 10 percent of the port’s business.
   Annual lease payments from Long Beach Container Terminal will reimburse the port for its investment. LBCT will also invest $500 million for cranes and other cargo-handling equipment.

Lytle

   The deal between the Port of Long Beach and OOCL is considered a lease rather than a concession agreement because the private sector partner is not committing to build and operate any infrastructure at its own risk on the port authority’s behalf. 
   “This agreement represents a major endorsement of our vision for the port by one of the leading maritime companies in the world,” Lytle said in a separate statement.
   City officials say the increased trade volume through the terminal will generate more than 14,000 new, permanent jobs throughout Southern California by 2020 and 1,000 construction jobs, as well as reduce traffic congestion and air pollution. Air pollution is expected to be cut in half through the use of more on-dock rail, electrified cargo handling equipment and plug-in electrical stations that will enable ships at berth to operate systems without running diesel-powered auxiliary engines. Other improvements to minimize environmental impact include storm-water pollution prevention and solar panels.
   In October, dredging was completed on the main channel all the way to the Middle Harbor and the East Basin, providing the necessary depth to handle the largest container ships in the world.
   The Middle Harbor Project is part of a $4.5 billion capital improvement program at the Port of Long Beach.
   The Board of Harbor Commissioner’s Finance and Administration Committee is scheduled to review the preliminary arrangement on Monday, Jan. 23.
   In his address to port stakeholders at the Long Beach Convention Center, Lytle said the port projects container volume in 2012 to reach 6.3 million TEUs. 
   By 2014, all major terminals at the port will have shore power capability, he added. 
   “We must continue to make major investments in our facilities so that the Port of Long Beach remains the Port of Choice” for carriers and shippers that will have more options with the widening of the Panama Canal in two years, Lytle said.
   (To read more about how the ports of Long Beach and Los Angeles are gearing up to compete with other ports in North America for container business, see the feature package titled “One voice for infrastructure” in the December issue of American Shipper.) — Eric Kulisch