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Port Report: Long Beach Container Terminal’s automation adding to buyer interest

Long Beach Container Terminal (Photo: POLB)

One of the biggest terminals on the west coast is showing better results after multi-year automation project as final auction nears.

The buying interest for a marine terminal on the U.S. West Coast shows the increasing value of automation in the logistics sector.

The Long Beach Container Terminal (LBCT) has been on the auction block since last year as required for its owner Orient Overseas (International) Limited (OOIL) (HKEX: 316) to win U.S. approval for a merger with Cosco Shipping Holdings (SSE: 601919). The Wall Street Journal reported one of the bidders, Yilport Holdings, is lining up some $2 billion in financing for the terminal’s acquisition. Yilport, the tenth largest ports operator in the world by volume, is joining other potential bidders including EQT Infrastructure, Macquarie Group and Stonepeak Infrastructure Partners.  

A deal for LBCT would provide a big boost to Yilport’s business, adding capacity of three million twenty-foot equivalent (TEU) to the 6.4 million TEU in volume Yilport handled last year. But aside from size, Yilport’s Chairman Yuksel Yildrim said that the fully automated facility “is one of the best terminals in the world.”

Automating ports in California is a highly fraught issue due to concerns from local dockworkers over the future of their jobs. But LBCT has had to press on with automation in order to reach the scale it has now.

It is set to complete a nine-year project that stitched together three separate docks into one and that allows it to handle about 40 percent of the volume coming into the Port of Long Beach. Once complete, LBCT will be able to berth up to three container ships with 21,000 TEUs of capacity. To handle that volume, LBCT has had to invest in remote controlled yard equipment and container stacking technology, among other types of automated port equipment.

While the full development of the terminal is still not complete, the results of those investments are starting to show up on LBCT’s bottom line. With the second phase of its expansion and automation project completed in September 2017, the terminal showed an operating profit of $32.7 million last year, compared to a $5.9 million operating loss for the year earlier. Much of that gain came from lower operating expenses, which dropped by a third from 2017 to 2018 due to OOIL’s investments.

While a like-for-like comparison is difficult, LBCT’s results do stand out versus those of other terminal operators which run a mix of automated and labor-intensive sites. LBCT’s operating margin of 28 percent last year beats that of Maersk’s (Nasdaq OMX: MAER.B) APM Terminals subsidiary and Cosco Shipping Ports (HKEX: 1199), which both showed an 18 percent operating margin. LBCT’s results are in-line with what port executives expect from automation, according to a report from global consulting firm McKinsey. Their survey showed that automation could result in operating expenses falling up to 35 percent through adding automation.

Chinese ship builders pare debt for deal

China State Shipbuilding said it will restructure debt for merger with peer firm. (Splash 247)

Port of Oakland invests in low emission yard equipment

SSA Marine will convert equipment from diesel to hybrid power gear. (Maritime Executive)

Cosco Shipping is looking at adding ships

Potential order would include 21,000 TEU vessels. (TradeWinds)

Flexport sees better way to consolidate freight

Start-up freight forwarder Flexport is taking some of the dead air out of ocean shipping with a new freight consolidation service that aims to better utilize marine containers.  

Called OceanMatch, the service aims to offer shippers that have less-than-container load volumes the ability to take advantage of full-container load pricing and promptness.

Ram Siddarth, vice president of Flexport, said the new service offering comes out of his company’s research into container utilization. Flexport estimates that only 65 percent of a container’s volume is typically used, leaving room for more shipments on the millions of containers that traverse the ocean.    

“From the outset, we saw there was this problem in the market for container utilization,” Siddarth said. “The customer was not using container fully. So we thought there was a better way we can do this.”

“Most customers have been measuring in the number of containers for years,” he added. “Instead we looked at what’s inside the boxes.”

OceanMatch is similar to traditional consolidation service in that Flexport aggregates less-than-container load volumes at its warehouses until there is enough to fill an entire marine container. Each shipment is charged based on the volume and weight of the freight.

But Siddarth notes that traditional freight consolidation bears the risk of extra time and warehousing expenses due to bundling cargo from up to 10 different shippers in one box. Going through traditional consolidation service means four- or five-day lead times as forwarders aggregate cargo, plus the delays at the destination as the cargo is sorted and transported.

OceanMatch limits containers to three shipments of similar cargo with the same origin-destination pairs, thus reducing handling time and costs.

“You are not dealing with the extra handling fees, and the sorting and desegregating of cargo,” Siddarth said.  

Likewise, Siddarth said OceanMatch eases the flow and improves the speed of ocean freight. Shippers can receive a smaller amount of cargo each week as opposed to waiting to fill a full container every other week or so.

Siddarth said OceanMatch, which has been offered since the fourth quarter, has been able to consolidate over 200 shipments for 50 customers. Depending on the final destination, he adds that customers using OceanMatch save between 10 percent and 35 percent over partially filling a full container. He says an increasing number of those early customers are giving Flexport blanket approval to consolidate shipments through OceanMatch rather than ship LCL.

Siddarth said OceanMatch is most frequently used on the trans-Pacific trade into the U.S. West Coast. But it is also offering the service into Canada and some European ports.

 

 

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Michael Angell, Bulk and Intermodal Editor

Michael Angell covers maritime, intermodal and related topics for FreightWaves. His interest in transportation stretches back several generations. One great-grandfather was a dray horseman along the New York waterfront and another was a railway engineer in Texas. More recently, Michael has written about the shipping industry for TradeWinds, energy markets for Oil Price Information Service, and general business topics for FactSet Mergerstat and Investor's Business Daily. When he is not stuck in the office, he enjoys tours of ports, terminals, and railyards.

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