California Apparel News

A record number of cargo containers will be sailing from Asia to the Los Angeles area this year as retail sales in the United States are forecast to edge up slightly over 2006.

The tidal wave of containers should swell, as the Port of Los Angeles finally has the capacity to accept fully loaded mega-ships carrying 8,000 containers, almost double the standard amount carried by older ships. Officials predict that cargo-container volume at Los Angeles’ port will inch up by 5 percent to 6 percent this year. In 2006, there were more than 8 million cargo containers that went in and out of the 100-year-old facility, compared to 7.5 million in 2005.

Next door at the Port of Long Beach, where an alltime high in cargo activity was reached in 2006, with an estimated 7.2 million containers, pundits predict a 6 percent to 10 percent rise in container traffic in 2007. More megaships are scheduled to arrive at the port, one of the first in the United States capable of handling the seagoing giants, which require larger cranes to unload them.

“I would say that about 40 percent of all the containers arriving here are now brought in by megaships,” said Long Beach port spokesperson Art Wong.

At the end of 2006, the Port of Los Angeles finished dredging its main channel to 53 feet, adding 8 feet to its depth. Now the facility should start seeing a wave of mega-ships calling at three of the port’s eight cargo-container terminals, port spokesperson Theresa Adams Lopez said. Another 18 cargo terminals handle dry and liquid bulk, break-bulk, and other items.

Despite the continuing growth in cargo activity, both ports believe they will have no problem accommodating the more-than 15 million steel containers that will arrive dockside this year and then be transferred to trucks or trains to be hauled to their destinations.

Last year, some 6,080 seagoing vessels called at the two ports, said Capt. Manny Aschemeyer, executive director of the Marine Exchange of Southern California, which tracks the number of ships coming in and out of the two ports. Some 51 percent of those were cargo-container ships.

“We’re anticipating another good year,” Aschemeyer said. “We’re averaging just under 20 ship arrivals a day, which is about the same as last year, when we had a banner year. And there are bigger ones coming in now, no question about it.”

The rising tide of mega-ships in the international shipping fleets bodes well for importers, who are likely to see ocean shipping rates slide to lower levels this year.

Paul Bingham, an economist with Global Insight, a Boston company that tracks port activity for the National Retail Federation, said the cargo-container shipping fleet is expected to grow by 14 percent this year, while cargo freight volume will grow less than 10 percent. “There will be an overhang of excess capacity,” he observed, leading to lower rates to ship goods from overseas factories that do most of the manufacturing for the majority of U.S. apparel companies.

It is a different story for intermodal freight rates, however, at the nation’s railroads. With capacity still stretched, freight forwarders have noticed that rail shipping rates are inching up considerably. Two railroads—the Union Pacific and the Burlington Northern Santa Fe—serve the ports of Los Angeles and Long Beach, giving them one of the best port-to-railroad connections in the country. But rail capacity has been stretched, leading to higher rates as more cargo floods the local harbors.

“The rail rates are going up. They are substantially higher,” said Robert Krieger, president of Norman Krieger Inc., a Los Angeles customs broker and freight forwarder. “If you’re receiving your goods on a mini-land bridge in, say, Kansas City, it appears you are in for some pretty-good rate hikes.”

The railroads have experienced big staffing shortages as aging baby boomers have headed to retirement. Union Pacific and Burlington Northern Santa Fe have hired thousands of workers in the last couple of years, but still about 40 percent of railroad workers are eligible for retirement over the next decade, sources said.

Besides hiring more employees, the railroads are investing in capital improvements to improve their capacity. They are retiring old locomotives, streamlining routes to have fewer stops and building more tracks.

Union Pacific, with more than 32,400 miles of rail across the United States, started in 2003 to double-track the Sunset Route, which stretches from Los Angeles to El Paso, Texas, before breaking into other routes. By the end of 2006, 49 percent of the 760-mile route was double-tracked to speed freight from the West Coast to the Midwest and beyond, said UP spokesperson Mark Davis.

BNSF plans to lay a third track over its El Cajon Pass route to speed the journey of freight trains crossing the steep grade from the San Bernardino, Calif., area toward Barstow, Calif., said BNSF spokesperson Lena Kent.

All of this should help keep pace with another year of record volume at the ports, which started to see a return in business after major problems in 2004.

A wave of shipments arrived at the docks and never seemed to stop coming, leading to a watery traffic jam where ships waited as long as one week to get their cargo unloaded.

After that fiasco, the ports opened their gates to truckers at night and on Saturdays to make sure cargo didn’t back up. The program is working well, said Bruce Wargo, president and chief executive of PierPass Inc., the not-for-profit company that runs the extended-hour program, which charges importers $100 to pick up a 40-foot container during the day. It is free at night. Wargo said the PierPass program should be able to handle the predicted increase in cargo traffic in 2007.

Right now, 13,000 trucks pick up cargo every Saturday, while 11,000 to 12,000 truckers work the 6 p.m. to 3 a.m. shift. “We had a peak season without a lot of congestion,” Wargo said. “I expect it to be that way this year.”