OAKLAND’S TRANSITION PLAN

Ben Franklin Feb 2016By now, everyone knows Ports America will be closing their terminal in Oakland in short order. Here is an update of the latest developments:

 

Ports America’s Outer Harbor Terminal LLC filed for bankruptcy. The Port of Oakland accepted the early termination of their lease agreement.  The port will receive $6M in lease payments for February and March and $5.1M for clean up expenses.  To aid in a smooth transition, the port is giving the terminal operator an additional 30 days rent free. As a result, vessel operations will be extended through March 31st and terminal operations through the end of April.

 

85% of the cargo will find a new home at SSA’s Oakland International Container Terminal (OICT), thereby, increasing their volumes by nearly 70%.  So, what is SSA doing to accommodate this significant uptick in traffic?

 

They will offer Saturday gates for export containers in, “One Stop” import containers out, wheeled containers, refrigerated containers in and out, and empties in and out.  For those unfamiliar with a “One Stop,” if you have twenty or more containers on the same vessel, SSA will put them all in one stack served with a top pick versus in the ever-crowded transtainer rows. The trade off is a specific container cannot be selected. The driver receives the container at the top of the stack.  

 

Shippers Transport Express (STE), an SSA sister company, has plans to move approximately 2000 import containers per week from SSA to their yard in Oakland. The containers will be selected randomly. There is no charge to the cargo owner for these moves.  These dray offs will be in addition to the paid moves nominated and paid for by cargo owners.

 

SSA will take on additional acreage virtually next door to operate a depot for empty containers. Empty containers can be picked up from or returned to this depot.

 

SSA will offer night gates Sunday through Thursday.  Sounds good so far, right?  Well, here is the disappointing part…these night gates will ONLY service refrigerated cargo, which equates to 5-10% of their overall volume. It has been said SSA will review the night gates in a month’s time to see what other transactions should be added. 

 

With queues stretching for miles, turn times degrading to horrific levels, their import yard being so busy by 8:30am they begin closing entire sections, and export receiving windows narrowing to 2-3 days or less, in a month’s time, we will be buried under a mountain of unmoved freight.  We need additional services on the night gates now!

 

Yes, night gates are expensive, about $1400 per longshoreman per shift. The more services you offer on the night side, the more people needed to work the shift.  We get it.  But, there is also a cost…monetarily, reputation, migration of business to other gateways…not to expand these gates.

 

The Port of Oakland has approval to spend $1.5M to help subsidize these additional gates at a rate of $10,000 per gate. A reefer-only night gate is not getting them the bang for the buck that is necessary to keep cargo moving fluidly.  As such, port management is exploring increasing the per gate subsidy.  We support this idea and hope for a quick review and implementation.

PORTS AMERICA TERMINAL CLOSING IN OAKLAND

Ports America Ship at DockAbout six years into their 50-year lease, Ports America announced they will be ceasing operations in Oakland.

The original agreement between the Port of Oakland and Ports America included lease rates significantly below market in exchange for Ports America performing the necessary capital improvements at Outer Harbor Terminal. This agreement brought on the ire of the other terminal operators in Oakland, so much so, that SSA sued and eventually came to a settlement with the port.

During their six-year tenancy, Ports America did not upgrade the terminal as agreed.  Instead, they plan to cease vessel operations in the next 30 days and evacuate the terminal in the next 60 days. In an effort to smooth the transition, Port of Oakland management is working with Ports America to extend the timeline.

Ocean carriers who have been calling Ports America are actively looking for new homes for their vessels and containers.  It is expected that CMA, Maersk and MSC will land at SSA and K-Line at TraPac.  TraPac, already in negotiations with the port to expand their terminal, is looking to take over an additional two berths and 44 acres.

In the port’s opinion, the marine terminals in Oakland are operating below capacity and the traffic at Ports America can easily be absorbed by the remaining terminals.  The port intends to explore non-containerized operations for Outer Harbor Terminal including ro-ro and bulk businesses.

In our opinion, while there may be enough berth space and land to handle the business, yard and gate operations will suffer.  Evergreen temporarily moved to SSA in December while they upgraded their terminal, and that move created congestion and long truck turn times at SSA.  The addition of CMA, Maersk and MSC will surely have a negative impact on truck turn times.

SSA plans to operate night and weekend gates to accommodate the increased volumes.  The frequency of night gates and the specific transaction types accepted are yet to be determined.  The Port of Oakland has plans to subsidize night and weekend gates during the transition period to ensure a successful conversion.

There are many moving parts to this change.  We are unsure how it will all shake out, but we will keep you informed.