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00:00Well, you're relatively new on the job, and obviously you're coming in at a time where global trade is just
00:04going through a lot of transformation right now.
00:06Let's start with August. Great month for you. I don't think anybody wants to discount that, but give me a
00:12sense about the complexion of those 900,000 plus containers.
00:15How much of that was maybe a bit of pull forward as people try to stay ahead of whatever the
00:20tariff regime is?
00:21Yeah, Rumi, we're handling more cargo than ever before. For the month of August, our dock workers handled 920,000
00:27container units safely and reliably.
00:29And much of what we're seeing today is shippers trying to manage uncertainty, and so they're front-loading.
00:35They're advancing their shipments. They're employing a lot of different strategies to ensure that they can mitigate as much risk
00:40as they can.
00:41Well, when we talk about what they're trying to do, how do you plan for that?
00:45I mean, ultimately, your job isn't really a day-to-day job, at least I wouldn't think so.
00:49It's more about the longer terms. How do you sort of thread that needle?
00:53Well, as a port authority, we sit at the intersection of trade, geopolitics, climate technology.
00:57Everything that happens around the globe eventually affects our operation.
01:01Our job is to make sure that we offer reliability, we offer predictability, and we keep that cargo moving because
01:08it supports nearly 3 million jobs across the United States.
01:11I do have to ask you, though.
01:12I mean, of those 920,000 containers, there was a big chunk of them, more than 300,000, that were
01:17empty.
01:17What does that say about global trade right now?
01:20It's not unusual, although we have seen the ratio between imports and exports go from 4 to 1 to 5
01:25to 1, and that's all the result of all the tariffs that were announced and the retaliatory tariffs.
01:31So right now, the shippers are trying to manage uncertainty, the timing of shipments, where they source their product, and
01:37how they get the product to the United States market is important.
01:39With regards to the share of ships that you're getting from China, I know the official numbers show that's slightly
01:45lower, and then you've seen an uptick from other places like Vietnam.
01:49Do you have a sense here as to the stuff that's coming from some of the Asian, non-China, Asian
01:56nations?
01:56Is that still just Chinese goods that have been rerouted through Vietnam and other places?
02:00That's right, Romain. Just to give you some numbers, in 2019, China alone accounted for about 70% of our
02:06business, imports and exports.
02:07Today, that's down to 55%.
02:10And yet, last year, we set an all-time record, 9.9 million container units.
02:14We're seeing less activity with China, but certainly more with Vietnam, Thailand, Indonesia, and Malaysia.
02:21Southeast Asia is an emerging block for us.
02:24Southeast Asia is an emerging block. Does that remain an emerging block?
02:27I know it's hard to sort of forecast what the next 5, 10 years look like, but is that what
02:31you're counting on?
02:32That trend has been in motion for some time.
02:35It's certainly accelerated.
02:36The China plus one strategy that many shippers are adopting has taken shape.
02:40What that means for us, Romain, is that we have to find a way to improve our value proposition.
02:45Because when cargo comes from Southeast Asia versus China, it has two to three days on the water.
02:50And this is why we have big plans for the future.
02:53This is why we're expanding our capacity to offer more reliability and even greater value to the customers.
02:58Well, your long-term plans, your long-term forecast is something like 20 million containers, right, by 2050?
03:04That's right.
03:05Our plan is to double our cargo volumes to 20 million containers by 2050.
03:09That's not a lot of time to prepare for that.
03:11And this is why I'm adopting a hurry-up office, to make sure that we deliver the infrastructure,
03:17the technology, and the process improvements that we need to continue to be a reliable port of choice.
03:22I mean, just talk to me about that growth, though.
03:24I mean, that's something like 3% annual compound growth rate, which is pretty fast for a port of any
03:30size,
03:30but certainly one of Long Beach's size.
03:32What gives you the confidence you can do that?
03:34Well, we're very bullish on the future.
03:35When you talk to the shipping lines and the shippers, the U.S. market is one that will continue to
03:40grow.
03:40The U.S. population continues to grow.
03:42What we need to do is ensure that we deliver the infrastructure so that the shippers and the shipping lines
03:48know where they can send their bigger ships.
03:50I mean, the whole industry has changed.
03:52Ships have gotten bigger.
03:53They need more capacity.
03:54They need velocity, reliability.
03:56The infrastructure that we're going to be developing between now and 2050 is going to deliver all of that.
04:01With regards to that 20 million by 2050, do you anticipate that China would be less than 50% of
04:07that,
04:07or do you think it might hold around current levels?
04:09It's possible.
04:10Again, the shippers are in the process of redesigning their supply chains.
04:14They're adopting different strategies to try to mitigate the risk.
04:17A lot of it will depend on what happens going forward.
04:20The meeting later this month between President Trump and President Xi is going to be watched very closely to see
04:26what comes out of that and what that may portend for the future.
04:29Well, I mean, we talk about the suspension of those Section 301, Maritime Section 301 rules, the expiration coming up
04:35in early November.
04:37If that expires and there isn't some sort of deal put in place to counter it, what does that mean
04:43for the number of ships that would be going to your port or maybe not?
04:48So a lot of the cargo that has already arrived is for that very reason.
04:52Shippers not wanting to wait to see what happens.
04:54So they've been advancing their shipments.
04:56A lot of the product that typically hits our port in June, July, August for the holiday season, it already
05:02arrived.
05:03And so a lot of that mitigation strategy has already been employed.
05:07So those folks, for those of us who are looking to shop this holiday season, we don't have to worry
05:11about.
05:11You don't have to worry about it.
05:13Yeah.
05:13In all seriousness, though, I am curious.
05:15Have you lobbied Washington at all for an extension of this moratorium?
05:20Has there been any efforts to try to press the Trump administration to hold the line?
05:24Well, part of our job as a major gateway and a major infrastructure is to make sure that our policymakers
05:31are educated on what's happening on the ground and what the results are of different changes in policy.
05:37We're not necessarily there to lobby as much as educate and make sure that the administration has all the information,
05:43all the data they need to make decisions.
05:45Do you want an exemption for Long Beach, given its importance?
05:49Well, the Port of Long Beach is the nation's second busiest seaport.
05:52We are a U.S. commercial strategic seaport.
05:55We are a reliable gateway for the nation.
05:57And it's important for us, in order to continue to deliver that value to our customers, to have policy that
06:04enables that growth.
06:05With regards to just the container rates overall, are you anticipating that we will see additional increases, whether this extension
06:13actually comes or not, of the trade truce?
06:15What we're hearing from the shipping lines and the shippers is that the next two to three months will continue
06:20to be as busy.
06:20In fact, we're looking at a very solid September, and we expect that October is going to be another busy
06:27month.
06:27What happens after that will largely depend on what comes out of the meetings later this month.
06:32I do want to ask you about your expansion into 2050 and just the economics of building out Pier B
06:38and just the costs involved.
06:41A, are all the costs, excuse me, is all the money there to cover the costs in some commitment or
06:46another?
06:47So the first tranche to get us to that 2050 vision and double our container throughput is $3.3 billion.
06:54Romain, that's the single largest CapEx program of any port in North America.
06:57We're doing that because rail is the key to our future.
07:02And the more containers we move directly off of a ship onto a train, that will drive the value for
07:09our customers, for our shippers, and it will ensure that we continue to support the entire country.
07:15So other money, though, that you actually have now, and more importantly, the money that you think you're going to
07:20need overall, do you already have commitments from some of the railroads and the shippers and other stuff that they
07:25are actually going to utilize this reimagined Pier B?
07:30Yeah, so the $3.3 billion is all the public infrastructure that we're delivering.
07:35All that capital outlay has been committed.
07:38It's already planned for the next 10 years.
07:41We're going to build it, and we are working closely with the Class 1 railroads to ensure that they update
07:46their own plans to make sure that we maximize this important infrastructure.
07:50Part of the disruptions that we've seen, whether it's from trade or wars or in other things, is that, you
07:55know, it seems like everybody's looking for alternative routes.
07:57It's not necessarily permanent, but the idea is that nobody wants to be reliant on just one thing.
08:02Does that have an impact on you long term when you start having people saying, look, you go, maybe we
08:07can go through Panama.
08:08Maybe we can go through the Suez.
08:09Maybe we, I don't know, maybe if we get enough melting ice, people just go, you know, through the Arctic.
08:14I mean, these are things that people have talked about.
08:16And then with energy, you have pipelines and other things.
08:19How do you factor that into your longer term forecast?
08:20Yeah, I mean, cargo follows the path of least resistance, and the shippers will always look for the fastest, most
08:26efficient way to get their cargo from point A to point B.
08:28This is why we're investing so aggressively in our port.
08:31We believe that the infrastructure that we're going to be delivering by 2050 is going to offer that value, the
08:36velocity, reliability, and the sustainability that our customers desire.
08:41I do, I am curious, though, but 20 million by 2050, when I hear that, I also think you've got
08:47to also have a lot more automation to make that work.
08:49I mean, isn't that just kind of the reality of how this works?
08:52Yeah, so our plan is very simple.
08:54We're not going to double our real estate.
08:55It would take too long.
08:56It would be too expensive.
08:57So how we're going to get to 20 million TEUs by 2050 is we're going to densify, electrify, and modernize.
09:04Now, it doesn't mean that it's all going to be automation.
09:06For example, we're developing a project at PRS, and we're looking at developing the world's first human-operated zero-emissions
09:14container terminal that will primarily service express services.
09:17So we are constantly looking for new models to deliver infrastructure that check off multiple boxes at one time.
09:24I do have to.
09:24How are our relations right now with the labor unions?
09:27Because this is obviously, they're going to have a say to some extent or another as you do this build
09:32-out.
09:32They're going to want to project their jobs and the human capacity at these ports.
09:36Our workforce is vital.
09:38They're the ones who power the port.
09:39They're the ones who handle the record 920,000 TEU.
09:42We have excellent relationships with them.
09:44And as we build the port of the future, we're going to continue to work with our workforce to prepare
09:49and train the workforce of tomorrow.
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