Port’s Storage Unit to Open With a Loss : Commerce: Facility to store imports before they are shipped to markets, expected to open in January, has already lost out on a large shipment of Chilean fruit.
The San Diego Unified Port District’s new $8-million cold storage facility will miss out on about 14 shiploads of fruit from South America over the next five months and is expected to operate at a loss next year, the facility’s operator said.
The Port District had counted on a share of the grape and stone fruit shipments, historically handled at the Los Angeles’ port, for the majority of its business during the first year of operation.
Work is expected to be completed this month on converting the former Van Camp tuna cannery at the Tenth Avenue Marine Terminal into the 200,000-square-foot commodities storage facility. The space is split equally between receiving and fumigation areas and refrigerated storage.
The Tenth Avenue Terminal, which will provide stevedore services as well as storage and government-mandated fumigation for produce, has raised concerns of environmentalists and others over the use of a toxic gas, methyl bromide, to fumigate the imported fruit, as required by the government. A Port District task force has been set up to explore alternative means of fumigation.
“You build these things and you hope the industry is attracted to it,” Deputy Port Director Dan Wilkens said. “It’s a volatile and competitive industry, but we anticipate the (Chilean fruit) business will come next year. We didn’t think we’d be bursting at the rim during the first year.”
Port officials learned over the past few months that major shipments of Chilean fruit, mostly grapes, will continue to be taken to Los Angeles despite a year’s worth of marketing by the Port. It was estimated that revenues from those shipments would have been worth $3 million.
Because of that loss, the operator and tenant, Tenth Avenue Cold Storage, will not sign a contract proposed by the Port that would have called for the operator to pay the Port about $52,000 in monthly rent and 50% of all revenue from wharfage charges over the next 10 years.
Instead, the contract is expected to be for one year and give the Port District 50% of all revenue collected at the facility, but no rent. The facility has not lined up any business.
“The completion of construction was getting close to the point we would start importing the fruit,” Wilkens of the Port District said about losing the Chilean shipments. “It just didn’t work out to everyone’s comfort level. Now we expect to get some fruit but certainly not the level we thought we would be getting.”
Port Commissioner Bob Penner, who had hoped the cold storage facility would be ready last year, said the determining factor in the Port missing out on the Chilean fruit this year was that “the primary carrier wanted to return to Los Angeles, and the smaller shippers (which use the same ships as the primary carrier) probably didn’t have much of a choice but to go to L.A.”
This spring, Penner paid a visit to that primary shipper, Lauritzen Shipping Lines of Denmark, and said he “didn’t leave a stone unturned” in detailing the advantages of San Diego’s cold storage facility over regular storage at Los Angeles.
Port officials say their facility is superior to those at other West Coast ports because San Diego isn’t congested and is closer to South America. And its new cold storage facility will allow perishable commodities to be handled less--refrigerated storage is 40 yards from the dock. At other West Coast ports, perishables must be trucked inland to cold storage.
“This is not a one-year shot,” Penner said. “This is a commitment to start a new industry here and it requires a long-term look. If the Port doesn’t do anything, we’re bound to end up with hotels and T-shirt factories along the waterfront.”
Last year a consultant told the Board of Port Commissioners that they had a good chance of luring as much as 40% of West Coast imports of South American fruit from Long Beach and Los Angeles. The Port has also been interested in importing kiwis from New Zealand, and still might capture some kiwi shipments this year, according to Albert Garnier, director of Tenth Avenue Cold Storage.
Garnier said the facility, which will likely be tested and ready to accept fruit in January, may yet get a couple of shiploads of South American fruit. But the shipments would be “demonstrations” in which the growers would get a reduced price on handling and storage of their fruit so the operator could prove San Diego’s terminal is worthwhile.
If it can lure some of the shipments that now go to Los Angeles, the Port District expects to carve out a new niche as an importer and exporter of perishables such as fruit and seafood, creating jobs for longshoremen, truck drivers, shipmasters and others.
In the height of the South American fruit transport season, Garnier said, about 10 people would regularly operate the terminal, while each ship that calls will require an additional 10 terminal operators and about four shifts of 60 workers to unload. Until the facility wins someone’s business, it will employ only a few people to keep the refrigeration area operational.
Now the Port and Tenth Avenue Cold Storage will focus their energy on marketing their new facility. Wilkens said efforts are underway to capture exports and imports of beef, fish and poultry, all of which can be kept in cold storage before being trucked inland or loaded onto a ship. Also, the Port is working to get citrus growers in the West to consider using the Tenth Avenue terminal to export their fruit to the Pacific Rim.
