Ports Duke It Out for Ship Traffic

Some businesses lure clients with expensive dinners or tickets to a sporting event.

The Port of Los Angeles built an island in San Pedro Bay with 58 million cubic yards of concrete, rock and muck to woo the world’s largest shipping conglomerate.

And these days, more ships turn left instead of right after passing through the breakwater as they move 1 million containers of cargo a year in and out of the Port of Los Angeles instead of neighboring Long Beach.

Los Angeles’ $328-million gamble that lured Maersk Sealand paid several rich dividends. One was a lease worth $2 billion over 25 years. Another was the dethroning of Long Beach as the nation’s busiest containership port.

The ports may share San Pedro Bay, but behind the scenes on shore there’s a fierce sibling rivalry. Three times over the last 20 years, one port has lost to the other the right to call itself the U.S. leader in handling cargo containers.

And if the last three months are any indication, the numbers will get a lot closer again this year, as Long Beach revs its engines to try to regain the top spot. Since December, Long Beach, aided by deeper waters that allow it to accommodate the largest containerships, has moved more than 1.5 million containers, just off the pace set by Los Angeles at nearly 1.7 million containers.

“It’s like a tug of war,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “Los Angeles has had the advantage, but now Long Beach is coming back. It’s getting to be a horse race again.”

The Los Angeles-Long Beach matchup is unique. Although many harbors vie to receive a piece of the ever-growing international shipping traffic destined for the United States, no two major U.S. ports do it in such close proximity.

“In other parts of the country, you have ports competing,” Kyser said, “but it’s not like here where they are sitting on the same couch.”

On the West Coast, Seattle and Tacoma share Puget Sound but are separated by 34 miles. Portland’s port faces Vancouver, Wash., across the Columbia River, but the two harbors work together rather than as competitors, according to port officials.

Los Angeles and Long Beach work differently. Both are so-called landlord ports. Unable to levy taxes or otherwise raise funds of their own, they depend on long-term lease agreements with shipping lines, terminal operators and stevedoring companies for their operating budgets.

Long Beach set the tone for the duel during the 1990s, when it moved ahead of Los Angeles in containership traffic with a reputation for being much more efficient and responsive, according to port experts and financial analysts. Meanwhile, two audits hammered the Port of Los Angeles for needing nearly two-thirds more employees to generate less business than its neighbor.

In an attempt to cut costs, Los Angeles closed its business office in Australia in 1997. The decision backfired: Although the port saved about $70,000 annually, it left the door open for Long Beach, which was able to build up its Australian business from zero in 1997 to $618 million in 2004.

Port of Los Angeles officials struck back with a bold move -- building a world-class cargo terminal and praying it would attract a world-class client. The artificial island complex, called Pier 400, reeled in Maersk in late 1999 despite a counteroffer from Long Beach for new space in two separate parcels.

At the time, Maersk accounted for nearly 25% of the 4.3 million containers handled by Long Beach. Los Angeles trailed with 3.7 million containers in 2001.

“Maersk was the big deal,” said analyst Ann Van Praagh, who follows West Coast seaports for Moody’s Investors Service. “It was driven in large part by the fact that Los Angeles had a vision for what it thought its port could look like at full build-out.”

Maersk moved into its new home in August 2002, and the following year the Los Angeles port surged far ahead of Long Beach to become the nation’s biggest hub for international trade and seventh in the world in container traffic, just ahead of Rotterdam in the Netherlands, the busiest port in Europe.

Art Wong, longtime spokesman for the Port of Long Beach, said that officials always assumed that some shipping line would step up to take any pier space that had been vacated, but added, “I don’t think that we really wanted to test that with 25% of our business.”

Despite the loss of Maersk, Long Beach pushed full speed ahead, assisted by an explosion of international trade and by a fortuitous consequence of oil drilling.

So much oil had been pumped out of the tidelands around Long Beach over the years that the seafloor in the eastern part of the bay sank as much as 30 feet in some places, according to Tom Teofilo, managing director of maritime services for the port of Long Beach. That has helped it accommodate the giant 8,000-TEU (a standard industry measurement for the equivalent of a 20-foot-long steel cargo-bearing box) container vessels headed for Southern California from Asia.

In 2003, Long Beach handled more containers than in any previous year. In 2004 the growth accelerated to a record 5.8 million containers.

The increase came largely from Maersk’s biggest competitors. Hanjin Shipping of South Korea, for example, doubled its acreage at the port. And Geneva-based Mediterranean Shipping Co., which didn’t have its own terminal before, moved into Hanjin’s old space.

Long Beach also did some poaching of its own, snaring Carnival Corp.’s Carnival Cruise Lines from Los Angeles by building a new cruise ship terminal. Carnival left Los Angeles in 2003 because it wanted a location that could accommodate vacationers who want to spend time seeing tourist attractions before departure.

“The location in Long Beach is much more conducive to getting out and walking around the area,” said Jennifer de la Cruz, spokeswoman for Carnival, which brings 250,000 passengers through Long Beach each year. “There are a variety of tourist-friendly locations close by.”

In Long Beach, the port has benefited from its favorite-son status with city politicians who rarely argue about proposed upgrades. The Los Angeles port, in contrast, was something of a political football in the mayor’s race with candidates putting forward different visions for the harbor.

Port growth has been controversial, particularly for Los Angeles, as neighboring communities have complained about increasing congestion and pollution.

Critics contend that the two ports aren’t working together to craft solutions. Those pressures contributed to the departure of the Los Angeles port’s executive director in 2004.

Bruce Seaton, interim executive director of the Port of Los Angeles, said that leading the nation in cargo traffic wasn’t the harbor’s sole measurement of success.

“You also have to be No. 1 in the environmental initiatives, in having enough infrastructure, in leadership in the security area,” Seaton said. “We have broadened that definition.”

His counterpart at Long Beach, longtime Executive Director Dick Steinke, said that the competition between the two ports has made both facilities better than they would have been otherwise.

“It has kept us agile and nimble,” he said. “We make sure we are responsible to our customers’ requests. We know they have a choice.”

Steinke said it didn’t matter which port was on top.

Seaton couldn’t bring himself to agree: “No one would ever want to lose that rating.”