By Bob Brewer, Braumiller Law Group
The Maritime Port Authority (MPA in Singapore) is currently in the process of building the Tuas Port, which will be the biggest port in the world with a capacity of 60 million TEU’s (twenty-foot equivalent units) once it is fully completed in 2040. PSA, the company taking the lead in the construction has implemented a four-phase process, with the first phase officially opening this September 2022, with three berths being operational. This isn’t just a 5 mile stretch of reclaimed land getting new ports, but instead a major modern expansion of fully automated ports. When Phase one of port operations at Tuas Port is fully operational in 2027, the port will have 21 deep-water berths that can handle 20 million TEUs annually. The first two berths started operations on schedule in December 2021, and three more berths will be operational by December 2022. In 2021, Singapore handled 37.2 million TEU being connected to more than 600 ports worldwide, making it the busiest port outside China. Tuas, when fully operational in 2040, will have more than 16 miles of berths. The port has been designed with the capacity to handle 65 million TEUs annually. By comparison, current plans for Shanghai, the globe’s number one port, call for a capacity of 50 million TEU annually.
Consider the technology that will be driving the day-to-day operations for a higher level of efficiency (sorry humans) like driverless trucks, drones, and automation in the movement of goods from the ship to the trucks or rail cars. Obviously, an added bonus is that this implementation of technology takes those “human oriented things” like covid (A China ports problem given the zero policy) and unions (A U.S. ports problem-recently solved, but ever looming) out of the equation for any future bottlenecks. The new port is digital (think paperless) and uses artificial intelligence to coordinate operations more seamlessly. They will also use digital technologies such as a state-of-art vessel traffic management system and digitalPORT@SGTM, a one-stop portal for port clearances and other regulatory transactions that improve the turnaround time of vessels.
These recent developments in Singapore’s ever-growing status as a hub to the world are a natural progression with a government that has always been on top of their game with economic ties to world trade. It’s roughly a $20 billion investment that was an absolute no-brainer. If you take a snapshot of the major ports around the world regarding the movement of billions of dollars in daily in trade, and the efficiencies, or lack thereof, it’s testimony in the case of Singapore as to where the future is to making trade flow. Singapore has been the number one mid-way stopping point for goods flowing from Asia into the E.U. and U.S. and has made a commitment to not just hold on to that top position but improve upon it. In the bigger picture, it’s in the number two spot of the top 8 ports in the world. Six of the other top eight positions are held by China ports, Shanghai being number one. Imagine that. Of note, Chinese state-owned enterprises hold ownership stakes in terminals at Long Beach (number 21 in the world) and Los Angeles, (number 17 in the world) which are the largest ports in the United States, as measured by container volume. Here is a quick glance at the top 8 ports in the world:
- Port of Shanghai, China
- Port of Singapore, Singapore
- Port of Ningbo-Zhoushan, China
- Port of Shenzhen, China
- Port of Guangzhou, China
- Port of Busan, South Korea
- Port of Qingdao, China
- Port of Hong Kong
There are currently problems in the two largest ports in the U.S. that still loom large, especially when it comes to the dwell time of around 9 days prior to movement of a container to rail or truck. In contrast, Singapore leads the way in efficiency with a 24-hour dwell time. Of course, it’s worth mentioning that the dwell time would have come to an absolute screeching halt for thousands of containers if the recently proposed union rail strike in the U.S. would have been initiated. The White House intervened and negotiated a settlement that would have otherwise cost the U.S. economy roughly $2 billion per day. That is a great deal of power for a union to possess, and not a very equitable foundation for any future discussions, given that rail car from the U.S. ports represents about 41% overall. I think it was a well deserved 25% raise, and we will see how long that new imaginary watermark “happy face” on the paychecks survives, especially if the feds can’t get inflation under control.
Singapore’s government seems to be able to keep the union (Singapore Port Workers Union) happy, although there were some rough patches over the last few decades. Therefore, this monumental task at hand via PSA and the building of the most modern port in the world, really does beg the question, unions aside, why can’t we do that in the U.S.? It’s always been a matter of port efficiency when overcoming obstacles like the pandemic within a world-wide supply chain, so we live and learn. Singapore kept operating throughout the pandemic 24/7, with dwell times of between 1-2 days. I must divert some attention to the so-called “dwell times” because it has everything to do with how well port operations do, or don’t, handle the traffic. There are vessel dwell times, as well as import and export dwell times on the containers. It’s about the TEU’s and their movement, or not, once the vessel gets within port limits. Imagine a scenario of 100 ships destined for the port of Long Beach, or Los Angeles carrying an average of 24,000 TEU’s of cargo. At the time of this writing, just for grins, I Googled the question of the number of ships in the Los Angeles harbor and got this: The local time at LOS ANGELES is 2022-09-24 11:29:00 and the time zone is UTC -7. 98 ships have arrived in this Port within the last 24 hours. Currently there are 109 vessels in this Port and another 48 vessels are scheduled to make a port call in the next 24 hours. Ouch!! If you add in a dwell time of 5-6 days on the imports at port, you can see why the pile of containers, when added to the export containers, has become problematic, and the dwell fees (still postponed) have come into play, but are still just a threat. This scenario of course lends itself to the vessels sitting out in the port waiting for a berth just to unload, which not too long ago was taking up to three weeks, as the port was clogged to the point that you could walk a mile out into the harbor, vessel to vessel, and never touch the water. It paints a not so rosy picture when it comes to getting products to market. In contrast, worth another mention, dwell times overall in Singapore have remained steady at roughly 24 hours. Granted the tale end of the pandemic woes are still in effect globally, but at some point, we have simply got to quit blaming the pandemic and get our act together. Why can’t the U.S. ports of Los Angeles and Long Beach be more like Singapore in regard to investing in modernization? It’s an article in itself, but it really comes down to who actually owns the various ports and who oversees them in governmental policy. To say the least, it’s complicated, with several private companies involved in ownership of the various ports. Overall, there is quite a pyramid of red tape within the realm of “getting things done.”
For example, the Port of Los Angeles is a department of the City of Los Angeles (also known as the Los Angeles Harbor Department) and is governed by the Los Angeles Board of Harbor Commissioners, a panel appointed by the Mayor. The Los Angeles Board of Harbor Commissioners oversees the management and operation of the Port of Los Angeles. They serve five-year terms and elections are typically held every July for the offices of President and Vice President and have very little experience with actual port operations on a daily basis. All five members of the Harbor Commission are also volunteers, which often doesn’t bode well when it comes to commitment vs the day job that pays the bills. Honestly, I had a tough time figuring out the priority of the board, as they seemed to be focusing funds more on the construction of large entertainment venues along the ports to attract tourists, as well as the locals.
In an even crazier nutshell, state involvement with ports in California is distributed across several agencies, including the California Department of Transportation (Caltrans), California State Transportation Agency (CalSTA), California Air Resources Board (CARB), and the Governor’s Office of Business and Economic Development (GO-Biz), and the CPFC (California Port Finance Committee)…not really, I just made that one up. What’s one more? Each agency has different responsibilities regarding the ports of Los Angeles, as well as Long Beach, when it comes to the movement of goods. Caltrans leads the state planning processes for freight transportation, which includes ports. CARB regulates the emissions of ports and enforces state goals for ports to transition to zero-emission technologies. (Go electric like Singapore!) GO-Biz assists ports by facilitating meetings with local, state, and federal representatives on issues impacting California’s freight movement. The state also established a new freight policy team at CalSTA, can you imagine trying to get something blessed by all three agencies, at the local, state, and federal level like investing in upgrades in technology, or even more rail? Would their fiscal priorities ever really align?
In steps the mandate. About a year ago Governor Newsom issued Executive Order N-19-21, which directed state agencies to identify additional ways to alleviate congestion at California’s ports. In response, the Department of General Services (DGS) found six surplus state properties in proximity to highly congested ports, like Long Beach and Los Angeles, which can store up to 20,000 containers. The state plans to lend these properties to support port operations for one year, with an option to renew for another year. So, instead of finding a way to move the containers more efficiently, they have decided to find more room to store them. Brilliant. Someone is paying for that. Quite possibly, the importer of record.
In all fairness, in recent years, the legislature has engaged on several budget and policy efforts regarding ports. For example, they have committed nearly $1.9 billion over the next several years for port-related issues, such as infrastructure projects, workforce development, and operational improvements. I would however highly recommend that they look to Singapore’s Tuas as the model and devote some funds to the new technology in operational efficiencies. It’s going to be an interesting Christmas for many as far as when the gifts may, or may not, arrive. Remember, Walmart is the largest retailer in the U.S. and about 80% of their product comes from China. Right now, it’s taking about 2 months to get product in from China. How do I know? I order things from Ali Express, just to stay on top of it. I finally got my paper mache vest yesterday, ordered back in July.