Think Global, Dredge Local 

Oakland port snares a new tenant and plans for the future

The 88 acres of the new maritime terminal at the Port of Oakland look like a parking lot on steroids. Vast rows of red and blue containers are stacked on the yard's brick-paved surface, which eventually will expand to 120 acres. At the water's edge sit ready the four cranes the Bay Area anxiously watched last summer as they slipped under the Bay Bridge. Called "super-Panamax class," they are among the largest cranes in the world; each can lift over 60 metric tons and has a 65-meter reach, enabling it to clear the decks of ships up to 22 containers wide. With 2,400 feet of berth space, the terminal can handle more than 200,000 containers a year.

And at a time when Bay Area commercial developments are worrying about finding tenants, this one has a secure resident: Hanjin Shipping, a Korean company that plies waters around the world with 122 vessels and owns ten terminals around the Pacific Rim, plus one in Germany. Hanjin's selection of Oakland as its latest home is a feather in the city's cap, and it celebrated with a modest grand opening ceremony earlier this month. In a crowded tent where politicians such as Oakland Mayor Jerry Brown gave their congratulations and a bevy of international businesspeople looked on, port officials said the Hanjin terminal's opening is just one step in their three-pronged expansion plans. The other two projects -- continued dredging of berths and channels to 50 feet deep, and creation of an intermodal rail terminal -- are equally vital to the health of the port's maritime operations, they stress.

In the competitive world of West Coast shipping, Oakland is eager to carve out a niche for its port and capture its fair share of expanding Pacific Rim trade. As regional economics continue to reel from the dot-com downturn, analysts are counting on the port, always an economic powerhouse, to play an even larger role in the East Bay's economy. Oakland already lost warehouse operators and redistribution centers to ports such as those in Southern California when the port's efforts to dredge their channels to a depth of 42 feet fell behind schedule. Now, if the port does not move quickly to catch up, it could lose more business, not only to Los Angeles and Long Beach, but also Seattle and even Mexico and Canada. "Unless we're able to keep pace with change," said Clement Chin, senior manager of marketing and business development for maritime operations, "we stand a risk of being relocated to a small regional port, or going away."

That dire state of affairs seemed unlikely as Hanjin officials celebrated their new terminal with a ribbon cutting and catered lunch, but there are threats to the port's continued health. Although projected trade growth is strong, new security measures are cutting into the profit margins of shipping firms. Moreover, continued survival means continued growth and that depends on dredging, which in turn probably means battles with environmentalists over disposal of dredged material. Growth also depends on a planned intermodal rail terminal, which is expected to open within months but which will require cooperation between labor, rail lines, state transportation agencies, and shipping firms to run smoothly and efficiently.

Last year, the port's maritime operations generated $1.6 billion dollars in revenue around the region. The maritime division generated more than 9,000 direct jobs and an estimated 270,900 related jobs through companies that ship or receive goods through the port, according to port statistics. Chin says the economic reach of the port extends well beyond the urban realm of longshoremen and crane operators. "In the Central Valley, a lot of their growth is tied to international growth," he said. "Wine, cotton -- those are export-driven commodities, and if we don't have the infrastructure to enable them to get the goods to market competitively and cost-effectively, it would dry up businesses locally in this area."

This relationship is likely to grow in the future. "Both exports and imports have been an increasing part of economic activity in the US, and that's particularly true of California, and even more true of the Bay Area," said Ashok Deo Bardhan, senior research associate at UC Berkeley's Fisher Center for Real Estate and Urban Economics at Haas Business School. "Trade is the engine of growth these days, in many ways, particularly for the Bay Area." Bardhan said recent global economic troubles will have little impact on activity at the port and the role global shipping plays in regional economics. "The downturn is going to affect everyone, of course," he said. "But long-term, it doesn't show any sign of reducing the proportion of the economic role the port plays."

Port officials echo that outlook. "Based on our most recent figures, we're about seven percent off of project growth," said Phil Tagami, president of the Oakland Board of Port Commissioners. "And September 11 has probably slowed down the efficiency, but not the volume. Basically, we've recast all our budget numbers, and we're still well within tolerance." On the ground, managers don't sound worried. "Everybody's anticipating sustained growth for the West Coast for the next five years," said Sal DiGrande, manager of maritime contracts and pricing. "Long-term, the growth is still there."

DiGrande conceded that the increased security measures being put in place in the wake of last month's terrorist attacks are slowing the transfer of goods from ship to ground, and he said that delays and extra security costs will have some impact on shipping firms. "The margins in this business are real small," he said. "But international trade growth is still there."

An even greater concern for the port, however, is making sure Oakland gets its piece of the pie as international trade continues to grow. "We need to capitalize on those opportunities," DiGrande said. As the fourth largest port in the United States, Oakland is not likely to overtake Southern California anytime soon. More pressing is the need to simply stay in the game. "We're playing catch-up," Chin said. "When we failed to get our 42-foot dredging program done in a timely manner, we lost opportunities because that hurt our ability to keep warehouses and redistribution centers, which relocated to Southern California."

Keeping up with the Joneses means dredging even deeper -- to 50 feet -- to accommodate the ever-larger ships now popular on trans-Pacific routes. "The ships are getting larger, and if we couldn't accommodate those ships, only smaller ships could come in, and that would bring up the cost of doing business in Oakland," Chin said. But dredging projects have run afoul of environmentalists, who argue that the port's proposed wetlands restoration is of ambiguous value and that toxics buried in overused harbor soil may come back to haunt us.

At the same time, environmentalists worry as the port has moved to expand by planning for additional berths and opening the Hanjin terminal -- which freed up still more berths at public terminals. Environmentalists have sued state agencies, asking them to regulate port expansion since the number of invasive water organisms brought in by large container ships increases along with port traffic. Port officials such as Chin counter that without a vibrant shipping trade in Oakland, the region would see a lot more trucks on the road bringing goods from Southern California and Seattle, further degrading air quality in an area already suffering from bad air.

Even if the port does complete the dredging and expansion projects, port managers believe they need to do more to set Oakland apart from its competitors. Essential to carving out a niche for the Oakland Port is the planned intermodal rail terminal, a dedicated freight station that would allow containers to be moved quickly to nearby rail lines serving the rest of the country. "The Port of Oakland right now primarily handles regional cargo," explains Chin. "The intermodal enhancement we're building will enable us to look at growing beyond our regional market to help diversify the business we handle, which helps us when the regional economy takes a down-turn."

As shipping grows, such connections are becoming more important. The bulk of Asian imports are processed through West Coast ports and then moved inland to reach consumers, Chin said. But in Southern California, ship-to-rail capacity is congested. That congestion provides a window of opportunity for Oakland, which already has visited Asian companies on a trade mission touting the coming rail links.

The first phase of the planned terminal, a $26 million project, will consolidate rail traffic out of the port in one large access point near the docks. The facility is already built, and maritime project manager Mike Beritzhoff said his team currently is negotiating with Burlington Northern-Santa Fe railroads. If the port authority board approves a contract with BNSF, the facility could be up and running as early as mid-November. Union Pacific, which currently serves about ninety percent of the port's international business, also could use the terminal.

In a region where activists and analysts often critique global trade policies, the busy trade at the Port of Oakland isn't always viewed favorably. But given that the port's role in the regional economy will probably increase, the economic health of the East Bay will rise and fall, to some extent, on its coattails. And East Bay consumers, progressive as they may be, are happy to enjoy the benefits of port activity. "When you go out to a store and you buy something from Williams-Sonoma or the Gap, it's made somewhere else, and it's transported through the Port of Oakland," Chin said. "Without the port, you wouldn't be able to get these products at such a reasonable cost."

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