By RICHARD CLOUGH
With growth in Asian shipping to Mexico’s Pacific Coast, the Los Angeles and Long Beach ports,Orange County’s maritime gateways,have launched talks with Mexican officials in a bid to develop new trade routes and limit future damage to the Southland’s import-dependent economy.
Last month, representatives from the two local ports visited Mexico, following up a memorandum signed in May by officials and their Mexican counterparts.
The memorandum calls for increased cooperation and communication between port officials on both sides of the border as large Asian freighters are increasingly docking in Mexican ports,even when they are carrying goods bound for the U.S.
U.S. port officials also have their eye on a state-of-the-art megaport Mexico plans to build 150 miles south of Tijuana that would directly compete with the Southern California ports.
“There’s now sufficient critical mass for steamship lines to justify putting a ship into Mexico,” said Paul Bingham, an economist who tracks ports for Waltham, Mass.-based Global Insight Inc.
Local port officials are seeking to boost so-called “short sea shipping,” which involves sending U.S.-bound goods to the Los Angeles and Long Beach ports via smaller freighters once they arrive at Mexican ports.
Port officials say the practice, which requires the cooperation of Mexican ports, would be positive for both sides,preserving import volumes of domestic goods at the Southern California ports while allowing Mexico a chance to capture a greater share of its own growing domestic commerce.
The process also could benefit Mexico by compensating for the country’s inadequate roads and rail lines, which otherwise could stunt its growth in trade by limiting inland dispersal of goods once they reach ports.
The Los Angeles and Long Beach port complex is by far the largest in the country and is the fifth largest in the world. The ports handle about 40% of all of the country’s imported and exported goods.
Growing Ports
The ports are a key shipping point for a host of OC companies, including the U.S. operations of Asian companies here.
But several smaller Mexican ports are growing quickly.
After handling just 2,670 cargo containers in 2003, the Port of Lazaro Cardenas on the Pacific coast in the Southern Mexican state of Michoacan grew to 160,000 containers in 2005.
Now, it is in the process of expanding its capacity to as much as 2.2 million units per year,and with 6,000 acres at its disposal, experts predict the port could handle upward of 6 million containers within the next five years.
The Port of Ensenada, about 70 miles south of Tijuana, handled 123,000 containers in 2006, a number that is likely to rise after rail lines are built to the U.S. border, which is expected in the near future.
But Lazaro Cardenas and Ensenada are not even the country’s largest ports. The Port of Manzanillo in the state of Colima handled 1.2 million containers last year and sees itself as a growing competitor to the Southland ports.
“Lazaro Cardenas and Manzanillo are already promoting themselves as alternatives,” Bingham said.
Then there is the massive port complex in Baja California that would be built to handle the largest tankers on the seas today and others still on the drawing board.
But much of this anticipated development would be dependent on the growth of Mexico’s consumer market for mostly low-cost, finished consumer products from Asia, including apparel, furniture and consumer electronics.
With all the Mexican ports, it remains to be seen whether any can reach all of their theoretical container volume potential given limitations to the country’s transportation infrastructure.
Mexican ports have accepted cargo diverted from Los Angeles and Long Beach during past labor disputes and are hoping to grab a piece of the huge growth expected in the next decade.
Costco Wholesale Corp., the Issaquah, Wash.-based national warehouse retailer, brings about 60% of its products through the local ports but diverted goods through Ensenada and some other ports during past labor disputes.
Chief Financial Officer Richard Galanti said the company only rarely diverts cargo, but is willing to move its business to other ports if they become more operationally efficient.
“Ultimately, cost and time of delivery are the two main issues,” he said. “What is the least expensive and most efficient way to get the goods to their destination?”
Megaport
That attitude is behind plans for a new project proposed in the Baja bay of Punta Colonet, south of Tijuana. Mexican officials envision a sprawling port in the pristine bay that would attract Asian goods and serve both Mexico and the large U.S. Midwest and East Coast markets.
The project is drawing serious interest from major corporations. But while observers expect construction contracts to be awarded perhaps before the end of the year, progress has stagnated of late.
Omaha, Neb.-based rail line Union Pacific Corp. was set to partner with port developer Hutchison Port Holdings Ltd., a subsidiary of Hong Kong-based Hutchison Tele-
communications International Ltd., to bid on the project but ended the partnership earlier this year.
The company still is monitoring the project and observers expect that either Union Pacific or Fort Worth, Texas-based rail line Burlington Northern Santa Fe Corp. will ultimately bid when the proposal moves forward.
Clough is a staff writer with the Los Angeles Business Journal.
