Trade war, trucking competition 'undercut' Alameda Corridor

Intermodal container traffic falling sharply
RELATED TOPICS: INTERMODAL | CALIFORNIA
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LOS ANGELES — Competition from other ports, U.S. trade policies, and local dray moves are causing intermodal traffic declines that undercut the financial stability of the multi-track Alameda Corridor serving the Ports of Los Angeles and Long Beach.

Opened in 2002, the Alameda Corridor routes Union Pacific and BNSF Railway trains away from the ports on 20 miles of tracks with no at-grade crossings. Declining traffic “poses a severe financial risk” to the Alameda Corridor Transportation Authority, according to transportation consultant Mercator’s report to the Pacific Maritime Association.

It’s part of “a long term shift” of traffic leaving Los Angeles/Long Beach, intermodal consultant Larry Gross tells Trains.

The Alameda Corridor’s market share of Asian container traffic dropped from 56% in 2003 to 46% in 2018, the Mercator report says.

Also, large numbers of containers go directly to trucks and are drayed to local warehouses.

Gross says there is a slow trend of some freight being transloaded into domestic containers and “This results in a dray from the port to the Inland Empire for transloading and then the container hits the rail in San Bernadino or L.A. proper, avoiding the Alameda Corridor.”

Essentially, all authority revenue comes from user fees on containers moving by rail through the corridor.

“If the current trend continues [the authority] will experience significant cash flow deficits beginning in 2024, growing from $47 million per year from 2024 to 2029, to more than $100 million in 2029,” the Mercator report says. “Under this scenario, the accumulated shortfall would climb to $1.2 billion by 2038.”

The Alameda Corridor was constructed at a cost of $2.4 billion and continued revenue shortfalls could negatively affect the ratings of the authority’s bonds, says the Mercator report and a credit opinion by Moody’s Investor’s Service.

Increases in user fees that BNSF and Union Pacific pay the authority are restricted — the fees are indexed to inflation and range from between 1.5% to a limit of 4.5%, according to Moody’s.

Once fees are at the 4.5% ceiling, any revenue shortfall to the authority must be paid by the ports, Moody’s says.

The Mercator report says 94% of import containers through Los Angeles and Long Beach are from Asia and that the biggest threats are from expansions at the British Columbia ports in Prince Rupert and Vancouver.

Advantages of the Canadian ports for shipments to the Midwest are “transit time and dollar savings,” according to Gross.

Volume also is shifting from Los Angeles/Long Beach to the East Coast as a result of the 2016 completion of expansion of the Panama canal.

“Service issues, congestions, chassis shortages, land labor unrest are some of the contributing factors,” Gross says.

The U.S. Eastern and Gulf Coast ports have launched massive upgrade projects — including enlarged rail capacities — to lure Asian container traffic through the Panama Canal.

The upgrades have been paying off. 

American Shipper reported last week that Los Angles suffered a 19% decrease in container traffic — the biggest in two decades — due to U.S. trade policies. 

“Now, with the China trade war, sources are shifting away from China towards Southeast Asia points which are just as likely to come to the U.S. west through the Suez Canal versus east to the U.S. West Coast,” Gross says.

And Gulf Coast ports are benefitting from shippers abandoning intermodal for all-water routes “being driven by the rise of resin exports from the Gulf Coast refineries driven by fracking and the availability of cheap natural gas,” he says.
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