Containerization and International Shipping - Coursework Example

CONTAINERIZATION

History of the Ports

The Ports of Los Angeles (POLA) and Long Beach (POLB) have been a crucial item in the transformation of the City of Angels to become the largest business investment in the American side. Their existence contributes to the $8.9 trillion global exchange that facilitates for the contemporary US deficit with other global economic giants such as China. The deficit stands to be the greatest deficit in the world ever. POLA and POLB are responsible for handling $14.1 million containers each year, and up to the year 2005, the port earned the title of the largest seaport in the world. The harbors at the two ports incorporate modern and refurbished designs to beat the world’s leading ports in terms of their design and in their operation processes. Being the two busiest operations in the California region, the ports account for over 94% of the air pollution in the region (Martinez 2015). The history of the ports runs deep to cover to the year 1542 when the native Californians encountered Portuguese Juan Rodriguez Cabrillo and the state of the ports was a mere marshy region and was shallow. The location did not change for years in selection. The location of the ports remained recurrent in the process hosting some of the greatest world’s occurrences such as the Mission periods, the US-Mexican war and the Mexican independence (Martinez 2015).

With mere operations of the port, Phineas Banning rose in the 1850s and 60s to help build a transportation system using stagecoaches that moved the recently arrived people and goods through the southland region. The “Father of the Los Angeles Harbor” helped construct a post office and a newspaper office in the harbor region. The occurrence of the civil war boosted all activities in the harbor region and it became of great importance to the Union troops in aiding through the war activities. The development of the two ports has an enhancement from the construction and opening of the Panama Canal in 1914. The strategic location of the Los Angeles port transformed it to the main port to form the basis for the Pacific and the Atlantic trade. The basis became more solidified with the opening of the Long Beach port in 1911 to solidify the dual seaports and their operations. Rearmament processes of the World War II benefited POLA and POLB greatly by making the operations of the ports to run up to twenty-four hours in manufacturing tons of war equipment to facilitate the World War. Additional processes happened in the ports where 500,000 employees launched into the ship, plane, and steel production. The growth of the two ports is also from the multiple trade agreements to utilize the two ports. Agreements such as the General Agreement on Tariffs and Trade initiated an international trade proliferation from an amount of $365 billion to $64 trillion. The amount results from the international cargo passing through the two ports (Martinez 2015). Over the years, various trade agreements boost the operations of the two ports to cover relations with global economic giants such as Hong Kong, China, Japan, and Taiwan.

Operations of the Ports

The economic impacts from the expansion of the ports remain hugely phenomenal since the inception of the ports. Many expansion projects of the two ports produce positive economic gaining that further prioritizes the importance of the existence of the ports. Yet despite the immense growth in the physical layout and technological improvements, the port authorities still come up with the paradigm that motivates the need for more and more expansions of the ports. The hugely involved group in the ports’ expansion processes remains to the community living around the two ports. The community has so far lived with the ports as part of their daily lives, even incorporating the ports into their health. The litany of the various improvements made continues to have significant and permanent impacts to the communities living around the two magnificent ports. It is worth noting that even with the positive and ever desired economic growth, the ports bring forth a handful of detrimental impacts to the surrounding community, all that will have a speculation in the paper.

For starters, during the early years, the ports housed the largest fishing processes to form Star-Kist Foods, the world’s largest fish cannery. The union jobs from the firm pleased every member of the community and the officials of the firm and of the revenue remained hugely glad about the millions in revenue collected from the industry. By the year 1929, California produced up to 75% of the canned fish rotating in the US market among other side products such as oils and fishmeals (Braathen 2011). However, the over dependency of the fishing activities and the industrial pollution negated the economic activity and the expansion projects stifled the aquatic life in the region. To such steps, the detrimental effects of destruction of the employment unions, the vast fishing industry became vivid to the world, and hugely affected the community living around the region of the ports. The continuous expansion of the ports led to a great loss in the community acreage for the schools, parks, and even for the community amenities (Braathen 2011).

The development projects are still persistent amid fears that the Panama Canal might overturn the business operations of the POLA and POLB. The decades overseeing the developments of the ports produce the health risks posed to the community from the daily operations of the ports. With a specific concern being on the diesel exhaust, the community culminates in the deadly environmental impacts posed by the operations of the ports, and from the fumes from the numerous trucks driving around the port.

Financial analysis

For the Fiscal year 2014 the gross operating revenue for POLB rose to 356.9 million which was higher when compared to 2013. This represented an increase of 3.1% as a result of increasing main cargo categories. Handled cargo rose by 2.0% totaling to 165.5 million. The containerized cargo experienced an increase of 3.3% rising to a total of 125.7 million. Although the port appeared to be doing fine in terms of finance, the net income dropped by 8.9%.

The main financial areas of concern are summarized below (in thousands);

September 30th 2014

Port operation revenue - $356880

Operating expenses - 108455

Depreciation - 117966

Income from operations - 130459

Increase in net position - 283523

Clean air action plan – (2474)

Capital grants - 178295

Contributions to other entities – (10203)

Transfers to the city – (17844)

Other non-operating revenue (expenses) - 5290

As for the assets, the capital assets amounted to $3,897,293,776 while other assets amounted to $784,607,052. When combined the total assets amounted to $4,681,900,828. The addition of deferred outflows raised this amount to $4,691,493,828.

As for the liabilities, the long-term obligations amounted to $1,036,715,255 while the current liabilities amounted to $189,606,445. When combined the total liabilities amounted to $1,226,321,700. With the addition of deferred inflows the amount hit $1,229,284,663.

At the end of the year, the assets were higher than the liabilities. The capital assets which include land, buildings and equipment were higher as compared to 2013 due to a rise in the construction projects throughout the year at the port.

Economic Impacts

The two ports in California operate in processes to handle the world’s greatest shipments in the shipping industry. The far-reaching economic impacts of the ports to the regional economy have an inclusion of generating more than $10 billion in local and state tax revenues in each year of operation. The existing businesses that link with the port in receiving and handling the imports and the exports through the two ports generate $12.1 billion and additionally stimulate another $5.5 billion through the various indirect sales in the local regions (Braathen 2011). The employees in the regions of the ports, who work directly to facilitate imports and exports, spend an average of $4.1 billion annually. The two ports are responsible for handling over $199 billion of cargo and the foreign and domestic shippers spend an estimated amount of $billion in every year to facilitate in their operations in the Port of Los Angeles and the Port of Long Beach (Braathen 2011). The two ports in California have a nationwide importance through their contribution of offering three million jobs across the whole nation that link to the products from the two ports. The ports generate federal tax revenue to an amount of $21.5 billion to boost the growth of the nation.

Apart from the economic forums posted from the operations of the two ports, the ports also pose a community benefit to the people living around them. The Port of Long Beach initiated a couple of outreach events and in 2005; the Green Port Fest has an initiation. The so far annual event allows the public to see the operations of the ports and get a chance to learn more about the policies and procedures of the ports regarding environment and security stances. The ports offer public tours to carry out various educational forums to the local people of the town. The ports offer educational scholarships to the students graduating from the Long Beach Polytechnic High School. The scholarship ranges in between $1000 to $8000 and is offered to the students with aspirations to pursue courses in international trade and related port operations.

Port Operations

Owing to the busy and ever congested operations in the port, the Heavy Container Corridor had its creation to aid in the movement of overweight 40’ or any other larger ocean-going container all through the Port of Los Angeles. The Heavy Container Corridor Map reflects on the appropriate overweight corridor route in the POLA and in the surrounding regions. The goods movement at the Port of Los Angeles plays a key initiative in the transportation efforts and projects in and to the dockworkers safety issues. The development of a master way plan for the easy movement of the commodities in the port is currently underway. The development of the master ways has a huge reliance on the current and the projected traffic volumes in the ports.

Congestion Challenges and the Causes

The two ports POLA and POLB face a serious challenge of congestion. With the recurrent development efforts, the ports still lack a clear way of moving the cargo traffic smoothly without causing any delays. The congestions run a high frustration to the business operations in the ports and acts as a barrier for efficient business operations. The high volumes of cargo that arrive through the Ports of Los Angeles and Long Beach exacerbate the congestion problem. Trucking the cargo from the docks becomes increasingly challenging and there are factors that lead to the scenario. The bigger alliances and ships make the process of unloading more complex reducing on the efficiency and the time taken to offload normal sized ships. Inadequate and lack of chassis at all increasing the congestion issue at the sister ports (Waldheim 2016). Prior to the Great Recession, the service providers included coffering the chassis to their operations but as a method of recovering from the huge losses, provision of the chassis ended. Currently, the result of the shortage of the chassis results in the commonly dubbed Chassis Crisis. Lack of the chassis hinders the movement of the cargo containers in the Ports of Los Angeles and Long Beach. Truck shortage problem poses as an international problem to the shipping industry. The dilemma lies in the shortage experienced in the provision of truck drivers who from the basic unit in the transportation chain. The lack of adequate numbers of truckers or even well experienced drivers creates delays in the ports and alternates to increase the costs to the shippers (Waldheim 2016). Waldheim further explains that an additional challenge to the sister ports disguises as the strong peak season shipping (2016). The increase activities in the shipping yards certain periods of the year pose a great challenge to smoothen out operations as compares to the other times of the year.

The waiting period at the two ports gets longer and longer each day and that ahs a negative consequence to the business community as it erodes their share to the international trade processes. The two sister ports continually struggle to respond to the rapid changes in the global shipping processes and align themselves properly to the international standards of carrying out operations. The most notable efforts are the advent of the giant cargo ships that clog the docks with the massive loads of cargo. The labor strife and provision rate to the port continue to play a great role in shrinking the market role of the Ports of Los Angeles and Long Beach California. Moreover, among the scrambling efforts are the efforts to live up to current shipping technology and infrastructure. With other globally recognized ports moving at a steady pace in updating the technology, the two sister ports remain in the throes of multibillion-dollar expansion projects. The projects aim to handle the international markets and business procedures (Waldheim 2016).

In conclusion, the two ports, POLA, and POLB remain in the struggling lot in the shipping market industry. Despite that demeaning fact, the two ports offer the quickest route to get to the Asian markets and while boasting about that fact, other shipping yards and regions continue to put relentless efforts in their operations in order to emerge as the global leaders in the shipping industry. Efforts to construct new railroads, raise the bridge levels, make new containers, and deepen the harbor waters play an imperative factor to ensure the twin ports remain at the top of the league in the shipping world. Policy-making and adjusting to the international market requirements additionally play a crucial role in the development and long-term sustenance of the Ports of Los Angeles and long Beach.