California Apparel News

A major Hong Kong firm has plans to build a new port south of Ensenada in Mexico’s Baja California region to compete with the jammed port complex in the Los Angeles/Long Beach area.

Hutchison Port Holdings, a Hong Kong–based company that already operates the small and shallow Ensenada port, has plans to invest up to $1.2 billion over the next 10 years to build a port in one of three locations south of Ensenada, according to an interview with Antonio Rodriguez Hernandez, president of the Baja California House of Deputies’ Commission for Economic Development and Port Affairs, published in the Tijuana newspaper Frontera.

The locations under consideration are Punta China, Bocana de Santo Tomas and Punta Colonet, all about 80 miles south of Ensenada, Rodriguez said.

The new port could handle from 1 million to 1.5 million 20-foot-long containers a year when it opens. Currently the tiny Ensenada port can handle about 100,000 to 120,000 such containers every year but averages 60,000. The Ensenada port, known as the Ensenada International Terminal, located 100 miles south of San Diego, has just one cargo berth and two cranes and would not be a prime spot for a major cargo container port. The port is dedicated primarily to cruise ships, fishing boats and sailboats.

Despite its limited size, Ensenada played a major role for shippers during the dockworkers lockout more than two years ago that shut down operations at 29 West Coast ports. At that time, more than 10,000 U.S. bound containers were unloaded at Ensenada and seven other Mexican ports.

To make the new port work, other infrastructure projects must be completed such as a railroad connecting Mexicali, on the Mexican-California border, with Yuma, Ariz., and a new highway to link Punta Colonet with Ensenada and Tecate.

Hutchison, which is part of the Hong Kong conglomerate Cheung Kong Group, operates dozens of ports around the world. In Mexico, it operates the Port of Lazaro Cardenas, on the Pacific. It is the closest port to Mexico City. Currently there is a single-berth terminal and on-dock rail facilities. Hutchison has the permission to build two more terminals.

The Southwest and Midwest regions of the United States would benefit the most from a new port around Punta Colonet. “It is another alternative,” said Robert Krieger, president of Norman Krieger Inc., a Los Angeles customs broker and freight forwarder.

He noted that the same kind of bi-country competition exists between the ports of Vancouver, Canada, and those in Seattle and Tacoma, Wash. A few years ago when the Canadian dollar was weaker compared to the U.S. dollar, many importers preferred to ship their cargo containers to Vancouver, transport them by rail or truck across Canada and bring them into New York. “It may not have been the premium service they might have gotten in the United States, but it kept a lid on prices,” Krieger said.

Another factor concerning shippers is long delays at the Southern California port. They were overwhelmed with cargo from July to early November by an influx of containers coming from Asia. It is only expected to get worse next year when apparel and textile quotas among the 148 World Trade Organization members disappear.

At one point, there were nearly 95 ships docked or waiting for berths at the two ports, causing a three- to five-day delay in getting cargo unloaded at the biggest port complex in the United States. During the normal season, there are only 35 to 50 vessels at both ports.

This year, the Port of Long Beach is expected to handle 5.5 million 20-foot containers (TEUs), a 20 percent increase over last year. The Port of Los Angeles is expected to handle more than 7.3 million TEUs or around a 2 percent increase.

The port developments south of the U.S. border leave Southern California port officials with mixed feelings. “We have been quite aware of the developments there,” said Jim MacLellan, director of marketing for the Port of Los Angeles. “It takes some time to build a port because right now it doesn’t exist. You have to build a breakwater, railway spurs, highways and docks. It is a major civil engineering project,” he said. “It won’t decrease our current cargo coming in. But it might take away some of our future growth.”

Port of Long Beach officials have also been aware of the Mexican port project but are not worried. “We have gone for a year with cargo backed up all over the place and there have been diversions. So we are not concerned about competition,” said Art Wong, a Long Beach port spokesman. “We are dealing with our own expansion issues. If there are other ports that have to expand and take up the growth, that’s fine.”