Trade and Currency

COSCO melds pieces of US-China success

By Li Xing (China Daily)
Updated: 2011-01-14 07:57

LOS ANGELES - A sea lion stole a look above the water close to the shores of Long Beach, where the COSCO Xiamen - a container ship of China Ocean Shipping (Group) Co - was docked just a few meters away at the Southern California port in December.

The Xiamen, with a capacity of 5,500 TEU (20-foot equivalent unit, the standard for container ships), carried about 3,000 containers. All were filled with merchandise from Northeast Asia with the largest volume coming from China.

Three white gantry cranes on the Xiamen were putting the fully loaded containers onto big rigs, which then headed to different destinations across the United States. On another side of the ship, five gantry cranes worked simultaneously to unload the MV Don Giovanni, a cargo ship for CMA CGM, a global container shipping group. Most of the goods also came from China.

Zigzagging across the dockyard, trucks pass by containers marked K-line (Japan) and Hanjin (South Korea), in addition to COSCO and CMA CGM.

"All these white gantry cranes are ours," said He Guangcheng, vice-president of the Pacific Maritime Services LLC. The gantry cranes were made in Shanghai by Shanghai Zhenhua Heavy Industry Co Ltd.

Pacific Maritime Services, which operates the Pacific Container Terminal at the Port of Long Beach, is a joint venture between COSCO and the Stevedoring Services of America. It offers terminal services mainly for COSCO, CMA CGM and other third parties.

It is now one of the biggest specialized container terminals in North America, He said.

The alliance transports goods between the Pacific East and Pacific West, serving trade between the US and Northeast Asia. But imports and exports between China and the US account for the largest share.

The volumes Pacific Maritime Services handled in 2010 increased by 26 percent over 2009 with its revenue rising by 25.1 percent, He said. Even though the figures still fell short of the boom years of 2005-2007, they indicated that China-US trade rebounded after the deep recession in 2008.

Shipping companies focus on volume, but Liu Shun'an, vice-president of COSCO Agencies (Los Angeles) Inc, could still tell what merchandise goes to China from the US and what comes to the US from China.

Recyclable paper and metal, half-processed forest products and other raw materials as well as agricultural products account for most of the American goods that depart the terminal for China and other ports in Northeast Asia.

Five white gantry cranes work simultaneously to unload the MV Don Giovanni, a CMA CGM cargo ship that can carry about 4,800 regular containers. Most of the goods are from China. [Li Xing/ China Daily]

And the ships make port calls at Long Beach with loads of manufactured commodities, such as athletic clothing and shoes, toys, furniture and daily necessities, Liu said.

His carriers come out winners if two-way trade is balanced, Liu said. However, they feel pinched when trade between Northeast Asia and the US is imbalanced.

In the worst of times, empty containers in a cargo ship accounted for up to 60 percent of the load on a journey from Long Beach back to China, Liu said.

This year, however, "we saw an increase in US exports to China", Liu said, so much so that the number of empty containers shipped back to China was largely reduced.

Both He and Liu said that the exchange rate between the renminbi and the dollar is not the key issue in the current US trade deficit with China.

"It all depends on the quality of the merchandise and their values," He said. "Most of the made-in-China goods satisfy the needs of the American people."

Despite the problems, they believe the prospects for China-US trade are bright.

On April 18, 1979, Liu Lin Hai, a 20,000-ton general cargo ship for COSCO's Shanghai branch, arrived in Seattle on her maiden voyage. She became the first merchant ship to arrive in a US port after China, and the US formalized diplomatic relations.

The ships then were small and the port calls were few and far between. Trade volume between the two nations was minuscule.

In the 1980s, a COSCO cargo ship arrived in Long Beach twice a month, said Roy Chang, Pacific Maritime Services vice-president in charge of vessel operations.

During part of the 1990s, more goods were shipped from the US to China, Liu said.

Today, nine container ships make port calls at the terminal every week as the value of China-US trade has grown from $2.5 billion to more than $300 billion a year. Some 9.57 million TEU of goods from China reached the US in 2008, while 2.23 million TEU from the US arrived in China, according to China's General Administration of Customs.

The volumes Pacific Maritime Services handles at the terminal have risen an average of 19 percent every year since 2001, He said.

In fact, the development of Pacific Maritime Services is a testimony to the robust China-US trade.

He said COSCO saw the need to open its own terminal base in the US in the 1990s as trade volume between the two countries grew.

"Without a self-owned terminal base at the destination, COSCO had to suffer not only from the uncontrollable liner-operating costs, but also from the non-guaranteed servicing qualities to its clients," He said.

In 1996, COSCO signed an agreement to rent the deserted navy pier at the Port of Long Beach, but the US Congress blocked the execution of the agreement in the name of national defense.

The terminal now covers an area of 256 acres, or 103.6 hectares, with 15 gantry cranes and an open storage area of 77.8 hectares.

COSCO holds 51 percent of the shares, with its container volumes as investments, while SSA invested with terminal equipments handling container volume of 700,000 units a year.

The joint venture has benefited not only the two parties but also the local economy, He said.

At present, Pacific Maritime has created more than 500 jobs for the local people, with 121 permanent positions for the local terminal managers, administrators, equipment engineers and technicians. Meanwhile, it also indirectly employs 394 terminal operators for the double shifts.