The Port of Los Angeles stands poised for significant growth and transformational change following news of Union Pacific’s plans to acquire Norfolk Southern (NYSE: NSC) and create the nation’s first transcontinental freight railroad.
In a phone interview with FreightWaves, Executive Director Gene Seroka emphasized the vast opportunities presented by the historic rail agreement, particularly in terms of enhancing cargo flow and expanding reach into key markets across the country.
“We’ve been working real closely with Union Pacific (NYSE: UNP) on bringing more cargo in to go through the Alameda Corridor,” Seroka said, referring to the below-grade rail freight route used by UP and BNSF to access the San Pedro port complex, which he said was a “great investment but underutilized.”
The $85 billion rail consolidation aims to optimize the use of the corridor, opening up access to the populous regions east of the Mississippi, and boosting intermodal freight capabilities out of the southern California container hub.
Seroka reminisced about past successes in transcontinental cargo movement as president of the Americas for American President Lines, noting how apparel was efficiently transported from Asia to New York.
“Think about garments on hangars that would come right out of the box to Macy’s on 34th Street in Manhattan’s Garment District and get put right on their racks,” he recalled. This efficient supply chain model is a compelling vision for future operations, especially with the potential enhanced efficiency from the merger.
Seroka said that the rail-tie up would enable more efficient transportation of goods from Los Angeles to East Coast destinations.
“You’re reducing paperwork and handoffs, you’re improving digital technology and you’re sailing on a ship getting to Los Angeles to on- dock rail through the Alameda Corridor,” he said. “There’s the retail consuming area of the tri-state New York, New Jersey and Connecticut, the ability to get to Boston, to get to the Mid- And South Atlantic, to get to the Sunbelt, which is growing so fast. And you can do that today, but if you combine the two companies, whether it’s steel wheel interchange at UP’s Global 4 terminal north of Chicago or west of Cleveland, you now have the same company trying to make that turn more efficient.”
The prospect of streamlined logistics would benefit other major markets.
“That will also buoy our biggest markets like Chicago where 20% of our intermodal goes, and then to Memphis and Dallas, but also to get to secondary and tertiary markets quicker. Think of Kansas City, Denver, Salt Lake City. There’s going to probably be a reconfiguration of how the two companies combined to get deeper and longer into this market.”
Despite the transformative potential, the merger is subject to multi-level approvals. Seroka expressed confidence in the diligent work being conducted at both the federal and state levels to secure this future.
“We’re confident both companies have been working on that,” he said. “But what [the merger] does is it improves our service offering. You know what’s interesting? When just before the Alameda Corridor opened [in 2002], 41% of our imports were intermodal. It dropped down as low as 23%. These ports on the East and Gulf coasts for decades now have hired switched-on leaders, aligned with policymakers and have made massive investment. Cargo owners have gone to a four-corner strategy of port diversification. It’s now possible to get to Chicago from a Mid-Atlantic port. But this puts us back in the game with a higher level of service offering to go out and champion the cause for that discretionary cargo.”
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Find more articles by Stuart Chirls here.
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