Moody's: With port automation comes political risk

Dive Brief:

Automating port terminal operations can result in TEU throughput reaching 10,000 TEUs per acre or more. This is almost double traditional operations where 5,000-7,000 TEUs per acre is the norm, according to a new analysis from Moody's emailed to Supply Chain Dive.
Increased automation can also lower labor requirements 40%-70% — an expense which typically makes up 50% of a terminal's cost. Automated operations mean fewer humans are needed to operate utility tractor rigs used to haul containers and fewer clerks and supervisor are required to oversee the operations, the report said.
But the report says this can all come with significant political cost, something anyone following the attempts to automate the APM Terminal at Port of Los Angeles already knows. "Managing the employment impact resulting from automation, without concessions that compromise the economic potential of the technology, remains a key challenge," the report said.

Dive Insight:

Dockworkers have already experienced dwindling numbers as a result of improved technology. Moody's points to the Port of New York and New Jersey as an example of these declines as it employed 35,000 longshoremen in 1956 to handle 35 million metric tons of cargo, but by 2011 was down to 3,500 longshoremen handling 79 million metric tons of cargo.

Automation continues this trend. The TraPac terminal at the Port of Los Angeles was redeveloped to handle fully-autonomous operations and the report estimates this will decrease the number of workers per dock crane by 50% and the number of workers per yard crane by 80%.

Automation will also save on facilities' energy and maintenance costs. This new equipment often uses hybrid or electric motors that will reduce reliance on fossil fuels and electric machines typically have lower life-cycle costs versus diesel-powered systems, the report said.

While saving cost, automation can also increase the number of containers a port can handle in the same amount of acreage. "Capacity can be added by increasing the amount of container storage or by increasing the operating hours of the terminal," the report reads. "Automated container terminals are well suited to both of these factors."

One downside of automation is it can lower crane productivity to 25 to 30 crane moves per hour versus 30 to 40 for conventional operations. But Moody's says this is balanced out by more consistent performance over time and the fact that automated cranes can operate 24/7.

Putting automation in place, though, could come with a fight. The Los Angeles City Council is planning to vote today on a project that would allow APM Terminals to automate some of its operations. This vote comes after a months-long fight between the union, APM Terminals and the Port of Los Angeles Harbor Commission, which approved the project last week.

"Even if not explicitly stated, there is likely a limit to the willingness of many port authorities and their parent governments to support automation initiatives that result in meaningful job losses," Moody's writes. Some of these job losses could be offset with retraining in new positions like maintenance and repair, the report suggests.

Correction: A previous version of this article misstated the name of the Port of Los Angeles Harbor Commission.