Q&A: Mario Cordero, Executive Director at the Port of Long Beach

Logistics Management Group News Editor Jeff Berman recently spoke with Mario Cordero, Executive Director at the Port of Long Beach (POLB), which is known “as one of the world’s premier seaports, a gateway for trans-Pacific trade and a trailblazer in goods movement and environmental stewardship,” that handles more than $170 billion in trade annually, supporting more than 575,000 Southern California jobs. Cordero was appointed to his position by the Long Beach Board of Harbor Commissioners in 2017. Starting in 2003, Cordero served as a member, vice president and president of the Long Beach Board of Harbor Commissioners for eight years, before resigning to accept President Barack Obama’s appointment to the Federal Maritime Commission in 2011. He served on the FMC until his appointment as Executive Director in May 2017 and was FMC Chairman from April 2013 to January 2017. Over the course of this interview, Cordero provided LM's Berman with insights on the current state of the ocean shipping sector, including the COVID-19 pandemic, trade and tariffs, and the 2020 Peak Season, among others. Their conversation follows below.

LM: These are unprecedented times, to be sure. What, in your opinion, have been the biggest changes in the sector going back to the onset of COVID-19 in mid-March?

Cordero: Yes, these are unprecedented times. For the port industry, going back to 2019 before the pandemic, we were already in a period of uncertainty in regards to tariff implementation and it impacted both imports and exports. As we went into 2020, we were a little bit concerned about the direction of the trade war, and then the whole pandemic thing comes in and there is a full fledge impact on operations, as we approached March. What this has been for POLB, for the first half of the year, was that there were negative impacts related to the pandemic on our economy, and when that happened people got laid off and there were various shelter-in-place initiatives…and that all circles down to commerce. And, at POLB, for the first four months of the year, we were in negative numbers. Then we enter the fifth month, which is May, and we finally got into a positive area, with 10% annual growth, and then moved down to a negative number again in June. For the first half of the year, the impact to POLB was a 6.9% annual loss in volume.     

LM: How did that impact things changing at POLB?

Cordero: Keep in mind that the despite the shelter-in-place orders, ports are identified as an essential operation, so commerce continued to move, demand moved on the waterfront, with terminal operators and truckers continuing to work day in and day out. What we started to see was unforeseeable expenditures, and this speaks to the priority we have for worker and employee safety. We did a quick pivot to what we have today, with most of our employees telecommuting. The people working on the waterfront have continued to work. But the work environment changed, and it was a priority for us to put in PPE (personal protective equipment). And the Pacific Maritime Association and the ILWU early on agreed to a partnership to make sure they work together to not only provide PPE but also have time allocated for the cleaning of equipment. This was the quick pivot that we needed to make. The worker safety issue became a priority, and going back to the spring, we had a real shortage of PPE, for things like masks and sanitizers. We paid a high number to obtain that stuff, and luckily, we were able to have partnerships with the government, at a federal level, with the Maritime Administration, and the State of California, which provided PPE to the port authority, which we, in turn donated to people in need in the industry like truckers and terminal operators.

LM: You go from a 6.9% annual decline, for the first half of 2020, to the third quarter, which saw a major volume turnaround, with rapidly rising import levels, as evidenced by reported data from the port. How did that impact port operations, in terms of both the opportunities and challenges in presented?

Cordero: As you are going into the second half of the year, we had a 21% annual volume gain in July, so we started to see a turnaround. There are a few factors related to that. Number one, when you back to the pandemic, its epicenter was China. Factories there were shut down for the first quarter of the year. And then over the second half of the year factories in China began to ramp back up to 100%. What that means is we began to see a replenishment of the warehouses, with that cargo that was delayed was now going to be sent over. While we did expect a surge, with the expectation that the factories would be back online at some point, it was beyond what we thought. The second factor was the ongoing demand for PPE. And, at this point, we were very dependent on Asia, there was a big priority, and rightfully so, for expediting PPE, which was a major driver in the cargo increase. POLB worked very well with our healthcare partners in that business to expedite and prioritize PPE-related cargo at the port. We put them “in front of the line,” so to speak. The third factor is e-commerce, and this is a very interesting development, as e-commerce is something we have talked about for years. We saw that some of the retailers, for example, like Target, were already transitioning to [more] e-commerce before the pandemic, in terms of improving efficiencies. And consumer spending has continued throughout the pandemic, which is a big factor, not only for the national economy but also for international trade. In the U.S., our GDP is very dependent on consumer spending, and because of e-commerce it has facilitated the continued purchasing by the American consumer. Rather than physically go to a large retail setting, they instead now go and buy online, and I think that has been a salvation not only for the economy but for us at the port. I do have concerns, though, even though we are doing very well, that the expectations made by those who forecast that this e-commerce surge will continue into February 2021. The question is: what happens after that? That is all dependent on the pandemic and how well we have that under control at some point, and, of course, the economy. People continue to be losing their jobs, even though there is some light at the end of the tunnel. What is saving us right now is the usual peak we have for holiday shopping. But we are concerned what happens after February, in terms of where the economy is going, and, of course, how that could impact consumer demand.

LM: How do you view the current state of the economic recovery? i.e. what is going well (import growth and inventory rebuild) and what are the main concerns i.e. COVID?

Cordero: Going back to the May-June timeframe, there were a lot of questions in regards to the economy and how the pandemic would impact us. I think one question that we have answered, in my opinion, at the national level, is if there is a V-shaped recovery? Unfortunately, that has not happened and that won’t happen. Some people have referenced a U-shaped recovery analysis, and I think it is fair to say, from my point of view, that we have had a K-shaped recovery. By that, I mean those Americans that have been fortunate to spend money and invest have continued to do so, and those Americans in the lower echelon that have lost their jobs and are dependent on manufacturing and retail, have not recovered at this point. I think going forward I am optimistic, in that there is movement going forward with a vaccine. We need to be cautious in regards to how the vaccine is distributed, but it also typically takes two years to gauge the side effects of a vaccine. I do have optimism, though, because the vaccine has seen a historical march, in terms of the various pharmaceutical entities that are investing into it and moving it forward. The experts that predicted another wave of the virus were correct, and that is what we are seeing throughout the country. The fact that we have a new administration, regardless of what your politics are, points to that we need some stability. The election is over, and I am hopeful that in Washington, D.C. both parties now come together and start working for the benefit of the American people, and, of course, for the benefit of business and this industry, because there is a lot we need to do. I am hopeful we are going to have stability in January, and a very important part related to that is the passing of a stimulus bill.

LM: Now that there is some clarity regarding the recent election, what does a Biden Administration mean for the ocean shipping sector, for certain market fundamentals, like tariffs, for example?

Cordero: In my opinion, I think the tariff policy…has some legitimate issues to address. As I look at it now, it was not a good approach. There were too many people who were impacted. I am hopeful there is a reassessment on it, in terms of how we go about the key issues related to tariffs. Honestly, tariffs did nothing for the trade imbalance, we all knew that. And it added tremendous pressure to the U.S. shipper and exporter. Again, there are ways to reassess this, and I am confident that the new administration will do that, particularly now that they have had a good year-and-a-half to make an assessment, in terms of whether it was a good policy or a bad policy. In my opinion, I don’t think it was a good policy, and I do believe it will be reassessed.

LM: Looking at Peak Season, it seems like it really started far earlier than normal, due to elevated demand, consumers staying at home and buying more goods than services, too. How does the 2020 peak fit in, or match up, with what you have seen in the past? In other words, is it a one of its kind peak season?

Cordero: I think it is a one-of-a-kind peak, in that annually things tend to kick in around late July and into August and September, to prepare for the holiday shopping season. By definition, that is what it is. It is one of a kind because peak season this year includes cargo that was delayed in prior months, from March and through May. And adding that cargo along with that expected for peak season and the holidays, despite the economy those two put together add directly to the volume we have. It is, in my opinion, one of a kind, due to a confluence of factors. It is good for the economy and obviously very good for the port and its stakeholders.

LM: With the bridge at the Port of Long Beach now officially open, it is nothing short of significant, with $1.5 billion invested and it is handling 15% of the nation’s waterborne cargo and 68,000 vehicle trips each day. What are your expectations for the bridge, relevant to how it improves port throughput, efficiency, and operations?

Cordero: That project was a Herculean effort, and it required a lot of time and making sure that we had the budget and, more importantly, the collaboration between federal and state partners who helped us with this effort. It is a proud accomplishment. When I was on the harbor commission in 2008 and 2009, we started to move forward on that project. That was happening during the global recession. It is really comforting that back then we took a risk to continue with our capital improvement project plan, which was a $4 billion, ten-year plan, and we could have easily shut it down, due to the global recession. In 2009, our volume loss compared to 2008 was upwards to 25%. But we decided to continue with our capital improvement projects, and it was a very good time to do that. People were hired, and we had to make sure that construction workers had jobs. That endeavor commenced, and at the brick-and-mortar groundbreaking, in a recession, and it is ironic that it is concluded in a global recession related to the pandemic. It is very apropos to see the grand opening of this bridge, because with the volume we are seeing right now, if you were to drive across this bridge, it is fluid and efficient as a mode for the commuter and the truck cargo. It has three lanes now in each direction, with an emergency lane, and it opened at the right time with the volume surge that we have. I call it the “Bridge to Everywhere,” because 15% of the nation’s imported cargo crosses that bridge.

LM: In late September, the federal surface transportation reauthorization, the FAST Act, was extended through September 30, 2021. With that as a backdrop, what are some examples of port infrastructure efforts you would like to see come to fruition. The Harbor Maintenance Tax (HMT) remains an issue, with ports seemingly not having received a solid ROI out of it, given the amount of collective investment by U.S. ports. How does a clean slate, in the form of a new administration, fit into all of this?

Cordero: First, whether in good times or bad times, the attention to infrastructure investment, for port authorities, lacks the priority that I believe it needs to have. When you talk about infrastructure, the political discussion related to that usually focuses on bridges and roads. But part of that also includes ports. When you look at commerce, the main corridors around the country are bridges, and the bottom line is that commerce starts at the ports. I am hopeful that the new administration will put more of a priority with regard to maritime infrastructure overall. Number two, in these times, it is of upmost importance. And, in my role as Chairman of the American Association of Port Authorities (AAPA), we have placed a lot of effort to seek port relief, at the level that was previously given to the airports. The airports were very deserving of CARES Act part one, because, I have to say, the airports took a real economic hit with this pandemic, with some down 90% for passenger traffic. But you also have to look at water ports, and I think that has to be the comparison going forward. Like I said before, we have had some unforeseen expenditures that were very costly, because of what we needed to do in a quick pivot to address worker safety and address all of the other impacts related to COVID-19. There are also a few key acts, or programs, that are crucial for the ports to make sure are at the table and have the political support needed. I will say I am please at what I am seeing in the House and the Senate regarding freight movement. Our industry is very appreciative on Rep. DeFazio on the House side and Senator Shelby on the Senate side, and we have had some good related discussions.

LM: What are some of the key programs crucial for ports?

Cordero: The first one is the Port Infrastructure Development Program (PIDP). It is very important that we seek funding going towards that program, and the good news is that Congress has put some money towards it. We will see where it goes, but there still needs to be negotiations between the Senate and the House to reach a common ground. The second is the BUILD (Better Utilization of Infrastructure to Leverage Development) grants. That is key for providing building for national infrastructure…which is of upmost importance, whether it is related to ports of not, but we are hoping some of this money comes to the ports. Third is the marine highways program. While we are not an inland port, so to speak, we are part of marine highways. AAPA strongly advocates helping these ports, in terms of what they need to do to move cargo inland. The last one is consolidated rail infrastructure and safety improvements (CRISI), which is also very important for the ports. When you talk about the movement of cargo throughout the nation, our partners in the rail industry are very key. These four things are on the table for the House and Senate to continue to negotiate the levels of funding. Now that there is some stability, with the election over, I am hopeful there is a bipartisan effort to move forward with these very important bills that are paramount for both the maritime authorities and port stakeholders.        

LM: How does POLB approach on-dock rail operations?

Cordero: Going forward, we now have a $1.5 billion roadmap specifically for rail. On-dock rail, in my opinion, is the key to the reliable and efficient movement of containerized cargo. It has worked very well in Long Beach, and being on the West Coast, we have the benefit of having very good rail infrastructure with our excellent rail partners. I would say it is the best rail infrastructure in the country. We will continue to invest in on-dock rail. The percentage of cargo that moves on-dock is somewhere around 27% and will head up to around 38% over the next decade. We have four rail projects right now in the design phase, and our goal long-term is to move containers by rail on-dock 50% of the time, because, at the end of the day, that is crucial for us to remain competitive. Before the pandemic, we were talking to our Class I partners—BNSF and Union Pacific—about collaborative efforts and what we need to do to make sure we need to do to protect our West Coast market share and remain competitive. Unfortunately, those plans were put in limbo because of COVID-19, and part of that was a joint marketing effort. Another part of that is inland port connectivity. We continue to work with our Class I railroad partners to make sure have clear connectivity to inland ports, and that is a big priority for us going forward.

LM: The pandemic aside, there have been some gains made by Eastern ports, in terms of picking up some market share. How do you view that, from both a competitive and efficiency perspective?

Cordero: We talked about the tremendous investment POB has made in our capital improvement plan, and for fiscal year 2021, we have set aside $380 million towards our capital projects. That is 58% of our budget; we are very much investing in the future. To your question, so are other ports. I will say that New York/New Jersey, Virginia, Savannah, and Charleston and my colleagues at other ports in that area have all done a great job, in terms of rationalizing infrastructure investments. It is a good thing for the country, it fosters the movement of international cargo, to be efficient, and to have these continued gateways to benefit our nation. It is a very competitive market now, but the fact of the matter is the epicenter of manufacturing is Asia. I don’t see that changing in the near term. And, geographically, our port is the closest port that approximates the most important trade route, the Tran-Pacific trade route. So, for me, I think it is vital that the West Coast remains competitive and whether it is local cargo or discretionary cargo because of the infrastructure we have. It very much benefits the nation, particularly when we look at the enclosures that lead to the Midwest and the Ohio Valley, and, of course, even Kansas City and as far east as Atlanta. It is a very competitive business today, and we take that seriously and believe we will remain competitive. I am very proud to have the opportunity to be in this position and continue the efforts my predecessors made.    

LM: How do you view harbor trucking and drayage at POLB?

Cordero: Drayage has always been a big component in the moving of cargo at the port. We talked about the importance of on-dock rail; trucking is always going to be an important part of that program. In terms of how the trucking sector in Southern California has evolved, it goes back to the Clean Air Action Plan (CAAP) in 2006. It is a great story for us, I think. It has very important stakeholders, and we have had a three-pronged approach to address the movement of cargo and have also released our environmental footprint for the various programs we have to reduce emissions, particularly truck drayage. As for legislation in California, we had Prop. 16, with voters supported the need for the independent contract model in certain cases. For us, those truckers that are employees or independent contractors, they will continue to move the cargo in a way that is efficient and reliable.