U.S. Ports Update: Shifting Tides
Changing liner schedules could have a lasting effect on the nation's “mega” gateways. Meanwhile, niche ports are poised to take advantage of the unprecedented pattern with the hope that new fixed schedules may be the rule rather than the exception.
-- Logistics Management, 5/1/2009
The world's major container lines are redeploying fleets on a flexible and non-traditional basis to stem the bleeding from slack demand and a slump in manufacturing. As a consequence, the major ocean cargo gateways are suffering from less congestion, and supply chain disruption.
Could this be a good thing? Well, the second-tier and “niche” ports certainly think so, and have been taking advantage of the unprecedented pattern with the hope that new fixed schedules may be the rule rather than the exception. In fact, shipping analysts are saying that the days of “mega” U.S. seaports may be diminished, if not entirely behind us, as some of the smaller ocean cargo gateways capture more share.
Philip Damas, division director of Drewry Supply Chain Advisors in London, says inbound container traffic at Los Angeles and Long Beach has fallen 39 percent to date. “These were activity levels last seen in February 2006,” Damas says. “We have rolled back about three years of growth.”
He notes that U.S. East Coast ports have also seen declining volumes, but not to the level of the West Coast ports. “East Coast ports have gained share in a declining market, and to some extent because West Coast ports are more exposed than East Coast gateways to the decline in transpacific trade,” he says.
Gulf ports, too, are growing in relative terms, says Aaron Ellis, communications director for the American Association of Ports Authority (AAPA). Given the fact that the Panama Canal's expansion is on schedule for 2014, this trend can only become more sustainable, he says. “Many of the ports in Georgia, Florida, and Texas are positioning themselves for more business,” he says. “And given the flexibility of carrier calls now, they are in a better position to be included in North American deployment loops.”
That's not to say that other West Coast ports will quit seeking the same advantage, however. Ellis observes that both Oakland and Tacoma are building for the future with innovative new finance plans and public/private partnerships.
“The whole continental landscape—or 'port scape,' if you will—is changing,” he says. “As a consequence, port authorities have to reinvent themselves every five years just to stay in the game. That's what makes it such a dynamic industry.”
Battle for inbound
As reported in Logistics Management and across the trade press this past spring, a reconfigured Asia/North America service provided by the CKYH Alliance and China Shipping makes the Virginia Port Authority in Norfolk the first U.S. East Coast stop. The Port of New York/New Jersey had formerly enjoyed this position.
“A few infrastructure issues notwithstanding, New York is going to lose some business to ports with better intermodal connections,” says Paul Bingham, managing director of IHS Global Insight. “Clearly, other ports are waging an aggressive battle to win direct inbound calls.”
Officials at the Virginia Port Authority (VPA), the parent organization of the Port of Virginia, note that the port now provides a direct weekly link between the burgeoning gateway and Asia-based manufacturing markets. The CKYH Steamship Alliance comprises four steamship lines that contribute cargo and vessels, including: China Ocean Shipping Co. (China); “K” Line (Japan); Yang Ming (Taiwan); and Hanjin (South Korea).
The Panama Canal will also continue to play a huge role here. “Our partnership with the Virginia Port Authority is more important than ever,” says Panama Canal Authority CEO Alberto Alemán Zubieta. “As the only U.S. East Coast port with the existing capability to handle today's larger vessels, the Port of Virginia is prepared for the waterway's expansion.”
At the neighboring Port of Savannah—the fastest growing ocean cargo gateway in the U.S.—investments in new facilities are paying big dividends, says Doug Marchand, executive director of Georgia Ports Authority (GPA). “We are setting new records, exceeding service levels, and moving forward with an aggressive $1.2 billion capital improvement plan,” Marchand adds.
By 2015, the throughput capacity at the GPA's main Garden City Terminal is projected to be 6.5 million TEUs, (twenty-equivalent units) more than double the existing capacity. While the global recession has significantly affected international trade, the GPA is focused on preparing for future growth by improving efficiencies and increasing capacity. “We are taking the opportunity during this time to improve rail connectivity, increase on-terminal capacity, and decrease the time it takes to process cargo,” Marchand says.
Gulf go-getters
Two Gulf ports are making bullish bids for more business in a down economy, too. Both Freeport and Galveston are poised to take advantage of the Panama Canal expansion with the hope of capturing more discretionary freight destined for inland destinations.
“The Port of Galveston has deep water and is right on the coast, which always is an advantage,” says Global Insight's Bingham. “The sea change in ocean vessel deployment may become more intense as a widened Panama Canal comes into the equation.”
Located at the entrance to Galveston Bay, the port leases and maintains facilities situated on the north side of Galveston Island and on adjacent Pelican Island. The Galveston Island operations are a diversified mix of traditional and non-traditional cargo operations including roll-on/roll-off cargo, bulk, export grain, refrigerated fruit, general cargo, and project cargo.
Meanwhile, the Port Freeport is busy widening the offshore entrance and jetty channels to its harbor. The non-federal widening project is an innovative public/private collaboration between Port Freeport and users of the waterway, notably Freeport LNG and Conoco Phillips.
Port Freeport's traffic has increased substantially in recent years with the opening of the Freeport LNG facility and the growth in the importation of windmill components, pipe, and project cargoes. The widening of the six mile offshore entrance and jetty channels up to 600 feet from the current 400-foot width will allow larger LNG, crude oil, and other cargo vessels to access Port Freeport.
“The non-federal widening effort is the initial component of a more extensive federal expansion of the navigable waterway that has been under development for more than five years” says Port Freeport executive director and CEO A. J. “Pete” Reixach, Jr. “The widening will facilitate additional growth in the years ahead by accommodating larger vessels,” he adds. In 2008, Port Freeport handled over 29.6 million tons of cargo through the public and private docks.
West Coast stalwarts
The Ports of Oakland and Tacoma are not taking anything for granted, either, as both battle back with innovative new strategies. At Oakland, for example, two new developments promise to give this major West Coast ocean cargo gateway competitive advantage in the future.
Just a few months ago the Oakland Board of Port Commissioners approved a precedent-setting, long-term agreement that is the first of its kind for U.S. marine terminal concession agreements. As a consequence, Ports America Outer Harbor Terminal, LLC (PAOH) will be the new concessionaire for the port's Outer Harbor berths 20-24 for 50 years beginning in January 2010.
PAOH envisions investing $2.5 billion over the life of the concession for capital improvements in the Outer Harbor. According to PAOH, economic consultants Martin Associates estimates this long-term agreement will realize over 6,000 jobs and more than $100 million in direct personal income.
“You could call it a stimulus package at the Port of Oakland,” says executive director Omar Benjamin. “We know it will translate into local business and employment opportunities and environmental improvements to the maritime area.”
Traditionally, the port has had 10-15 year lease agreements. This concession is for 50 years and requires the concessionaire to be responsible for operations, investment in capital improvements, and development of the property.
The Port of Tacoma is marking a break with tradition, too, partnering with its key supply chain partners in tracking and tracing shipments. For several months now, tests have been underway on a GPS tracking system designed to measure throughput speed from the time containers leave waterfront terminals to final destination in the U.S. Midwest and East.
“This whole new strategy is port-driven,” says Larry St. Clair, Tacoma's director, of intermodal marketing. “It will provide shippers with a new information base to make their future sourcing decisions.” Joining the port in the test project are BNSF Railway, ocean carrier Yan Ming Line, and Edmonton, Alberta-based Safefreight Technology.
“We will be able to proactively work with our steamship and rail partners to plan for the future and make sure that Tacoma remains a high-velocity transit point in the global supply chain,” says Rob Collins, the ports' manager of transportation and supply chain planning.
Since June 2008, when the port began testing the container tracking system, Collins says his team learned much about what happens to containers after they leave the Tacoma waterfront. “People have assumptions about cargo scheduling routing and delivery, but when you dig into the data, many of those assumptions may turn out to be false,” he says.
A side benefit, according to Collins, is that systems like Safefreight's ultimately could lead to greater security in the intermodal supply chain. “I have long felt that the most secure supply chain is the most visible supply chain,” he says. “Moreover, this system illustrates when cargo is moving and when it is standing still. Cargo in motion is inherently more secure.”
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