New York/New Jersey wins Maersk, Sea-Land contract

By Staff -- Logistics Management, 6/1/1999

Maersk Line and Sea-Land have announced that the Port of New York/New Jersey is the winner of their yearlong search for a single "megaport" to handle most of their shipments to and from the Northeast and Midwest.

The two partners--among the largest ocean carriers in the world--share vessels, containers, terminals, and other assets under a five-year-old operating alliance. Last December, the carriers announced that they had narrowed their list down from the seven ports originally under consideration to three contenders: Halifax, Nova Scotia; New York/New Jersey; and Baltimore, Md. Among the requirements these ports had to meet were:

- Capacity for handling 750,000 lifts annually;

- Capacity for 12,000 40-foot containers, either on wheels or grounded;

- 50 feet of water depth to accommodate deep-draft vessels;

- 6,000 contiguous feet of berth space;

- Sixteen post-Panamax container cranes; and

- On-dock or nearby rail facilities for at least two railroads.

All three ports put together "very aggressive and attractive packages," but New York/New Jersey presented the best total economic picture as well as the best direct market access, says Philip V. Connors, executive vice president of Maersk Line.

Under the 30-year agreement's terms, the Port of New York/New Jersey and the carriers will share the cost of constructing a 350-acre container terminal and a 70-acre on-dock rail facility in Port Elizabeth, N.J. They will create those facilities, which are scheduled for completion in 2003, by renovating the existing Sea-Land terminal and part of the adjacent Maher Tripoli terminal, says Connors. The port also has committed to deepen the shipping channel and the berths to accommodate the new generation of giant containerships, he notes.

Some industry observers have expressed surprise at the choice of New York/New Jersey, given that port's high terminal-handling costs and highly politicized atmosphere. Handling costs in that port are high, acknowledges Sea-Land spokesman Clint Eisenhauer, but that is just one factor out of many that were considered, he says. "We used a fairly complex model and tried to capture all of the variable expenses for a good number of years to come ... [I]t's a complicated chain of activity costs." In addition to the factors listed above, he says, Maersk and Sea-Land also considered inland transportation costs, labor rules, costs and policies, proximity to the largest population centers, port and terminal costs, vessel steaming time, and port authority and state political implications.

It appears that politics did indeed play a role in the final decision. Gov. George Pataki of New York and Gov. Christine Todd Whitman of New Jersey reportedly engaged in a running battle over each state's share of subsidies to help build the new container facility. In the end, Whitman agreed to contribute all of that money.

The carriers' decision means that most of their considerable container volumes will move by rail, truck, and barge to and from New York/New Jersey. For shippers, that may mean slightly longer transit times and earlier cut-off dates for export shipments. But the advent of the new super terminal doesn't necessarily mean Maersk and Sea-Land will drop all other direct port calls in the Northeast, says Connors. He expects that the carriers will continue to call in Halifax to take advantage of direct access to Eastern Canada's large and growing markets.

As for the other ports in the region, it's too early to say, Connors notes. "Think about how far away 2003 is and about the dynamics of our business. We sometimes change vessel deployments by quarters. We won't be making those decisions this early."