Tight Squeeze (page 2)

-- Logistics Management, 1/1/2005

Page 2 of 3

"Five years ago, when the consultants came back to us with a master plan, one of the areas they said represented a huge opportunity for us was all-water, Far East container traffic," says Alabama State Port Authority Director/CEO Jim Lyons. "I basically told them they were out of their minds." Since then he's become a true believer, he says. "The growth of Far East all-water [service] has been substantial and sustained. From what I'm seeing, further growth is ahead, and there's just no way that the infrastructure that exists today can handle it. Now we just have to put the facilities in place."

That process has already begun at the Port of Mobile. According to Lyons, construction will soon begin on Mobile's first container port, slated to open in 2007. "We'll never develop into an L.A., but we can take a part of the load that's coming through and handle it cost-effectively," he says

While Mobile plans for the future, the Georgia Ports Authority (GPA) is having to cope right now with a rising tide of inbound containers from Asia. "In fiscal year 2003 [during the West Coast labor problems] we saw a 31-percent increase in containers…and we thought we'd see that business going back to the West Coast in 2004," says Robert Morris, GPA's director of external affairs. "But we didn't. Not only did we keep that business, but we grew another 7 percent on top of that." In October 2004, in fact, the Port of Savannah handled the largest monthly container volume in its history. It's no surprise where that traffic originated: "Overall, we've found that 70 percent of the container traffic is Asia-related," Morris says.

Since the crush of business began in 2003, the GPA has built up Savannah's infrastructure by increasing gate capacity by 50 percent, hiring 100 new field employees, and buying four new container cranes.

These and other improvements are aimed at satisfying the needs of major retailers. That approach appears to be working: Pier One, Home Depot, Wal-Mart, Kmart, Dollar General, Lowe's, Michael's, and Hugo Boss, among others, have all set up import distribution centers within striking distance of the port.

The Lynchpin

For Gulf Coast and East Coast ports, the key to import container growth is the continued health and welfare of the Panama Canal, which has witnessed double-digit traffic growth since the Panamanian government took over its operation in 1999.

The Panama Canal Authority (ACP) is working nearly around the clock to accommodate this growing traffic. For example, says Rodolfo Sabonge, director for planning and marketing, the ACP is improving lighting at the locks and extending the number of hours that larger vessels can move through there. The ACP also is increasing draft limits from 39.5 feet to 40.5 feet. "In container vessels, that represents close to 300 more containers that vessels can carry on board," he notes.

Although that added capacity sounds attractive, it's a double-edged sword: In December the ACP proposed changing its rates and charging container ships according to potential capacity rather than the actual weight of containers and cargo on board.

Even bigger changes would come under the proposed Permanent Modernization Project (PMP). The program would widen the Gaillard Cut, deepen the Gatun Lake, update the locomotive fleet at Gatun Locks, implement new security measures, and roll out a new communication system for vessels planning transits. According to the ACP, Asia-to-East Coast traffic is the single biggest driver of the $1 billion project. In 2004, 3.2 million containers originating in or destined for Asia transited the Canal, an increase of more than 347,000 from 2003. The number of "Panamax" transits (by ships more than 900 feet in length) jumped from 4,730 in 2003 to 5,300 in '04.

The PMP is a long-term project, and the much-anticipated widening project is moving forward through "appropriate steps," says Sabonge. Yet the timeframe for completion is unknown. "We are about to finish the recommendations regarding the possibility of expanding the Canal and building a new set of locks, but that has to go through a referendum and consultation process," he explains. "We should have the referendum sometime next year."

Once the Canal has been widened and expanded—most likely many years from now—it will take some of the pressure off of West Coast ports. "If the 6,000- or 6,500-TEU vessels can transit the Canal, then you're probably going to see a fine line drawn on the cargo," predicts Bill Woods, director of trans-Pacific services for freight forwarder Wilson Logistics. "If [a container's] final destination is east of the Mississippi, it will go all-water and back haul [inland]; if it's going to the West Coast, you'll see more of them going to Tacoma or back to L.A." Continued...

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