One issue—growth—has dominated discussions in the maritime industry this year: growth in global trade volumes; growth in road, rail, and port congestion; growth in the size of containerships and the ocean carriers that operate them; and growth in pressure on ports and carriers to keep the recent flood of containers from overwhelming our maritime transportation infrastructure.

Although the U.S. economic slowdown is affecting world trade volumes, containerized shipments will continue to rise—albeit at a slower pace than they did last year. According to London-based Drewry Shipping Consultants' Container Market Quarterly report, worldwide container trade will grow to 74.5 million TEUs (twenty-foot equivalent units), up nearly 8.5 percent over 2000 figures. (See Figure 1 below.) Yet growth in the trans-Pacific trade is forecast to be only about 5.0 percent, down sharply from the double-digit pace of two years ago.

Even that small increase will continue to put pressure on the transportation infrastructure that supports international trade. Rail connections are filled to capacity in many areas, and road congestion around major ports already poses problems. Many port facilities have become clogged with piles of ocean containers.

Industry and government have begun to take notice. These problems became the subject of House Maritime Subcommittee hearings in May. They also have spawned three industry coalitions—the West Coast Waterfront Coalition, the Coastwise Coalition, and "Waterways Work"—that hope to facilitate trade flows through better cargo-handling processes and greater use of ocean and inland feeder services.

At the House hearings, former U.S. Maritime Administrator Vice Admiral A.J. Herberger (Ret.) spoke for the Coastwise Coalition. Herberger cited studies that predicted containerized imports in the United States would double within 20 years. The rail and highway infrastructure is incapable of absorbing that much traffic, regardless of how much equipment is added, he said. He urged Congress to implement policies that would ensure a "truly multimodal, integrated coastal transportation system" as the best solution for avoiding impending gridlock.

Port of Oakland Deputy Executive Director Tay Yoshitani, representing the American Association of Port Authorities at the same hearings, emphasized the need for government support of infrastructure improvements and a national maritime transportation system. "Transportation system efficiency is one of the many factors that can determine product competitiveness in the world market," he said. "Without the infrastructure to support the flow of trade, the resulting gridlock and congestion would have a devastating effect on the economy."

Secretary of Transportation Norman Mineta is likely to champion those views within the federal government. Mineta has suggested that Congress create a maritime-oriented program (tentatively called SEA-21) that would be modeled after the "TEA-21" infrastructure funding authorized by 1998's Transportation Equity Act of the 21st Century.

The new generation of containerships represents yet another strain on the overburdened maritime system. In 1999, more than half of all containerships on order were 5,000 TEUs or larger, reports Gustaaf de Monie, a maritime industry consultant based in Belgium. Now, there are ships on order that exceed 9,000 TEUs, and de Monie predicts that 12,000- to 18,000-TEU containerships are on the horizon. "If these huge ships actually come, they will fundamentally change the geography of liner shipping," he says. Only a handful of "global pivot ports" will be able to handle the huge vessels, and other ports will be served by a "cascading" transshipment system using smaller vessels, he adds.

Those huge ships could easily overwhelm shoreside handling capacity, says APL Ltd. Vice President David Noe. Ports will be forced to invest millions of dollars in infrastructure improvements to accommodate them. "We may see ports developing dual-side unloading systems, building berths where you can work a ship on both sides with maybe nine or 10 cranes," he says. "And if you don't have [on-dock rail service], you're dead, because you cannot unload these big ships without it."

Right now, Noe says, 1.6 million TEUs of capacity—the equivalent of 34 percent of the world's containership capacity—is scheduled for delivery over the next two years. That means ships ordered during boom times will arrive as traffic volumes head downward. This will pose problems for carriers at a time when things were just starting to look up. Owing in large part to surging imports from Asia and their internal cost-cutting initiatives, many carriers had reported improved earnings for 2000. Zim Israel, P&O Nedlloyd, Hapag-Lloyd, Maersk Sealand, OOCL, Neptune Orient Lines and subsidiary APL, NYK Line, and MOL all reported higher profits last year.

That won't last, says Noe. "The year 2002 looks pretty bad," he notes, "and 2003 looks very bad [for carrier finances]." In fact, some carriers are already seeing a drop. First-quarter revenues for Evergreen's parent company are down 6.0 percent over the same period last year, and Korea's Hyundai Merchant Marine is in the midst of a restructuring. Cho Yang, another Korean carrier, filed for bankruptcy earlier this year.

In an effort to rationalize costs, carriers will form new cooperative relationships, Noe predicts. More mergers also are likely if the world economy continues to slide. Some ocean carriers may already be on the prowl: NOL Group, APL's parent company, recently received a $1 billion credit line to fund what company executives termed "expansion" plans.

Taken together with NOL's move, plans by CP Ships, P&O Nedlloyd, and Hapag-Lloyd to become public companies indicate that although the current economic slowdown should be taken seriously, international trade will continue to grow. The strongest will survive, but the weak are probably in grave danger.

Figure 1.
Key container trade indices, 1999, 2000, and forecast 2001