Top 30 U.S. Ports: Finding the right balance

The recent surge of U.S. exports has created a more balanced trade picture for U.S. ports and the stakeholders they serve. If this is a sustainable trend, analysts expect to see more investment in infrastructure and increased competition among the leading gateways.

By · May 1, 2012

For most multinational shippers, the days of having one or two major domestic ocean cargo load centers is over. Highly segmented supply chains along with cross-enterprise operations are now changing the U.S. landscape. While Mega-vessels may be calling on some deep-water ports, ocean carriers are also hedging their bets by sending smaller ships on alternative deployments.

Zepol Corporation, a leading trade intelligence service, notes that as America’s seaports prepare for balanced trade, shippers can expect to see more regional cooperation among ports. But Zepol’s president, Paul Rasmussen, has one caveat: “That doesn’t mean regional rivalry will disappear.”

Indeed, Ports on the U.S. West Coast—which are supposed to be at risk when the Panama Canal expands in two years—don’t appear to be too concerned. The neighboring gateways of Los Angeles and Long Beach are booming, with a greater balance of inbound and outbound cargo serving to keep them both on top of Zepol’s’ current port rankings.

According to Peter Friedmann, executive director of the Agriculture Transportation Coalition, the dynamics of ocean cargo have “flipped” dramatically. With U.S. exports growing by 5 percent to 6 percent annually, it’s only matter of time when carriers will reconfigure shipping schedules. “It’s pure mathematics,” says Friedmann. “Outbound sailings are catching up with inbound calls, and ports need to make those adjustments.”

West Coast advantage
San Pedro Bay port officials seem to concur with Freidmann’s observation on surging exports, noting that outbound volumes are approaching record levels.
Kraig Jondle, director of business and trade development at the Port of Los Angeles, says that the existing infrastructure and ongoing expansion of terminals and warehousing will only make the port more attractive for trade in both directions.

“It’s encouraging to see that exports are ramping up,” says Jondle, “but we are forecasting a steady increase in inbound calls, too. We work very closely with the Port of Long Beach to ensure that Southern California can compete with ports anywhere in the nation. We have deep water and a great rail network, so we don’t have to raise bridges or dredge harbors.”

Sean Strawbridge, managing director of trade development and operations at the Port of Long Beach, also points to the cooperative nature of the San Pedro Bay gateways. “We’re seeing record strength in export demand, and are planning for a more balanced trade mix,” he says. “There’s a growing demand for agricultural commodities to be containerized, particularly to China.”

“Regional marketing” is less successful in the Puget Sound, however, where the ports of Seattle and Tacoma are compteting aggressively for new business. When The Grand Alliance—a shipping consortium comprising Hapag-Lloyd, NYK, and OOCL—announced that it plans to move operations from the Port of Seattle to neighboring Tacoma later this year, there came a howl of protest.

“It’s important that the business remains in Washington,” says Linda Styrk, Port of Seattle’s managing director.

“Unfortunately, though many of the jobs will be preserved, others may not. Some who work in the Seattle harbor could see their livelihood impacted severely or in some cases, disappear.”

Lost in this observation, however, is the fact that just three years ago Seattle lured Maersk and CMC-CGM away from Tacoma.

Oakland, meanwhile, attracted its first “mega-vessel” call this year, demonstrating that it can accommodate the new generation of huge container ships. The MSC Fabiola, a 12,562 twenty-foot equivalent-unit (TEU) vessel owned by Geneva-based Mediterranean Shipping Co SA. MSC came steaming into the San Francisco Bay early this year.

While this was largely a symbolic call—it may never be repeated—it demonstrates why the world’s second-largest shipping company is one of the Port of Oakland’s fastest-growing carriers.

Generally, ships arriving at Oakland carry imports such as electronics, wood furniture, apparel, bedding, toys, sports equipment, auto parts, coffee, and bicycles.  When they depart, they carry exports including dried fruit and nuts, wine, rice, cotton, recycled paper and metal scrap, machinery, chilled and frozen meat and poultry, as well as vehicles.

“Our role as a leading export gateway helped us maintain our maritime volumes last year despite a weak economy,” says Oakland Executive Director Omar Benjamin. “Bigger ships are part of growing our exports.”

Walt Rakowich, co-chief executive officer of Prologis, says West Coast ports needn’t be too concerned about losing market share in the near future, either. “There are too many “unknowns” associated with alternatives,” he says. “We don’t know, for example, if the East Coast and Gulf ports will be able to handle the volume when the Panama Canal expansion is completed in 2014. And the concentration of population and industry in California is hard to dismiss.”

East Coast challenge
Infrastructure investment may help to eventually move some ports up in Zepol’s research rankings, however. The Port Authority of New York/New Jersey has committed $1 billion to increase the navigational clearance of the Bayonne Bridge from 151 feet to 215 feet in anticipation of the Panama Canal widening completion.

This expansion will allow for larger post-Panamax ships to access the region through the Kill Van Kull Channel. The project is currently undergoing the required Environmental Policy Act (NEPA) review with the U.S. Coast Guard, the designated lead federal agency under the U.S. Department of Homeland Security. Construction on the project is anticipated to begin in early 2013, pending federal and local environmental reviews.

“Every day becomes critically important to our goal of making sure larger cargo ships can call here,” says Port Authority Executive Director Pat Foye.

“Speed is essential, and I am committed to making our cargo operations faster and more competitive.”

With 45 feet of depth at mean low water, The Port of Charleston currently has the deepest channels in the South Atlantic region and can handle ships drafting up to 48 feet on high tide. But officials here say that with the on-going deepening project, Deepening Charleston Harbor will open the port to expanded trade opportunities and increased big-ship traffic via the new locks of the Panama Canal 24 hours a day.

“Already in 2012, we have handled 24 ships with actual docking or sailing drafts 40 feet or greater,” says Bill Stern, chairman of the South Carolina Ports Authority (SCPA) Board.

Jim Newsome, president and CEO of the SCPA, says much the same thing, noting that the local economy is thriving as a consequence. “We’re experiencing a very balanced trade between import and export containers, which is a credit to the companies in South Carolina and across the Southeast that are competing well in the global marketplace,” says Newsome.

Port Miami—the number one container gateway in the State of Florida—also needs to deepen its harbor to 50-feet by 2014. While containerized cargo movements were up 7 percent in its fiscal year 2010-2011, with a total of 906,607 TEUs, port officials say they expect more business in 2012.

Today, the State of Florida ranks number four in the U.S. for trade, “but we can be number one,” says Port Miami Director Bill Johnson. “Thanks to our trio of infrastructure projects at Port Miami—the port tunnel, on-port rail, and the Deep Dredge—we are well-positioned to capture new trade?with Asian markets.”

In the meantime, analysts note that Miami has outperformed many large container ports in the U.S. due in part to the strength of Latin American economies. More than 50 percent of its trade is with South and Central American nations. “There’s a reason we are called “the gateway to the Americas,” adds Johnson. “We are on our way to becoming a logistical hub linking North and South America.”

For the Port of Savannah, 50-foot depth is not the Holy Grail, however. The U.S. Army Corps of Engineers and the Georgia Ports Authority (GPA) have agreed to deepen the Savannah River channel from 42 to 47 feet.

GPA Executive Director Curtis Foltz says that this compromise will mean that most fully-loaded vessels will be easily accommodated, while saving money for other infrastructural needs.

“We all know how critical this extra depth is to the ability of our nation to move cargo efficiently,” adds Foltz. “The depth, along with an average seven foot tide, strikes the right balance between the needs of our industry and the environment of the Savannah River. Nearly 40 percent of the project cost is dedicated to environmental mitigation, preservation of cultural resources, or the improvements to river access for the public.”

Gulf Coast preparation
The Port of Houston is in the enviable position of not having to dredge, as its harbor is one of the deepest in the nation. According to Zepol, it posted an 11 percent increase in container throughput in the first quarter of this year. Along with Charleston, it was the only top 10 port to have an increase of more than 10 percent.

Furthermore, says Bill Hensel, Port of Houston’s marketing director, the port had a record 17.7 million tons of container cargo moved in 2011.

“It was a really good year for us. Container cargo was up 4 percent overall from 2010 when the port handled slightly more than 17 million tons.”

With the introduction of new dual carrier service called the Gulf of Mexico Express, or GME, Houston is expected to capture even more balanced trade. Last month, Cosco Container Lines and Hanjin Shipping launched a new service linking the Far East, Panama, and Houston. The two carriers, part of the CKYH Green Alliance among Cosco, “K” Line, Yang Ming, and Hanjin, are deploying eight Panamax container ships with capacities of 4,000 TEUs apiece on the new service. Cosco deploys six of the ships, while Hanjin deploys two.

Meanwhile, analysts point out that Houston may lose some regional market share to the Port of New Orleans if a “peak pricing program” is implemented in the future.
Last year proved to be a banner year for container volumes at the Port of New Orleans. Year-end figures show that the Napoleon Avenue Container Terminal moved 476,413 TEUs, up 11.6 percent compared to 2010—the Port’s previous record-setting year—and up 46 percent compared to volumes just two years ago.

Balanced trade played a crucial role in this story, too. “A strong export market, particularly chemicals and agricultural products, helped us achieve two back-to-back record-setting years,” says Port of New Orleans President and CEO Gary LaGrange. “Coffee and apparel were strong commodities on the inbound side.”

The port also added a new Latin American container service in 2011 and a new container carrier, as CMA CGM returned to New Orleans. The shipping line joins Mediterranean Shipping Company, Hapag-Lloyd, Maersk, Seaboard Marine, and CSAV in serving the Napoleon Avenue Container Terminal.

 


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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