Panama

US ports strugglied in the last year, but with an expected recovery from the financial crisis, better trade relations and planned spending, the only way is up, according to officials. John Fossey examines the situation

US ports had a difficult 2009, with many reporting double-digit rates of decline in cargo throughput volumes. Particularly pronounced was the sharp fall in container traffic, down more than 15% at the main ports for which data is available (see table).

Weak consumer confidence, which depressed the all-important retail sector, lower levels of capital investment by corporations and an ongoing slowdown in the real estate sector resulted in a significant reduction in imports. The transpacific headhaul eastbound trade lane was one of the worst affected, with cargo flows down about 12% in 2009.

While only a modest recovery is expected this year, there are several reasons for port authorities, terminal operators and stevedores to be optimistic in the longer term.

Many ports, especially those located in the Gulf and on the east coast, think trade with Latin America will pick up and show sustained rates of growth as business relations improve and trade barriers come down. A hemispherical free trade agreement is still a strong possibility and it would prove a strong catalyst for growth.

Many US east coast ports are also pinning their hopes on the spin-off associated with the opening of the enlarged Panama Canal. Scheduled for completion in 2014, it will potentially shake up shipping movements and trading patterns across the whole region.

The panamax containership, for instance, will overnight become a 12,000-13,000teu-sized unit compared to the current maximum loading capacity of about 5,000teu. It will change the operating dynamics of the ocean carriers and the economics of serving the Asia/US trades and the split of cargo routed through east and west coast ports.

According to a report from Netherlands-based shipping information and consultancy firm Dynamar entitled Panama Canal Container Trades – Past, Present, Future, by 2020 as much as 25% of all container cargo moving through North American west coast ports and the US intermodal system will have switched to the Panama Canal.

The report forecasts that annual volumes of 15m teu would be shipped between Asia and the US Atlantic seaboard by that time. Currently, an estimated 22% of all US imports from Asia are routed via the Panama Canal.

Generally speaking, US east coast (USEC) ports are positive about the larger canal and believe that volumes will jump and the ships using it will continue to call direct in the US. However, the Dynamar report issues a warning that US east coast and Gulf coast ports "need something to happen and urgently too".

The author suggests that several US ports could be relegated to feeder status as a consequence of the new canal, but that many "Fleur-de-Lys" type transhipment networks encompassing South America, the Caribbean and Central America will evolve.

"It will be their capability in determining the maximum size of box ships transiting the Panama Canal that will determine their success. Looking at water depth and ship-to-shore gantry outreach as the main parameters, only three USEC ports – Halifax, New York and Norfolk – presently qualify for 10,000teu ships. Four more – Boston, Charleston, Savannah and Miami – now meet one of those requirements."

As a consequence, several ports are planning to deepen their access channels, expand their yards and buy new equipment to be ready to accommodate the new breed of panamax tonnage once the new set of Panama Canal locks are operational in four year’s time.

James White, executive director of Maryland Port Administration (MPA), which owns the port of Baltimore, sums up the views of many USEC ports. "An expanded Panama Canal will become very important for Baltimore and we are determined to make the most of the opportunities," he says.

Hence a new 300-metre-plus berth with a 15.25-metre draught alongside will be developed at the Seagirt Marine Terminal as part of Ports America’s new 50-year operating concession. An estimated US$105.5m will be spent on constructing the new berth and buying at least four super post-panamax ship-to-shore gantry cranes.

Management at the MPA believes this new berth, the port’s expanded handling capacity and its deep water will enable it to carve out a bigger share of the country’s growing east coast container market. In particular, White sees the port processing more Far East import and export cargo. "The Baltimore region has the third biggest population group in the US and the goods have to come to us," he says.

"The cost of moving a container by rail from the US west coast to the east coast is $2,000. If the larger containerships come through the canal to Baltimore, the inland haulage leg would average out at $200 per move."

Interestingly, Baltimore is one of a number of ports that has linked up with the Panama Canal Authority (ACP) to jointly promote trade, economic growth and commercial activity. Last year, the MPA signed a memorandum of understanding (MoU) with the ACP that will see them conduct joint activities and share best practice.

"This MoU demonstrates our desire to have a close, productive relationship with the ACP as we move closer to 2014," White said at the time. "Ships that now travel to west Coast US ports will instead transit to the east coast following the canal’s expansion. We will want to be ready for that business."

Nonetheless, Baltimore faces strong competition for the larger panamax business from the Hampton Roads port complex in Virginia. The Virginia Port Authority (VPA) is in the midst of several programmes that will substantially boost its container throughput capacity. In addition to the ongoing discussions taking place with APM Terminals about taking over the latter’s highly automated facility at Portsmouth, is the longer-term plan to build a 2.5m teu-plus container terminal complex on Craney Island.

The Craney Island Marine Terminal project will cost approximately $2.2bn to develop and is viewed as key to both the VPA’s and Commonwealth’s economic growth. Planned to occupy a 243ha site, it will ultimately comprise a 2,560-metre quay, serviced with 20 so-called Suez-class gantry cranes and featuring an on-dock rail processing yard.

VPA is keen to start phase one in 2011 and have at least some of the initial 914 metres of wharf operational by 2014. The planned completion for phase one is 2019/20, by which time the rail yard will be complete. Eight of the gantry cranes will also be erected.

A major obstacle to New York/New Jersey accommodating new panamax-sized vessels is the air draught under the Bayonne Bridge, a solution to which is needed to prevent traffic diverting to Baltimore, Norfolk or even Pacific coast ports.

"We are committed to finding a resolution to the Bayonne Bridge’s height issues," says Susan Bass Levin, the port authority’s deputy executive director. Indeed, she refers to the problem as being critical in maintaining New York’s status as one of the busiest container ports in the nation.

Last year, the USEC’s largest container handling complex witnessed a fall of 14% in its box throughput to an estimated 3.6m teu.

However, the port authority’s efforts – involving a conceptual engineering study and a preliminary environmental analysis of any alternatives – will mean that any solution will not be in place until well after 2014 and the scheduled opening of the larger canal.

Further south, Georgia Ports Authority (GPA), which owns and operates the port of Savannah, recently secured Federal funding for its channel dredging programme which is viewed as being an integral part of its ambitious Savannah Harbor Expansion Project (SHEP).

The decision means that the port’s access channel will be deepened from 12.8 metres to 14.6 metres. However, completion of the project in time for the opening of the expanded Panama Canal will depend on further funding becoming available.

Savannah has gained market share in recent years and is now firmly positioned as the second largest container gateway on the eastern seaboard of North America. While the port also lost traffic in 2009 (down 10%) it performed somewhat better than many of its competitors, including the other South Atlantic heavyweight Charleston, which has leaked traffic in recent years.

Nonetheless, Charleston, which is owned and operated by the South Carolina State Ports Authority (SCSPA), has managed to keep hold of one of its largest customers, Maersk Line. The world’s premier liner company had threatened to leave owing to mounting costs and the refusal of local unions to allow the company to operate from a common use area in the port with non-unionised labour.