A desire to avoid last year's spate of peak season backups at U.S. West Coast ports is motivating some shippers to seek alternative, all-water routes from their Asian-Pacific sources to East Coast destinations. While congestion problems remain in the West, ports up and down the East Coast — from Miami to Halifax and Saint John in Canada — are experiencing significant increases in cargo arriving from the Suez Canal (www.suezcanal.com) and Panama Canal (www.pancanal.com).
Historically, Singapore is the pivot point for whether cargo moves through one canal or the other. Points north of Singapore tend to ship through the Panama; those to the south through the Suez. Business lately has been robust for both canals.
It's been suggested that the Panama Canal has been operating at 93% of capacity, indicating that traffic and income have been very good of late. For 2004, the Suez Canal saw its income jump 16%, and although some of that boost came from U.S. and other coalition nations moving military ships to the Iraq war, one Suez official notes that increased trade with India and China, among other Southeast Asian countries, now represents 40% of the Suez Canal's traffic.
Because using either canal for cargo transport from Asia requires greater expenditure of fuel by ocean carriers and can add four to five days in transit time, a number of other factors come into play when shippers decide to use the all-water routes to the U.S. East Coast. As Frankie Lau, director of marketing for Orient Overseas Container Line (OOCL) (www.oocl.com), points out, "Choices of routes are specific to individual shippers, basing them on inventory practices based on transit time. It also can depend on the customer's final distribution system. If most distribution is located in the Eastern U.S., then there are good reasons to ship there."
Size matters when all-water routes are the choice. The Suez can transit larger ships. Although the Panama Canal has a plan (awaiting approval through a referendum) to add a third lane to accommodate larger vessels, even if it was approved today, it will be another eight years before the project goes online, according to Rodolfo Sabonge, director of corporate planning and marketing for the Panama Canal Authority.
Ships handling about 4,500 TEUs (twenty-foot equivalent units) — called Panamax — are the maximum size that can pass through the Canal. Most shipbuilding today is for vessels with more and more cargo capacity, but that's not the total picture. "We are building some 8,000-TEU class vessels," says John Gurrad, vice president of planning & ecommerce for Mitsui O.S.K. America Inc. (MOL) (www.mol.com). "But we're still building a lot of vessels that are Panamax class because the demand is very strong for them."
Speaking to the perception that the Panama Canal is close to reaching full capacity, Sabonge notes there is a difference between availability of capacity and demand. "When you look at the demand on a day-by-day basis, there are days where we are full and there are days when we don't have enough vessels to fill it," he says. "The problem is everyone makes schedules with the assumption that the canal is there regardless of capacity. We need to balance load factors through the peaks and valleys."
The Panama Canal's answer has been to establish a web-based reservation system that permits scheduling two to three weeks in advance.
As far as the matter of post-Panamax ships increasingly becoming vessels of choice, Sabonge sees that many ports aren't yet ready to accommodate them because of depth of draft and size of cranes for loading and unloading. Ports along the U.S. East Coast are aware of the infrastructure issues involved with increased global commerce, including that from the Asia-Pacific region, and have taken steps to meet the new requirements.
The Port of Miami (www.miamidade.gov/portofmiami) has been going through an extensive redevelopment program on the expectation that volumes will double over the next 10 years, with most of that driven by Far East cargo. This year it has received super post-Panamax size cranes — delivered from China, ironically — and is dredging to reach a 50-foot depth.
Recently the number of vessel calls has dropped, but volume has increased through the port, an indication that ships are larger, carrying more cargo. AMAX, new service from China Shipping (www.cnshippingna.com), will be calling at Miami. AMAX moves from Asia through the Suez, continues on to the U.S. East Coast, then back to Asia through the Panama.
As the closest U.S. port to the Panama Canal, Miami hopes to gain a competitive edge through intermodal projects that can get cargo to market quicker than other East Coast ports. One option would bring cargo into the gantry area, where stack trains would be loaded and moved directly to the Midwest and Northeast.
Further up the coast of Florida, the Port of Jacksonville (www.jaxport.com) has just signed a long term contract with MOL, its first container service with Asia.
According to MOL's John Gurrad, one reason for locating at Jacksonville is its intermodal connections that will serve as a gateway to the Southeast U.S. The plan is to be operational by the end of 2007 with a proprietary terminal, he explains.
One thing the port is doing for MOL is identifying good backhaul opportunities. Too, it's building on a greenfield site that at the moment is little more than 158 acres of scrub and dirt. The port is able to design from the ground up, providing a modern container terminal that will include post-Panamax equipment.
The Port of Virginia (www.vaports.com) wrapped up its fiscal year with a number of record achievements, including 1.9 million containers handled, an increase of 11% year over year. Import and export with China accounted for more than 250,000 TEUs, and more than 55,000 TEUs with India.
In 2002, Virginia International Terminals began a complete renovation of the south terminal at Norfolk International Terminals (renovation of the north terminal was completed in 1998). The $279 million project includes reconstruction of the wharf, installation of eight new post-Panamax cranes, demolition of outdated warehouse space, reconfiguring the container yard, and a phased-in switch to a straddle carrier operation. The project is scheduled for completion in 2012.
The port is authorized to dredge its channels to 55-feet — it's currently at 50-feet. In addition to its post-Panamax size cranes, it is using a "live gate" to put containers on trailers and gets them quickly onto interstate highways.
The story is the same along the entire East Coast, as shippers continue to seek alternatives to West Coast port congestion by moving cargo through the Canals and from there to East Coast ports.
Demystifying maritime terms
Draft is important since ports must dredge deeply enough to accommodate the largest post-Panamax vessels. The American Association of Port Authorities believes that the norm to handle the larger ships for general cargo navigation channels should be as great as 53 feet.
TEU stands for twenty-foot equivalent unit, a 20-foot long container. Cargo vessels carry 20- and 40-foot containers. The generally accepted figure for Panamax container capacity is 4,500 TEUs. Earlier this year, Hyundai Heavy Industries received an order to build the world's first 10,000 TEU ultra-large containership.