Expanding While Contracting

Jan. 1, 2009
There's no denying the global economy is in a bad way and dragging down business of every kind, including transportation. Import and export freight movements

There's no denying the global economy is in a bad way and dragging down business of every kind, including transportation. Import and export freight movements through the nation's ports have been in decline, just as with cargo for air, rail and truck. While ports are suffering with dwindling commerce, when looking beyond immediate problems there are a number of issues on the horizon that require action now if they are to remain viable — and even ahead of the competition — when the gloom lifts.

A few of the matters needing to be addressed now in order to be ready when the economy grows again include the fact that larger vessels, carrying more cargo will have to be accommodated with deeper channels and cranes that can handle their size and volume. Facilities to move and house freight must be expanded. On-dock rail is a requisite for speedy movement of freight to intermediate or final destinations. There are increased governmental demands for safety and security as well as improved environmental conditions being imposed on the ports that require greater investments as well. The list goes on. What is happening is that though business is shrinking, ports are continuing to invest in upgrading their infrastructure. The story is one of current negatives and future positives.

Negative news

Among items of negative news is a report from Port Tracker, produced for the National Retail Federation by IHS Global Insight. Its analysis indicates retail container traffic at the nation's major retail container ports will be the lowest since 2004. Volume for 2008 is projected at 15.3 million TEU (twenty-foot equivalent units) compared to 2007's 16.5 million TEU, a decline of 7.5%

Because of the volume of container traffic handled by West Coast ports and since so much import business of late has come from Asia, they garner the most attention. Drewry Supply Chain Advisors claims problems being faced by US West Coast ports are structural and not of a temporary nature.

The argument forwarded by a division of Drewry — whose expertise is in shipping, international supply chains and related sectors — is covered in its white paper, “US Transpacific Intermodal Today and Tomorrow.“ By analyzing end-to-end transport costs of containers shipped to and from the US interior via West Coast and East Coast ports, then forecasting a decline in vessel-related costs once the Panama Canal expands it capabilities by 2015, and the increased development of the Suez Canal as a viable route for cargo from Southeast Asia, Drewry Supply Chain Advisors sees the economic forces and infrastructure improvements favoring growth of Gulf and East Coast ports.

Examining typical patterns of cargo arriving at West Coast ports destined for customers in the East, the study looks at costs for moving that freight via intermodal rail traffic. “Faced with a tightening market and rising demand,” claims Philip Damas, director of Drewry Supply Chain Advisors, “the railroads have chosen to up their prices rather than invest in significantly more capacity, in the mistaken belief that they had a captive market.”

Ultimately, because of all these factors, concludes Damas, “Intermodal costs are certain to keep rising, while all-water costs will continue to fall, which means that the ‘land-bridge’ route will become less economic than the all-water route except for very time-sensitive goods.”

Positive actions

Even in the face of such serious traffic issues, ports are taking steps to improve infrastructure. Here are some exemplary projects underway aimed at meeting future needs as the world economy improves and demands for port services and facilities increases.

The Port of Anchorage

This far north port services 80% of the state's populated areas, handling 90% of all shipped goods and moving more than 4 million tons of freight each year. Its current $700 million expansion project is aimed at responding to a need for facilities for additional containerized carriers; servicing more industries related to export, such as mining and forest products; and lending oil field assembly and load-out support.

Among other facilities being built under the project manager, ICRC, are two barge terminals, four container/military berths, and three fuel berths.

The Port of Los Angeles

It is anticipated that $383.7 million in construction projects is to be awarded. The port's executive director, Geraldine Knatz, Ph.D., notes, “The rise in construction activity underscores our mission to continue upgrading Port infrastructure and cargo terminals in the most environmentally sustainable fashion. After a seven-year hiatus in our capital development program, this construction activity is a sign that we are back in business in a big way.”

Among the projects is a $97.9 million wharf improvement, part of TraPac Container Terminal expansion and $42.7 million for marine wharf maintenance and improvements of various berths.

The Port of Tacoma

With three major projects estimated to cost $1 billion, the port will increase its capacity for growth and development within its industrial core. The relocation of the Totem Ocean Trailer Express (TOTE) Terminal is scheduled for 2009-2011. By extending the port's Blair-Hylebos Peninsula by 6.4 acres and moving the TOTE facility there, space will be made in the old location to support a new terminal for NYK Line. The Blair Waterway will also be widened to accommodate larger ships.

Two berths will be built for the new NYK 168-acre container terminal to be constructed from 2010 to 2012. To be named the Yusen Terminals Tacoma Inc. (YTTI), the new facility will incorporate an on-dock intermodal rail yard with the capability of handing full-unit trains. The port is also working to improve road and rail connections from 2009 to 2013.

The Port of New Orleans

A $1 billion 2020 master plan was announced by the port early in 2007. Reported estimates are that short-term projects would cost $574.3 million and long-term work would be an additional $465.1 million. The port has continued to suffer long-term effects from Hurricane Katrina that struck the City and Port in August 2005. Part of this is because the US Army Corps of Engineers has halted dredging the Mississippi River Gulf Outlet that would create deep draft access to the port's Inner Harbor.

Despite the setbacks, the port is moving ahead with its projects. Most recently it awarded a $26.5 million contract for construction of two new multi-purpose gantry cranes for its Napoleon Avenue Container Terminal. These will join four cranes already in operation when work is completed in July 2010.

The Port of Houston

The port reports that each year 7,700 vessels call there, which ranks it first in the US in foreign waterborne tonnage and second in overall tonnage. The Port Commission is highly active in projects to improve the port's infrastructure.

Among the most current projects under consideration are $30 million for Bayport Container Terminal improvements that include building a Terminal Administration Building and a Maintenance and Repair Building. Additionally, consideration is being given for a $5 million project to deepen and widen the Houston Ship Channel.

The Port of Tampa

Most recently the Port Authority Board of Commissioners approved $40 million in improvements it characterizes as preparing the port for significant future growth. $8.3 million will be used for the first phase of a project to expand the Port of Tampa Container Terminal. The first phase will add 14.5 acres of paved storage area to the 25 acres already at the terminal. Target date for completion is August 2009.

The Port Authority expects to award larger contracts for the expansion project. Presently the Container Terminal features a 43-foot deepwater channel, 2100 feet of berth, three container gantry cranes and a 120-ton lift capacity mobile harbor crane. There has been an additional $19 million allocated for dredging to support new maritime business.

The Port of Jacksonville. Signed in early December was a 30-year lease by South Korea's Hanjin Shipping Co. It calls for construction of a new $300 million terminal by the end of 2011. The facility will function as a key hub in Hanjin's East Coast port activity.

The new facility will be located adjacent to MOL's (Mitsui O.S.K. Lines) TraPac Container Terminal at Dames Point. Fronting on the harbor's 441-foot deep channel, the 158-acre Terminal is 12 miles from the open sea. At Dames Point there will be two berths able to accommodate post-Panamax vessels as long as 2500 feet. Featured will be a dual operating rubber-tired gantry and rail-mounted gantry.

The Port of Savannah

Exuding confidence, Doug J. Marchand, executive director of the Georgia Ports Authority claims it will not only survive the current recession, but will come out of it stronger than ever. “Now is the time for our ports to expand capacity and prepare for the next wave of cargo shipped to Georgia,” he says, “Our ports are in the advantageous position of being able to attract additional cargo, even in a challenging economy, while preparing for future growth.”

At Savannah, four additional super post-Panamax cranes will be operational by May. Additionally, construction has been completed for 14 additional rubber-tired gantry cranes at the port. Part of Georgia Ports, The Port of Brunswick is building a 10,000-ton grain storage tank, scheduled to be completed in April.

The Port of New York and New Jersey

As with others authorities around the country, this one has responsibility for more than just ocean traffic. It also oversees airports, tunnel traffic, light rail and more. Among activities related to cargo, it most recently authorized an additional $7 million in a project to complete construction of its Phase 1B ExpressRail Corbin Street Intermodal Support Facility at the Port of Newark and the Elizabeth-Port Authority Marine Terminal.

The Port Authority has reached agreements with the US Environmental Protection Agency and ACCION New York to establish and implement a $2 million Emissions Reduction Program to provide financial incentives to truck owners operating within the Port District. The financing is aimed at allowing the purchase of used trucks retrofitted with new emission control technologies.

Canadian Ports Are Sailing Ahead

Though this story centers more on domestic port activities, the country's northern neighbor has felt a pinch from a diminished global economy, but not as significantly as those in the US. Here's a quick overview of activities at three major Canadian ports.

Vancouver Fraser Port Authority, marketed as Port Metro Vancouver. The Fraser River Port Authority, North Fraser Port Authority and Vancouver Fraser Port Authority amalgamated on January 1, 2008. Through mid-2008, overall cargo tonnage was down 5% year over year, attributed to reductions in shipments of minerals. At the same time, in contrast to many West Coast North American ports, total container traffic at the port grew 4%.

Although the port is projecting overall increases in tonnage in 2009, for the latter part of 2008 it had experienced lower than usual volumes. To remain competitive, Port Metro Vancouver is moving ahead with its $4.25 billion in capital construction plan. As it explains the overall expansion strategy is to, “increase production at existing terminals, expand existing facilities and explore options for new facilities. Picking just one project as exemplary of work underway, the Deltaport 3rd Berth Project began construction in January 2007 and is scheduled for completion in Fall 2009. Among its principal components is an expanded 50 acre container storage yard, a new wharf to accommodate a third berth, expansion of an existing ship channel and adding 73,000 feet of rail track.

The Port of Montreal. Calling itself the world's largest inland port, through the first eight months of 2008 container traffic was up 8.4%. By the end of September 2008, the Port of Montreal handled 1,117,000 TEUs (twenty-foot-equivalent units), up 9.9% year over year. As third quarter statistics became available, the port showed cumulative growth of 10.1%.

The Port of Montreal's infrastructure improvement project is called Vision 2020. “Since the early 1990s world container traffic has grown almost three times faster than GDP,” notes Patrice M. Pelletier, the port's president and CEO. “By 2020 container traffic is expected to grow by nearly 7 % a year. We must act right away to obtain a large share of this traffic.”

Similar in approach to Port Metro Vancouver, the $2.5 billion Vision 2020 four phase plan is to optimize current infrastructure for increased operational efficiency and to immediately expand capacity; expand the port existing sites for optimum bulk and container storage; develop new infrastructure; and to increase the port's capacity to 4.5 million TEUs.

Port of Halifax. Through mid-year 2008, the port experienced the same lessening in traffic others were seeing. Though year over year breakbulk cargo was up 12.4% and ro/ro up 14.7%, they were not enough to offset declines in bulk cargo, down 12.6% and containerized cargo, off 19.6%. Overall through the end of June 2008, total cargo was down 14.2%. Reflecting on global economic conditions in 2008, George Malec, vice president Business Development & Operations for the Halifax Port Authority says, “We are weathering the storm and looking to the future. Our fundamentals are strong with a strong financial position reflected in our 'A' outlook stable credit rating from Standard & Poor's. When the global economy recovers, there's every reason to expect a return to the kind of growth that was predicted before the global economy started to go into recession.”

Infrastructure improvement continues for the port, although 2007 was a record year for investments on cargo infrastructure. Improvements were made by doubling on-dock rail tracks, creation of a new truck marshalling yard, and the purchases by Ceres/NYK of two new super-post-Panamax cranes.

A one-time dredging project is underway and will be completed this year. The port claims to have one of the world's deepest harbors and at 16.8 meters, the deepest berths on the East Coast. Other projects for the year include construction of a new maintenance garage at a container terminal, resurfacing of piers and lighting upgrades.

“In addition to our recent infrastructure up-grades.” Claims Malec, “we also have the capacity to handle more cargo. The Port of Halifax can nearly triple cargo volumes without significant investment. With our existing footprint, current container capacity is 1.4 million TEUs. By fully maximizing use of current terminals, expanding onto adjacent lands and further efficiency up-grades we could facilitate an expansion to 2.5 million TEUs. Our rail partner, CN has capacity on the rail system to more than triple volumes.”

Five Facts About US Public Ports

The American Association or Port Authorities offers these bits of information about the role of the nation's ports in supporting the economy.

  1. Deep-draft ports, which accommodate oceangoing vessels, move 99.4% of US overseas trade by volume and 64.1% by value, according to the US Census Bureau.

  2. Ports on the coasts and inland waterways provide a total of 3,200 berths for deep-draft ships.

  3. The US Department of Transportation projects that compared to 2001, total freight moved through US ports will increase by more than 50% by 2020 and the volume of international container traffic will more than double.

  4. Since 1945, US ports have invested more than $34 billion in capital projects to enhance their facilities, and nearly $9 billion in the last five years. In the foreseeable future, ports are projected to spend an estimated $2.1 billion more annually.

  5. More than 300 million cubic yards of dredged material are removed from navigation channels each year. Another 100 million cubic yards are dredged from berths and private terminals. The total, 400 million cubic yards of dredged material, would form a four-lane highway, 20 feet deep, stretching from New York to Los Angeles.

For more information on these and other ports, visit www.outsourced-logistics.com/portmap.


Russian Port Upgrades Its Infrastructure

In October, the Commercial Port of Vladivostok, in Russia, announced it had received new equipment for the handling of cargo. Included in the equipment are four cranes for handling containers, each weighing 1,000 tons.

The cranes were purchased as the result of a feasibility study and year-and-a-half of work that included road reconstruction, installation of under-crane rails, and upgrading of engineering and electrical networks at the port.

Purchase of he equipment is part of the general strategy of the Far Eastern Shipping Company (FESCO), Russia's largest container operator. “Vladivostok Commercial Seaport is the only one in the Far East to operate cargo handling equipment like this,” claims Vyachesalv Pertsev, the port's general director. He estimates that the port will handle 250,000 TEU (twenty-foot equivalent units) of containers in 2008 and that by 2010 that figure will climb to 650,000 TEU.

Indian Port Investments Pay Big Dividends

In its coverage of a highly successful liberalization of ports, the CATO Institute draws attention to the Indian state of Gujarat. The report, The Benefits of Port Liberalization, notes that various forms of port liberalization since the 1990s has led Gujarat to become India's most rapidly growing state, averaging annual increases of 10.14% from fiscal 2001 through fiscal 2006, the most recent years for data. Gujarart is 153 nautical miles northwest of Mumbai.

Swaminathan S. Anklesaria Aiyar, the report's author, claims that Gujarat has taken advantage of a loophole in the Indian constitution to “convert its minor ports into some of the biggest ports in the country, vastly improve the availability and efficiency of port infrastructure and facilitate the development of industrial centers that otherwise would not have existed.”

Proof of the port's commitment to enhancing infrastructure comes in the announcement from Gujarat Pipavav Port Ltd. that it is investing an additional € 40 million to dredge its facilities to a 14.5 meter from its present 12.5 meter draft to further improve the port's accessibility. The dredging is scheduled for completion by mid-2009.

In addition to its existing container traffic area the port has constructed an additional container yard to support 600,000 TEU (twenty-foot equivalent units) of cargo. It plans to add another yard to handle 670,000 TEU by the end of 2009.

Philip Littlejohn, the port's managing director, claims that, “With the deeper draft, Pipavav offers a safe port for the ever larger container vessels that cannot call at major ports in India. The port has road and rail connectivity, and the rail freight costs from our on-dock facility to the north Indian ICDs (inland container depots) are lower and the current maximum capacity of the rail link is 22 trains per day in each direction.”

Europe Looks to Boost Inland Waterways

In early October, 2008, the European Commission (EC) launched PLATINA, a platform to encourage inland waterway transport of bulk freight while reducing congestion and CO2 emissions. The aim of the platform is to aid in implementing the EC's action program, established in January 2006, NAIADES, to run from 2006 through 2013. The PLATINA platform has received € 8.5 million and unites 22 partners from nine European countries.

NAIADES focuses on five strategic areas: improvement of market conditions, modernization of the fleet, development of human capital, strengthening of the image of inland waterway transport and upgrading infrastructure.

In a progress report issued at the end of 2007, the EC noted that at least in, “the first quarter of 2007, the volumes transported on inland waterways in Europe showed an upward tendency, a development expected to continue after 2007.”

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