Should big ports combine terminals to better handle big ships and the concentrated box volumes they throw off?
Most large U.S. container ports are
chopped into multiple terminals and operate as separate units, but
the traditional layouts may not be well suited for the new dynamics
in maritime shipping.
chopped into multiple terminals and operate as separate units, but
the traditional layouts may not be well suited for the new dynamics
in maritime shipping.
The liner industry’s rapid
transition to much larger vessels has strained ports and inland
infrastructure. Today’s leviathans of the sea can dump up to three
times as much cargo at one time than previous generation vessels,
which takes much longer to unload and can cause congestion without
adequate cranes, longshoremen, storage areas, chassis, rail capacity
and efficient truck gates. New carrier alliances are compounding the
situation, as companies share vessels and then steer them to
different terminals each week depending on the arrangement of the
underlying vessel operator.
Fifty-six percent of the
containerships on order worldwide are 14,000 TEUs or larger. Over the
holidays the ports of Los Angeles and Oakland welcomed the largest
vessel to ever enter a U.S. port—CMA CGM’s 18,000-TEU Benjamin
Franklin.
transition to much larger vessels has strained ports and inland
infrastructure. Today’s leviathans of the sea can dump up to three
times as much cargo at one time than previous generation vessels,
which takes much longer to unload and can cause congestion without
adequate cranes, longshoremen, storage areas, chassis, rail capacity
and efficient truck gates. New carrier alliances are compounding the
situation, as companies share vessels and then steer them to
different terminals each week depending on the arrangement of the
underlying vessel operator.
Fifty-six percent of the
containerships on order worldwide are 14,000 TEUs or larger. Over the
holidays the ports of Los Angeles and Oakland welcomed the largest
vessel to ever enter a U.S. port—CMA CGM’s 18,000-TEU Benjamin
Franklin.
Major gateways such as Los Angeles,
Long Beach, New York/New Jersey, Norfolk, and Oakland have been
plagued for three years with severe backlogs due to inefficient
processes and terminals configured decades ago for much smaller
vessels. The systemic challenges were magnified a year ago by a labor
dispute that slowed productivity at West Coast ports and forced many
retailers and manufacturers to divert shipments, resulting in a surge
of cargo at East and Gulf coast ports. Cargo is flowing more smoothly
in recent months due to extensive industry collaboration to reform
operations, such as right-sizing chassis fleets, adding
cargo-handling equipment, creating free-flow systems for truckers (as
opposed to picking up an assigned box), and quickly flushing
containers to off-dock depots where sortation to final destinations
are made.
Long Beach, New York/New Jersey, Norfolk, and Oakland have been
plagued for three years with severe backlogs due to inefficient
processes and terminals configured decades ago for much smaller
vessels. The systemic challenges were magnified a year ago by a labor
dispute that slowed productivity at West Coast ports and forced many
retailers and manufacturers to divert shipments, resulting in a surge
of cargo at East and Gulf coast ports. Cargo is flowing more smoothly
in recent months due to extensive industry collaboration to reform
operations, such as right-sizing chassis fleets, adding
cargo-handling equipment, creating free-flow systems for truckers (as
opposed to picking up an assigned box), and quickly flushing
containers to off-dock depots where sortation to final destinations
are made.
“The big ships and the
mega-alliances together have accelerated this issue,” Peter Ford,
chief strategy officer for Ports America, said. “Most of the ports
in the U.S. are too fragmented. We think consolidation is absolutely
something that port authorities should encourage port operators to
take on.”
Ports America is the largest terminal operator and
stevedore in the United States. In a typical year, it handles more
than 13.4 million TEUs, 2.5 million vehicles, 10.1 million tons of
general cargo and 1.7 million cruise ship passengers.
mega-alliances together have accelerated this issue,” Peter Ford,
chief strategy officer for Ports America, said. “Most of the ports
in the U.S. are too fragmented. We think consolidation is absolutely
something that port authorities should encourage port operators to
take on.”
Ports America is the largest terminal operator and
stevedore in the United States. In a typical year, it handles more
than 13.4 million TEUs, 2.5 million vehicles, 10.1 million tons of
general cargo and 1.7 million cruise ship passengers.
“A terminal without enough berth
for at least two ultra-large vessels, plus a smaller ship, doesn’t
do anyone any good today—it’s not big enough. The larger ships
are 400 meters, so you need at least 1,200 feet of berth to be able
to cater efficiently to the new vessel schedules,” Ford said.
for at least two ultra-large vessels, plus a smaller ship, doesn’t
do anyone any good today—it’s not big enough. The larger ships
are 400 meters, so you need at least 1,200 feet of berth to be able
to cater efficiently to the new vessel schedules,” Ford said.
One port that has remained mostly
fluid despite a record cargo influx is Georgia’s Port of Savannah.
Some look to it as a potential model for how ports should be
configured to handle big ships.
Savannah set an annual record in
2015 for container throughput with 3.48 million TEUs—with only 11
months in the books so far (full-year figures were reported after
press time). In 2014, Savannah experienced a 10.2 percent growth in
container volume to 3.34 million TEUs. On a fiscal year basis through
the end of June, TEU volume was up 17 percent at Savannah and
double-digit growth was common in several months.
fluid despite a record cargo influx is Georgia’s Port of Savannah.
Some look to it as a potential model for how ports should be
configured to handle big ships.
Savannah set an annual record in
2015 for container throughput with 3.48 million TEUs—with only 11
months in the books so far (full-year figures were reported after
press time). In 2014, Savannah experienced a 10.2 percent growth in
container volume to 3.34 million TEUs. On a fiscal year basis through
the end of June, TEU volume was up 17 percent at Savannah and
double-digit growth was common in several months.
The port is handling volumes it
didn’t anticipate until 2018.
didn’t anticipate until 2018.
Although some diverted cargo has
returned to the West Coast following the dockworker’s contract
settlement, shippers say they are pleased with the reliability,
performance, predictability and proximity to consumer markets
provided by Savannah, and intend to continue re-routing a portion of
their Northeast Asia shipments via the Panama Canal.
returned to the West Coast following the dockworker’s contract
settlement, shippers say they are pleased with the reliability,
performance, predictability and proximity to consumer markets
provided by Savannah, and intend to continue re-routing a portion of
their Northeast Asia shipments via the Panama Canal.
An advantage that sets Savannah
apart from other ports is that all container operations are
concentrated on one enormous facility—the Garden City Terminal.
apart from other ports is that all container operations are
concentrated on one enormous facility—the Garden City Terminal.
At 1,200 acres, it is North
America’s busiest single terminal for container trade. Officials
say it allows for maximum efficiency and flexibility because all
manpower, technology and equipment are co-located in one area, along
with nine contiguous berths spanning 9,693 feet.
America’s busiest single terminal for container trade. Officials
say it allows for maximum efficiency and flexibility because all
manpower, technology and equipment are co-located in one area, along
with nine contiguous berths spanning 9,693 feet.
The setup means truck drivers don’t
have to go hunting among different facilities for chassis and boxes,
which helps to keep average turn-times under an hour for double
moves.
have to go hunting among different facilities for chassis and boxes,
which helps to keep average turn-times under an hour for double
moves.
“Any day, I’d rather have a
single 14,000-TEU vessel than three 4,000-TEU ships,” Georgia Ports
Authority Executive Director Curtis Foltz said at a private briefing
on port productivity in December 2014.
single 14,000-TEU vessel than three 4,000-TEU ships,” Georgia Ports
Authority Executive Director Curtis Foltz said at a private briefing
on port productivity in December 2014.
A few months later he said Savannah
was prepared for the unexpected influx in volume because the state of
Georgia had the foresight to invest heavily in infrastructure and
create one big terminal with the scale to achieve better efficiency
than several, disconnected smaller terminals.
was prepared for the unexpected influx in volume because the state of
Georgia had the foresight to invest heavily in infrastructure and
create one big terminal with the scale to achieve better efficiency
than several, disconnected smaller terminals.
Carriers give little warning when
they introduce big ships into service,
so it helps to be ahead of the curve with the necessary cranes, wharf
upgrades, rail capacity, roads and cargo-handling equipment, he said.
so it helps to be ahead of the curve with the necessary cranes, wharf
upgrades, rail capacity, roads and cargo-handling equipment, he said.
The GPA operates under a 10-year
planning cycle that is updated every two years. Officials study
economic trends and project future box volumes, identify needed
projects to accommodate that growth, and develop a financing plan.
planning cycle that is updated every two years. Officials study
economic trends and project future box volumes, identify needed
projects to accommodate that growth, and develop a financing plan.
“Our board directed us to invest
in capacity that exceeded our projected demand by 20 percent at any
point in time,” Foltz said.
in capacity that exceeded our projected demand by 20 percent at any
point in time,” Foltz said.
The GPA board has approved $142
million worth of improvements for the current fiscal year, including
an empty container yard with space for 15,000 TEUs, a new truck gate
with eight additional interchange lanes, four ship-to-shore cranes
and 30 rubber-tired gantry cranes.
million worth of improvements for the current fiscal year, including
an empty container yard with space for 15,000 TEUs, a new truck gate
with eight additional interchange lanes, four ship-to-shore cranes
and 30 rubber-tired gantry cranes.
Capital expenditures and
consolidation of container storage areas to create more space over
the next decade will increase annual throughput from 4.5 million TEUs
to 6.5 million TEUs. By 2024, Savannah is expected to feature about
30 ship-to-shore cranes, up from 22 today, and 169 rubber-tired
gantry cranes.
consolidation of container storage areas to create more space over
the next decade will increase annual throughput from 4.5 million TEUs
to 6.5 million TEUs. By 2024, Savannah is expected to feature about
30 ship-to-shore cranes, up from 22 today, and 169 rubber-tired
gantry cranes.
Savannah’s Achilles’ heel is
water depth, but a multi-year project is now underway to dredge the
Savannah River to 47 feet.
water depth, but a multi-year project is now underway to dredge the
Savannah River to 47 feet.
The new mega-alliances among
carriers have added to the need for the additional scale because
equipment (i.e. chassis and containers) frequently have to be shunted
between terminals to match up with where vessels dock, experts agree.
carriers have added to the need for the additional scale because
equipment (i.e. chassis and containers) frequently have to be shunted
between terminals to match up with where vessels dock, experts agree.
In Los Angeles and Long Beach, for
example, “you have multiple terminals and very few of them can
handle the entire alliance volume, let alone the large-ship
combination,” Ford said.
example, “you have multiple terminals and very few of them can
handle the entire alliance volume, let alone the large-ship
combination,” Ford said.
Pier 400, operated by APM Terminals,
is the largest of seven container terminals at the Port of Los
Angeles with nearly 400 acres and five berths. Last spring, the
company worked three 13,000-TEU vessels during an eight-day period,
including two days in which all three were alongside, accounting for
34,465 container moves, which remains a North American record,
according to the company.
is the largest of seven container terminals at the Port of Los
Angeles with nearly 400 acres and five berths. Last spring, the
company worked three 13,000-TEU vessels during an eight-day period,
including two days in which all three were alongside, accounting for
34,465 container moves, which remains a North American record,
according to the company.
At the Intermodal Association of
North America’s annual conference in Fort Lauderdale, Fla., last
September, Port of Los Angeles Executive Director Gene Seroka
acknowledged the industry would be better served with fewer terminal
operators controlling a wider swath of property.
North America’s annual conference in Fort Lauderdale, Fla., last
September, Port of Los Angeles Executive Director Gene Seroka
acknowledged the industry would be better served with fewer terminal
operators controlling a wider swath of property.
Together with the Port of Long
Beach, there are 13 terminals in the San Pedro Bay port complex,
represented by 11 different companies. Getting some of them to
voluntarily exit the market is likely to be controversial.
Beach, there are 13 terminals in the San Pedro Bay port complex,
represented by 11 different companies. Getting some of them to
voluntarily exit the market is likely to be controversial.
Seroka said simplifying operations
is part of the overall discussion that must be had to make the ports
attractive to beneficial cargo owners.
is part of the overall discussion that must be had to make the ports
attractive to beneficial cargo owners.
“Some of the thought leaders in
this industry are already sitting down with us on this topic. Others
will be laggards and some will be very difficult to bring into this
conversation. But, I think for the betterment of the industry and our
service delivery capabilities, it has to take place, whether it be
tomorrow or in the future,” Seroka said.
this industry are already sitting down with us on this topic. Others
will be laggards and some will be very difficult to bring into this
conversation. But, I think for the betterment of the industry and our
service delivery capabilities, it has to take place, whether it be
tomorrow or in the future,” Seroka said.
Meanwhile, the twin Southern
California ports are focused on maximizing land-use opportunities by
knocking down fences within terminals, repurposing underutilized land
and providing larger backlands to stack containers.
California ports are focused on maximizing land-use opportunities by
knocking down fences within terminals, repurposing underutilized land
and providing larger backlands to stack containers.
One of the biggest projects is the
$330 million expansion of the TraPac terminal, which when completed
in 2017 will encompass 220 acres. It will include some of the most
automated container-handling equipment in the world and on-dock rail
for the first time.
$330 million expansion of the TraPac terminal, which when completed
in 2017 will encompass 220 acres. It will include some of the most
automated container-handling equipment in the world and on-dock rail
for the first time.
And the Middle Harbor redevelopment
project in Long Beach, expected to be completed by 2019, involves
combining two existing terminals into one, along with technological
and rail upgrades.
project in Long Beach, expected to be completed by 2019, involves
combining two existing terminals into one, along with technological
and rail upgrades.
At the Port of Los Angeles,
terminals and ocean carriers increasingly coordinate where to dock a
vessel based on ship size and berth availability. Big ships are
directed to bigger terminals and smaller ships to smaller terminals,
when possible, Michael DiBernardo, the deputy executive director,
said. When CMA CGM, for example, brought the 18,000-TEU Benjamin
Franklin to Los Angeles on a trial run it went to APMT’s Pier
400 rather than West Basin Container Terminal—the carrier’s
normal stop.
terminals and ocean carriers increasingly coordinate where to dock a
vessel based on ship size and berth availability. Big ships are
directed to bigger terminals and smaller ships to smaller terminals,
when possible, Michael DiBernardo, the deputy executive director,
said. When CMA CGM, for example, brought the 18,000-TEU Benjamin
Franklin to Los Angeles on a trial run it went to APMT’s Pier
400 rather than West Basin Container Terminal—the carrier’s
normal stop.
“We have long-term contracts with
our marine terminals. Certainly our plan is to honor those
contracts,” Noel Hacegaba, chief commercial officer for the Port of
Long Beach, said in an interview. “Our focus right now is on
improving operational efficiencies within the construct that exists
today.”
The port authority is also conducting a study to help
determine the best use for existing land.
PortMiami is
contemplating whether to knock down the fence separating two of its
three terminals to allow more room for storage and cargo-handling
equipment to run back and forth between container stacks and vessels,
Port Director Juan Kuryla told American Shipper.
our marine terminals. Certainly our plan is to honor those
contracts,” Noel Hacegaba, chief commercial officer for the Port of
Long Beach, said in an interview. “Our focus right now is on
improving operational efficiencies within the construct that exists
today.”
The port authority is also conducting a study to help
determine the best use for existing land.
PortMiami is
contemplating whether to knock down the fence separating two of its
three terminals to allow more room for storage and cargo-handling
equipment to run back and forth between container stacks and vessels,
Port Director Juan Kuryla told American Shipper.
“By not having a fence, and maybe
developing another row of containers, you can accommodate more
throughput in that same square footage,” he said.
developing another row of containers, you can accommodate more
throughput in that same square footage,” he said.
The new footprint could be shared by
the existing terminal operators with flex space in the middle that
would be available to the company that had more vessels and box
volume at a particular time, he suggested.
the existing terminal operators with flex space in the middle that
would be available to the company that had more vessels and box
volume at a particular time, he suggested.
Port officials are also considering
combining two existing truck gates into a larger, unified one that
they say would allow cargo to be processed faster.
combining two existing truck gates into a larger, unified one that
they say would allow cargo to be processed faster.
“The investments required to
provide the scale and infrastructure can easily be funded by higher
rates from the lines who will gain the full impact of the economies
of scale these larger, better equipped terminals will provide,”
Ford said.
provide the scale and infrastructure can easily be funded by higher
rates from the lines who will gain the full impact of the economies
of scale these larger, better equipped terminals will provide,”
Ford said.
There are ways for port authorities
to consolidate even if terminal leases overlap, he added. One option
is to wait for a lease to expire and then offer a single concession
to a neighboring leaseholder to take on the expanded footprint. Some
stakeholders might be encouraged to divest, as many ocean carriers
have done in recent years with their terminal assets, in favor of a
new investor willing to manage combined terminals.
to consolidate even if terminal leases overlap, he added. One option
is to wait for a lease to expire and then offer a single concession
to a neighboring leaseholder to take on the expanded footprint. Some
stakeholders might be encouraged to divest, as many ocean carriers
have done in recent years with their terminal assets, in favor of a
new investor willing to manage combined terminals.
In the summer of 2013, the Port of
Oakland, under legal pressure from long-term tenant SSA Marine,
created a “mega-terminal” by combining three terminals into one.
Oakland, under legal pressure from long-term tenant SSA Marine,
created a “mega-terminal” by combining three terminals into one.
Under the agreement, SSA, the
incumbent at Oakland International Container Terminal, renewed its
lease and picked up the lease of the Global Gateway Central terminal
after APL exited the terminal business. Additionally, SSA was
assigned the lease to berths 55-56, previously operated by Total
Terminals International, through 2016, with an option to extend to
2022.
incumbent at Oakland International Container Terminal, renewed its
lease and picked up the lease of the Global Gateway Central terminal
after APL exited the terminal business. Additionally, SSA was
assigned the lease to berths 55-56, previously operated by Total
Terminals International, through 2016, with an option to extend to
2022.
The moves created a 350-acre
terminal, which the port authority said was better suited to meeting
the needs of ocean carriers.
terminal, which the port authority said was better suited to meeting
the needs of ocean carriers.
At the time, the port authority
faced the expiration of all four terminal leases along its middle and
inner harbors in 2016 and 2017. Further, those leases all had very
short renewal notification periods, leaving the port vulnerable in
the event one of the operators decided not to renew its lease.
Maher Terminals in New Jersey, which has been up for sale for 18
months, also presents a consolidation opportunity given that it sits
between Port Newark Container Terminal (operated by Ports America)
and the APM Terminals’ facility.
faced the expiration of all four terminal leases along its middle and
inner harbors in 2016 and 2017. Further, those leases all had very
short renewal notification periods, leaving the port vulnerable in
the event one of the operators decided not to renew its lease.
Maher Terminals in New Jersey, which has been up for sale for 18
months, also presents a consolidation opportunity given that it sits
between Port Newark Container Terminal (operated by Ports America)
and the APM Terminals’ facility.
“If you look at the landlord
ports, there’s clearly an argument to be made that you probably
don’t need 13 different terminal operators in L.A.-Long Beach. You
may not even need four in New York/New Jersey,” James Newsome,
chief executive officer of the South Carolina Ports Authority, said
Jan. 11 at the Transportation Research Board convention in
Washington, D.C. “You can’t work an 18,000-TEU ship on a
100-acre terminal.”
ports, there’s clearly an argument to be made that you probably
don’t need 13 different terminal operators in L.A.-Long Beach. You
may not even need four in New York/New Jersey,” James Newsome,
chief executive officer of the South Carolina Ports Authority, said
Jan. 11 at the Transportation Research Board convention in
Washington, D.C. “You can’t work an 18,000-TEU ship on a
100-acre terminal.”
The port authority operates four
terminals at the Port of Charleston and can steer ships to the
facility best suited to handling them—a luxury that ports with
multiple operators do not have, he said.
The Port of Virginia,
also an operating port, reopened the idle Portsmouth Terminal in 2014
to provide extra capacity for container operations in the midst of a
congestion crisis. The port authority was unsuccessful finding
non-container tenants for the facility when container business was
slower, and port officials now look fortuitously on their bad luck.
Portsmouth has older equipment and shallower draft at the wharf, but
is now a critical relief valve for Norfolk International and Virginia
International Gateway terminals, handling about 100,000 TEUs. Port
managers now direct to Portsmouth smaller services that deploy ships
of 5,000 TEUs or less so the other terminals can concentrate on the
neo-Panamax vessels, according to Thomas Capozzi, chief sales officer
for the Port of Virginia.
terminals at the Port of Charleston and can steer ships to the
facility best suited to handling them—a luxury that ports with
multiple operators do not have, he said.
The Port of Virginia,
also an operating port, reopened the idle Portsmouth Terminal in 2014
to provide extra capacity for container operations in the midst of a
congestion crisis. The port authority was unsuccessful finding
non-container tenants for the facility when container business was
slower, and port officials now look fortuitously on their bad luck.
Portsmouth has older equipment and shallower draft at the wharf, but
is now a critical relief valve for Norfolk International and Virginia
International Gateway terminals, handling about 100,000 TEUs. Port
managers now direct to Portsmouth smaller services that deploy ships
of 5,000 TEUs or less so the other terminals can concentrate on the
neo-Panamax vessels, according to Thomas Capozzi, chief sales officer
for the Port of Virginia.
Reade Kidde, director of
international logistics for Home Depot, echoed the sentiment during
another TRB panel.
international logistics for Home Depot, echoed the sentiment during
another TRB panel.
“I think we should have that
conversation. Is it a tough conversation? Absolutely. But we should
have the conversation” about mega-terminals, he said.
conversation. Is it a tough conversation? Absolutely. But we should
have the conversation” about mega-terminals, he said.