Special Coverage: Port of NY/NJ prepares for larger vessels

The third-busiest port complex in North America has spent billions raising the Bayonne Bridge and dredging New York harbor in preparation for larger containerships.

   Big changes are expected in the Port of New York and New Jersey when a project to increase the vertical clearance beneath the Bayonne Bridge – a span that connects Bayonne, N.J., with New York City’s Staten Island – is completed later this year.
   The port authority has spent billions raising the bridge and deepening surrounding shipping channels in order to allow larger containerships to call port terminals in Staten Island. Carriers are expected to deploy these bigger, more efficient vessels to the United States from Asia to take advantage of the economies of scale they offer.
   The bridge raising is also an opportunity for New York to finally realize the benefits of the new locks that opened on the Panama Canal last summer, which nearly tripled the size limit for ships crossing the isthmus from 5,000 TEUs to as much as 14,000 TEUs.
   “We’re excited to have the larger ships coming to the port,” said Molly Campbell, the director of the port department of the Port Authority of New York and New Jersey (PANYNJ). But with their arrival, “there are certainly some challenges that we’ll have to meet head on.”

John Nardi

   “The vision of a lot of our forefathers here is finally coming to pass, between the Panama Canal, the Bayonne Bridge, the dredging, and infrastructure development,” said John Nardi, the president of the New York Shipping Association, which negotiates local labor issues with the International Longshoremen’s Association (ILA) on behalf of its terminal operator employers and promotes the port as an economic engine for the greater metropolitan area.
   While the port has received ships with capacity of more than 10,000 TEUs, Campbell said the vast majority of vessels calling there today – the “workhorses,” as she put it – have ranged between 5,000 and 8,000 TEUs.
   She expects some carriers to move rapidly to increase the size of ships calling the port once the project is complete, bringing vessels with between 10,000 and 14,000 TEUs of capacity in the short-term and as large as 18,000 TEUs in the future.

Rising Tide. Although last year’s container volumes were disappointing – throughput at NY/NJ’s terminals was down 1.9 percent from 2015 – this may have been an anomaly. Volumes grew 10.4 percent year-over-year in 2015 and 5.6 percent in 2014. And so far in 2017, growth has resumed, with box volumes up 4.7 percent through the first two months of the year compared with the same 2016 period.
   The third-busiest port complex in North America after Los Angeles and Long Beach, New York/New Jersey is a key stop for carriers in the Northeast and is often the first-port-in, last-port-out, or both, on services that call the U.S. East Coast.
   The 6.25 million containers handled at NY/NJ terminals last year amounted to 48.9 percent of the total volumes of ports north of Cape Hatteras, N.C. (Halifax; Montreal; Boston; NY/NJ; Philadelphia; Wilmington, Del.; Baltimore; and Hampton Roads, Va.), according to figures from the American Association of Port Authorities (AAPA). Eliminate the Canadian ports, and that market share jumps to nearly 57.6 percent.
   AAPA noted, however, that growth in container traffic at some southern U.S. ports has outpaced that of NY/NJ, which has seen volumes rise 23 percent from 2006 to 2016. Throughput at the Port of Savannah shot up 69 percent during the same 10-year period, while volumes at Wilmington, N.C., Hampton Roads and Jacksonville, Fla. grew 46 percent, 30 percent and 36 percent, respectively.
   Nardi said this trend is not surprising, given the explosive population growth and the relocation of manufacturing across the southeastern U.S.
   “The thing that we can do on our side to offset some of those challenges is to be more productive and try to get our costs down, and that’s what we’re trying to do,” he said.

   And while they may compete for discretionary cargo, there is also a recognition by other ports that a rising tide – or in this case a bridge – can potentially lift all of their proverbial boats.
   “One port is not going to attract big ships [by itself], we need multiple ports that are prepared,” says Joe Harris, a spokesman for the Port of Virginia. “So we think the raising of the Bayonne Bridge is positive for East Coast cargo in general.”
   But that’s not to say competition is lacking for discretionary cargo.
   The Heartland Corridor, completed in 2010, gave double-stack trains on the Norfolk Southern (NS) railroad (and intermodal shippers) access to the Midwest. Served by both NS and CSX, the Port of Virginia saw rail volumes rise 14 percent year-over-year to 551,496 containers in 2016.
   Virginia is scheduled to receive its first call from the 13,092-TEU COSCO Development in early May. The newly commenced OCEAN Alliance of CMA CGM, China COSCO Shipping, Evergreen Line and Orient Overseas Container Line (OOCL) is deploying the vessel on a string from China that will call at Norfolk, Savannah and Charleston, but will not come to New York.
   The Port of Baltimore could become a bigger intermodal player if Maryland Gov. Larry Hogan is successful in his efforts to obtain federal funding to improve clearances in the Howard Street Tunnel, allowing double-stack trains to pass beneath the city of Baltimore as they travel inland.
   And a potential sleeper right in New York’s backyard is Philadelphia, which has seen its cargo volumes swell 86 percent between 2006 and 2016. Though its container throughput amounts to just 7 percent of New York/New Jersey’s, Gov. Tom Wolf in November announced plans to spend $300 million on infrastructure, warehousing and equipment to double the port’s annual container handling capacity.
   Campbell, who joined PANYNJ in 2015 after 15 years at the Port of Los Angeles, recalled that shortly after starting her job, she had a conversation with an economist that gave her some some statistics she found “a little bit staggering.”
   “The stat he gave me was that within 250 miles of the Port of New York and New Jersey is 20 percent of the GDP for the entire country,” she said. “And I asked him to check and double check and triple check.”
   Given this, it seems likely the port will always be a big draw for container carriers. And if carriers have “discretionary” cargo that might move through other ports to landlocked destinations like the Midwest, “why then go to Norfolk or Savannah or someplace else when the goods could be dropped off here, put on a truck or train, and be taken inland?” Campbell asked.
   NY/NJ’s on-dock ExpressRail system has seen volumes grow from 338,994 lifts in 2006 to 540,149 last year, a 59 percent increase compared to the 23 percent increase in cargo.
   And the port has plenty of capacity to grow its intermodal rail business. The ExpressRail system today has capacity for 1.5 million lifts annually at its facilities that serve APM Terminals (APMT) and Maher Terminals in Elizabeth, N.J., the Port Newark Container Terminal (PNCT), and the GCT New York terminal on Staten Island. The port authority in December broke ground on a new ExpressRail terminal at GCT Bayonne that will add capacity for another 250,000 lifts or 430,000 TEUs.

Under The Bridge. When the Bayonne Bridge opened in 1931, its 151 feet of “air draft” – the distance from the bottom of the bridge’s roadway at midspan to the waterway below – was great enough that even the largest ships in the U.S. Navy could sail beneath it.
   But as containerships grew larger, carriers began to lobby for both deeper channels and a taller bridge.
   In a widely publicized stunt in 1998, Maersk Line had the 6,400-TEU Regina Maersk – the largest containership in the world when it was delivered and still considered a colossus at the time – call the Port of New York. A New York Times reporter on board the inbound ship described how it had to lower its radio mast to slip beneath the Bayonne Bridge, and “a digital meter indicating how much water lay beneath the keel displayed a string of nerve-racking numbers showing the gap between the ship and harbor bottom often at less than 10 feet.”
   That year, Maersk and Sea-Land Service (then a separate company, but acquired by Maersk in 1999) also asked other ports for bid for their business. The implication was that if the harbor was not deepened, cargo bound for New York might be offloaded in ports like Baltimore or Halifax for transshipment to the northeastern U.S. by ship, rail or truck.
   Whether or not the carriers were bluffing, the port and local politicians got behind the need for a deeper harbor and the project was authorized by Congress in the Water Resources Development Act of 2000.
   Since that time, of course, the average size of containerships serving the major east-west trade has grown exponentially.
   According to the Army Corps of Engineers, $2.1 billion (which was actually less than the $2.965 billion originally estimated) was spent deepening the port’s main shipping channels to 50 feet, a project that was completed last fall.
   Work on the $1.3 billion project to raise the height of the Bayonne Bridge from 151 feet to 215 feet began in 2013. New approaches to the bridge and a second roadway were built above the original bridge deck. Several lanes of the new, upper roadway opened to traffic in February, and teams are currently in the process of demolishing the lower roadway.
   Officials expect to complete the demolition later this year, making it possible for larger ships to pass under the bridge. Work will continue on finishing the upper deck through 2019.
   Although complex (it was once compared to taking apart an airplane and rebuilding it while in flight), the project was much less expensive than other alternatives, such as building an entire new bridge or tunnel.
   The new 215-foot height, as well as the deeper channels, will enable big ships to call at the APMT Elizabeth, Maher, PNCT and GCT New York terminals.
   Campbell noted that a simulation study last year concluded both 14,000-TEU and 18,000-TEU vessels will be able to come into the terminals in Newark and Elizabeth. The study was conducted with members of the Sandy Hook Pilots Association, Metro Pilots and McAllister Harbor Pilots using at a simulator at the Masters, Mates and Pilots Union’s  Maritime Institute of Technology and Graduate Studies in Linthicum Heights, Md.
   In addition to using the simulator, some harbor pilots travelled to West Coast ports to learn from pilots there and gain experience in handling the bigger ships.
   There will be operational restrictions, however, for big ships calling these terminals.
   For example, the vessels will need to have both a Sandy Hook harbor pilot and a docking pilot, 1.5 miles of visibility at Bergen Point, winds of 20 miles per hour or less, and transit will have to be made within one hour either side of slack water at Bergen Point, though some of these restrictions my change over time.
   Campbell said the port expects 14,000-TEU ships to lead the way, but that it is a “big plus” that ships with up to 18,000 TEUs of capacity will be able to move through the waterway.
   The port says it will be able to give carriers notice of when bigger ships can be accommodated about 90 days in advance, and Campbell expects liner companies to take advantage of the opportunity right away.
   Campbell said she is confident terminals in the port are prepared to handle the unique challenges that come with the larger ships.
   “We have spent a lot of time and energy to see what we can do to make sure that we are – it’s an overused term, but I think certainly very accurate – ‘big ship ready,” said Campbell.

Source: PORT AUTHORITY OF NYNJ
Workers disassembling the old road deck on the Bayonne Bridge so larger ships will be able to travel beneath.

Terminal Investments. Last year, the 10,100-TEU MOL Benefactor became the largest ship ever to call the Port of New York and New Jersey, but was only able to do so because it berthed at the the GCT Bayonne terminal on Upper New York Bay, east of, and therefore not impeded by the Bayonne Bridge.
   “While we certainly expect to see larger ships calling the port following the Bayonne Bridge upgrade, larger vessels have been calling in advance of its raising first through the Suez and more recently through the expanded Panama Canal last summer,” said John Atkins, president of GCT USA, who oversees the company’s Bayonne and Staten Island Terminals. “The pace of the cascading is more dependent upon the new alliances and their resulting service rotations. Having handled the largest calls in the port to date, our experience is that volume surges are best served by strong landside capability.”
   According to Atkins, GCT Bayonne is one of the most advanced container terminals in the country, with a “state-of-the-art” gate complex and semi-automated container yard featuring rail mounted gantry cranes. The company in 2015 completed a project to deepen the terminal’s berth to 50 feet.
   Other terminals in the port are improving their facilities, albeit not with the same level of automation as GCT Bayonne, and it appears automation could be a hot-button issue in contract negotiations between the ILA and employers. The current six-year labor deal expires on Sept. 30, 2018.
   ILA President Harold Daggett in January predicted “the issue of automation will dominate our master contract talks,” adding that the dockworker union “will not allow automation to rip apart our livelihoods and destroy our jobs and families.
   “Right from the outset, the ILA intends to let management know that we are totally opposed to fully automated terminals,” he said.
   As recently as 2014, APM Terminals had been looking to sell a 50 percent stake in its Elizabeth terminal to Toronto-based Brookfield Asset Management. When the deal fell through, however, it reversed course and has since decided to invest heavily in the facility and retain full ownership.
   APMT said last fall it would spend $70 million to modernize the terminal, but in February decided to more than double that planned investment to $200 million.
   Scheduled to begin at the end of April, the improvements will involve reinforcing and deepening 2,500 feet of berths, allowing bigger cranes to be used, said Brian Clark, managing director of APM Terminals Elizabeth. The other 3,500 feet of berths at the terminal have already been improved.
   APMT Elizabeth will also purchase four additional “super post-Panamax” cranes, which can handle ships with 10 high-cube containers stacked on deck. When the project is completed, the terminal will have 14 cranes: eight super post-Panamaxes capable of working ships with 23 rows of containers across their beam and six post-Panamax cranes capable of working ships 18 containers wide.
   The investment will allow the terminal to handle three ultra-large containerships simultaneously and increase its annual capacity from 1.5 million TEUs to 2.3 million TEUs. The facility, which handled 1.3 million TEUs last year, is also building a new gate complex that will match the capacity of the terminal, Clark said.
   “We certainly expect that we will initially see 10,000-TEU to 14,000-TEU vessels calling terminals west of the bridge,” he said. “I haven’t heard any timeline as to how large the ships will get and how quickly they will cascade, but I know in speaking to customers they are anxious for the bridge project to be completed and anxious to start seeing larger vessels being able to transit west of the bridge.”

Concentration Concerns. The biggest ship APMT Elizabeth has handled in the past had capacity for 9,600 TEUs, and the terminal has handled vessels discharging and loading as many as 6,000 TEUs in a single call.
   “From our standpoint, we have the equipment capable of handling the larger vessels, we have the container yard space to support the volumes,” Clark said.
   As larger ships cascade into the transpacific trade between Asia and North America, however, NY/NJ could see “greater peaks and valleys where we might have fewer vessel calls with greater concentration of volume,” he said.
   GCT Bayonne in January introduced a truck management system that requires drivers picking up cargo during morning hours to have reservations. Initially, reservations were required for pick-ups between 6 a.m. and 8 a.m., but that was soon extended between 6 a.m. and 9 a.m., and Atkins said in April the company is planning to extend the window further to between 6 a.m. to 10 a.m.
   “The truck reservation system has enjoyed a high subscription rate from the drayage community, resulting in a 41 percent improvement in truck turn times,” Atkins said.
   Jeff Bader, the chief executive officer of trucking company Golden Carriers and president of the Association of BiState Motor Carriers, said the GCT Bayonne reservation system “seems to working.”
   When truckers expressed some initial concerns, GCT was “very cooperative, very responsive, and they’ve already made some changes,” he said.
   “It’s helped,” Steve Schulein, vice president drayage and industry relations at third-party logistics provider National Retail Systems, said of the reservation system. “Instead of lining up at four in the morning and not knowing if you’re going to get in, now you have to set up an appointment and it’s been working well. The drivers are happy with it, we’re happy with it, and it is enabling us to manage a little bit better.”
   The system has also helped take some pressure off other terminals, said Schulein. A trucker might schedule his first pick-up at GCT Bayonne, for example, and then look to do a pick-up later in the day at another terminal.
   “The real problem is that unless everybody else gets on board, it’s a temporary patch. It is helping one terminal, but we have issues at the other terminals,” he said.
   Bader said he’s heard other terminals may also roll out appointment systems, but noted how there is concern among truckers that if every terminal requires appointments for every hour they are open, drivers may be unable to keep later appointments due to unexpected delays earlier in the day.
   Clark said APMT is currently evaluating the GCT Bayonne truck appointment system and expects to install something similar at some point in the future at its Elizabeth facility.
   “Being able to understand the expected volumes that will be calling the terminal during that appointment window allows us to provide better service, more efficient service, when we know what to expect,” he said.
   Neither Maher Terminals, which was sold last fall by Deutsche Bank to the Macquarie Infrastructure Partners III fund (80 percent) and NYK Ports (20 percent), nor Ports America, which owns PNCT in partnership with Mediterranean Shipping Co. (MSC) subsidiary Terminal Investment Ltd., agree to be interviewed for this article, but Campbell said both have projects underway to improve their facilities.
   Maher, for example, is upgrading its optical character recognition capability and making additional investments in its straddle carrier fleet. At the Navis World conference in San Francisco at the end of March, members of the Maher information technology department described how they successfully upgraded the facility’s Navis N4 terminal operating system (TOS) in 2016, in marked contrast to its initial switch to a Navis TOS in 2013, which was fraught with problems.
   PNCT is expanding its truck lanes so it can accommodate more trucks within its facility, developing an additional 30 acres of yard space and adding an additional 20 straddle carriers.
   When the current contract with the ILA was negotiated in 2012-13, it included a provision for a relief gang system, which is a variation of shift work, and incentives for older ILA members to retire.
   The NYSA is still in discussions about implementing the relief gang system, which Nardi said will help improve productivity, especially as bigger ships call the port.

   With more boxes on board, larger ships take longer to unload, but workers get tired after several hours and productivity can suffer. Under the agreement negotiated with the ILA, fresh workers would come on at designated intervals, and “that would help with some of the fatigue factor that we think we’re going to be facing with the larger vessels,” he said.
   Whereas today two workers would be hired for a piece of equipment and relieve each other periodically, the new system might allow the three people to be hired for two pieces of equipment.

Holding Council. In 2013, PANYNJ formed the Port Performance Task Force to identify challenges to terminal efficiency and service reliability. Over 500 stakeholders participated in meetings that resulted in a report consisting of a series of 23 recommendations the following year.
   A permanent Council on Port Performance continues to work on implementing those recommendations, and Campbell pointed to a number of recent successes, including a plan for dealing with disruptions caused by winter weather, a truck resource guide and a port community system called TIPS.
   TIPS, which stands for terminal information portal system, gives trucking carriers visibility into the status of cargo at all terminals, rather than requiring firms to check the status of cargo on the individual systems of each terminal operator.
   The only drawback, said Bader, is a slight delay in information being updated on the TIPS system. The status of a container might be updated on the system of an individual terminal a half-hour before the change appears on TIPS.
   One of the gnarliest issues facing the port has been the creation of an interoperable chassis pool, sometimes called a “gray” or “market” pool.
   There are about 30,000 marine chassis in three pools in the New York/New Jersey region operated by TRAC Intermodal, Flexi-Van Leasing and Direct ChassisLink Inc. (DCLI).
   TRAC has about 20,000 chassis, Flexi-Van about 2,500 and DCLI the remainder.
   Keith Lovetro, the president of TRAC said a gray pool can help make the port more fluid and increase the velocity of containers in and out of its terminals.
   The three companies came close to implementing a gray pool nearly a year and a half ago, but then hit a snag because labor had concerns about the structure of the pool, work jurisdiction, and the enforceability of jurisdiction rules, he said.
   Last year, TRAC began a dialogue with labor and was “able to allay their concerns. So today the union, labor, is supportive of the market pool,” Lovetro said, and the three companies are “making progress” in discussions about an operating pool agreement.
   Phil Connors, who recently retired as executive vice president of Flexi-Van and is now working as a consultant, said the major sticking point today is that TRAC has proposed a voting structure for the collective board that is based on the number of assets contributed by each company, rather than a single vote per company.
   “There is no pool in the country that functions that way today,” he said. Instead, each chassis contributor gets one vote, provided they meet a certain threshold.
   Nevertheless, Lovetro says he thinks there is a very good chance that the three chassis leasing companies will come to an agreement on a gray pool before peak season begins later this year, and before the Bayonne Bridge project is completed.
   Neil Davidson, senior ports and terminals analyst at London-based consultant Drewry, said it is “too early to say what the long-term prognosis is for NY/NJ.”
   “That may sound like a cop out, but it’s not, because what we have right now is an unprecedented set of short- to medium-term changes under way – the establishment and bedding in of three mega-alliances, the cascade effects of very rapid increase in ship sizes, and the expansion of the Panama Canal,” he said. “All of this is creating a lot of turmoil and market share volatility, not just for transhipment ports but gateway ones too.
   “There’s also a degree of illogical port choices being made by alliances,” meaning shipping lines are not necessarily funneling their business to ports where sister companies have terminals, he said.
   “NY/NJ has some important factors in its favor, not least of which the huge consumer and industrial market on its doorstep. But also increasingly significant in the new world of mega-alliances is terminals with close relationships with major carriers,” he said, pointing to the ties between Maersk Line and APMT, MSC and PNCT, and NYK and Maher.
   “So all that NY/NJ port can do (and indeed any port) is to make sure that they have the facilities and capabilities to play the game as effectively as possible, to give themselves the best chance of keeping and winning market share,” Davidson said. “Raising the Bayonne Bridge is a key example of this.”

  Chris Dupin is Maritime and Intermodal Editor of American Shipper. He can be reached by email at cdupin@shippers.com.