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GEORGIA PORTS AUTHORITY INVESTS IN THE FUTURE

georgia ports authority
Archives, Global Trade Daily, Ocean Ports

GEORGIA PORTS AUTHORITY INVESTS IN THE FUTURE

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Capacity expansion, cranes and infrastructure are the focuses for Georgia Ports Authority (GPA) in FY2021. The GPA announced the official approval of $305 million in projects to increase overall TEU capacity for the Port of Savannah from 6 million to 7.4 million. 

The goal of meeting increased cargo volume includes support from the U.S. Army Corps of Engineers through the deepening of the Savannah Harbor. Additional projects include the re-purposing of property on Garden City Terminal and doubling GPA’s rail lift capacity to 2 million TEUs per year through commissioning the second set of nine new working tracks at the Mason Mega Rail terminal. 

The GPA has begun refurbishing Berth 1 at the Garden City Terminal to increase the dock capacity to include four 16,000-TEU vessels–the largest class of container ships currently serving the U.S. East Coast–as well as three additional ships. The greater efficiency possible when working one large vessel compared to multiple smaller ones will increase Savannah’s overall berth capacity and velocity of vessel service. This renovation alone will add 1 million TEUs per year of capacity for the berth. 

The most recent additions completed by the GPA include the Appalachian Regional Port’s addition of six container storage bays, bringing the TEU slots to 390 for increased demand at the inland terminal and an overall capacity increase of 25,000 TEUs annually. 

In February, the GPA commissioned an additional 6,000 TEUs of grounded container slots at Savannah’s Ocean Terminal, including space for dry and refrigerated containers. The expanded container yard is served by six rubber-tired gantry cranes, for an increased capacity there of 210,000 TEUs annually.

At Garden City Terminal, the GPA added six new ship-to-shore cranes in FY2020 and 20 new rubber-tired gantry cranes for a total of 172. Also at Garden City Terminal, the GPA brought online new container stacks for berths 7, 8 and 9, increasing Savannah’s annual capacity by 400,000 TEUs.

Looking ahead to the future, the GPA has purchased 145 acres adjacent to the Mason Mega Rail Terminal. GPA is developing 92 of those acres for an additional 750,000 annual TEU capacity within the next two years. 

shipping costs
Archives, Global Trade Daily, Ocean Ports

Why Do Global Shipping Costs Continue to Skyrocket?

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Global shipping costs are reaching rarely seen levels, putting strain on logistics teams and product purchasers alike. Here’s a closer look at some of the reasons for this phenomenon.

Worsening Container Delays Create Bidding Wars

Port backups were among the issues of the early days of the COVID-19 pandemic. Unfortunately, they persist now, limiting the number of containers each port can efficiently accommodate. Relatedly, the shipping customers outpace the available space in each container. That problem makes prices rise so high that some entities lose out because they cannot afford to pay them.

Port Backups Cause Headaches

Some port backups are so severe that ships arrive unable to dock. That’s an ongoing situation at Washington State ports in Tacoma and Seattle. U.S. Coast Guard representatives helped redirect some vessels as they waited days or weeks to unload. Some ended up in unusual locations, such as off the Puget Sound. The offloading delays also cause a container shortage that affects new freight.

HMM, South Korea’s top national container carrier, recently reported severe vessel berthing congestion at most of its port calls, as well as related yard and gate issues. Other providers reported similar disruptions. However, the affected parties disagree about what’s to blame. The carriers often assert that ports are not sufficiently well-managed, which causes the delays. But port managers respond that carriers have not met their berthing window requirements.

Bids Can Reach the Tens of Thousands of Dollars

In any case, these slowdowns have made it exceptionally challenging to keep goods moving. Desperation makes some parties engage in bidding wars.

Philip Damas, head of the supply chain advisors practice at Drewry, a maritime research consultancy, explained, “Everyone is spending much longer on round trips. Containers are sitting on the water for much longer periods of time, containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.”

He continued by clarifying that freight indexes that track the changes in shipping costs usually gather the associated spot booking prices that get offered about a week before a ship departs. However, some ocean carriers offer available slots in shorter timeframes once the vessels are already at terminals. By then, there are plenty of customers eager to get goods on board at the last minute.

“Now everything is overbooked,” Damas said. “Shippers are desperate to book tomorrow. It’s more a bidding war than it is a traditional tariff, and this bidding war is accelerating. Some of these $23,000, $24,000 prices include the inland distribution cost, and that can easily add far more to the final cost.”

A combination of factors means many shippers decide there’s no choice but to pay those high prices. One longstanding issue is that carriers have cut capacity on major routes. Plus, the container shortage caused by backups escalates the problem. Shippers often realize they have to pay higher prices or leave the overseas markets.

Increased Demand From Customers Exacerbates the Issue

Company leaders usually appreciate when their products are in high demand, but the matter becomes more complicated when shipping costs are so high. In such cases, it’s necessary to either invest massive amounts of money to alleviate the shipping struggles or face lengthy delays that could upset customers.

For example, Amazon manages its own logistics system with extraordinary efficiency. However, that decision means building huge distribution centers as close as possible to the people who place orders. The company even began purchasing jets in early 2021 to exert more control over its air shipping options. However, most other brands don’t have such gigantic resources. Plus, the strategy may not pay off forever.

In the second quarter of 2020, Amazon showed a 68% increase in money spent on shipping. The e-commerce giant has yet to raise shipping costs for consumers, but other brands have already taken that approach. The rise in global shipping costs could even cause long-term stock shortages.

A Luggage Brand Goes to Great Lengths to Receive Goods

In one case, a global luggage company usually receives 11 container deliveries annually by August. That scheduling gets the goods to the merchant in time for the holidays. But, this year, it has only received three of the 11 so far, and not without significant expense.

The company normally pays $2,500 per 40-foot container. But representatives got an offer from an entity promising to get the container onto a ship in Thailand for $15,000. However, people at the company had to first get the goods to the vessel from Myanmar — a challenge in itself due to a trucking shortage affecting Asia. The brand eventually secured the necessary trucking assistance for $3,000.

In the end, the brand paid $18,000 to have its goods shipped. This example shows how much the global shipping crisis can quickly eat into profits. Another downside is that the container’s goods had a $30,000 value, so sending them cost more than half that amount.

The company reported that consumer demand was up, which is usually a positive thing. It’s probably in large part because of how people are starting to travel for pleasure more with the air travel industry beginning to recover and offer more routes.

Fewer Overall Affordable and Available Transport Options

A lack of choices to move goods also contributes to soaring global shipping costs. Some parties may get their products shipped by train and air when possible, but capacity limits exist there, too. The rush to get goods shipped causes a crunch that requires scrambling for any available slots offered via any kind of transit. Plus, air shipments are much costlier than those sent by sea, with some estimates saying that method is at least five times more expensive.

Severe weather can wreak havoc, too. In July 2021, a typhoon hit China and closed the country’s air, sea, and rail hubs. Earlier in the year, snowstorms forced some rail freight operators to temporarily cease running some routes. These challenges mean some customers decide they must cope with the tremendous shipping costs because there aren’t many other viable options.

Some brands are also trying to cope with delays within the supply chain by making up time at other points. One way to do that is with drones. Supermarket chain Tesco carried out a trial where some customers in Ireland received grocery orders only 200 seconds after the goods departed the store property.

In another instance, DHL partnered with a cargo drone company. The agreement involves using and managing several thousand drones to give customers same-day deliveries. Drone deliveries are not yet widespread options. However, they could become more popular, particularly as shipping professionals look for feasible ways to cut costs while keeping customers happy.

No Short-Term Price Easing

Analysts believe the global shipping costs will not return to more manageable levels during 2021. There are certainly not any quick fixes to the problem. Thus, the parties affected by it must decide on the most appropriate ways to deal with it, even if that means accepting astronomical prices or restructuring supply chains to avoid long-distance shipments as much as possible.

_____________________________________________________________

Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

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Archives, Global Trade Daily, News

Container xChange: Suez Canal Closure Increases the Pressure on Europe’s Ports

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The anticipated box crunch at European ports following the closure of the Suez Canal at the end of March has been less severe than expected, according to Container xChange.

However, Europe’s leading box hubs are still receiving far more boxes than are departing.

The average CAx reading of incoming 20-foot dry-containers across three of Europe’s biggest ports – Rotterdam, Antwerp, and Hamburg – climbed just 3% in week 17 compared to the week before.

At Rotterdam, the increase in incoming 20 ft. dry containers was most stark, with box numbers rising +3.75% week-on-week. At Antwerp, the week-on-week increase was +3.5%, while at Hamburg it was +2.2%.

At all three ports, incoming box traffic has been heavy since March. In Container xChange’s Container Availability Index (CAx) an index reading of below 0.5 means more containers leave a port compared to the number which enter. Above 0.5 means more containers are entering the port.

Chart: Container Availability Index for 20 ft. Dry-Containers at the ports of Antwerp, Rotterdam, Felixstowe, and Hamburg in 2021. For more info, click here.

Hamburg has recorded a CAx reading of above 0.8 since week 9 of this year. In week 17 its CAx reading was 0.93, up from 0.48 in week 1. Rotterdam’s CAx reading has also risen steadily in 2021, climbing from 0.65 in week 1 to 0.74 in week 9 and up to 0.83 in week 17.

Antwerp, meanwhile, recorded a CAx of 0.38 at the start of the year, 0.78 in week 9 and 0.9 in week 17.

In contrast, the situation at heavily-congested Felixstowe has been dire all year. The hub’s lowest CAx this year was 0.87 in week 3. In week 17 it recorded a CAx of 0.95, up from 0.94 in week 16.

Dr. Johannes Schlingmeier, CEO & Founder of Container xChange, the world’s leading container leasing and trading platform, commented:

“Europe’s top container terminals have been struggling to keep congestion at bay, with incoming boxes outweighing outgoing boxes for much of 2021. The closure of the Suez Canal appears to have only made the box crunch at Europe’s hubs only slightly worse than it already was.

“What we’re hearing from our container leasing and trading members is that they find it increasingly difficult to book export containers with the carriers across Europe. It seems shipping lines are prioritizing empty containers in order to move the boxes back to China as fast as possible.”

__________________________________________________________________

About the Container Availability Index:

The Container Availability Index tracks millions of monthly container moves to monitor and forecast the global container equipment supply. An index of 0.5 describes a balanced market, below 0.5 a shortage of containers. For more information and weekly email updates, check out https://container-xchange.com/features/cax/

About Container xChange:

Container xChange is the world’s leading online platform used by 600+ companies to buy, sell and lease shipping containers. Container users and owners use the platform to find containers, work with vetted partners and automate the operational workload. Started by Dr. Johannes Schlingmeier and Christian Roeloffs in 2017, the company has now more than 100+ employees with headquarters in Hamburg, Germany. https://container-xchange.com/

ports
Archives, Global Trade Daily, News

South Carolina Ports Shares Optimistic Outlook for 2021

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Pandemic or no pandemic, South Carolina Ports Authority (SCPA) continues to keep things moving throughout the supply chain. In February, the Inland Port Greer finished the month off with record numbers while Inland Port Dillon reported a 7.4 percent year-over-year increase in rail moves. These and other robust metrics released this week further confirm SCPA’s resilience and efficiencies in operations.

“As retail imports continue to boom during the pandemic, the ability to quickly move goods from ships to the hinterland via rail is paramount,” SC Ports CEO Jim Newsome said. “Cargo owners benefit from SC Ports’ fast-import transit to population centers — with intermodal imports arriving at the railheads within 24 hours — and overnight rail service to Inland Port Greer and Inland Port Dillon.”

An increase in the automotive sector has also contributed to the Port’s success for FY2021. In February, the Columbus Street Terminal completed the handling of 17,555 vehicles, contributing to the year-to-date total of 165,528 vehicles. This number represents an increase of 11 percent compared to the same period last year. So far, SCPA reported an impressive 1.61 million TEUs handled in fiscal year 2021, of which more than 180,00 handled at the Port of Charleston’s Wando Welch and North Charleston container terminals in February alone.

“By investing more than $2 billion in terminal infrastructure, we are able to deliver unmatched vessel and cargo fluidity to our customers,” Newsome said. “We remain focused on providing congestion-free terminals and available berths to keep the supply chain fluid.”

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Archives, Global Trade Daily, International Trade, U.S. Ports

Despite Shortage, Containers Rotting in Depots?

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Container availability across China is still at a record low, while US ports are overwhelmed by a surge of shipping containers from Asia, full of products retailers are eager to get on shelves for the holidays.

Due to the fastest increase in demand after months full of blank sailings, container availability for 40HCs is only at 0.05 CAx points compared to 0.63 at the same time last year, according to the Container Availability Index. 

Although the US East Coast is usually a surplus location of equipment (last year’s CAx value for 40DC was 0.7), the container availability dropped to 0.43 indicating actually fewer containers than needed. 

Containers spend 45 days on average in depot 

The average and median time of containers (in days) between “empty in depot” and “empty dispatched” | Source: Research Project FraunhoferCML & Container xChange

Although containers are very much in need, they still spend on average 45 days empty at depots according to a research project by FraunhoferCML and Container xChange.

Especially in regions with low container availability such as China and the US, the average is comparably high with 61 and 66 days compared to the global average of 45 days.

The high standard deviation of 85 days in North America and 129 days across Asia indicates many cases where containers spend far more days inside depots than the average suggests. 

Compared to the Middle East (21 days on average) and Europe (23 days on average) it takes more than 30 extra days to move containers out of the depots and make money with them. 

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Archives, Features, Global Logistics, Global Trade Daily, Top Ports

TOP CONTAINER PORTS: LA & NY … AND THEN EVERYONE ELSE

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The U.S. Army Corps of Engineers compiles annual lists of the top container ports by volume, with the figures for 2018 being the most recently released.

The list shows Los Angeles handled more than 1 million more containers than its neighbor Long Beach did, but Long Beach dealt with nearly a million more than third-place New York/New Jersey did.

That those three occupied the first three U.S. slots on the Army Corps’ list is not surprising to anyone who has followed container traffic in recent years. What may raise eyebrows is how many more containers those ports handle compared to everyone else in the country.

Los Angeles took in 19.5 percent of the nation’s containers in 2018, compared to 17.9 percent the year before. Indeed, Long Beach and New York/New Jersey saw year-to-year growth under the same metrics. Long Beach containers accounted for 16.7 percent of the nation’s total for 2018, up from 14.4 percent the year before. New York/New Jersey grabbed 14.8 percent in ’18, compared to 12.8 percent in ’17.

Combined, Los Angeles and Long Beach, whose ports essentially border one another, accounted for 36.2 percent of the containers handled in America in 2018, up from 32.3 percent the year prior. If you combine the Californians with New York/New Jersey, the three-port complexes handled more than half of the containers in the U.S. in 2018, at 51.1 percent. That’s up from 45.1 percent in 2017.

While Savannah handled more than 2 million fewer containers than New York/New Jersey to land at No. 4, the Georgia Ports Authority port had an impressive growth of 305,760 units from 2017 to ’18, which was better than top dog Los Angeles.

Others who beat LA’s 115k in that metric were (in order of impressiveness): Houston (240k); Jacksonville (237k); Charleston (138k); Seattle/Tacoma, which together form the Northwest Seaport Alliance (132k); and Oakland (125k).

Below is the U.S. Army Corps of Engineers’ list of the top 15 container ports in order, with their totals for 2018, 2017 and how many more containers that represented—because no one on the list handled fewer containers than they did the year before.

Because no 2018 data is indicated for some ports, but their 2017 totals are included, these facilities are indented about where they would fall if they pulled in similar numbers of containers in ’18. However, those ports are not counted among the top 15 as presented by Global Trade.

-Los Angeles
2018: 9,458,749
2017: 9,343,192
+115,557

-Long Beach
2018: 8,091,029
2017: 7,544,507
+546,522

-New York/New Jersey
2018: 7,179,792
2017: 6,710,817
+468,975

-Savannah
2018: 4,351,976
2017: 4,046,216
+305,760

-Seattle/Tacoma Alliance
2018: 3,797,627
2017: 3,665,329
+132,298

-Hampton Roads
2018: 2,855,914
2017: 2,841,016
+14,898

-Houston
2018: 2,699,850
2017: 2,459,107
+240,743

-Oakland
2018: 2,546,357
2017: 2,420,836
+125,521

-Charleston
2018: 2,316,255
2017: 2,177,550
+138,705

-San Juan (Puerto Rico)
2017: 1,319,572

-Jacksonville
2018: 1,270,480
2017: 1,033,070
+237,410

-Honolulu
2017: 1,204,568

-Everglades
2018: 1,108,465
2017: 1,076,893
+31,572

-Miami
2018: 1,084,000
2017: 1,024,338
+59,662

-Baltimore
2018: 1,023,161
2017: 962,484
+60.677

-Philadelphia
2018: 600,000
2017: 545,408
+54,592

-New Orleans
2018: 591,532
2017: 532,597
+58,935

vietnam
Archives, Global Trade Daily, International Trade

Is Vietnam the Next China: Myth vs. Reality

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The ongoing US-China trade war has brought a renewed urgency in recent months resulting in my crisscrossing this tiny nation from the northern capital of Hanoi to the country’s economic epicenter to the south, Ho Chi Minh City – formerly known as Saigon, and every stop in between. Once viewed as an emerging market with potential, Vietnam today is considered the hottest “go-to” sourcing destination as supply chains uproot from China and President Trump and President Xi continue to work out their disagreements.

However, despite logging thousands of miles of travel and spending days upon days conducting factory audits in the remotest corners of the country, I’ve discovered Vietnam’s manufacturing industry and export products may not live up to the hype as China’s best alternative.

Myth #1: Vietnam manufacturing is on par with China.

One striking difference I noticed immediately is that Vietnam’s manufacturing is at least 10-15 years behind China. On my factory tours, I witnessed outdated machinery, lack of modern equipment and saw few signs of the latest supply chain best practices, including LEAN certification standards and supply chain manufacturing principles in action. In my daily research on vetting manufacturers, I consistently come across poorly designed websites- if I am lucky to find one at all, sales pages listing professional contacts using Gmail and Yahoo accounts, and often encounter few staff members who can converse or speak English well. These deficiencies contribute to the challenging task of sourcing products meeting global export standards.

Myth #2: Vietnam’s pricing is cheaper than China.  

With labor about one-third of China, the cost of living and land is much cheaper than its northern neighbor, many falsely believe that Vietnam-made products automatically translate into big savings.

There are three contributing factors:

1. In nearly every industry, Vietnam lacks quality raw materials and must import them from China, thereby, increasing costs

2.  As new foreign direct investments set record highs, industrial park land costs have increased dramatically to coincide with this boom

3. Manufacturers (well aware that the US-China trade war has put American buyers in a corner) have raised their prices accordingly.

These all contribute to the drowning out of any major cost savings. In my experience, several times North American buyers have responded that my Vietnam price offer is wildly off the mark and not competitive with their current China suppliers, China tariff included. 

Myth #3: In Vietnam, you can expect to find everything as in China.

In the world of manufacturing and supply chain, I constantly hear: “Just start sourcing from Vietnam.” That would be all fine and dandy assuming an apples to apples comparison, but Vietnam is anything but China. Over the past two decades, China has perfected their manufacturing and supply chains to the point of employing robotics and automation churning out sophisticated products by the millions. Just take a trip to the hugely popular Canton Fair or attend one of the hundreds of trade shows and expos throughout the year; you will find every product imaginable, in every variant and color, too.

Furthermore, China has the most up-to-date and modern infrastructure—from container ports, highways, railways, and warehouses—to deliver goods globally. In contrast, Vietnam only in recent years has started to emerge onto the manufacturing scene, known mostly for light furniture, textiles, sewing, and electronics parts. 

Exasperated by the US-China trade war, Vietnam’s manufacturing industry has been red hot, however, it’s not an equivalent replacement for China. Buyers can expect less-than-stellar quality products and choices than what China offers, met with challenging business practices and frustration due to the lack of manufacturing transparency, data, and information. While Vietnam might be a manufacturing dream destination for many of your gains, it might be just that in the end: a pipe dream. 

Tariffs & Shippers
Archives, Global Trade Daily, Ocean Carriers

IS THE CARGO SHIP SAILING ON NEW TARIFFS?

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Demand for Space on Cargo Ships is Surging Ahead of Anticipated Tariffs on China

As over 300 witnesses present testimony in Washington, DC this week and next on the impact of proposed China tariffs on their businesses, uncertainty hangs in the air.

Following the hearing process, committee review and publication of tariff schedules, new tariffs could be imposed as soon as late July or August, which means the cargo shipping rush is on to beat the potential hikes.

Don’t Miss the Boat

The prospect of tariff hikes acts like an “early bird” registration rate as companies are incentivized to lock in better prices now. Many retailers are competing just to find space for their goods on an ocean carrier. Air shipments are an alternative, but far costlier. The shipment surge has resulted in massive congestion at ports and warehouses that are bursting at the seams.

This scenario is familiar. Retailers scrambled last year to book cargo to get ahead of tariffs. Importers front-loaded holiday merchandise shipments to beat the 10 percent tariffs on $200 billion of Chinese imports in the fall of 2018, and then front-loaded spring 2019 merchandise imports late in the year when they anticipated the tariffs would go up from 10 to 25 percent on January 1, 2019. That threat temporarily subsided when President Trump extended the negotiation deadline with China, but reemerged in May 2019. This time, the tariff threat materialized. Goods would remain at 10 percent only if they were exported from China to the United States prior to May 10, 2019 and entered into the United States before June 15, 2019.

New Tariffs, New Shipping Surge

The President has said he will make a decision after the June 28-29 G-20 meetingwhether to impose 25 percent tariffs on an additional $300 billion in Chinese imports, meaning a tariff on nearly everything the United States imports from China, including the kitchen sink (yes, kitchen sinks are on the tariff list).

Retailers generally import most of their holiday goods in August and September, but many are moving up this timetable in anticipation of higher tariffs, accelerating the traditional holiday peak shipping season. If major importers all do the same, advancing the shipment of months of inventory, how will shipping lines manage the demand and allocate vessel space? Where does all this volume sit when it arrives? What is the impact on costs for shippers?

All of this can add up to some choppy trade waters.

Hold My Spot

Retailers, who are the “shippers” of goods, may negotiate service contracts with ocean carriers under which the shipper commits to provide a certain amount of volume over a given period and the carrier commits to a certain rate schedule and set of services. Typically, the greater amount of volume, the better the rates will be. The alternative to contracts is the less predictable spot rate market. Usually valid for only one shipment, the spot rates fluctuate with market conditions.

Larger established shippers are more likely to have service contracts, while small- and medium-sized businesses are likely to be more at the mercy of the spot rate market. Because retailers generally require more pricing certainty and service guarantees, they may opt for contractual arrangements and lose out on the chance to capitalize on weak spot markets. Spot rates can dip below contract levels, for example, if carriers add too much capacity into the system or volume slows. Some businesses play it both ways, confirming some volume under contract and turning to the spot rate market for the rest.

There can also be price-based competition to secure slots on a particular vessel during peak periods, with carriers able to demand surcharges to protect shippers from being rolled onto a later vessel departure. When tariffs are imminent, shippers are often more willing to pay these surcharges to get space on the next available crossing.

Rather than contracting with an individual shipline, a shipper may choose to work with a common carrier, like UPS, that offers ocean transportation, but does not operate the vessels. These Non-Vessel Owning Common Carriers (NVOCCs) differentiate themselves by pointing to their ability to offer a diversified carrier mix and flexibility in cases of unexpected circumstances, such as a strike at the dock a particular carrier uses. The NVOCC negotiates with ocean carriers for a number of slots on particular trade lanes, in effect negotiating as the shipper, and then offers ocean shipping service to customers.

Seeking A Port in a Storm

In theory, changes to service contracts must be agreed upon by both parties – carrier and shipper – before taking effect. In practice, however, shippers and carriers sometimes treat service contracts more as guidelines than binding agreements. Import surges have caused some carriers to hike previously agreed rates, and if the shipper won’t pay, the cargo might sit in Shanghai.

Various organizations are developing innovative solutions to address these contract challenges, including through the use of technology to record contract terms and track shipments’ conformity with those terms, financial security tools to ensure penalty settlement, and requirements to pay collateral at the time of contract, unlike the current spot market where no money is exchanged until goods are on the water and either party can cancel at any prior point without an enforceable penalty.

As the race to get goods to shore heats up, shippers not only face cost increases at sea. With ports struggling with containers stacked six or seven high, shippers also face extra charges to get their goods off ships, onto trucks and into warehouses. As one example, the onslaught of containers also means a surge in demand for chassis, the steel frames that allow trucks to carry shipping containers. If sufficient chassis are not available, truckers have to delay deliveries, incurring costs that are passed to the shipper.

With thousands of retailers moving tremendous volume, the issue of warehouse capacity also becomes a challenge. According to Los Angeles Times reporting, Southern California’s warehousing and distribution complex, the largest in the world, has a less than one percent vacancy rate. Some retailers have resorted to storing pallets outside, while others face hefty fees for exceeding storage windows.

Ports part one
China trade

Are China’s Neighboring Ports Ready?

What about sourcing from countries other than China to avoid the tariffs? That’s easier said than done, at least in the short term to beat a looming tariff deadline. Switching to new vendors and manufacturers takes money and time. New vendors must be trained to meet retailer standards and be able to meet needed lead times. Factories must be vetted for quality standards, social welfare conditions and security factors. China also has superb logistics and other supply chain advantages that other countries cannot match.

In a recent piece in The Hill, the Cato Institute’s Dan Ikenson pointed to trade data showing that, as U.S. imports from China fell by 12 percent in the first four months of 2019, imports from Vietnam grew by 32 percent over the same period. However, Vietnam’s transportation infrastructure is reportedly overwhelmed with the new volume, straining the country’s roads and ports. And, Vietnam is facing pressure to adopt more rigorous measures to ensure that Chinese products do not get transshipped through the country and into the United States, merely to avoid U.S. tariffs.

“The Port of Los Angeles and the Port of Long Beach together comprise the San Pedro Bay Port Complex…On the import side, our most recent analysis estimates the current and proposed tariffs directed at China will impact roughly 66% of all imports by value at the San Pedro Bay.”

– June 17 letter to U.S. Trade Representative Robert Lighthizer from Eugene Seroka, Executive Director, Port of Los Angeles

Rough Waters Ahead

Despite the current shipping boom as producers and retailers build inventory to get ahead of tariffs, the shipping industry is concerned about the future impacts of an inevitable falloff in volume, even if the U.S. economy remains strong. When import volumes soften, dockworkers are not called to work, and the demand shrinks for logistics workers, warehouse workers and truckers. The surges and variability caused by tariff threats – some enacted and some not — have generated a boatload of uncertainty across the wide range of industries that make up the supply chain.

That uncertainty affects not only the users of shipping infrastructure, but sometimes the infrastructure itself. The Massachusetts Port Authority (Massport) owns and operates the Conley Container Terminal in the port of Boston, which serves 1,600 regional import and export businesses. After avoiding tariffs last fall on ship-to-shore cranes to service larger container ships, Massport finds the cranes back on the proposed tariff list. The imposition of 25 percent tariffs would add at least $10 million in costs for three new cranes it plans to buy. Currently, there is no U.S. manufacturer for these cranes and the only experienced manufacturer is in China.

The President and CEO of the American Association of Port Authorities is among those testifying at the hearings this week. He will make the case that tariff increases would negatively impact ports’ ability to make investments in infrastructure that are needed to handle significant growth in trade volumes in years to come. Modern transport infrastructure and a return to greater trade certainty will add up to smoother sailing for ports, consumers, and workers across the supply chain.

Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.

This article originally appeared on TradeVistas.org. Used with permission.

Archives, Global Trade Daily, News

Port of Baltimore Reports Record-Breaking March

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Following a very successful 2018, the state-owned public marine terminals at the Helen Delich Bentley Port of Baltimore reported record-setting numbers in March including most general cargo tons in a month (1,018,274), most 20-foot containers in a month (95,82), best March on record for cars and light trucks (59,052), and the highest amount roll on/roll off cargo tons since June 2012 (96,535). The cumulative tonnage amount beat records set in May 2017 as well as surpassing the latest container record from July 2018.

Adding to the success in 2018, the Port reported handling $59.7 billion in cargo value while both state-owned public and privately-owned marine terminals were responsible for 43 million tons of international cargo. Furthermore, state-owned public terminals reported the number of TEU containers exceeded the one million mark for the first time with 1,023,152 TEU containers in 2018.

The Port of Baltimore continues its leading position in the state’s economy as it’s responsible for approximately 15,330 direct jobs while providing a salary 9.5 percent higher than Maryland’s annual wage, according to The 2017 Economic Impact of the Port of Baltimore in Maryland report. Additionally, the report states The Port is responsible for roughly $3.3 billion in personal wages and salaries and $2.6 billion in business revenues.

“Month after month, the Port of Baltimore continues to demonstrate its importance to Maryland’s economy,” said Governor Larry Hogan. “These new records reflect the industry’s confidence in our Port and its workforce, further proving that Maryland is open for business.” 

Source: Port of Baltimore

Archives, Global Trade Daily, U.S. Ports

WE CAN’T CONTAIN OURSELVES

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As global trade continues to grow (albeit at a slower pace than the World Trade Organization initially projected for 2018), there are some ports that are already processing an impressive number of twenty-foot-equivalent units (TEUs). A TEU is a unit of measurement given to cargo capacity, based upon the volume of a 20-foot-long container. Height does not factor in when determining TEUs, though most containers range between four feet, three inches and 9 feet, six inches. When a port processes a TEU, one container counts as one TEU. When a port processes 9.3 million TEUs in a year like the Port of Los Angeles, that earns them the No. 1 spot on Global Trade’s Top 50 North American Container Ports.

But while some ports are already doing big business, a greater push for more efficient container ports is being applied across the continent. While many larger ports are already equipped to handle large vessels, many simply cannot accommodate the newer, larger Panamax-sized ships which are becoming increasingly more common thanks to new larger size limits allowed by the Panama Canal expansion. Super Panamax, Post Panamax and Neo Panamax vessels got their name from the Panama Canal Authority (ACP) in 1914, but newer requirements were enacted on June 26, 2016, when the Panama Canal opened its most recent set of locks.

Whether a vessel is Panamax, Neo Panamax, Super Panamax or Post Panamax is based upon the Panama Canal’s initial lock chamber dimensions of 1,050 feet long by 110 feet wide by 41.2 feet deep. These guidelines allow the ACP to determine whether a ship can pass through the canal, by factoring in the width and depth of the water in the available locks, as well as by the height of the Bridge of the Americas, which these ships must pass under on their way through the canal.

But Super, Post and Neo Panamax ships aren’t just larger, they’re more efficient, too, thanks to their ability to carry more cargo per trip. Unfortunately, all that efficiency is for naught if a port can’t accommodate that size vessel. The good news is that an increasing number of ports are expanding to accommodate these ships, investing millions of dollars to dredge deeper waterways and wider locks, expanding docks, adding cranes, extending existing rail and much more. Among those ports, many of the top 50 have gone above and beyond to expand and improve, earning them spots among the top 50 container ports by TEU in North America.

The Big Guys

The two largest ports by TEU are both located in the Golden State of California. With more than 9.3 million TEUs in 2017 alone, the Port of Los Angeles is the No. 1 port by volume in North America, with the Port of Long Beach not far behind with 7.5 million TEUs the same year.

So, what’s bringing so much cargo to the Left Coast? In addition to its capacity for larger Panamax ships and high volume shipments, the Port of LA’s proximity to Asian markets such as China, Japan, Hong Kong, South Korea, Vietnam and Taiwan that make it so popular. In fact, the 7,500-acre Port of LA alone processes 20 percent of the foreign cargo entering the United States.

Just nine miles south of the Port of LA, No. 2 ranked Port of Long Beach prides itself on being a popular cruise ship port as well as one of the “greenest” ports in the world. With its Green Port Policy initiative and more than 20 years of environmental protection programs, the Port of Long Beach strives to reduce its environmental footprint, encourage sustainability and protect the greater community from environmental impacts the port may make. As such, the port has invested $4 billion dollars toward efforts to become a zero-emissions port in the coming years.

Changing Infrastructure

One way North American ports are accommodating the new Super and Neo Panamax ships is by changing infrastructure and expanding ports to allow larger vessels to maneuver through locks with ease. The Port of Miami (No. 18) recently invested $1 billion into a major port overhaul and expansion, complete with channel widening (from 50 to 52 feet), $50 million dollars in rail improvements, and several super Panamax-capable cranes with 22-container outreach that are the biggest in the entire Southeast United States.

A $350 million-dollar expansion at the Port of Virginia (No. 7) is slated to be completed in 2019 and will include a brand new, 26-lane motor carrier gate, rail mounted gantry cranes (RMGs) to allow for higher container stacks, and various rail improvements. Not far up the coast, the Port of Baltimore is investing in several port-related projects around the city, including replacing the dilapidated Colgate Creek Bridge, which will expand access from the port to Interstate 95 for larger logistics trucks. A recent purchase of 70 acres of land will enable the port to store and process the increased amount of cargo coming off Super Panamax vessels. The expansion is expected to generate 1,650 new jobs for the city.

This past September, the Port of Georgia (No. 4) announced it would be investing $2.5 billion over the next 10 years to jump from its current capacity of 5.5 million, 20-foot TEUs to an impressive 8 million. It’s part of a whopping $14.1 billion in investments over the next five decades. For each dollar invested, the Port of Georgia expects a profit of $7.3 dollars to the U.S. economy.

Not too far north, the South Carolina Port Authority has committed $2.4 billion to deepen the Port of Charleston (No. 11) to 52 feet, making it the deepest port on the East Coast by the year 2021, and capable of an 8 million TEU capacity by 2028. Furthermore, the port plans to double its rail capacity by the year 2020. With a planned 180,000 additional feet of rail, the project is part of a strategy to cut 24 hours off transit time to the Midwest.

The Port of Philadelphia (No. 24), now known as PhilaPort, doesn’t just carry cargo but a rich history dating back to 1701 and the days of William Penn. But the 300+-year-old PhilaPort is anything but dated. Today, the port is undergoing improvements as part of a $300-million expansion authorized in 2016. The funds will be used to double PhilaPort’s container capacity, improve their PAMT terminal and increase the terminal’s capacity from 485,000 to 900,000.

Philaport is also undergoing a channel expansion which will bring the main channel from its current 40 feet to 45 feet to accommodate larger Super and Neo Panamax ships.

The Port Authority of New York and New Jersey (No. 3) is in the midst of a $4-billion expansion and improvement project that will make room for Super Panamax vessels, as well as their increased cargo load.

International Ports

The U.S. is not the only country with ports making big changes—and doing big business—in North America. Canada is also home to two notable ports. The Port of Vancouver (No. 6), which is the largest port in Canada and the sixth-largest in North America, boasts a decidedly global hub, while the Port of Montreal (No. 12) does much of its business with Europe.

The Port of Vancouver processes about 2.9 million TEUs each year. Located on Canada’s west coast in picturesque Vancouver, British Columbia, the Port of Vancouver contributes $24.2 billion CDN to Canada’s economy each year, supplying about 92,600 jobs in British Columbia and an additional 115,300 jobs across Canada.

On Canada’s east coast, the Port of Montreal processes more than 1.5 million TEUs annually and has recently entered a partnership with the Centre for Technological Entrepreneurship (CENTECH) and École de technologie supérieure (ÉTS) to create a “port logistics innovation unit.” The aim is to help address modern issues facing the port such as cybersecurity, supply-chain visibility and decarbonization and process improvement. The innovative program will be the first of its kind in North America.

The Port of Montreal also happens to be the closest port to Europe, and as such offers the shortest direct route of any North American port from Europe and the Mediterranean.

South of the U.S. border in the State of Colima, Mexico, is the Port of Manzanillo (No. 8), which processes more than 2.8 million TEUs per year. The largest port in Mexico, the Port of Manzanillo is the only container port from the country in the top ten. The port generates most of its business from iron ore, pectin, pickles (yes, pickles), cement and seafood products such as giant squid, swordfish, tuna and even shark.

Teaming Up

Much like the No. 3 ranked Port of New York and New Jersey, the Ports of Seattle and Tacoma have merged to create the Northwest Seaport Alliance, which has rounded out the top of the list at No. 5. In 2017, the Northwest Seaport Alliance processed more than 3.6 million TEUs, with a 15.6 percent increase in September 2018 over the prior year—the biggest increase in September volume since 2005. The port hopes to increase its annual TEUs from its current rate of 3.6 million annually to 6 million by the year 2025, generating 14,600 new jobs in the process.

In addition to being a major gateway for cargo from Asia and a major distribution point for cargo from Asia heading to the Eastern United States, the Northwest Seaport Alliance is also home to the Puget Sound, which has the strategic position of being an important gateway to Alaska. In fact, according to the Northwest Seaport Alliance, more than 80 percent of total trade volume between Alaska and the rest of the U.S. passes through the alliance’s North and South harbors.

New Ownership

This past September, the Port of Wilmington (No. 27) in Wilmington, Delaware, was sold to Gulftainer, a United Arab Emirates-based port operator on a 50-year concession. Gulftainer plans to invest $600 million into the improvement of the port. No stranger to North American ports, Gulftainer also currently operates Florida’s Port of Canaveral.

Of Gulftainer’s planned $600-million investment, $400 million would go toward a new, 1.2 million TEU container facility. Currently, the Port of Wilmington can process 600,000 TEUs. A new cargo terminal and training facility are also slated for development with the new concession.

 

Everything’s Bigger in Texas

The State of Texas is home to several major ports, including the Port Houston (No. 9) and Port Freeport (No. 39), both of which are undergoing expansions of their own.

Port Freeport is planning a major expansion which will deepen the port from its current 45 feet to 55 feet. It also will be lengthened to 2,200 linear feet to accommodate larger Post Panamax vessels. There are also plans at Port Freeport to expand operations from 125,000 TEUs to 800,000 TEUs each year with the addition of 90 acres of land that will be developed for container operations in the coming years.

Another current Port Freeport development is the Velasco Container Terminal, which upon completion will include another 130 acres of land where 1.5 million to 2 million TEUs will be processed annually. The Velasco Container Terminal will eventually house five Post-Panamax gantry cranes.

North of Port Freeport is inland Port Houston, which is undergoing some big changes of its own. Thanks to a $314 million budget approved in 2016 by the Port Commission, Port Houston is slated to undergo numerous repairs on existing properties. Current projects include rehabilitating Wharf Three to accommodate 100-gauge, ship-to-shore cranes, construction of 6,500 feet of railroad track and the demolition of several buildings and Lash Dock.

In addition to these improvements, Container Yard 7, which will span 50 acres of land, is being constructed at Port Houston. According to the facility’s website, the yard will boast reinforced and roller-compacted concrete pavement and will be fully equipped with water and sewer, stormwater collection, communication conduit and high-mast lighting.

Future plans for Port Houston include adding five security cameras, installing numerous drainage systems and conducting general repairs around the port.

Looking Ahead

These 50 North American container ports are leading the way in TEUs and making way for anticipated growth in the future. From updating security systems to survive in an increasingly “cyber” world, to fixing irrigation issues and repairing dilapidated structures, more and more ports are turning their focus to customer service, making their facilities more modern, efficient and comfortable.

Additionally, many ports are dredging deeper and wider channels to make room for larger Post Panamax, Super Panamax and Neo Panamax ships that are quickly becoming the norm. These ships don’t just enable shippers to ship more product at once, they also create a major savings in time and money for both the shipper and the ship. Plus, with fewer ships in the water, this larger class of Panama ships allows for a greener footprint, reducing emissions. Larger ships also mean more work unloading, and thus have the potential to generate more jobs, boosting local economies—and isn’t that what trade is all about?