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US ports: productivity quest

Wed 06 Sep 2017 by Rebecca Moore

US ports: productivity quest
Port of LA executive director Gene Seroka and CEO of GE Transportation Jamie Miller announcing mega-ship information portal partnership

As bigger ships enter US trade lanes, North American ports are ramping up their productivity levels. This quest is a priority for both east and west coast ports 

North America’s box port scene is dominated by trends emerging from the wider locks on the Panama Canal and much larger ships cascading onto the transpacific trades.

Crucial for Florida’s Port Everglades is the green light it has been given to deepen its channel depth after a bill was passed in Washington DC in December for funding, allowing the project to go ahead.

Port Everglades chief executive officer Steve Cernak told Container Shipping & Trade that the port was currently gathering the funds for this project and that environmental assessments were being carried out for the deepening. The work is expected to be contracted out in 2018 and take three years to complete.

Mr Cernak emphasised that the channel deepening was crucial because of the larger ships moving into US trade lanes. He said that ships of 10-12,000 TEU were the “sweet spot” for the port but, while it can currently accept these ships, they are not fully loaded. Once the channel has been dredged from a depth of 12.8 m to 15.2 m, the port will be able to handle these vessels with ease, he said.

The Florida port has also had its south port expansion project approved, which will lead to five extra container ship berths being constructed, although no time schedule has yet been set for this work.

It is also in the process of ordering custom-built cranes to handle fully-laden vessels. Nine new cranes will be added, with an option for three more.

Panama Canal boost for east coast

These channel and port expansion projects are particularly important because of the Panama Canal’s capacity expansion that took place in June last year and will boost the number of services calling at Everglades.

North-south trade currently contributes 87.1% of Everglades’ container business but Mr Cernak expects that to change once it wins business via the widened Panama Canal. He foresees an opportunity to win at least one east-west service, which would lead to a 10% jump in cargo volumes being handled at Everglades.

The port is already reaping the rewards of the expanded Panama Canal. Its volumes (as of August) are up by 5% compared to last year and the port is on target to hit 1.1 million TEU this year.

Port of Savannah has also felt big impact from the expanded Panama Canal, both in terms of bigger vessels and strong market opportunities. The port told Container Shipping & Trade that since the reopening of the Panama Canal in June last year, the average size of the vessels calling had increased by nearly 20%. The largest vessel to call Savannah a year ago was a 10,000 TEU vessel, but in August the port handled its first 14,000 TEU vessel.

In a statement for this report, the port referred to the benefits the canal now brings: “With the opening of the expanded Panama Canal, shipping lines are taking advantage of the improved route, and the Port of Savannah is moving more cargo than ever before,” it said.

It has also helped to expand the port’s hinterland: “Other opportunities arise from the reduced container slot costs on the larger vessels now transiting the Panama Canal,” the port’s statement said. “These lower transportation costs add westward territory to the area best served by the Port of Savannah,” which now encompasses the area from Houston to Memphis and Chicago.

The largest terminal operator in the US, Ports America is also boosting its facilities on the east coast. It has struck an agreement with Sydney Harbour in Nova Scotia to develop and operate a marine container facility in the Canadian port. It is hoped that construction will begin by the end of 2018.

Ports America chief commercial officer Tom Perdue told Container Shipping & Trade “Canada is a growing market for terminal operations and it is natural for the North American industry leader to participate in that growth.”

On the US East Coast, Ports America is investing heavily in Port Newark Container Terminal (PNCT) in New Jersey. Plans involve a US$500M investment before 2030 for expansion that is expected to double the number of containers moving through that terminal and create significant growth within the region.

Mr Perdue pointed out that PNCT has already doubled its on-dock rail capacity compared to what it had previously and purchased three super-post-Panamax ship-to-shore cranes that cement “PNCT’s readiness for the ultra-large container vessels”. Further expansion plans include additional yard space, improved gate facilities, deep berths and more super-post-Panamax ship-to-shore cranes.

This is important, he said, because “with the deployment and cascading of larger ships into North America, it is expected that there may be demand for reduced ports of call in the US, consolidated volumes at strategic ports and terminals, with greater peak throughputs.”

Therefore, he said, “we anticipate that increased port handling and productivity will be essential to ensure seamless cargo movement through the supply chain. Enhancements on landside intermodal connectivity points, [such as] terminals, barges, rail and roads, will be crucial.” Also, automation, technology and further infrastructure improvements and investments will be required, through both public and private partnerships.

Over on the west coast

Mega alliances have also had an impact on US West Coast ports. “Carrier alliances are concentrating their vessel calls at fewer container terminals as they seek leverage and scale of operations,” Mr Perdue said. As a result, some ports find themselves with excess terminal capacity and are looking closely at combining smaller facilities into larger container terminals, or at repurposing container terminals for other uses, he explained.

So Ports America sees its future on the West Coast in two gateways: Los Angeles-Long Beach in the south and Seattle-Tacoma-Vancouver, British Columbia, in the Pacific Northwest.

Carrier changes have also affected US West Coast’s Port of Long Beach. At the start of 2017, MSC subsidiary Terminal Investment Ltd (TIL) bought out bankrupt Hanjin’s stake in the long-term lease to operate the port’s Pier T terminal. As soon as it took over Hanjin’s share, it sold 20% to 2M partner HMM.

Long Beach chief commercial officer Noel Hacegaba told Container Shipping & Trade: “Because of this change the terminal is predominantly 2M, and we expect this to benefit the terminal.” TIL is now in the process of raising two cranes that can accommodate 20,000 TEU ships. These will be ready by 2020.

Long Beach expects its container cargo volumes for 2017 to jump by 7% compared with last year. Reasons for this include the new Pier T terminal ownership, the launch of new South Korean carrier SM Line – which started calling at Long Beach in April – and the new alliance structure.

Over at Port of Los Angeles, its focus is also on boosting productivity to deal efficiently with the larger ships coming its way. It has partnered with GE Transportation to launch a port information portal that will allow all those involved in the supply chain to have better planning capabilities to service ultra large container ships at the port more effectively.

It will allow ships’ cargo information to be available earlier and the two-month pilot project (which took place between December 2016 and January 2017) included customs' information related to the cargo in the ships.

Port of Los Angeles director of planning and strategy Michael Keenan told Container Shipping & TradeBy getting customs data two weeks in advance rather than two days means that we can better plan the schedule of ships and it will make a big difference for railroads.” This is because, by having an extended window of time to track inbound cargo, cargo and vessel movement in the port can be optimised and the predictability and reliability of the supply chain improved.

The pilot took place at Pier 400 terminal, but once the system is implemented, it will be broadened gradually across all terminals.

Another productivity drive by the port involves a large piece of empty land in the port complex. A pilot project is being carried out on a smaller piece of land to see if this larger area can be used as storage for trucks and their cargo. “Taking trucks off the terminal frees up space and boosts efficiency and means beneficiary cargo owners can pick up their cargo from this land away from the terminal,” said Mr Keenan.

The future certainly looks bright for the port: it had a “record” year in 2016, Mr Keenan said, handling 8.8M TEU, its greatest box volumes seen since 2006. The forecast is for slow but steady annual growth of 2-3%.

Snapshot bio: Mike Keenan (Port of Los Angeles)

Mike Keenan is the director of planning and strategy at Port of Los Angeles. He joined the port in 2005 as a harbour planning and economic analyst with the port’s planning and research division, where he worked on data analysis and research projects. Before joining the port, he worked as a consultant with the Los Angeles consulting firm Econ One Research for 11 years. He has a bachelor’s degree in economics from Stanford University.