The transatlantic has been hit with a double whammy – congestion in ports due to ULCS from Asia and the cascading of larger vessels. How are ports resolving these issues?
US east coast ports’ struggles to accommodate larger vessels from Asia are having a knock-on effect on all other US trades – and ACL chief executive Andrew Abbott describes it and political uncertainty as “our biggest headaches”.
“The ports are finding it problematic to handle these larger vessels due to antiquated infrastructure. Instead of two ships of 5,000 TEU coming in each week, there is now one big 14,000-TEU ship, and the ports cannot handle it,” he said.
Indeed, Mr Abbott said that his carrier was experiencing delays in most of its North American ports.
“The productivity is not where it needs to be – that is the issue.” He believes one potential solution is for the US to go to 24-hour gate systems, like the major ports in Europe and Asia, to spread out pick-up and delivery times over a longer period to reduce gate congestion.
US ports are also seeing a surge in volumes during the pre-Chinese New Year period due to uncertainty caused by the US-China trade tariff war, and this has compounded the problem.
The other issue on the transatlantic trade is the cascading of larger vessels. Mr Abbott explained that, “As the big alliances built mega vessels for the Asian trade, they shifted the older Asian tonnage onto trades like the transatlantic, so vessel capacity has gotten larger.”
He said that, in recent years, ships of 3,500-5,000 TEU had generally been deployed on the transatlantic – this has now jumped to vessels of 5-8,000 TEU.
“Right now, this situation has been ok, because westbound trade has been stable at decent volume levels, even though eastbound has been lousy for several years.” But he warned that “If westbound volumes should start tailing off due to an economic slowdown or trade war, there will be a serious overcapacity in the trade, as supply will be way higher than demand. If this happens, there will not be enough cargo around to fill these larger ships.” Mr Abbott commented that the two leading trade indicators – US housing stats and car sales – are showing signs of weakness.
He noted that the eastbound market from North America to Europe is “as weak as it has ever been, despite all-time low freight rates.” He added that “People are just not buying as much from North America, and there is a worse trade imbalance compared to a year ago.”
Another impact on the transatlantic trade will be the 2020 ultra-low sulphur directive. ACL is well-prepared for this as its fleet of five G4 conros are fitted with Alfa Laval scrubbers. At 3,800 TEU they have double the capacity of the older ships but share the same footprint. The company started phasing the new vessels in at the start of 2016. The new fleet is more efficient and greener then the company’s previous G3 fleet.
“It was a great decision to go with the scrubbers and they are working with excellent reliability so far,” Mr Abbott remarked. He said that lines without scrubbers need to be fully ultra-low sulphur compliant by 1 January 2020. To achieve compliance, those lines need to start filling up with ultra-low sulphur fuel mid-year to purge their fuel tanks of uncompliant fuel. “Everyone expects fuel costs to skyrocket once this occurs, and this will eventually get passed on to the consumer – there is no margin left to absorb anything at today’s freight rates.”
Big berths – big ships
Ports on the US east coast have launched various schemes to deal with larger ships, which can only be positive for the transatlantic trade. At the Georgia Foreign Trade Conference, Georgia Ports Authority (GPA) executive director Griff Lynch unveiled GPA's ‘Big Berth/Big Ship’ programme that will allow the Port of Savannah to simultaneously handle six 14,000-TEU vessels by 2024.
"No other single container terminal in North America has the ability to expand berth capacity at this rate," said Mr Lynch. Currently, Savannah's Garden City Terminal is equipped to handle two of these vessels and by April of this year that number will increase to three.
During his presentation titled "2019: The Triple Crown?" Mr Lynch told an audience of 350 logistics professionals that the Port of Savannah had the previous week achieved the busiest month ever in its history, moving 433,975 TEU, a 28% jump over the previous year.
"A strong global economy coupled with a growing awareness of Savannah's logistical advantages are driving sustained growth at our deepwater container terminal," GPA board chairman Jimmy Allgood said. "GPA's Big Berth/Big Ship programme will ensure Georgia stays ahead of demand and ahead of the competition."
Over the next five years, the authority plans to add another 21 neo-panamax ship-to-shore cranes, replacing 14 of its older models to bring the total fleet to 37. Dock upgrades are already under way to support the new, larger machines.
In addition to the ship-to-shore cranes, GPA is adding a dozen new rubber-tired gantry (RTG) cranes which will bring the number of Garden City Terminal's container handling cranes to 158. Ten RTGs will be commissioned in July, another two in September. Phase I of the Mason Mega Rail project will be complete in October 2019. Full completion a year later will double the Port of Savannah's rail lift capacity to 1M containers per year. In late 2021, the Savannah harbour expansion project is slated for completion, delivering the deeper water necessary to accommodate the larger vessels now calling on the US east coast.
"These advancements are necessary to handle tremendous customer demand at our terminals," Mr Lynch said.
Other ports on the US east coast are also focused on boosting productivity to cope with larger vessels. Ports America Chesapeake general manager Bayard Hogans said “The overall increase in size of vessels on all trade lanes has increased the amount of vessel moves for each call. This creates a domino-effect stress level on all aspects of the terminal. When the larger ships start to stack up based on schedule degradation, the impacts are amplified.”
Explaining how the port was dealing with such challenges he said “There are several aspects of the terminal that are being developed and upgraded. Additional RTG cranes and other container-handling equipment have been, and will continue to be, replaced and upgraded. Improvements to two gate complexes are underway and plans are being finalised for additional waterside capabilities.”
Speaking about boosting efficiency, Mr Hogans said “Efficiencies compared to volume growth is being managed in several ways. Ancillary services such as container maintenance and repair as well as chassis are being moved to off-dock locations. The introduction of additional container handling equipment is directly connected to maintaining aggressive vessel production and truck turn times.”
He summed up “Our focus is based on a two-pronged approach. The first focal point is on bringing value to the ocean carriers with very productive vessel operations that allow the vessels to turn quickly. The second is on the motor carriers and BCO community. When trucks have low turn times in our terminal, the BCOs get their cargo faster.”
Ports America’s Port Newark Container Terminal has embarked on a US$500M+ expansion plan that will upgrade the terminal from a 0.85M-lift per year container terminal without ultra large container ships or barge capabilities to a 1.4M-lift per year terminal with ULCS, barges and significantly improved road and rail capabilities.
Elsewhere, Port Everglades has seen “stable, consistent” growth in its operations, its chief executive Steve Cernak told Container Shipping & Trade. In 2017, its container volume hit 1.76M TEU.
The port is in the midst of a capital programme to boost its infrastructure. The port serves the north–south markets (predominantly the Mediterranean, north Europe and central and south America). But once the programme is completed, Mr Cernak is hopeful the port will win an east–west service, explaining it would benefit due to its “connectivity to north–south tradelanes and the transhipment opportunities to other services”.
It is also ordering custom-built cranes to handle fully-laden vessels. Nine new super-post-Panamax cranes will be added, with an option for three more. The project is expected to be completed and in operation by 2021. “The cranes are critical.” Mr Cernak commented. “We need their reach.”
Port Everglades is also moving forward with a public-private partnership to build a logistics centre on port property that includes cold storage. The project is called the Port Everglades International Logistics Center, and will include design, construction, financing, operation and maintenance.
Port Everglades International Logistics Center will contain a warehouse, refrigerated warehouse, office space and cross-docking facilities, which will enhance the services available to shippers using Port Everglades. The entire logistics centre will be designated as a foreign-trade zone. Construction will be completed late 2020/early 2021.
Over in Canada, Port of Montreal is focused on boosting its transatlantic trade and deriving benefits from CETA (The Comprehensive Economic and Trade Agreement is a free-trade agreement between Canada, the European Union and its member states. It has been provisionally applied, so the treaty has eliminated 98% of the tariffs between Canada and the EU).
Montreal Port Authority public affairs vice president Sophie Roux said “With more than 55% of our volumes tied to northern Europe, CETA will continue to be a major growth driver in the coming years.”
She said that CETA's positive impact saw a 3.7% growth in trade between the Port of Montreal and the European Union between January to November 2017 and January to November 2018.
Ms Roux added “We have always been a leader for trade with Europe, as we are the gateway for Europe to the industrial heartland of North America. We are actively working at promoting the opportunities tied with the new CETA agreement to consolidate our presence in European markets.”
She said that with the announcement of new Mediterranean container services in 2017 and 2018 by CMA CGM and Maersk and the addition of Hamburg Sud shipping line in 2018, “our market diversification is expected to continue and the outlook is for sustained growth over the coming years”.