There is a maritime financial tsunami building. In different ways, it will affect container lines, ports, and shippers. This piece is about the ports.
Ports are the vital link between the lines and their customers. They face a decision with the mega ships on whether to invest in upgrading their facilities to be able to handle these ultra large vessels. Where is the greater financial risk? To invest in the larger ships, or not to invest; that is the question.
In addition, ports in the US face issues. What is the long-term effect of the West Coast ports slowdown from the ILWU contract negotiation? East Coast ports are looking at having to handle bigger ships with the opening of the expanded Panama Canal.
Here are Gary’s comments:
Look at the recent report by the JOC on port productivity and see who is in the top 10 - six Chinese ports who all handle the big and really big ships; Khor Fakkan, Jebel Ali, Yokohama and Rotterdam. How did they do it? Know about it? Plan for it? Make it happen? They saw, they talked they acted. Most of Europe did not and virtually none in the US did. What Norfolk/APMT did was in their plans already; someone told them that big ships were coming.
The issues ports have are not big ships, but larger and larger volumes that were actually going to be worse but the financial slippage in 2007-2010 cut the volumes by 30%. Now we've caught up, few terminals have invested and they can't handle the volumes. It's worse here because we have so many ports and no national plan on how to prioritize and spend the money smartly, in addition to not spending what is collected in Harbor Maintenance Taxes (about 1/2 is spent on port maintenance, rest is in general fund for Congress to use as they please). And many of the City owned ports are taking in billions and little of it is used for the ports, they use it for their general fund.
To capsulate---1) Volumes have grown since 2000 and the ports haven't spent the dollars required to handle efficiently.
2) In the US there is no national port plan, anyone and everyone decides they want a container port they go build one and then try to get federal $$ and with no national plan and priorities, it gets spread too far and thin in addition to monies collected are diverted to non-related matter that only politicians and lobbyists can dream of
3) There are enough examples (try the top 10 productive ports) who have done it, what stops the rest of the world?
4) The labor issue on the US West Coast I discussed. Those are the port issues, not big ships.
Here are Tom’s comments:
The ports’ decision on investing is not a simple one. They need additional space to handle the loaded and unloaded containers from each large ship, more space for the storing chasses and containers, and more roads to handle the volume.
Also, there is uncertainty with container lines. Are the mega ships the low cost saviors they are reported to be? What if they are not, what happens if they invest? How long can the lines continue to lose money as they have been? What happens then if the line that goes bankrupt is your customer? How do the alliances play into all this with the different ports being used?
Ports need financial incentive to invest. For ports that are owned by various government agencies, should they risk taxpayers’ monies with the expansion? What and where is the return on investment? Where will they get additional volume besides what is on each ship? Will the lines focus on using fewer ports to give them greater volumes?
Adding to the story is the release by the Organization for Economic Cooperation and Development of its report—“The Impact of Mega-Ships”. It has doubts on the savings from these ships.
Container lines had these mega ships built to benefit their businesses. So it is not unreasonable to suggest that container lines should step up and invest in the port expansions. The point of this recommendation is that global trade and global maritime transportation needs to change. Statesmanship is needed. All stakeholders should step up and collaborate on the future. That cooperation should include risk sharing.