Source: Journal of Commerce
February 15th 2016
The eyes of Texas and other U.S. Gulf ports are fixed on the opening of the new Panama Canal locks later this spring. Port executives expect the long-delayed opening to post-Panamax vessel traffic will be a seminal event in the growth of their volumes, but later rather than sooner.
U.S. Gulf ports are hoping the expanded locks will enable them to gain direct calls by carriers from Asia, but this probably won’t happen until next year. To that end, they’ve been courting Asian carriers for several years.
“We’re going to see some growth from the opening of new locks this year,” said Roger Guenther, executive director of the Port of Houston Authority. “We’ve got two weekly services coming in now, and they’re full, so we think that by the end of this year we’re going to have more volume coming in just because of larger ships. There’s a lot of cargo that wants to come to Houston and has not been able to because the ships are full.”
As carriers deploy larger ships on their all-water services to the Gulf, Guenther thinks they will call more U.S. Gulf ports to drop off imports and pick up exports rather than go up the East Coast. “Ports that we don’t compete with, like Mobile and Tampa, will have the opportunity to gain more calls,” he said.
“We are talking to quite a few carriers in different trade routes that are looking at Mobile,” said Jimmy Lyons, director and CEO of the Alabama State Ports Authority. “We think there will begin to be increased distribution activity in Mobile, which will attract additional services into the port.”
The Gulf container ports of Houston, Mobile, New Orleans and Tampa don’t expect the new locks to bring much additional cargo to their ports this year, but expect steady growth over the longer term after container shipping lines adjust their schedules and services to include post-Panamax ships that can carry up to 13,000 20-foot-equivalent units in their all-water services. To prepare for those ships, the ports have been deepening their harbors, buying bigger cranes, building new rail ramps and expanding terminals.
“We won’t see a huge bonanza at the outset,” said Gary LaGrange, president and CEO of the Port of New Orleans. “The real impact will come in 2017.”
As carriers add larger post-Panamax container ships to their all-water services through the new locks, one of the questions will be whether they will reduce the number of Panamax services. “Right now, you don’t have the trade to fill a 6,000-TEU ship, much less an 8,000-TEU ship unless you condense the schedules and have fewer sailings,” said Dan Smith, a partner in Philadelphia-based consulting firm Tioga Group. “The other way is to try to serve more ports with existing sailings and try to build up the cargo, but that would delay the transit times.”
In anticipation of the canal expansion, the Port of New Orleans commissioned a number of consulting studies from Parson Brinckerhoff, A.T. Kearney and others that forecast U.S. Gulf ports would attract an increased share of the cargo moving through the canal.
The studies forecast 50 percent of the traffic moving through the expanded canal would be destined for East Coast ports, but that Gulf ports would gain 12 to 15 percent, equal to an additional 5 million TEUs of cargo over the 12 years through 2028. The increased market share would be divvied up among the four major ports of Houston, New Orleans, Mobile and Tampa. The Gulf ports’ share would increase 7 percent in 2017, and then taper to growth of 3 to 4 percent a year through 2028.
Container throughput in New Orleans climbed 7.4 percent year-over-year in 2015 to a record 537,000 TEUs. The growth was driven by a surge in agricultural exports and exports of resin and other plastics produced with low-priced natural gas in the region’s petrochemical plants.
Also boosting imports was the return of Chiquita Brands, which relocated to New Orleans from Gulfport, Mississippi. This will bring another 50,000 TEUs annually to New Orleans terminals, both from Chiquita’s banana imports from Guatemala and from exports of materials to Central America to package fresh fruit for shipment to New Orleans and other ports.
New Orleans’ imports sagged in the fourth quarter because of the slowing economy and overstocked inventories. LaGrange expects the slowdown will continue through the first half of 2016 until retailers work off excess stocks. Imports are expected to resume growth in the second half following the opening of the new Panama Canal locks and after the port’s new $24 million rail ramp comes into full operation.
The port’s new intermodal container rail facility, adjacent to the existing 12-acre railyard at the Napoleon Avenue Container Terminal, will boost the port’s capacity by 200,000 TEUs. It will be operated by Canadian National Railway and will connect container cargo with U.S. and Canadian markets through CN’s extensive North American rail network through Chicago.
“It’s not at full throttle now, but when it is, it will bring us into a better balance between trucks, rail and barge,” LaGrange said. About 55 percent of the port’s container throughput moves by truck in and out of the port now, but trucking’s share is expected to decline to 40 percent after the rail ramp is fully operational. LaGrange expects the new ramp to draw more container exports and imports because it will lower shippers’ costs of moving containers in and out of the port.
The port hopes to launch a new container-on-barge service to Baton Rouge this year and eventually to Memphis, which will further reduce trucking’s share of container volumes and bring it into better balance. Start of the barge service, however, may have to await the return of more container growth in the port.
Container throughput at Mobile has been flat year-over-year during the last two years, at about 225,000 TEUs. The formation of the 2M Alliance between Maersk Line and Mediterranean Shipping cut the number of weekly calls from two to one joint service. “We had both Maersk and MSC coming into Mobile with their North European service, but with those two going together, that was reduced to one shipment a week, so we were a bit of a loser,” Lyons said.
Although other Gulf ports gained container volumes last winter because of West Coast labor problems and resulting port congestion, Mobile saw no increase because its only Asian service operated by CMA CGM was fully booked.
“That put us in a flat line situation, so we won’t see any significant growth until we see more carrier calls,” Lyons said. “I’m not sure how quickly the larger ships can be rotated into the trans-Pacific services, so I don’t see a whole lot in 2016, but we expect to see some growth beyond 2016.”
He expects the port’s marketing efforts to produce one new service by an Asian carrier next year and perhaps a second by an alliance after it sees how the first new service fares.
Lyons said the port had experienced double-digit growth year-over-year in the years after APM Terminals opened its new Mobile container terminal in 2008, which then leveled off to slower steady growth. “I think we’ll get back into that phase once the canal is opened and has matured a little bit,” he said.
In anticipation of one or more new Asian services using the new Panama locks, APM Terminals has ordered two cranes that can handle ships with containers up to 21 containers across. The new cranes will join the two current cranes, which can handle up to 18 containers across, such as the 8,000-TEU ships in the 2M Alliance service.
The new cranes will be able to handle ships up to 13,000 to 14,000 TEUs. “We eventually expect to see 10,000 TEUs or better coming into Mobile and we are prepared to handle them,” Lyons said. The port widened its turning basin a few years ago to handle ships up to 1,300 feet in length.
The APM terminal is expanding its annual capacity under Phase 2 to 500,000 to 600,000 TEUs from 350,000 TEUs now. When demand builds, it plans to launch Phase 3, which will bring capacity up to 750,000 TEUs.
Mobile will open a new intermodal container transfer facility in June near the APM terminal. APMT, which will operate the ICTF, is importing used rubber-tired gantry cranes from its overseas terminals for use at the rail ramp. The port plans to build a connector bridge that will make it an on-dock terminal when demand warrants.
Tampa, which is still a small player in the Gulf’s container trade, has big ambitions to capitalize on the demographic growth of the Central Florida region to capture more retail imports. “The Panama Canal expansion will enable us to attract a new line of service that will provide our market with a more direct and cost-efficient service from Asia, said Raul Alfonso, executive vice president and chief commercial officer of the Tampa Port Authority. “I don’t expect to see much in 2016 after the new locks open in May or June, but I think 2017 could be a very telling year for us.”
Tampa is currently served by Zim Integrated Shipping Services through transshipment to feeder services in Kingston, Jamaica, and by MSC through transshipment at Caucedo in the Dominican Republic.
In 2015, the volume of containers flowing through Tampa jumped 20 percent, to 57,000 TEUs. “Those are very small volumes, but we are preparing ourselves for the growth of our backyard. The I-4 corridor is the fastest-growing market in the state and one of the fastest-growing markets in the U.S.,” Alfonso said.
Central Florida has a population of 9 million, and gets 60 million tourist visits each year. Most of the major retail importers have distribution centers in the region, and Amazon and Wal-Mart are opening 2 million-square-foot DCs within a 45-minute drive of the port to meet e-commerce demand.
“The growth of Central Florida is becoming too important to serve as a secondary market, so we expect growth of DCs here will attract new direct container services with cargo that usually goes to other ports and has to be trucked into our market,” Alfonso said. “That will produce savings of up to $600 per truckload.”
To accommodate the growth it expects to come through the new canal locks, the port has acquired two post-Panamax cranes that will be delivered in March and installed at Ports America’s Hookers Point container terminal in May. The new cranes will be able to handle ships with 22 containers across.
The port is building an $11 million on-dock rail ramp at the Hookers Point Container Terminal that will be operated by CSX. It also is building a new cold storage facility at Hookers Point that will handle refrigerated imports of fresh fruit from Central America.
NYK Line provides roll-on, roll-off service to Tampa, handling exports of used cars and heavy machinery. The port signed a contract with Amports last year to process new car imports from Mexico when it gets a proposed Maersk short-sea shipping service from Veracruz and Altamira in the next year or so.
The Tampa harbor has an operational depth of 43 feet. “We are suited to serve the 8,600- to 9,000-TEU ships that will be coming through the canal,” Alfonso said. “We’re not targeting the 10,000- to 13,000-TEU ships.”