Bigger Ships to Bring Changes To Ports’ Container Handling
By Daniel P. Bearth, Senior Features Writer
This story appears in the Nov. 12 print edition of Transport Topics. Click here to subscribe today.
Sometime in the near future, a new generation of supersized containerships — up to 50% larger than current vessels — will make its first appearance on the East Coast of the United States.
The likely port of call is Norfolk, Va., home of the U.S. Navy’s nuclear-powered aircraft carrier fleet. There, Danish shipping firm Maersk Inc. recently opened a $450 million deep-water terminal in adjacent Portsmouth, Va., that is specifically designed to ac-commodate bigger ships.
Although Maersk officials said there are no current plans to redeploy the new “Series PS” containerships to Norfolk, “given their gainful employment in the Europe-Far East trade,” Virginia Port Authority spokesman Joe Harris said it is just a matter of time be-fore the new ships make their appearance.
“Once one of the Maersk vessels comes and people see how we can handle it, it’s going to be very good for us,” Harris said.
In fact, economic ramifications of the new supersized cargo ships extend well beyond the ports, according to intermodal transportation experts interviewed by Transport Top-ics. The new ships already are beginning to influence distribution patterns of shippers. They also will change the mix of freight carried by trucking and railroads and stimulate investment in port infrastructure, industry analysts said.
“We’re seeing growth of international freight coming into East Coast ports and as the infrastructure improves it’s going to help drive this trend,” said Richard Coleman, chair-man of ContainerPort Group, a company that provides intermodal drayage, container storage and terminal management services in the Northeast and Midwest. “We see this as a good thing.”
Other industry observers said the arrival of bigger ships could create problems for drayage carriers by putting too many containers onto congested highways.
“What big ships are doing is putting more capacity where we don’t need it,” said Tom Finkbiner, chairman of the Intermodal Transportation Institute in Denver. Finkbiner also is a consultant to tank truck carrier Quality Distribution Inc. and a former rail executive at Norfolk Southern Corp.
“A lot of distribution centers are being built in the Norfolk area in anticipation [of the new containerships]. That means more truck traffic,” he said.
“It’s a peaking problem,” said John Anderson, chairman of RoadLink USA, a company that provides drayage service at nearly all ports throughout the United States. “It’s like church on Easter or Christmas. It’s a bottleneck issue.”
Since larger ships won’t necessarily bring more volume of containers to the United States, Anderson said the challenge will be to move more containers at less-frequent intervals from fewer terminals.
“We may have 80 drivers serving two ships a day and keeping busy. What happens if those 10 ships a week become two ships? Then we’ll need all those drivers for just two days.”
One way to handle the situation is for port operators to provide more dock-side con-tainer storage, which, Anderson said, would allow containers to be parsed out to dray-age carriers or put on rail cars on a more even schedule.
Better access and longer operating hours could also help to stagger the flow of containers leaving the port and minimize delays for truck drivers, Anderson said.
“Drivers need to earn a living and get utilization out of their equipment,” he said.
Over time, Anderson said that he expects port truckers and rail carriers to adjust to the changes in container traffic. He said RoadLink does not plan to shift a large number of its truck drivers to Norfolk, or other ports, specifically to handle the bigger ships.
“We will see more development of close-in distribution centers and transloading activity, and not just at Norfolk,” Anderson said. “It’s an evolving part of the business, especially for retail shippers.”
Bert Evans, president of Evans Delivery Co., a firm based in Pennsylvania that provides intermodal drayage in 63 locations, mostly on the East Coast, said ports are getting better at coordinating container moves.
“We see more terminals extending hours of operation,” he said. “Chassis pools are a good thing. And we’re using technology to schedule pickups and to track container movement.”
Evans said he expects that trucks will continue to haul the bulk of intermodal freight from East Coast ports because of the proximity of major population centers.
Maersk officials said the move to open a deep-water port on the East Coast was driven, in part, by rising rail rates for containerized freight moving from the West Coast to inland destinations.
In May, Maersk stopped providing direct service to 18 inland distribution points in the United States. It said it could not fully recover the cost of providing point-to-point ser-vice, because of the rising cost of rail service and inadequate terminal infrastructure to support growth.
“The cost of shipping containers by rail from Los Angeles to Chicago used to be $650 per container,” said Finkbiner. “Now it’s double that.”
By focusing on ocean service and hauling more freight on fewer ships, Maersk and other ocean carriers see an opportunity to increase profits on high-volume traffic lanes, according to industry observers.
The ramifications of using larger containerships to haul containers from Asia to the East Coast of the United States extend well beyond the ports.
“What we’ll see, I believe, is a new mini-land bridge to service Midwest assembly plants with parts sourced in Asia,” said Frank Hazeltine, vice president of global logistics for Penske Logistics in Reading, Pa.
Auto manufacturing plants in South Carolina and Alabama, in fact, already receive parts that are brought in through ports in Savannah, Ga., and Mobile, Ala., he said.
Both of those ports are beefing up terminal facilities to handle more containerized freight.
Byron Miller, director of public relations for the South Carolina Ports Authority, said officials at the Port of Charleston already see a migration from older, smaller vessels to larger containerships at East Coast ports because of concern by shippers about capac-ity and possible labor disruption on the West Coast.
Freight is also moving farther inland.
“The Port of Charleston used to supply a local market or maybe five or six surrounding states” Miller said. “Now with bigger ships, the port is able to reach out further.”
Trucks are routinely carrying freight to destinations as far as 500 miles to 700 miles from the port, Miller said.
A similar effect could be felt on the West Coast as larger containerships are put into service at the ports of Long Beach and Los Angeles in Southern California, San Fran-cisco and Oakland, and Seattle and Tacoma in the Pacific Northwest.
In addition, new deepwater ports in Canada and Mexico are coming on line.
The Fairview Container Terminal at Prince Rupert in British Columbia was expected to receive its first vessel call Oct. 31. The facility is set up to provide rail service exclusively from the port to Chicago.
Along Mexico’s Pacific coast, the Lazaro Cardenas Terminal is likewise expected to provide direct rails for containers from Asia to the Midwest and even the East Coast.
Chris Gutierrez, president of the Kansas City SmartPort, a non-profit group that is promoting development of distribution businesses in the area, said that he expects to see an increasing volume of traffic coming from the east and the west as railroads link their lines to high-volume container ports on both coasts.
BNSF Corp. and Kansas City Southern are each developing new logistics parks in the Kansas City area, he said. And some of the firms that have announced plans to locate distribution facilities there include Kimberly-Clark, Pacific Sunwear and online distributor Musician’s Friend.
“And for the first time ever,” Gutierrez said, “we’re seeing national developers do spec development. That’s never been done before.”
In Columbus, Ohio, local officials are likewise preparing for an influx of container traffic with the opening of a 300-acre train-truck intermodal terminal at the Columbus airport.
The Rickenbacker Intermodal Terminal will be the end point of a rail line that Norfolk Southern Corp. is upgrading to provide double-stacked container service directly from the port at Norfolk to Columbus.
The so-called Heartland Corridor will shave 233 miles from an existing route and reduce transit time by one to one-and-a-half days, railroad officials said.
Integrated distribution centers that combine air, rail and truck service are in the van-guard of a fundamental change in transportation management, said Gil Carmichael, senior chairman of the Intermodal Transportation Institute.
“Transportation is not vertical anymore,” he said. “It’s horizontal.”
Carmichael said intermodalism eliminates the need for traditional logistics management, which he said is based on moving freight through a “dysfunctional supply chain.”
With higher capacity containerships and the use of double-stacked rail service, the cost of freight “is not going to go up,” he said.
“It’s the reason you can still buy cargo pants at Dollar General for $10 a pair. You can put 100,000 pairs in a single container.”
The shift is leading to more investment in port infrastructure, experts said.
Rick Jordan, a transportation procurement specialist with ICG Commerce, said many ports, such as the Port of New York and New Jersey, are dredging channels and ex-panding lift capabilities on the dock to be able to handle larger containerships.
“What concerns me is the amount of money invested in roads and bridges,” Jordan said. “State governments could do more and rail investment is lagging. It’s price that we need to pay. We can’t wait for another bridge to collapse.”
More flexible labor rules also could improve productivity at the ports, Jordan said.
Negotiations between West Coast port operators and the International Longshore and Warehouse Union are expected to get under way early in 2008. The contract expired in May. A separate contract between East Coast and Gulf Coast port operators and the ILWU expires in 2010.
