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USEC Ports in Deep Trouble -Drewry

Great changes lie ahead in the trade lane between Europe and the US East Coast/US Gulf, but to what extent will its ports be up to the job, and what are the implications for shippers?

By MarEx 2014-03-12 12:23:00

Recent clarification of the port rotations of G6’s proposed services between Northern Europe and US East Coast/US Gulf from 2Q 14 underlines the great changes that are in the making in the Transatlantic. If all goes according to plan, Hapag-Lloyd, OOCL, NYK, HMM, APL and MOL will offer just three jointly run schedules from 2Q 14. And Maersk, MSC and CMA CGM will provide another three within the P3 alliance, in addition to two between the Mediterranean and USEC/USGC, assuming regulatory approval.

In theory, this means that much larger ships over 8,000 teu could replace the vessels between 3,500 teu and 6,500 teu currently deployed, subject to USEC/USGC ports being able to handle them satisfactorily. It would be a natural progression, as today’s ships are already a third larger on average compared to 2006 (see Figure 1). Ocean carriers also desperately need greater economies of scale; few can be making any money, as evidenced by the withdrawal of Zim Line last year, and Hanjin in May this year.

Figure 1
Average Headhaul Vessel Size: North Europe-USEC Trade Route, 2006-13 (teu)

Source: Drewry Maritime Research

Source: Drewry Maritime Research

The problem is that many USEC/USGC ports have been gearing themselves up for the arrival of deep draught ships over 8,000 teu from the middle of 2015, when the new Panama locks were originally due to open, not 2Q 14.

Tables 1 and 2 show how the G6 and P3 alliances plan to start their respective Transatlantic schedules in 2Q 14, although, interestingly, neither have yet confirmed the size of vessels involved.  These include G6 calls in New York/New Jersey, Norfolk, Charleston, Savannah, Port Everglades, New Orleans and Houston, and P3 calls in New York/New Jersey, Boston, Baltimore, Norfolk, Charleston, Savannah, Miami, New Orleans, Mobile and Houston. The P3’s Mediterranean services will also call at Port Everglades.

Table 1
Port Calls of Proposed G6 Transatlantic Services

* Also Veracruz and Altamira in Mexico Note: Two further services linking Asia-USEC-North Europe via Panama are also planned Source: Hapag-Lloyd

* Also Veracruz and Altamira in Mexico
Note: Two further services linking Asia-USEC-North Europe via Panama are also planned
Source: Hapag-Lloyd

Table 2
Port Calls of Proposed P3 Transatlantic Services

* Also calls Freeport, Altamira and Veracruz ** Also calls Freeport Source: Maersk Line

* Also calls Freeport, Altamira and Veracruz
** Also calls Freeport
Source: Maersk Line

The main USEC ports already handle ships of over 9,000 teu on Asian all-water services via Suez. However, inbound cargo tends to consist of relatively low weight consumer goods, and outbound vessels have significant empties aboard, so maximum draught is never reached. On the Transatlantic route, cargoes tend to consist of heavier industrial goods, plus the trade flow is relatively balanced, meaning inbound and outbound vessels can be well laden. Fully laden with heavy cargo, a typical 8,000 teu vessel has a draught of around 14.3 meters (47ft) which, with underkeel clearance, would require channel depth of at least 49ft (14.9m).  This brings into focus the status of each USEC port’s dredging program.

As Table 3 shows, Norfolk and Baltimore are sitting pretty with 50ft channel depths already. The Port of New York/New Jersey has also nearly completed its 50ft dredging program, which incidentally was authorized by the port authority Board way back in 2001 – an indication of the extraordinary long lead in time for such projects. Interestingly though, the original cost estimate for the dredging has reduced from $2.3 billion to a “mere” $1.6 billion. To this has to be added the $1.3 billion cost of raising the Bayonne Bridge (although this is not currently a restriction on 8-9,000 teu vessels accessing the Port Elizabeth terminals but does need to be raised for 13,000 teu New Panamax vessels).

The remaining main USEC ports would face challenges if ships of 8,000 teu were deployed by the G6 and P3 by mid-2014, and were seeking to call fully loaded, as their current channel depths range from 40-45ft (12.2-13.7m). Tide dependent access can ameliorate this to a degree – for example, in Charleston, high water adds approximately 5.5ft (1.7m) to the water depth. Other USEC ports typically have a similar tidal range of around 6ft (2m) but the effect this can have on permissible vessel drafts and tidal windows is complex.

All have channel deepening projects, but at widely varying stages. Miami expects to have its 50ft channel completed by 2015 but Savannah, Charleston, Jacksonville and Port Everglades are at least three years beyond this, and in some cases nearer the end of the decade. In Savannah, the channel deepening project received the last of its federal and state regulatory approvals in 2013 – meaning that after 14 years of study and review, it became ready to move to the construction phase.

Table 3
Current and Planned Channel Depths at Main USEC Ports

Notes: Channel depths shown are at mean low water Typically at least 2ft (0.6m) underkeel clearance is required by vessels Deeper vessel draughts can be accommodated within tidal access windows Source: Drewry Maritime Research derived from port authorities

Notes: Channel depths shown are at mean low water
Typically at least 2ft (0.6m) underkeel clearance is required by vessels
Deeper vessel draughts can be accommodated within tidal access windows
Source: Drewry Maritime Research derived from port authorities

Clearly a significant step up in Transatlantic vessel sizes will require careful consideration of ports, particularly call rotations and the all-important deepest draught first call inbound, last call outbound choices. As significant for the ports though will be the concentration of volume in fewer services, bigger ships and hence greater volume peaks.

This will increase the pressure on landside operations, something that is already challenging for USEC ports. For example, in Norfolk and Portsmouth (Virginia), truck and rail delays and congestion have been an issue – a result of growing pains from the port’s strong overall volume growth and double digit rail growth, not least due to its increased number of “first in” and “last out” port calls. The port authority recently set up a Motor Carrier Task Force to focus on reducing truck turnaround times, cutting wait-time at terminal gates, improving chassis availability and spreading the arrival times for trucks throughout the day through the implementation of an appointment system.

Meanwhile in New York/New Jersey, the influential Retail Industry Leaders Association (RILA) recently sent a strongly worded letter to the port authority urging more action to address landside delivery congestion, backlogs and productivity issues.

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Significantly bigger ships on the Transatlantic route will highlight draught issues at USEC ports, although port call rotations and tidal windows will be key. Perhaps more significantly, bigger ships will increase pressure on already strained landside capacity at key ports.

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Source: http://ciw.drewry.co.uk/