All for one, one for all
In December, Jim Newsome, president and chief executive officer of the South Carolina State Ports Authority, suggested ports may respond to the planned P3 Network of Maersk, Mediterranean Shipping Co. and CMA CGM by filing agreements with the U.S. Federal Maritime Commission to work more closely together.
Ports that are in close proximity may file cooperation agreements with the FMC to create "a reasonable countervailing power," he said. "The idea is that there are going to be bigger ships, maybe fewer ships, and a lot of pressure on and competition between ports, so the ports may want to respond to that in a little bit more proactive way."
His remarks proved prescient.
In January, Seattle and Tacoma filed a discussion agreement with the FMC that will allow them "to gather and share information to identify potential options for responding to unprecedented industry pressures.”
In a letter to the FMC, leaders of the two ports said “recent developments in the shipping industry threaten the future of the Pacific Northwest trade beyond anything they have seen during the usual boom/bust cycles in the Pacific trade.”
A different sort of collaboration, one not requiring an FMC agreement, has been forged by the ports of Houston, Mobile and Tampa.
For four years they have been jointly marketing themselves as the “Gulf Coast Advantage” in an effort to attract more container services.
Representatives from the three ports—John Moseley, general manager of trade development at the Port of Houston; Frank Fogarty, vice president of trade and development at the Alabama State Port Authority; and Wade Elliott, vice president of marketing and business development at the Port Tampa Bay – discussed the initiative at Cargo Business News’ Port Productivity Conference in February.
Moseley noted the agreement is not aimed at restricting competition, but is “a loosely-built friendship more than anything. We’re like The Three Musketeers.”
He said most discussions about U.S. container shipping focus on East and West coast traffic, with rare mentions of the Gulf.
“When we look at the overall container market in North America, the conversation is dominated by the transpacific trade, which is the second largest trade in the world,” he said. “The Gulf Coast only handles about 2.5 percent of all the transpacific trade.
“For a very long time, Houston was really the only major container port on the Gulf Coast. New Orleans does have a container presence but it’s rather small,” he said. At the same time “you’ve had a couple of ports, namely Mobile and Tampa, really step up and develop their container business.”
According to a 2012 American Association of Port Authorities survey, Houston handled 1,922,529 TEUs; Mobile 218,844 TEUs; and Tampa, 39,882 TEUs. Each of the three ports in the alliance is more than a day’s drive from each other and are “strong, distinct markets.” They aren’t as close together as, say, Houston and New Orleans or New Orleans and Mobile.
“So now you’ve got three strong container ports, two of them up-and-coming very quickly and now you’ve got a really viable itinerary for a transpacific all water service,” Moseley said. “The idea was let’s get together, we have a lot more to win together than we have to lose; let’s get together and co-market and go out to the steamship lines and to the business and develop an itinerary that calls the Gulf Coast.”
A former liner company executive, Moseley said most transpacific services that called the Gulf did so as part of an East Coast or South Atlantic rotation.
With Mobile and Tampa developing their container businesses, the ports felt they could “demonstrate to the ocean carriers that there is a huge potential market that could be converted”—served by ship, instead of by intermodal rail though East and West coast ports.
The ports say there’s a market of about 6.5 million TEUs they could serve in a dozen states—both the five states bordering the Gulf from Texas to Florida, but also those reached easily by rail or truck to the north, such as Oklahoma, Arkansas, Tennessee, Kentucky and up the East Coast to North Carolina. This includes 3.2 million TEUs in trade with Asia, 1.9 million TEUs with Latin America, and 1.3 million TEUs with Europe.
They say the region should be attractive to carriers because it is one of the fastest growing markets in the United States today, expanding faster than either the West or East coasts. About a third of the U.S. population and GDP border the Gulf.
At the Port Productivity Conference, it was noted several times that Florida is expected this year to overtake New York to become the third most populous state after California and Texas.
Elliott said the Tampa-Orlando area has become the nation’s 10th largest economy, and an increasing number of companies are locating their distribution facilities in the region.
“We complement each other quite well, yet we’re in the same coast, so when a carrier is looking at a new service they can say, ‘hey I can call all three ports, go in full get a great cargo mix, get a good customer mix and then leave the Gulf with my ship full,’” Moseley added.
At the same time, Fogarty noted about 4-5 percent of the world’s container fleet is in lay-up, so carriers may be attracted to trying out new services.
Fogarty said the three Gulf ports make both joint and individual calls on carriers and “we are getting some positive feedback from them.”
At the same time, he said response is not instantaneous.
“This business is not like selling Girl Scout cookies—you don’t knock on the door and pull out your orderbook. It’s development and we feel we are making good strides. We are getting the word out and we are starting to get some recognition and we’re very confident that we are going to see a big improvement with ship calls in the Gulf in the future as a result of this campaign,” he said.