Ports, terminals prepare for challenges from bigger ships, expanding alliances.
By Chris Dupin
Ports and terminals in the United States and worldwide will have to accommodate growing numbers of larger containerships in the years ahead.
Later this year, Maersk is expected to put the first of 18,000-TEU “Triple E” ships into service in the Asia-Europe trade, and West Coast ports have already been visited by giant vessels such as the MSC Beatrice and MSC Fabiola, with capacities of 13,798 TEUs and 12,562 TEUs, respectively.
For the moment, ships that large are unusual in the transpacific, but Lawrence Dunnigan, manager of business development and international marketing at the Port of Oakland, said the workhorse containership of the transpacific is shifting from the 5,000- to 6,000-TEU range to upwards of 8,000 to 8,500 TEUs.
On the U.S. East and Gulf coasts, ports are racing to prepare for the arrival of bigger ships when the expanded Panama Canal opens in 2015 and the maximum size of ships able to pass through the waterway’s new locks will grow to 13,200 to 14,100 TEUs from today’s 4,500 to 5,000 TEUs.
But with the price of fuel skyrocketing, the London-based consultancy Drewry said “ocean carriers have thrown the spanner into the works” for ports by deploying increasing numbers of post-Panamax ships two years ahead of schedule, using the Suez Canal to connect Asia and the U.S. East Coast.
Maersk, Mediterranean Shipping Co., and CMA CGM — these carriers have already deployed ships with capacities of more than 8,000 TEUs on Suez routings to the U.S. East Coast. Maersk is adding a second Suez string by converting its TP7 from a Panama to Suez routing, and rewry expects one of the new G6 strings that will start calling the U.S. East Coast this month could use 8,000- to 9,000-TEU ships.
Jim Newsome, president and chief executive officer of the South Carolina Ports Authority, said the number of services from Asia using the Suez Canal are “a bit of a surprise to everybody,” and added it’s related to the fact the Europe-Asia trade is not growing as fast as had been expected, so that big ships are being repositioned into the U.S. trades.
Big Ships, Fewer Ports? And the big ships are scheduled to keep on coming.
The information service Alphaliner said of the 3.4 million TEUs of containerships on order for delivery in the next three years, 48 percent of the capacity is on ships that are larger than 10,000 TEUs, and 25 percent is on ships with capacities of 7,500 to 9,999 TEUs.
While big ships are attractive because of their economies of scale, few carriers have the ability to fill the capacity on their own. Nor would they want to do this, since filling such large ships would likely require carriers to combine several of their services into fewer strings and offer shippers less port pairs and limited sailings.
The problem is further complicated by the fact that while ships are making huge leaps in size, container volumes are growing at a slower pace than in the past.
This appears to be happening for two reasons. First is the general slowdown in the global economy, and second, for many years, growth in container volumes has outpaced global GDP, both because of increases in international trade and a growing share of trade moving in containers. Now that container multiplier effect appears to be shrinking.
Mark Sisson, a senior port planner at AECOM, said it’s almost certain as carriers put bigger ships into service, they will likely reduce the number of ports each vessel calls, both because fewer ports will be able to serve the ships and also a desire to reduce time spent travelling between ports with large, very expensive ships.
It is similar, he said, to operating a Boeing 747 — airlines don’t want planes to stop at three or four intermediate cities where they discharge and load 10 percent of the passengers.
Join The Band. To fill the big ships, some carriers are banding into even bigger alliances. A recent example is the G6, which combines the volumes of six steamship lines onto ships — the three members of the Grand Alliance (Hapag-Lloyd, NYK and OOCL) and the three members of the New World Alliance (APL, Hyundai, and MOL). G6 carriers have been cooperating on Asia-Europe routes for more than a year, and this month they are entering the trade between Asia and the U.S. East Coast. Zim will also take space on some of these ships.
G6 carriers are not alone, saying there’s increased cooperation, for example, between the existing CKYH Alliance of COSCO, “K” Line, Yang Ming and Hanjin with Evergreen and between CMA CGM and MSC.
Jim Devine, president of Global Container Terminal USA, said an alliance like the G6 can help smaller carriers compete with mega-carriers like Maersk, CMA CGM, and MSC.
If bigger ships mean carriers are forced to reduce the number of ports which they call, then that could make them less attractive to shippers who would have to move cargo longer distances to get to those load centers. But by banding together in larger alliances, steamship lines may be able to offer the same or, perhaps, better service.
For example, Hapag-Lloyd said the six G6 services to the U.S. East Coast will allow it to offer shippers 40 percent more port pairs, 70 percent more weekly connections and shorter transit times for important port pairs than if it just remained part of the Grand Alliance. And that’s not even counting its services to the U.S. West Coast from Asia, and two other Grand Alliance services to the U.S. East Coast from Asia that will not be part of the G6.
An analysis by Jacksonville, Fla.-based Bluewater Reporting concluded the changes coming about from G6’s entry into the U.S. East Coast market are “in some cases better, but others are actually worse.” Options may be “more ‘streamlined’ from the point of view of the carriers, but from a shipper’s perspective, this will not have a significant impact on transit times except in very specific instances,” the reporting service said.
It said Savannah is the big winner of the U.S. East Coast ports, as it will now be called first for all G6 services transitting the Panama Canal, rather than going all the way to New York for the first port into the east coast of North America.
Drewry also saw G6 as a mixed bag for ports in its Container Insight Weekly, saying some will gain a weekly call while others will lose one or two.
But these judgments are debatable. For example, in a table of the G6 effect on ports, Drewry labeled Halifax, Canada, a “loser,” and said Jacksonville maintained the “status quo.”
Karen Oldfield, president and chief executive of the Halifax Port Authority, said to the contrary that the changes would actually give her port “three new container shipping lines calling with an Asian-Suez service — APL, MOL and Hyundai.
“With this addition, Halifax will have 10 of the top 15 global carriers providing service in our port,” she said.
“Halifax has been targeting this type of Asian service as part of our container growth strategy,” Oldfield added. “This service plays to our port’s strengths including transit time advantages via the Suez Canal, deep container berths, rail connectivity to major inland markets, and modern, well-equipped terminals.”
Halifax is also upgrading its South End Container Terminal, so it can simultaneously berth and service two post-Panamax ships.
And in Jacksonville, Roy Schleicher, interim chief executive officer at the port authority, said the Florida port was picking-up calls from six new carriers because of recent alliance announcements. The G6 cooperation on the Asia-U.S. East Coast lane means Grand Alliance carriers will call Jacksonville for the first time. Furthermore, Hanjin (which in March announced it was ending plans to build a terminal in Jacksonville) said the CKYH or “Green Alliance,” of which it is a member along with COSCO, “K” Line, and Yang Ming, will start calling the port. Previously, only Hanjin had made this call on a service with Evergreen.
‘Disturbance In The Force.’ Even within ports, reconfiguration of alliances has the potential to “cause a disturbance in the force,” Devine said.
The Grand Alliance, for instance, had services calling at both of Global’s terminals in New York, while New World Alliance services called Maher Terminal. The alliance could continue to send some services to each terminal or consolidate them at a single facility.
Sisson said the ability of ports to handle larger ships is limited by what he calls both “hard” bottlenecks, such as bridge heights and channel depths, and “soft” bottlenecks, which are more easily modified.
“You have to raise bridges, dredge harbors and turning basins. You need taller, higher, wider cranes, if you want the biggest ships, and there is an ongoing debate on where the cost benefit is for that in a lot of places,” he explained.
While the Port of New York and New Jersey has 50-foot channels to many of its container berths, limited clearance or “air draft” beneath the Bayonne Bridge currently restricts the size of ships calling terminals in Newark, Elizabeth, and Staten Island, while the Gerald Desmond Bridge in Long Beach, Calif., prevents some ships from entering the inner harbor.
The Coast Guard is reviewing public comments on a draft environmental assessment for the Bayonne Bridge project, but the port authority hopes to have the roadbed of the bridge raised from 151 to 212 feet above the Kill Van Kull waterway by 2015, around the time the expanded Panama Canal is scheduled to open. Construction of the Gerald Desmond Bridge is underway.
For Devine’s company, the limited “air draft” beneath the Bayonne Bridge is a drawback for the New York Container Terminal on Staten Island, but possibly a boon for its container terminal in Bayonne, which has 50 feet of water and is not impeded by the bridge.
“Even draft is sort of a soft bottleneck, since ships don’t always come in fully laden and you have tides in some places that give you extra draft,” Sisson said.
Water depth is generally not a problem for ships calling the major ports on the U.S. West Coast. Seattle, Tacoma, Oakland, Los Angeles and Long Beach were all rated “post-Panamax ready” in a report published last June by the Army Corps of Engineers’ Institute for Water Resources. On the U.S. East Coast, choices are more limited with the Corps noting that only Norfolk, Baltimore, and New York have 50-foot-deep channels.
Florida’s state government has agreed to fund Port of Miami’s deepening to 50 feet, and last October the Corps recommended deepening Savannah’s harbor from 42 to 47 feet. The Delaware River is being deepened from 40 to 45 feet.
The Corps is also about halfway through a four-year feasibility study to deepen Charleston Harbor to 50 feet, but Newsome said ships can already sail from the port drafting up to 48 feet by transiting during a two-hour window around high tide.
Since early April, a fifth of the ships calling Charleston had drafts in excess of the maximum the Panama Canal could handle, and 21 ships had docking or sailing drafts of 43 feet or more, and earlier this year the 6,400-TEU MSC Stella offloaded boxes in both Charleston and Savannah, then returned to Charleston to add an additional 800 heavy export containerloads.
Deepening the harbor would allow ships to sail to and from berths in Charleston 24 hours a day, an increasingly important consideration as ships get bigger, more expensive, and have to keep to rigorous schedules.
While numerous ports seek to deepen their harbors, the Association of American Port Authorities noted President Obama’s 2014 budget calls for just $108 million, a 28.5-percent decrease in funding from the prior year to pay for deep-draft navigation channels.
Charleston said it will receive $1.165 million to continue a feasibility study for its deepening project, but Sen. Lindsey Graham, R-S.C., has called for the creation of a “merit-based” system for funding port infrastructure and a $20 billion fund out of which both port deepening for U.S. East Coast ports and road and rail infrastructure at West Coast ports could be funded, as well as inland navigation projects.
Even European ports that regularly handle the biggest containerships are looking at possible deepening of their shipping channels.
When the 16,000-TEU CMA CGM Marco Polo called Hamburg’s HHLA Container Terminal Burchardkai in December, the port said the vessel could not be fully laden because the “fairway” of the Elbe river only allows for ships drawing a maximum depth of 49.5 feet.
Handling the ultra-large containerships isn’t a problem in Hamburg, “as our terminals are equipped with very modern gantry cranes and offer very long berths for these kind of ships,” a port spokesman said. But the 49.5-foot-deep fairway of the Elbe River “means if the 18,000-TEU Maersk Triple E vessels, or larger ships, would like to call at the Port of Hamburg, then they cannot be fully loaded,” the spokesman added. A decision from a Federal Administrative Court on the start of work to dredge the shipping channel is expected later this year.
John Vickerman, president of Vickerman Associates, a firm specializing in the planning and design of port, intermodal and freight logistics facilities, believes ships will be built that will surpass the Maersk Triple E ships in size with capacities in the 21,000- to 23,000-TEU range.
But even ships of 12,000 TEUs will increase the intensity of activity and congestion on wharves as carriers seek to turn these vessels around in 24 to 36 hours, he said.
Sisson said the ability of terminals to handle bigger ships will depend, in part, on their size. A large terminal like Maher, the largest in the Port of New York and New Jersey, should not be stressed by bigger ships, but smaller terminals may find handling a surge of containers from a big ship to be more challenging.
Bigger Ships, Bigger Cranes. Since 1988, when APL built the first post-Panamax containerships which had 16 rows of containers across, the width of these vessels has grown, for example to 21 across on the CMA CGM Marco Polo, currently the largest containership in the world and 22 across on the Emma Maersk, a ship that’s so wide it will not even pass through the expanded Panama Canal. The new Triple E ships being built for Maersk will require gantry cranes to span across 23 containers.
Cranes to serve these massive ships present a variety of challenges to ports and terminals.
Ross Clarke, head of new terminal design and operations at APM Terminals, said making cranes tall enough for ships such as the Triple E is a major challenge. Not only are more boxes being stacked above deck, the cranes must be able clear ships during high tide and seasonal peaks when they may be riding high in the water because they’re loaded with large numbers of empty boxes.
Sisson said ports located near airports may be limited to using low profile container cranes, and that may make it difficult for them to reach 22 to 23 rows across a berthed vessel.
Kathryn McDermott, deputy executive director of business development at the Port of Los Angeles, noted to accommodate these larger ships, terminals like those at TraPac and China Shipping not only deepened their berths, but strengthened the wharves to accommodate heavier cranes.
“We have to adapt our infrastructure construction and construction standards to the changing trends,” she said.
McDermott said where the standard gauge of container cranes was once 100 feet, it’s now being increased to 120 feet to accommodate longer back-reach, and Vickerman said the gauge on some big cranes could go as wide as 150 feet.
To be able to handle bigger ships, terminals are also increasing their automation and numbers of rail-mounted gantry cranes.
Global in the Port of New York and New Jersey is undergoing a $300 million expansion, adding 900 feet of berth, building a new automated gatehouse, and installing rail-mounted gantry cranes.
Devine expects that with these upgrades, Global’s terminal in Bayonne will be able to boost the productivity of the ship-to-shore cranes from the mid-20s to as much as 40 moves per hour.
The straddle carriers at Global will be operated by International Longshoremen’s Association drivers, but some terminals are looking at increased use of robotic technology to boost terminal productivity.
Sisson said this is particularly true on the U.S. West Coast where he said dockworkers “are perhaps the most expensive blue collar workforce in the world” and the biggest payback exists for terminal companies that invest in automation.
He noted Global in Bayonne, TraPac terminal in Los Angeles, and OOCL’s Long Beach Container Terminal are all preparing to use rail-mounted gantry cranes which were pioneered in the United States by APMT’s terminal in Portsmouth, Va.
TraPac and OOCL are also using automation to move containers between the ship-to-shore cranes and the stacking cranes — TraPac with automated guided vehicles, and OOCL with automated gantry cranes.
Clarke noted terminals are also boosting productivity through the use of both tandem-lift cranes that can pick up two 40-foot containers simultaneously and double trolley cranes where containers moving off the ship are placed on an intermediate platform and then moved to the ground with a second hoist.
Sisson compared the dual hoist system to a “bucket brigade,” and said the second hoist from crane to the pier can be automated as it has been done at the Euromax terminal in Rotterdam and HHLA Container Terminal Altenwerder in Hamburg.
Vickerman said another trend he expects to see is the continuing efforts by ocean carriers to look at privatizing ports in selective port ranges. While Virginia rejected bids made by APM Terminals and other companies to privatize its Hampton Roads facilities, he believes it “could be a precursor of greater things to come in terms of North American port privatization.”
He also expects as ships become larger, trans-loading will become increasingly important.
Panama, he said, could become the “Singapore of Latin America.” Cargo volumes at the Central American country’s ports have skyrocketed from 300,000 TEUs in 1996 to 6.8 million TEUs last year, and 95 percent of that volume is transshipments.
Vickerman believes those volumes could yet double, and said it’s possible more cargo moving to the United States through the Panama Canal will be transshipped rather than carried on ships that call the United States directly.