South East Shipping News

Brookings takes on the Panama Canal Fantasy -Guest opinion

Adie Tomer and Joseph Kane | May 17, 2013 4:25pm

Widening the Panama Canal and the Future of Global Trade Mapping

• Email
• Print

Up and down the Atlantic coast, US ports are abuzz. Dredging machines, tunnel excavators, and highway pavers from Miami to New York are preparing metropolitan economies and their ports for a newly expanded Panama Canal. As the thinking goes, an expanded Canal promises bigger ships, bigger cargo loads--and each metro wants a piece of the bigger business.

 

But lost in this port-related arms race is what the newly-widened Panama Canal means for the US economy . Too many metropolitan areas simply assume they’ll immediately acquire new freight business when the expanded Canal opens, or that there will be more business at all. These billion-dollar assumptions ignore a more fundamental question: how and where will the Panama Canal affect US’ global goods trade?

Answering that question requires a broader view, one less predicated on ship size and more on economy size. It also requires metropolitan areas to gain a better understanding of their goods trading relationships, and how those relationships power their local economies.

It’s time to have a frank conversation about what investments like the Panama Canal mean for US trade and economic growth.

First, let’s start with a little context. The Panama Canal, set to celebrate its 100th birthday next year, is one of the world’s most important trade assets. It primarily helps connect US Atlantic and Gulf ports to their trading partners in Asia, Oceania, and South America. Driven by those major markets, the Canal already moves over 330 million tons of freight each year.

However, the Canal suffers from capacity constraints. The world's largest ships can no longer fit through certain locks, meaning the Canal was ill-prepared for its second century. In response, Panama initiated a major overhaul including two new locks, plus widening and deepening several existing channels. When complete in 2015, larger container ships will expand potential trade volumes between the Americas and Asia--and more seamlessly connect global markets in the process. The promise of these larger ships is the inspiration behind the Atlantic ports’ major capital projects.

Yet, as ports carry out such extensive projects, questions and skepticism linger over the future direction of freight movement and the long-term economic implications. How will ports handle the extra time it takes to load and unload the new mammoth ships? How will Pacific port investments in the United States and Canada counter the investments at the Atlantic ports? These uncertainties complicate analysts’ and policymakers’ abilities to identify exactly how the expansion will shift the precise location and scope of all freight flows.

The country and its metropolitan leaders need a way to remove these uncertainties. And it begins with a better understanding of our current goods trading relationships at the metropolitan scale.

As it stands, metropolitan data is scant. There is no geographically-consistent database of what goods metropolitan areas consume and what goods they export. Similarly, there is no database of geographic trading relationships with their domestic and international peers, or which ports facilitate the international side of the trade ledger

Imagine if the United States didn’t know how much electronics it imported from China, or how much oil it imported from the Middle East. That’s the situation metropolitan economic and freight leaders face.

It’s time to get a better handle on these regional trade relationships. Local, state, and federal officials should know which metropolitan areas trade the most goods with Asia, and are therefore the most sensitive to the Panama Canal’s capacity. They should also know how these goods flow between markets—whether they’re more reliant on Pacific or Atlantic ports, and how a capacity change on either coast could shift that equation.

This kind of knowledge also extends beyond just the Panama Canal. As other freight investments come online across the United States and the world, public and private sector leaders should have the statistical tools to know what’s at stake. A more thorough understanding of the country’s metropolitan trading network would help inform local investment decisions like we’re seeing in Baltimore and Norfolk. It would also inform a national freight strategy that prioritizes investments with the highest returns.

The metropolitan reaction to the Canal widening is a microcosm for what the country misses when it comes to freight planning. In a relatively fact-free zone, it’s easy for local ports to justify these major investments. But dredging a port or building a tunnel costs significantly more than simply upgrading our knowledge base.

Even with global trade slowing its growth since the Great Recession, there’s little question that goods volumes will continue to rise in the coming decades, whether through the Panama Canal or elsewhere. It’s time we make sure our metropolitan economies have the knowledge to succeed in that environment.

The Brookings Metropolitan Policy team will aim to address that knowledge gap over the coming year. Working with a team of outside experts, we've assembled a geographically-consistent, globally-oriented goods trade database. In turn, the analytics from that database will help us provide public and private sector leaders with a better understanding of exactly what, where, and how metropolitan areas trade goods and the implications for their local economies. We are excited to start sharing those results this fall.

Related articles

Colliers International Port Analysis: CapEx or Capsize

Panama Canal loses another carrier to cheaper Suez

Post Panamax transshipment fantasy begins to unwind - Eyerdam opinion

Great news for Gulf Coast Ports: U. S. Achieves Parity with Mexico as a Preferred Manufacturing Location; To Achieve Cost Parity with China by 2015

  Editor’s note: The US has reached the goal once thought impossible by achieving energy independence. This happened, ironically, on the Democrat’s watch and despite confounding environmental constraints. Energy access was the only weakness in the US economy and altered all foreign policy and trade balance equations. The nation is free and we ought to celebrate. This article is another positive sign of the great future we confront. RE)

U. S. Achieves Parity with Mexico as a Preferred Manufacturing Location; To Achieve Cost Parity with China by 2015

But, look before you leap – nearshoring may not be profitable in all situations

04.18.13

 

NEW YORK (April 18, 2013) – In another sign that America is becoming more competitive in manufacturing, the United States is now equal to Mexico in “attractiveness” as a source for manufacturing operations and is on track to achieve cost parity with manufactured imports from China by 2015. However, before companies set up or move production from formerly favored locales, including China, they need to perform thorough, case-by-case analyses as a number of critical factors -- including product type, location, transportation and other variables -- can greatly impact attractiveness and cost-effectiveness. That’s according to new research, including a survey of 137 C-level manufacturing-company executives and an in-depth economic and cost analysis, released today by AlixPartners, the global business advisory firm.

In the AlixPartners survey, 37% of manufacturing executives said they would choose the U.S. as their preferred location for nearshoring (defined as moving production of products closer to the U.S. consumer base).  While an equal percentage of respondents cited Mexico as the most attractive nearshoring locale, the U.S. continues to post impressive gains versus perceptions of just a few years ago. In a similar AlixPartners survey last year, 49% of executives said they would choose Mexico, while 36% said they would choose the U.S.  In the firm’s survey just two years ago, 63% chose Mexico, while only 19% said they would choose the U.S.

 

However, while AlixPartners’ accompanying economic and manufacturing cost analysis finds that some goods can indeed be manufactured at an equal or lower cost in Mexico than in China, many other types of products cannot.  This provides clear evidence that in all cases, many factors need to be carefully analyzed and weighed before nearshoring or reshoring takes place. For example, AlixPartners found that while the “China cost” for items analyzed such as machined aluminum parts, plastic molded parts, non-denim slacks, and knit apparel and sweaters is indeed on the rise, that cost is still lower than Mexico’s in each case – and is forecast to remain lower through at least 2015.

 

“The U.S. is definitely a more cost-competitive source for manufacturing today than it has been in many, many years,” said Steve Maurer, managing director at AlixPartners and leader of the firm’s Manufacturing Practice in the Americas.  “In fact, the cost gap with China has on average been closed by approximately 70% for the products we analyzed. However, some consultants have taken that fact and tried to apply it with a broad brush across all of their clients and all of their clients’ products. As our analytical and product-specific research shows, that could be a big mistake.”

 

With a resounding 84% of the C-level executives surveyed by AlixPartners saying that the decision to nearshore their manufacturing would be an important one during the next year (versus just 53% who said the same last year), it is clear that nearshoring and reshoring decisions are moving to the “front burner” in 2013. According to AlixPartners, factors that need to be carefully analyzed before shifting production include product type, raw materials costs, labor costs, inventory costs, exchange rates, duties, freight costs and overhead costs, among others.

 

“Without question, these are absolutely critical decisions for company leaders.  When it comes to moving production, companies should look twice before they leap,” said Foster Finley, managing director at AlixPartners and leader of the firm’s Supply Chain Practice in the Americas.  “Not only do product-cost variables vary widely by product type, but several factors, such as exchange rates, materials costs and labor agreements, can all have a dramatic impact on the outcome.” 

 

Approximately 58% of the respondents to the AlixPartners survey said that for production that has either already been nearshored or is being considered for nearshoring, they have either reduced or expect to reduce their total “landed cost” by 5% to 20%.  Landed cost is the calculation of all aspects of bringing a product to its point of sale, including transportation costs, duties and the expense of inventory in transit.

 

Regarding landed costs, AlixPartners’ research showed that a number of other variables need to be considered by executives before making nearshoring decisions.  While rising production costs, today’s exchange rates and the cost of transporting goods currently make China a more expensive product source than it was a decade ago, it remains important to consider future costs when making sourcing decisions, says the firm. 

 

But, if current trends remain in place, AlixPartners finds that, on average, by 2015 the cost of importing manufactured products from China will be about the same as manufacturing them in the U.S. However, other key low-cost countries, such as Mexico and India, will remain highly competitive, thus highlighting the need for case-by-case analyses when evaluating nearshoring. According to AlixPartners’ analysis, Mexico and India have maintained cost advantages vis-à-vis China of 15% to 20%, similar to the advantage levels China enjoyed over other low-cost countries in the early 2000s.

 

Furthermore, according to AlixPartners, even when economic advantages are clear and risks are low, there are significant barriers to nearshoring that must be considered, such as the often massive costs of switching manufacturing locations, and the current shortages in the U.S. of foundational manufacturing assets and of manufacturing talent and management.

 

About the Study

The AlixPartners Manufacturing-Sourcing Outlook analyzed manufacturing sourcing costs, patterns and expectations related to meeting U.S. demand. The Outlook includes data from the AlixPartners Manufacturing-Sourcing Index™, which analyzes a variety of manufactured products and compares the cost to build them in various low-cost countries and transport them to the U.S. versus the cost of manufacturing them in the U.S., tracking several key cost drivers. Those drivers include labor costs, transportation costs, raw-materials costs, inventory costs, capital-equipment costs, overhead costs, duties and exchange rates. The Outlook also included an online survey, conducted in March, of 137 C-level executives from manufacturing-related companies across more than 10 industries. Among the companies represented in the survey, approximately half had annual revenue of $1 billion or more, and all of the respondents said they sourced production across multiple continents.

 

Related articles

U.S. Achieves Parity with Mexico as a Preferred Manufacturing Location; To Achieve Cost Parity with China by 2015, According to AlixPartners Study

Nearshore Trends as Medical Device Manufacturers React to Newly Imposed U.S. Excise Tax by Co-Production International

New Study: China Manufacturing Costs Rising to U.S. Level

The U.S. Could Learn from the EU's Short Sea Policies - Guest Opinion

 

 

 BY TONY MUNOZ

April 24, 2013

 Tony Munoz, Editor-in-Chief of Maritime Executive and the MarEx Newsletter, was a guest contributor for the European Union’s Government Gazette in its first quarter edition - released in March 2013.

Here is his article:

The European short sea shipping network has been an enormous catalyst in building the world’s most efficient and environmentally friendly transportation infrastructure over the last two decades. The vision and foresight – not to mention the political will it took to move the project forward – was unprecedented, and the commitment of stakeholders from across the EU countries will provide benefits for generations to come.

 

Motorways of the Sea

 

Today, the Motorways of the Sea, as it is known in the EU-27, is a major component of the transportation infrastructure supporting a huge and diverse economy, second only to the U.S. The unified effort of eliminating borders, dealing with regional congestion and environmental issues, and integrating the various economies and cultures of the EU serves as a powerful example of what can be done through coordinated and centralized government policy to strengthen long-term prosperity.

 

The strategy of establishing dozens of marketing offices to engage stakeholders at the local level and educate them about the benefits of a regional system of multi-modalism was brilliantly orchestrated from the beginning. It recognized that an integrated transportation network was essential to a strong and unified economy that could compete on a global scale with the other regional superpowers of the world – North America, Southeast Asia, the Middle East & Africa, Central & South America – and, at the same time, serve future generations. Programs like Marco Polo I & II, which incentivized users to join the system, were positive measures that pushed the short-sea agenda forward. 

 

There were other benefits as well. The Baltic Sea, with the largest density of vessels in the world, became the world’s first ECA (Emission Control Area), instituting strict emission-control standards that drastically reduced the volume of greenhouse gasses. Because of the EU’s progressive views on environmental issues, the Motorways of the Sea program has benefited both the environment and the economy.

 

America’s Marine Highway – Fact or Fiction?

 

Unfortunately, the U.S. does not have an effective maritime policy beyond general rulemaking for its EEZ. Recently, the Department of Transportation was awarded an additional $1.4 billion to its $98.5 billion budget for 2013. The Obama Administration provided an additional $492 billion over five years (2014-2018) for planes, trucks and rail. Unfortunately, when it came to shipping, the Administration gave the Maritime Administration (MARAD) a paltry $433 million for its 2013 budget. 

 

What is even more troubling is, with all the years of studies and analyses showing the benefits of short sea shipping on America’s 96,000 miles of coastline and 22,000 miles of inland waterways, there is still no federal policy on development of America’s Marine Highway. In fact, the Administration has tabled discussions about maritime initiatives until 2017, which essentially means maritime policies will wait until the next administration takes office.

 

But the U.S. cannot wait as there are more than 15.5 million trucks on the nation’s highways that log more than 450 billion miles a year. Gridlock annually costs the U.S. economy about $80 billion, and Americans spend 4.5 billion hours stuck in traffic each year. Most urban areas have failing grades for smog, and another 60,000 people will die this year due to illnesses brought on by pollution.

 

No Lack of Funding…

 

Today, the Inland Waterways Trust Fund – funded by a user tax on fuel oil – has more than $5 billion in funds sitting idle because Congress will not release them to rehabilitate the 191 locks and 238 lock chambers that support about 11,000 miles of inland waterways. Furthermore, there is over $7 billion sitting in the Harbor Maintenance Tax Fund, paid for by a user fee on the value of a ship’s cargo and intended for dredging and maintaining the 360 commercial ports in the U.S.

 

Capitol Hill is gridlocked, and policies about spending on maritime infrastructure are on hold. What will the U.S. do when the expansion of the Panama Canal is completed in early 2015? U.S. port authorities are privately investing as are vessel operators. But there is no leadership from Washington.

 

Here is a golden opportunity for the U.S. to follow the European example and provide incentives for the building of a hub-and-spoke system that would take containers from 12,000-TEU post-Panamax vessels and transfer them to smaller freighters or barges that could then transport them up and down the coast or into the interior. One small freighter or barge can displace hundreds of trucks and the attendant pollution and congestion.

 

… But a Lack of Leadership

 

As it is, while ports like Miami and Charleston and New York are busy deepening their channels and installing giant cranes to handle the increased container traffic from an expanded Panama Canal, there is no such equivalent activity at the smaller ports that dot America’s inland waterways. Nor does the U.S. have a fleet of feeder ships to carry the containers inland, presenting another opportunity for government policies that would encourage the building of such vessels, much as the EU did.

 

With the example of the EU to guide us, the way forward for America’s Marine Highway seems clear. Unfortunately, the political will seems to be lacking along with the necessary leadership in Washington. Hopefully, it is not too late.

Related articles

Port of Hueneme moves to take part in national shipping network

Friday comment: why now’s the time for air freight to fight back - guest opinion

Friday comment: why now’s the time for air freight to fight back by Alex Lennane

The air cargo industry is at a tipping point. It has a choice to make. It can either carry on as before, a forgotten and only partially relevant subset of its more glamorous and profitable passenger parent. Or it can become its own industry, with its own lobbying power, investment, trained staff and strengthened relations across the supply chain.

This has, of course, been debated endlessly – but thankfully, the debate now seems to have stopped, and action has started.

Don’t believe it? Why now, you may well ask?

Well, in part, because one airline, some time ago, thought it wise to train its cargo staff, and they are now in a position to pass on the benefits of that knowledge to the industry. While some may see the new and increasingly important TIACA as a kind of ex-KLM mafia, you could also see it as KLM’s gift to the industry. Michael Steen (Atlas), Oliver Evans (Swiss), Stan Wraight (SASI), Enno Osinga (Schiphol), Robert van der Weg (Cargolux)… all began their careers at the Dutch carrier. Sadly, KLM has perhaps had less success than its staff, but right there is proof that a proper training programme has benefited the industry as a whole. Concerns that when this KLM generation has hung up its working boots there will be few to replace it are well-founded.

That, in a sense, is simply a happy coincidence, that at a time the industry needs direction, there is someone who can drive it.

Because there is another reason for this timing. Right now, the air cargo industry has got nothing to lose. Years of neglect – by investors, by passenger airlines, by regulatory authorities, by IATA – combined with the drive and focus of the integrators, and now the ever-improving sea freight sector, have made it frail. Throw into that mix a period of chronic economic weakness, and you’ve got an industry on its knees; an industry that needs to find its voice and show that it plays an essential part in global GDP.

The relationship between air freight and GDP is complex, and one that IATA is studying, but in 2011 the University of Nottingham published a paper, ‘Estimating the effects of containerisation on world trade’, which found that containerisation led to an increase in bilateral trade flows of between 75% and 100% between 1962 and 1990. It’s clear, if you talk to flower growers in Africa, vegetable exporters in South America, high-tech manufacturers in Asia, that air cargo enables world trade, it enables otherwise isolated countries to sell their produce in world markets.

It is also a good time for other, non-industry reasons – slowly but surely, governments are beginning to understand that behind strong national economies lies globalisation. And behind globalisation lies logistics. For some reason that no one seems to be able properly to identify, logistics has been concealed as the powerhouse of globalisation – a cover-up that hasn’t benefited the wider industry at all.

Irregular Customs procedures, lack of financial investment, uncomprehending governments, poor infrastructure, to name but a few, are factors that have conspired to make life more difficult than it should be for forwarders, shipping lines and airlines, but that is beginning to change. Logistics and freight is beginning to get the recognition that it deserves; never has the opportunity been better for bodies such as TIACA to capitalise on that.

Additionally, as governments the world over struggle to kickstart their economies – and in many cases with not a clue as to how to do it – they are starting to turn to the more innovative private sector which, along with its workforce, knows a thing or two about streamlining processes, introducing efficiencies, in a bid to turn a profit. And as governments – and in air freight’s case the UN body ICAO – start to listen, now is certainly the time to speak to them.

So what needs to be done? Well, TIACA has identified several points. Customs procedures are critical. Border delays are particularly harmful for air freight, whose USP is speed. Customs processes need to be modernised, automated and quick.

Equally important, traffic rights for all-cargo carriers should not be determined by the passenger business, but by the economic argument for shippers and countries. Likewise sustainability - CO2 emissions would fall by 12% if countries made proper air traffic management improvements, while noise pollution at airports could be better managed - and would allow for cargo night flights - if there was, for example, better land-planning and noise abatement procedures.

There are many things which could help make air freight a viable industry, and it is up to its members to start acting locally to make it happen.

For some companies, it will all be too late. This isn’t going to be a quick process. A handful of people can’t change everything, globally, now. But as all-cargo carriers struggle beyond the odds to keep flying, there is more reason than ever for the industry to speak with one voice and make changes. The list of once-strong all-freighter operators, who are now distressed in some way, gets longer by the day. We owe it to those who battled to set up an airline - not a job for the faint-hearted - to ensure that freighters are still relevant, and could be profitable again if they had better traffic rights, an understanding from authorities that they have a role to play - they simply need to be allowed to play it.

And, on the week before the CNS partnership conference (IATA’s US arm) begins in Phoenix, let’s hope that the industry turns talk into action. Now is the time.

Excellent Rail Industry and Port Trends Article

Rail Industry Trends Article
Panama Canal expansion spurs railroads, ports to prepare for new business

Rail Industry Trends

— by Julie Sneider, assistant editor

As the $5.25 billion Panama Canal expansion nears its 2015 completion to allow supersize, "Post-Panamax" cargo ships to pass through on their way to markets farther north, eastern U.S. ports and a number of railroads are gearing up for an anticipated increase in international intermodal traffic in the coming years.

East and Gulf Coast port authorities are developing and deepening their harbors in preparation for the influx of giant ships, and eastern railroads are building or expanding on-dock rail facilities, building intermodal centers or advancing other plans to accommodate an expected increase in freight traffic.

The aim of the multi-stage Panama Canal expansion project, which began in 2007, is to enable giant cargo ships coming from Asia to pass through the 51-mile canal's channels. The construction entails two sets of locks, one on the Pacific and one on the Atlantic side of the canal, with each lock containing three chambers with three water reutilization basins, according to the Panama Canal Authority's website.

The project also involves widening and deepening the navigation channels in Gatun Lake, and deepening the Culebra Cut, which required four dry excavation projects. In mid-March, the canal project reached a milestone when dredging work was completed at Culebra Cut, the narrowest point in the canal's navigation channel.

When the entire expansion is completed, it will be the largest project taken on by the canal since its 1914 opening and will double its capacity, according to canal officials.

Among railroads anticipating a bump in intermodal traffic after the bigger canal opens is Florida East Coast Railway L.L.C. (FEC), the only rail provider to south Florida's ports. Based in Jacksonville, Fla., the 351-mile regional is working with PortMiami andPort Everglades to build on-dock rail facilities as part of their expansion programs, which FEC execs view as a big part of the railroad's strategy to grow intermodal traffic.

"We're prepared to handle the cargo, and we've got plenty of capacity," says FEC President and Chief Executive Officer James Hertwig.

Getting Miami Back On Track

In Miami, FEC is part of a plan to reconnect the port with freight-rail service, which was suspended after a hurricane in 2005. The public-private effort has involved reconstruction of a 4.4-mile port lead, which was the original rail mainline to the port; rehabilitating the bascule bridge that connects the port to FEC; constructing an on-port rail facility; and expanding FEC's rail yard to make room for more traffic.

FEC is contributing $9 million to the $50 million project, with the remainder coming from federal, state and port sources.

"By summer 2014, we'll have the on-dock rail facility fully operational, which means that from PortMiami we can hit 70 percent of the American population in a matter of days," says PortMiami Director Bill Johnson. "It will allow us to double stack containers directly to Jacksonville in under nine hours, and connect to Norfolk Southern Railwayand CSX directly to the heartland of America."

Two additional PortMiami projects are under way as part of $2 billion in capital improvements to accommodate the bigger cargo vessels: construction of a four-lane tunnel that will run under Biscayne Bay to connect the port directly to the interstate system; and a $77 million dredging project to deepen the port's channel to 50 feet. The tunnel is scheduled for completion in summer 2014 and the dredging in late 2014 or early 2015.

"When the Panama Canal opens at 50 feet, Miami will be the only port south of Norfolk, Va., at the same depth on the East Coast, and that will be a huge advantage," Johnson says.

Johnson anticipates PortMiami will register an upturn in business starting in 2015. By the decade's end, the port should reach 2 million 20-foot equivalent units (TEUs) — it's just under 1 million now — and 3.5 million TEUs by 2025.

In addition, commercial real estate firm Flagler, an FEC sister company, is developing the South Florida Logistics Center adjacent to FEC's intermodal center in Miami. The center will offer shippers transloading, perishable- and dry-freight warehouse capabilities, helping them reduce drayage costs, Hertwig says.

Meanwhile, FEC broke ground in January on an on-dock intermodal container transfer facility that the railway is building with Port Everglades in Fort Lauderdale. That facility, slated for completion in 2014, will help eliminate about 180,000 truck trips by 2029, according to the port's website.

Also in the works is a Port Everglades project to deepen and widen its navigational channels from 42 feet to 50 feet, and double the number of berths. The project is expected to wrap up in 2016. Moreover, the Florida Department of Transportation, in partnership with the port and Broward County, is overseeing construction of the Port Everglades Eller Drive Overpass, which will elevate a section of Interstate 595 to enable trains to access the port on ground-level track. That project is expected to be completed in mid-2014.

"Within a couple of years of the Panama Canal expansion, you will have two ports with 50 feet of water and on-dock rail," Hertwig says. "And Port Everglades is a unique terminal because it will be for international cargo, but it also will be a domestic facility, where we will bring 53-foot containers in and out of the same facility."

Class I Interchanges In Jacksonville

FEC's traffic moving north of Florida via rail will interchange in Jacksonville with NS or CSX Transportation, whose preparations for the canal expansion are part of the Class Is' broader strategies to manage growth in international freight entering eastern U.S. ports.

Over the past decade, NS and CSX have experienced a shift in international traffic via the East Coast ports, say execs for the two Class Is. They trace that trend to the 11-day shutdown of West Coast ports in 2002, when 10,500 longshoremen were locked out during a contract extension dispute between the ports and the International Longshore and Warehouse Union (ILWU).

CSX has been preparing its infrastructure to support additional traffic "however it wants to come onto the CSX network," says CSX Vice President of Intermodal Bill Clement. That means ensuring the Class I has seamless connectivity to western railroads so that freight flows through Pacific ports. On the East Coast, CSX has taken a similar approach by locating near-dock or on-dock rail facilities to move freight entering the ports, he says.

An example of CSX's infrastructure preparation? Clement cites the National Gateway initiative to create a more efficient double-stack route between mid-Atlantic ports and the Midwest markets. And a cornerstone of the double-stack corridor is CSX's Northwest Ohio Terminal that opened in 2011 near North Baltimore, Ohio.

"One of our main objectives at that terminal is that, whichever port the freight comes over, we'll be able to take it into that facility and get it out to the important destinations in the Ohio Valley and the Chicago market very reliably," Clement says.

Other CSX efforts to improve the flow of double-stack traffic through the East Coast are the Liberty Corridor Freightway, a public-private partnership that offers expanded access to the Port of New York and New Jersey (PANYNJ); the expansion of an on-dock rail facility at the Port of Savannah, Ga.; and construction of a new, near-dock intermodal facility near the Port of Baltimore that will enable CSX to operate double-stack trains from the port's Seagirt Marine Terminal. The new facility will be located south of the Howard Street Tunnel, which lacks double-stack clearance.

All the East Coast ports have been "working hard" to accommodate the larger cargo vessels, and "all have obstacles to overcome in getting them to where they would like to be," Clement says, noting the PANYNJ's Bayonne Bridge project to raise the structure's navigational clearance from 151 feet to 215 feet — enough to accommodate the larger ships.

"We think we are in a good position as far as connectivity on the ports," Clement says. "Our focus now is to make sure that we have the inland capacity, and we're doing some targeted expansion projects to handle that."

Taking A Two-Step Approach

The shift in international traffic direction prompted NS to take two key steps: tighten its relationships with East Coast ports and launch an infrastructure investment program to increase capacity through multiple corridors, says Jeffrey Heller, NS group vice president for international intermodal.

"We reinvigorated our discussions with our East Coast partners about having more on-dock rail, more capacity for on-dock rail, and more synergy between the railroads and all the ports" to reduce costs in order to be more competitive with short-haul truck markets, he says.

In 2012, about 60 percent of NS' international business moved through the East Coast ports versus 40 percent from the West Coast.

The thinking behind the infrastructure investment program was to offer shippers as many options on the NS network as possible "so that, at the end of the day, as an Eastern railroad, we really won't dictate whether the box moves from the East Coast or the West Coast," Heller says. The program included the Heartland Corridor project, a $200 million public-private venture among NS, federal and state governments to enable double-stack international freight capabilities by increasing clearances through some 30 tunnels between Hampton Roads, Va., and the Midwest.

"That has allowed us to take 250 miles or a full day off our route between Hampton Roads and Chicago," Heller says.

Then there's the joint venture between NS and Kansas City Southern to manage the 320-mile Meridian Speedway between Meridian, Miss., and Shreveport, La. The joint venture investment means "we now have additional capacity and velocity between what primarily are the Southeast ports and Dallas," says Heller. "And it facilitates business from southern California to Atlanta."

NS execs also consider the railroad's new Crescent Corridor service, developed to bolster domestic intermodal business, as a complement to business coming through the East Coast ports, Heller says. The corridor features new intermodal terminals in Birmingham, Ala., and Greencastle, Pa., and will sport a future terminal in Charlotte, N.C., that will be able to serve international intermodal customers.

Once the expanded Panama Canal opens, the growth in related traffic will be gradual, Heller believes.

"It's not going to be this surge or tsunami of freight that some people imagine will happen," he says.

East Coast ports and the railroads that serve them aren't the only ones planning for new business opportunities after the expanded canal opens. Texas state transportation officials, too, have been examining how the state's Gulf Coast ports might capture new maritime cargo activity. Last year, the Texas Department of Transportation (TxDOT) organized the Panama Canal Stakeholder Working Group, which was charged with identifying projects that would put the state in a better position to take advantage of the canal's expansion.

BNSF Railway Co. and Union Pacific Railroad were members of the group, which recommended TxDOT draft a formal Texas Freight Plan and work with railroads, Texas ports and other stakeholders to support rail capacity projects that would accommodate growth in imports and exports.

Costs Will Influence Cargo's Direction

UP has been investing in its intermodal network regardless of where freight is coming from, says spokesman Tom Lange.

"We haven't really been preparing for the Panama Canal expansion specifically," he says, adding that UP continually invests in expanding its network capacity.

How or whether freight flows change after the expanded Panama Canal opens will depend on multiple factors, such as time sensitivity of cargo and costs associated with transporting freight through West versus East Coast ports, says Lange. The cost to expand the canal and the billions invested in East Coast ports to handle the bigger ships will "have to be recovered somewhere," he adds.

"We feel pretty good that the total imports going into the U.S. will go from about 30 percent to 33 percent [after the Panama Canal expansion]," Lange says. "We also feel that the total volume of imports will continue to grow. And with our investments in our overall network — and specifically in our intermodal business — we're prepared to handle an influx of ongoing growth in that business."

One question that won't be answered until after 2015 is whether all the East Coast port expansions will amount to overbuilding, as some media reports have suggested.

PortMiami's Johnson is confident in his answer: No way.

"Economists tell us that within the next 20 to 25 years, a minimum 35 percent of GDP will be based on international trade. That's a huge, important fact to understand," Johnson says. "You have to continue to improve and strengthen your ports. Not every port needs to be super Post-Panamax ready, not every port needs to be at 50 feet. But ports need to continue to reinvest in the right strategic investments."

With Miami being the first U.S. port north of the Panama Canal, it must be Post-Panamax ready, and that includes immediate access to rail infrastructure, Johnson adds.

That's music to Jim Hertwig's ears.

"I think it's going to be great for the railroad," he says of FEC. "At the end of the day, it's all about the customers making the decision based on price and time to market. And we already have had pilot shipments where we've moved cargo from ships from Asia to the southeast and had it at destination before the shipper ever got to Savannah. So, I believe we will have not only a service advantage, but a cost advantage in that equation."

Related articles

Colliers International Port Analysis: CapEx or Capsize

How air freight could prevent modal shift – by listening to its customers

How air freight could prevent modal shift – by listening to its customers by Alex Lennane in Dallas

The air freight industry could prevent further modal shift – and even boost volumes - if it responded better to the needs of the shipper, delegates at TIACA’s Executive Summit in Dallas heard last week.

In a speech littered with the word unprofessional, Robert Mellin, head of distribution logistics for Ericsson, revealed that the air freight industry is failing to make itself attractive and failing to compete on service levels with other modes of transport.

Top of the shippers’ wish list, he said, is shipment visibility and electronic communication, something that other modes of transport have already put in place.

“It is very important to know very, very fast if there is a problem,” said Mr Mellin. “We need better e-services, which we get with other transport modes. Each year we fly the equivalent of a 747 filled with documents. This is an area which can really improve.”

But, he added, the most irritating aspect to air freight – which he said would drive him away from it - is unexpected surcharges.

“All these surcharges are popping up, and our logistics service providers (LSPs) say we have to take them. We say: No way. We have a budget and we cannot just increase it. It is not a professional way of working. Ad hoc charges are no good and we need a more stable way to work. It just drives me away from air freight.” He added that this did not include the fuel surcharge, which was understandable but should be calculated in a more transparent way.

In a wide-ranging speech, Mr Mellin explained that despite Ericsson reducing its air freight usage to just 20% of its shipments, it remained a critical mode of transport for the communications company.

But he said that airlines could improve their service and make the mode more attractive to customers. Calling for a more direct relationship between carriers and shippers, he said that not only would this help to optimise processes, but it was the job of the airlines to support shippers with the latest security and safety regulations. “There needs to be less pain around regulations,” he said. “Airlines need to take a more active role, to help us as a customer know what it all really means.”

In an open discussion later, Mr Mellin said that he was worried. “You have talked about a lot of things,” he told the airline crowd. “What we try to do is understand the customer, the guy who holds the phone. And we have been sitting here for an hour, and I have not once heard CO2 mentioned. You are focusing so much on certain things, but forgetting to talk about what your customers really want.”

Ericsson is just the latest in a line of shippers and retailers from consumer-facing industries which have called on the airlines to establish transparent and standardised data on their emissions. In sea freight, the Clean Cargo Working Group gathers information which allows shippers to judge carbon emissions by ship and trade lane. Air freight has yet to devise an industry standard, which prevents shippers from measuring their own emissions. This is an increasingly critical issue for multinational companies.

“Airlines need to align their systems to report on CO2 emissions. I still have not seen a solution. My calculation for CO2 is like sticking my finger in the air. It is unprofessional and embarrassing. And we have been asking for 10 years. The companies that are not investing in new aircraft should not get the cargo.”

When asked whether he would pay more for a low emission aircraft, he replied: “It depends how much more. But it is very important to us.”

Despite Ericsson’s requirements, Mr Mellin said that the company was unlikely to reduce its air freight usage any further, pointing to three core reasons for air freighting some shipments. Emerging markets, he said, leapfrog other countries in their technological development, and there was not time to put things on a boat. He also cited unpredictable fluctuations in volumes, and customer unique materials: equipment designed for specific customer needs with one-off production. “It is extremely expensive. The customers cannot wait, and we have too much capital bound up in the shipments to wait.”

But in 2010 Ericsson, which has moved out of the production of mobile phones, sent 46% of its shipments by land or sea. In 2012 that changed to 69%, rising to 80% this year.

“You should be suicidal if you do not want to get out of air freight,” he noted. Referring to the volcanic ash cloud which disrupted  aviation in Europe, he said: “I loved that volcano. Because it forced us to think differently and find a new solution. And it forced our customers to open a dialogue with us and talk properly about lead times.”

Alex Lennane in Dallas | April 23, 2013 at 1:12 pm | Categories: Air, Loadstar posts | URL: http://wp.me/p29NNe-3pc

Related articles

IATA e-waybill to become widely accepted, says British air freight assoc. (BIFA)

Forwarders will lose business if they fail to adapt to e-freight, airlines warn

Shipping has won a tenth of global air cargo volumes

Shipping lines could save $10m by cutting 30 minutes off port calls

By Gavin van Marle in Amsterdam

11.28.2012 · Posted in Loadstar posts, Sea  Add to favorites

 

Hapag-Lloyd

Shipping lines could save millions of dollars in fuel costs if time spent in ports was decreased by even the most marginal amounts, claims new analysis from container shipping consultancy SeaIntel.

The company, in conjunction with industry group the Global Institute of Logistics and software provider Cirrus Group, set out to discover what the effects would be on a scheduled liner service if the time it took for a port to berth a vessel was incrementally reduced. The study focused on time savings that could be made through the optimisation of the berthing process, from the point a ship arrives, on time, at its station.

The results are nothing less than startling. By reducing the berthing time of a vessel in and out of ports, an extra lag is created in the liner’s schedule which the shipping line can use to slow down the vessel en route to its next port of call by the equivalent amount of time saved in the previous port.

“If the berthing process is systematically reduced in a given port, this will allow vessel operators to slow their vessels down slightly, and still be able to berth in a timely fashion. Of course, this is only possible if the process improvement is a genuine time saving, and hence the port changes the time set aside for the berthing process,” the paper says.

The study had to make a few assumptions, given that the possible financial savings made by carriers would be derived from subsequent fuel savings made by being able to cut vessel speeds between ports. In this case, it used the fuel consumption data for the 11,400teu CMA CGM Andromeda.

The cost of fuel consumption does not work in a linear fashion – the savings made from reducing a vessel from 18 knots to 17.9 knots are greater than reducing from 14 knots to 13.9 knots. So the savings made by shipping companies on fuel costs depend on the speeds that the ships are able to reduce from. If a port was able to reduce berthing time by two hours, which was then built into a 200-mile trip to the next port, the line would save $2,000 per port call if the vessel was steaming at 14 knots, and nearly $6,000 if it was steaming close to 19 knots.

But when this type of saving is multiplied across a scheduled container liner service, where vessels of identical size would be calling at the same port on a weekly basis and steaming at the same speeds, SeaIntel calculates that a 11,400teu vessel would see annual savings of between $150,000-$300,000, depending on the currently scheduled speeds, at that one port – although there appears to be something of a ceiling on savings, depending on the distances from the previous port in the string.

“We find that savings tangentially reach a maximum level after a certain distance. However, that distance depends on the time saving obtained in the port. Generally we find that more than 90% of the savings are obtained with a port-to-port distance below 500-600 miles,” it said.

Nonetheless, if berthing time reductions can be achieved across a string of ports on a particular service, the savings can be magnified. A typical Asia-Europe service calls at eight to 12 ports. If five of those ports can reduce berthing times by half an hour, the study concluded that almost $10m can be saved annually from reduced fuel consumption on the trade as a whole. If those five ports can reduce berthing times by three hours, the annual savings on the trade would jump to $40m.

The next step was to extrapolate that calculation out to the global liner industry, with the result that if five ports per string were to reduce berthing times by three hours the industry would stand to save $180m by improved optimisation of slow-steaming techniques.

Clearly, the actual savings remain hypothetical – sailing speeds vary according to a variety of factors; fuel consumption depends on the ratio of laden and empty containers; port productivity can vary wildly and so on – but the potential benefits to the liner shipping through even marginally improved, but consistent, berthing efficiencies are huge, and would give ports an important competitive tool.

“A port which improves berthing times by a few hours can easily argue that instead of offering a carrier a reduced handling charge, the carrier is getting the value straight from the bunker fuel savings,” it concluded.

• Share this:
• Share

•  

3 Responses to “Shipping lines could save $10m by cutting 30 minutes off port calls”

1. Kevin monteath says:

November 28, 2012 at 2:32 pm

With the ships getting bigger, and the old system of joint service, this time saving will not be possible at ports. The shipping giants need to address these points of port services in respective countries. Bigger and more containers, and joint service with partners bring in more cargo, hence the port authorities need to understand this and bunker cost. I am sure the pencil can be sharpened to save shipping lines millions of dollars… My views..

reply

1. Mike Harrison says:

January 3, 2013 at 5:18 pm

If you want to save time when berthing, the pilot and master must have confidence in the approach manoeuvre, should know the permitted berthing speeds and angles of the installed fenders, and have the right Portable Piloting Units (PPUs) to see the full picture. The cost is peanuts compared to the savings on more efficient operations. At Inshore Systems we advise clients on reducing risks and cost without compromise.

Perhaps container lines should consider equipping pilots with PPUs as well as reviewing the fenders on the berths they use. Small investments will pay large dividends.

reply

1. Ted Daly says:

March 28, 2013 at 12:28 pm

The real savings comes about by evaluating and determining the best schedule to keep for the entire round trip voyage of the vessel. While I agree pilot time and maneuvering are two critical components of a port stay, many times there is little to no opportunities to save enough time to justify slow steaming unless you have a good amount of pilotage time, considered over 2 hours in duration. Most pilots and vessel captains work hand in hand to get the vessel quickly to the dock, as long as the weather conditions allow for that safe transit. So it is hard to find more time there.
The real savings comes at the dock. Vessel clearance by authorities can take up to 2 hours in some locations. Stevedoring time or the production and the number of gangs put on the vessel upon arrival also is a contributing factor. With ever larger move counts and larger vessels stowage planners need to know each port limitations intimately and make sure the vessel is stowed in the most efficient manner to allow for the most gangs and best productivity, decreasing the total port time. As an example, with a move count is 3,500 and 4 gangs to total port stay would be 35 hours, at 25 GMPH/Gang. With the same move count and production with 6 gangs you can save almost 12 hours of port time. This can be a more realistic and sustainable time savings opportunity than just saving 30 min of pilot time or maneuvering time at a few ports of call. Manage to save this kind of time over 8 to 10 port calls and you can save up to 120 hours per round trip, that is 5 days saved, now that is a significant amount of time and the vessel could then save money by slow steaming. Roll it all together, stevedoring time saved, reduce time in port, better pilot times, slow steaming and you can make a significant impact on the overall cost of operating a vessel.

reply

• Rick Eyerdam says:

April 9, 2013 at 3:34 pm

Your comment is awaiting moderation.

Great comments. Tideworks Technology among others can improve the loading/off-loading configuration and some scheduling. Ted is right on but he needs to take it to the next step in the logistics chain gang. Are there enough roadworthy chassis, TWIC empowered truck drivers, or space to store containers that must wait days for a move? When does demurrage kick in? Are the gates fast enough – in and out — and what about the highways?

Then there are the train intersection issues. In short fast cranes and agile gangs are essential unless the fill the yard so fast the cargo is bogged by its own time-sensitive volume.

These are some of the issues we are trying to reduce to the least common denominator as part of the stand up of the Caribbean Maritime Exchange.

 

Fitch: Virginia Port Decision May Hurt Other Privatization Attempts

Fitch: Virginia Port Decision May Hurt Other Privatizations

NEW YORK -- 

Virginia Port Authority's decision to discontinue negotiations with two potential lessors of its ocean terminals may create negative momentum for other large port privatization projects because of the length of the negotiation, the strong brand names of the bidders, and the meaningful pricing that was considered. It would have been the first privatization of a major U.S. port facility. In our view, the privatization of smaller, individual terminals is less likely to be affected.

The authority had received bids from APM Terminals, a group headed by JP Morgan IIF Acquisitions, the port's existing operating unit, and two other firms that dropped out. The process began in 2011, and estimates of the lease payments were in the $3 billion to $4 billion range over 20 years. In 2009, three parties approached the port with bids to operate the port. They were also turned down by the state. The port's board is opting instead to reorganize the port's structure, integrate the operating unit, and cut costs through the elimination of duplicate management positions.

We believe that those contemplating similar large port privatizations will consider this decision and the events surrounding The Dubai Ports World bid for six major U.S. ports in 1996. Both were politically complicated and suggest that future privatizations will be similarly challenging. We would expect the privatization of smaller, individual terminals to continue, as they present smaller political challenges.

We anticipate no rating action as a result of this development. We have always included the port's existing structure as an operator in analysing the Virginia Port Authority's credit.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed atwww.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Port of Goof: Obama's Chinese crane cover-up - Guest opinion

Henry PayneDetroit News editorial cartoonist, columnist

 

On top of Solyndra bankruptcies and LG Chem boondoggles, President Obama’s green stimulus has been dogged of late by tales of China snapping up insolvent American companies – A123 Systems, Fisker Auto – into which Uncle Sam has sunk millions of taxpayer dollars.

So the president was no doubt relieved to be in Miami last week touting good ol’ infrastructure stimulus employing good ol’ American construction workers.

The project? A Port of Miami tunnel. Infrastructure! Government investment! Jobs! American jobs! The better to compete with China! Trouble is, the giant cranes the Port of Miami uses to offload ship containers are giant gantry cranes Made in China.

What?

 

CNN

China is the secret sauce in U.S. infrastructure projects these days. Thanks to its cheap labor, huge bridge spans (the Bay Bridge in San Francisco, Alexander Hamilton Bridge in New York, the new Detroit-Canada bridge – which was likely to be made with Chinese steel until union outcry guaranteed its U.S./Canada origin) and giant cranes are constructed in China – then shipped to their U.S. sites.

But rather than acknowledge the global nature of 21st century commerce, the Big Labor stooges in the White House decided to cover up the fact the president’s American Jobs Speech would have Made-in-China cranes as its backdrop.

So they draped American flags over the ZPMC (Shanghai Zhenhua Heavy Industries Company) logos on the cranes. And then one of the flags fell awry – exposing the cover-up (or lack thereof). See nearby before/after photos from CNN.

 

You can’t make this stuff up. Bravo to Alexander Mooney of CNN for his sharp reporting. Raspberries to the White House advance team.

 

Henry Payne is a columnist, editorial writer, and award-winning editorial cartoonist for The Detroit News. A twenty-five year newspaper veteran, the Pulitzer Prize-nominated satirist produces 12 cartoons a week for The News and United Feature Syndicate. Payne is also a contributor to National Review, The Wall Street Journal, The New York Post, and other national publications. HisNews column appears every Tuesday online.

 

Related articles

American Flag Used to Hide Obama PR Problem

Chinese company's logo conveniently absent from White House photo of Obama's US infrastructure speech

Busted! Obama touts American infrastructure in front of Chinese crane

Securing the Air Cargo Supply Chain - Guest opinion

 

Securing the Air Cargo Supply Chain

Geneva – The International Air Transport Association (IATA) identified four priorities to make air cargo more secure and urged stakeholders to move forward on the implementation of the Secure Freight principles. Secure Freight was initiated by IATA to promote global security standards in order to facilitate safe, secure and efficient operations of air cargo.

“The stakes are high. If regulators and governments lose confidence in the security of air freight, then bureaucracy will increase and ultimately some items may not even be viable to be air freighted. Commerce as we know it would look very different,” said Tony Tyler, IATA’s Director General and CEO.

Speaking at the Secure Freight Forum held at IATA’s offices in Geneva, Tyler noted that nearly 50 million tonnes of cargo are transported by air each year. This translates to $5.3 trillion of business which accounts for about 35% of the value of goods traded internationally.

“Governments and industry share the goal of keeping air cargo secure. That is the common ground for closer cooperation, harmonization of regulations, global capacity building and the long-term commitment that is needed,” said Tyler.

Tyler called for:

• Closer cooperation between all stakeholders: A team effort engaging the entire air cargo supply chain and governments is necessary to enhance and deploy global standards for security.
• Harmonization and convergence of regulations: The International Civil Aviation Organization should be the focal point for this work, which could embrace a roadmap for states to obtain mutual recognition of cargo security regimes.
• Global capacity building: Mutual support among governments will strengthen the security network. There are already good examples of this, such as Canada assisting Mexico with security programs for cargo and passenger traffic
• Long-term commitment: Harmonization and recognition of air cargo security requires a continued commitment from all parties over the long-term.

These priorities converge in the Secure Freight principles. Eight pilot schemes around the world have demonstrated that the tried and tested Secure Freight standards offer states a robust security regime as well as significant economic benefits. A case study of the Secure Freight pilot in Malaysia shows that the benefits anticipated from full national implementation of Secure Freight are estimated to be $350-600 million annually.