Although the US is the world’s leading economy, the country does not have a port infrastructure to match. The World Economic Forum now ranks US port infrastructure competitiveness as 23rd in the world. At a time when US exports are increasing and other global players understand that port innovation and capacity are key to competitiveness in an export-driven economy, investments in American port and inland waterway cargo-handling facilities  are falling behind countries like Iceland and Estonia in relative terms.
A new report by the American Society of Civil Engineers (ASCE) points out that the nation’s seaborne trade is being hit hard by a lack of investment in key shipping infrastructure. Unless funding improves for US ports and waterways, their deteriorating condition is likely to cost jobs, impede economic growth and reduce US competitiveness in the global market.
The ASCE study, entitled “Failure to Act: The Economic Impact of Current Investment Trends in Airports, Inland Waterways and Marine Ports Infrastructure”, highlights the years of neglect to which the country’s waterborne trade infrastructure has been subject. The industry experts that carried out the investigation estimate that America will need investments totalling around USD 30 billion through 2020 to repair the key port interfaces and inland waterway lock arrangements. Unfortunately, as things stand, only USD 14 billion has been earmarked for the purpose.
According to ASCE, USD 42.2 trillion worth of goods passed through the country’s ports in 2010. The Society’s report estimates that failing to address infrastructure needs could result in annual losses of USD 270 billion by 2020 and a USD 697 billion drop in gross domestic product, or 738,000 jobs.
A key driver of the need to improve US cargo-handling capabilities in the years ahead is the opening of the new, enlarged Panama Canal locks in the first half of 2014. The new link will enable the passage of container ships able to carry up to 12,500 twenty foot equivalent units (TEUs) and introduce a new era in logistics planning for US shippers and importers.
China, Korea and The Netherlands not only surpass the US in “post-Panamax readiness” but also lead in terms of container traffic. According to a newly published Colliers International white paper on port logistics, the top 70 North American container ports handle approximately 45 million TEUs per year, of which Mexico and Canada are responsible for an aggregate 8.7 million TEU. In contrast China, home to six of the world’s 10 busiest container ports, processes 130 million TEUs annually. The US is only able to crack the global top ten standings by combining the throughputs of Los Angeles and neighbouring Long Beach to yield a 14 million TEU total.
The opening of the enlarged Panama Canal will mean that US East Coast ports will grow more quickly than their West Coast counterparts in the years ahead. The four principal western ports of Los Angeles, Long Beach, Oakland and Seattle are already able to handle post-Panamax container ships.
By the time the new waterway is opened, four East Coast ports will be able to accommodate post-Panamax size ships. Norfolk is currently post-Panamax ready and Baltimore will be by the end of this year. Miami, where the necessary dredging has been approved and super post-Panamax cranes ordered, will be geared up for post-Panamax vessels by 2015. New York will be able to handle the bigger ships by the end of 2015, the funding required to raise the Bayonne Bridge having now been cleared.
Colliers defines a port as being post-Panamax ready when it has a channel depth of 50 feet (15.25 metres) with sufficient channel width and turning basin size; cranes capable of loading and unloading post-Panamax ships; and terminal docks engineered to handle the new, bigger cranes required for such vessels.
For a port to enable the smooth flow of container traffic inland freight links are as important as ship-handling arrangements. Historically, road vehicles have been the preferred mode of transporting containerised goods inland from North American ports while railways and inland waterways are favoured as the means of carrying bulk commodities to ports for export.
However, the rail mode is now being utilised to an increasing extent for containerised movements to and from ports. The switch is being prompted by volatile fuel prices, shortages of qualified truck drivers, highway traffic congestion and the improved speed and reliability of rail freight connections. The development is being facilitated by the rise to prominence of over 20 rail-connected intermodal hubs at strategic US inland locations.
While the opening of an enlarged Panama Canal and the flowering of intermodal hubs present opportunities, the latest North American infrastructure developments are not without their risks, as highlighted by the Colliers International white paper.
Top of the list of concerns is the current parlous economic situation. China’s slowing GDP growth, and Europe’s debt crisis, each threaten global trade. Reduced traffic flows, in turn, could mean a dramatic drop in fees that port authorities need to collect to maintain and upgrade their facilities.
Intra-regional port competition is another consideration. Some ports in Canada and Mexico have used incentives to steer container traffic bound for US destinations to their terminals. From there the cargo enters the US via rail, thus avoiding American port taxes which support harbour maintenance. The duties levied on ships pay for not only port dredging, security and infrastructure arrangements but also the maintenance of inland waterway connections.
Environmental inaction, too, has been identified as a cause for concern, as incentives and financing mechanisms are required for port authorities to maintain momentum on the greening of their facilities. In addition, some environmental initiatives, such as the electrification of gantry cranes and automation of port facilities, face resistance from organised labour.
As part of the march of progress, port authorities and multinational shipping companies have turned to leasing companies to help upgrade facilities and finance post-Panamax port equipment. For its part the International Longshoremen’s Association (ILA) fears that these new private owners will employ non-union labour or turn to other labour unions, such as the use of electrical workers to operate the new electric gantry cranes. In the face of concerns about the loss of jobs to port automation and the transfer of ownership of intermodal equipment, the ILA holds the threat of strikes as its ultimate weapon.
A final risk identified by Colliers is the potential roadblock of state budgets. Five of the top ten US container ports are located within states ranked in the bottom ten for fiscal soundness.
As an example, Chicago, the most vital intermodal metropolitan area in North America, is located within Illinois, the most fiscally distressed US state. Chicago’s most pressing intermodal congestion issue is the fact that passenger rail traffic must share lines with freight trains. While the cost to cure Chicago’s congestion problem would be USD 3 billion, it is unlikely that the city can expect this kind of funding from a state operating a USD 500 million annual deficit.
In the final analysis increasing port funding is going to be a difficult sell for US taxpayers, who feel pinched already. However, the start of the new post-Panamax era in global freight movements, rising fuel costs and growing US exports, not least of agricultural products, reinforce the importance of smooth port operations to the scale needed. Not to invest in the necessary infrastructure would be a false economy.
Source: BIMCO