Post-Panamax containerization presents new port challenges

QUEBEC – Containerization is the most lucrative trade for ports, says a University of New Brunswick civil engineering professor specializing in transportation, but its highly competitive nature and requisite capital investment make it risky business.

Global containerization is expected to double over the next decade, Michael Ircha told delegates at the recent Canadian Marine Pilots’ Association Conference in Quebec City. Container flow to North America is predicted to soar by 75 per cent from 41.1 million TEUs to 72 million TEUs by 2015, with most of it coming from China and other Asian countries.

While the bulk of that business will continue to flow to North America’s West Coast, Asian traffic to the East Coast via the Suez Canal and Mediterranean is on the rise.

“In 2004, some 22 per cent of Asia-U.S. traffic moved through East Coast ports compared to 78 per cent via the West Coast,” Dr. Ircha related, “but, in that same period, Asian trade to the East Coast increased at almost twice the rate of growth of the West Coast due to delays at West Coast ports.”

Vancouver’s Deltaport and other terminals in the Burrard Inlet have already faced delays. “Intermodal congestion led CN and CP to take the unprecedented step of cooperating with each other in sharing regional rail line capacity to move containers and other freight more quickly and efficiently,” Dr. Ircha noted.

Reducing the amount of time a container remains at a port would make a big difference, he emphasized. “By limiting the time for free container storage, shippers have a financial incentive to remove their containers from the terminal more quickly.”

Operating on a 24/7 basis, as most European ports already do, is essential to keep containers moving, he suggested. Another way is to reduce gate congestion. Los Angeles and Long Beach have introduced a PierPass system that charges the owners of containers leaving the port at peak hours an extra $40 per TEU. Other innovations include the Internet reservation system that Vancouver and other ports have installed to enable truckers to schedule arrivals. The Container Terminal Altenwerder (CTA) in Hamburg is using fully automated ground vehicle systems and double rail mounted gantry cranes to load and unload cargo faster.

As more of the world’s fleet converts to post-Panamax ships with 6,000-plus TEU capacity, ports everywhere are reassessing how they can fit into the hub-and-spokes model of transshipment expected to become reality with cargo on- or offloaded at fewer huge ports for transshipment elsewhere by rail, trucks or short-sea shipping.

To become a hub, Dr. Ircha said, a port must be centrally located to main shipping routes and feeder ports in both time and distance. It must be able to accommodate post-Panamax ships in terms of water depth, harbour space and appropriate container lift equipment, and have excellent intermodal links, high productivity (the number of container moves per ship every 24 hours), competitive rates and tariffs, and reliable labour. Shipping lines will also increasingly demand guaranteed window berths, additional labour and equipment capacity to meet peak cargo times (such as leading up to Christmas), dependable security and competitive pricing.

Space has become a major factor. Plans to expand container facilities at the ports of Vancouver, Fraser River and Prince Rupert will add between 3.4 million and 4.9 million TEUs, Dr. Ircha noted, well beyond the 2.7-million-TEU increase forecasted for the region. Nevertheless, concerns about capacity limitations at West Coast ports is prompting Asian shipping lines to reorient some trade through the Suez Canal to North America’s East Coast.

Several East Coast ports could potentially establish themselves as hubs, Dr. Ircha suggested. Halifax is a leading contender with its natural depth and two terminals operating at less than full capacity. The nearby Strait of Canso is another possibility with its deep water, big harbour, and large treks of undeveloped industrial land that could be converted into container terminals, but it would need a captive market (which could be Halifax, only 240 kilometres away) and upgraded rail facilities. Although Saint John is somewhat off the main shipping routes, its proximity to New England markets could make it a hub, especially if new container facilities were developed in the outer harbour, but it would also need much better rail connections.

Sept-Îles presents another interesting option, if transshipments were made by short-sea shipping to Montreal or farther through the Great Lakes to Chicago and/or other Midwest ports, Dr. Ircha said. Along with a deep-water harbour, Sept-Îles has a labour force experienced in handling large bulk ships. Its more remote location could also provide greater security than an urban port. Cabotage restrictions and Seaway tolls, however, might be drawbacks, along with the closing of the St. Lawrence Seaway and Welland Canal for three months.

“The difficulties of finding alternative transport and the likely higher intermodal costs involved – due to the loss of volume and ‘loyalty’ discounts by rail – would probably cause shipping lines to continue with their current, well-established intermodal contracts through Montreal, Halifax or New York,” Dr. Ircha stated.

Hub contenders would have to prove they’re up to snuff. The owners of mega-ships are demanding productivity levels that are higher than the Canadian norm, Dr. Ircha emphasized. Container stacking densities would need to increase from the current 1,000- to 1,200-TEU average density per hectare to 2,000 to 4,000 TEUs. Sustained ship-to-shore gantry crane productivity must reach 50 moves per hour rather than the current 30 on average. Dwell times in a container yard – which sometimes reach six days – cannot exceed three days. Trucks have to turn around import and export containers within 30 minutes instead of an hour. Finally, rail access has to be an on-dock service rather than just in the port area.

“The evidence to date shows that meeting these standards will not be easy,” Dr. Ircha declared. “North American container terminal productivity tends to be less than that achieved in Asian ports.” One analysis pegged annual ship-to-shore gantry crane productivity at 60,500 TEUs in North America, compared to an average of 95,500 TEUs at Asian ports.

Making the huge investments required to accommodate post-Panamax ships and their container loads runs other risks, Dr. Ircha warned. For starters, there’s no guarantee that shipping will make the shift everywhere to the hub-and-spokes model touted since the early 1990s.

“Recent terminal congestion problems and other difficulties relating to labour relations and inland intermodal services in North American ports have led many shippers and shipping lines to diversify their port options in choosing to serve more than one hub port,” he explained. As a result, 22 new ports (18 of them in Asia) were added to top-tier shipping line services between 1992 and 2002.

Yet consolidation seems inevitable with Shanghai, for instance, building a 25-million-TEU facility on the Yangshan islands with a four-lane bridge connecting to the mainland city about 50 kilometres away.

Security concerns present a strong incentive for building hub terminals in rural areas. “It is not beyond reason to expect that the U.S. and likely Canadian security agencies would prefer to have containers offloaded and inspected in a non-urban setting to avoid the possibility of a terrorist act occurring in a densely populated area,” Dr. Ircha said.

Increasing public demand for access to waterfront land for recreational purposes is another factor. “There is pressure on the Port of Vancouver to curtail terminal operations in the Burrard Inlet as Vancouver’s ‘cappuccino crowd’ seeks additional waterfront lands for alternative urban uses,” Dr. Ircha stated. “In part, the port responded to these pressures by developing its major container terminal expansions at Deltaport on Roberts Bank, far from the city centre.”

Wherever ports are located, they’re going to need better rail and road access to remain competitive. “Part of the congestion problems afflicting West Coast ports over the past year arose from the lack of rail stock to move peak container traffic,” Dr. Ircha said. He praised railway companies for taking some revolutionary steps to handle the burgeoning container market, such as double-stacking containers in special deep-well flatcars, but said railways need to invest additional capital. He mentioned CN’s $125-million investment in rail stock and track upgrades to the new Prince Rupert container terminal being constructed as one example of the investments required.

“In the road mode, considerable concerns are being raised about the lack of drivers for medium- and long-haul container moves,” he said. Labour shortages are becoming a real problem as baby boomers leave the workforce.

Less labour-intensive rail, and short-sea shipping might be part of the solution, especially with higher fuel costs for trucks, and mounting concern about highway congestion and pollution from road vehicles. Short-sea shipping, however, will remain largely hampered, Dr. Ircha predicted, until the United States and Canada loosen up cabotage restrictions so a vessel can enter more than one port in the other’s country.

“It is unlikely that an international operator would mount a one-port-per-country shuttle service in the St. Lawrence and Great Lakes competitive with existing overland intermodal services,” Dr. Ircha said, adding that railways are determined to keep the status quo. “In the past, proposed marine services that tried to compete with the railways tended to fail as the railways generally lowered their rates to discourage such a modal switch.”

To work, short-sea shipping has to prove its reliability, provide high service frequency, involve short transit times, and be competitively priced before many shippers will even look at it as a way to avoid road congestion and reduce pollution. With Canadian and Americans being less vocal than Europeans about reducing urban congestion and pollution, Dr. Ircha doubts the North American investment community is ready to put up money any time soon to develop hubs whose outward distribution would be mainly by short-sea shipping. The port would also need strong rail and probably road links.

While the challenges facing Canadian ports determined to capitalize on the world’s rapidly expanding containerized trade are many, Dr. Ircha says they must be addressed promptly for ports to remain key players in the continued development of the North American economy.