August 12, 2019
transportation | Maritime/Ports

U.S. ports underpin hot economy with record volumes, rapid growth

U.S. ports underpin hot economy with record volumes, rapid growth

Like the proverbial rising tide, the buoyant economy has lifted the fortunes of many U.S. ports. But how long can the good times last?

By Gary Frantz

U.S. ports are on a hot streak.

Backed by a burgeoning and resilient U.S. economy, many U.S. ports processed record or near-record freight volumes through the first part of 2019, building on a 2018 that set a high-water mark for import and export ocean cargo.

"We're actually very encouraged," says Beth Rooney, deputy director, port department, for the Port Authority of New York & New Jersey. "We're experiencing consistently strong volumes. Year-to-date container volume is up 7 percent over 2018, and that was a record year as well," she noted, adding that the port continues to roll out strategic expansion projects. It most recently cut the ribbon on the new ExpressRail Port Jersey facility, completing a major upgrade of the port's intermodal rail network.

"That was the very last piece of the puzzle the port authority envisioned 20 years ago," she says, referring to a program that also included such initiatives as deepening channels to 50 feet, adding more cranes to service the new megaships, raising the Bayonne (N.J.) bridge, and building out four on-dock rail facilities. The port last year also launched its Port Community Systems portal, a "one-stop" Web portal providing visibility and transparency to port operations, including containers coming off the ship, drayage within the yard, containers' location in the yard, and when trucks enter or exit the port's gate.

New Jersey port aerial shotThe visibility portal is supported by the Port Truck Pass system, launched in 2016, which tracks radio-frequency identification (RFID)-tagged trucks (every truck serving the port is registered in a master database with an RFID tag and the driver's TWIC, or Transportation Worker Identification Credential, card). In additional to real-time tracking, the system supports the port's sustainability program, enabling it to measure and calculate truck emissions within the port.

According to its recently released port master plan 2050, the port expects volumes to more than double in the next 20 to 30 years, Rooney says. That will require better, smarter, and more efficient use of resources.

"We can't create land where it doesn't exist," says Rooney. "We have to take the land we have and make it more productive, increase capacity [by adding more shifts, operating longer hours, and running on Saturdays], and densify the operation. We [have to] do it predominantly on the existing footprint we have today."

SOUTHEAST: "THE BEST PLACE TO BE"

Farther down the coast, Jim Newsome, chief executive of the South Carolina Ports Authority, reports the robust U.S. economy is fueling regional manufacturing and driving exports of automobiles, chemicals, forest products, and auto parts, and imports of auto parts and general consumer merchandise through the Port of Charleston. (BMW has its largest global assembly plant in South Carolina, and as a net exporter, annually moves some 50,000 containers and 200,000 manufactured vehicles through the port.)

Like other ports, South Carolina is in the midst of extensive port infrastructure improvements and expansions. It is optimizing the Wando Welch terminal, a 400-acre complex and the port's largest terminal, moving 78 percent of annual container volume, or about 1.1 million TEUs (twenty-foot equivalent units) annually. Its three-year plan calls for building infrastructure to increase container-yard capacity, improve traffic flow and technology systems, and add a new refrigerated-cargo yard. The three-berth terminal will have 15 155-foot-tall ship-to-shore cranes that can handle three 14,500-TEU neo-Panamax ships at one time, with a maximum capability for handling vessels up to 19,000 TEUs. It's also deepening the harbor to 52 feet, which will allow full operation without any tide restrictions, and it is constructing the new Hugh K. Leatherman Sr. terminal along the Cooper River on the former Navy base in North Charleston. At full build-out, the three-wharf terminal will double the port's existing capacity.

"At the end of our fiscal year in June, we were up 10 percent," Newsome says. With port capacity expansion plans well under way and local developers proposing new warehousing capacity to handle e-commerce-driven distribution, Newsome believes opportunities in South Carolina and neighboring Southern states abound. "The Southeast is the best place to be in the port business," he says.

He adds that the continued deployment of "mega" containerships, those with 14,000 TEU capacity (or more), is challenging ports to upgrade, and do so quickly. As has a shift of trade moving from the West Coast to the East Coast, influenced in part by the opening of the expanded Panama Canal.

"That shift will continue," says Newsome. "It's a good opportunity for ports that are ready. You don't just buy one or two cranes and say you're ready for 14,000-TEU ships. You have to have four or five and related lift equipment. That's why we are investing in the future—we [have to be able to handle] these big ships without restriction. We are locked and loaded with our plans to support that growth."

OUT WEST: A NEED FOR SPEED

Port of OaklandOn the West Coast, the Port of Oakland has processed record cargo tonnage each of the past two years. Oakland's total import/export container volume through the first six months of 2019 was up 3.6 percent from last year's record, and its five-year strategic plan, adopted last year, "projects steady growth in the 2- to 3-percent range into the next decade. That's good growth that can be digested operationally and by the neighboring community," notes Mike Zampa, the Port of Oakland's communications director.

Top import origins for Oakland are China, Vietnam, Taiwan, South Korea, Thailand, and Japan, with principal products being furniture, machinery, glass/glassware, and plastics. Leading export markets include China, Japan, South Korea, Taiwan, and Vietnam for commodities that include wastepaper, almonds and other nuts, oranges and other fruits, rice, hay, and pork. Oakland is also negotiating to reintroduce bulk shipping for the first time in 20 years.

Zampa agrees with Newsome that larger ships calling more frequently on U.S. ports place more pressure on seaport operators to perform: moving containers as quickly as possible off vessels; in, around, and through the port; and out to the cargo's owner. "Shippers are demanding greater efficiency from ports to avoid congestion that could result from greater scale and larger ships," he says. Among the improvements at Oakland have been deepening harbor channels to 50 feet, introducing night gates and appointments to improve capacity and throughput, and heightening existing cranes and buying new cranes that can accommodate the 18,000-TEU ships that could regularly call on West Coast ports in two to three years.

Lastly, the port introduced its one-stop online gateway, the Oakland Portal, last year. It provides single log-in access and a consolidated view of container and operational information for all marine terminals, vessel schedules, and cargo status. The portal this year also started posting current average truck turn times as well as historical comparison capability. All of which allow the port's constituents to access timely, accurate information quickly about virtually all aspects of port operations.

Port of Long BeachFarther down the California coast, the Port of Long Beach is ranked as the second-busiest seaport in the country. Served by more than 175 shipping lines, the port processed a record 8,091,023 total twenty-foot equivalent units (TEUs) in 2018. This June's volume of 677,167 TEUs was the second-highest June total in the port's history. And while total TEU throughput in the first half of 2019 was 6.7 percent off last year's record pace, Executive Director Mario Cordero likes his port's prospects, citing the port's proximity to Asia trade lanes and nearly $4 billion in planned upgrades over the next decade.

"The dynamic for us is Asia," Cordero adds. "Bottom line, that's a key trade region for the U.S. and will continue to be. The only question for the future is, is it all going to be about China or will it include [more of] Southeast Asia, countries like Vietnam, Cambodia, and India? We believe we're the port of choice for Asia trade."

The plan he has for differentiating Long Beach: move containers through the port faster than any other gateway by focusing on three things—efficiency, reliability, and predictability.

Two projects illustrate those objectives. One is the state-of-the-art Long Beach Container Terminal, which is in its third and final stage of construction. It will have automated guided vehicles for moving containers between the ship-to-shore cranes and container yards, and automated stacking cranes, which are rail-mounted cranes in the yard that move containers on and off guided vehicles and on and off waiting trucks.

When fully completed in 2021, the terminal will have grown from its current footprint of 172 acres to 311 acres and have the capacity to handle in excess of 3.3 million containers annually. "On that metric alone, it would be the sixth-largest container port in the U.S.," Cordero says.

The second is expanding and improving on-dock rail capability. The port commission recently approved the Pier B On-Dock Rail Support Facility, a rail infrastructure project that will "enhance [the way] we stage longer trains and accelerate the movement and number of trains in and out of the port," Cordero explains, adding that the port's rail partners today operate trains in excess of 12,000 feet in length.

"This will allow us to move trains more quickly and efficiently out of the harbor district" and contribute to the goal of moving 50 percent of the port's containers by rail, up from about 27 percent today, Cordero says. Overall, he adds, the end game is moving containers on and off vessels and through the port infrastructure as quickly as possible. "[We want to] maximize gate hours and minimize truck turn time."

HOUSTON GOES DEEP

Business is brisk over on the Gulf Coast as well. Cargo volumes at the Port of Houston grew 9.5 percent year over year to 2.21 million TEUs in 2018, with imports rising 11.4 percent and exports up some 9 percent. Through June this year, containerized cargo volumes at Port Houston grew 12 percent year over year to 1.46 million TEUs, with loaded imports rising 9 percent and loaded exports up 15 percent. The port, which consists of 200 private and eight public terminals, handles about 70 percent of the container cargo moving through the Gulf of Mexico.

Its number-one priority is widening and deepening the 52-mile-long Houston Ship Channel. The Texas legislature recently enacted a law restricting transit of ships over 1,100 feet in length to maximize the efficiency and safety of two-way transit in the channel. Even with the restriction that prohibits 9,000-TEU-plus ships from navigating the channel more than once a week, Houston expects to remain the largest breakbulk port in the country, notes Executive Director Roger Guenther.

The port is nearing completion of a study with the Army Corps of Engineers of a widening project, for which it hopes to receive congressional approval in 2020. It would be the 11th deepening and widening of the waterway in its history. "With the growing frequency and size of ships coming into our port, Houston needs a wider and deeper channel, and we are moving that effort forward right now," Guenther says.

UNCERTAINTY AHEAD

Yet for U.S. ports, continued growth and prosperity are not without challenges. According to the American Association of Port Authorities (AAPA), issues today and in the foreseeable future include finding innovations and new methods to develop and pay for landside and waterside infrastructure improvements; ensuring resiliency and security of cargo and passenger operations; protecting against adverse environmental impacts; addressing operational efficiency needs and personnel shortages; and adapting to changing trade flows, market volatility, changing shipping alliances, and accelerated technological disruption.

Perhaps the most important issue is local: getting port communities more involved, engaged, and supportive of ports and their mission, notes Kurt Nagle, the AAPA's president and chief executive. "Because ports are in the spotlight more than ever, they have both a need and a social responsibility to include communities in their planning, which in turn helps improve stakeholder awareness and understanding," he says.

Preparing for market shifts and technology disruption means ports may need to "focus more on productivity and less on growing capacity through capital investment," adds Nagle. While this doesn't mean ports should stop investing, "it does suggest they may need to focus more on maximizing efficient [use of] land and equipment, and on controlling costs," he says.

Lastly, Nagle believes port operators, like other cargo transportation-related businesses, need to up their game in recruiting and developing the next-generation skilled work force. "This includes reskilling of existing personnel and offering training programs and internships to those just entering the job market and those seeking to change professions," he says.

Another wrench of uncertainty thrown into the mix is the Trump administration's seemingly ever-evolving China tariff policies, and on-again, off-again trade negotiations. "Our customers are impacted by tariffs," the Port of Oakland's maritime director, John Driscoll, recently told a gathering of local shipping, trucking, retail, and labor leaders.

Chris Lytle, who was the Oakland port's executive director before retiring July 19, also sounded the alarm. In a letter to U.S. Trade Representative Robert Lighthizer, Lytle wrote, "It's clear that the overall negative long-term potential impacts of these tariffs on the international movement of agriculture products, manufactured goods, household items, and retail products is real."

He also called on the Trump administration to avoid tariffs on cargo-handling equipment produced in China. The Oakland port's largest maritime terminal is awaiting delivery in 2020 of three new ship-to-shore cranes from Shanghai-based ZPMC. "There is not a comparable domestic producer," Lytle said. "Tariffs could severely impede and/or prevent our marine terminal partners from making critical infrastructure investments needed to [compete in] the changing international trade landscape." China accounts for roughly 38 percent of Oakland's business.

The Port of Long Beach's Cordero believes the tariff situation has at the very least created uncertainty. "It's a no-win situation if it's prolonged," he says, yet he expects it to be resolved eventually to the benefit of both parties. South Carolina's Newsome is somewhat less optimistic: "I think this trade dispute will be with us for a while," he said.

THE GREAT AUTOMATION DEBATE

And then there is the debate over automation. While some ports have begun incorporating automated technologies into their operations, others are still weighing the pros and cons.

"We've assessed it and don't think the extra investment is worth it. We have a great work force that provides great service, so we want to stay with how we are operating today," says South Carolina's Newsome, who adds that the Port of Charleston was recently recognized by an independent organization as among the best places to work in South Carolina.

A December 2018 McKinsey research report titled The future of automated ports┬áprovides some interesting perspectives and findings. According to the report, the first automated container port was developed in Europe in the early 1990s. Since then, "many ports—more than 20 in the past six years—have installed equipment to automate at least some of the processes in their terminals," the report stated.

Today, the report noted, there are some 40 partly or fully automated ports doing business in various parts of the world. Estimates suggest those automation projects represent somewhere around $10 billion of investment.

"On the face of it, container ports seem ideal places to automate. The physical environment is structured and predictable. Many activities are repetitive and straightforward. They generate vast amounts of readily collected and processed data," the report said. "Better still, the value from automation includes not only cost savings but also performance and safety gains from ports and the companies that do business there."

Yet in its survey of industry practitioners, McKinsey found that "real-world performance of most automated ports doesn't increase sufficiently in every material way. Safety improves, the number of human-related disruptions (such as shift changes) falls significantly, and performance becomes more predictable," the report said. Still, practitioners responding to the survey said they thought that "these ports, especially fully automated ones, are generally less productive than their conventional counterparts."

Nevertheless, the survey indicated automation is a trend gaining momentum. More than "80 percent of respondents believe that in the next five years, at least half of all 'greenfield' port projects will be semi- or fully automated. Brownfield projects—the total or partial conversion of existing conventional ports—[will see] at least 50 percent of the top 50 ports ... initiate retrofitting plans or ... add automated equipment during the next five years," the report said.

The McKinsey study projects that as ports navigate the automation challenge, they will migrate through four stages of development: Port 1.0 (management by hero), Port 2.0 (management by process), Port 3.0 (management by exception), and finally, Port 4.0, where ports will push beyond automation and enlarge their role from "manage to orchestrate."

At this stage, the report postulates that "every player—terminal operators, trucking companies, railroads, shippers, logistics companies, and freight forwarders—will be connected to optimize not just the port itself, but also its entire [supply chain] ecosystem."

And that, one could argue, is a future worth pondering.

About the Author

Gary Frantz
Contributing Editor
Gary Frantz is a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.

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