Key issues for US ports include the US-China trade war and moving ahead with crucial infrastructure investments
The impact of the US-China trade war has been felt on the transpacific with trade falling between the two countries. But this has led to a shift in manufacturing from China to southeast Asia and boosted volumes between this region and the US.
US tariffs have been imposed on US$250Bn of Chinese goods and Chinese tariffs have been levied on US$110Bn of US goods. A cessation announcement on the tariffs at the end of last year initially led to a surge through US terminals as shippers aimed to push through goods before the tariffs were enforced.
But following the end of the cessation period, China’s tradeflow to the US has dropped. According to ClipperData analysis/CTS, China volumes to the US east coast slumped by 6.4% in May 2019 compared to May 2019. The decrease in Chinese exports to the US is even more pronounced on the US west coast, dropping by 12.3% in May 2019 versus May 2018.
However, there is a bright spot for US ports, as some manufacturing has shifted to Vietnam and other southeast Asian countries to escape the tariffs. According to ClipperData analysis/CTS, Vietnam’s exports to the US east coast grew by 34% in May 2019 versus May 2018, while Malaysian exports surged by 36.7%. Thailand and Indonesia have also seen their exports to the US east coast jump, by 20.9% and 23.9% respectively.
Over on the US west coast, Vietnam’s exports jumped by 15.2% year-on-year in May 2019, says ClipperData analysis/CTS, with Thailand’s US exports up by 11.1%.
Import and export gap
Port of LA has felt the effects of the US China trade war. Port spokesperson Phillip Sanfield says “We have definitely seen an impact here. In 2018 US retailers pushed forward imports to beat tariffs which resulted in a surge of imports, particularly in Q4. A significant decline on the export side of more than 20% means the existing trade gap has been exacerbated. If imports grow significantly and there is a decline in exports (which were out of balance to start with), this makes it hard for railroad and chassis operators to plan and get cargo turned around.”
The US trade tariff war means that a continued decline in US exports and a slight uptick in imports has led to a significant rise in empties.
Mr Sanfield says that while a drop in imports from China has been seen, some growth has been transferred to other Asian countries including Vietnam, Thailand, South Korea and Japan. “It is small but a shift away from China,” says Mr Sanfield.
Looking ahead he says “We are concerned about if and when the trade war ends, as China has developed a relationship with other countries to import products such as soya beans and agriculture which it had previously imported from the US. US companies could have problems regaining the lost market share.
“The significant rise in empties and the decrease in the export side is not a sustainable economic pattern. We are concerned about the export side and very hopeful it will be solved soon.”
The trade war is also creating uncertainty for terminals. Ports America vice president containers Joseph M Greco says “The current rhetoric associated with tariffs continues to cloud the industry with a high level of uncertainty. As of today, we have seen little to no impact on volumes that we can directly attribute to a trade war. The latest comments circulating in the media just add to the level of uncertainty the entire industry faces.”
In terms of the shift in supply chain to southeast Asia, he says “Based on direct conversations with beneficial cargo owners (BCOs), there has been an increase in requests for ocean services emanating from southeast Asia to support BCOs shifting, or planned shifting, of manufacturing and sourcing facilities to these locations as a strategy to avoid or lessen tariff implications.”
Tariff threat to port equipment
Another major issue for US ports is that new terminal equipment may incur tariffs, affecting planned port upgrades.
This could impact Port Everglades. Three new super-post-panamax cranes are currently being constructed in China, which are necessary if the port is to handle wider ships.
Port Everglades acting chief executive Glenn Wiltshire explains, “The trade discussions with China could potentially impact on our three cranes being built in Shanghai at a cost of US$41M. If the 25% tariff is imposed on the cranes’ import it will add over US$10M to our purchase.”
When such a tariff was proposed last September Port Everglades, in conjunction with American Association of Port Authorities, submitted written comments. Container gantry cranes were subsequently taken off the list, but were put back on two months ago. Mr Wiltshire and other port directors have testified during a recent US trade representative hearing committee about why they should not be subject to tariffs. Mr Wiltshire says “Container cranes should not be on the list because China is the source of either cranes or the steel for most of the container cranes built in the world.
“Adding over US$10M of additional costs to our capital budget means another project would be delayed.”
Mr Wiltshire says he is hopeful the tariff will be deferred. “Container gantry cranes are a critical resource to ports in the US. They are crucial to expanding capacity and throughput for many ports in the US.”
Despite the ongoing challenge of the US-China trade war tariffs, ports are continuing to expand their facilities.
Key infrastructure investment
Indeed, Mr Greco highlights the importance. “The requirement to continue with large capital infrastructure investments remains a key issue. Water depth and crane size are critical components to handle the increasing number of 14,000-TEU vessels calling at the US east coast.”
He adds “There are many challenges the industry is currently facing. Interoperable chassis pools remain elusive, creating inefficiencies for motor carriers across the country at marine terminals and rail ramps. Initial steps to remove chassis from marine terminals to off-site depots are starting to gain traction and free up valuable terminal land, allowing smoother yard operations.”
Ports America has invested heavily in its terminals. Port Newark Container Terminal (PNCT) commissioned four super-post-panamax cranes, a berth-strengthening project and yard expansion. In Baltimore, the Berth 3 modernisation project has started, which includes berth deepening to 15 m and adding four super-post-panamax cranes scheduled for completion by Q1 2021. The clearance project to support double-stack rail in Baltimore through the Howard Street tunnel aligns well with Baltimore’s berth expansion. When the Berth 3 project is complete, both PNCT and Baltimore will be able to work two 14,000-TEU vessels simultaneously.
He adds “Tampa has not only received updated and improved container handling equipment but is focused on a terminal gate complex project currently underway. In addition to updating and expanding the number of lanes for increased velocity, a terminal operating system upgrade to Navis N4 is scheduled be completed by end of the year. There are several improvements planned for New Orleans, which include four additional super-post-panamax container cranes and demolition of on-dock warehouses to increase container yard storage capacity.”
Elsewhere, the Port of LA has revealed three critical focuses over the next few months.
Port spokesperson Phillip Sanfield told Container Shipping & Trade its focuses are:
After trials, Port Optimizer was launched in January this year. Port of LA has partnered with GE Transportation to launch the port information portal across both Port of LA and Long Beach that will allow the supply chain to have better planning capabilities to service container ships at the ports more effectively.
Mr Sanfield said “We are getting very positive feedback, whether it be truckers or chassis operators and we are continuing to refine it – we have had more than 20 versions. 90% of cargo imported is seen by Port Optimizer. It gives stakeholders a better line of visibility and allows incoming cargo to be better planned.”
Elsewhere, the port is aiming to install a global trucking reservation system through the San Pedro Bay complex. It plans for the Port Optimizer to play a role in this trucking system.
The port also wants to move chassis off the terminal which are currently taking up space and slowing down processes.
Elsewhere, APM Terminals is progressing with its plans to automate its terminal at the Port of LA. Mr Sanfield comments “At the end of the day the decision to automate is up to individual operators. The port sees the need to have workforce training and we developed a centre for this.” The port has also set up a commission to look at the future of work.
Mr Sanfield emphasises “It is critical for the workforce in Southern California to be retrained, reskilled and upskilled to address future needs. We see one of our roles as helping to facilitate this training.”
Meanwhile, Port Everglades has a fast-paced capital programme. Mr Wiltshire says “We have a very aggressive capital programme. We are spending a lot of money monthly to complete those projects. My primary focus is on keeping current and planned construction projects underway.”
He underlines that critical to the longer-term future is the deepening and widening project, increasing the terminal water depth from 12-15 m. Dredging will start next year and is expected to take 3-5 years to complete.
Mr Wiltshire says “We need this depth of water to accommodate larger ships going through the expanded Panama Canal. We also need deeper water for services from Europe.”
When the channel is dredged, the port will be able to accommodate 10,000 TEU. Currently it can take up to 8,000 TEU, but these ships can only come in lightly loaded. They will be able to come in fully loaded when the channel is deepened.
The port is spending US$471M on the channel deepening; its Turning Notch project adding several new berths; and the three new super-post-panamax cranes previously mentioned.
Mr Wiltshire sums up “Not one project unto itself provides all of our needs. The cranes are a critical component for servicing wider ships, the deeper water is critical for taking the largest ships fully loaded and berth capacity is needed because there is more demand for berth than berths available. There are synergies in all three projects.”
Snapshot CV: Glenn Wiltshire (Port Everglades)
Glenn Wiltshire, a 30-year US Coast Guard veteran, is the acting chief executive and port director for the Broward County Port Everglades Department. Joining Port Everglades in 2006 as deputy port director, Mr Wiltshire has successfully implemented several innovative programmes to support increasing cargo, cruise and petroleum volumes. Prior to joining Port Everglades, Mr Wiltshire was the US Coast Guard captain of the port for New York/New Jersey, served as chief of staff for the 14th Coast Guard district in Honolulu and as executive assistant to the assistant commandant for Marine Safety, Security and Environmental Protection in Washington, DC.