Last week I was asked to offer a competitive assessment of the Port of New York and New Jersey for a New Jersey transportation planners’ conference. My overall message to the group was the port’s future is largely secure, but there are near- and longer-term reasons to temper an overall rosy outlook.
On an overall basis, the port is extremely well positioned. At the heart of a growing region with one of the world’s largest concentrations of people and wealth, the port is far and away the East Coast’s largest. It will have 50 feet of draft into its main container terminals by the end of this year. And, although the height restrictions of the Bayonne Bridge leading to those terminals have made headlines in recent years, that obstacle will be cleared by 2016, paving the way for the port to handle the largest ships any carrier would want to bring there, likely for decades.
So, although the port won’t quite be ready for mega-ships when the Panama Canal expands in 2014, it will be soon thereafter, and any downside will be minimal.
Although Norfolk, with its Heartland Corridor to the Midwest, may pose a threat to New York-New Jersey’s intermodal volumes, there is little evidence the 2-year-old rail network is making a dent. New York on average saw nearly 191,000 additional 20-foot equivalent units of cargo each year from 2001 to 2011, more than triple Norfolk’s annual growth of nearly 60,000 TEUs.
New York-New Jersey’s share of the import market among East Coast ports has held steady at about 66 percent during that same period, while its export share has grown, according to data from JOC sister company PIERS.
The port’s 2011 volumes, completely recovered from the recession, reached a record 5.5 million TEUs, up 4 percent year-over-year and a stark contrast to weaker or flat growth at many other U.S. ports.
Some $600 million in intermodal rail investment and 12 percent growth in rail volumes last year shows the port is competitive in areas where it arguably faces its largest competitive threat from Norfolk.
And the port has all the room it needs, and more, to keep growing. It has capacity to handle 12 million TEUs, a level that, at current growth rates, will take 25 years to hit. That fact points to another positive, at least as it pertains to the port’s attractiveness to carriers: While New York-New Jersey’s productivity has traditionally lagged — a negative for carriers — cutthroat competition among the port’s six container terminals for carrier business has driven terminal rates to rock-bottom levels.
So, all in all, there’s a compelling argument that the port is in good shape. But the optimistic picture has its limits, and they exist on several fronts. The first is where cargo originates. Northeast ports are hugely dependent on Asia, a region that accounts for 53 percent of Northeast imports last year versus 30 percent a decade ago, and 43 percent of exports versus 32 percent a decade ago. Most of that growth is from China, whose industrialization and export orientation was a windfall for New York-New Jersey and other ports.
But China no longer can be counted as a fount of future cargo growth. Given its rapid growth in labor costs and its national policy to reduce dependence on exports, China no longer is growing faster than other sources of containerized imports.
Of course, New York-New Jersey is so large that it stands to benefit no matter where the source of imports shifts — Vietnam, India or even Central America — but China’s slowing growth as a source of imports will have a big impact on New York-New Jersey and all U.S. ports.
There are other issues. One is the port’s long-standing reputation for labor peace, a critical factor for shippers that was thrown into question after International Longshoremen’s Association President Harold Daggett told the TPM ocean shipping conference in March he couldn’t rule out the possibility of a strike this year.
Since then, positive statements from labor and management indicate a coastwise agreement is more likely, but trouble still could emerge during negotiations for a separate contract between local employers and ILA locals.
It’s in those talks where management will try to improve productivity and address work rules and practices, such as those allowing for payments to longshoremen for hours they didn’t actually work. Pat Foye, executive director of the Port Authority of New York and New Jersey, is taking aim at a lack of diversity among dockworkers, reinforcing the port’s reputation as a holdout from another era.
Will shippers avoid sending their cargo through the port for reasons like these? Maybe, but so far the cost benefits of shipping through a port near the ultimate consumer has kept cargo at New York-New Jersey.