Auto traffic through US ports grows amid tariff pressure

Auto traffic through US ports grows amid tariff pressure

Port of Jacksonville.

Roll-on, roll-off cargo flowed smoothly through US ports during the first half of 2018, and the involved ports are moving forward with planned, needed investments. Further, the immediate years ahead look promising, provided the trade tension winds die down. (Above: Processors preparing cars for transit at the Port of Jacksonville.) Photo credit: Port of Jacksonville.

Amid rumbling threats to trade norms, vehicles and other roll-on, roll-off (ro-ro) cargo flowed smoothly through US ports during the first half of 2018. As of May, the ports of New York-New Jersey; Jacksonville; Baltimore; Brunswick, Georgia; and Hueneme, California, had handled 1.7 million autos and light vehicles, or 50 percent of a total 3.4 million, a 17 percent increase over the same period last year. During 2017, total autos and light vehicles imported and exported through US ports reached 8.2 million, up from 7.6 million in 2016, according to IHS Markit data. 

Auto manufacturing blossoms in US Southeast

Exports have grown as automotive manufacturing has blossomed in the US Southeast, said Frank Camp, director of cargo sales at the Port of Jacksonville, or Jaxport. The port, which handled 693,000 vehicles during 2017, aims to create a “density of services” for the industry and is developing a new auto terminal at Dames Point.

From Jaxport, exports are bound for Central and South America and into the Middle East, while their key inbound lanes originate in Japan, Mexico, and Germany. Carrier Hoegh this year added a new, twice-monthly service linking Jacksonville to Australia and New Zealand.

Ro-ro cargo surges tend to revolve around ends of months, quarters, and fiscal years, Camp said, as these are key reporting times when original equipment manufacturers (OEMs) are out to boost sales. On the outbound side, marshaling vehicles to build up cargo in advance of a vessel call “normally takes several days, so organization is key” on the port. 

The long-term trend for ro­-ro is upward and supports continued infrastructure investment at the Port of Brunswick, Griff Lynch, CEO of the Georgia Ports Authority (GPA), which operates the port, told JOC.com earlier this year. The GPA is implementing a master plan that will expand the port’s 800,000-unit annual throughput capacity to 1.4 million units.

The GPA invested $25 million in increased capacity at Brunswick during 2017, and an additional $20 million in investment is planned. Further expansion is planned at Savannah’s Ocean Terminal, where vehicle shipments are primarily on services to Oceania.

In the ro-ro market, ports compete on space, said Dona Lacayo, chief commercial and public affairs officer at the Port of Hueneme, especially as carriers continue to increase in width and size.

Hueneme is applying for grants to build a zero-emissions parking structure to double its present 7,500-vehicle capacity. The port will also be increasing its ship channel depth from 35 to 40 feet. Hueneme averages about 321,000 vehicles annually and handles high and heavy cargo including farm machinery, cranes, yachts, and sailboats.

Baltimore is also adding ro-ro space and recently approved filling in a wet basin at Fairfield Marine Terminal to add seven acres for auto and ro-ro cargo. But “it’s not storage,” said Rick Powers, director of sales and marketing with the Maryland Port Administration. “We want low dwell and fast turnover. Like turning tables at a restaurant.”

Imports dominate Baltimore's vehicle cargo mix at about 70 percent, and Powers said they have seen an upswing in carrier services inbound from Mexico. In 2017, the port handled more than 807,000 vehicles. As of late July, Powers said Baltimore had handled more than 400,000 units. Like the other ports, carriers, and transport and service providers JOC.com spoke with, Powers said they were proceeding “as normal” until and if threatened tariffs become concrete.

The strong US economy, rail service, and an auto incentive program designed to attract manufacturers and shippers to the Port of New York and New Jersey drove a 14 percent increase in auto cargo handled by the port in 2017 — the third successive year of growth — as car volumes at ports along the East Coast rose. New York­-New Jersey handled 577,223 vehicles in 2017, with imports accounting for 90 percent of the total since the port complex mainly serves the New York regional market.

An incentive program launched in 2014, which offered manufacturers who are new to the port a 50 percent discount on every eligible vehicle that they import or export, also boosted volume. The incentive is available to manufacturers in the first year they come to the port.

Q-checks and ro-ro rodeos

Baltimore runs a monthly “Q-check” quality control program, Powers said, for OEMs, processors, truckers, rail, and port staff in the supply chain to find issues before they become problems. As vehicle models change, questions such as where keys should be left, whether cars are ignition or push button, and if drivers can change seat placement are settled proactively. Wearing belts, rings, and watches can scrape cars, so no jewelry or belts are allowed, and drivers must wear uniforms; there is no eating or drinking on or near the cars to avoid spills.

Driving high and heavy rolling stock on and off ro-ro vessels, or preparing it for transport, can be far more challenging than loading and discharging cars. To address that, every year the port blocks off a large area on port property and holds a “ro-ro rodeo,” where they bring in affected stakeholders and refresh the driving teams on the rolling stock.  

High and heavy volumes are a relatively small part of the mix, and this cargo is often delivered to distribution or processing centers and held until sold to dealers or end-user customers. Owners tend to hold little stock at dealerships, unlike with cars, because moving it can be very costly. “It’s the unique nature; every machine is different. They require securement and blocking and bracing. The larger the machine, the more unique the securement required,” said Chris Easter, president of Keen Transport. Open flatbed rates are high, and machines may also require specialized, multi-axle transport. Keen Transport, wholly owned by Wallenius Wilhelmsen since December 2017, specializes in the transport of high and heavy cargo with a focus on construction, mining, and agricultural machinery. 

Easter has observed an increase in high and heavy imports after a downturn from 2012 through 2017. “The OEMs are struggling to keep up with demand. We have a fairly optimistic outlook for the next few years,” he said. However, the US truck driver shortage is amplified in the high and heavy specialty, as a newly licensed commercial driver is not at all ready to operate an open deck or multi-axle trailer.

Processing and the car-haul

Normally, in the automotive supply chain, “everyone’s desire is to give that car to the next person in the chain exactly as it was received. We are the only ones who actually add value to the car. We can make it safer, make it prettier, or improve the vehicles’ performance. One of the most profitable things we do for our customer’s bottom line is accessorize the car,” said Gary Salvador, vice president of sales and marketing with Amports, a vehicle processor with eight US port facilities, three of them owned.

OEMs provide arrival notices, so the processor knows what to expect and by which mode. The first step is inspection, said Salvador, who is based in Jacksonville. Using a given car's vehicle identification number, Amport's paint shop is able to repair dings by matching the paint of any new car from any OEM in the world. “An ounce of this, a teaspoon of that, and we have an exact match.”

Processors typically individualize cars for their export destinations. This can include adding an undercoating material, wrapping the car, putting on a car cover, taking out English manuals and putting in Arabic (or the appropriate language), changing out mirrors so they are in the destination language, adding first aid kits and fire extinguishers, upgrading the vehicle's factory software, upgrading the tires, or adding accessories such as stickers and spoiler kits, Salvador said.

Jack Cooper Logistics handles the truck transport of between 3.7 million and 4.1 million vehicles annually in the United States. Of these, roughly 10 percent are imports or exports. They typically move cars from assembly plants to dealers, said Sarah Amico, executive chairman and head of planning, merger and acquisitions with Jack Cooper Holdings, “but we are all so interdependent that we all get effects when there are supply chain delays. That’s what can happen with emerging trade wars, with anything that could affect the volumes coming into the ports, or with how efficiently freight moves through the car-haul footprint.”

“A decade ago, most foreign vehicles came into the US through ports, and that changed the network design of finished vehicle logistics. Will this political moment change that reality again? How do we plan? [...] In trucking, turnaround time for an investment in a new truck is 10 to 15 years. Railcars last three to six decades. Ports: they invest for a century.” The current tit-for-tat trade war atmosphere creates uncertainty, and perhaps a disincentive to invest. “Will we be in a capacity crunch in a future boom market because the present moment discouraged investment?” Amico said.

Ro-ro continues to move, and Baltimore, Jaxport, and Hueneme are not delaying investment, but trade threats and North American Free Trade Agreement negotiations are far from settled; the long-term effects of threatened or imposed tariffs on global trade and extended supply chains have yet to play out.

Contact Janet Nodar at janet.nodar@ihsmarkit.com and follow her on Twitter: @janet_nodar.

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