The capacity conundrum: One problem, two strategies

The capacity conundrum: One problem, two strategies

During a visit to Europe last month, I went two-for-two. I toured two ports, Antwerp and Hamburg, and at both encountered actual construction of significant additional container terminal capacity, or announced plans to expand capacity. The project in Antwerp is the Deurganck dock, which, when completed, will add more than 7 million TEUs of capacity to the port. In Hamburg, which last year handled in excess of 8 million TEUs, Juergen Sorgenfrei, chairman of Port of Hamburg Marketing Association, pointed out locations that in total will eventually expand the port's capacity by 6 million TEUs in the next four years and another 4 million TEUs by 2015.

If I had visited other major European ports, the story would have been similar. Rotterdam, Europe's largest container port, has plans that will ultimately add nearly 13 million TEUs of capacity.

Think about those figures, and then compare them to what's under way in the U.S. The comparison is bleak. Face it: Port construction on this scale is virtually unheard of in the U.S. If I were to visit two random U.S. ports, chances are I would go zero-for-two, or maybe one-for-two, since the U.S. is not completely at a standstill. The likelihood is that I would hear little about expansion, and much about plans to expand through greater efficiency, by utilizing better information systems and terminal management to improve the per-TEU, per-acre, per-year count.

This is fine as far as it goes, because opportunities always exist to improve utilization. Terminals are doing everything they can to accomplish that, as the crackdown on free time during the last year or two has demonstrated. But the bottom line is that there are limits to how many containers that ports can handle before congestion sets in.

I don't believe it is possible for ports to double their utilization - that is, double in size without adding a single acreage of terminal space - and not cause huge disruption in the process. It's impossible to pinpoint when congestion begins to set in, but in general, the market senses when ports are maxing out and responds by seeking an alternative.

The market started to realize this was happening in Southern California in the late 1990s. Since then, the sagging fortunes of Oakland and the Pacific Northwest during the 1990s have been relegated to memory, and demand for Panama services has soared. Now, with increasing indications that the Panama Canal is reaching capacity, and with carriers talking of increasing costs and delays, the Suez Canal route is suddenly back in the spotlight. Cargo is searching for capacity.

Eventually, we will run out of options, and this is what shippers have become increasingly cognizant and vocal about. It was the potent voice of shippers that finally galvanized the Department of Transportation last month to unveil its Framework for a National Freight Policy, a long-overdue document and government mindset. As the DOT acknowledged, "Dramatically increasing freight flows have created congestion in the transportation system, imposing costs on shippers, consumers and the environment."

It's good that the government has acknowledged what the private sector has realized for years. We should not diminish that, but at the same time, we must bear in mind that it's one thing to issue a report; it's something else to do something about it. At every turn you find phrases such as "public-private collaboration." That's another way of saying the private sector will be asked to chip in. That's stumbling block No. 1, because shippers are accustomed to seeing their user-fee dollars disappear into thin air.

Until policy-makers realize that the private sector will resist being a serious participant in infrastructure upgrades until it is guaranteed a meaningful say in how the money will be spent and a guarantee that money collected will go entirely for its intended purpose, more time will be lost, and gridlock detrimental to the economy will draw ever closer.

Peter Tirschwell is vice president and editorial director of Commonwealth Business Media's Magazine Division. He can be contacted at (973) 848-7158 or at