GOTHAM'S GAMBIT

GOTHAM'S GAMBIT

The Port of New York and New Jersey is not the center of the U.S. port world. It doesn't dominate the industry the way Wall Street dominates the financial sector or the garment district looms over the fashion business. No single port in the U.S. really holds that distinction, though Los Angeles-Long Beach comes the closest. But because the port is big and is situated closer to the world's biggest-dollar consumer market than any other major port, what happens in New York harbor affects how much and what kind of cargo moves through other gateways. So developments there bear close attention, especially now. As it convenes for its second annual Port Industry Day on Wednesday, indications are that the port has entered the latest of many crisis phases over the years. By its own admission, the Port Authority of New York and New Jersey says the port will reach its capacity of about 3.2 million TEUs a year by 2004. Some believe the port is already maxed-out. Nevertheless, it is clear from how the port's management is behaving that it appreciates the significance of the deadline. It is working frantically to en-sure that the East Coast's largest seaport does not grind to a halt by the next presidential election. That involves do-ing things like tearing down old warehouses to make room for container storage and declining to renew leases of harbor trucking companies to free up even more space. It is doing this while it converts the port into a construction zone to build out the terminal acreage granted to Maersk Sealand, Port Newark Container Terminal and Maher Terminals under their new 25-year leases.

The port will surely survive beyond 2004, though the next few years will be a trying period for anyone working at or using the port. It's what comes in the years to follow that really matters. That is when it will become clear whether today's short-term space crunch evolves into a long-term problem of stunted growth. Will the port be able to expand capacity fast enough to keep pace with demand? Or will it fail to do that and risk becoming so associated with gridlock that shippers and carriers take some of their cargo to other ports?Aware that those questions can't be answered today, the port has plotted three scenarios for what its future will look like. Annual growth of 3.7% between 2000 and 2040 would indicate that the port is attracting mostly local cargo and losing market share. At this rate of growth, it would expect to handle 11.8 million TEUs in 2040. Keeping pace with the projected growth of containerized traffic through U.S. ports would yield 4.2% annual growth and 14.4 million TEUs in 2040. More robust growth of 4.6% would expand the port's market share and leave it with 16.5 million TEUs. The port naturally hopes the most aggressive of these scenarios materializes, so it's taking several steps to ensure that it can handle the maximum possible amount of cargo. The centerpiece is the port's plan to deepen its main channels to 50-feet by 2009 to handle the biggest container ships, a project that at $2.3 billion will cost about the same as the Alameda Corridor in California. The port also has long-term plans to more than double per-acre productivity and move automobile-handling facilities to docks away from its main channels because auto carriers only require 35 feet of draft. It has also floated (ever so gently) the idea of a 400-acre landfill in Newark Bay.

Will the port achieve its ambitious cargo goals? Statistics from the Port Import/Export Reporting Service of the Journal of Commerce Group show a disturbing trend over the last decade. Asia is the biggest source for U.S. containerized imports, and it will only get bigger. Ever-larger numbers of boxes are being shipped directly to East Coast ports through the Suez or Panama canals. Yet in this category, New York has been losing market share steadily to ports such as Savannah, Virginia and Charleston. Part of the reason is the success those ports have had in convincing major retailers to locate distribution centers on ample plots of land near their ports. New York cannot make a similar pitch. So the land crunch that's hurting the port today may turn into a long-term disability. Only the future will tell.

Peter Tirschwell is editor of JoC Week. He can be reached at (973) 848-7158, or via e-mail at ptirschwell

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