Can Miami be a major gateway for Asian imports heading out of Florida?

Can Miami be a major gateway for Asian imports heading out of Florida?

In the wake of a major deepening project to accommodate post-Panamax megaships, there is intense debate over how successful the Port of Miami will be realizing its goal of becoming a competitive gateway for Asian imports destined for points beyond Florida.

While other U.S. East Coast ports have said West Coast diversions are fading, Miami says it is confident the Asian volume it gained will stay and coupled with Latin America growth, will allow the port to hit 1 million 20-foot equivalent units this year for the first time in a decade.

“Asia trade is looking strong,” Miami Port Director Juan Kuryla told JOC.com, adding he believes Miami has the competitive edge to be an East Coast first port of call for Asian cargo.

That strength has dipped and spiked over the past nine months, with the month-to-month growth of Asian import container volume fluctuating and the port’s market share of East Coast traffic slipping, according to analysis of data from PIERS, a sister product of JOC.com within IHS. Those trends don’t reveal if Miami is retaining West Coast diversions, attracting cargo bound for outside the state, Florida demand is building or some combination of the three.

Miami says it’s not seeing any indication in its most recent traffic numbers that it’s losing Asian cargo back to the West Coast.

Emboldened by its newly-achieved draft of 50-feet, allowing the port to handle the larger container ships able to pass through the expanded Panama Canal in mid-2016, Miami’s play for Asian volume is two-fold.

According to a report commissioned by the Florida Ports Council, in 2013 more than 308,000 TEUs were imported into Florida through non-state ports, representing more than half of the state’s total imports. About half of the imports from the state’s largest trade partner, Southeast Asia, entered through Florida, the report found. Miami, along with other Florida ports, wants to see volume destined for Florida to move across its docks rather than those out of state.  

But with its mega ship channel Miami also sees itself as a gateway for Asian cargo headed into the U.S. Southeast and perhaps even as far north as Chicago. Kuryla said imports moving on Miami’s new on-dock rail service via Florida East Coast Railway can connect to 70 percent of the U.S. population in four days or less.

The deeper harbor and on-dock rail combination makes Miami a “more viable option to the lines than the typical route to West Coast ports,” Kuryla said.

Some shippers are interested. Procon Pacific, an Illinois-based importer of bulk packaging material from China, does not currently move goods through Miami, but is considering the port more seriously following the completion of its $205 million deepening project in September. That project now allows the port to handle the up to 14,000-TEU vessels that will able to transit the new Panama Canal locks when the project is completed in April.

Moving goods through Miami hinges on the transaction proving cost-effective and “breakeven,” Daniel Krassenstein, director of Asian operations at Procon Pacific, said at the JOC TPM Asia Conference in Shenzhen, China earlier this month.

“We’re quite excited about our discussions with the Florida East Coast Railway and the Port of Miami,” he said.

Others doubt Miami’s chances of ever becoming a primary gateway for that traffic, primarily citing its remote location relative to the U.S. heartland.

“It’s just too remote being down in Miami,” international logistics consultant Dean Tracy told JOC.com. “It may be four days, but the cost would be horrendous.”

Tracy said he does not deny cargo imported through Miami could reach 70 percent of the U.S. population within four days via FECR rail, but said it would come at a higher cost than traditional rail service through Savannah or Charleston. And moving goods by truck would come at an even higher cost, he said.

“Miami is a standalone port,” he said. For example, every chassis that leaves Miami has to come back to Miami. Whereas other Southeast ports — including Charleston; Wilmington, North Carolina; Savannah; and Norfolk, Virginia — share chassis within the same pool, Miami does not.

“That creates an enormous expense, thousands of dollars, because it’s not a one-way trip, it’s a roundtrip” for drivers to return chassis from their destination back to Miami, Tracy said.

He added he couldn’t see many shippers opting for Miami when other ports, such as Savannah, remain congestion-free, closer to U.S. consumers, have nearby distribution center clusters and are overall cost-effective. If Miami were a viable port of entry for Asian imports destined for broader U.S. instead of Florida consumers, Tracy put it bluntly: Shippers would be using the port instead of talking about using the port.

“If it’s a viable port already, then why isn’t anybody using it?” he asked. “I don’t see it as a gateway and I don’t think many other importers do see it as a gateway.”

Today, the port has six weekly services from Asia through three of the four major carrier alliances including 2M, O3 and G6. It is the first port of call for just one service via the G6 Alliance. Miami is the top port in Florida for Asian imports, ranks 4th among Southeast ports and 12th among all U.S. ports. In the first nine months of 2015, Miami handled 132,277 TEUs from Asia, up 12 percent year-over-year, according to data from PIERS. The port was outpaced, however, by Savannah, which handled 32 percent more Asian import volume during the same nine months; Virginia, which handled 15 percent more; and Charleston, which handled 17 percent more.

While Asian imports at Miami may be trending upward this year, the month-to-month traffic has been less stable. Asia imports at Miami did rise between February and March this year, near the chaotic end of the West Coast port crisis. In March, for example, Asia imports were up 48 percent year-over-year. The figures fell off in April, however, down 21 percent compared to March and down versus April 2014.

Between April and July, imports from Asia were up substantially, soaring 45 percent. But, growth dropped off in August, down nearly 25 percent compared to July and 5 percent year-over-year. In September, imports from Asia rebounded, up 23 percent year-over-year and 18.5 percent month-to-month.

Miami said its most recent data from August doesn’t show a repositioning of Asian imports back to the West Coast.

That is, however, exactly what the data and port officials have said occurred at other ports in the Southeast.

Port officials in both Savannah and Charleston have said they expect to lose some of their Asian import gains as cargo drifts back to the West Coast. Those ports have both said they are now relying on organic growth to build business on their respective waterfronts.

Trade patterns indeed appear to be returning to normal, with import growth on the East Coast appearing to gravitate back to the more normal range of 4 to 5 percent, according to PIERS.

West Coast container volumes, which were down considerably earlier this year, have recovered somewhat in recent months. In August, the Pacific Northwest Gateway of Seattle and Tacoma reported a 21.6 percent increase in imports compared to August 2014. Import volumes increased 15.1 percent at Oakland and 23 percent at Long Beach. Imports rose a modest 3.8 percent at Los Angeles, although that was the port’s best August since the peak year of 2006.

Volumes at Savannah, meanwhile, rose 4.4 percent in August from the same period in 2014, an indication that the torrid pace of 10 to 27 percent year-over-year growth rates experienced in previous months could moderate as shippers return to the West Coast. Curtis Foltz, executive director of the Georgia Ports Authority, told JOC.com in September he was pleasantly surprised that Savannah has been able to retain that level of growth as container volumes at West Coast ports picked up in line with normal season trends.

Meanwhile, growth at Virginia and Charleston also slowed in August. Traffic volumes through Virginia rose only 2.7 percent, the smallest year-over-year gain seen on a monthly basis since traffic slipped 1 percent in February. Charleston volume growth slowed to 4 percent, as difficult year-over-year comparisons to a then-record August 2014 ended several months of double-digit increases.

“I think a lot of the short-term diverted cargo is going back to its natural gateway. That seems to be the consensus,” Jim Newsome, president and CEO of the South Carolina Ports Authority, said during a JOC.com intermodal roundtable discussion in August.

Slowing Asian import traffic has been matched by declining market share for Miami and almost every Southeast port but Savannah. Among Southeast ports, only Savannah increased its market share of Asian imports in the first nine months of 2015, up from 46.9 percent in the first nine months of 2014 to 50.6 percent in the first nine months of 2015. Virginia, Charleston and Miami have all seen their shares decline.

While Asian imports may be trending up this year at Miami, the port’s market share has fallen among Southeast ports year-over-year since 2012. Miami’s Southeast market share of Asian imports in the first nine months of 2015 was 4.0 percent, down 0.3 points or 7 percent year-over-year.

Port officials at Miami said they were unfazed by the declining market share, the dip in August Asian import volumes and the corresponding figures coming out of ports farther north.

Kuryla said he was confident in the outlook for Miami’s Asia trade and called it a “cornerstone” of its growth strategy.

But, Asia trade will never develop to the point where Miami stands to gain a majority or even sizeable market share, said Tracy. Miami would be better served focusing on its Latin America import business, he said, where the endgame is far more realistic. After all, he said, Miami is “best servicing the Central and South American and Caribbean market.”

While there’s room for debate over whether Miami could ever evolve into a competitive gateway for U.S. Asian imports, there’s little question of Miami’s Latin American business: The port’s import trade with the region is, without a doubt, strong and growing stronger.

“In terms of the region, Latin America and the Caribbean is still 50 percent of our total trade,” Kuryla said.

Miami, which has 15 weekly services from Latin America and the Caribbean through APL and Seaboard Marine, is the fifth largest U.S. gateway for Latin American cargo and the fourth largest on the East Coast. In the first eight months of 2015, the port handled 83,445 TEUs from the region, up 30 percent year-over-year, a much faster growth rate than other U.S. ports handling imports from the region.

New York and Philadelphia, which handle larger volumes from the region than Miami does, both saw Latin American imports increase just 13 percent in the first eight months of the year.

Kuryla credits Miami’s booming Latin American trade to its aggressive marketing campaign south of the border.

“We are very engaged in these parts of the world. We’ve had people in Chile, Peru, Colombia, promoting the Port of Miami and our facilities,” Kuryla said. “I, myself, will be in Honduras in December.”

Miami’s Latin America trade has also seen a boost from a recent federal pilot program that has allowed the port for the first time in years to handle direct imports of select cold-treated produce from South America. For decades, the U.S. government required select produce from South America to enter at ports above the 39th parallel — which cuts through the center of the country — to protect domestic crops from being infested with pests.

Miami, which has participated in the pilot for just more than year, is now cleared to import citrus from Peru, grapes and blueberries from Peru and Uruguay and blueberries, apples and pears from Argentina, said Kuryla.

In the first eight months of 2015, Miami handled 27 percent more refrigerated, or reefer, cargo over the same period last year. Reefer cargo from Latin America alone was up some 38 percent at the port.

Kuryla said it’s a triumph, considering the current economic weakness in several South American states, largely due to slowing growth in Brazil, the largest economy on the continent. Miami’s strategy, he said, is to build business now with the strongest economies and plan for business later when the struggling economies recover.

“You still have some very strong countries in Latin America where the economy is growing: Chile, Peru, Ecuador,” Kuryla said. “It’s not news that Venezuela is doing poorly. It’s not news Brazil is doing poorly. But, it is just a matter of time before those countries make that turn.”

Contact Reynolds Hutchins at reynolds.hutchins@ihs.com and follow him on Twitter: @Hutchins_JOC.