On a sunny September day, the arrival of the 14,400-TEU CMA CGM T. Roosevelt — the largest ship ever to call at the Port of New York and New Jersey, and one that until recently could not reach most of the port’s main terminals — heralded the dawn of a new era at the East Coast’s largest cargo gateway.
The June opening of the newly raised Bayonne Bridge, which was previously too low to enable ships of more than 9,500 TEU to get to three of the port’s four main terminals, capped a series of events enabling larger ships to call the coast. The expanded Panama Canal, enabling ships up to 14,000-TEU, opened in June 2016, two months before the Army Corps of Engineers completed a decade-long dredging project to deepen the port’s channel to 50 feet.
The major work may be completed, but the port’s ability to regain and expand market share is still far from assured. How it handles the ramp up in business — and the intense logistical demands of quickly offloading and removing thousands of containers — will go a long way in determining the port’s future growth.
The port’s share of East Coast import volumes from Asia has slipped from 44.1 to 35.5 percent since 2009, even as the coast as a whole has seized market share from the West Coast, according to PIERS, a sister product of JOC.com. East Coast ports — from Baltimore to Philadelphia and Savannah — have capitalized on New York-New Jersey’s history of sporadic congestion, higher costs, union walkouts, and longer turn times; truck lines of more than two hours are not uncommon. Some shippers are wary of using the port, wondering whether it is up to the mega-ship challenge.
The summer collapse of a proposed portwide “gray” chassis pool and the failure to implement a portwide trucker appointment system — widely seen as a success at GCT Bayonne, the one New York-New Jersey terminal with such a program in place — only feed into those concerns.
“We actually see a lot of shippers looking for alternatives,” Thilo Trusch, senior director of trade management Atlantic for ocean carrier Hapag-Lloyd, told the JOC Container Trade Europe Conference in Hamburg last month. “We see that customers are trying to find options to New York in the expectation that something bad might eventually happen there.”
Officials at the Port Authority of New York and New Jersey are confident that the port’s size, location next to the nation’s largest consumer market, and ongoing efforts to upgrade and improve terminals and infrastructure will secure its existing business and fend off the competition.
“We are not going to just sit back because of our bigness and say, ‘We are always going to be big, that’s the way it goes,’” said Sam Ruda, the port authority’s assistant director. “We know what our issues are. We know about congestion. And there are opportunities to improve efficiency and turn time. We get all that. We are not here to say, ‘victory.’ There is room for improvement.”
The Port Performance Council, a panel of experienced stakeholders, convened three years ago to improve efficiency at the port, Ruda noted. Restoring the proposed chassis pool is a top priority, and at least two other terminals are likely to take up the appointment system after they complete gate upgrades, he added.
“I think the facilities and infrastructure improvements, and investments in the port, are saying that we can accommodate growth,” Ruda said. The growing New York-area population, the explosion of e-commerce activity in the region, and extensive industrial real estate development around the port also suggest that demand for the port’s services is growing, he said.
Port officials are also confident that the port’s prominence will help snare a larger share of future cargo volumes if, as some observers speculate, bigger ships stop at just a few ports along the East Coast. A typical 8,000 TEU vessel calling the coast currently unloads 46 percent of the vessel’s capacity at New York-New Jersey, leaving just 54 percent for the rest of the ports on the coast, port officials say.
Ruda cited the example of CMA CGM’s decision — prompted by the raising of the Bayonne Bridge — to not only add New York-New Jersey to its South Atlantic Express route but also to make it the first port of call. The weekly Ocean Alliance route, where the carrier operates ships of 14,000 TEU, previously stopped only at Norfolk, Charleston, and Savannah on the East Coast.
“First port of call, while not a guarantee, certainly puts us in a position to compete for intermodal volumes,” he said. “Clearly, earlier port calls are where that cargo wants to discharge.”
Although the port has had congestion problems and delays in the past, it has seen few such problems this year, even as cargo volumes have increased steadily, port officials said. The port handled 3.2 million TEU in the first eight months of 2017, up nearly 5 percent from the same period last year. Imports and exports rose 5.7 percent and 4.3 percent, respectively. The port said volume in August hit a monthly record, surpassing the best month on record — July 2015 — and positioning it for record volume this year.
The challenge, however, may be in overcoming the perception built up over years of difficulties. Klaus Schnede, manager of North American marine at Eastman Chemical, said the company exports a small volume of cargo through the port from a plant in Pennsylvania. Based on that experience and hearing from associates who use the port regularly, Schnede said he is concerned about long truck lines, congestion, and the strength of the International Longshoremen’s Association and its power to halt the flow of cargo through the port.
“I don’t want to paint a picture that it’s all doom and gloom,” he said. “But the perception is that not everything is going really well with the port of New York.”
The port’s growth in recent years has lagged that of its two main rivals, Savannah, ranked second by volume on the East Coast, and Norfolk, ranked third. New York’s market share peaked at 40 percent of East Coast loaded cargo volume in 2010, and has since declined to 34.4 percent, according to PIERS. Savannah’s East Coast market share has grown from 10.9 percent to 18.8 percent over the same period. Norfolk, with 10.9 percent in 2010, now has 12.3 percent of the market.
And although New York-New Jersey’s share of the market for loaded imports from Asia has fallen to 35.5 percent from its peak of 44.1 percent in 2009, Savannah’s share has grown from 23 percent to 27 percent. Norfolk’s Asian import share has grown from 10.5 percent to 12.8 percent.
Key to how the big-ship era affects all three ports may lie in their attractiveness to shippers looking to send discretionary cargo to the Midwest by rail. New York-New Jersey, with four near- or on-dock terminals and construction underway at a fifth, argues that the port is a natural dispatch point for Midwest-bound cargo, given that many shippers — attracted by the local market — will send goods through the port anyway.
Yet that trend has not played out in recent years. Although the volume of rail lifts at New York-New Jersey rose 2.7 percent in the first eight months of the year, that increase comes after its share of the intermodal rail market slipped 3.7 percent from 2012 to 2016 to a share of 32 percent. Over the same period, Charleston, Norfolk, and Virginia all increased their shares, with Virginia rising to 30 percent.
New York-New Jersey officials say the port began planning for the big-ship era two decades ago with the start of a channel-dredging operation. At the time, the biggest ships expected in the future were thought to be 8,000 TEU. Concluded a year ago, the project took the port’s channel to a depth of 50 feet.
When the project to raise the Bayonne Bridge from an elevation of 151 feet to 215 feet began seven years ago, the largest ship expected was 12,000 TEU. Yet that has already been far exceeded by the CMA CGM T. Roosevelt, a 14,400 TEU vessel that stopped at Maher Terminals in September. Port officials believe the channel and bridge in the future will handle vessels of up to 18,000 TEU.
The question, however, is how the port copes with the logistical challenges expected to come with the big ships, the transition to which is already well underway.
Since the bridge opened in June, 14 vessels of greater than 10,000 TEUs — too big to pass under the bridge before it was elevated — have stopped at the three terminals, according to PIERS. The ships were among 1,348 vessels to visit the port in the first eight months of the year, a 15 percent decline in the number from the year before.
But the number of 8,000 to 10,000 TEU ships that visited the port’s four main terminals increased 35 percent — to 429 — in the first eight months of 2017 from a year earlier, according to AIS Live, a satellite-based ship-tracking sister product of The Journal of Commerce. The data offer a comparison of the period before the opening of the expanded Panama Canal, and after.
So far, the flow of large vessels has not taxed the port in the way back-to-back mega-ships calling the terminals are expected to do in the future. To help prepare for the big ships, port terminal operators have spent about $2 billion on upgrades, and the port authority and federal government have spent $4.7 billion on dredging, rail access, and other projects, including raising the Bayonne Bridge.
The Port Performance Council also was created to prepare for the big-ship era, but its recommendations have had mixed outcomes.
GCT Bayonne in December introduced a reservation system that required truckers to make an appointment to enter the terminal gate from 6 a.m. to 8 a.m., and the program has expanded steadily. The appointment period is now 6 a.m. to noon, and terminal officials say turn times in the appointment period are 25 percent faster than those when no reservation is needed.
Once skeptical of appointment systems, truckers said the port has slashed turn times to the extent that dual transactions can sometimes be completed in an hour, compared with twice that or more in the past. “From where we were before, it’s much better,” said Tom Adamski, agent for First Coast Logistics, who represents the New Jersey Motor Truck Association’s intermodal council and who initially was not convinced the system would improve efficiency.
Two other terminal operators at the port — APM Terminals and Port Newark Container Terminal — are expected to install a similar system when they finish gate upgrades, and others among the port’s six terminals are expected to follow suit.
The port has not made progress on another council recommendation, that the terminals extend gate hours so they can avoid backups, and so that trucks can get in and out more quickly. The terminals currently open around 6 a.m. and close between 3 p.m. and 7 p.m., depending on the terminal and the type of cargo. Opponents of extending port gate hours argue that there is little point in extending gate hours when warehouses are not open round-the-clock, and that trucks would have nowhere to take containers once they have picked them up.
The port also has made little progress in creating an interoperable chassis pool that would allow truckers to deliver and pick up chassis at any terminal, rather than, for example, having to drop off a chassis at one terminal and pick one up at another location.
A planned 8,000-chassis pool among Flexi-Van Leasing and Direct Chassis Link Inc. (DCLI) fell apart several weeks after the two participants said the initiative had been finalized and was ready to go. DCLI pulled out because of uncertainty over where it would operate the business as a result of its pending removal from the Elizabeth, New Jersey, facility operated by APM Terminals; the latter said it needs the space currently occupied by chassis for terminal expansion.
The collapse followed the earlier dissolution of an effort to create a portwide pool among DCLI, Flexi-Van, and TRAC Intermodal, which controls two-thirds of the port’s chassis. That effort ended amid disagreements over the proposed pool’s management and governance issues.
One possibility expected to be studied by the Port Performance Council is whether to involve the Ocean Carrier Equipment Management Association (OCEMA) in managing the pool. The group raised the suggestion in a letter to the port authority last month, according to council minutes stating OCEMA considered the port “at risk” because the chassis issue "has not been prudently addressed.”
Don Pisano, president of American Coffee Corporation, which frequently sends cargo through the port, said the collapse of the gray chassis pool proposals underscored the port’s difficulties. “We are extremely disappointed and frustrated that the prospects for a much-needed gray chassis pool now looks to have vanished,” he said. “Although our draymen are getting the job done right now, it is not without unnecessary time spent splitting up movements of containers and chassis, the costs associated with that, and the added congestion these moves compound to an already overburdened infrastructure.”
A key missing element, Pisano added, is the ability to assess exactly how long trucks spend waiting outside the port. Such figures are available at other ports and would allow New York-New Jersey to see “how badly they measure up,” he said.
Dave Arsenault, president of Logistics Transformation Solutions and a former president of Hyundai Merchant Marine America, said beneficial cargo owner clients complain the import discharges of the mega-ships have “started to expose some of the weaknesses and vulnerabilities that had always been there but had never been magnified to the degree they are now.” These growing pains, however, are to be expected, he said.
“The cargo dwell time in this gateway for import local and intermodal cargo is now averaging nearly five days,” according to what Arsenault said he hears. “This, particularly for intermodal cargo, is not anywhere near the velocity it should be.” The lack of a gray chassis pool and the lack of a portwide appointment systems are slowing down velocity, he said.
A global logistics manager for a Midwest vehicle manufacturer said it avoids New York-New Jersey when possible, and predominantly sends its imports and exports through Canadian ports because there is “much less variability and disruption” getting cargo off the ships and onto the rails. The company likes to spread its risk, though, and sends some through New York-New Jersey, the largest shipments coming to the port from a plant in Spain.
“A lot of times I get pressure from my folks in Europe, and they say, ‘Why aren’t you using New York?’ and note that the sail time is a day or so shorter to New York than to Montreal or Halifax,” the logistics manager said. But that benefit disappears once the time taken to get cargo from ship to rail is factored in. She estimates it takes three days at a Canadian port compared with five to seven days in New York. In addition, New York-New Jersey’s performance is variable, she said, noting the company once lost a container for weeks at the port.
“If we could get the connection here in the United States to be as seamless with New York as it is in the Canadian gateway, we would definitely use it more.” She added, however, that the service through New York-New Jersey has been more “stable” this year.