Time to wake up

Time to wake up

The subject of a well-reported article on the front page of the Newark Star-Ledger on April 27 was the rapidly becoming infamous Bayonne Bridge. The bridge spans the channel leading to the main container terminals of the Port of New York and New Jersey and is too low for the largest container ships and for many more that soon will take to the oceans. The question is, to what extent is this a competitive disadvantage for the East Coast's largest port?

Some, such as Ernesto Butcher, deputy executive director for operations at the Port Authority of New York and New Jersey, aren't convinced there's a threat to the port. "I can't say that there's a risk," he told the Star-Ledger. With all due respect to Mr. Butcher, he is wrong. The Bayonne Bridge is a huge threat to the future of the port. On top of other major problems the port faces - dredging that is three years behind schedule, lagging crane productivity and lengthy truck wait times at terminals - the impression is growing in the industry that New York-New Jersey is slipping.

The threat posed by the Bayonne Bridge is not a matter of debate among carriers. The bridge is well-known at ocean carrier headquarters from Beijing to Hamburg. Dealing with obstacles to vessel movement, whether it's locks, shallow draft or one-way channels, is a daily challenge for ocean carriers. They know an obstacle when they see one, and since at least 2005 they have been publicly raising the alarm. Don Hamm, chief executive of Port Newark Container Terminal, summed up the situation last month upon accepting the 2008 Good Scout Award. "If we don't do something about the Bayonne Bridge, the big ships can't come here. It's really that simple."

Note the point he's making: The bridge is an issue because it prevents big ships, not all ships, from entering. Until now, the vessels making calls at New York-New Jersey have had few problems getting into the port. The bridge opened in 1931, well before container shipping, and New York-New Jersey has become by far the largest East Coast box port, handling more than 4 million TEUs in 2007. But what has been seen as a future problem is becoming a problem now.

The reason is carrier economics. Container ships have grown increasingly larger. Carriers can't accurately predict their revenue because of unpredictability in freight rates and underlying trade volumes, and few see that changing. So they focus on costs. With their expenses rising on many fronts, they have turned again and again to bigger ships, reducing their unit costs per container carried.

New York-New Jersey can get away with obstructing the biggest ships for a while, because of its large local population. The higher per-unit cost associated with smaller ships is still less than the cost of landing containers in, say, Norfolk, and shipping them to the New York area by the much-higher per-mile cost of truck or rail. But over time, the cost difference will erode and some containers will arrive via a longer and indirect route, raising transit times and costs for local shippers.

The bigger concern is discretionary cargo, a big part of what makes any port truly competitive and a source of thousands of jobs at New York-New Jersey and the rationale behind hundreds of millions of dollars in on-dock rail investment. New York-New Jersey's franchise handling this cargo, which moves to and from the U.S. interior via rail, stands to be eroded by the Bayonne Bridge.

The Heartland Corridor under construction from the Port of Virginia makes for an attractive, high-volume container operation, with big ships arriving at the obstacle-free Port of Virginia and transferring large quantities of boxes to rail for onward movement into the interior, and the opposite way for exports.

Port officials should note that the AW-5 service of Cosco, "K" Line, Yang Ming and Hanjin that will begin in July will operate from Asia, through the Panama Canal and make calls at the East Coast ports of Savannah, Norfolk and Charleston before heading back. New York-New Jersey is not on the itinerary.

From the day the Panama Canal widening project is completed in 2014, a multibillion-dollar project undertaken primarily to address the needs of container lines, the carriers will start bringing larger ships to the East Coast. It is already too late for New York-New Jersey to be ready by then because not only has no work begun to eliminate the obstacle of the Bayonne Bridge, the port isn't even sure it's a problem. That, right there, is the port's biggest problem.