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Sept.21, 2015

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 16 THE JOURNAL OF COMMERCE SEPTEMBER 21.2015 By Peter Tirschwell SAVANNAH'S PORT HAS had a blistering year of growth, with huge volume increases and market share gains in the Southeast and nationally. But for the leader of the Geor- gia Ports Authority, any optimism about being the fastest-growing major U.S. port this year must be tempered by difficulties at other East Coast ports that could affect Savannah down the road. The port has handled this year's gains free of congestion, but its ability to perma- nently lock in diversions resulting from West Coast labor trouble and attract additional business following next year's expansion of the Panama Canal will depend on the larger East Coast port range being free of chronic bottlenecks. That's far from the case today. "I need Norfolk and New York to work very well because ocean carriers aren't going to make network deployments to the Eastern Seaboard without being able to call two of the ports, if not three," GPA Executive Director Curtis Foltz told The Journal of Commerce. "Regardless of our capacity to grow, if they (other East Coast ports) don't have capacity to grow, ocean carriers aren't going to put additional tonnage on the Eastern Seaboard." This is an important time for the East Coast. Although volumes have surged coast- wide this year — imports were up 15 percent through July, versus a 4 percent decline on the West Coast — ports face questions about their ability to provide reliable service. Terminals at the largest East Coast port, New York-New Jersey, can't keep up with sporadic surges of cargo coming off ships, with hours-long truck turnaround times the norm, and Virginia terminals have yet to put chronic congestion behind them. The International Longshoremen's Association and employers represented by United States Maritime Alliance are discussing a possible extension of the East Coast longshore con- tract, which would reduce shippers' unease about the East Coast, but that wouldn't spell an automatic end to congestion at New York- New Jersey and other key gateways. Asked how many of the 530,000 20-foot- equivalent-container units in g row th Savannah experienced during the fiscal year that ended June 30 represented diversions from the West Coast, Foltz said, "I would suspect half." On top of that, he said the East Coast will pick up incremental market share gains of a few percentage points after the Pan- ama Canal opens its expanded locks because of anticipated lower freight rates for shippers. As a result, the East Coast is being put to the test, and questions abound about how well the range as a whole is responding. "Savan- nah has done well in large part because it has become more efficient, more serious than before in terms of what needs to be done, and offered to make itself a true viable choice. Other ports need to have their own introspec- tion and only by doing that can they increase their lifts and gain the support from their shipper communities," said Allen Clifford, executive vice president of Mediterranean Shipping Co. USA. "Carriers need ports to run as efficiently as possible, because delays can cost carriers a lot of wasted money, none of which is especially pleasant when rates in many trades are non-remunerable." Pressure on East Coast ports will only increase when the Panama Canal expansion opens and smaller, Panamax-sized ships dis- appear from the Asia-North America east coast market. Foltz said he met with a senior canal official in August who told him the canal is holding firm to a second-quarter 2016 opening. Change will come quickly thereaf- ter. Among them will be 6,500- to 8,500-TEU ships deployed in Panama all-water services, as part of a shift back to the Panama Canal of North Asia sailings now deployed to the East Coast via Suez Canal routings. And a change in economics of the Pan- ama Canal all-water trade toward lower rates will bring additional cargo to the East Coast, Foltz predicted. "Today that route is hamstrung by the economies of a 4,500-TEU ship. Now you will be dealing with the economics of a 6,500- to 8,500-TEU ship," he said. "I don't think there is any question that the cost to the ocean carrier is improved, and simple economics says that there will be a portion of that — how much I can't tell you — that should move downstream to the (ben- eficial cargo owner) or the shipper. "It would be hard to envision a scenario where that mode won't become price-com- petitive so that there won't be a market share shift of a few percentage points," Foltz said. All of that plays into the point that the East Coast as a whole must be prepared, because carrier rotations typically call both North and South Atlantic ports. "The pair- ing of a South Atlantic port with a North Atlantic port on a vessel rotation is com- mon, to serve the local markets," longtime port consultant John Martin said. "To the extent that these port pairings offer non- congested terminal operations, the pairing of the ports by a carrier is more competitive than that of another carrier that would have port pairings where congestion exists at one or both of the ports of call." Foltz is confident about Savannah han- dling whatever volumes are thrown at it. The port has proved itself this year. Its import container volume surged 32 percent in the first half of the year, with no hint of congestion. Miami's imports grew 20 per- cent in the period, while Charleston's rose 15 percent, Port Everglades' dropped 6 per- cent and Jacksonville's dropped 1 percent, according to PIERS, a sister product of The Journal of Commerce within IHS. "It certainly tested our limits in the latter part of the first quarter and into the second, but on the positive side it allowed us as an operating entity to test our philoso- phy on how we would handle volume and incremental surges," Foltz said. "We came out of it extremely well." The philosophy is centered around unin- terrupted investment over the past decade in gates, storage yards, rail, and cranes JOINED AT THE SHIP Savannah is the fastest-growing major U.S. port, but holding onto those gains depends on the efficiency of others

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