[240414.EN.SEA] “Mega-Alliances” Bring Age Of The Big Ship To The Port

A new challenge is facing the port of Hampton Roads: the arrival of the port’s largest-ever container ships. 

“Mega-alliances” formed by the largest ocean carriers are putting gargantuan ships into service on the busiest trade lanes – vessels big enough to carry 18,000 20-foot containers. That’s three times the capacity of the biggest ships only two decades ago.

Though these giants are plying the Asia-Europe routes, they’ve shoved other smaller, yet-still-massive vessels into other trade lanes.

Hampton Roads and many other ports that already have been struggling to handle cargo surges have begun to feel this cascade effect.

“You have this big crunch through the terminal where you’re trying to force more and more containers through the system,” said Paul Avery, associate editor at World Cargo News, a trade publication based in Britain. “Terminals are struggling to manage this without congestion.”

It’s an issue facing ports worldwide, not just Hampton Roads, where cargo backups have been cited as a factor in the Virginia Port Authority’s multimillion-dollar operating losses this year.

“Virginia’s not unique in the challenge that it has,” Avery said.

Preparing for the larger ships the alliances are bringing “is a critical aspect of any port’s job,” said John Reinhart, a former Maersk Line Ltd. chief executive who took over as the Virginia authority’s CEO in February.

Reinhart has moved aggressively to streamline the port’s operations, knowing that its inefficiencies will be magnified in the era of mega-ships.

Just a few years ago, the norm for Hampton Roads was five ships calling per week on a typical trade lane, each carrying the equivalent of 4,000 20-foot containers and unloading 800 of them over five days, said Tom Capozzi, the Port Authority’s chief commercial officer.

In their place, he said, it now may get two 9,000-unit vessels, each discharging up to 2,000 containers – over two days.

The larger ships began calling on Hampton Roads about two years ago, said Joe Harris, a Port Authority spokesman. About a half-dozen of these vessels visited in the past couple of weeks, and their share of port calls is expected to increase sharply in the coming months and years as mega-alliances expand their reach.

The changes are creating “this huge surge of volume that’s all being condensed,” Capozzi said.

Meanwhile, truckers still want to get in and grab the containers they’ve been hired to haul away as soon as they hit the tarmac, and rail customers still expect their cargo to move within 48 hours, Capozzi said. They don’t understand the magnitude of the change occurring, he added.

For ocean carriers, the alliances are a necessity, industry experts say.

It’s all about lowering costs by sharing the space on huge ships that none of the lines could fill on their own.

“For a number of the carriers, this is a matter of survival,” Lars Jensen, CEO of SeaIntel Consulting, said at The Journal of Commerce’s Trans-Pacific Maritime Conference in Long Beach, Calif., last month.

Jensen, a former Maersk executive, stressed there will be significant demands on ports and terminals.

“There’s going to be a lot more bottleneck effects, and there’s going to be a lot more strain on a port in terms of infrastructure,” he said. “Not because the number of containers they have to handle changes materially, but the concentration changes. It’s going to come much more in lumps – and that’s much more difficult to handle.”

Severe congestion has become a problem at some of the biggest container gateways on the continent, Peter Tirschwell, a top executive at The Journal of Commerce, said at the Long Beach conference.

He rattled off a list of ports – including New York, Chicago, Los Angeles and Vancouver – that he said are struggling with congestion.

“Higher growth, accelerating trade volumes, is actually, at this moment, a fairly frightening prospect,” Tirschwell said.

An executive at Dollar General Corp., a big shipper, told the audience at a conference session on the mega-alliances that his company will be taking a closer look at where its containers go and what happens to them.

“It’s of growing importance,” said Adam Hall, the retail chain’s senior director of international logistics. “You have to sit down and think through: Where have I had good experiences with port philosophy, where have I had good rail connections?”

The biggest of the new alliances – the “P3” – brings together the Nos. 1, 2 and 3 shipping lines in the world: Maersk Line, Mediterranean Shipping Co. and CMA-CGM.

Early estimates were that the alliance would control about 42 percent of the Asia-to-Europe route, 24 percent of the trans-Pacific route and 40 to 42 percent of the trans-Atlantic route, according to the Federal Maritime Commission. That agency allowed the ship lines’ compact to move forward.

The other big alliance – the so-called “G6” – brings together APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL. It will control roughly a third of the Far East-U.S. West Coast market and about 40 percent of the northern Europe-U.S. trade.

The G6 accounts for more than a third of the Virginia Port Authority’s business.

Earlier this month, the commission let the alliance, already operating in Hampton Roads and some other U.S. ports, expand into additional U.S. trade routes.

A third big alliance has been announced. That one, called “CKYHE,” is made up of Cosco, “K” Line, Yang Ming, Hanjin and Evergreen. It has not yet filed paperwork with the commission.

What’s somewhat confusing is that all or most of these lines already call on many U.S. ports, including Hampton Roads, either independently or as part of other, smaller agreements with other carriers.

For decades, big ocean carriers have shared ships through vessel-sharing agreements, enabling them to lower costs and increase efficiency by splitting up the available slots for containers.

They’re a little like the arrangements some airlines have with one another, enabling them to share seats and keep their planes full.

Since 1984, the Federal Maritime Commission has allowed more than 220 vessel-sharing agreements to advance.

In fact, it’s never stopped one of them.

Many of them, however, were relatively routine transactions, affecting fewer than 100 slots on vessels that carry thousands of containers, according to the commission staff.

The new, giant alliances provide the carriers a way to afford the costs of operating mega-ships.

That may not translate into a benefit for ports.

But port executives know there’s no stopping the mega-ships from coming.

In Hampton Roads, officials have decided to make the best of the situation – and perhaps even capitalize on it.

The Port Authority recently set up a task force to address truck congestion. It plans to launch, in May, a new appointment system for truckers arriving at Norfolk International Terminals – a variation on a system already in use at APM Terminals in Portsmouth.

“We’ve come up with a plan that we think will work,” Capozzi said. “It’s just going to take some time; it’s going to take some investment.”

While the bigger vessels pose logistical challenges, they present opportunities as well, he added.

“There are some real advantages at play for us going forward with these alliances, because what it’s doing is it’s finally bringing the size of ships to the East Coast that play to our strengths, play to our ability to handle the ships with the deep water.”


Source : The Virginia Pilot, SN-TR.