Friday, September 19, 2014

Port Industry Meeting Challenge of Much Larger Vessels

By Luis Mota

The Port of Long Beach’s Acting Deputy Executive Director, Dr. Noel Hacegaba, has published a white paper, Big Ships, Big Challenges, on the competitive impact that a new generation of mega container cargo ships is having on US port authorities.

“The deployment of these mega ships presents physical, financial and operational challenges that must be met by port authorities across the country,” Hacegaba writes.

“Even for ports that will not see the mega vessels call at their ports any time soon, the arrival of the larger ships is creating a cascading effect in which the ships being replaced by mega vessels are being deployed in the smaller trade lanes. Thus, the strain of larger vessels has the potential to affect all ports, big and small.”

Dr. Hacegaba notes that the average size of container ships has grown considerably in recent years, and the trend is likely to continue for years to come.

According to Dr. Hacegaba’s report, ports around the country are spending $46 billion in capital improvements. Shipping companies are ordering larger ships to meet demand, while cutting the operational costs they would otherwise incur by sending cargo on multiple trips. As a result, ports of all sizes are struggling to ready themselves to handle the larger vessels. Hacegaba states that regardless of a port’s size, they face a demand to handle a larger class of vessels. In the coming years it is projected that smaller vessels will be put out of service to make way for larger ones. But the largest ships will go to the biggest ports, while today’s larger ships will switch to smaller ports.

For the vessel operators, the major investments in larger ships is straining their resources, so ocean carrier alliances and consolidations are also being forged as a result. While this is not new to the maritime industry, Hacegaba points out that they are “providing financial uncertainty for port authorities.” The newly aligned or consolidated vessel operators may move to different ports. A smaller port may spend millions on fixing its infrastructure, and then lose a major tenant.

Regardless, he says, smaller ports that don’t upgrade infrastructure, because of their struggle for funding, may face losing business as small-sized fleets are phased out.