Global Shipping Within North America

By Patrick Penfield
Whitman School of Management
Syracuse University

When we hear the term freight shipment many of us assume this freight is being shipped by truck or plane. We think of freight shipped by sea as something that was done in the early 19th century. Global shipping continues to be the most important mode of shipping freight. This article will explain how global shipping is impacting our economy, how vital ports and waterways are to North America, the issues these North American ports face and what we can expect to see in the future in regards to global shipping.

Global shipping is becoming an important economic driver for the North American economy. “Ocean-going vessels transport nearly 80% by weight of all goods shipped in and out of North America”1. “In the United States 8.4 million Americans were employed as a result of activities related to port sector imports and exports in 2006. Factoring in direct, indirect and induced amounts, the total economic value related to ports and port sector business in 2006 provided nearly 2 trillion dollars to the U.S. economy.”2 “U.S. ports and waterways handle over 2 billion tons of domestic and international cargo annually.”3

“As a clear indication of globalism’s impact on the U.S. economy, international trade has grown from 13% of the U.S. Gross Domestic Product in 1990, to 24% in 2000 with projections of 30% by 2010.”4 The United States continues to import more than we export but exports are starting to increase. “According to the Pacific Maritime Association their latest report details a trend that has been in effect for most of 2007, with exports increasing at a much faster pace than imports. In the first seven months of the year containerized exports jumped 12% while imports rose 3%.”5 The drop in the value of the U.S. dollar has helped our exports since foreign countries are getting more products for their money.

Trade between the U.S. and China continues to grow, and shipping will grow along with it.. “China exports to the United States climbed from $100 billion in 2000 to $287.7 billion last year”6 “The U.S. imbalance of trade with China is in the billions and growing every year.”7 “The Chinese are in the process of spending $15 billion to redevelop the Yangshan deep water port near Shanghai. Currently the port can handle 20 million containers a year by 2010 and it will be capable of exporting 30 million containers a year, with a vast majority destined for North America.”8

Ship builders are now producing post-Panamax ships (container ships too big to fit through the Panama Canal) or otherwise known as “Mega” container ships capable of handling over 10,000 TEUs (twenty foot containers).

Samsung Heavy Industries is building eight mega-ships that can carry 13,296 twenty-foot containers (TEU). Delivery of these ships are set for the 2010-2012 timeframe. “Containerization is the most lucrative trade for ports. Container flow to North America is predicted to soar by 75% from 41.1 million twenty foot containers to 72 million twenty foot containers by 2015, with most coming from China and other Asian countries.”9

Many ports/waterways are having difficulty handling these post-Panamax ships and keeping up with the growing container shipments. Because these new ships are bigger and not all ports or waterways can handle their size. The Panama and Suez canals are two important canals for global shipping. Both are in the midst of expansion plans. In 2006, Panama passed a referendum to spend over 5 billion dollars to expand and upgrade the Canal. “At present, it can only handle ships carrying up to 4,000 containers, known as Panamax vessels. But with wider locks and deeper and wider access canals it could take ships carrying up to 10,000 containers. The expansion will be completed by 2015.

“The Panama Canal handles nearly 5% of global trade.”10 The Suez Canal started their expansion plans in 2000. “The 441-million-US-dollar project will increase the width of the canal from 345 meters to 400 meters and its depth from 22 meters to 25 meters. The three-stage expansion project, slated to be complete by 2010, will allow the passage of 92 percent of the existing commercial ships in the world, including supertankers with a capacity of 200,000 to 350,000 tons.”11

The post-Panamax ships are also impacting the infrastructure and equipment used in ports. “Finding the landside capacity to handle the cargo coming off these ships is becoming an issue. The equipment used at many ports isn’t sized to the task. As these ships get wider rather than longer or deeper, the cranes don’t have sufficient outreach to service them.”12 Many shipping lines are becoming more pro-active and finding alternate ports to escape congestion.“ Recent terminal problems and other difficulties relating to labor relations and inland intermodal services in North American ports have led many shippers and shipping lines to diversify their port options. As a result, 22 new ports were added to top tier shipping line services between 1992 and 2002.”13

Another issue plaguing North American ports is productivity. “North American container productivity tends to be less than that achieved in Asian ports. One analysis pegged annual ship to shore gantry crane productivity at 60,500 TEUs in North America compared to an average of 95,500 TEUs at Asian ports.”14

Major Ports within the U.S.
Long Beach, California—The port at Long Beach continues to grow and set shipment records. “The Port of Long Beach is one of the world’s busiest seaports, a gateway for $100 billion a year in trade that supports 316,000 regional jobs and produces $5 billion a year in tax revenues. The Port is also a global leader in environmental stewardship. The San Pedro Bay port complex ranks as the world’s fifth busiest, after only Singapore, Hong Kong, Shanghai and Shenzhen (China).”15 The workforce has grown over 38% in 4 years and the current Longshore Warehouse and Union Contract expires on July 1, 2008. Negotiations are supposed to occur at the start of 2008 with the hope of preventing another strike that occurred in 2002.

Los Angeles, California—“The port of Los Angeles recently received ISO 14001 certification.”16 The Port encompasses 7,500 acres, 43 miles of waterfront and features 27 cargo terminals, including dry and liquid bulk, container, break-bulk, automobile and omni facilities. Combined, these terminals handle almost 190 million metric revenue tons of cargo annually. They employ 259,100 full- and part-time jobs (one of every 24 jobs in Southern California) and produce $1.4 billion in tax revenues.” 17

New York City, New York/New Jersey—“In 2006, the Port of New York and New Jersey set a new cargo record, surpassing 5 million loaded and unloaded 20-foot equivalent units (TEUs) handled during the period for the first time. The Port of New York and New Jersey is planning to spend $2 billion in seaport investments over the next 10 years so that the Port is better equipped to handle projected growth.”18

Port of Virginia—“The ports of Virginia continue to set records on cargo tonnage and in the past five years have grown 37.7%.”19 “A new privately owned terminal recently opened in September 2007. APM Terminals International spent 450 million dollars to build a state of the art facility which can handle one million TEUs and can pinpoint the location of each container within the port. The automation that APM has built into this new terminal will put pressure on other ports to adopt similar efficiencies.”20

Houston, Texas—“The Port of Houston is a 25-mile-long complex of diversified public and private facilities located just a few hours’ sailing time from the Gulf of Mexico. The port is ranked first in the United States in foreign waterborne tonnage, second in the U.S. in total tonnage, and tenth in the world in total tonnage.”21 “In 2005, the port authority completed a five-and-a-half-year plan to deepen the channel from 40 to 45 feet and widen it from 400 to 530 feet.”22

Major Ports within Canada
Vancouver—The Port of Vancouver is the largest port in Canada and the most diversified port in North America. In North America, the Port of Vancouver ranks number one in total foreign exports. In Canada, it ranks number one in total cargo handled and number one in total container throughput.23 “Plans are underway to increase container-handling capacity to 4.0 million TEUs by 2012.”24 The International Longshore and Warehouse Union are in the process of negotiating a contract with The Port of Vancouver.

Montreal—A leader among container ports serving the North Atlantic, every year the Port of Montreal handles more than 20 million tons of highly-diversified cargo: the Port of Montreal creates close to 18,000 direct and indirect jobs, and generates business revenues of almost $2 billion annually. It has grown at an average annual rate of 5.3 per cent for the past 10 years.”25
Halifax—In 2006 the Port of Halifax shipped 13.7 million tons of cargo. The port recently invested $35 million in port improvements for 2005 and $100 million will be invested in the Port over the next five years.”26

Major Ports within Mexico
Manzanillo—Manzanillo is Mexico’s principal deep-sea port handling the highest volume of cargo on the country’s Pacific coast. The port facilities are privately owned and operated. It is the only Mexican port that has a double-stowage train service that moves its high volume of container cargo on 8.4 miles (13.5 kms) of tracks privately owned by FERROMEX (Ferrocarriles Mexicanos).”27

Punta Colonet, Mexico Proposed New Mega Port—The Mexican government is in the planning stages of opening up a “Mega” container port at Punta Colonet on Mexico’s West Coast. “The Colonet port-rail project, which will be centered at an uninhabited bay 150 miles south of San Diego, is among numerous efforts to increase the ability of the West Coast to receive a growing amount of containerized-cargo shipments from Asia, especially China.”28 “The project, calls for a container facility that can handle five to eight million TEUs a year. With no infrastructure to speak of at the moment - neither port nor rail or road links - the tag for the development is estimated to top US $8 billion.”29

Legislation/Regulations Impacting Ports
New legislation has been impacting ports within the United States. The Port Security Improvement Act of 2006 was enacted in order to establish the following. “A ‘GreenLane,’ that will provide benefits such as expedited cargo clearance and fewer customs inspections for shippers that meet the highest security standards; a new system for resuming trade after an incident and funding port security grants.”30
One bill that may hamper the GreenLane program was signed into law by President Bush on August third of 2007. This law requires The Department of Homeland Security to use x-ray and radiation detection machines on all containers coming into the United States by July 2012.31

In November of 2006 the ports of Los Angeles and Long Beach implemented a program called the Clean Air Action Plan. “It’s aimed at reducing air pollution emissions from trucks, locomotives, and other landside equipment.”32 The ports have to reduce the amount of pollution they emit in order to get approval from the state of California to expand their operations.

Future of Ports within North America
North American ports should continue to grow exponentially as global trade increases. Many ports in North America need to address their capacity issues in order to keep up with Asian ports. Port management in the United States and Canada must collaborate with labor unions to improve productivity and eliminate labor stoppages. Private ownership of ports will continue to grow throughout North America. Investments in technology and training will provide advantages to ports in the future. Opportunities to open new ports such as Punta Colonet could improve the congestion issues on the West Coast.

Footnotes
1. Inside Supply Management, August 2007
2. http://www.aapaseaports.com/AAPAFall07.pdf
3. http://www.aapaseaports.com/AAPAFall07.pdf
4. http:// www.worldnetdaily.com/news/article.asp?ARTICLE_ID=57590
5. Shipping Digest, September 17,2007
6. American Shipper, September 2007
7. http:// www.worldnetdaily.com/news/article.asp?ARTICLE_ID=57590
8. http:// www.worldnetdaily.com/news/article.asp?ARTICLE_ID=57590
9. http://www.atlantica.org/library.asp?cmPageID=93&fd=0&id=1210&=1
10. http://news.bbc.co.uk/2/hi/americas/5182472.stm
11. http://english.peopledaily.com.cn/english/200012/18/eng20001218_58165.html
12.Logistics Management, July 2007
13. http://www.atlantica.org/library.asp?cmPageID=93&fd=0&id=1210&p=1
14. http://www.atlantica.org/library.asp?cmPageID=93&fd=0&id=1210&p=1
15. http://www.polb.com/news/displaynews.asp?NewsID=120&targetid=1,17,7
16. http://www.portoflosangeles.org/
17. http://www.portoflosangeles.org/about_economicimpact.htm
18. http://www.panynj.gov/DoingBusinessWith/seaport/html/trade_statistics.html
19. http://www.vaport.com/Port_Information/PORT-stats-generalstats.asp
20. The Journal of Commerce, September 2007
21. http://www.portofhouston.com/geninfo/overview1.html
22. http://www.portofhouston.com/geninfo/overview2.html#portpresent
23. http://www.portvancouver.com/trade_shipping/
24. http://www.portvancouver.com/trade_shipping/why.html
25. http://www.portofhalifax.ca/english/aboutus/financialinfo_developmentupdate.html
26. http://www.mexconnect.com/mex_/colima/colimaindex.html
27. http://www.signonsandiego.com/news/mexico/20070816-9999-1b16colonet.html
28. http://www.cargonewsasia.com/secured/article.aspx?id=17&article=13895
29. http://www.amo-union.org/Newspaper/Morgue/10-2006/sections/news/safeport.htm
30. Logistics Management, October 2006
31. American Shipper, September 2007
32. Logistics Management, September 2007

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