US Port System Running Out Of Room

(This article was originally published Friday)

When County Commissioner Joe McClash of Manatee County, Fla., looks at the thousand acres of abandoned industrial facilities and overgrown orange groves that sprawl around Port Manatee at the southern end of Tampa Bay, he doesn't see a post-industrial wasteland; he sees opportunity.

"It's probably the best land for port development in the state of Florida," McClash said.

Unlike most U.S. ports, Manatee has room to expand, and these days, such space is at a premium.

America's ports are running out room. Squeezed by their urban hosts and struggling to keep up with wave after wave of exports from the thriving economies of the developing world, the country's long-neglected port infrastructure, like much of its aging transportation network, is nearing a crisis point.

"Fortunately, we're not in an urban center," said McClash, who also serves as the port's chairman. "Look at the history of local ports. Port Tampa is a good example: Now the realization has come that those ports are not as attractive because its very difficult to move goods from those ports to the rest of America."

According to the U.S. Maritime Administration, part of the U.S. Department of Transportation, the amount of trade moving through U.S. ports could as much as triple in the next 15 years. To keep up, the U.S. would have to add capacity equivalent to the combined Ports of Seattle and Tacoma, Wash., every year, and a slight downtick in import volume this year may be the lull before the storm.

"We're facing an enormous challenge in the not-too-distant future," said Maritime Administrator Sean Connaughton. "People get in their foreign Ducatis and buy their iPods or, you know, go to the store and buy fruit from all over the world and never think that every one of those is moved by a port."

   Shipping Rates On The Rise 

Since the fall of the Soviet Union, trade as a percentage of gross domestic product has risen sharply; from 15% in 1992 to 22% in 2006. Waterborne trade is an increasingly large part of that, and shipping rates, after years of decline, have already begun to rise. Increased congestion could spell further increases, leading ultimately to higher prices for struggling U.S. consumers.

Historically, cities grew up around ports naturally, and excess capacity was mandated by law for use in national emergencies, in return for guaranteed market share. When ports were deregulated starting in the late 1970s, the cost of logistics, moving and storing goods and materials as they flow through the economy, fell as excess capacity that had been regulated into the system was absorbed. Now that trend has reversed. Since 2002, shipping rates have risen dramatically, and shipping companies are already seeing congestion. Many cities, nurtured by ports, have choked off the possibility of expansion, devoting chunks of waterfront to other uses, such as stadiums and harbor-view condominiums.

Meanwhile, many smaller ports were closed out of the trade expansion because they lacked the infrastructure and deep-water access to handle modern container ships. In Manatee's case, its largest customer, Del Monte Foods Co. (DLM), threatened to pull up stakes if the capacity wasn't expanded.

The port responded. On the morning of Dec. 19, Manatee's new $3.9 million crane picked up its first container: 25 tons of Del Monte honeydew melons from Guatemala. McClash said that, with the new crane, the Manatee port will move more than three times as much cargo.

For container-ship owners, port constraints are a mixed bag, with rate increases helping their bottom line because long lines at ports drive demand for ships. A similar dynamic played out at Australian ports driving bulk shipping rates to unprecedented heights.

However, Gerry Wang, chief executive of Vancouver-based vessel owner Seaspan Corp. (SSW), expressed concerns about the ability of the U.S. to process growing global trade.

"Receiving goods is part of globalization. If (it doesn't) have the infrastructure to stay in the game, the U.S. won't benefit as much as other countries would," Wang said. "It's a competitive landscape. If the U.S. doesn't get the traffic, it will go somewhere else."

Wang, who does most of his business with China, drew a comparison between the response to the surge in global trade in both countries. While China has poured billions of government dollars into its infrastructure, building its way out of a problem, the U.S., relying primarily on private resources, has lagged behind despite a 25% boost in port infrastructure investment since 2000.

   Solutions Could Include 'Megaports' 

Several solutions have been put forward to address the problem.

The Maritime Administration has proposed a hub and spoke system, where some ports would become "megaports," unloading the huge ocean-going container ships onto smaller vessels for deliveries to regional ports. In December, Congress designated coastal waterways as "extensions of the surface transportation system," paving the way for more government investment.

McClash, for one, doesn't see that plan working in Florida, because of space constraints at the state's bigger ports. "The super-mega ports, I think, will be in different countries," he said.

Improving the efficiency of ports and their links to ground transportation is another option. On that front, the U.S. lags far behind Asia and Europe. In Shanghai, throughput - the amount of containers a port can process for its size - is triple that at North American ports.

"If you halve dwell time, you double the capacity of the port without building anything," said port logistics consultant John Vickerman of TranSystems Corp. "Not everything is terrible. In the future, we could actually accommodate this, (but) it's going to have to be done by an industry, and the industry will have to wake up."

In some cases, industry has done just that. In July 2007, Danish transportation giant A.P. Moller-Maersk A/S opened a new state-of-the-art $450 million terminal in Virginia with direct road and rail access. It was the first private container terminal in the U.S., perhaps the shape of things to come.

"The future is to encourage more private investment," said John Bowe, U.S. president of Maersk competitor APL, which operates several West Coast terminals. "To encourage and facilitate investment and expansion in the system, we need a higher level of awareness and energy at the federal level to hopefully guide policy around the nation."

Back at Manatee, McClash said his port is opening up a direct corridor to Interstate 75, and designating the surrounding acreage for port use, with an eye to the future.

"Ports don't usually move," he said. "They're usually forever."

-By Andrew Edwards, Dow Jones Newswires; 201-938-5973; Andrew.Edwards@dowjones.com