EAST COAST PORTS GAINING COST ADVANTAGES

March 17, 2008
PETER T. LEACH

The historic dominance of West Coast ports in the U.S. trade with Asia is being threatened by East and Gulf Coast ports, which continue to gain containerized cargo from Asia because of their relative cost advantages and room to grow.

Rising fees and environmental regulations are undermining West Coast dominance in Southern California, along with lower cost of intermodal shipments to inland points from East and Gulf Coast ports, and plans for expansion of ports and distribution centers in the Southeast, according to a recent panel at the 8th Annual Trans-Pacific Maritime Conference sponsored by The Journal of Commerce, a sister publication of Florida Shipper.

“We lost 100,000 containers a year in shipment by one customer at our terminal in Seattle because it decided to deliver to the East Coast,” said Edward DeNike, president of SSA Containers. This happened at a time when the International Longshore and Warehouse Union is performing better than ever and no importer has a problem delivering cargo form the West Coast, he said.

Carriers that deliver cargo to the ports of Long Beach and Los Angeles are facing a combination of new fees for environmental mitigation that amount to $100 per fully loaded container.

“The cost of fees is more than we pay to load or unload a container at the San Pedro ports,” DeNike said. “This is Southern California and we know that Northern California will follow and the Pacific Northwest won’t be far behind.”

He said all the terminals on the West Coast have the capacity to handle more cargo, but the railroads don’t.

Shippers are importing more of their containers through East Coast ports because 80 percent of the U.S. population lives east of a line drawn from Chicago through Dallas, said John Wheeler, director of trade development for the Georgia Ports Authority.

Although cargo volumes at East Coast and West Coast ports have grown at approximately the same rate over the past seven years, East Coast ports have seen imports from Asia increase at a faster rate than West Coast ports, Wheeler said, because of rail capacity problems and higher costs on the West Coast.

“Beneficial cargo owners want to diversify away form the West Coast ports because of higher costs there and closer proximity to their markets on the East Coast,” Wheeler said.

The expansion of the Panama Canal by 2014 will further enhance the growing cost advantages of East and Gulf Coast ports, said Wayne Schmidt, an associate at Drewry Shipping Consultants.

Schmidt said the waterway’s expansion would increase its throughput capacity 39 to 70 percent annually. This will enable transits by 8,000-TEU ships, which will dramatically lower the cost per container when shipping from Asia to East Coast ports, he said.