Logistics Management ran an article today entitled, “Ocean cargo/global logistics: U.S. Seaports compete for declining inbound vessel calls“.  The first line of the story reads, 

Shipping analysts are saying that the days of “mega” U.S. seaports may be behind us, as more marginal ocean cargo gateways capture share.

I think that announcing the death of the US “mega” seaport may not only be premature, but dead wrong.  Certainly, there will be changes in the shipping patterns to the US.  We see this every day through service changes, new partnerships and slot sharing agreements.  However, I believe what you are seeing is not a shift away from “mega” ports, but a shift towards new “mega” ports.  

Let’s be clear, the US doesn’t have too many “mega” ports to begin with.  Basically, it’s LA and Long Beach right now.  The trend that Moreland Advisors is seeing, and the trend that our clients our seeing is a shift away from the West Coast ports to East Coast ports.  Some recent analysis indicates that up to 25% of the business that currently calls on the West Coast will transfer to the East Coast in the next 8-10 years.  The enlarged Panama Canal, new Suez services, as well as the improved capacities and intermodal capabilities have helped to drive this paradigm shift.  Also, don’t forget that 75% of the US population lives on the Eastern side of the US.  It’s pretty basic, if you have the option, put the goods as close to the people as possible.

Our contention is not that the “mega” port is dying, but that it is moving.  We expect to see 1, maybe 2, East Coast hubs emerge from the fray.  Economically, it just makes sense to use bigger ships and call on fewer ports.  Why pay multiple port and harbor pilot fees, and incur the additional time delays, if you don’t have to?  This becomes especially critical when you consider that many of the US ports are tidally constrained and shippers are facing the prospect of steaming to a new port only to have to wait until high tide to unload (or low tide to get under bridges).  We are in an era where efficiencies and cost cutting is critical and we believe that benefits the new hub, or “mega” ports, not the smaller niche ports.

On Wednesday afternoon, the MSC Catania gracefully slid up to its berth at Jacksonville’s Blount Island Terminal.  The 983-foot, 4,900 TEU vessel represents the largest ship to ever call upon the port.  The large vessel did have to come in “light” due to the restrictive depth of the channel.  She will also not be part of a regular rotation at the port, as she was filling in for another vessel that ran aground.  Jacksonville hopes to be able to allocate a portion of the Stimulus funds to further deepen the channel to 40-feet.  The arrival of such a large ship is a momentous day for Jacksonville as they work towards becoming a major est coast player.

“You’re getting a snapshot of what Jacksonville can be,” said Rick Ferrin, the Jacksonville Port Authority’s executive director.

As large as the MSC Catania is, she is still medium size by today’s standards.  The MSC Catania is 300 meters long and 37.8 meters wide, drawing 14 meters.  As a comparison, the Emma Maersk, one of the largest container vessels in the world, is 397 meters long and 56 meters wide and draws 15.5 meters.  Even today, larger ships are being built.  Even with the additional dredging, Jacksonville has a long way to go before the Emma Maersk graces their terminals.

We are only 27 days into the new year and already the Mediterranean Shipping Company (MSC) has taken possession of its largest ship to date.  Samsung Heavy Industry Shipyard in Geoje, South Korea built the 13,800 TEU MSC Daniela.  Around the world, thirty-five vessels of this size will enter service in 2009, bringing the fleet total to 70 vessels.  Over the next 4 years, over 130 more just like her will hit the high seas.  And if 14,000 TEUs wasn’t enough for you, South Korea’s STX Shipbuilding Co. has designed a ship capable of transporting 22,000 TEUs!

SPEC SHEET

MSC Daniela is unique in a couple of respects.  First, her shear size is tremendous.  From bow to stern she measures 366m (1,200 ft) and has an overall beam of 51m (167 ft).  That hippy beam figure will mean that narrow channels are difficult, if not impossible, to maneuver.  Also, with a draught of 15m (49.2 ft) she will be very limited as to which US ports she’ll be able to call on.  There are certainly some techniques MSC can employ to wedge her into more ports such as coming in without a full load or in on a high tide, however with a necessary 15% sea margin she will still be very limited.  I have not been able to find a figure for her air draught, which will determine if she can fit under the Bayonne Bridge (among others).

Second, the Samsung designers have separated the deckhouse from the engine room and its exhaust stack.  Moving the deckhouse forward increases the visibility of the captain and the total ship capacity by allowing more containers to be stacked on deck.  It also decreases the amount of ballast water needed by better distributing the ship loads, resulting is better fuel efficiencies.

There’s no doubt that we’ll be seeing more and more Big Ships delivered.  Now we need to see a concerted effort on the US’ part to enhance our ports’ capabilities to handle them.

For years, many in the commercial real estate world have been denying the trend toward bigger ships.  If you’ve been paying any attention to the industry, you realize that denial would be akin to denying Obama would be elected President.  You don’t have to “predict” it, it has already happened.  The big ships are here and more are coming.

Recently, MSC took ownership of the 14,000 TEU vessel named MSC Danit.  This new ship comes online only weeks after MSC took delivery of the 14,000 TEU vessel MSC Daniela.  MSC Danit is the product of South Korea’s Daewoo shipyards and MSC Daniela was built by Samsung Heavy Industry.  Once delivered and fully commissioned, it is anticipated that the MSC Danit will join the Far-East Mediterranean Jade service, which MSC is upgrading from 8,000-9,000 TEU ships.

This latest delivery for MSC demonstrates two trends which are heading towards the US like a freight train.  First, the shipping lines believe in the value of the big ships and want to employ them.  A quick peek through the order book shows that there are currently twenty-five 10,000+ TEU ships in service and 186 under construction.  Second, the shipping lines want to upgrade services (where possible) to the larger ships.  So, even if MSC isn’t bringing a 14,000 TEU ship to US shores today, they are freeing up 8,000 TEU vessels that they will certainly want to utilize in other services.  Even an 8,000 TEU ship poses a logistical challenge to many of the US ports today.  Whether it’s bridge height, channel depth, channel width or crane capacity many of the US ports can’t handle a ship that large.  And we haven’t even begun to discuss whether they could handle it efficiently.  That’s a topic for another day…