In order to thrive in the contemporary trade environment, ports will have to make adjustments.
Ports are under pressure to improve efficiency, find a response to liner consolidation and transform to open access to larger ships that many shipping lines now employ. Efficient use of capacity these days is about as rare as seaside ports in New Mexico. Supply outstrips demand by such a significant amount that hundreds of ships have sat idle through the first quarter of 2016. Meanwhile, those ships that are in use are employed by lines that are consolidating, placing pressure on ports to attract the business of fewer lines. Lastly, terminals all over have to adjust to the prevalence of Panamax vessels and other massive ships. While these vessels have been making calls in Europe and Asia, they are relatively new to North America.
Huge ships require adjustments
The size of ships employed by many liners nowadays has been tough to adjust to for many ports. Kim Fejfer, CEO of APM Terminals, explained the issue with mega ships to the Global Liner Shipping Conference in London, according to the Journal of Commerce (JOC).
"We see these trends in our operations: in the past we handled 13,000-20-foot-equivalent unit (TEU) vessels, now we handle vessels 50 percent larger," she explained, "and you need to be ready to handle these 20,000-TEU ships in all your ports, or watch the business go elsewhere."
The CMA CGM Benjamin Franklin recently made calls to the Ports of Los Angeles and Long Beach, and CMA CGM will begin sending ships there regularly. However, the Benjamin Franklin was the first ship of its kind to call on a North American port. On both coasts, adjustments are necessary to accommodate regular visits from massive ships. However, the size of visiting vessels isn't the only issue ports face this year.
Shippers are having issues with efficiency due to the excess capacity they're dealing with, but through standardization and new technology ports can grow more efficient, according to the JOC. What this will take is further investment in port infrastructure. The American Association of Port Authorities' "2015 The State of Freight" report found that congestion has been getting worse in recent years. In fact, 38 percent of survey respondents indicated that to fight that trend, ports will have to put money into terminal standardization and more efficient processes.
"If port operators are to contribute to the efficiency of shipping lines we have to drive rationalization, consolidation and segmentation to serve the larger vessels and smaller vessels," Fejfer explained. "More investment is needed in port infrastructure."
Efficiency improvements could appeal to shipping lines
If ports can improve efficiency and, through that, lower costs for shippers, they can attract more business. Shipping lines are operating on "razor thin margins," the JOC explained. They need lower costs and more efficient port operations to keep business affordable. Ports that are able to offer those benefits to shippers are more likely to attract their business.
Investments in efficiency is one of the factors contributing to improvements at the Ports of Los Angeles and Long Beach, ground zero for the 2014-2015 congestion crisis. These improvements are meant to bring business back from the East Coast, where many shipping lines shifted routes during the congestion crisis.
If ports can manage to make these adjustments, they could end up thriving at a time when such performance can be called the exception rather than the norm. They may even be able to bring in more business.