Page 40: of Maritime Logistics Professional Magazine (Q2 2014)

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40 | Maritime Professional | 2Q 2014

LOGISTICS

I t always comes down to time and money, doesn’t it?

And when it comes to the readiness of U.S. ports and inland waterways to handle the opening of the expanded

Panama Canal, service post-Panamax ships and deliver exports to burgeoning middle classes in southeast Asia and

China, it’s the same old song and dance: Will they have the money to get done what needs to be done, and will they get it done in a timely fashion?

Given estimates that as much as 99% of U.S. trade – $1.4 trillion in goods every year – travels through the ports and inland waters, and as much as 81% of U.S. agricultural ex- ports ride the Illinois and Mississippi Rivers, the answer could signifi cantly impact U.S export market shares – and even open the door to aggressive South American ports and suppliers if we’re not careful. The United States is the world’s economic powerhouse – we buy the most stuff and ship the fastest in key areas. Shippers want to come here. Our rate of consumption is unlikely to abate anytime soon, but from an export standpoint, where we are most at risk is time to market, or more precisely, time to port. And time is money – at all stops along the deliv- ery channel.

Speed “What makes the U.S. so competitive is not because we do, say agriculture better. But because we can get the agricultural goods to market better. We win on the world market consistent- ly because of our speed. If we lose that ability it puts a whammy on the system,” says Jim Kruse, a ports and waterways expert and researcher at the Texas Institute of Transportation.

The Panama Canal Authority (PCA) claims that roughly 14,000 ships transport 300 million tons of cargo through the canal every year, adding that 66% of that cargo traffi c today fl ows to and from the U.S. Post expansion, the PCA expects canal volumes to grow from 12.3 million TEUs to 25.4 mil- lion TEUs by 2028, in the process doubling existing TEU vol- umes to the East Coast and Gulf ports by 2028.

Those increased volumes are going to show up at U.S. piers in signifi cantly larger vessels. The canal is currently limited to handling vessels up to 5,000 TEU, but that will jump up to 13,000 TEU once the third set of locks is completed sometime in early 2016. Moreover, some U.S. ports are already seeing vessels as large as 18,000 TEU coming through the Suez Ca- nal, which can handle even larger vessels that are not too far off on the horizon. According to the U.S. Army Corp. of En- gineers (USACE), post-Panamax vessels accounted for 16% of the world fl eet and 45% of its capacity in 2012; it estimates that by 2030, those vessels will account for 62% of the global container fl eet capacity.

Partially driving the movement to bigger vessels is the rise of shipper mega alliances, which are likely to pick a handful of ports to do business with. “Shipping companies are going to pick one or two ports that they are going to come into. They aren’t going to hopscotch between ports. They want to drop off a massive load and pick up another massive load and leave as soon as possible. They don’t make money in port,” says Kruse.

Those big vessels will be looking to load up with U.S. goods to bring back to new hot consumer markets abroad. And in- creased demand for exportable products at the ports means an increase in grain and other traffi c up river, on a system that has “fl at out-lived its intended design life,” says Paul Rohde, vice president at Waterways Council, Inc., an inland indus- try alliance. “They’d be on the National Registry of Historic

Places as if they were museum pieces instead of the essential transportation infrastructure providing for our future needs, like whatever the Panama Canal may dish up.”

That’s a lot to get ready for, and size is going to matter – a lot. The deepest pocketed, deepest dredged ports with the big- gest cranes, rail heads, cargo space and most access to the most forms of intermodal transportation, are going to be the winners here – for their communities and for the nation, as it strives to protect and expand its export business in a global marketplace that is getting more level by the day.

Inland Issues – International Implications

Inland, the issue revolves more around getting project au- thorizations and funding for new construction and repairs to proceed fast enough to outrun the growing creep of unsched- uled delays due to breakdowns within the crumbing system of 240 locks and dams. “If you’ve got a million dollar port, it doesn’t do you any good if you can’t get to it,” noted Gary

LaGrange, president of the Port of New Orleans.

In fact, in terms of readiness, for the inland waterway sys- tem, the answer is decidedly no. Not with estimates ranging from 78% to 90% of the system locks and dams being well into their dotage – some locks are between 60 and 90 years old – and barges being stopped for hours each day with unscheduled delays, preventing goods from getting to market and driving up costs, according to the American Society of Civil Engineers’ (ASCE) 2013 Infrastructure Report Card. It cited an average of 52 service interruptions a day throughout the system.

Worse, there is little to no money to fund repairs because the

Inland Trust Fund is essentially broke, and has been hijacked by one repair project. It is fed by a diesel tax paid by operators on the river that hasn’t been increased in over a decade. But more importantly, allocations from the fund have been eaten up by the money pit that is the Olmsted locks, a project so delayed, its estimated completion date is 23 years late. In fact,

Olmsted’s delays have ricocheted onto other projects, either pushing them back as well, or in some cases stopping them, and any new funding needed, cold. If something isn’t done to get Olmsted off the Corp.’s budget for maintaining and repair- ing the Inland system, Rohde warns it could take until 2090 34-49 Q2 MP2014.indd 40 5/16/2014 2:56:40 PM