Port Automation Puts Labor on Notice
TEU Growth Forces Efficiency, Productivity Drive
When Maersk subsidiary ADP Terminals (ADPT) launched APMT Maasvlakte 2, the world’s first fully automated container terminal in April, it did so against a background of months of acrimonious labor discussions between the International Longshore and Warehouse Union (ILWU) and West Coast ports in the U.S. That dispute eventually morphed into a hugely expensive, multi-month slowdown that left customers frantic to move cargo and analysts arguing about its impact on the overall economy.
The impact of that four-month slowdown has been described in some quarters as near catastrophic for local agriculture, small businesses and time-sensitive retail campaigns, as food rotted and other goods stayed locked out of reach of inventory -starved businesses. Short-term, the ports lost business as frustrated shippers rerouted to air, rail and or to Canadian and East Coast ports in an effort to get their cargo delivered, adding significantly to their costs in the process. Exacerbating the trauma was the months of port congestion that followed the contract agreement reached in February and ratified in May.
Longer term, the West Coast ports will have to address the serious damage done to their reputations. “Over the past year, the following has been reinforced at the ports of Los Angeles and Long Beach: cargo has no loyalty; cargo seeks the path of least resistance; cargo requires order and predictability at a competitive price. . . Regardless the cause, we have lost the confidence of many in the supply chain and we must work at reestablishing trust and confidence,” said John McLaurin, President, Pacific Merchant Shipping Association, who minced no words while speaking at the World Trade Week Luncheon in May. The loss of trust has already dealt a devastating blow in the Pacific Northwest. First Hanjin Shipping Co., frustrated over productivity issues, and then Hapag-Lloyd, citing “schedule integrity,” abandoned the Port of Portland, together taking away 99 percent of that port’s container business. Analysts are predicting that LA and Long Beach will also permanently lose some of the clients they lost during the slowdown.
Ports Look to Automation
The union got the contract it wanted, but the dispute may have hammered the final nail in the coffin of manual labor as ports know it today. Union membership has been trending down since a high in 2007. In the fiercely competitive and margin-pressed world of shipping, terminals and local economies cannot afford to be at the mercy of labor, any more than they can afford to rely on even the best productivity provided by a mostly human workforce. And there is no denying the benefits to be had from an environmental and safety aspect. Earlier ILWU contacts gave terminals unlimited rights to bring in automation of all kinds, and U.S. ports and terminals are starting to make their move.
In addition to the semi-automated terminals at the Port of Virginia, and Bayonne, NJ, LA’s TraPac terminal operator is in the second phase of its move toward full automation, while the Port of Long Beach expects to open its $1.3 billion automated Middle Harbor redevelopment project, described as the world’s greenest container shipping terminal, in 2020. Similar projects have launched in other parts of the world, including APMT’s April unveiling of the first fully automated terminal in the world, in Rotterdam, which will be joined by yearend by a similar project, DP World’s Rotterdam World Gateway, and eventually, an all-electric port in Mexico.
Global Container Terminals, Inc. (GCT), where automation was uniquely retrofitted on top of the existing, fully operational terminal, due to land constraints, is currently the most automated terminal in the U.S., having gone live with its new technology a year ago.
Richard Ceci, GCT’s vice president of information technology, says that so far, automation has not cost a single union job at the Bayonne, NJ facility. Instead, he says workers have been moved around and retrained, for example, to be mechanics able to fix robotic equipment or as remote operators of cranes, vehicles and inspection cameras. Ceci was recruited from the auto industry to help design the automated terminals in Virginia and NJ.
A lot of this new technology requires more training than longshoremen have needed in the past, say Ceci and John Nardi, president the New York Shipping Association. “We’re seeing a shift in the type of jobs going from more traditional longshore workers to skilled drivers and more mechanics. There is a movement away from a casual workforce to a more dedicated workforce,” says Nardi. “There are six terminals in the Port of NY and each may have a different technology. You can [no longer] just take labor from one terminal and move it to another without a little training delay, whereas in the past you did not have that learning curve when the technology was much similar.”
Going forward, Nardi says, “What you are really looking at is the ability to handle more containers with the same workforce, who will be doing different jobs in the future.” He also predicted that the overall workforce will stay steady, but as the volume (TEUs) grows, the amount of labor required per containers will be less.
In a report released in 2014, the Port of Los Angeles laid out in stark detail the extent to which automation will likely cut labor cuts, estimating reductions of 40 to 50 percent, or as many as 160-200 jobs, once its semi-automated TraPac facility comes fully online. That’s about half TraPac’s 2011 longshoreman workforce. If the facility reaches its capacity of approximately 2 million TEUs, and the volumes are split between the automated and manual sectors of the terminal, as many as 600 jobs could be lost, the report continues.
The world’s first fully automated container terminal, APMT Maasvlakte 2, which is targeting a 40 percent increase in vessel productivity, is considered the pinnacle of port automation today. European dockworker unions estimate that once APMT Maasvlakte 2 is fully automated, it will result in a loss of 1,000 jobs, or about 20 percent of the existing unionized labor force; meanwhile, their Australian brethren are already mourning job losses.
That Ship is Sailing
There isn’t much labor can do to stem the tide, because at the end of the day – the primary driver behind current port and terminal automaton trends are the same issues that drive all port innovations – the need to increase efficiency and productivity, and you do that in great part by increasing velocity. The prevailing factors behind today’s drive to automate are twofold: the ever-expanding size of vessels carrying at least twice the cargo of their smaller predecessors; and the push by influential carriers such as Maersk for ports to handle a staggering 6,000 moves per 24 hours – impossible without automation. At best, some terminals can meet a little more than half that today.
There are other benefits to automation from a labor standpoint, according to Ceci, Nardi and Port of Virginia spokesman Joe Harris.
The workers that remain can expect to benefit from healthier environments, increased safety, and yes, career longevity. Removing humans from the terminal floor significantly improves safety. Electric vehicles reduce emissions. And working in a remote office protected from the elements and having to dodge machinery led one longshoreman to tell Ceci he expects to add another six to seven years onto his working life as a result. “No one ever tells me they want to go back to the way it was,” says Ceci.
All that technology will require a new, albeit smaller class of highly paid, skilled workers able to run and repair the robots, automated cranes and unmanned vehicles. Automation can also provide a solution when the issue is not enough labor.
Terminals need a steady supply of trained labor. But for a variety of reasons, labor is actually in short supply in many areas. There is a chronic shortage of people in the port of NYNJ, according to Ceci. At other ports, the situation is more drastic. Rotterdam, and at least one port in Mexico, for example, are not located near cities. The drive to get to work is long. There just aren’t enough people living in the area to meet the demand for labor. In Dubai, the issue is more a matter of disinterest from the native workforce. So workers are instead flown in from Pakistan and India and then trained.
In the auto industry, a United Auto Worker member typically works a specific job every day for a specific company. In contrast, marine terminal workers can jump around between jobs and ports. They might work cruise ships one day and cargo containers another, at two different sites. It can be difficult to schedule and assign shifts when you can’t be certain of how many, and specifically with what skills, the workers coming in will have.
Automation allows for building and operating terminals in areas where there aren’t any, opening up new markets, particularly in third-world countries where a suitable labor pool, again, may be limited.
Automation can also help smaller ports with space limitations expand their capacity by making better use of the space they have to handle significantly more cargo from bigger ships.
Most of the automated terminal facilities around the world have been built on green fields, but room to grow is a big issue in the U.S., says Ceci. Leading the way are the automated terminals in Norfolk and Bayonne, which are unique for the way in which the projects were done: by retrofitting the new facility on top of the old terminals, which remained in full operation throughout the four-year construction schedule.
“With one 10,000 TEU ship versus two 5,000 TEU ships – you need capacity, not necessarily to be faster. That’s where automation [and retrofitting] comes into play,” says Beth Rooney, assistant director of port performance initiative for the Port of NYNJ. “There is no more land to put the boxes on or to expand the gates. There is no real estate to expand to, so you need to handle better and more efficiently.”
“Densifying” existing facilities also enables terminals and ports to better protect coastal habitats and wildlife, and meet environmental regulations and restrictions. .
If You to Ask, You Can’t Afford It
There are many automation projects being talked about today, says Ceci, but only a small number are actually in process – for example, LA, Long beach and Mexico.
The biggest obstacle? Money. People always talk about the savings automation can bring – and it does deliver savings –but it takes a monstrous amount of money, and an equally large commitment to build an automated terminal. The first two semi-automated terminals, which opened in the late ‘90s, in Rotterdam and Hamburger, took 10 years and $1 billion to build using a team of 100 IT workers who had to invent the needed technology, says Ceci.
Today, similar terminals are being built in as little as four years, for a half billion dollars, using mostly off the shelf software, primarily from Navis, but also from some smaller companies. Much of that money pays not for technology but to strengthen infrastructure. Bigger ships require bigger cranes, so dockside facilities have to be shored up. More containers stacked in a yard means more stress on the yard floor.
Even if cost and space were not an issue, there’s the ROI factor. Automation isn’t necessarily going to increase business, because the factors that drive clients to a port have less to do with technology, and everything to do with the type of goods and the ability to transport them the fastest possible way to their final destination, says Rooney.
“Automation is about whether it’s efficient or not. We could fully automate the NYNJ Port, and it wouldn’t bring more cargo to us. There might be some discretionary cargo opportunities but the market is the market. If you bring something to NY and it costs three times as much to move it to Tennessee than it would to bring it to Savannah, it’s not going to matter whether the port is automated or not,” she adds.
The one thing everyone agrees technology can do is keep terminals competitive. Still, “The fact there is going to be fewer, larger ships hauling to fewer ports means that if you are not the largest port on the west or east coast, the likelihood of investing in automation will be slim. The margins are very small on shipping, and anything that adds to the cost gets added to the cost of the consumer good. People are very mindful of the cost of automating, the cost of investing in new technology. There is a careful balance between services to the customer and managing costs as much as possible,” says Rooney.
Most U.S. ports are treading lightly, but as they gear up to accommodate the Super-Max fleet expected to burst through the expanded Panama Canal, and represent the big shipping alliances, they need make sure they spend as much time figuring out how to efficiently service those super loaded vessels after they dock, as they are on making sure the ships can get into their ports.
Thin margins and the volatility of the economy over the last decade means ports and terminal operators are going to need massive commitment, and importantly, investment, from shippers and other marine investors, in order to move forward with modernization. But there are busy shipping lines today that are looking three years ahead at their likely bookings and not seeing a lot of work, says Ceci.
“So when you have the investors lined up, there may not be enough work for them, and when there’s enough work, you may find the investors aren’t ready to commit,” observes Ceci.
In the end, automation is going to require a big leap of faith by all parties involved. Ships are only going to get larger, thanks in part to the expansion of both the Suez and Panama Canals, as well continued economic turbulence that makes alliances and fewer trips in bigger ships attractive. The juxtaposition of taglines from two automated terminal pioneers best sums up what ports should be planning on from here on out: The Future of Global Terminals (APMT Rotterdam) is Where Tomorrow Arrives Today.
Patricia Keefe is a veteran journalist, editor and commentator who writes about technology, business and maritime topics.
(As published in the 3Q 2015 edition of Maritime Professional - www.maritimeprofessional.com)