North American ports must adapt to changes in customer demand and future industry trajectory.
Newark, New Jersey - December 18 2017
Speaking at the Journal of Commerce’s annual Port Performance North America conference, APM Terminals head of Hub Terminals, Jack Craig spoke to the audience about the challenges ahead for North American ports and how they compare to other ports in the world.
“The customer landscape has changed and become much more competitive. We as an industry need to work together, adapt and respond or watch the cargo move elsewhere,” according to Mr. Craig. The vessel alliances now reshaping the industry have been a success for ocean carriers and their quest for cost savings, asset efficiency and economies of scale. “Larger alliances, larger vessels and larger port call volumes per ship are a catalyst to improve performance at ports. The newly widened Panama Canal and heightened Bayonne Bridge in the Port of New York/New Jersey create new opportunities for larger ships plying the US east coast trade - and creates new demands on port infrastructure, port operations and all the stakeholders in the supply chain.”
In Elizabeth, New Jersey – APM Terminals is one of the largest container terminals in the Port of New York & New Jersey port complex, handling over 2,100 trucks a day, 4000 terminal gate transactions and more than 500 vessel calls per year. The terminal handled 1.33 million TEUs in 2016. To respond to the changing demands of customers, the terminal has embarked on a $200 million port upgrade, adding larger cranes, upgrading the container yard, installing technologically-enhanced gates to enable truckers to enter and exit faster – as a time and cost saver for supply chain managers.
In Los Angeles, California, APM Terminals Pier 400 elevated ten of its nineteen gantry cranes by 33 feet to enable ten high, above desk container stowage operations for customers deploying larger vessels. Retrofitting of existing gantry crane equipment has enabled one gantry crane every six weeks to be heightened. This option is faster and more cost effective than waiting two years for a new crane to arrive. Equally important, crane lighting was upgraded, using Light Emitting Diode (LED) lighting to improve crane operator visibility, safety and accuracy for the cranes’ Optical Character Recognition (OCR) performance.
With the lower bunker prices of recent years, terminal costs have now become the highest cost for liner operators. “This obviously creates increased pressure on terminal margins as our customers are expecting us to find ways to help them reduce costs year over year. Given the inflationary pressures built into large portions of a terminal’s cost base, this requires different thinking to remain competitive,” cited Mr. Craig.
Mr. Craig also talked about the role of technology in the ports business in the context that every industry is using technology to improve the customer experience, create a safer working environment and improve competitiveness. “We can do this in a responsible way with our partners to grow the business, improve productivity and reliability for our customers and ensure the port industry business model is viable short and long term.” Business and economic cycles are moving faster every year and technology is changing, disrupting and improving the way work is performed in many industries and consumer items. Companies that stay at the forefront of technology, historically perform better and grow significantly more than those who don’t.
North American container terminals need to continue to improve the level of service to the landside customers. “The solution is some combination of better transparency between terminal and customer, better use of available gate hours and an increased use of appointment systems. The question is when will stakeholders collectively work to bring this into practice.”
In North American container terminals, land use is one of the areas where the region performs most poorly, with results for the region in 2016 being only around half the world average and only around one third of the best performing region (Asia), according to Drewry Maritime Research’s Ports and Terminals Insight 4th quarter 2017 report. The report adds “For investors and operators, the key to success is the intensity with which expensive assets – quay line, crane and land – are used. Actual industry performance for all three assets has not changed that much over the last ten years and lags performance seen in other parts of the world.” The historical use of ocean carriers providing truck chassis in North America - unique compared to other world regions – is now being phased out in most North American ports. “Nowhere else do we see acres of such expensive real estate being used to store chassis. The trend of moving chassis storage away from terminals is an important step to addressing this issue,” added Mr. Craig.
APM Terminals press release