Posted on: August 26th, 2015
By Janet Plume
Container carriers have been increasing in size since the first box was carried on a vessel half a century ago. Bigger ships solve a multitude of shipping industry challenges, from reducing freight costs to lowering ocean shipping’s environmental impact. The latest megaships, which carry between 10,000 and 20,000 TEUs, also bring with them a host of complications when they arrive in port. Unloading 3,000-6,000 TEUs at once can present terminal operators with logistics challenges of a previously unexperienced magnitude.
Known as Ultra Large Container Ships, or ULCSs, these floating giants are already calling at Canadian ports such as Prince Rupert. They can reduce fuel consumption per TEU by more than one-third, and reduce CO2 emissions by half.
But how can ports accommodate them? Bigger ships have implications for port infrastructure in approach channels, dockside handling, and logistics and infrastructure moving cargo to the hinterland. Some ports such as Montreal and Hamburg have restricted draft that will always limit port calls to vessels with drafts of less than 15 metres.
Beam widths of ULCSs presents another limitation. The 18,000 and 19,000-TEU vessels in the Europe-Asia trades boast beams up to 60 metres. This extraordinary width becomes problematic in a turning basin or a narrow channel where two ships need room plus a safe separation zone to pass. Currently, container ship traffic through the Panama Canal is restricted to 5,500 TEUs. Even when the Panama Canal Expansion opens next year with lock dimensions of 427 metres length, 55 metres in width, and some 18 metres in depth, these restrictions will allow ships no larger than about 12,000-13,000 TEUs to transit.
Air draft is also a limitation for megaships. Port of New York/New Jersey is raising the Bayonne Bridge from 46 metres to 65 metres to allow it to handle megaships.
Larger ships challenge terminal operations, creating peak periods in which terminal operators must call in extra stevedores and longshoremen, have enough intermediate storage space, and invest in taller cranes with wider reach.
While none of Canada’s Atlantic or St. Lawrence Seaway ports are expecting calls from ULCSs in the next year, the cascading effect of these megaships is prompting similar infrastructure expansions and supply chain reviews.
“There are 139 vessels of 14,000+ TEUs scheduled for delivery by the end of 2016,” said Neil Davidson, Senior Analyst Ports & Terminals at Drewry Maritime Research. “They will push even more ‘smaller’ vessels in the 8,000-10,000 TEU range into cascaded routes. That is why we will continue to see bigger ships squeezing into smaller ports.”
While Montreal is uniquely qualified to handle larger container ships (see sidebar), Halifax Port Authority’s long-term strategy of attracting larger container ships is beginning to pay off. This summer saw port calls from CMA-CGM’s 8,450-TEU Vivaldi, the largest container ship to ever call at Halifax and possibly at any Canadian East Coast port. Vivaldi had barely weighed anchor before Hapag-Lloyd’s 8,750-TEU Budapest Express arrived.
“Halifax has always been a natural harbor for megaships with a 16-metre draft,” said George Malec, Vice-President, Business Development & Operations at Halifax Port Authority. “But we realized some time ago that having enough draft wasn’t enough.”
Vivaldi and Budapest Express are part of two new services from Asia via the Suez Canal to Halifax. Mr. Malec says these and more scheduled port calls by megaships at Halifax reflect years of planning and preparation. “We realized it had to be an entire integrated team game, to be able to bring in bigger vessels,” Mr. Malec said. “We had to have the logistics coordination to offload and move cargo to interior destinations such as Ontario and the (U.S.) Midwest. It has to be a total supply chain solution.”
When the global economic slowdown swept through ports in 2008, Mr. Malec and his colleagues sat down to review the port’s trade lanes and its options as the economy turned up. “Our strategic planning determined how the Port Authority should invest in infrastructure,” he said. “Our container terminals have been built and expanded so we can double-dock big ships simultaneously.”
The port sent its pilots to a Quebec simulation center to learn how to escort bigger ships. Four miles of on-dock rail and track beds were upgraded to handle more containers at a single vessel discharge. The port’s gateway was enlarged, allowing faster offloads. The union increased its work force while terminal operators added super post-Panamax cranes. “We realized the heart of our business has to be supply chain management,” Mr. Malec said. “Any strategy has to be in unision with our partners.”
CN committed to railcar availability to take on higher volumes of discharged containers. “The train is positioned right on the terminal as containers are moved to railcars,” Mr. Malec said.
Just as Halifax did, West Coast ports such as Vancouver and Prince Rupert developed close relationships with rail partners to ensure seamless intermodal connections during peak periods created by larger ships. “One of the key advantages of Prince Rupert is its fluidity,” said Michael Guerney, Manager of Corporate Communications at Port of Prince Rupert. “Trains come right onto the terminal and load directly from ship to rail.”
Ports, Cities and Alliances
Many a city in Canada owes its existence to its birthplace as a port, but the fraternal relationship between city and port may be endangered with the onset of the new era of ULCSs. That’s because the steady growth in container ship size in recent years has been paralleled by a rise in the scale of liner alliances, according to Drewry’s Mr. Davidson. “The only way to fill ever-larger container ships and obtain the potential economies of scale they offer is for carriers to pool their volumes on particular trade routes and share ships,” Mr. Davidson said.
The 16 main box carriers have essentially pooled into four main groupings. Maersk and MSC are in the 2M alliance, while Mitsui OSK Lines, NYK Line, APL, Hapag-Lloyd, OOCL, and Hyundai Merchant Marine are in the G6 alliance. COSCO, “K” Line, Yang Ming, Hanjin Shipping, and Evergreen are in the CKYHE alliance, while China Shipping Container Lines, UASC, and CMA-CGM are in the Ocean Three alliance.
That consolidation has caused headaches at port terminals, particularly on the U.S. West Coast. Historically, shipping lines called separate terminals with containers loaded in blocks for distribution to different cities. With the new alliances, containers from different shipping lines arrive at one terminal with boxes randomly stacked.
Longshoremen must sort through containers from multiple carriers before truckers can pick them up. The result is longer delays for containers to move through ports such as Los Angeles, prompting some shippers to switch cargo to Canada’s West Coast ports or U.S. East Coast and Gulf of Mexico ports. Discharging thousands of containers at one time also creates congestion at U.S. West Coast ports as boxes move by truck and train out of the big cities.
Canada’s two biggest West Coast ports were quick to understand the coming conflict between cities and megaships, and took steps to avoid it. Port Metro Vancouver is well-positioned to handle megaships at its Deltaport Terminal at Roberts Bank, which is undergoing expansion. The Roberts Bank Terminal 2 project, scheduled for completion in 2022, will allow Vancouver to handle any of the megaships coming on line, according to Peter Xotta, Vice-President of Planning and Operations at Port Metro Vancouver.
“We are expecting calls from 10,000-TEU ships that cascade from the Europe-Asia trades into the Transpacific trade,” Mr. Xotta said. “They will call multiple ports and unload 1,500-3,000 TEUs at a time. This has been increasing.”
Port officials turned to the port’s infrastructure to identify potential bottlenecks that could stem from a call by a megaship. Among a host of improvements under way, the causeway overpass was the first element of the Deltaport Terminal, Road and Rail Improvement Project to be completed at the end of last year. Reconfiguration of rail track and container handling equipment is under permit review at Deltaport, Canada’s biggest container terminal. Plans are being drawn up for additional rail track and road improvements.
“There is a basket of challenges a port faces as vessels become larger,” Mr. Xotta said. “For a number of years, the port has worked hard to optimize what we have. We have developed tools to increase our visibility, rather than wait for issues to crop up and react to them.” To that end, Port Metro Vancouver has in recent years offered incentives for vessels to arrive on time. “The wharfage rebate is a signal of the way the port approaches the business,” Mr. Xotta said. “It’s about the logistics of moving cargo efficiently.”
The port also has equipped container trucks with GPS units that collect data and report turn-time performance. The data is posted online in real time so trucking companies can decide when to deploy their trucks. “As a port, we are on the receiving end of concerns about performance,” Mr. Xotta said. “If a trucking company tells us it takes a long time to get into a terminal, we can look at it and pinpoint where the problem is.”
Port of Prince Rupert garnered many a naysayer in 2007 with the opening of the Fairview Container Terminal in a remote isolated village where a pulp and paper mill had shut down three years earlier. However, planners correctly envisioned Prince Rupert would become a major intermodal link to the heartland, easily accommodating the largest megaship to yet visit Canada, the 14,000-TEU Cosco Fortune.
The surge of traffic at Prince Rupert has silenced the naysayers and prompted terminal operator Maher to embark on a $200 million expansion of a second berth at Fairview, a container yard expansion and four additional gantry cranes. CN will extend on-track rail, and the longshore workforce has increased by 100 jobs.
“Fairview’s expansion will increase its capacity by 500,000 TEUs to 1.3 million TEUs when it is completed in mid-2017,” Prince Rupert’s Mr. Guerney said. “The thing that people said would be a disadvantage – the isolation, the distance from urban centers – have turned into a benefit for us when handling the megaships. We are not subject to congestion from urban traffic after a train or truck leaves our intermodal terminal. “With almost no local traffic, everything flows straight through the terminal.”
Drewry’s Mr. Davidson concurs that megaships and their alliances are having a profound effect on the nature of capacity that is needed in ports. “The nature of capacity the market is demanding is changing,” Mr. Davidson said. “The ever larger combined volumes of bigger alliances demands fewer and larger terminals in each port.”