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By Paul Scott Abbott, AJOT

Filling vast unused northbound capacity is critical to the future of Puerto Rico trade, according to executives of ocean carriers serving the island commonwealth.

Speaking at the Puerto Rico Summit II, presented by the Jacksonville Port Authority (JAXPORT), John D. McCown, chairman and chief executive officer of Trailer Bridge Inc., termed the more than 400,000 empty 20-foot-equivalent container units that annually move north from the island, "Puerto Rico's greatest unused asset." He suggested assembly, plastics and paper goods as possible industries to "fill that cube."

The summit, held Oct. 25 and 26 at the Renaissance Resort at World Golf Village in St. Augustine, FL, some 30 miles south of Jacksonville, has come at a crucial time, as federal tax incentives favoring US investment in Puerto Rico are due to expire at the end of this year. Despite hurricane-related concerns, this month's gathering drew some 250 participants, about 50 more than took part in the first JAXPORT Puerto Rico summit, held in Northeast Florida in 2003.

Jacksonville has a major vested interest in Puerto Rico trade development, as more than 70% of all cargo shipped between the US mainland and the island commonwealth moves through the Northeast Florida city's port. Puerto Rico is by far JAXPORT's No. 1 trade partner, with more than 70% of Jacksonville's current container movements traveling either to or from San Juan. Puerto Rico trade's economic impact on North Florida is more than $1 billion a year.

McCown was joined on a summit panel by executives of Crowley Liner Services Inc., which, like Trailer Bridge, uses tug-and-barge sets to serve the trade, and Horizon Lines and Sea Star Line LLC, both of whom employ self-propelled vessels in the lane.

The trade is increasingly skewing toward the tug-barge method, according to McCown, who said tug-barge combination now represents between 42 and 43% of container activity, up from about one-third 10 years ago. The tug-barge option, while slower, uses smaller crew sizes, consumes less, but more expensive (and environmentally friendly) fuel, and offers much lower construction, maintenance and drydocking costs.

According to figures presented by Trailer Bridge, Horizon has a 34.5% share of the southbound market to Puerto Rico, followed by Crowley at 32%, Sea Star at 20.5% and Trailer Bridge at 13%.

In an interview, Sea Star's president and chief operating officer, Frank Peake, told the American Journal of Transportation that only one filled container comes north from Puerto Rico for every five that head south. Meanwhile, northbound rates are about half of those for southbound moves, he said.

Peake, who said costs for shipping to Jacksonville from Puerto Rico compare favorably with charges for domestic moves, is particularly interested in seeing northbound capacity filled as Sea Star is adding a third ship, the El Faro, to its fleet in March.

Sea Star's representative in the panel discussion, Robert P. Magee Jr., who serves as the line's chairman as well as chairman and chief executive officer of parent American Shipping Group Inc., noted that the age of fleets in Puerto Rico trade is signaling the necessity to invest in ships, tow-barge sets and containers.

The need for fleet investments was supported by fellow panelists Gabe Serra, vice president and general manager for Horizon Lines, and Robert B. Grune, senior vice president and general manager for Puerto Rico and Caribbean service for Crowley.

Magee said that carrier executives also must face the fact that, over the past seven years, the trade has on average been about a breakeven proposition.

According to Magee, inflation-adjusted real revenue per container unit has gone down in all three leading Jones Act trades served by US-flag carriers, but the Puerto Rico trade's real revenue decline has been the greatest, dropping 29% from 1991 to 2005,