Ocean carriers have themselves to blame for today’s rock-bottom container freight rates, according to a pair of steamship line executives.
Allen Clifford, executive vice president of Mediterranean Shipping Co. (USA) Inc., and George Goldman, president of ZIM USA, made the candid comments Feb. 2 in a discussion at the Planning for Shifting Trade Conference in Tampa, Florida, that featured equally forthright views from major marine terminal operators. “It’s our fault,” Clifford said, noting his comments to be his own and not the views of global container shipping leader MSC. “For some reason, we don’t know our costs.
“We’re in a position today that we made ourselves,” Clifford continued. “The sooner we recognize that, the sooner we can be healthy.”
Clifford said he recently spent more on a New York business group dinner than the current $600 to $700 freight rate for a 40-foot container going from Asia to New York.
“Everybody tries to beat each other over the head for another 25 dollars,” he said, adding that carriers, third-party logistics firms, forwarders and other industry entities must return to following a simple axiom: “There has to be a proper remuneration for services provided… The fact of the matter is, we don’t know how to say ‘no.’”
Clifford said it is imperative that ocean carriers cover such costs as those associated with ports, chassis and container leasing, and ever-fluctuating bunker fuel prices.
“There has to be a change in how we all do business,” he said. “I’m in a quagmire that I have to accept subpar rates… We all deserve to earn a proper living.”
Goldman, who described ZIM as “a global niche carrier” and, because of its independent aversion to carrier alliance participation, “the anti-Christ in the industry,” called Clifford’s remarks “refreshing.” Then he echoed some of the preceding speaker’s sentiments. “We are our own worst enemies, but there is a lot of help out there in the market,” Goldman said. “The carriers have a lot to learn about doing business. We have to learn to make money no matter what the market conditions are.”
Goldman said ZIM executives have carefully decided in which lanes the company participates – “I don’t want to fight with MSC into L.A.” – and that has helped put its earnings-before-interest-and-tax margins above the industry average, “But we still lose money.”
“I think the issue is equipment; it’s in the wrong place,” Goldman said. “The carrier that’ll make money is the guy that balances these boxes.”
Goldman said he believes rates will go up but added that carriers are in “uncharted waters” with the takeover of the new administration in Washington.
Speaking on the same panel, Doug Hansen, director of strategic planning at marine terminal operator NYK Ports LLC, said things aren’t easy these days for MTOs either.
“We’re at a very tough period right now,” Hansen said, citing mega-alliances bringing ever-larger containerships to port. “As the ships grow, that’s where the problem really starts to affect me. We can’t move the cargo out fast enough.”
Hansen said increasing use of intermodal rail can help, as will collaboration among terminal operators within the same port. “Liner alliances will settle into a new rhythm, and customers will demand cost-effective transport and efficient landside operations,” Hansen said. “MTOs, stevedores and ports will adapt.”
To effectively manage change, Hansen said, MTOs must focus on safely increasing productivity, including with incremental application of technology; improve the communications stream, with data-sharing among the full spectrum of stakeholders, including beneficial cargo owners; and achieve peak productivity demanded by the largest ships, including via preplanning from origin.
Tom Perdue, executive vice president of Ports America and president of Ports America Stevedoring, the largest U.S. terminal operator and stevedoring firm, said MTOs are at the bottom of “a bit of a death spiral.”
“We really have a price of service challenge in our industry,” Perdue said, adding that, while Ports America has invested more than $1 billion in its terminals, “Here in the U.S., our marine-based infrastructure is essentially Third World-class.”
Perdue said ports and MTOs alike are under pressure to reduce their charges at a time when unions are seeking more.
“We’ve got to find a more healthy way to handle the basic economies of the business,” Perdue said, opining that greater collaborations are needed between terminal operators and with port authorities, alliances, carriers and local and federal stakeholders.
“It’s difficult to soar with eagles when you’re up to your ass in alligators,” he said.
The carrier and terminal operator executives made their comments in a discussion moderated by Mark McAndrews, port director of the Port of Pascagoula, Mississippi, and chairman of the American Association of Port Authorities The Feb. 2-3 conference, hosted by Port Tampa Bay, was presented by AAPA and the Transportation Research Board in partnership with the Florida Chapter of the American Planning Association and in cooperation with the U.S. Maritime Administration.
Also during the Tampa conference:
Ana Teresa Igarza, general director of Cuba’s Mariel Special Development Zone, said the Port of Mariel, 28 miles from Havana, is in a “very privileged position” to serve as a cargo hub for Cuba and the Gulf of Mexico region;
Jose Leonardo Sosa Barrios, deputy director of the Mariel Container Terminal, touted the expanding facility as “the new transport hub for the Americas,” noting that its 2,300-foot-long berth is to be lengthened to nearly 7,900 feet, while, by late 2017 or early 2018, the Port of Mariel’s entrance channel is to be dredged from its present 45 feet to nearly 59 feet, to match quayside depths;
Marianela Dengo, manager of the strategic relations management section of the Panama Canal Authority, said that, with locks expansion completed, attention has turned to advancement of transshipment hub facilities, including a roll-on/roll-off terminal to be put out for bid by yearend, logistics parks and a liquefied natural gas terminal;
Patrick Jefferson, the Virginia Port Authority’s general manager of multiuse terminals, and Matt Gresham, the Port of New Orleans’ director of external affairs, extolled the advantages of river barge operations as an emissions-cutting, reduced-congestion, container-repositioning alternative to trucking;
John C. Driscoll, the Port of Oakland’s director of maritime, noted how his port is benefiting from development, mostly via the private sector, of former military sites; and
CSX Corp. President Clarence Gooden and Elaine Nessle, executive director of the Coalition for America’s Gateways and Trade Corridors, in separate presentations, each urged an increase in the federal fuels tax, for the first time since 1993, to fund sorely needed U.S. infrastructure projects.