By Matthew French
Staff Writer

Located less than 100 miles apart, Charleston and Savannah have been in direct competition for port business for years.

The Georgia port has grown at an astounding rate during the past half decade: 60% in 1999, 30% in 2003 and 6% in 2004. Still, Charleston remains the fourth-largest container port in the country.

To place the Palmetto State’s port facilities at the forefront of shipping executives’ minds, the South Carolina State Ports Authority is banking on a new marketing campaign that accompanies recent improvements to the terminals and harbor.

In an attempt to capitalize on the Chinese market—widely regarded as the world’s fastest growing market—the SPA is promoting use of Egypt’s Suez Canal as a cost-effective alternative to the more widely-used Panama Canal for Asian trade to the East Coast.

“We have launched an official campaign that directly markets the China-Suez Canal-Charleston link,” SPA spokesman Byron Miller says. “With all of the labor, railway and congestion issues shipping lines face on the West Coast, we think that we’re in a great place to capitalize.”

Ships traveling from Asia to the United States tend to either do business on the West Coast or sail through the Panama Canal to an East Coast port. One problem that shipping lines run into is that the Panama Canal is relatively narrow and cannot accommodate the larger container ships in which many companies are choosing to invests, says Miller.

The Suez Canal has a virtually limitless capacity, given its breadth and depth. The Panama Canal, by comparison, has a maximum allowance for the size of ships it can handle, says Miller, and that could benefit the Port of Charleston.

“The maximum size of a ship through the Panama Canal, what we call a Panamax ship, is 13 containers wide, about 4,400 (containers),” he says. “Now we have post-Panamax ships that carry 5,000 and up. (Shipping companies) have placed orders for 130 ships that carry 8,000 (containers) or more.”

With its deeper harbor, its larger cranes to handle heavier loads, and the new Cooper River bridge removing height restrictions on ships, the Charleston port is better able to handle the post Panamax-size ships than its Georgia neighbor, says Miller.

The SPA is careful to add that it still maintains a good relationship with the Panama Canal Authority, and the Panama Canal route will still play a vital role for the Panamax-size ships.

“At the same time, the fact that there are no (size) limits on the Suez gives us future options,” Miller says.

In an indication of shipping’s future, COSCO, one of the world’s largest shipping lines, confirmed late last month that it will launch a shipping service from the Far East to the East Coast by the fourth quarter of this year, and it will do so through the Suez Canal.

Asia rising

China’s growth into one of the most powerful players in the import/export market is one driving factor in the competition between the two Southern ports. The result of China’s demand for foreign goods was a 67% increase in South Carolina exports. In 2000, China was the 14th largest foreign consumer of South Carolina goods; in 2004, China ranked sixth.

“China’s purchasing power is increasing, and they’re becoming increasingly more exposed to Western products. And as great a producer as they are, China is also a tremendous consumer and is not very self sufficient,” says Melissa McLeod, manager for the South Carolina Commerce Department’s International Trade for Europe, Africa and the Middle East.

Textiles, high-end machinery and soybeans are some of the products China has purchased from South Carolina companies in the past year. With the S.C. Department of Commerce’s new office in Shanghai, the state expects to see even bigger results in coming months.

But China is not alone in seeing explosive import growth on the Asian continent.

“If it were not for China, all of the talk would be about India,” Miller says. “India trade was up 70 percent last year, and just about all of the ships out of India coming to the East Coast do so through the Suez.”

Economies of scale 

Cost is another factor influencing the shipping industry to choose the Suez instead of the Panama Canal. The Panama Canal Authority has indicated it will increase the rates it charges container ships for the third year in a row and increase costs during peak shipping times, including additional surcharges for fuel.

This year’s expected increase will hover between 5% and 7%, in line with last year’s increase. In February, Panama canal Authority administrator Alberto Alen Zubieta indicated the increases would be phased in over three years, starting in May of this year.

“The bottom line is that we simply closed a loophole that prevented us from charging for containers carried on deck,” Zubieta says. “Today, with some ships carrying more containers on-deck than in the ship’s belly, this new system is more equitable, more transparent and will provide the Canal with a fair price.”

The current pricing schedule, which began May 1, charges $42 per container through the end of April 2006. On May 1, 2006, the price goes up to $49 per container and, a year later, it will increase to $54 per container. On a Panamax ship carrying 4,400 containers, that translates into a transit surcharge of nearly $185,000 this year and $237,600 in 2007. In addition, shippers traveling through either canal have to pay fueling fees, towing fees, booking fees and other fees, making passage a costly endeavor.

“The fact is that the crew and fuel for a 5,500 or 6,000 (container) ship is the same as a 3,000 (container) ship,” says Miller. “So shipping companies have to look elsewhere for savings; larger ships that can carry more cargo, and less expensive routes seem to be one way to accomplish those.

“Savannah has done a very good job at building the Asia-Panama Canal-Savannah route, to our detriment,” he says. “Savannah has taken (Asian) business away from Charleston. But the larger ships that are emerging, the greater capacity of the Suez Canal and our deeper water is going to give us a competitive advantage.”

Matthew French covers imports and exports for the Business Journal. E-mail him at mfrench@crbj.com.

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