By Dan McCue
Staff Writer

The absence of a national focus on infrastructure and port terminal needs is crippling regional ports authorities’ ability to deal with a tsunami of trade from the Far East, foreshadowing a potential crisis that could spread throughout the U.S. economy, according to one of the nation’s leading experts on international trade issues.

“This is a supply-chain business in which what we do is really just part of a long continuum,” said Peter Keller, chief operating officer of the Japanese NYK Shipping Line.

“We need to recognize that. We also need to acknowledge that the weakest and shortest link in the supply chain will be the one that breaks,” he said. “Until we do that, and until we all pull together to face that reality, we’re going to continue to have problems in this factory that is international trade.”

For the second year in a row, the Port Productivity Conference held at the North Charleston Convention Center was a sobering affair, noteworthy for the alarms it sounded for the industry and the occasional glimpses of hope shared among its participants.

Keller, a 38-year veteran of the shipping industry, was one of nearly two dozen speakers who all sang a similar refrain: Cargo from the manufacturing centers of China, India and the rest of the Far East is coming, and our ports, hemmed in by development and unable to resolve transportation issue outside their terminal gates, are woefully unprepared for it.

The challenge is particularly acute for East Coast ports such as Charleston, because they are being buffeted by several industry developments at once. The first is the volume of trade, which is growing at a rate in excess of 10% a year, despite the fact that terminals haven’t grown, and frankly can’t grow, at anywhere near that pace.

The second is lingering congestion problems on the West Coast, the traditional call for some of the largest container ships in the world, which has lead to even more cargo being sent to East and Gulf Coast ports via Europe and the Suez Canal.

Finally, and perhaps most problematic, is that despite port operators’ efforts to use every inch of their terminal space more effectively, there’s next to nothing they can do to offset the weakness of the transportation arteries and the transportation industry itself that carries the goods from their docks to market.

“Bigger ships, small highways, the issue of containers dwelling on precious terminal space, driver shortages; at the end of the day, it all comes down to productivity,” Keller said. “Charleston has been a leader on this front, but soon cargo volume is going to be so great that it won’t be something solved by aggressive measures taken within the terminal gates. It’s going to be a real issue for the economy as a whole.”

Conference focuses on solutions

Peter Hurme, publisher of Marine Digest & Cargo Business News, the sponsor of the conference, said while many of the themes at this year’s conference were similar to those discussed last year, there were some significant differences between this year and last.

In additional to being the first Port Productivity Conference, the 2006 event was dominated by the then-breaking controversy of the Dubai ports deal. Another major difference is that attendees appeared to be talking more about collaborative solutions than thorny issues this year, he said.

“That really is what our intention was when we started this conference,” Hurme said. “We all know the issues, and believe me, it’s healthy to talk about them. But the real benefit in getting people together like this is having the discussion move forward.”

So while port operators and other industry insiders talked about such time-honored solutions to space and congestion challenges as chassis pools, off-site storage of empty containers and the extension of gate hours to include nights and weekends, more than last year, conference participants were talking about their actions in terms of their context to the actions of others.

“The key to having a late gate is that you have someone to accept the cargo. The key is that the warehouses at the other end of the road be open,” said Thomas Ward, chief engineer for the Marine Terminals Corp.

Ward said that in Tacoma, Wash., for instance, both Wal-Mart and Target have agreed to request a late gate when they know a ship is coming in heavy with their merchandise, and they will keep their warehouses open late to speed to removal of their goods from the port terminal.

Larry Keller, director of ports and maritime for industry consultant firm Kennedy Jenks, said ports authorities have long believed that the main thing shippers wanted was for cargo to be off-loaded quickly, and more quickly than last year.

That assumption, however, is changing. “What industry surveys and discussions have shown is that what they really want is speed and reliability.”

Both factors are driving one of the most talked-about developments at this year’s conference, Norfolk Southern’s commitment to build a new, state-of-the-art intermodal facility near Charlotte Douglas International Airport.

Norfolk Southern has operated a daily intermodal service between the Port of Charleston and Charlotte, N.C., for years, but it’s now in the process of upgrading the line with additional passing tracks and negotiating with a number of state agencies in North Carolina for the right to build the new facility.

“Should our negotiations be successful, the new facility should come on stream in 2010,” said Augie Eckhardt, international market manager for the railroad.

The perfect place to talk productivity

Although Hurme’s magazine is based in Seattle, Charleston is the perfect location for the conference because people in the industry here “are a little more keyed in on what’s happening” and have been working hard to address the issues outlined, he said.

Hurme said the magnitude of what’s about to rain down on U.S. ports was driven home to him four months ago during a tour of Chinese ports with Marine Digest chairman Mike Daigle.

“China is ready, there’s no doubt about that,” he said. “Their facilities are huge and unlike the United States, the Chinese are not dealing with community issues and labor issues and so forth; they’re just moving ahead.

“I have to say, based on what we saw in China, our port system is going to be severely stressed going forward,” he said.

Tony Scioscia of Maersk Inc., another of the world’s premiere shipping line, said one of the port industry’s biggest issues is also one of its least discussed: In the wake of the Dubai ports imbroglio, several international companies sold their operations to investment and retirement funds.

“What that means is that we’ve gone from an industry dominated by people with global trade in their blood (to one where) many of our companies are now owned by entities like the Ontario Teachers Union, people who are going to have very different priorities than our own,” he said.

Despite this, Keller said he believes that when push comes to shove, the onslaught of cargo will finally push all the industry’s stakeholders to sit down at the table and come up with a comprehensive solution to handling the trade.

“There’s a saying that freight doesn’t vote, and therefore it doesn’t get noticed, but I think once our challenges become everybody’s challenges, the powers that be are going to be forced to craft a new national infrastructure policy for the nation and to find new ways to make this business work,” he said.

“Right now, everybody is looking for the problem to fit the solution,” Keller continued. “We need to look for more simple, linear, straightforward solutions. Right now we’re talking past each other and everybody’s trying to get around dealing with somebody else. I’ve always believed the most elegant solution is the simplest, and at the end of the day, this is a team sport. It’s football, not golf.”

Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.

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