East Coast ports, Caribbean, even Mexico look to gain as shippers spurn West Coast

Not only are ports along the U.S. East Coast benefiting as shippers look for options to congested West Coast gateways, but opportunities also await in the Caribbean and Mexico as near-sourcing of products for American consumers is likely to accelerate. Those were among views expressed March 24 during a full day of discussions at the JAXPORT Logistics & Intermodal Conference, hosted by the Jacksonville Port Authority in Ponte Vedra Beach, Fla. Calling the West Coast situation “a seismic event for the industry,” Chris Swartz, director of global transportation and logistics services at AJC International Inc., an Atlanta-based global distributor of poultry and other protein products, said repercussions may well include an increase in manufacturing in the Caribbean region, along with commensurate gains in shipping. “I’d be shocked if there’s not more short shipping from the Caribbean,” Swartz said, citing transshipment options plus anticipated gains in production closer to U.S. consumers. “The Caribbean is perfectly poised.” Shawn Barnett, senior vice president of Jacksonville-based Suddath Global Logistics LLC, said that as West Coast woes motivate shippers to look at ways to reduce supply chain risk, “Certainly near-sourcing is an option.” Barnett said that could mean more manufacturing of goods bound for the U.S. mainland in such places as Puerto Rico and other islands in the Caribbean that over the past few years have experienced economic downturns and reduced shipping volumes. Jay Brickman, vice president of government services and Cuba service at Jacksonville-based Crowley Maritime Corp., one of three remaining carriers in the Puerto Rico trade and a longtime server of the Cuba market, also said he expects supply chain shifts to include more Caribbean activity. Brickman noted that U.S. near-sourcing from Mexico is already on the upswing and – as it does not require use of seaports – is likely to additionally accelerate. He added that he thinks near-sourcing from Cuba also will come to fruition, as political and economic relations with the United States become further normalized. Peter Keller, executive vice president of TOTE Inc., parent of Jacksonville-based Puerto Rico carrier Sea Star Line LLC, said that new ships being deployed by Sea Star and Crowley, including ones that run on liquefied natural gas, provide a favorable outlook for transportation in the region. Rob Martinez, vice president of business development at Norfolk, Va.-based Class I rail firm Norfolk Southern Corp., said shippers began shifting cargo volumes to the East Coast long before the recent labor and congestion problems but that he sees that trend picking up, commenting, “I’m increasingly of the mind that there may be additional opportunity on the East Coast. “Certainly, the widening of the Panama Canal doesn’t hurt in that effect,” Martinez went on to say, adding that Mexico, with its proliferation of free-trade agreements, is likely to realize manufacturing gains, as is the United States, in part due to increasing comparative manufacturing costs in China. Another factor that is apt to lead to greater intermodal volumes for NS and other freight railroads is the worsening shortage of truck drivers, expected to be exacerbated by impending electronic logging requirements, according to Tim Crumley, vice president of supply chain and logistics for Plant City, Fla.-based Sysco International Food Group Inc., which exports products to more than 90 countries. “We’ll be looking at intermodal options to spread our risk if you will,” Crumley said. Marie-Claire Abercrombie, distribution and branch manager for Anaheim, Calif.-based tile importer Bedrosians, echoed that thought, saying, “There are no young people who want to be a [truck] driver, so we’re looking at other options, too.” Richard Markovich, vice president of global transportation and trade management at Dallas-based Michaels Stores Inc., the world’s largest specialty retailer of arts and crafts and related items, said he believes the shrinking availability of truck drivers, both for port drayage and long hauls, will lead to higher overall freight costs. Referring to his company and other beneficial cargo owners, Markovich said, “We do believe we’re going to be paying more money because of the shortage of drivers.” Mike Wilson, senior vice president for business operations at global container line Hamburg Süd, said he anticipates significant increases in the cost of moving freight as trucking issues get even worse if terminals do not enhance efficiencies in getting trucks in and out of facilities faster, especially as the increasingly large containerships being deployed by alliances are creating “a surge beyond the design capacity of the facilities.” “The United States has the least-automated terminal operation in the world, which is a little embarrassing,” Wilson said. Val Noel, senior vice president and chief operating officer of Princeton, N.J.-based TRAC Intermodal, North America’s leading chassis provider, said expanded chassis pools, such as recently introduced in Southern California and due in July in the New York-New Jersey market, may help ease terminal backups, but he said greater cooperation among all stakeholders is the true key. “We as an industry have to be more collaborative,” Noel said. Earlier in the day, Brian Taylor, JAXPORT’s chief executive officer, said he believes labor and congestion woes on the U.S. West Coast will lead to “monumental change” in shipping patterns, with the South Atlantic being a “land of opportunity,” as new East Coast distribution centers open and trans-Suez Canal routings become more popular. That sentiment was seconded by Clarence Gooden, executive vice president and chief commercial officer at Jacksonville-based CSX Corp., who commented, “The East Coast ports are going to benefit greatly off this disaster on the West Coast,” which, he opined, is “probably going to have more strategic implications in the near term than the opening of the [expanded] Panama Canal.” A “material shift to the East Coast” was predicted by Paul Cozza, chief executive officer of the North Carolina State Ports Authority, while Curtis Foltz, executive director of the Georgia Ports Authority, noting dynamic recent gains in Port of Savannah container volumes, said South Atlantic ports must provide efficient terminals – with deep channels and solid multimodal links – to continue to benefit as shippers seek alternatives to the West Coast for bringing imports into the United States. Foltz noted that, with 70 percent of U.S. consumers living in the eastern one-third of the nation, there are “clearly going to be opportunities” in long and short terms for South Atlantic seaports.