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USWC ports reconsider conventional wisdom that bigger is better

DESPITE assessments from international agencies of a significant redirection in traffic to the Panama Canal from the Suez Canal, observers and the ports themselves say the effect is yet to be felt at US west coast ports.

Yet, statistics from Alphaliner confirm that Panama is taking 60 per cent of all-water traffic, compared to 40 per cent at the start of the year, reports Port Strategy of Fareham, Hampshire.

US west coast ports knew bigger ships were on the way but thought they would be able to keep pace with a gradual, manageable progression.

It was also wrongly predicted that there would be a similar steady progression in business and trade volumes instead of world trade stagnation.

Economist Jock O'Connell said the slowdown in trade, particularly US exports, has confused the issue and been a dampener for planners.

Canada provides an indication of a slackening world trade outlook. Total TEU volume to the end of July at Vancouver, the country's biggest port, was down 6.6 per cent to 1.6 million TEU.

Maritime analyst Dan Smith of the Tioga Group pointed out that carriers are still trying to get the right balance of vessel size versus the cargo on offer and that the preference to use the Panama Canal instead of serving the US west coast will be decided later.

Alphaliner put the weekly capacity of the Asia to east coast trade at 145,000 TEU, two per cent higher than the year before. The number of weekly services has dropped from 16 to 13, but average vessel size has increased from 4,600 TEU to 6,400 TEU. The average vessel size through the Suez is 8,000 TEU, while there are only eight weekly strings, said the agency.

"There is overcapacity on all trades at the moment and a vicious rate war on the Pacific lanes," said Mr Smith. "There is not much to gain from opting for savings by going to the US east coast."

Assistant professor at the Marshall School of Business at the University of Southern California, Nick Vyas said: "The liners are losing millions of dollars, and I don't think larger vessels are truly the answer. I personally believe we have met an inflection point. The question is how big is big enough. At some point, it has diminishing returns."

Industry executives are saying privately that it is time to re-think the conventional notion that bigger is better for the US west coast, because of the extra investment, and that there will be more revenue per container with the use of ships of 8,500 TEU.

The new perception has led to a more guarded and critical response to the Ocean Alliance proposal to the US Federal Maritime Commission for as many as 175 vessels ranging from 4,200 to 18,000 TEU, increasing to 220 ships and a maximum capacity of 21,000 TEU.