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Chasing Phantom Ships Post-Panamax

The end of 2011 brought discouraging news for advocates of effective goods movement policy, as evidenced by new developments in the standoff between the ports of Charleston and Savannah. As reported by the Charleston Post & Courier (h/t to Peter T. Leach at The Journal of Commerce), the Army Corps of Engineers does not anticipate dredging Charleston Harbor before 2024 under its standard funding formulas. Meanwhile, with South Carolina having decided to end its support for a joint Georgia-South Carolina Jasper Ocean Terminal, a collaborative solution that would work to the greatest advantage of both states is now effectively unachievable. 

South Carolina’s congressional delegation will now continue to fight for an earmark for Charleston, while dredging the Savannah River still may not happen; even if it did, as the South Carolina State Ports Authority noted in its decision to abandon Jasper, changes in the shipping industry may render the currently planned expansion of Savannah ineffective.

Continuing high costs for fuel and consolidation in the shipping sector are leading to bigger and bigger ships, which can carry more containers per unit of fuel and enjoy economies of scale in labor as well. Ships much bigger than the 12,500 TEU limit of the expanded Panama Canal are already serving Asia-Europe routes--ships that all of the West Coast ports can handle already, but which are too tall and have drafts too deep for any U.S. East Coast ports except Hampton Roads, Baltimore, and a single terminal at New York-New Jersey. 

(While there will still be plenty of U.S. traffic using the newly expanded canal--particularly between the West Coast and the east coast of South America and between the East Coast and the west coast of South America--Asian countries will remain the United States’ primary maritime trading partners for the foreseeable future.) 

Long-distance shipping routes that stop at several ports on each end are likely to be replaced with hub-and-spoke service, with a few major hubs served by gigantic ships, and trucks, trains, and smaller ships distributing containers to outlying cities.

The aforementioned ports already able to accommodate the giant ships now coming into service may soon dominate the market, especially with Norfolk Southern’s and CSX’s new rail connections to the Midwest providing Hampton Roads and Baltimore a significant advantage over their more southerly rivals.  By the time the other East and Gulf Coast ports are able to accommodate the big ships, supply chains will have shifted and carriers will be unwilling to use these ports for anything but niche services employing smaller ships. (Either Miami or neighboring Port Everglades may emerge as a hub for transshipment to the Western Caribbean and the Gulf, but each faces stiff competition from lower-cost rivals such as Kingston, Jamaica and Freeport, Bahamas.)

Ports that are now scrambling to accommodate “New Panamax” ships--and in the case of Charleston and Savannah, prevent their rivals from doing so--ultimately would find themselves having spent hundreds of millions of dollars (and possibly damaged a few ecologically sensitive areas) chasing phantom ships. This may also make the “beat the canal” efforts at the West Coast ports unnecessary for their stated purpose of maintaining market share (although the infrastructure projects grouped under the “beat the canal” banner certainly will help the Los Angeles/Long Beach complex accommodate future growth in traffic).

This situation is an excellent example of the need for a national freight plan with teeth--funded by user fees and allocating federal dollars only to those maritime, rail, highway, and inland waterway projects that will provide the biggest bang for the buck. The MAP-21 transportation reauthorization bill put forward last month by the Senate Environment and Public Works Committee has a good start in the form of a National Freight Program, but it only funds projects with highway components, limits non-highway spending in funds it controls by states to only 10 percent of their annual allocation, and maintains the traditional federal-aid highway program’s restrictions on tolling. This will not do.

While the shipping lobby is happy to see the current state of affairs continue--why pay user fees for infrastructure improvements that primarily benefit your industry, when you can shift these costs to the general-revenue taxpayer using earmarks?--for everyone else, it should be considered a travesty. An effective national freight program will ensure that ever-scarcer federal funds do not go to duplicative projects intended to capture nonexistent business.