Bigger cargo ships ‘game changer’ in port industry

The State Ports Authority is developing a new container terminal at the south end of the old Navy Base in North Charleston. Port chief Jim Newsome said that extra capacity will be critical as cargo ships get bigger.

Larger cargo ships will be calling on Port of Charleston, with or without the widening of the Panama Canal.

That, in turn, adds to the urgency of deepening Charleston Harbor sooner, in addition to improving and adding infrastructure to handle the expected growth in cargo volume.

That was the message echoed throughout Tuesday’s sessions at the S.C. International Trade Conference at Wild Dunes Resort.

Maritime officials said carriers will continue to seek to control costs due to sluggish market growth in the highly competitive environment. That has forced carriers to form alliances for certain shipping routes, slow vessels down to conserve on fuel and switch to larger ships.

The arrival of the bigger vessels represents what one official called a “game changer” for the industry.

“We can debate their impact, but they are coming,” said Frank J. Baragona, president of CMA CGM LLC, the U.S. arm of the French ocean carrier CMA CGM.

The larger vessels also threaten to chip away at the dominance of the Panama Canal, which is losing some market share to the larger Suez Canal in Egypt, officials said Tuesday.

Rodolfo Sabonge, planning director for the Panama Canal Authority, said the increasingly larger classes of ships have changed what the $5 billion expansion of the canal will mean for the maritime industry.

“When we were designing this six or seven years ago, we asked the shipping industry ... and they told us to be confident that we would not need larger locks than we had designed,” Sabonge said Tuesday. “I don’t think six months have passed by that they asked us to increase the size of the locks.”

Sabonge said there are projections that when the enlarged canal opens in 2015, about 9 percent of the world’s container fleet will be too big to use it.

The Panama Canal has been a key trade route for shipments between Asian nations and the U.S. East Coast, including Charleston.

Recently, some big ocean carriers have been diverting ships away from the Panama Canal due to rising access fees.

Earlier this year, Maersk Line, the world’s largest container shipper, fast-forwarded the schedule for larger vessels by choosing to use the Suez Canal for its Asia-to-U.S. East Coast routes.

Charleston has already seen business from the decision. One prominent example is the Arthur Maersk. The 1,157-foot vessel marked the longest vessel to call on Port of Charleston when it tied up in May at the Wando Welch Terminal in Mount Pleasant on a route that took it through the Suez Canal.

It was the same case with the 1,155-foot Axel Maersk, which called on Wando Welch in April.

On Tuesday, carrier executives said cost continues to shift momentum to the Suez Canal, and there is potential for some routes to return to Panama when the canal expansion is completed.

“You may see some services move back over to the Panama and I think that may happen, but that is a cost play,” said Timothy O’Connell, a vice president at Maersk Line North America.

Charleston Harbor can handle big ships that draft 48 feet and carry the equivalent of more than 9,500 20-foot containers when the tide is high enough.

The S.C. State Ports Authority wants to deepen the 45-foot-deep shipping lane to 50 feet.

The project is in the hands of the Army Corps of Engineers, which is in the thick of a $13 million feasibility study, one of the first stages in the lengthy process.

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The deepening is scheduled to be completed by 2020, with the $300 million to $350 million cost to be shared by the state and federal governments.

A logistics executive for a big shipper of retail goods said deeper water is just one piece of what is needed to accommodate the larger vessels.

“I hear a lot about dredging but I don’t hear a ton about the rest of the infrastructure we need to improve,” said Eric Sherman, vice president of imports for Family Dollar.

SPA chief executive Jim Newsome said based on what he heard Tuesday, it’s more critical than ever to ensure the harbor is deepened by 2018. He also said he’s committed to his agency’s billion-dollar capital spending plan.

“What I heard here this morning reaffirms what we are trying to do,” Newsome said.

The SPA is in the midst of a massive expansion project that includes a rail-served “inland port” set to open next month in Spartanburg County.

The agency also is making upgrades to existing facilities and is developing a new container terminal at the former Navy base in North Charleston.

Reach Tyrone Richardson at 937-5550 and follow him on Twitter @tyrichardsonPC.

The Associated Press contributed to this story.