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Container Shipping Outlook

We could review more lower case scenarios such as more uncertain and volatile development of oil prices, further discontent and sanctions with Russia and its former satellite states, etc., but as we have seen in the past after a decline in growth the market has rebounded within a year. Again, although the current decline has more influencing events in play at this time that will dictate the pace of recovery, we can assume that there will be a recovery in consumer spending and the overall growth in container shipping will continue to track as it has in the past. 

There may be some readjustment to the various tradelane volumes as manufacturers continue to seek further economies through outsourcing, but for future planning overall we should assume that the global container shipping growth will continue to track more or less as it has in the past.

Short Term

As we have mentioned, the Port serves two distinct markets, immediate hinterland and gateway traffic.

Of immediate relevance to the PANYNJ is the impending cascade of larger tonnage into the Atlantic trades as this would be a natural choice for this size of vessel.  Already we are seeing the possibility of 7,500 TEU vessels being deployed in the African trades as container shipping lines seek to utilise this class of vessel which has been displaced by the 10,000+ TEU vessels being deployed in the Asia Europe trades.

Although the port can accommodate particular designs of ships in the region of 8,000 TEU, the inability to accommodate all of these larger vessels could see the port acting as a secondary US port primarily serving its immediate hinterland. Although this is a substantial market the future growth of the port would then rely on this market so growth would basically be tied to the economic growth of the region.  However, with larger vessels calling Virginian and Canadian ports this could also erode growth as goods are railed or trucked from these ports to the New York/New Jersey conurbation, particularly as infrastructure links continue to be improved to and from the New York/New Jersey area from other regional ports.

Taking a very simplistic approach, the future volume projections for the port could therefore be considered as:

 Current volumes less a factor for discretionary freight to mid-west and other more distant areas where PANYNJ will compete with other regional ports

 A factor for loss of local hinterland business to line haul services calling adjacent ports

 From this base the future volume growth projections would be a multiple of projected GDP growth for the NY/NJ conurbation

The issue is therefore a potential drop in throughput as the cascade effect takes place in the coming period, with volumes slowly recovering with regional organic growth.  The future of the port would then be intrinsically linked to the economic growth of the immediate hinterland.

The factors for loss of business could be estimated by looking at current and planned infrastructure from the regional ports to major city conurbations that are currently served by PONYNJ. Basically the better the links are to and from these areas from adjacent ports, the higher the risk of losing business.

Longer Term

Longer term there will be further increases in vessel size that will serve the US market as the expansion of the Panama Canal is completed which will allow vessels of around 13,000 TEU to traverse the waterway.  The economies of scale that all of the shipping lines are pursuing by ordering this size of vessel will mean they will be deployed in all water services, Suez and Panama, to the US in the Asian services. 

Again, if PANYNJ cannot accommodate these vessels the port would be served by secondary strings catering to the local New York/New Jersey market.  New York/New Jersey cargo could also be discharged at other east coast ports and either feedered, railed or trucked to the region.  For this type of service shipping lines could consider the port as an outport and raise an arbitrary charge as they do in other global regions which could further reduce the competitive position of the port.

In this case the levels of business could be:

 Little or no containers to the Midwest or more distant areas as premier line haul services with 13,000 TEU vessels call other ports

Significant erosion of New York/New Jersey traffic to major cities in the region as containers are feedered, railed or trucked from other regional ports

Container traffic limited to a smaller radius of the port

The port is considered an outport attracting arbitrary charges

The above could be viewed as a worst case scenario but in the relentless pursuit of economies of scale in the industry it is a distinct possibility.  Under this situation, the current and planned investment in rail would have to be considered.


(September 15,2008)

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