View the May 2017 seminar recording
Nicole Coene
Good afternoon or good morning to those of you in the West. Welcome to the Talking Freight Seminar Series. My name is Nicole Coene and I will moderate today's seminar. Today's topic is: Understanding the Impacts of Megaships.
Before I go any further, I do want to let those of you who are calling into the teleconference for the audio know that you need to mute your computer speakers or else you will be hearing your audio over the computer as well.
Today we'll have four presentations, given by:
Dan Smith has over 35 years of consulting experience in freight transportation economics, strategy, policy, and planning. His major clients have included ports, railroads, shippers, leasing companies, industry associations, and government agencies. He has led landmark studies of intermodal transportation, cargo forecasts for major container ports, and highly regarded studies on intermodal interchange, terminals, drayage, equipment utilization, and productivity. Before co-founding Tioga in 1997, he was with Mercer Management Consulting and Analytics, Inc.
Lee Kindberg is Head of Environment, Health, Safety and Sustainability for Maersk Line in North America. Maersk Line is the world's largest container shipping company. Dr. Kindberg co-chaired the EPA Ports Workgroup in 2014-2016 and has served 6 years on the US Environmental Protection Agency's Clean Air Act Advisory Committee. She has been active for over 10 years in the Clean Cargo Working Group, a global group dedicated to assessing and improving the environmental impact of shipping. Dr. Kindberg has a B.S. in Chemistry from the University of Alabama and a Doctorate in Chemistry from the University of South Carolina. She joined Maersk Line in 2005.
Tom Ward is the Senior Maritime Planner for WSP. He is a licensed civil and structural engineer, with over 30 years of experience leading the planning and analysis of marine terminals and port facilities. Prior to joining WSP in 2013, he was Chief Engineer for Ports America, overseeing engineering for operations at over dozens of US ports. Since joining WSP, he has led planning efforts in Charleston, Oakland, Long Beach, Portsmouth, Vancouver, Halifax, Miami, Honolulu, and Freeport. His focus is preparing port and facility plans that respond to specific capacity, performance, sustainability, and financial targets.
Anne Strauss-Wieder is the Director of Freight Planning for the North Jersey Transportation Planning Authority (NJTPA). She has over 35 years of public and private sector experience in supply chains and freight movement, economic analyses, and policy and project development.
She has authored numerous reports and industry assessments on emerging supply chain trends and issues. Ms. Strauss-Wieder also teaches a graduate course on Freight and Public Policy at Rutgers University. Ms. Strauss-Wieder has been or is in leadership roles in several national professional organizations including the Council of Supply Chain Management Professionals, the Transportation Research Board and NAIOP (the commercial and industrial real estate development organization). She is also an appointed member of the US Department of Commerce's Advisory Committee on Supply Chain Competitiveness (where she chairs the Workforce Subcommittee) and the US Maritime Administration's Marine Transportation System National Advisory Committee. Ms. Strauss-Wieder was a Leadership New Jersey 2010 Fellow. She has a BA and MA in Regional Science from the University of Pennsylvania.
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I'm now going to turn it over to Dan Smith of Tioga Group to get us started.
Dan Smith
Thank you very much. The newest and largest container ships captured a lot of attention mostly for their sheer size. The trade press calls them "megaships" and we're using the term here although you will see it is a bit imprecise. The reasons why ocean carriers are building and deploying megaships are clear: they save money, fuel, and emissions through economies of scale and improved design. Handling those megaships however creates issues for ports, terminals, drayage firms, and communities and regions where they operate. My job today is to briefly cover some megaship basics as a common background for the presentations that follow.
What is a megaship and what is all the fuss about? You all have seen diagrams like this tracing the growth of container ships and we know megaships are bigger than Panamax or even post- Panamax vessels. Some working definitions start the megaship category with the neo-Panamax vessels at 12-13,000 TEU but on the west coast some vessels are already larger than that. Megaships can have twice the capacity of post-Panamax vessels which are already pretty big. They can be 20-25% wider and higher and 100 feet longer. What aspects of that 'bigness' affect port terminal and drayage efficiency? Is it overall size? Is it TEU capacity? Length, height, and beam? Ports are very concerned about draft when it comes to large vessels. The answer (as usual) is "all the above".
In talking over these issues before the January TRB workshop, we concluded that, in a practical sense, a megaship is anything much bigger than what you're used to handling. That varies by port. As of 2015, West Coast port handled routinely handled vessels of 12-14,000 TEU and the average there was over 6000. East Coast ports saw 9-10,000 TEU vessels and they averaged about 5000 TEU. But, Savanna just got its first 13,000 TEU vessel last week. Gulf ports saw vessels of 6-7000 TEU and average about 4000. Many of the maximums will be the same because the same vessels are calling in multiple ports but look for a minute at the purple bars that indicate TEU handle per vessel column and they vary far more than the other vessels. In Southern California, they have averaged over 7000 TEU handled per voyage which is more than triple the volumes of most other ports. On the West Coast, they handle 73% the vessel capacity on the average compared to 35% for the Eastern gulf ports and those numbers – have some interesting implications for vessel size as well. Channel and berth depth is critical, but the need for 50' drafts arrived with large post-Panamax vessels before we ever got to megaships.
The relationship between vessel design draft and TEU capacity used to be relatively simple and in historical range of 1,500-6,000 TEU we saw steady increase in design drafts, but look what happened when capacities go to 8,000 and 10,000 TEU and beyond. Vessel designers have effectively capped design draft at 50-52' and increased length and beam instead to achieve higher capacity. This is very good news for ports because they will not have to keep dredging indefinitely, but it also means that we have to cope with greater length, beam, and height of the vessels.
To achieve megaships capacities designers have increased beam and height much faster than length and to put it bluntly, megaships are fat. A 4500 TEU Panamax vessel (shown here in green) is about 15 containers wide and has about 174 containers in each mid-ship hatch. The mid-ship hatches on a 7000 TEU post-Panamax vessel (show here in blue) are typically 17 containers wide, 6 deep, with containers stacked 9 high on deck. Completely full, that mid-ship hatch holds 247 containers (42% more than the panama vessel). On an 18,000 TEU megaship hatches are 8-10 containers deep, 23 wide, and are stacked 9-10 high on deck. That's 406 containers per hatch - 64% more than the post Panamax vessels. A 64% increase in terminal handing productivity to match that growth is not easily achieved. A terminal that is used to handling 4,500 TEU Panamax ships could face a 133% increase in containers per hatch when the megaship shows up.
Beam and height have implication for crane size and speed. New super-post-Panamax cranes that can reach 23 across and 19 high cost $10-12 million each. Raising an existing crane costs $2-4 million. Crane moves per hour is a favored industry metric, but that metric may drop as the ships get wider and taller. It's a long way across and a long way down into that hatch. Assuming an average move is halfway across and halfway down, the megaship requires 28% more crane travel than a 7,000 TEU post-Panamax vessel. The newest cranes are faster, but it can still take them longer to handle the same number of moves on a megaship than on a smaller ship. Crane operators move boxes in an arc whenever possible rather than just up and down. What this diagram does not show is megaships typically have cell guides up to 5 containers high on deck limiting ability of operators.
The beam and height of megaships implies some drastic increases in the cargo volume that must be handled for the berth. The terminal handling 4,000 TEU Panamax vessels at most U.S. ports is operating at about 1.3 TEU for the berth. The post Panamax vessel unloading and reloading the same 35% capacity raises it to 2.3 TEU per berth. The post Panamax vessel goes up to about 3.3 TEU per berth but 8000 TEU megaship unloading and loading 35% of its capacity raises it to 4.2 TEU - double that of a post Panamax vessel and almost triple that of a Panamax ship. Other US ports would like to become regional hubs and intermodal gateways in Southern California but be careful what you wish for because that would more than double the berth again. From the Panamax at 35% difficult of the East Coast to megaships at 73% typical of the West Coast would be an eight-fold increase in throughput.
The concept of the berth is changed. The rule of thumb is that a vessel requires a berth equal to its length plus its beam. A 1,300' megaship therefore needs a 1,500' berth. The table shows total berth length in 1,500' equivalents for major US ports along with a number of super post Panamax berths and it is clear we cannot use all those berths to handle megaships. A few minutes with Google Earth will show the practice is to use six or seven super-post-Panamax cranes on a megaship. When the CMA/CGM Bridgman Franklin arrived in Los Angeles in December of 2015, it took 1,500 longshoremen 56 hours to load and unload 11,229 containers using 9 cranes. You may say "that is a 20,000 TEU ship, no wonder it needed 9 cranes." But in fact, it was only loaded to 15,000 TEU on that voyage. If the terminal is handling only part of the vessel's capacity and it is stowed accordingly they might get away with only four cranes. But the numbers show that most ports average less than that, so at bare minimum they will have to steal cranes from other berths – even to handle partially loaded vessels.
Here is an example. The Siegert at Baltimore has 4,300' wharf face, usually good enough for four berths. They have 11 cranes and 4 of them are super-post-Panamax. They finished their dredging. So, are they big ship ready? Yes. But only one at a time and only for light cargo volumes. This diagram is drawn to scale and 4,300' is not enough for 3 megaship berths. The clever terminal manager show large and small cranes in combination to work a megaship but on a regular basis you need more big cranes. Baltimore is not unique in this. Terminals around the country struggle when the big ships pull up in the terminal.
Cargo peeking is inherent in the shipping business. Larger vessels can make it worse and a lot depends on what combination vessel shows up and how long it stays. This is the mid-2015 schedule vessel capacity for each ship at the APM terminal of Los Angeles one of the largest in North America and as big-ship-ready as they come. On an average ship, they had about 14,000 TEU of vessel capacity berth, but there aren't any average ships. For Ship 16, midnight on Sunday, June 12 the berth should have been empty. For ships 29 and 30 during the day on Thursday the 16th, they would have had almost 30,000 TEU of vessel capacity and been scrambling to find enough men and equipment to go around. On average, those vessels would have generated about 12,000 container loads for the terminal plus 5,000 rail moves and 10,000 truck trips. Those volumes have serious implications for the road and rail systems.
New megaship publicity photos look like this – with all the neatly stowed matching containers. Appropriately, this is the CMA CGM Jules Verne because this degree of organization is pure science fiction. Carriers have entered into complex alliances in part to fill these large ships. One ship may have containers for up to 6 lines and each line may bring containers to up to three different terminals on the same deck. So, to a terminal operator the vessel looks more like this. In reality, every one of these shared vessels are a puzzle and they are all shared. One of the main reasons we're talking here today is to solve that puzzle.
Megaships and alliance complexity affect operations inside and outside the terminal. For example, empty container return has become a headache at multi-terminal ports. At the Port of Virginia, they issued a new empty return matrix every day with six container types, four return locations and 28 lines. In Southern California, each of the 13 terminals issues their own instructions. This is an example of from Pier 300 with six container types in 11 different shipping lines just at that terminal. This matrix can change every shift.
What does all this mean for ports and terminals? We expect benefits from megaship deployment but need to cope with the landside issues to realize just how the megaships dimensions, volumes, and surges in complexity affect port and trucking operations and what we do about it.
On the policy and planning side - what must all of us do to realize the megaship benefits and minimize the adverse impacts? How do we justify, prioritize, and find the investments we need to make? How do we mitigate community and regional impacts? Finally, are there high-level policy and program implications to all of this?
With that I will turn this over to the Nicole.
Nicole Coene
Thank you, Dan. We will now move on to Lee Kindberg of Maersk Line.
Lee Kindberg
If you think about it, if you're moving 15,000 TEU you have a choice today of having three, 300m long Panamax vessels taking up 900m of berth capacity or one 400m long Triple E. They can move the same number of containers, but you take one third as many tugs and one third as much time lost berthing and un-berthing the ship. There is real economy of scale that can be achieved here. Certainly, cargo will tend to arrive in bigger blocks. Time and yard and gate layout may need to be adjusted to handle these bigger peak volumes, but this should be more than offset with efficiencies at the berth and within the harbor.
Vessels are the most energy-efficient way to move freight. They have the lowest emissions. On the next slide, what we see is that port-related operations are significant sources of both air emissions and greenhouse gases. The biggest ports are in areas that already have air-quality challenges such as Southern California and New York and New Jersey, the eastern seaboard and some on the Gulf Coast. The nonattainment shown here in this map - and by the way this was produced in the ports working group report on the EPA Ports Initiative website if you want to know more about it - but the nonattainment shown is just one indicator of air quality and impact. Based on GSI data approximately 40% of principal ports were located in or near current nonattainment or maintenance areas. However nearby community and worker exposure from diesel emissions can occur at all ports. So, both greenhouse gasses and all pollutant emissions are of concern any time we have this concentration of diesel engines operating.
Bigger ships are typically newer and more fuel-efficient - so lower emitting while underway and at berth. We have higher efficiencies and provide enormous economies of scale and lower emissions per container moved. Our largest variable costs in operating these big ships are personnel and fuel. A vessel - regardless of how big it is - is going to carry 18-20 people and these folks, the crew and officers live on that ship for months at a time. But there are only 18-20 of them, regardless of the size of the ship. The new vessels do have additional technologies for energy efficiency as well as economies of scale.
Some of the existing big vessels were eco-retrofitted to make them more energy efficient or to increase capacity (or both). This picture is Marie Maersk, she's one of our Triple Es which is an 18,000+ capacity vessel. In this picture, she was leaving Algeciras, Spain with 17,603 TEU onboard. Quite a large vessel.
I believe our record is currently the Maersk McKinney Moller leaving Algeciras at 18,450 TEU. But it is not just the biggest or newest ships. It is having the right ship for the service need because capacity utilization has a big impact, both on the cost and on the operations and on the environmental impact.
This is what a Triple E looks like. These are our versions of those 18,000+ TEU vessels. We designed them to be energy-efficient, have economies of scale, and better environmental performance. That involves the engines, the hull design, the capacity, and putting in technology like waste heat recovery systems. All of these are designed to optimize the three characteristics. In doing so, we have managed to make these ships operate at 30% to 35% less fuel and therefore 35 less emissions than other vessels on similar services.
Let's look at some data and there is a lot of data on this. On this particular slide, I've gone into our databases and selected vessels ranging from 1,700 TEU up to 18,000 TEU to give you a feel for the kind of energy efficiency that can be achieved with these vessels. Now, all the emission factors I will quote to you are calculated using the methodology agreed to and published by the Clean Cargo Working Group and you will see the link to that at the bottom.
You will have access to this link or just Google "Clean Cargo Working Group". This group does have methodologies for taking actual distance steamed by a vessel in a year and the actual fuel used, and then the nominal capacity and coming up with a standardized CO2 emission factor that is calculated directly from the fuel consumed. Any time you look at the CO2, you are looking at the fuel consumed and you can also ratio to the other criteria pollutants. Let's look at a couple of vessels. As you can see the Maersk Wolfsburg, at 1700 TEU has a CO2 dry emissions rate of 75g per container per kilometer moved. So, that would be the dot on the chart in the upper left. As we get to bigger and bigger vessels, the amount of CO2 and the amount of fuel per container per kilometer drops with the size of the vessel. If you look at the Sealand Racer and Sealand Champion the second and third vessels on the list, you will see the two vessels are identical in TEU capacity but they have different CO2 emissions and in other words feel efficiency. What you see is that emissions are a factor of not only how the vessel is built but also how it is operated. If you look down to the Majestic Maersk at 26 g CO2 per TEU-kilometer you will see it is one third the energy used and emissions related that you get on the Maersk Wolfsburg. It can make significant improvements in emissions and energy consumption with these newer and larger vessels.
Here we see the same sort of plot but this graph shows the 2,900 vessels that participated in the Clean Cargo Working Group's annual environmental reporting in 2014. Again, what you're seeing on the vertical axis is the CO2 consumed (in other words the fuel), and on the horizontal axis you've got the vessel size. Size certainly matters but as you can see there is also a good bit of scatter for each vessel size reported and that does definitely reflect the technology and speed and other operational factors for that particular vessel on that particular service.
The good news is that vessels are increasingly fuel-efficient. The red bars are reflecting the Clean Cargo Working Group industry average and those almost 3,000 vessels - now over 3,000 - reflect almost 85% of the number of containers moved globally. This is a very significant study done each year that gives information reflecting the global fleet average and by the way those emission factors for twenty-five different trade lanes are published on the Clean Cargo Working Group website each year. Looking at the red bars you see the global average has come down each year - as a matter fact the Clean Cargo Working Group annual average is down about 34% between 2009 and 2015. The blue bars by the way are my fleet average, Maersk Line, since 2007 has come down 42%. How are we doing that? Certainly there are new vessels but you can only buy so many vessels and still stay in business - they are expensive. Big vessels are part of it and new vessels are a part, but it is only a small percentage of the fleet. We are also retrofitting existing vessels. Other factors are the network design -- what ports do the vessels call, and when are they expected to call (in other words how fast do they have to go to get from one to the other), and then the operations execution. If you think about your car, if you're always speeding up and slowing down then you'll have poorer fuel economy than if you set the cruise control and leave it alone. The same thing is true with vessels but we are going speeds about 20 miles an hour as our top speed. So vessels are much slower, but a lot of the same operational considerations apply. The newest thing that is happening is Big Data. We take about a terabyte of data per month from some of the big ships and it really gives us much more granular appreciation for what operational changes do in terms of energy efficiency and emissions. That is really enabling us to do much more optimization than we were able to do with the previous data -- what they called "noon readings."
The key result from the environmental side is to decouple growth in our business and emissions, because our goal is to reduce CO2 by 60% by 2020. We'll use less than half the fuel per container per kilometer than we used in 2007. Again, the key result is to decouple growth in the business and the environmental impact. Here you can see again since 2007 business growing in number of containers by 53% but the environmental impact is down 21% and that is total environmental impact, not just intensity-based. Certainly, that has a cost impact but it is a win-win: making business more sustainable both economically and environmentally.
Now let's talk about "how big is big and how do you describe what big means?" Let's learn and talk about a few terms. If you look across the top of the chart you will see I have listed TEU (which is capacity in 20 foot equivalent units), LOA (which is the length of the vessel), beam (which is the width), keel to top of mast (which is the total height of vessel from the very bottom under the water to the tippy-top of the mast) and we have the depth (how deep from the water line down to the bottom of the keel), and that leaves you the height above the water which is important if you need to go under a bridge.
As a matter of fact, we have to collapse the masts to get under some bridges like Long Beach or the Bayonne bridges - a significant investment is being made there to raise the road level so bigger ships can get under it. Compare the Sealand Champion in terms of length at 292m (964 feet) and the Maersk Edmonton at 367m (1200 feet), and look at the tripling in capacity. So, a small change in length and a big change in capacity, as Dan pointed out. So, that enables more efficient use of cranes and tugs and berths, but it does require changes in how the marine terminal handles the cargo and the trucks and trains taking the cargo inland. But, that is what we do as an industry, everything we do moves and so everything has to adapt.
On the next slide, you will see some of the challenges. The first being will it fit? The air draft, the turning basin and can you actually turn the vessel around or is it too big to fit in the turning basin. What about the crane heights? Not all cranes have been elevated - in fact only a small portion have been elevated to be able to work some of these big ships at nine-high. There is a question on the West Coast about shore power connection locations. If you bring in a bigger ship can you still align with the connection point? That has definitely been a concern in LA Long Beach and Oakland. It also gives us challenges in network planning and vessel deployment and capacity utilization. How much cargo do you take? Do you have enough cargo to get under the bridge not only coming into a port, but getting back out? And then there is storage planning too.
Moving on to the last slide, we see some real opportunities in starting to work with terminal operators to improve efficiency within those terminals - coming up with creative solutions to get containers in and out as they come off the bigger ships. I will turn it over to the next speaker. Thank you.
Nicole Coene
Thank you. Will now move to Tom Ward of WSP.
Tom Ward
As pointed out, there are quite a few very decided and real advantages that the ship changes have brought on the maritime side in terms of efficiency and fuel efficiency - we have seen some of those effects as they roll into the marine terminals in terms of berth utilization (Dan alluded to that). I would like to focus a little bit more on the land side of the facilities and talk about some of the impacts we are seeing on marine terminals and port facilities.
I have an analytical example to work through that illustrates the numeric impact of these vessels' operations on the ports and I want to talk about problems associated with volumes of container movement, dimensions of the ship, the commercial environment in which we're working, and problems of finance that the ports and terminal operators are facing.
My simple analytical example depends upon simulation models we use to model terminal storage inventory. I present three cases each of them has the same weekly volume. The first case has three ships in one week and 1,000 lifts per call. The second case puts that into two ships per week at 1,500 lifts per call, and the third case puts it into a single large vessel at 3,000 lifts in a single call. These are moderate lift volumes but they are similar to what you might see in the port of New York. They have the same annual volume of 156,000 lifts for this vessel deployment. I have set the maximum call duration of two working days, assumed the gates are open seven days, and used US West Coast values for container storage dwell times and the mixture of imports and exports and so forth.
This first chart shows the simulated inventory over a four-week period of time from weeks 16 through week 19 of the simulation. Each curve shows the time varying demand on container storage area - which is the size of a container yard consumed by the vessels' containers. The blue line with three peaks per week represents case one, three ships per week, and a maximum of under 19 acres consume. Case two was two calls per week with two bumps, if you will, that drives it up to 21 acres. Case three with a single call drives it up to 26 acres and again these are identical volumes per week, but different results being driven by peaking and by the way the different loads from different vessels superpose with one another. What we're seeing is, for the same volume, an 11% increase in case two, and a 37% increase in Case three, for storage area on the marine terminal.
The next slide deals not with storage area but with flow across the gate. It is essential in evaluating the impact on the port and regional road systems. Case One in blue shows a peak of 299 trucks per day, Case Two it jumps to 317, and in Case Three it jumps to 380. By themselves the flows are not terribly large but they illustrate the change in truck flow behavior in response to the mixture of vessel lift count and schedule and container storage dwell time and gate operating hours. Again, we see an increase in boundary flow for the same volume.
For the same volume consolidated into fewer calls, we're increasing the structure demand, increasing the storage area, and increasing boundary flow rates for both gate and truck moves and rail/train moves. We also see some changes on the waterside edge of the terminal to keep the same call duration, which is essential in determining the number of ships deployed into a rotating service. We would need to increase the number of ship to shore cranes deployed against the vessel. In Case One we used two cranes per ship, in Cased Two it was three, and in Case Three it was four cranes per ship. This can have an impact on the peak number of cranes required to be deployed in the terminal at the same time. Each crane is also supported by a fleet of yard equipment, each with its own emissions package and with its own labor deployment requirement.
I have a few slides that illustrate the evolution of dimensions with the classes of vessels. It shows what the trend has been and what the impact is on the port facilities for each dimension. The first one we talk about is the length of the vessel – Lee alluded to this - we are getting more containers in less length but the absolute length of the vessels has been increasing and is now in excess of 1,300 feet. We're having problems with loss of channel maneuverability and loss of the usability of vessel turning basins where the vessels maneuver. We have been seeing ships that are wider. Those wider ships have increased beam. Increased beam requires cranes with longer booms and when those booms are stowed, to protect the crane in storm wind conditions, those cranes are taller. A modern crane with the boom up in the storm stowed position is 450 feet tall. If you are anywhere near an airport, they will not like that.
The combination of vessel length and beam affects the amount of space they take up at the berth. Each vessel requires more and more berth length. It's now up to about 1,500 feet for very large vessels. It has plateaued, fortunately. Ships have been getting wider faster than they have beginning longer but we have seen a net reduction in the total number of assignable berths. The utilization has improved because the ships make better use of them. But the number of physical berths and the ability to schedule vessels for competing berths is becoming a problem.
Draft has not been as much of a problem because we went through a draft revolution when the ships went to post-Panamax. It seems to be stabilized in the 50-foot channel range. There are ports, especially river ports like Savannah, where dredging is extremely difficult because they are in a river and it is just more difficult to dredge out. I have a value here I call height that is not absolute height but it reflects the fact we are storing containers higher on the ship and this is driving a need for taller cranes and higher bridges and it is difficult to change bridges. The Bayonne Bridge and the Gerald Desmond Bridge are the two most recent changes that have been made. And between them, those two ports are spending over $4 billion to change those bridges to clear these ships.
The increase in height and length of the vessel combine to create a greater what we call sail area. We do not think them as having sails but a very large container has a sail area of about 6 acres. You put a 20-knot win on that 6-acre sail area, and you're going to need big tugs to hold the ship in place and prevent it from getting into trouble, and we have seen an increase in the demand for big tugs.
We have a number of dimensional problems that are driving the need for changes within the port. As Lee mentioned there has been shifting to alliances within the maritime industry. We used to have terminals that look like public terminals that serve multiple shipping lines. Then we became more dedicated where a single terminal will serve one major shipping line and a few third parties, but we are actually moving back toward a situation where each terminal may serve multiple shipping lines each with its own inland rail connections requiring multiple rail operators to serve each port and increasing the complexity of the sorting of the containers on the terminal which is in turn in some cases reducing density. In some cases, it's improving but in many cases, it is reducing density. Because there has been a shift to fewer alliances there has been something of a change in the power structure relationship between shipping lines and terminal operators and port authorities.
I want to talk about finance. How we pay for this. The shift to bigger ships, as we saw through our simple analytical example, is driving a need for more container storage area and we need more and bigger ship to shore cranes. Those ship to shore cranes are heavier and in some cases, we are having to rebuild wharves and in some cases, they have to become longer because there is not enough wharf space to hold two ships at once. We need more supporting equipment and some cases we're remodeling cranes. We need higher storage densities in the terminal which, in turn, increases the operating cost. We're having to dredge channels, making them wider and deeper and having to expand turning basins to make them long enough to turn ships around. We're having to change bridges and in some cases, we're having to buy new and more powerful tugs to hold the ships in place. We're having higher traffic impacts in the hinterland. The ones I highlighted in red I would consider hard constraints because they take time and a great deal of money resolve.
In terms of finance policy, what we're seeing is bigger ships mean higher terminal costs and in some cases, poorer terminal service for the same volume. Serving the bigger ships requires substantial investment in equipment and space for the same volume and for the same revenue. The ports are choking on bigger ships because these investments - capital investments with no increased revenue - are generating negative returns. They are scratching their head and saying, "do we want to make this investment and how do we pay for it?". This difficulty with the fundamental viability of the finance structure is making it difficult to sell these projects to public private partnerships. Public sources of financing are tolerant of low returns on investment but private investors are rather intolerant of low returns on investment. To a very large degree the public does not understand why this is their problem and why their port authority has to deal with this issue. This may be a temporary problem and will work itself out over a few years. But as a consultant, much of the work I'm doing is being driven by these trends and the struggles of the ports to adapt. Eventually it will work itself out, but for the moment we are dealing with a number of changes at a number of ports.
With that, I will turn this over to Anne.
Nicole Coene
Thank you. We will now have our last presentation of the day by being given by Anne Strauss-Weider
Anne Strauss-Weider
Thank you very much. We have talked about the vessels, we talked about the terminals. Now, we're going to go outside the gate and look at the topic from a community and supply chain perspective. First, background on our region as context. New Jersey is the most densely populated state in the country, and it has been that way for 40 years. The state is also within the most densely populated, affluent consumer markets in North America. We are a big demand/destination point for the goods coming in. Because of this situation, we're also a key distribution platform for North America and the world. The largest port on the East Coast, very robust rail and road network, Newark-Liberty International (10th largest in terms of air cargo), and very importantly our region has over 808 million square feet of industrial property as of the first quarter of 2017 with over 11 million square feet under construction. New Jersey, as a whole, probably has close to 1.1 billion square feet of industrial property.
Our agency is very involved with our partner organizations, the private sector, and the community with all aspects of freight. Whether it's through our committee meetings, or time in the field, the data we develop, the projects we undertake, or our involvement in various groups here. For example, we are a member of the Council for Port Performance. I want to highlight this organization. The Council was formed by the Port Authority of New York and New Jersey and New York Shipping Association and includes a full range of public and private sector organizations involved in all aspects of the supply chain and port operations. Among other key initiatives, the Council has been focused on optimizing operations at the port and keenly focused on prepping for the megaships coming in.
Some additional background on New Jersey to set the stage. We are the birthplace of containerization with Malcom Mclean and the Ideal X vessel in 1956 at Port Newark. Also, the State is the place where rail started - the New Jersey Railroad Company - and some of the first roadways. This means that we must adapt our 19th century, older infrastructure for 21st century needs.
A little background on our region from a maritime perspective. The orange on the left, Port Newark-Elizabeth, is the location of three major container terminals, An additional container terminal is located on Staten Island at Howland Hook and a fifth at Port Jersey – GCT Bayonne. GCT has been servicing the larger post-Panamax vessels for some time as this terminal was not constrained by the air draft issues of the Bayonne Bridge. Regarding the three container terminals in Port Newark/Elizabeth and the one in Howland Hook, the channels have been deepened and at the end of June 2017, the air draft clearance project (the raising of the Bayonne Bridge roadway) will be completed to the point where the megaships can come to all the terminals. Further, simulations has been undertaken by the Port Authority (and there's a good write up on this on the Port Authority website on the Bayonne Bridge) indicating what the harbor can handle the 14,000 and 18,000 TEU vessels and a working group of the pilots is focusing on actual operations now.
Let's go to the supply chain and put the megaships in perspective. What keeps the supply chain professionals up at night should be keeping us up at night – that was the question that I posed to a group of high level private sector supply chain executives in June 2016. One of the key responses was the rapidly evolving retail environment where not only do we want our goods available all the time but we want free shipping. We want inexpensive shipping which puts a lot of pressure on the transportation providers to reduce those costs which goes to Lee's presentation and how we reduce that per-slot cost for us. Night time concerns also include looking at temperature controlled supply chains and understanding what is needed for a 24/7 supply chain. We must deal with inconsistent travel time and bunching and pinch points. Clearly, any additional peaking associated with megaships can be that kind of bunch point that we have to consider in optimizing for what the supply chain needs.
Now let's talk about the communities. Ports aren't in a vacuum; they are surrounded by communities. This is a picture of Port Jersey and that is where GTC Bayonne is located and you can see all the residential in that immediate area as well. What are the considerations from a community perspective? As a good neighbor, it is to provide economic opportunities in terms of jobs and tax tables. There are safety and quality of life concerns. There are concerns about the environment. Part of that concern could be seen with extensive the truck traffic which occurred some time ago at GTC Bayonne with work simultaneously occurring at the Turnpike interchange servicing the area and the construction work on the Bayonne Bridge. At one point, the truck traffic led to very large backups reported in national papers. Something that could be a concern when we're talking about megaships. GTC Bayonne implemented this year, with a great deal of cooperation with trucking community, a truck appointment system to alleviate the morning congestion. The implementation was assisted by the fact that they are the most automated terminal to the harbor. So they are able to know once the truck appointments were made, what containers to tell the automated system to pull the night before. So, there is now a truck appointment system in effect for that terminal from six to 10 AM daily.
It's not just about the jobs at the waterfront. The vast majority of jobs are created off the waterfront now as part of the distribution platform and production platform. Here are just a couple examples from our region - to the far left that is interchange 8A, an address even known when I have been overseas in Asia. That location alone in New Jersey has over 77,000,000 ft.2 of industrial property. To give you some idea of the jobs involved, the picture in the middle is an Amazon fulfillment center in Mercer County New Jersey. You will note a great parking lot out front and that is because it is an e-commerce fulfillment center, the facility employs three times the number of workers as a typical distribution center. A typical distribution center has maybe .3 employees per 1,000 ft.2 An e-commerce facility the facility, one employee per 1,000 and during peak periods, 3 employees per 1,000 square feet, which is equivalent to an office building. Tremendous job opportunity of all sorts.
That is not just in distribution centers. The picture on the bottom right is Firmenich, which is an international fragrance and flavoring company. They are located in Newark, New Jersey adjacent to the port, and 70% of their product is exported. Their products are in much of the food you eat and other things you have used throughout the day. On the top right is Fratelli-Baretta which is an Italian meat processing facility. That is their brand-new operation in Morris County, New Jersey and they export both through the port and by air. So again, ports were formed at the earliest point in settlements (and we are going way back to ancient history) as centers of commerce and trade and opportunity. So, as we talk about an international environment, this is a mega opportunity as we go with the larger vessels and the connective tissue.
I talked about workforce opportunities. This is a chart put together by the New Jersey Department of Labor illustrating all of the different types of occupations needed in transportation, logistics, and distribution. It includes welding and blue-collar jobs, all the way up to logisticians and individuals with tremendous computer training for warehouse management and other logistics systems. Not only do we need individuals who are trained -because there are tremendous opportunities with positions open right now - we have to link the workforce to these new locations and jobs, something our agency has been working on through our transportation management associations (TMAs) to create that new last mile connectivity. In terms of workforce opportunities, awareness can start as early as eighth grade with beginning to look at transportation logistics and distribution as another opportunity for a successful and rewarding career. As has been pointed out before with megaships, mega peaking requires mega nodes to handle inbound and outbound freight. Currently the port of New York and New Jersey is 85% truck on inbound and outbound and about 15% by rail. The rail is anticipated to grow with the megaships because of the larger hinterland that is covered. The reason that the trucking percent is so high is again because of our large local consumer market and in many respects it is also the fact that we're capturing all that in the distribution platform and all the jobs associated there. But we do have to think about environmental consideration when you have that level of traffic. Part of it is optimizing all the modes. The picture on the far right is the express rail facilities built for GTC Bayonne, again the most automated terminal and the one with the truck appointment system, to support additional rail utilization. It is also looking to our water and short sea shipping opportunities and other ways to move cargo coming in and out, because when the megaships are coming in, it may not be serving as many ports and the cargo is distributed to other ports coast-wide. It's looking at environmental initiatives, this is something our agency is involved with grants for truck and port terminal equipment programs that reduced emissions and even retrofitting some of the harbor vessels themselves with low emission engines and technology.
When our roundtable of supply chain professionals from the private sector got together, we asked them what they saw as strengths from the region and I think we have to look very positively at the megaships in terms of what they offer to communities such as ours. We know they will be coming here because the demand is here for product. We know we have extensive freight infrastructure we can optimize. In fact, I've included a picture here because it has every single freight mode in parallel with port and pipeline in turnpikes and New York Liberty International Airport. Most importantly, I think this is highlighted by the Council for Performance in the work we and others do, is a willingness to work together on issues proactively. In fact, the Council for Performance created a work force development team here that has involved schools, mayors, and the private sector; looking at not only the opportunities but ensuring you have the workforce. If you look at industrial site selection, one of the top three considerations is having a sufficient workforce. I think this is an opportunity to think positively about what megaships can mean.
With that, I thank you and I will turn it back over to Nicole.
Nicole Coene
Thank you, Anne. We're going to go ahead and start up the question and answer session right now. We have had a lot of chatter in the chat pod about rails. I do not know if our presenters have had a chance to read all the comments that have come in.
I will start out with a comment from Howie Mann, "Truck vs. rail, much less impact on rail. You can always add railcars with little change to locomotives at all but much larger impact with a greater number of trucks". That was followed up by a comment from Thomas Noyes adding, additional rails container cars to accommodate additional container offload demand is more efficient than adding more trucks but the rail infrastructure: sufficient length, rail side, mainlining, needs to be in place. Class I railroads are moving toward longer trains and sometimes in the 8,000 to 10,000-foot length. Port-side rail infrastructure is not adequate to accommodate these longer supersize trains. There are land-side impacts as a result of this. I'm not sure how big an issue this is for Southern California, but inadequate rail infrastructure is an issue for Pacific northwest ports, especially relative to the Vancouver, British Columbia ports. What any of the presenters like to weigh in on this point?"
Tom Ward
This is Tom Ward. The fundamental challenge in the ports is that rail geometry and port geometry are fundamentally incompatible with one another. A large marine terminal might be 3,000 to 4,000 feet long. An average on-dock intermodal rail yard in the Port of Long Beach has tracks on the order of 2,500 feet long. So, you take an 8,000-foot-long train, it will take three more tracks with all of the switching attendant upon that to get it in there. If you visually were to lay a train down next to a ship, in one 40-foot length of ship it may have 400 containers. In the same length of train, it might have two. There's a fundamental geometric mismatch between trains and ships. The greater complexity comes from the diversity of origins and destinations. A train may hold containers going to multiple overseas destinations that go to very different locations on any ship and may go to multiple ships calling on a port and getting those sorted - they may actually be going to multiple terminals within the same port. Getting those trains broken up and sorted out between their trans-con move and their port move is a major logistical headache for a port, especially in a crowded region with limited track resources. This logistics are a major issue for every port. Dan Smith and I are both working in the Port of Long Beach right now and it is a challenge. The geometry is a challenge, the right-of-way is a challenge, the operating tempos of the marine terminals are a challenge, and it has been a continuous effort to get intermodal fractions to increase but they logistical challenges are quite enormous and quite difficult to resolve.
Anne Strauss-Weider
Tom, let me add on to that. I pulled the map I showed before, I think it highlights one approach to it. Adjacent to the New Jersey Turnpike, in a 2-mile-long yard, all of the on-dock express rail, particular those in the Port of Newark-Elizabeth that feed into this yard which is long enough to set up a full-length train. So, it can go from there to Chicago and other locations. In addition to having the on-dock rail, this may be fairly unique to have the length of track and yard set up for those kinds of trains. So, it is a consideration and again this is where the agencies and the public and private sectors need to work together - even looking at something like the new express rail at GTC Bayonne, and looking at our 19th century infrastructure and trying to think through what additional right-of-way capacity has to be put in place to accommodate that many trains as well as the difference in origins and destinations. It can take place and it is not inexpensive. I believe the port authority alone has spent over $650 million on the rail improvements. That does not include expenses the railroads in New Jersey and other organizations have spent as well to increase real right of way. But overall it is not just looking at rail and including that of a mode not just for long distance but also looking at shorter distance shuttle services. Those have been around for a while, even looking at Savannah to Atlanta. But they have been considered for New York New Jersey region to and from Harrisburg and Massachusetts and other locations as well.
Nicole Coene
Thank you. We will move to a question for Lee: "Has the emissions efficiency that was shown been adjusted for the emission efficiency of the newer and larger ships?"
Lee Kindberg
Thank you. There were a couple of questions that popped up related to that. The emissions efficiencies I was showing are actually based for each vessel on the actual fuel consumed by the vessel for a calendar year, the actual distance traveled by that vessel for the calendar year, and then nominal capacity of the ship. Yes, the fleet averages are then weighted averages of those vessel averages and those are definitely adjusted each year based on the actual performance of the vessel. You can go to the Clean Cargo website for trade lane averages for what those numbers look like. Someone did ask about the nominal versus actual capacity utilization and the Clean Cargo data is set up to use nominal capacity because the actual capacity utilization changes at every port. The complexity that would add becomes problematic and Clean Cargo did a study for about three years recently looking at nominal versus actual and the differences on a trade lane basis, but globally the difference was about 70% global average capacity utilization versus nominal.
Hopefully I hit several of your questions as I came through some of that information.
Nicole Coene
Thank you. If your questions were not covered go-ahead and type into the chat box. They were all kind of related. Martha, you had questions similar.
Lee Kindberg
There was also question from Bernadette about what "Edinburgh class" meant and I should have explained that. When we build a ship, we do not build one ship to a given set of plans. We may build 20 or more and all of the ships are basically identical. We call that a class of ships and we will give that class of ships a name. In this case, it was Edinburgh but it may typically be named for the first vessel of the class that was put into operation. Sometimes it is given in different name, like our Triple Es are one class, but often it's named for the first vessel of that class like the Emma Maersk that has seven sisters so there are eight vessels in that class.
Nicole Coene
Thank you. Abby wanted to follow up with her question regarding factoring in emissions due to highway congestion - do you do cargo peaking? She wanted to know if the lower emissions still held when you factored in highway congestion and cargo peaking.
Tom Ward
This is Tom and we are doing a combined emissions assessment for the Port of Long Beach that takes off from the StarCrest Clean Air Action Assessment and the larger ships have generally, if they are cold ironed (if they are plugged in) have reduced emissions and that is a major advance on the West Coast. Even without cold ironing there has been a general improvement. Lee pointed to some of the technological changes to improving things beyond cold ironing but the ships are a huge impact and anything you can do to a ship's emissions has a huge impact on the air shed. They are like the elephant in the living room when it comes to the air shed. So, the emission savings there are showing themselves to be a net method even when you take into account the peaking and the facts on the land side.
Nicole Coene
Thank you, Tom. Did anyone else want to weigh in?
Chip Millard
This is Chip Millard from the Freight Office sitting here with Nicole. Anne Strauss-Weider made a comment in the chat box with regard to the port of New Jersey site in terms of how it is developed and the need to operate and optimize operations. I think that is an excellent point and I think that is where a lot of issues can be addressed is really finding ways, if we do not have sufficient infrastructure on-site it's very difficult in many cases, to expand ports. They are often times hemmed in by other development. It is finding ways to optimize the operations of the ports. Stuff like cold ironing that was mentioned is a way to do that and I wanted to point out and mention the comment is an important point.
Lee Kindberg
This is Lee. We have seen practices and some new developing practices having to do with automated gates, peer pass, and appointment systems. Starting to see peel-off pile considerations and other new ways of handling this surge. But remember that surge may happen over four days on a West Coast port for example. The West Coast ports I think have been leading in some of these because in Southern California often a vessel may be unloaded entirely at one port rather than being unloaded and reloaded at each port coming down the East Coast. We really have some very different considerations out there.
Unknown Male Speaker
I see a couple of related customers from Jennifer Bennett and Russell Adise that are related to inland transfer and optimization of supply chains through inland rail ports and so forth. There have been some successes with inland rail ports the most notable is at Greer, South Carolina associated with Port Charleston. That one is a roaring port success mostly because the rail yard was built next to BMW, Michelin, Adidas and John Deere. So, they're seeing some efficiencies in moving container cargo back and forth between Greer and Charleston because there is a large industrial complex at the inland. It has been a successful move. Using inland ports as a sorting facility has been less successful because of the high cost of lifting containers on and off and to put in perspective a port charge for a container may be $350 total and intermodal rail charge for lifting a container on and off a train the port might be $75. The lift costs are rather high and you have to make the best of them. In terms of the supply chain optimization, I invite people to pay attention to what Long Beach has done. Long Beach and LA have been working in a collaborative fashion, overcoming some fairly substantial historical resistance I would say to have a joint supply chain optimization group that branches across all modes of transport: liner, terminal operator, trucker, railroad, and so forth to try and find and eliminate institutional and similar barriers between freight movements and to find ways to make them more efficient. We are seeing more inter-port collaboration. Seattle and Tacoma are collaborating. LA and Long Beach are collaborating. There is a growing movement to have a collaboration across multiple ports on the East Coast to share data and to allow optimization of the waterfront resource.
Unknown Male Speaker
I'd like to take the inland port question a little bit further. The long-haul movements are already dominated by rail. So, no one is trucking containers in LA/Long Beach and Chicago in any appreciable volume. In order to do the shorter movements like Greer, and the ones between Seattle and Portland, and so forth, all of those short haul intermodal operations should be subsidized in one fashion or another. Different strategies have been used to get those up and started because the distances are so short and because they transfer costs - as Tom mentioned - are so high, those operations do not make money for the railroads and in each of the cases someone has had to step in - usually the public - to prop up those operations financially so you can gain the congestion and emissions. Moving on a little bit to the vessels questions on the overall supply chain, one of the things that the growth in containerized shipping in general and specifically the surge associated with mega vessels have done is take the slack out of the system. It has put a premium on appointment systems such as the one Anne mentioned and which are becoming very common. All of the major west coast ports now have appointment systems. Scheduling and use of information and use of the pool off and dray off operations and every tool that is out there to regularize and manage and even out the flow, rather than relying on excess capacity which no longer exists.
Nicole Coene
Thank you. We have Russell on the phone.
Russell Adise
Thank you to all the presenters. I appreciate all of the points that everyone has made. The work the administration did last year on how to help ports find ways to optimize their operations and supply chains to alleviate pressure of mega vessels, that work is still continuing. I wanted to thank each of the presenters for the points they raised on that. I am interested in hearing more as we go on with the series on the mega vessel impacts, particularly as the vessels begin to reach the east coast. Even though they may be relatively limited right now they will grow and the lack of pressure on container capacity that has presented more of the Benjamin Franklin's from hitting the West Coast, I think it the slack will go away sooner or later as trade demand increases. I think this mega vessel impacts are going to be a major issue in the future and the more ports can look at these issues and how to optimize their existing operations, I think more will handle the trade flow and economic development. Does anyone have any questions?
Tom Ward
I have a comment and this is Tom Ward. To one of the very real constraints on the East Coast has been the Bayonne Bridge in New Jersey. The circulation pattern of ships on the East Coast tends to be: cross the Atlantic, hit Halifax, hit New York, hit Charleston or Norfolk, go down to Span or Jacksonville, maybe go down to Florida and come back. New York being the huge load center that it is if you cannot take a ship into New York you will not take it to East Coast because you have to go to New York. In a sense if you could not get into New York you would not take the ship to the rest of the East Coast but with the raising of the Bayonne Bridge the constraint is being lifted and it is a substantial increase in the size of the vessel, even if you take turning basins, and channels, and everything else. All of the other ports on the East Coast are looking at a sudden change from 8-9,000 or TEU limits which is the old limit to 14-16,000 TEU vessels which will be the new limit and they will appear suddenly as the liners start to deploy those vessels to take advantage of those economies scale. I know Halifax is doing that now and they have two bridges that are too short. Every port is working to overcome their individual issues and the changes are going to come rapidly.
Anne Strauss-Weider
You raised a good point. It's channel deepening. The Bayonne Bridge is open to the larger vessels at the end of June of this year. I will look to see if I can find and posted the simulations that were done last year at a large-scale facility in Maryland showing the 14,000s and 18,000s can navigate once the bridge has been raised. So, again moving forward there have been discussions, starting with the pilots on how you will handle 14,000s. That is just in our region in New York/New Jersey. I would assume other ports are similarly taking a proactive role and anticipating that there is going to be a change now. Everyone has been watching the bridge. It's done, it's up. Now the groups are figuring out what vessels are coming to the East Coast.
Unknown Male Speaker
Everyone is being proactive, but all of these engineering changes take years to implement. It is time and money and political will and return on investment and risk and all of that stuff. So, it is a complex financial and institutional issue at each port.
Unknown Male Speaker
One of the reasons we raise the issue of improving operational best practices was as a standby until the investment was able to kick in and until we could optimize supply chains and ports together, on a broad enough scale so the mega vessel impacts would ease a bit. But you're right. Anne is quite right. We are early in the process of handling a lot of these impacts. But they are coming and they are coming fast and the more we can do to help ease things until the infrastructure is on board, the better we will be able to handle that without major congestion.
Nicole Coene
Thank you everyone. Anne, did you have any further follow-up comments?
Anne Strauss-Weider
One of the considerations that comes up often in these conversations is "What about the rest of the supply chain?" I increased my gate hours, are distribution centers and other facilities going to be open? Many facilities if we're talking have 24/7 operations. A growing number of new facilities have more extensive secure truck parking, recognizing that sometimes it is easier for those vehicles to come off-peak. So, if they can deliver or pick up a containers or loads at off hours. The entire supply chain is trying to optimize again towards what we have told it to be: 24/7 and as low cost as possible. Also, this points out another reason why that full set of users involved in supply chain have to be involved in discussions about port operations.
Nicole Coene
Thank you, Anne. Backing up to a question that came in a little while ago: "Why has the public sector had to eat so much cost to serve vessels that truly bring economies of scale and savings to the vessel owners, but they do not have any major costs associated. In other words, do ships get bigger but the costs are in the infrastructure?" I would address that to all presenters.
Lee Kindberg
This is Lee and I will jump in first. If you look at the financial reports from all of the shipping industry you will find it is not going into our pockets. It is a matter of survival to a certain extent for us to be more energy and fuel efficient. Freight rates today versus freight rates prior to 2008 are significantly lower and we as consumers are certainly benefiting from it. The coffee I am sitting here drinking did not grow in North America and probably the shoes I wear and so forth. It all came over in one of those big boxes and as consumers we are benefiting from those reduced freight rates. But there is also definitely a market failure in terms of the distribution of costs across the supply chain.
Tom Ward
This is Tom. The last major revolution we had in ship sizes was in the introduction of Panamax vessels in the 1980s by American President Lines in the Pacific basin and they were serving seven container ports across the Pacific basin. Those were pretty much dedicated terminals. American President Lines was the primary carrier for each one. They built six new Panamax ships. For every dollar they spent on the new post-Panamax ships they spent $0.75 $0.80 buying new cranes across the pacific basin. I was a very young man designing container gantry cranes at the time and there were a lot of cranes on order by American President Lines all at once in seven different ports. That reflected the commercial relationship at the time. There was a large carrier with a large number of ships in a large role they were in and they could make that investment and it made perfectly good sense to do that. They needed the economy of scale but in order to achieve that they needed to make an investment. They also made investment on the land-side so the benefits would rebound to them. In the current shipping environment of alliances and terminals that are becoming more mixed-use and with the economic downturn we had and the wild gyrations in fuel rates that the shipping lines had to deal with, there has been not what you would call a lot of fat on the Line's side to make these additional investments. I think it has been to some degree a mismatch between the logistics portions on one side and the land side's sectors ability to respond on the other side with ports that are built out, with ports facing major environmental impact statement requirements. In one in terminal in Southern California in took 10 years to get a permit and the report had to be issued four times before it could be passed. So, the constraint on development is extremely high and the cost is high and the timeline is long. So, we have a fundamental mismatch between the speed with which a shipping line can make a new investment to obtain an economy of scale and that of a port authority or terminal operator to respond to that. It's time and it is money.
Eventually it will work itself out. Eventually, it will. The cash flow is sufficient that eventually it will work itself out. But it is difficult.
Nicole Coene
Thank you. There is another question and we are almost out of time so we will try to go quickly. I believe it was Tom Ward who did a good job of explaining the additional resources required (land, crane, etc.) with a bigger ship compared to the more frequent, smaller ships. With Chicago being a major destination or throughput for containers, does Chicago end up experiencing the same shortcoming on resources beyond the usual delays or are the seaside peaks somewhat watered-down by the time the freight hits the Midwest?
Unknown Male Speaker
There is some buffering, and the railroads themselves have made some very large investments in intermediate yards. CSW at North Baltimore BNSF at Memphis and other places that act as train interchange points that soften the blow. But Chicago is absolutely the mare's nest of trains. It takes a long time for trains to traverse Chicago. I think there was a program laid out about 8-10 years ago that identified something like $5 billion in track improvements in Chicago that could be done in order to get trains across the city faster. But it didn't get funded. That's a lot of money. There is some peaking. The trains are getting bigger and getting more difficult to handle. There are having more and more interface with commuter rail as they enter the cities. More and more interest in using existing rail infrastructure for transit rail in cities. Passenger rail tends to trump freight rail transport in terms of politics. So, the freight carriers are having more and more difficulty traversing urban areas with trains. So, it's a problem. The rail yards are spending money to buffer it. So, that helps.
Unknown Male Speaker
I would add a bit to that. Tom's mention of buffer there is critical. You can't take a surge from a single-vessel ship arrival. That can be spread over 4 days. The suggest that happen at international ports do need to buffer somewhere. Either at the marine terminal, an increasing number of off-terminal facilities, or on the railroad systems. So, by the time we get it to Chicago, we're looking at something that looks more like a steady stream. Now, BNSF and UP together have something like 90 trains leaving BLA basin every day. So, in fact they are turning it more into a steady stream. As Tom points out, however, the sheer volume of that stream has ratcheted up over the years. So, whether that volume arrives on a mega ship or three smaller ships, the sheer volume has to be helped through at Chicago.
Unknown Male Speaker
BNSF recently tried to get permission to build a new buffering yard in southern California and the ports failed in their effort to get a permit.
Anne Strauss-Weider
Was that on-dock rail?
Unknown Male Speaker
No, it was a SCIG yard. A major near-dock off dock buffering yard that would have allowed BNSF to sort and handle trains and to load and discharge. It was a major rail project that BNSF wanted to do and it appears that if it is not dead, it is mortally wounded due to environmental approval.
Unknown Male Speaker
It's pretty much dead and the issue was not so much environmental. BNSF jumped through every hoop there is to make that a zero emissions yard. The issue was neighborhood opposition. The irony was that yard would have been 4 miles from the ports. Instead, those containers will continue to be drayed 20 miles over the highly congested I-710 freeway instead. So, it's a loss for the region, but that illustrates the difficulty we have in reconciling the need for capacity, efficiency, and so forth to move any kinds of goods with the concerns of the communities.
Nicole Coene
Thank you everyone. We will wrap up with a question for Ann. If there's anyone who had a question that did not get addressed, if you would like to e-mail that to me (I'll put my address in the chat box) or type it in the chat box, I'll attempt to get responses from the presenters. Ann, Russel had a comment and wanted to possibly expand upon how to help work force adjust to these increasing demands.
Anne Strauss-Weider
Well, work force needs across the entire transportation and logistics and distribution industry have been profound for some time. Russel is one of the key Dept. of Commerce staff working on the Advisory Committee on Supply Chain Competitiveness and our Work Force Development Committee. It's a multi-pronged effort. One is encouraging individuals, even at a very young age, to consider careers in various aspects of production, distribution, and logistics as a viable career opportunity and a rewarding one. So, it's about image. Second is training. Really looking at programs as early as middle school or even younger, VOTEC schools, technical training schools, apprenticeships, community colleges and so forth. Third is talking to employers. What kinds of skills are they looking for? Working with them, creating those opportunities. Supply chain programs – most of the people who graduate Bachelor or Masters programs in supply chain management, they have jobs before they graduate. Mostly good paying ones. The fourth area, beyond work force development and getting the word out there and training people is making sure they can connect with those locations of opportunity from where they live to where they work. It is a full range from unskilled hourly to highly skilled technical. Some can afford cars, some cannot. So, it's a full range that we have to be aware of and again, if regions want to capture those opportunities, these are the kinds of thoughts. We do see this around this around the country. People recognize a number of jobs associated with these facilities. Certainly we've seen it in other sectors, most notably health care or pharma, where regions have really gone to bat to capture those jobs. So again, this is an opportunity on a national level.
Nicole Coene
Thank you, Ann. Thank you everyone for holding on for a little extra time today. The recorded version of this event will be available within the next few weeks on the Talking Freight website.
The next seminar will be held on June 21, 2017 and the topic is tentatively scheduled to be "EPA Ports Initiative." Registration is not yet available but I will send a notice out through the Freight Planning LISTSERV announcing when registration is open.
I encourage you to join the Freight Planning LISTSERV if you have not already done so.
Thank you to our presenters and to everyone attending. Please enjoy the rest of your day.
