Shipping alliances making their way to Charleston even as they draw scrutiny from federal legislators
The Port of Charleston this week welcomes the largest container vessel to visit the East Coast, a symbolic reminder that the “big ship era” the State Ports Authority has spent years and more than $1 billion to prepare for has finally arrived.
But while local port leaders see the so-called New Panamax class of ships like the COSCO Development — scheduled to dock Saturday at Wando Welch Terminal in Mount Pleasant — as the future of commerce, Congress is trying to rein in the three major shipping alliances that operate the vessels.
Legislators said last week that the alliances, which handle 90 percent of all containerized cargo that moves around the globe, wield too much power when it comes to the prices that U.S. terminal operators, tugboat companies, stevedores and others get for their services. They want to overhaul the Shipping Act of 1984 to prevent what some in the maritime industry are calling blatant anti-trust violations by shipping lines colluding to drive down prices.
Shipping lines “are basically ganging up and forming these little groups to where we have almost no competition whatsoever,” Duncan Hunter, a California Republican, said during a subcommittee hearing Wednesday on Coast Guard and maritime transportation issues.
Thomas Allegretti, president and CEO of the American Waterways Operators, told legislators the alliances are “an existential threat to the health and viability” of the U.S. maritime industry.
The shipping act will be revised in coming weeks to give the Federal Maritime Commission more power to prevent anti-trust activity, said U.S. Rep. John Garamendi, a Democrat from California.
The shipping cooperatives — called the 2M, Ocean and THE Alliance — currently have limited exemption from anti-trust laws, and the commission’s hands are tied when U.S. businesses file complaints.
“Bottom line on all of this is the law is not up to date with the realities of the industry as it exists today,” Garamendi said. “There is no doubt in my mind the current law … has to be changed.”
Jim Newsome, president and CEO of the State Ports Authority, says there is still plenty of competition within the industry. He hopes to raise rates charged to shipping lines as they gain more stability following a tumultuous 2016, when operators lost a combined $10 billion and one vessel owner was liquidated in bankruptcy court.
John Butler, president and CEO of the World Shipping Council, told legislators the alliances are part of the industry’s move toward greater efficiency.
“Sharing vessels allows carriers to serve more ports worldwide, which improves choices for shipper customers and increases competition,” Butler said.
Still, it’s not entirely certain how well the alliances — made up of formerly fierce competitors — will cooperate in the new maritime landscape and what impact any changes to the shipping act might have on their operations.
“We’re all watching to see how the mega-alliance deployments happen, and that creates a bit of uncertainty in how seamlessly they are able to transition from old to new,” Newsome said.
The COSCO Development marks the first visit from what will be a weekly service at the Port of Charleston by Ocean Alliance vessels carrying up to 13,000 cargo boxes. Newsome expects the 2M alliance will start a weekly service with a similar-sized ship by the end of this year.
The additional vessel calls might come sooner now that a project to raise the Bayonne Bridge in New Jersey will be finished by June 30, months ahead of schedule. The taller bridge will allow the alliances’ biggest vessels to call on the Port of New York and New Jersey, and shipping lines might increase service to the East Coast as a result.
All told, Newsome expects 75 percent of the container ships calling on the Port of Charleston in coming months will be in the New Panamax class — a reference to vessels that can fit through the Panama Canal’s new locks but not the older ones.
That growth mirrors an increase in big ship sailings through the canal. To date, more than 1,200 New Panamax ships have made their way through the expanded waterway since last year. That’s an average of 5.9 vessels per day, nearly double the three daily transits initially forecasted for the expanded canal’s first year of operation.
“The arrival of the COSCO Development marks a new era,” Newsome said. “Seeing a 13,000 (cargo container) vessel in our harbor is a tangible reflection that our vision and capital investments to be big-ship ready are absolutely critical.”
The investments include a plan to dredge Charleston Harbor to 52 feet, giving it the East Coast’s deepest navigation channel. The plan has been approved by Congress and work can begin once federal money is set aside for the $509 million project, which already has $300 million in state funds in the bank.
The dredging will complement a $762 million container terminal under construction on the former Navy Base in North Charleston.
It’s all designed to make Charleston the port of choice for big, heavy ships taking on their final export loads before heading overseas. The extra draft a deeper harbor provides lets container ships export 800 to 1,000 additional cargo boxes if the Port of Charleston is their last stop along the East Coast.
“Most of the new manufacturing is along the Gulf Coast and in the Southeast, and that’s where I think we’re going to grow in the next five years — the manufacturing export side,” Newsome said.
Meanwhile, legislators will grapple with a shipping act that they say doesn’t adequately protect American businesses in the big ship era.
“The law makes it so that you look more at the shippers, not the tugboats and not the port or terminal operators,” Hunter, the California Republican, told Michael Khouri, acting chairman of the Federal Maritime Commission, which enforces the shipping act. “So, right now, you’re not protecting the American interest because the only guys that are shipping are foreign entities …”
“Something is wrong here,” Garamendi, the California Congresssman said, adding he wants to move quickly to “set up a balance that would create competition and eliminate collusion.”
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Source: Post and Courier