Stronger Case For Regional Collaboration

For several decades, Caribbean ports have talked around the need for regional collaboration in an effort to bolster their ability to compete in an increasingly competitive shipping environment.

While these discussions have resulted in little real action, developments particularly at competing ports in the United States are presenting opportunities for the Caribbean to leverage our collective advantages in response to the cries of shipping lines facing mounting challenges at some of their current ports of call.

Port congestion has become the Achilles’ heel of US West Coast ports over the last six months, as they struggle to counter the growth of the All Water Route via the Panama Canal which, as expected, is bringing greater volumes from G6 Alliance members.

There have been reports of delays of up to three weeks, heightened by unstable labor relations and the unreliability of critical support from providers of trucking services.

Some are comparing the current situation with the lockout in 2002 of US West Coast port workers amid contentious contract negotiations – some of the darkest days in their recent history.

Volatility

Chris Lytle, executive director of the Port of Oakland, has said that shippers on the US West Coast are the unhappiest he has seen them since the 2002 timeframe. “I hear every day cargo owners threatening to minimize their use of West Coast ports,” Lytle was d as saying in a JOC online release.

This increasing volatility has resulted in the announcement of a port congestion surcharge, in November, by major lines including MSC, CMA CGM and Zim, who serve the US East, West and Gulf Coast trade. The fees, averaging US$ 800 per 20 ft container and US$ 1,000 per 40 ft container, are adding to the frustration of shippers who are already reeling from the effects of reduced productivity and costly delays.

As the Caribbean focuses on its own infrastructure and capacity strengthening, it is critical that we are alert to the opportunities arising in our market, especially where our competitors’ limitations are among our strongest value propositions.

With an expanded Panama Canal as the centerpiece of our strategy, and the widening gaps in the US East-West Coast trade, the benefits of collaboration among ports in the Caribbean should become increasingly attractive to both industry regulators and terminal operators. We have the collective capacity to handle current and expected volumes efficiently; and ports in the Caribbean have a long history of stable industrial relations with employers and unions at regional ports, for example Cartagena and Kingston, signing progressive contracts that favor growth.

Operating Costs

With complex alliance structures and mergers, such as the deal completed in December by Hapag-Lloyd and Chile’s Compañía Sud Americana de Vapores (CSAV) being the order of the day as shipping lines seek to reduce their operating costs to match lowering freight rates, we in the Caribbean must contribute to this effort by increasing our own efficiencies and, as a consequence, keep the cost of doing business with us at attractive levels.

Some analysts are contending that the recent falls in oil prices and the resulting reductions in the cost of bunker fuel will be passed on to customers in an unsustainable manner that will ultimately add more pressure to the trade. Shipping lines will run even leaner operations and in turn demand lower rates from terminals as they struggle to maintain profitability.

There is, indeed, a strong case for our collaboration, one which we must recognize and act upon, against the reality that this joint approach has the potential to increase the region’s competitiveness as a shipping destination and place us finally ahead of some of our wealthier competitors in the United States.

Let me also use this opportunity to commend Barbados Port Inc on their recent announcement of plans to develop an incentive program geared at rewarding vessels based on their efficiency ratings. This is an important step in environmental sustainability and towards reducing the carbon footprint of the shipping industry.

The time has come for ports in the Caribbean to join the global movement and proactively tackle environmental issues.

As a body, the Caribbean Shipping Association continues to bolster its contribution to the shipping industry and its members in training development, advocacy and networking. Although our challenges are great, our members can be assured of our commitment and determination to this mission in the year ahead.

Isaac Newton said: ‘If I have seen farther than others, it is because I was standing on the shoulders of giants.’ Let us build on the CSA’s rich and distinguished history and combine our efforts at heralding positive change in our region’s future.

I wish you a happy and productive 2015.
 

Grantley Stephenson
President, Caribbean Shipping Association