Source: http://worldcityweb.com/home/MIA/publications/magazine/56/928/

(4-d) Miami Trade 2008 Q1 Report - Port vs Port

by Doreen Hemlock - June 2008


Could Port Everglades steal away the Port of Miamis longstanding titles as cargo gateway to the Americas and cruise capital of the world? Port of Miami Director Bill Johnson bellows at the suggestion. He insists the Miami seaport will keep its perch, thanks to aggressive marketing, new incentives for users, proposed dredging to 50 feet and plans for a $1 billion tunnel to skirt downtown traffic. The Port of Miami isnt relinquishing any titles, he said in a recent interview with WORLDCITY.

But industry leaders arent so sure. Port Everglades surpassed Miami last year as South Floridas busiest seaport for containerized cargo, the freight shipped in metal crates that is the most profitable part of the cargo business. Everglades also expects to rank tops in cruise passengers by 2012, when two new megaships from Royal Caribbean Cruises start calling.

Shipping lines say the Fort Lauderdale seaport offers numerous advantages over Miami. For starters, its right next to rail lines and highways, making it easy to send cargo containers onward. Its adjacent to an international airport, which eases transport for cruise passengers. It has plenty of acreage for growth. And it turns a profit: $14 million last year on revenue of $112.5 million.

Miamis seaport, in contrast, sits on a man-made island inside Biscayne Bay across a bridge off crowded downtown streets. Years of efforts to ease its congestion, including a recommendation to introduce round-the-clock operations to shift some truck traffic to nights, as in Los Angeles, have failed. And it reports a loss: $4.2 million last year on revenue of $92 million.

Much is at stake. The seaport is the second largest economic engine for Miami-Dade County, trailing only the airport. A 2005 study by The Four Gates Co. estimated the ports annual impact at more than $12 billion, mainly from cargo. That includes spinoffs in trucking, warehouses and other trade-related activities that support more than 81,000 jobs from stevedores to Customs brokers, lawyers to bankers.

Miami has been losing freight business for years, as Everglades grows. Volume fell nearly 10 percent to 7.8 million tons in fiscal year 2007, following a nearly 9 percent drop in 2006. That includes a 9 percent fall last year in containerized cargo to just under 900,000 TEUs or 20-foot trailer equivalents, the industry yardstick.

Port Everglades, meanwhile, posted a nearly 10 percent jump in container freight to almost 950,000 TEUS last fiscal year. Thats almost double its 2002 volume and its fifth straight year of gains. But Johnson, who took over as port director in Miami two years ago, is looking forward not back. Hes confident that freight volume will resume growth this year, as port executives get more aggressive in luring clients.

There are some encouraging signs. Denmark-based shipping line Maersk, the worlds largest, is consolidating freight from Everglades to Miami in a union with the powerful CMA line, headquartered in France. Johnson wants to sign a new contract with the Maersk team to allow other shipping companies to use its Miami freight terminal, too. That will open up competition to the oft-criticized Port of Miami Terminal Operating Co., POMTOC, long the only option at the Port of Miami for shippers without their own cargo depot. Competition should improve service for users, Johnson said.

Furthermore, Miami recently signed a new lease agreement with its largest client, shipping line Seaboard Marine, and is negotiating with POMTOC, its other major tenant. The long term accords up to 30 years provide large discounts based on cargo volume to encourage growth. Johnson says hes especially bullish on expansion by Miami-based Seaboard, which already handles about 40 percent of the ports total cargo and ranks as the largest carrier serving Central America.

But some users say the deals offer more immediate benefits to the seaport than to users. The leases would raise port rents and fees substantially, before the discounts for extra volume kick in.

Critics suggest the port boost its sagging finances by cutting dozens of the ports 400 staffers instead. POMTOC insiders also worry that Maersk with its global reach and deep pockets could siphon off POMTOCs existing business with bargain rates that the local firm could not afford to match.

The biggest payoff for the port, Johnson says, comes later as a result of its two mega-projects: dredging and the port tunnel. Congress last year authorized Miami to dredge its 42-foot channel to 50 feet. That would deepen the entry to allow the port to host the giant ships slated to pass through the Panama Canal after its $5.2 billion expansion set to be completed in 2014. Miami would be one of just three U.S. east coast ports at 50-feet, joining Norfolk,
Va. and New York.

Getting to 50-feet is a huge, huge advantage to be able to grow. Its why Maersk and CMA are growing in Miami now, he said. There are many ports in this country that would like that distinction.

But funding for the estimated $180 million dredging project has yet be finalized. The federal government could chip in about $72 million and state and local governments most of the rest if officials go along. Questions also remain about whether Miami can complete dredging on time and whether its the best place to dredge.

U.S. ports decry long delays by the U.S. Army Corps of Engineers and other U.S. agencies on dredging projects in a process some call archaic. Port of Tampa Director Richard Wainio said it can take anywhere from 15 to 40 years to get a U.S. seaport dredging project approved and completed.

The Panama Canal is moving forward with a whole new lane of locks across an entire country at warp speed, compared to what it takes to develop a single channel in the United States. Were falling further and further behind as a nation, said Wainio, who long worked at the Panama Canal. Some industry analysts say Port Everglades and the Port of Jacksonville may be better for dredging in Florida anyway, because they offer more land for expansion than Miami does.

But Johnson downplays the limits on land. He says the port has plenty of room to grow vertically. It now stacks cargo containers two or three high. But with new technologies, it can stack them five high as is already common in Shanghai, Singapore and Hong Kong, the worlds three top seaports. We can double or triple cargo on existing acreage, Johnson insisted.

More ambitious still is the proposed $1 billion port tunnel, slated to run 1.1 miles under Biscayne Bay. Its two huge tubes of two lanes each would link the port-island with Interstate 395, easing transit for more than 13,000 trucks, buses and cars that now drive through downtown Miami twice each day to enter and exit the port bridge, according to Port of Miami estimates.

Funding for the tunnel is to come about half from the state and half from county and city. The state also has pledged to cover maintenance costs. A toll could be considered in 2011. The agreements for the tunnel are in place. Its a done deal, said Johnson, adding that the dredging-tunnel combo will mean many more tons of goods coming into the port on megafreighters and leaving speedily by truck for distribution to South Florida and areas north.

Those who think we dont need a tunnel have their heads buried in the sand, Johnson said. Without a tunnel, when the Panama Canal expansion opens, we stagnate. With a tunnel, we create tens of thousands of good-paying jobs. Jose Perez Jones, senior vice president at Seaboard Marine concurs: Without a tunnel, the Port of Miami is in real trouble.

But questions remain over the tunnels hefty $1 billion price tag, especially when the State faces a budget crunch and when freight growth at Miami is hardly assured. Miami has already lost its prowess in the business of transferring cargo from one ship to another, especially for goods bound for Central and South America. Panama has won out, thanks to privatization of its ports in the 1990s. Panama now targets trans-shipment from the soaring number of freighters that carry goods from Asia aimed for Latin American ports that are closer to Panama than Miami. Today, Panama ports handle more container freight than all South Florida seaports combined.

That loss of trans-shipment business has hit Miami hard. Trans-shipment fell from 23 percent of Miamis freight business to 2 percent, Johnson said. The big drop came after the September 2001 attacks, when new U.S. security rules made it tougher to trans-ship through U.S. ports.

Turnaround times lengthened and port costs rose. Johnson says Miami is working with U.S. agencies to cut processing times and now offers discounts for trans-shipping. He aims to revive trans-shipment to 8 percent of freight business, even as competition grows from Dominican Republic, Jamaica, the Bahamas and other nearby Caribbean nations. Ive got the best tariff rate for trans-shipment on the U.S. East Coast. I can almost go toe-to-toe with what it costs someone in Kingston, Jamaica, Johnson boasted.

Even if Miami achieves its cargo goals, there remains the challenge of cruise business. Miami ranks tops globally in cruise passengers, with nearly 3.8 million last year, off slightly from its 2003 peak. But Everglades is catching up, swaying Royal Caribbean to base its two planned megaships there starting 2012.

Johnson said hes lured expansions by Norwegian Cruise Line and others to ensure Miamis lead. But competition is sure to rise. Said Port Everglades Director Phil Allen: If it floats, were after it.