- Import and export growth trends;
- North American ports survey;
- Mapping out old and new shipping routes;
- Growth in the south and Mexico;
- Infrastructure developments;
- Future risks and rewards.
Significant growth for both vehicle imports and exports continues throughout North American ports. The numbers and trends are in this annual port survey of the region
The North American vehicle trade has been growing strongly as US sales recover and production grows. With the expected rise in exports out of Mexico, there could be a shift in import volume and the port network, especially if more carmakers turn to short-sea shipping between the US and Mexico. At the same time, growth in production from the US southeast, as well as exports from both US and transplant brands – especially the Japanese – could prompt further changes to the region’s sea trade for vehicles.
The importance of Mexico is already evident by the volume at its main ports. The leading North American port for new vehicle imports and exports in 2012 was once again Veracruz, on Mexico’s east coast, where volumes grew more than 16% to nearly 876,000 units, including 689,000 exports. Volumes at Lázaro Cárdenas, the second largest Mexican port, grew more than 30%, and the port is primed for further expansion. However, with big customers planning to export more from Mexico, including the Volkswagen Group, Honda and Mazda, there are questions over whether these ports will have the capacity to handle a large increase in volumes.
Finished Vehicle Logistics’ annual port survey reveals growth almost across the board at ports that participated in the survey. Out of 22 ports reporting figures, overall volume was up 21.9% in 2012. A stronger US sales market, including recovery among Japanese carmakers and growing German luxury car sales, led to 23.5% growth in imports in our survey. Exports were also strong, rising more than 18%.
Toyota is one of the most important carmakers for vehicle trade to, and increasingly from, North America. The carmaker uses the Californian ports of Benicia (which did not report figures this year) and Long Beach, along with Jacksonville, Newark(New York/New Jersey) and Lázaro Cárdenas in Mexico.
In Canada, Toyota also uses the ports of Vancouver and, beginning this past May, Halifax to import the Yaris model built in France. These vehicles will also be imported through the ports of Newark, Jacksonville, and Long Beach, according to Brian Mason, national manager, strategic planning and communications at Toyota Logistics Services.
While Toyota’s imported volume to North America is expected to decline somewhat as it increases local production, its exports are expected to grow strongly.
Last year, exports from the US rose 45% to 124,000 units. Toyota moved exports from the ports of San Diego, Long Beach, Port Hueneme, Benicia, Baltimore, Brunswick and Port Everglades, Florida.
Toyota has connected to new markets from the US, including South Korea from Port Hueneme, as well as Russia from the ports of Brunswick and Benicia. This year, it begins shipping from Baltimore to Australia, New Zealand, and Israel. “Our largest growth has been at the port of Baltimore. From there, we already export to the Middle East and Europe,” reveals Mason.
Several ports have benefited from the export growth out of the US, including Baltimore, where exports rose 20%. Rick Powers, director of marketing, says Japan-based manufacturers increased exports last year because of the strong yen. Baltimore, which was again the largest US port for new vehicles, also points to strong trading to the Middle East, Australia, New Zealand and Europe.
New York and New Jersey, North America’s fifth-largest vehicle port, has also grown its car exports, led by General Motors, Ford and Japanese OEMs, according to Brian Kobza, industry relations manager, ocean carrier, labour, autos and rail. “We expect this export trend to continue because of our port’s numerous ocean carrier routes.”
The export volumes are large in some cases, including nearly 320,700 units from Baltimore (driven by the Detroit three and Toyota), 260,000 from Jacksonville, more than 200,000 vehicles at the port of Charleston (mainly BMWs), 118,000 from Brunswick and nearly 81,000 from Gray’s Harbor (mainly Chryslers). In other cases the exports make up small but important incremental volume at ports. Portland exported more than 4,000 last year, including Ford vehicles going to South Korea. The port of Los Angeles exported 7,000 vehicles.
At Wallenius Wilhelmsen Logistics Americas, Richard Heintzelman, executive vice-president and head of commercial, says that exports from North America to northern Europe and Russia have increased, although Europe as a whole is still weak. Heintzelman notes that higher production volume in North America will lead to shifts in the port network and shipping flows. “Increased auto production in the US and Mexico means that export volumes will increase across East Coast ports. For example, we are seeing fewer imports to North America and increased exports from North America to Asian destinations,” he says.
Heintzelman adds that the growth will lead to some capacity issues. He gives the example of the port of Jacksonville, where high volumes have led to space constraints, leading some shipping lines to use Brunswick. Both ports recorded rises of more than 20%, however.
The survey found that imports to North America are still two-and-a-half times higher in volume than exports, and four times higher at US and Canadian ports (Mexico, by contrast, is about 2:1 in favour of exports). The ports handling mostly imports saw big increases, particularly Houston, which saw a jump of 143%, driven by Volkswagen imports which it receives by sea and by rail from Mexico.
Imports at the port of Richmond grew by 70% to reach 187,000 units. The port’s biggest customer is Honda, but Subaru has also switched some imports from the port of Vancouver, Washington to Richmond, which now serves part of California and southwestern states for the carmaker, according to CEO Jim Matzorkis.
Imports were strong at other California ports, particularly in southern California. Long Beach grew more than 50% on recovering Toyota imports, while the port of San Diego saw imports rise more than 17.5%. Hueneme, meanwhile, increased its imports by 19%. Will Berg, director of marketing and public information, says that volumes increased for Toyota, Nissan, Honda, and General Motors, among others.
At Portland, import volume rose nearly 20% to 280,000 units. Sebastian Degens, general manager, marine business development, says that the increase followed the recovery of imports from the 2011 earthquake in Japan as well as higher volumes from South Korea.
Imports to Baltimore increased nearly 18% and should rise again this year. “We received our first imports from Fiat in Europe [this year],” says Powers, referring to the Fiat 500L built in Serbia.
Ocean shipping routes
Ocean carriers serve a broad network of North American ports. WWL serves Halifax, New York/New Jersey, Baltimore, Newport News, Savannah, Brunswick and Jacksonville on theeast coast, Galveston, Texas and Veracruz in the Gulf, and Port Hueneme, Tacoma, and Vancouver, Canada on the west coast. It also provides port processing and inland distribution, among other services. According to Steinar Lovdal, head of region, Americas at Höegh Autoliners, the shipping line calls at Halifax, Brunswick, Newport News, Virginia, Philadelphia, New York and Jacksonville. On the east coast, it exports from New York, Baltimore, Wilmington, Delaware, Jacksonville and Galveston.
Even before the new plants come online in Mexico, much of the strongest growth in port activity has already been in the southern United States and Mexico. Jacksonville, whose volume reached nearly 550,000 units in 2012, grew 27% compared to 2011. Jacksonville’s largest flow last year was Toyota imports, which exceeded 110,000 units, but there were also strong exports from Nissan. Other OEMs whose volumes exceeded 50,000 units at the port include Ford, General Motors and Mazda.
Volkswagen Group of America is an important player in southern US and Mexican ports, as it imports vehicles from Europe, exports from Mexico to the US and other markets, as well as from its Chattanooga plant in Tennessee. In 2016, it will open an Audi plant near to its current plant in Puebla, which will make its export flows from Mexico even more significant.
Volkswagen Group vehicles from Europe move on dedicated, chartered vessels from the port of Emden to Halifax, Davisville, Brunswick, Houston, and Veracruz. From Veracruz, Volkswagen exports vehicles to Brunswick, Davisville and Europe. According to Joerg Schnackenberg, who had been general manager of vehicle logistics before recently taking on a new assignment in Germany, Volkswagen uses a different vessel service to call at the port of San Diego and it also moves by rail from its plant in Puebla, Mexico to San Diego and Houston.
For exports from its Chattanooga plant, Volkswagen uses the ports of Brunswick for South Korea and Jacksonville for the Arabian Gulf. Schnackenberg says that Volkswagen’s highest port growth has been in San Diego and Brunswick because of its reallocation of certain dealers and service areas to these ports.Schnackenberg says Volkswagen is experiencing higher demand for faster production of a much higher volume and at the same time a demand for more accuracy in meeting processing and installation targets. “We are also seeing an increase in vessel size, which reduces port velocity,” says Schnackenberg.
Mercedes-Benz USA uses the port of Baltimore for 40% of its vehicle imports, while Brunswick and Long Beach each handle 30%, according to the OEM’s James Kasamis, manager, national import and domestic logistics. For exports from its plant in Tuscaloosa, Alabama, it uses Brunswick for 80% of its volume, with the rest moving through the ports of Jacksonville and Savannah, Georgia. Currently, Mercedes-Benz’s imports account for 70% of its port throughput, which Kasamis says are growing slightly faster than exports. Beginning next year, however, the carmaker will build the C-Class series in the US and end imports of the car from South Africa, which may reduce overall imports.
More short-sea shipping out of Mexico?
In 2015, Toyota plans to build vehicles at Mazda’s upcoming plant in Salamanca, which could use short-sea or rail transport. Toyota’s Mason wonders whether short-sea shipping could become viable in both directions between the US and Mexico. Alberto Cabrera, generalmanager and director of trade development and marketing at the port of Jacksonville, believes rail will not be able to handle all the expected volume. “Rail will not have the capacity to handle these volumes; it is having a difficult time now,” he says.
Shipping lines have already started to plan more routes between Mexico and US ports. MOL will serve Honda from its new plant in Celaya next year, as the carmaker exports to Brunswick, Baltimore and Davisville from Veracruz on the east coast, and San Diego, Richmond and Portland from Lázaro Cárdenas on the west coast. WWL has also just announced a new service starting later this year that will call every 12 days out of Veracruz to the US east coast.
Höegh currently exports from Veracruz to Jacksonville and Baltimore as legs on a loop that go to Europe and the Middle East. Its largest customers are Nissan, Ford, and Volkswagen.
“We ship from Mexico to the US twice monthly, and recently increased our sailings, while we are also replacing this route with bigger vessels,” says Höegh’s Lovdal. “Within 12 to 18 months, we should experience faster growth.”
Rick Powers says a lack of rail capacity has increased some flows from Mexico into east coast ports, such as Baltimore. “From Veracruz, we receive vehicles for GM, Nissan, and Ford every two to three weeks, and irregularly as well,” says Powers. “We predict a steady flow this year, while next year there may be a big increase.”
The third largest port in North America, Brunswick, also handles Volkswagen imports from Mexico through ocean carriers K-Line and MOL. “We can also handle vehicles by rail from Mexico. Volkswagen has used both modes of transportation,” says Bill Jakubsen, global manager ro-ro, bulk and general cargo at the Georgia Ports Authority. Jakubsen projects a throughput of 650,000 units for its fiscal year ending in June 2014, which will include higher volumes from Mexico during the first half of next year.
Our largest export growth has been at the port of Baltimore. From there, we already export to the Middle East and Europe – Brian Mason, Toyota Logistics Services
Currently, WWL ships high-and-heavy equipment and project equipment from Veracruz to the US and South America. “Over the past ten years, shippers have consolidated port calls on the west coast of Mexico from multiple ports – including Mazatlan, Manzanillo, and Acapulco – in favour of Lázaro Cárdenas. Moreover, with capacity restrictions at the port of Veracruz, OEMs and shipping lines are looking more at Lázaro Cárdenas. The port plans to develop a new specialised auto terminal commencing later this year,” comments Heintzelman.
Although there was no official comment from Lázaro Cárdenas or terminal operators, sources say that there are currently legal disputes over concessions at the port, which may have contributed to a contraction in the port’s export volume last year. The situation is expected to be settled later this year.
Although Volkswagen has a well-established multimodal trade between the US and Mexico, both rail and sea have positive and negative attributes. Schnackenberg says that the consolidation time at ports and larger vessel loads cause vehicles to accumulate at ports and increase the processing and transport times. “By contrast, rail traffic is more consistent and delivers vehicles to the port on a daily basis, which evens out the workload. On the other hand, during seasonal rail capacity shortages, vessel service offers relief,” Schnackenberg says. “Another advantage of shipping by sea with our loop system is the utilisation of vessels in both directions and hence good economic performance.”
With the growth in volume, several ports are investing in infrastructure. The port of Baltimore is constructing a new berth, which should be complete by next spring, according to Powers. The South Carolina Ports Authority (SCPA) is collaborating with Norfolk Southern Railway on a new inland port in Greer, near the BMW plant, more than 200 miles (320km) from the port of Charleston. The port, which has a paved area of 40 acres (16 hectares), is on schedule to open in September. The site will lie along Interstate 85, which links large markets in the southeast.
Steve Kemp, SCPA’s vice-president of operations, points out that the inland port is one aspect of the SCPA’s ten year, $1.3 billion capital plan that includes investments in both new and existing facilities, equipment and information systems. The state of South Carolina is also investing nearly $700m in port-related infrastructure, including $300m to fund the construction of Charleston’s Post 45 Harbour Deepening Project, which is due for completion by 2019.
The port of Davisville recently invested $22.3m, which added seven acres to the first point of rest, says director Evan Matthews. It also built new fendering systems for berths, which use plastic panels instead of rubber tires. The port financed a dredging project that increased its draft from 29 feet to 32 feet (8.8-9.75 metres), which will enable it to receive larger vessels.
The port of New York/New Jersey is also in the process of dredging its channel from 45 feet to 50 feet. It is raising the air draft restriction of the Bayonne Bridge – which connects Staten Island, New York to Bayonne, New Jersey – from 150 feet to 215 feet with its Raise the Roadway project, due for completion by 2015. The port has recently expanded its on-dock rail facility to 3,000 linear feet, which is near the railways’ shared asset facility in Newark. Other infrastructure projects include the construction of roads to and from the port that will eventually double throughput capacity.
In January, Portland approved a $2.8m expansion of vehicle processor Auto Warehousing Company’s (AWC) facility. By expanding the processing building by 27,000 square feet, AWC, which processes Hyundai’s imports and Ford’s exports, expects to increase annual capacity to more than 110,000 vehicles. Vehicle throughput velocity has also increased since the completion of its South Rivergate rail yard in August, according to Degens.
The port of Tacoma, Washington is relocating buildings to create a more efficient flow from the vessel to the first point of rest, according to Andre Elmaleh, senior manager, business development for non-container cargo at the port. These improvements are scheduled for completion by August.
Jacksonville also improved its rail infrastructure earlier this year, and Cabrera says that its recent switching yard improvements should reduce processing time.
Even with infrastructure investment, many ports face capacity issues. Kobza points out that the fourth quarter of 2012 was particularly challenging for the port of New York/New Jersey following the effects of ‘super storm’ Sandy, which caused extensive damage. “Our customers lost nearly 10,000 new vehicles, and many ships were diverted due to the port’s closure,” says Kobza. The port reopened within ten days and is now operating at full capacity.
Mercedes-Benz’s Kasamis says that the company is working with ocean carriers and with port operations in Germany to space its shipments more evenly. The company is also striving to automate tracking with its carriers by vehicle identification number (VIN). Finally, it is bringing more automation to its port processing systems and expects the changes to be in place by next year. “Currently, we use e-mail during the grey period before a vessel docks. Our carriers are willing to provide this information, so it is a matter of integrating it,” says Kasamis.
Ro-ro carriers face higher fuel costs from the Emission Control Area that will further tighten sulphur restrictions in fuel for vessels within 100 miles of the coastline. WWL’s Heintzelman also points to impacts on service following federal government budget cuts.
“The US government sequester budget cuts also pose issues at ports, [although] at some more than others,” he says. “In particular, the limited working days and hours by US Customs are causing some disruption at select ports due to a lack of availability of customs agents. Overall, this has not yet caused WWL to experience severe sailing delays.”
Heintzelman notes that given the current business environment for shipping and vehicle logistics suppliers, maintaining cost efficiency is a difficult balance as businesses are faced with increasing regulations, demands for infrastructure improvements and higher port labour-related costs.
The expectations for growth in US vehicle sales, along with higher production and exports from Mexico, suggest there will be increased sea trade of vehicles in North America. However, with capacity constraints in some ports, and potential changes in shipping flows, as well as competition with railways, nothing is certain; carmakers, shipping lines and port operators will hope to ride the rising waves for as long as they last.
