May 16, 2005
Out to sea | Increasing capacity for container shipping in Portland no easy task
By Sean Donahue
Every year, when tourist season winds down, the container shipping operation on the Portland waterfront gets a little more room. For most of the year, containers bound for export or imported from Europe are crowded onto a three-acre site next to the International Marine Terminal, just under the Casco Bay Bridge. But with the end of Scotia Prince Cruises' ferry season in the fall, a parking lot at the IMT that serves travelers all summer begins filling up with containers awaiting weekly transport between Portland and Halifax, Nova Scotia, aboard a small ship called the Ossian.
So in April, news that Scotia Prince Cruises was canceling its 2005 season meant that P&O Ports, the international company that manages Portland's container operation, might be able to use that spillover lot a little longer than usual. Then in early May, the city of Portland announced plans to use the IMT as a passenger transit hub this summer, bringing together tour bus companies, airport shuttle services and other travel services ˆ making it likely that the containers will have to vacate the spacious lot after all.
Still, Jack Humeniuk, chief of operations at P&O Ports in Portland, isn't overly worried about the city's plan. Like city officials, he sees the move as an interim step before passenger services can be moved to the proposed Ocean Gateway terminal on the east end of Portland Harbor (see "People movers," p. 30). Humeniuk's bigger concern is the pattern of continued delays for Ocean Gateway ˆ including the most recent setback in March, when contractor bids for the project came in at least $4.5 million above estimates.
Often overlooked in the Ocean Gateway saga is the fact that moving passenger operations out of the IMT was intended to create room for an expanded freight service in the space until recently set aside for the Scotia Prince. For years, city officials, private companies and federal maritime administrators have been eyeing the Port of Portland as a candidate for a so-called short-sea shipping line, which would use small feeder ships like the Ossian or towed container barges to shuttle freight between U.S. cities in particularly crowded regions such as the Northeast and the Gulf Coast.
Understandably, there's been little effort on behalf of public officials or private companies to develop such an operation without the space to handle it. "The whole purpose of Ocean Gateway was to remove passenger operations from the International Marine Terminal and ex-pand short-sea shipping," says Humeniuk. "But we can't market something we don't have."
Portland's infrastructure, however, is only one of several nagging issues that have kept container shipping a relatively small business in Portland Harbor. For starters, there's the low volume of products moving out of Maine by ship: Portland handles 2,000 to 2,400 containers through its harbor in the average year, compared to about 15,000 trucks and containers handled annually at the Auburn Intermodal Facility. Then there's Maine's imbalance between exports and imports: More containers leave the state than come into it, making it a less attractive market for shipping companies. Finally, freight brokers say that a weekly ship or barge is less convenient for companies that may need to send orders overnight to New York or Boston. That combination of factors has left many freight experts wondering how viable Portland really is for a short-sea shipping effort.
Despite those considerable hurdles, local supporters of the idea find reasons for optimism. Alarmed by a projected doubling of freight traffic during the next 20 years, the U.S. Department of Transportation's Maritime Administration, known as MARAD, created the Short Sea Shipping Initiative in 2002 to help reduce traffic congestion and, in turn, air pollution. The reason: One container barge can carry the equivalent of 36 trucks, according to a report by the U.S. Army Corps of Engineers. And those barges are five to 10 times more fuel efficient than trucks delivering the same amount of cargo.
Although MARAD's initiative so far hasn't moved much beyond the planning and discussion phase, momentum for short-sea service appears to be building across the country thanks to state and private sector developments. In 2003, New York began offering container barge service between the Port of New York/ New Jersey and Albany as the first phase of its proposed Port Inland Distribution Network that could include barge service to Bridgeport, Conn.; Providence, R.I., and Boston. In February of this year, Texas-based Osprey Line added a third weekly barge to its short-sea service between the Port of New Orleans and other Gulf of Mexico ports. Then, in April, Pittsburgh-based CSG Co. announced it would begin bi-weekly container barge service between Pittsburgh and New Orleans.
Such developments help bolster the confidence of local waterborne freight advocates including Armand Demers, director of forest products with Sprague Energy, which owns the Merrill's Marine Terminal bulk shipping operation in Portland. Demers has been working for more than a year to coordinate a container barge operation that would ship paper products from Maine to New York. He declines to talk in detail about the idea, saying he's still negotiating with paper companies and potential barge lines, but notes that Portland has a leg up on other ports attempting to develop such services by having the necessary infrastructure in place at the IMT. But like Humeniuk, Demers says optimism must be accompanied by extreme patience.
The Shamrock affair
Even developing Portland Harbor's existing container operation was an exercise in patience, says Jack Humeniuk. Container shipping had come to a standstill by the early 80s, when Bath Iron Works moved its dry dock facility to Portland and took over the pier where a shipping line had offered monthly container service. But starting in 1983, Maine voters began approving about $10 million in state bond money that allowed the city of Portland to make a series of upgrades that turned an old railroad terminal pier into the International Marine Terminal.
That facility helped convince Hamburg, Germany-based Hapag-Lloyd to move its weekly Halifax feeder ship from Portsmouth, N.H., to Portland. (Feeder ships are small vessels that bring containers to "mother ships," the huge, oceangoing vessels that carry 4,000-8,000 containers.) A subsequent state bond granted another $2.4 million to the city to buy a new crane for the operation in 2000.
Today, about 25 Maine companies regularly use the weekly line to import raw materials or export finished goods. The paper companies Sappi and Huhtamaki account for the majority of the container volume, says Humeniuk, but several smaller businesses also are regular customers. White Rock Distilleries uses the Ossian to bring in large tanks of undiluted spirits imported from Europe, which are then diluted and bottled in its Lewiston plant. Flemish Master Weavers, a rug maker in Sanford, also uses the Ossian to collect imported yarn, cotton, jute and other raw materials brought to Halifax from Europe.
All of those shipments came to a halt last summer, though, when a creditor foreclosed on the owner of the previous feeder ship, the Shamrock. The ship was seized by U.S. marshals and eventually sold at auction to cover the owner's debts. That meant no containers moved through Portland Harbor until Hapag-Lloyd contracted with the Ossian to resume service in January.
The standstill highlighted the potential advantage of having additional short-sea shipping lines serving Portland. And unlike other smaller ports examining ways to develop such services, Portland has an advantage to attracting shipping carriers: The International Marine Terminal offers both a container crane to load one type of ship, as well as a vehicle ramp (last used for the Scotia Prince) that can accommodate so-called roll-on/roll-off vessels, which let trucks drive onto the boat in Portland and drive off at their destination.
Creating a similar facility, for example, would cost the city of Bridgeport, Conn. between $4.6 million and $18 million, according to a study prepared by the Connecticut Department of Transportation. "We're ahead of the game," says Jeff Monroe, Portland's transportation director. "Everyone else is worried about the infrastructure to do this. Well, we've got the infrastructure."
Theoretically, then, a new barge or ship could start sailing today. The problem is, there still aren't enough companies interested in waterborne freight, according to nearly everyone interviewed for this story. Even Humeniuk admits there is excess capacity at the existing container operation. "People think you can get a load of liquor and a box of stoves and that's what makes these things work. But you need dozens and dozens of those boxes every week, and that's where it breaks down," says P.D. Merrill, the former owner of Merrill's Marine Terminal. "We simply don't have the volume for that."
To increase demand, says Humeniuk, a shipping company would have to make a ship or barge option significantly cheaper than other transportation modes. It currently costs about $1,100 to truck a container down to New York City, he says. While a feeder ship could offer the same service for about $600, there aren't enough containers flowing back into Maine from New York to even out that trade. That means a shipping company would have to pre-position empty containers in Portland, at a cost that would almost wipe out the savings offered by the feeder ship.
In the complicated world of logistics and inventory management, a small savings is typically not enough to entice a company to change its shipping ways, says Kelly L'Heureux, a licensed customs broker with freight forwarding company Ocean Air in Portland. "Pricing really needs to be a lot more attractive before we'll see people moving a lot more freight into the Port of Portland," she says.
Hurry up and wait
Scheduling is also an issue affecting the viability of feeder ships. Many companies now rely on just-in-time shipping to refresh their inventories or send out orders, says L'Heureux. In those cases, a weekly ship service is no match for a container that can be trucked to New York City overnight. For that reason, Hussey Seating Co. in North Berwick has never looked at Portland as an option for its overseas deliveries. "In the past I've had the option of paying less for shipping if I could wait a week, but rarely can I, or my customers, wait a week," says Peter Malcolm, Hussey's traffic manager. "We don't have time for that feeder to swing down to Portland from Halifax."
But current customers of the Hapag-Lloyd service have found ways to schedule their shipments around the Ossian's weekly schedule. Flemish Master Weavers, which imports on average four to five containers a month, says Portland's proximity and the ship's reliability actually make it more efficient than trucking containers from another port. "Trucking the container from Portland to here takes 40 minutes, but from Boston, with waiting in line and road congestion, it could take half a day," says Kathleen Taylor, who handles the company's purchasing. "Then we're really up against our deadline. We can't have those containers arrive any later than one in the afternoon."
More frequent service and additional destinations ˆ in the form of additional feeder lines ˆ would address some of the logistical issues that have kept companies away from waterborne freight thus far. But even testing a route would require a shipping company to contract with a ship operator to offer the service ˆ a risk that Jeff Monroe says would likely require a subsidy, such as the $3.3 million in state and federal funds, including money from the federal Congestion Mitigation Air Quality Improvement Program, New York used to subsidize its Albany barge service. "Someone has to step up to plate and put a little money behind it," says Monroe.
With the outlook for federal investment cloudy due to recent turnover at MARAD, congressional debate over transportation appropriations still to come and the state still wrestling with Ocean Gateway, no funds appear forthcoming. For that reason, Armand Demers is still pushing his own effort to develop a feeder barge service. And he says much of the uncertainty over potential demand could be settled if companies were more willing to collaborate on developing affordable freight options. "I've looked at a number of shippers throughout the region and they're all doing their own thing, and everyone keeps their cards so close to their chest," says Demers. "We need to take a look at the whole [market], and I can see a huge potential if everyone is going in same direction."
Otherwise, there's always the pressure of rising fuel prices and highway congestion in the Northeast that is predicted to get worse over the next decade. Such factors make the need for additional ship service inevitable, says Humeniuk, if still a long wait. "Container shipping is growing, and it's not slowing down," says Humeniuk. "The demand is building, and we're in a perfect position to take advantage of it. We're just not there yet."
So in April, news that Scotia Prince Cruises was canceling its 2005 season meant that P&O Ports, the international company that manages Portland's container operation, might be able to use that spillover lot a little longer than usual. Then in early May, the city of Portland announced plans to use the IMT as a passenger transit hub this summer, bringing together tour bus companies, airport shuttle services and other travel services ˆ making it likely that the containers will have to vacate the spacious lot after all.
Still, Jack Humeniuk, chief of operations at P&O Ports in Portland, isn't overly worried about the city's plan. Like city officials, he sees the move as an interim step before passenger services can be moved to the proposed Ocean Gateway terminal on the east end of Portland Harbor (see "People movers," p. 30). Humeniuk's bigger concern is the pattern of continued delays for Ocean Gateway ˆ including the most recent setback in March, when contractor bids for the project came in at least $4.5 million above estimates.
Often overlooked in the Ocean Gateway saga is the fact that moving passenger operations out of the IMT was intended to create room for an expanded freight service in the space until recently set aside for the Scotia Prince. For years, city officials, private companies and federal maritime administrators have been eyeing the Port of Portland as a candidate for a so-called short-sea shipping line, which would use small feeder ships like the Ossian or towed container barges to shuttle freight between U.S. cities in particularly crowded regions such as the Northeast and the Gulf Coast.
Understandably, there's been little effort on behalf of public officials or private companies to develop such an operation without the space to handle it. "The whole purpose of Ocean Gateway was to remove passenger operations from the International Marine Terminal and ex-pand short-sea shipping," says Humeniuk. "But we can't market something we don't have."
Portland's infrastructure, however, is only one of several nagging issues that have kept container shipping a relatively small business in Portland Harbor. For starters, there's the low volume of products moving out of Maine by ship: Portland handles 2,000 to 2,400 containers through its harbor in the average year, compared to about 15,000 trucks and containers handled annually at the Auburn Intermodal Facility. Then there's Maine's imbalance between exports and imports: More containers leave the state than come into it, making it a less attractive market for shipping companies. Finally, freight brokers say that a weekly ship or barge is less convenient for companies that may need to send orders overnight to New York or Boston. That combination of factors has left many freight experts wondering how viable Portland really is for a short-sea shipping effort.
Despite those considerable hurdles, local supporters of the idea find reasons for optimism. Alarmed by a projected doubling of freight traffic during the next 20 years, the U.S. Department of Transportation's Maritime Administration, known as MARAD, created the Short Sea Shipping Initiative in 2002 to help reduce traffic congestion and, in turn, air pollution. The reason: One container barge can carry the equivalent of 36 trucks, according to a report by the U.S. Army Corps of Engineers. And those barges are five to 10 times more fuel efficient than trucks delivering the same amount of cargo.
Although MARAD's initiative so far hasn't moved much beyond the planning and discussion phase, momentum for short-sea service appears to be building across the country thanks to state and private sector developments. In 2003, New York began offering container barge service between the Port of New York/ New Jersey and Albany as the first phase of its proposed Port Inland Distribution Network that could include barge service to Bridgeport, Conn.; Providence, R.I., and Boston. In February of this year, Texas-based Osprey Line added a third weekly barge to its short-sea service between the Port of New Orleans and other Gulf of Mexico ports. Then, in April, Pittsburgh-based CSG Co. announced it would begin bi-weekly container barge service between Pittsburgh and New Orleans.
Such developments help bolster the confidence of local waterborne freight advocates including Armand Demers, director of forest products with Sprague Energy, which owns the Merrill's Marine Terminal bulk shipping operation in Portland. Demers has been working for more than a year to coordinate a container barge operation that would ship paper products from Maine to New York. He declines to talk in detail about the idea, saying he's still negotiating with paper companies and potential barge lines, but notes that Portland has a leg up on other ports attempting to develop such services by having the necessary infrastructure in place at the IMT. But like Humeniuk, Demers says optimism must be accompanied by extreme patience.
The Shamrock affair
Even developing Portland Harbor's existing container operation was an exercise in patience, says Jack Humeniuk. Container shipping had come to a standstill by the early 80s, when Bath Iron Works moved its dry dock facility to Portland and took over the pier where a shipping line had offered monthly container service. But starting in 1983, Maine voters began approving about $10 million in state bond money that allowed the city of Portland to make a series of upgrades that turned an old railroad terminal pier into the International Marine Terminal.
That facility helped convince Hamburg, Germany-based Hapag-Lloyd to move its weekly Halifax feeder ship from Portsmouth, N.H., to Portland. (Feeder ships are small vessels that bring containers to "mother ships," the huge, oceangoing vessels that carry 4,000-8,000 containers.) A subsequent state bond granted another $2.4 million to the city to buy a new crane for the operation in 2000.
Today, about 25 Maine companies regularly use the weekly line to import raw materials or export finished goods. The paper companies Sappi and Huhtamaki account for the majority of the container volume, says Humeniuk, but several smaller businesses also are regular customers. White Rock Distilleries uses the Ossian to bring in large tanks of undiluted spirits imported from Europe, which are then diluted and bottled in its Lewiston plant. Flemish Master Weavers, a rug maker in Sanford, also uses the Ossian to collect imported yarn, cotton, jute and other raw materials brought to Halifax from Europe.
All of those shipments came to a halt last summer, though, when a creditor foreclosed on the owner of the previous feeder ship, the Shamrock. The ship was seized by U.S. marshals and eventually sold at auction to cover the owner's debts. That meant no containers moved through Portland Harbor until Hapag-Lloyd contracted with the Ossian to resume service in January.
The standstill highlighted the potential advantage of having additional short-sea shipping lines serving Portland. And unlike other smaller ports examining ways to develop such services, Portland has an advantage to attracting shipping carriers: The International Marine Terminal offers both a container crane to load one type of ship, as well as a vehicle ramp (last used for the Scotia Prince) that can accommodate so-called roll-on/roll-off vessels, which let trucks drive onto the boat in Portland and drive off at their destination.
Creating a similar facility, for example, would cost the city of Bridgeport, Conn. between $4.6 million and $18 million, according to a study prepared by the Connecticut Department of Transportation. "We're ahead of the game," says Jeff Monroe, Portland's transportation director. "Everyone else is worried about the infrastructure to do this. Well, we've got the infrastructure."
Theoretically, then, a new barge or ship could start sailing today. The problem is, there still aren't enough companies interested in waterborne freight, according to nearly everyone interviewed for this story. Even Humeniuk admits there is excess capacity at the existing container operation. "People think you can get a load of liquor and a box of stoves and that's what makes these things work. But you need dozens and dozens of those boxes every week, and that's where it breaks down," says P.D. Merrill, the former owner of Merrill's Marine Terminal. "We simply don't have the volume for that."
To increase demand, says Humeniuk, a shipping company would have to make a ship or barge option significantly cheaper than other transportation modes. It currently costs about $1,100 to truck a container down to New York City, he says. While a feeder ship could offer the same service for about $600, there aren't enough containers flowing back into Maine from New York to even out that trade. That means a shipping company would have to pre-position empty containers in Portland, at a cost that would almost wipe out the savings offered by the feeder ship.
In the complicated world of logistics and inventory management, a small savings is typically not enough to entice a company to change its shipping ways, says Kelly L'Heureux, a licensed customs broker with freight forwarding company Ocean Air in Portland. "Pricing really needs to be a lot more attractive before we'll see people moving a lot more freight into the Port of Portland," she says.
Hurry up and wait
Scheduling is also an issue affecting the viability of feeder ships. Many companies now rely on just-in-time shipping to refresh their inventories or send out orders, says L'Heureux. In those cases, a weekly ship service is no match for a container that can be trucked to New York City overnight. For that reason, Hussey Seating Co. in North Berwick has never looked at Portland as an option for its overseas deliveries. "In the past I've had the option of paying less for shipping if I could wait a week, but rarely can I, or my customers, wait a week," says Peter Malcolm, Hussey's traffic manager. "We don't have time for that feeder to swing down to Portland from Halifax."
But current customers of the Hapag-Lloyd service have found ways to schedule their shipments around the Ossian's weekly schedule. Flemish Master Weavers, which imports on average four to five containers a month, says Portland's proximity and the ship's reliability actually make it more efficient than trucking containers from another port. "Trucking the container from Portland to here takes 40 minutes, but from Boston, with waiting in line and road congestion, it could take half a day," says Kathleen Taylor, who handles the company's purchasing. "Then we're really up against our deadline. We can't have those containers arrive any later than one in the afternoon."
More frequent service and additional destinations ˆ in the form of additional feeder lines ˆ would address some of the logistical issues that have kept companies away from waterborne freight thus far. But even testing a route would require a shipping company to contract with a ship operator to offer the service ˆ a risk that Jeff Monroe says would likely require a subsidy, such as the $3.3 million in state and federal funds, including money from the federal Congestion Mitigation Air Quality Improvement Program, New York used to subsidize its Albany barge service. "Someone has to step up to plate and put a little money behind it," says Monroe.
With the outlook for federal investment cloudy due to recent turnover at MARAD, congressional debate over transportation appropriations still to come and the state still wrestling with Ocean Gateway, no funds appear forthcoming. For that reason, Armand Demers is still pushing his own effort to develop a feeder barge service. And he says much of the uncertainty over potential demand could be settled if companies were more willing to collaborate on developing affordable freight options. "I've looked at a number of shippers throughout the region and they're all doing their own thing, and everyone keeps their cards so close to their chest," says Demers. "We need to take a look at the whole [market], and I can see a huge potential if everyone is going in same direction."
Otherwise, there's always the pressure of rising fuel prices and highway congestion in the Northeast that is predicted to get worse over the next decade. Such factors make the need for additional ship service inevitable, says Humeniuk, if still a long wait. "Container shipping is growing, and it's not slowing down," says Humeniuk. "The demand is building, and we're in a perfect position to take advantage of it. We're just not there yet."
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