Sizing up growth opportunities in a changing market

Baltimore is the number one vehicle-handling port in the US, a position it has occupied for the past eight years, and it is still going strong. In 2018, the port posted an increase of almost 43,000 units, up more than 5% on the previous year, to reach a total of over 850,000 units handled, both imports and exports. It was a record for the port.

Given that increase, it is no wonder that one of Baltimore’s main terminal operators, Amports, is looking for more room. “Size matters” commented Gary Salvador, the company’s vice-president of sales and marketing, at this year’s FVL Import Export summit held in Baltimore.

Yet there are other major trends affecting North American vehicle movements that have implications for capacity, and not just at Baltimore. One of them is the growth in vehicle size as US car buyers opt for bigger vehicles. Those vehicles are taking up more space at the ports. According to Salvador, the vehicle mix Amports is handling at Baltimore is made up of around 80% SUVs and pickups, and these types of vehicles are on average 43% bigger than the cars the ports were originally built to handle.

“What I used to do with 200 acres with the cars now takes me 286 acres. Size matters, because these bigger [vehicles] are taking up more space,” Salvador explained.

At the same time, the ocean-going vessels now delivering these cars are bigger than ever, with post-Panamax vessels capable of carrying more than 8,000 units. That is leading to a dramatic increase in demand for room to park vehicles delivered at a first point-of-rest location.

“When I used to get 1,000 vehicles a week, I would need eight acres for the first point of rest,” said Salvador. “Now, you have a big boat dumping 4,000 cars a week, so I need 32 acres as a first point-of-rest before I start doing all of the value-added services to the cars. That all requires more space.”

The problem is that every customer wants a vehicle terminal to handle its peak volumes at the same time, but is willing to let vehicles dwell at the ports and take up space when the peak throughput has been dealt with.

Added to this is the impact on labour. To process a surge of 4,000 cars a week requires more staff on hand, but the question for a terminal operator is what to do with employees at other periods in the month when throughput is lower.

“We are also competing [for labour] with companies such as Amazon and FedEx,” noted Salvador. “For us to maintain labour, we need to work the month around.”

However, the presence of other industries at the ports is also a benefit, according to Andre Elmaleh, senior manager of business development, non-container, at Northwest Seaports Alliance (NSA). He recognised the need to maintain enough space for OEM customers, while at the same time acknowledging that there was competition for it from other sectors.

“You have to look at it in total,” said Elmaleh. “We look to diversify our portfolio. We have a strong container partnership and have doubled the size of our auto facility. It is about the life of the investment. Logistics will be different in 30 years and you have to build in redundancy to cope with the change in the future.”

NSA opened a new vehicle-handling facility late last year in Tacoma which is being managed by WW Solutions, currently handling Nissan volumes. It is the second such facility at Tacoma, after the Auto Warehousing Company operation that has been present since 1977. According to Elmaleh, Tacoma has become the new port of entry for Nissan in the Pacific northwest and this facility will push annual volumes up by 15% over the 2018 figure of around 146,000 units.

Preparing for EVs
For the future, there are other considerations. The rise in electric vehicles (EVs), while not as fast in the US as some had predicted, nevertheless requires new investment in such things as charging equipment and training.

“There needs to be investment in the equipment we need to charge these new types of vehicles and the training of people, especially safety training,” warned Salvador. There are a lot of different technologies out there, but first and foremost our people and [customers’] products need to be maintained safely.”

Andrew Higashi, director of strategy and analyst PwC, provided details on the growth in EVs and what factors were affecting their uptake. Battery electric vehicles (BEVs) sales, for example, have remained relatively low because the cars are still expensive and they are being led by the premium segment, a situation which is unlikely to change until 2022 at the earliest, when emissions regulations will start to drive a higher adoption of BEVs and hybrid vehicles.

Source: https://bit.ly/2Z9PPvf