Maritime Executive Tilden Predicts Cargo Diversion to Mexico, Canada

Maritime Executive Tilden Predicts Cargo Diversion to Mexico, Canada
(American Shipper – Eric Kulisch)

U.S. ports’ inability to expand infrastructure to keep up with growing trade volumes means more cargo from Asia will shift to Mexican and Canadian ports of entry rather than the U.S. West Coast, said Douglas Tilden, chief executive of Ports America.

The marine terminal executive blamed the lack of a national freight transportation policy and environmental constraints for limiting port investment for many years.

"I can sit down with the transportation minister of a country like Mexico and get the big picture about their plans. I'd have to wade through 20 different agencies in Washington to get the same information," he said in a lecture at the California Maritime Academy in Vallejo.

The Mexican government by comparison is embarking on a five-year, $250 billion infrastructure program that includes development of a new container port at Punta Colonet that would transport cargo by rail to the United States. Last year Canada opened the Port of Prince Rupert on the Pacific Coast dedicated to intermodal service to the U.S. Midwest.

Container volumes at West Coast ports are expected to triple by 2035, and Tilden said the United States is falling behind the curve.

At the twin ports of Los Angeles and Long Beach, "there hasn’t been a single application for new terminal capacity approved … for the last five years, and under the best of circumstances we might see two smaller facilities within the next five to seven years. The plain fact is that America needs to add the equivalent of a new port the size of New York and New Jersey every year for the next 12 years to meet growth demand,” Tilden said, according to a press release from the California Maritime Academy.

"Overall, I think we've lost the political will to build new port capacity and the rail and highway infrastructure which must go with it. Local politicians complain they see little of the economic benefits of a port locally but field all the complaints about the congestion and pollution they generate," he said.

Tilden recently took over expanded responsibilities managing the entire Ports America Group after last year's acquisition of Marine Terminal Corp. by a subsidiary of insurance giant AIG. AIG Highstar Capital has merged MTC and P&O Ports North America, which it previously acquired from Dubai Ports World, under the Ports America brand. It also owns vehicle processor AMPORTS. The combined company has 95 terminal operations in 49 ports with total annual revenue of $1.6 billion.

Tilden also blamed what he called "environmental Balkanization" for complicating marine transportation. "There are so many conflicting local, state and regional environmental regulations that it is hard for companies to make rational use of their assets. We want to be good stewards, but we face a welter of different local and regional regulations just on what fuels we can use for operations … propane, liquid natural gas or bio-diesel. When a change in rail rates or some other market factor suddenly shifts cargo volumes from one port to another, we often can't move our equipment assets because they don't meet the standards of the new location," he said.

Tilden said East Coast ports will not take up much of the slack, making Mexican and Canadian greenfield ports even more attractive. "The pending expansion of the Panama Canal will primarily benefit bulk cargoes like Brazilian soybeans bound for Asia. But for merchandise shipments, the extra fuel costs and tolls of a canal transit don't make economic sense. Merchandise will continue to flow to the West Coast."

However, several East Coast ports last year experienced continued volume growth led by the extraordinary 20.6 increase by the Port of Savannah compared to West Coast ports where volumes remained flat or slightly declined. Shippers have been diverting more cargo to East and Gulf costs ports and developing import distribution centers there during the past two years to add shipping flexibility. That trend is expected to continue, according to logistics experts.

The current economic downturn in the United States provides only a temporary reprieve from cargo congestion, Tilden said.

"Although volumes are currently flat, our analysis shows that when we come out of a recession, we get a pretty rapid upturn … sometimes as much as 15 percent in one year. If that happens in the next few years, it would create chaos under present conditions. We just couldn’t handle it.”