NY-NJ turning basin’s ability to handle mega-ships in question

Peter T. Leach, Editor-at-Large | Jun 04, 2016 9:30AM EDT

U.S. East Coast ports have spent billions of dollars in the last decade preparing for the large neo-Panamax ships that will transit the Panama Canal’s new locks when they open to commercial traffic. The Port of New York and New Jersey alone is spending $3.4 billion to deepen its channel to 50 feet and to raise the air draft of the Bayonne Bridge.

But until the U.S. Army Corps of Engineers completes a study of the Arthur Kill turning basin, the size of some ships on trans-Pacific strings that call at the four big container terminals on the western side of the New York-New Jersey harbor could be limited.

When the new locks are inaugurated on June 26, they will be able to handle container ships with capacities of up to 14,000 20-foot-equivalent units, compared with the 5,000-TEU size of the Panamax ships that currently transit the existing 110-year-old locks. Container lines are likely to test the new locks by sending through ships of up to 10,000 TEUs later this year.

But until the $1.3 billion project to raise the Bayonne Bridge between New Jersey and Staten Island is completed next year, carriers will have to wait to send 12,000-TEU ships to the Port of New York and New Jersey’s four biggest container terminals. And now they may have to wait longer while the Army Corps of Engineers studies whether the Arthur Kill turning basin can handle ships of that size.

The turning basin on the New Jersey side of the Bayonne Bridge is where container ships make a righthand turn to the three terminals in Port Newark and Port Elizabeth and the New York Container Terminal on Staten Island, the principal gateways to the United States’ largest consumer market.

“Ships coming through the Panama Canal have to call New York,” said a veteran port consultant who raised the issue of the turning basin. Container ships coming through the canal normally call at Savannah first and then come to New York to unload lighter-weight import containers before calling at Norfolk to pick up heavier export containers.  “If you can’t call New York with a 12,000-TEU vessel, you are not going to send a 12,000-TEU vessel to the East Coast,” he said.

The Port Authority of New York and New Jersey has asked the corps to perform a “general re-evaluation study” of the port’s channels and the turning basin after it has completed the decades-long, $2.1 billion project to deepen the port’s channel to 50 feet this summer. The authority said the study is designed “to evaluate the adequacy of the existing harbor configuration to meet the increased dimensions of oceangoing vessels now calling and anticipated to be calling at the port.”

The port authority said it requested the study because the container ships that will be coming through the Suez Canal and the new Panama locks are considerably larger than the vessels for which the deepening project was originally designed.

The agency also is using the corps’ data to evaluate the turning basin through simulations in conjunction with the New York Shipping Association and the Sandy Hook Pilots Association. “I wouldn’t characterize this as a smoking-gun issue from the standpoint of accommodating (mega-ships),” said Sam Ruda, the authority’s assistant port director. “It’s rather how best to manage the much-larger vessels.”

The Port of New York and New Jersey already handles ships with capacities of 10,000 TEUs that come through the Suez Canal. Until the Bayonne Bridge is raised, Ruda said vessels larger than that can call Global Container Terminal, which is located on the eastern side of the bridge.

The new Panama Canal locks are 1,200 feet long by 160 feet wide, and the Arthur Kill turning basin is 1,500 feet wide, so it should be large enough to handle the ships that come through the new locks. When the design of the new locks was revealed more than 10 years ago, the maximum container ship capacity was supposed to be 12,500 TEUs, but carriers have redesigned their ships so that this neo-Panamax size can carry up to 14,000 TEUs when fully loaded.

The chiefs of many East Coast gateway ports say they are ready to handle 12,000-TEU-plus ships, but carriers won’t be able to deploy ships of this size on rotations that call New York-New Jersey until they know the Arthur Kill turning basin can handle them.

“Our carriers have told us that, with a few exceptions here and there, they are going to watch the size of the ships that can call New York, and New York is going to dictate the timing of the rollout of the next largest size of the vessels they deploy,” said Griffin Lynch, chief operating officer and incoming executive director of the Georgia Ports Authority. “The carriers are all targeting 14,000-TEU ships as the size that they want to send through the Panama Canal and up the East Coast over the long term.”

If the Army Corps study finds that the Arthur Kill turning basin can handle neo-Panamax vessels, there should be no problem getting those ships under the elevated Bayonne Bridge and into the big terminals on the New Jersey side of the port. But if the study finds the basin isn’t adequate, the corps will have to dredge it deeper and/or wider.

This shouldn’t be a major hurdle if the bottom is silt, but if bedrock underlies some of the harbor, this could extend the time to prepare the port for the neo-Panamax ships, because the corps would have to drill and blast out the bedrock. This would require an environmental impact study and more funding, which may take time to secure.

“We’re monitoring the Bayonne Bridge and the turning basin,” said John Reinhart, CEO and executive director of the Virginia Port Authority, where the Norfolk International Terminal is ready to handle the largest ships that can transit Panama’s new locks. “It could be a major problem for imports because carriers couldn’t use the efficiencies of the larger ships.”

The Port of Virginia, which already gets regular calls by vessels of up to 9,600 TEUs that come through the Suez Canal, is in discussion with carriers that want to deploy vessels in a range of from 10,000 to 14,000 TEUs, some on rotations through the Suez Canal and others through the new Panama locks.

Reinhart expects to see 10,000-TEU ships coming to Norfolk through the Suez in the coming weeks, but said carriers will take “a little bit of a wait-and-see” attitude to see how the new locks perform before they redeploy their networks. Some of the Asian carriers already have made commitments to bring ships in the 10,000- to 12,500-TEU range through the new locks in the latter part of the peak season, he said.

By the start of the 2017 peak season, Reinhart said he expects the three major alliances — the 2M, Ocean and THE — to deploy vessels of up to 14,000 TEUs to East Coast ports through the Suez Canal because “a lot of production is coming from Southeast Asia and it’s natural.” Cargo from North Asia will be routed through the Panama Canal on the larger vessels carriers will be able to deploy on existing all-water services.

Carriers will begin to rebalance the Asia-to-East Coast services coming through the two canals later this year by bringing more ships through the new locks. “Five years ago, calls by vessels coming through the Panama Canal accounted for about 50 percent of all GPA vessel calls, and those coming through Suez had about 15 percent,” Lynch said. “Today we see it reversed. Panama has about 30 percent, while Suez has 48 percent, but we expect to see more coming through Panama and a leveling off of those through Suez.”

The Port of Savannah expects to get more first calls by ships coming through the new Panama locks. Beneficial cargo owners are building more distribution centers around the port to handle the growing import volumes they expect to shift away from the West Coast.  “The Panama Canal Authority tells us that around 40 percent of the container ships that transit the canal are coming to Savannah, the largest (share) on the East Coast,” Lynch said.

Charleston expects carriers to deploy ships of up to 14,000 TEUs on East Coast services coming through the Panama Canal after the Bayonne Bridge project is completed.  “There are so many ships built of the 13,000- to 14,000-TEU size that ships of this size will have to come to the East Coast, because there are just not a lot of other places for them to go,” said James Newsome, president and CEO of the South Carolina Ports Authority. “If they can’t call New York, they will have to go to ports where the ships can dock.”

Eleven of the 30 weekly services at Charleston currently come through the Panama Canal. At least four of these weekly strings plan to upgrade the size of their vessels after the new locks open, Newsome said. Three of those services will deploy 8,500-TEU ships and the fourth will upgrade to 6,500-TEU ships, which can call at river ports.

“Everywhere the carriers can deploy the bigger ships, they will do so,” he said. “The wild card is what the freight rates are. They are incredibly low and it remains to be seen how many strings will be deployed in various services.”