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Shipping Industrys Greatest Challenge Will Be Survival During 2002
BY MARIALBA MARTINEZ
January 24, 2002
In 2002, Puerto Ricos cargo transportation industry may face its greatest challenge yet--waiting for the global economic upturn forecasted for the second half of this year.
"If 2001 was a bad year in terms of financial gains for our industry, next year is certain to be the last for some key players," said Roberto Lugo, Jr., Crowley Lines Services operations vice president, referring to the islands five ocean carriers. "While there has been much talk in the past, I truly dont believe that all five carriers will be operating by the end of this year."
Companies that provide cargo transportation services between San Juan and the U.S. mainland are Crowley, CSX Lines, Navieras, Sea Star Lines, and Trailer Bridge, U.S.
Most industry members attracted by the stability and volume of Puerto Ricos cargo market agree that for some years now, there has been too much capacity (which translates as too many ships) for the cargo volume the island generates.
Trailer Bridge CEO John McCown has described the islands shipping industry as a "hyper-extended market" in the past as it battles operating losses for five consecutive quarters. And recently, CSX Lines General Manager Gabriel Serra expressed his worry about the islands "capacity-demand equation" and how it would be solved.
Cargo volume for 2001 was estimated to register 535,242,667 twenty-foot equivalent units (TEU), a 5.7% decrease compared to 577,511,000 TEUs in 2000. For 2002, growth is expected to remain flat, given economic projections that call for improvement towards the end of this year.
"In 2002, we expect the market to be stable. There will be a light reduction during the first part of the year that we hope will reverse itself midway 2002. But the volumes will probably be similar to last year (2001)," said Guerra.
Some of that growth in volume is expected to occur as a result of economic development legislation approved in 2001 by the Puerto Rico government. Manufacturing companies have begun or announced expansions and new facility constructions that will result in production increases that must be shipped to the U.S. mainland or other foreign destinations.
The new legislation also increases tax incentives for multinational companies that purchase goods from local companies for distribution in the U.S. mainland or foreign markets. Carriers are ready to accommodate larger load volumes traveling northbound (San Juan to U.S. mainland).
Navieras, the shipping subsidiary of Philadelphia-based The Holt Group, expects to emerge from a controversial financial restructuring process by June 2002. After filing for Chapter 11 bankruptcy protection in March 2001, the company was granted until Jan.15 to present its reorganization plan.
"The volumes Navieras achieved during 2001 were significantly higher than what we projected, and for 2002 we show volumes picking up after the second half of the year," said Geoffrey Thurston, Navieras sales vice president in Puerto Rico. "Despite [2001s] soft economy, the support for the company from our clients was very strong."
Upon announcing the approval of a $15 million line of credit provided by Wells Fargo Bank, Holt Group President Tom Holt Jr. said, " I can assure you that we at Navieras and the Holt Group Inc. will shortly be putting our financial issues behind us so that we can once again devote all our energies to building upon the 70-year history of our franchise."
According to Sea Star President Mike Shea, "We do not expect to expand service during 2002 but will continue to give good utilization of both our ships with our record of reliability, service, and versatility of Sea Stars roll on-roll off, load on-load off, high speed service vessels."
Other elements within the cargo handling industry in Puerto Rico that were affected by the economic slowdown and resulting volume decrease are islands shipping agents, custom brokers, freight forwarders, and consolidators. These companies supply services to ocean carriers are vital for successful cargo transportation.
Previously, industry experts such as custom broker Edmundo Rodriguez, president of Nestor Reyes Inc., expressed concern over the shortage of U.S. Custom inspectors, and the situation has not improved since Sept. 11. While port security demands more frequent, detailed, and time-consuming cargo inspections, additional personnel have yet to be hired.
This Caribbean Business article appears courtesy of Casiano Communications.