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Shipping Industry Celebrates 7% To 14% Gains In South / Northbound Cargo Volume

Rates inched up 7%, but not enough to cover increased expenses for security


December 25, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Puerto Rico’s shipping industry ended 2003 with an estimated 7% to 8% increase in the number of southbound container loads (transported from the U.S. mainland to Puerto Rico) and an exceptional 13% to 14% increase in northbound container loads (carried from the island to the U.S. mainland).

"Southbound maritime cargo through October 2003 saw a 7.6% increase compared with the same 10-month period in 2002," said Roberto Lugo, president of the Puerto Rico Shipping Association (PRSA) and vice president & Puerto Rico general manager of Crowley Liner Services.

"But it is the northbound cargo that really caught our eye, with a 13.9% increase as of October. It seems the so-called harmful effect of the repeal of [Internal Revenue Code] Section 936 may be over as we notice more pharmaceutical and health goods manufacturing companies transporting their goods to the U.S. mainland."

Lugo said local exports also had an impact on the northbound cargo statistics. "Local companies seem to be expanding their export volumes," he said. "Companies such as Vassallo Industries, Serralles, and Pan American Grain have signed contracts with megaretailers on the U.S. mainland. That and the tax exemptions or credits offered by the government may finally be affecting the cargo transportation industry."

Rates inched up 7%, but still below operating costs

With exports on the rise, shipping rates also went up in 2003, although not by the 10% local industry representatives had been expecting.

"Shipping rates are still more than 25% below the rates in 1992," said Lugo. "In 2003, we saw the rates go up approximately 7%. Our expectation is that in four or five years, the shipping industry will catch up with the rates of 12 years ago. This will make us more competitive and will enable us to recover our operational and investment costs."

In 2003, maritime cargo and cruise ship carriers dealt with an attempt by the Puerto Rico Ports Authority to increase tariffs. After intense discussions and public hearings, the Ports Authority and the maritime cargo transportation industry agreed on increasing the rates 9.5% over five years.

TSA granted $8.1 million for Puerto Rico ports

Since 9/11, national security has called for heightened–and more expensive–security measures by the cargo carriers. These include increased security at the terminals, background checks and IDs for personnel, and the computerization of the transportation documents presented to federal, state, and local authorities.

In 2003, federal security agencies granted $8 million for security to the Puerto Rico Ports Authority and private entities such as the Port of Ponce, Crowley, and Peerless Oil & Chemicals in Peñuelas. Some of these funds were intended to help the government and carriers comply with security initiatives such as the Shipper’s Export Declaration (SED) part of the U.S. Customs & Border Protection’s Automated Export System (AES) that must be submitted before a vessel’s departure.

The Ports Authority recently announced that the Transportation Security Administration has granted $3 million to build a Command, Control, Coordination, Communication, and Intelligence Center (known as 4CI), to begin operations in April 2004. The project involves installing 150 to 180 digital cameras at passenger and cargo ports.

Carriers had a good 2003

Crowley remains the market leader, in great part because of the large number of vehicles it transports from the U.S. mainland. The company estimates it will have moved 231,000 TEUs (a TEU is equivalent to one 20-foot container) by the end of 2003, compared with 196,000 in 2002, and will have retained 33.7% share of the market for a second year.

"This year we will have exceeded our revenue goal by $7 million or $8 million, but we have had to move 18% more cargo to achieve this," said Lugo. "The industry is improving and there is a lot of cargo movement in and out of Puerto Rico."

Horizon Lines LLC is Crowley’s strongest competitor, with a 27.8% share of Puerto Rico’s maritime cargo market. Horizon Lines expects to have moved 177,000 TEUs in 2003, compared with 163,000 in 2002.

"We had our ups and downs during 2003," said Gabriel Serra, Horizon Lines’ division vice president & Puerto Rico general manager. "At the start of the year, cargo volume was very low, but it has risen this last quarter. This is obviously an effect of the island’s economic activity."

Sea Star Lines, which bought Navieras’ assets in 2002, has been undergoing a systemwide restructuring to accommodate its new operation. It may end 2003 with a 20.9% market share and some 130,000 TEUs, compared with 17% and 100,000 in 2002.

Trailer Bridge’s revenue has been increasing each quarter and its losses have narrowed after nearly two years of deficits. Trailer Bridge President John McCown has maintained a positive outlook, particularly since the disappearance of Navieras. The carrier’s market share stands at 14.7%, with approximately 90,000 TEUs moved in 2003, compared with approximately 80,000 in 2002.

"In 2003, Trailer Bridge and all of the marine carriers in the lane had higher volumes as the effect of Navieras’ demise took hold," said McCown. "As carriers get back on an even financial footing, they will be in a better position to continue to make the significant capital investments that ensure Puerto Rico maintains a reliable transportation system."

This Caribbean Business article appears courtesy of Casiano Communications.
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