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Local Shipping Industry Moves Into 21st Century
BY MARIALBA MARTINEZ
November 23, 2000
Puerto Ricos shipping industry will sail into the 21st Century with the construction of the $1 billion transshipment port in Guayanilla and the surrounding value-added, light and medium industry Free Trade Zone.
Experts calculate that by 2010, Puerto Ricos transshipment port could eventually capture more than one-third of the worlds maritime cargo trade, create over 50,000 direct and indirect jobs, and add $6 billion a year to the islands economy.
Not bad for a 100 by 35 miles chunk of land off the Mona Passage.
According to the projects economic viability study, the backbone of this grandiose scheme of worldwide maritime transshipmentin its first phasewill be the present volume of maritime cargo that already moves through the islands ports.
The San Juan port ranked fourth in the U.S.
The lifeline of Puerto Ricos economy depends on the ocean-going vessels and barges. Last fiscal year (FY) 2000, they transported two million TEUs (twenty-foot equivalent units or containers) in cargo to and from Puerto Rico.
In 1998, the Port of San Juan ranked fourth (by container throughput) within the U.S., North America and the Western Hemisphere. A total of two million TEUs were handled, a 181% increase from the 711,000 TEUs reported eight years earlier. Only the ports of Long Beach and Los Angeles, in California, and New York/New Jersey in the eastern seaboard surpassed it.
The growth of maritime trade is a result of the explosive growth of Puerto Ricos trade with the world in the last decade. Between fiscal years 1990 and 2000, the figure for total trade grew at an average yearly rate of 6.2%. Exports and imports increased at an average yearly growth of 7.4% and 4.7%, respectively.
During FY 2000, Puerto Ricos domestic and foreign trade totaled $65.5 billion, with $38.5 billion exports and $27 billion in imports, for a favorable trade balance of $11.5 billion.
Not surprisingly, the largest amount of trade was interstate between Puerto Rico and the rest of the U.S., with $33.8 billion in exported goods and $15 billion in imports. This does not include another $63 million and $653 million in exports and imports, respectively, from the U.S. Virgin Islands, a disparity due mostly to the value of purchases of oil products from the Hess refinery in St. Croix.
Trade with foreign countries was $4.6 billion in exports and $11.3 billion in imports for the same time period. Puerto Ricos largest foreign export markets were the Dominican Republic ($772 million), followed by the Netherlands ($585 million). The largest import markets were Ireland ($2.8 billion) and Japan ($1.5 billion).
Between 1990 and 2000, total exports from Puerto Rico increased 87%, from $20.6 billion to the current $38.5 billion, while imports increased 41%, from $19.2 billion to $27 billion. The trade balance in Puerto Ricos favor rose almost eight-fold, from $1.5 billion in 1990 to $11.4 billion last fiscal year.
From 1974 to the present, at least 20 different shipping companies have served Puerto Ricos domestic maritime trade. Some served the market for relatively short periods or transformed into other carriers (see table). Today, only five U.S. shipping carriers flourish in an extremely competitive industry which carriers describe as "a market dominated by clients."
These five major U.S. flag ocean cargo carriers carry Puerto Ricos goods in the domestic maritime trade.
Crowley Liner Services
Of the five companies that service the U.S.-Puerto Rico domestic trade route today, Crowley Liner Services Puerto Rico & Caribbean has been on the island longest (48 years), through the purchase of 22-year old Trailer Marine Transport in 1974. Last year, its operations were consolidated and moved from Puerto Nuevo to Isla Grande terminal.
"The Ports Authority expanded our facilities in Isla Grande, next to the former Navy base. We have slowly made improvements to our operations, investing nearly $1 million," said Roberto Lugo, Jr., vice president for Crowley in Puerto Rico.
According to Lugo, Crowley still handles about 30% of the market. The company stores 4,000 containers and trailers (trucks with containers attached) in its local inventory to facilitate its entirely roll on-roll off operation (commonly known as ro-ro for cargo that is rolled on and rolled off barges).
Since the Christmas season is already active, sailings have increased from three times a week to four between San Juan and Jacksonville, and from once a week to two sailings a week to Philadelphia.
"The diversity of our equipment and the 20 ports we service attracts the most business. Our equipment consists of TEUs and FEUs (forty-foot equivalent units) plus the newer 45-, 48-, and 53-foot containers; low, high and expandable flat beds; reefers (refrigerated containers); and 20- and 40-foot tank containers," said Lugo.
Crowley, the only company in Puerto Rico to use the ro-ro method exclusively, unloads cargo rapidly with as many as 160 to 170 container movements per hour. The company is then able to identify and unload any container from a vessel within 15 to 30 minutes.
Regarding competitiveness on the island, Lugo said, "In Puerto Rico, theres a problem of over tonnage. This means we have more space on our ships than the amount of cargo available. For this reason, it is a clients market and the clients pretty much influence it.
"Fifteen to 20 years ago rates went up every year, according to the markets requirementan average of 2% or 3%. For the past 10 years, rates have pretty much remained the same. This is spite of the fact that Puerto Rico clients demand the most sophisticated equipment, which makes it expensive for our industry."
Navieras NPR Inc. is a subsidiary of the Holt Group Inc. since 1997, when the company bought it from Bank Trust Investment Partners, headed by Ronald Katims. Bank Trust, in turn, had bought it from government of Puerto Rico in 1995 for $44 million cash and $25 million in notes to selling stockholders.
According to President Thomas Holt, Jr., "the company has refurbished and remodeled its ocean-going vessels, containers, and information technology operations to the tune of $1 billion since 1997. We have also maintained a 98% on-time arrival record, with a 40% reduction of workforce across all areas of operation over the last two years."
Although its 1999 financial statements to the Securities and Exchange Commission reported a $41,323 income loss, vs. an $8,786 gain in 1998, they attributed it to competitive rate pressures.
North Carolina-based CSX Lines bought Sea-Land in 1986 from R.J. Reynolds Industries Inc. Last year, CSX sold Sea-Lands international operations to Danish carrier Maersk Inc., but the transaction did not include terminal and domestic operations such as Puerto Rico, Guam, Hawaii, and Alaska.
"CSX has invested about $3 million in the first completely automated terminal in the Caribbean. Right at the gate, truckers are given a receipt to pick-up or drop-off cargo, avoiding time out of their trucks. Its a paperless system, as easy as the newest rental car businesses where you pick up and go without entering an office," said Richard Rodriguez, port manager for CSX in Puerto Rico.
The company handles cargo loading and unloading by means of a crane (a system commonly referred to as lo-lo). A new $1.2 million mobile harbor crane began operations this month, to maintain their record time stevedoring (loading, stowing and unloading a vessel) of 34.7 container movements per hour, up from 25 container movements per hour three years ago, the highest lo-lo rate in the local industry.
"We attribute this impressive time achievement to the team environment between management, the members of the International Longshore Association, and crane mechanics. When Hurricane Georges hit two years ago, we all pulled together to handle cargo as rapidly and efficiently as possible. That team effort is still maintained in our company," said Rodriguez.
CSX just added a second weekly sailing from San Juan directly to Jacksonville, increasing service to twice a week. It is the company with the fastest transit time between those points (two days). Later this month, CSX will also consolidate service in the U.S. Gulf area to a single port in Houston, which will reduce ocean transit to San Juan from eight to four days.
Regarding rumors about the sale of Puerto Ricos and other domestic operations, Rodriguez stated, "that management has repeatedly stated they will not sell the company."
Sea Star Line
Sea Star Line is one of the most recent carriers arriving in Puerto Rico. A privately held company headquartered in Jacksonville (Fla.), Puerto Rico is its Caribbean regional headquarters. In 1998, Matson Navigation Co., from Hawaii; Totem Ocean Trailer Express, from Alaska; and a group of local investors purchased local carrier Sea-Barge and began operations as Sea Star.
"In the past year, we upgraded our information technology systems, creating a new web page where clients can make bookings and receive rates with a 24-hour response guarantee. Our two vessels are the only ones with combined ro-ro and lo-lo services, along with permanently fixed liquid bulk tanks," said General Manager Jaime Santiago.
This year, the company also opened new offices in the U.S. Virgin Islands to service St. Thomas and St. Croix. Sea Stars equipment includes TEUs, FEUs, 45- and 48 foot containers, trailers, flatbeds, and reefers. They also accept carrying shipper owned equipment.
A newcomer to the group, Trailer Bridge, has competed aggressively for its current 13% market share since its first sailing in 1992.
"We are very excited about our 3 Q 2000 financial results, in which trailer volume to Puerto Rico rose 32.5% compared with a year earlier, resulting in a 26.1% increase in core trailer revenue to Puerto Rico, or $3.1 million," said Chairman John McCown and Ralph Heim, president of Trailer Bridge, in an interview with CARIBBEAN BUSINESS.
According to Heim, "Although the market in general is a bit smaller, our market share continues increasing almost on a monthly basis. I think our best selling point is that we have the ability to deliver, while implementing mainland economics and offering more cubic access through both sea and land. We have effectively connected Puerto Rico to the mainland."
McCown anticipated that 4Q 2000 financial results would show a profit, something not seen in previous quarters. "Our companys growth has been estimated at 25%, while the market rate has been approximately 3%. This means we have been growing at eight times the market rate, which should benefit us in the long run."
Trailer Bridge vessels were also recently cited by the University of Delawares Marine Policy Program as emitting "from five to 14 times less particulate matter and sulfur dioxide, two pollutants of concern, on a unit-mile basis compared to other vessels in the Puerto Rico trade."
The companys vessels burn a distillate fuel while other carriers use heavy residual fuel, a non-distilled product that remains after crude oil has been refined.
This Caribbean Business article appears courtesy of Casiano Communications.