The Port of Baltimore is among those gaining business at the expense of the Port Authority of New York & New Jersey, enveloped in a scandal over lane closings at the George Washington Bridge that’s increased scrutiny of its management.
The authority lost Mazda Motor Corp. as a customer to Baltimore last year. The loss of 65,000 cars annually follows prior moves by Hyundai Motor Co. and Kia Motors to the port of Philadelphia. Automobile activity at the New York-area ports in 2014 is projected to decline by about 100,000 vehicles, according to agency budget documents.
In addition, the Port of Cleveland started a new express freight service to Europe, giving Midwestern manufacturers and producers another supply route instead of sending them by truck or rail to New York and New Jersey first, said a report from Colliers International, a Seattle-based commercial real estate brokerage.
While known mostly for its three New York City-area airports and Times Square bus terminal, the Port Authority runs the third-largest U.S. port by volume. It lost 2 percentage points of market share last year and is grappling with operational challenges 18 months before the expansion of the Panama Canal brings bigger container vessels to the East Coast.
A committee assembled by Governors Andrew Cuomo of New York and Chris Christie of New Jersey said this month that the Port Authority may need to change its management structure. The fragile nature of its terminal operations was exposed last year when a computer malfunction at Maher Terminals LLC and a shortage of equipment to move containers led to truck gridlock and cargo bottlenecks that delayed shipments.
“It was clear to us after last summer’s experience we fundamentally had to make some significant changes to the way we operated the port,” Richard Larrabee, the Port Authority’s director of Port Commerce, said in an interview.
At stake for the New York City-area economy is an operation that supports almost 300,000 direct and indirect jobs. The port’s seven facilities, within an eight-hour drive of 20 percent of the U.S. population, is the gateway for $200 billion of goods annually.
The Port Authority is a “landlord port,” meaning it leases space to terminal operators and provides infrastructure necessary for operations. The agency’s 2014 budget projects its Port Commerce division will collect $166 million in fixed rent and $77.5 million in other revenue this year, about a 7 percent decline from 2013.
West Coast ports, such as Los Angeles and Long Beach, are spending $5 billion in infrastructure upgrades in preparation for the Panama Canal expansion, about as much as the cost to enlarge the waterway’s lock system, according to a December 2013 report from Colliers.
“The Southern Californian ports see the Panama Canal as a big deal and intend to surrender nothing to the East Coast ports,” wrote K.C. Conway, U.S. chief economist for Colliers.
The agency’s market share among North Atlantic terminals dropped to 50.4 percent last year from 52.4 in 2012 because of concessions, incentives and the ability of rival ports to provide deeper channels sooner, according to a June report by an industry task force.
In 2013, cargo volume at New York’s ports declined 1 percent, to 5.5 million 20-foot equivalent units, the first year in the past 15 that cargo volumes didn’t grow, according to the task force.
To win back auto business, the Port Authority has offered manufacturers a 50 percent reduction in fees charged for the use of wharf for each additional vehicle that moves through the port above a certain level.
“We’re still in the automobile business and we very much want to grow that business again,” said Larrabee.
Through April, volume is up 3.1 percent over the prior year, according to the Port Authority.
“If we can’t handle what we have today, how are we going to handle these bigger ships down the road?” John Nardi, president of the New York Shipping Association, an industry trade group, said in an interview.