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Dr. Noel Hacegaba
Port of Long Beach

Big Ships, Big Challenges: The Impact of Mega Container Vessels on U.S. Port Authorities

The average size of container vessels calling U.S. ports has grown considerably over the past five years, and the trend towards even larger vessels is expected to continue in the years to come. According to industry analysts, almost half of current ship orders are for vessels exceeding 12,000 TEU’s. Larger vessels provide many advantages to liners, shippers and beneficial cargo owners, not the least of which is the reduction in the per-container cost to transport cargo. However, it is thought that few or no advantages trickle down to the port authorities, which are pressured to deliver water (dredging) and landside (capital, infrastructure and productivity) improvements to accommodate the bigger ships, whose advantages may be diminished without such improvements. According to the American Association of Port Authorities, U.S. ports are expected to spend $46 billion in port improvements by 2017. The Port of Long Beach alone is investing $4.5 billion on a 10-year capital improvement program. But, while many port authorities have committed to spending billions of dollars to prepare for the bigger vessels (10,000-plus TEU’s), there is no guarantee that the mega ships will call their port. On top of the excess capacity seen at ports across the nation, liners are forming new shipping alliances to maximize the economies of scale made possible by the mega vessels. The combination of the growing vessel capacity and the formation of new alliances is creating a new and daunting challenge for U.S. port authorities, which have to make important decisions with significant long-term ramifications. As U.S. port authorities prepare to welcome the mega vessels to their ports, this paper will assess the effects that these and related alliances may have on the port authorities. In the process, the paper will seek to identify the role of the port authority and address the fiscal and political factors that should be considered.

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