Port-folio Recovery

This is what we saw on nj.com on July 27th.

“Expansion of Port Newark Container Terminal will spur job growth, Gov. Christie says.”

“NEWARK – Gov. Chris Christie marked an expansion of a container facility at the Newark port as an important step toward increasing jobs in New Jersey.

“‘There is no question that this is the most important engine for economic growth in our state,’ Christie said at a press conference today at the port.

“The Port Newark Container Terminal will invest $ 500 million into the expansion, which will include new construction, the opening of the wharf and an increase in the number of cranes used to unload ships at the facility. The expansion is expected to double the number of containers moving through the port in 20 years.

“‘When global port leaders choose to invest $ 500 million at Port Newark, it sends a strong signal to the entire industry and is another example of business recognizing the benefits of investing in New Jersey,’ Christie said in a statement. ‘This investment will dramatically increase cargo volumes at Port Newark, create stable, good-paying jobs and advance our commitment to a competitive port growth strategy.’

“In addition to the half-billion dollars in private investment, the Port Authority itself will invest up to $ 150 million in improvements to the PNCT facility. The funds will come as a loan that will be paid with interest.

“In June, PNCT restructured their lease with the Port Authority in order to allow the project to move forward.

“Under PNCT’s original 30-year lease, the company was to make a total of $ 438 million in payments, plus $ 63 million in capital investments, though its actual investment has been about $ 250 million, the Port Authority said. The restructured lease deal lasts 50 years and totals $ 522 million in payments, essentially providing an additional $ 94 million in payments plus another $ 500 million in capital spending, in exchange for the additional 20 years and 107 acres.” –

Somebody’s selling the governor a bill of goods. But that’s how landlubber politicians are treated by maritime officials all the time – with one snow job after another. The song never changes:

“We’re knockin’ ’em dead, guv’nah! (Throw some more money our way.)”

Someone should tell the good governor that things aren’t too rosy in Newark. Nor in any other U.S. port, either.

Governor Christie should be told that on May 28th the analysts at Moody’s Investors Service indicated that containership earnings would weaken as more ships are delivered and overcapacity results. And he should be told that Moody’s reported the bad news in – of all places – Newark’s Journal of Commerce.

Two weeks ago, in Cargo Business Newswire, Moody’s stated that, “For the next 12 to 18 months, the global shipping industry’s outlook has been downgraded to “negative” due to overcapacity.

“Overcapacity”. That means that there are not enough goods available to be shipped by the active fleet, and that reduction in supply means that the public is no longer demanding because they no longer have weekly paychecks. The consequent loss of buying power is what happens when very large numbers of people lose their jobs How does that come across to the governor’s advisors that vast amounts of funding should be made available for a port that’s seeing ever-decreasing numbers of incoming containers? Whose payroll are those advisors on, anyway?

Bloomberg just published an article that New Jersey citizens at every level should read, and heed, and the headline says it all: “Container-Ship Plunge Signals U.S. Slowdown”

– “Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year …
– “‘The troubling part is that charter rates are falling in the peak season,’ said Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong. ‘Sentiment among consumers and retailers isn’t very strong.’…
– “U.S. orders for durable goods unexpectedly dropped 2.1 percent in June, the Commerce Department said yesterday, as companies lost confidence …
– “Retailers have pared stock levels as they ‘are so fearful of getting stuck with inventory’ after losses during the 2009 slump, said Barclays Capital analyst Jon Windham. ‘That means people will be trying to stuff in cargo later in the year.’ …
– “Any hope of a rebound in the container-shipping industry has been pretty much washed away for this year,’ said Um Kyung A, a Shinyoung Securities Co. analyst in Seoul.” –

How does any of this tragic news call for the expenditure of millions of taxpayer dollars for port expansion? U.S. ports are primitive, inefficiently operated facilities that have turned away all suggestions that call for a reduction in annual budgets.

Here’s a classic example of that mind set. The Port Authority of NY & NJ Port Guide, states that, “the Port Newark Container Terminal (PNCT), a 228.8-acre (76 hectares) state-of-the-art facility… has the capacity to handle more than one million twenty-foot-equivalent containers annually”.

Our patented system could handle that million TEUs on just 25 acres. Someone should tell the governor that the sale of about 200 PNCT acres would more than pay for our automated, time-saving, cost-reducing, storage, retrieval and delivery system … and the other 200 acres could be utilized in more practical, tax-generating ways. Hotels, condos, residences, businesses – any number of ventures would provide more benefits to the state than a sprawling, poorly operated container port.