Containerships Rerouted Away From Storm-Battered Northeast

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November 2, 2012

Sandy-related troubles at the Port of New York and New Jersey are forcing carriers to divert their ships to other ports, disrupting the supply flow for retailers and manufacturers already hurting in the storm’s aftermath.

The third-largest port in the nation said Friday evening that it checked many of its facilities and was opening most of its waterways to limited traffic. However, its terminals still didn’t have power, so it couldn’t test its equipment and systems, including the enormous loading cranes. The storm washed away containers, damaged port terminals and may even have shifted some shipping channels, according to shippers who use the port, adding they expect it will take through the weekend to fully reopen.

Maersk Inc., the world’s largest container-shipping company, has begun diverting its cargo to Halifax, Canada, Baltimore and Philadelphia—but most of its ships are going to the Port of Virginia in Norfolk, the deepest port on the East Coast and one of the largest.

Maersk had three of its own ships, as well as three ships it was co-operating with other carriers, scheduled to come to port in New York when the storm hit. “These vessels off the coast of the northeast, [were] burning fuel, just sitting there,” said Timothy Simpson, spokesman for Maersk Line North America. “We got to the point where there wasn’t any other choice.”

The carrier, based in Copenhagen, is notifying customers about the decision to send material to other ports and telling those customers they will have to pay the additional cost of transporting the shipments to their final destinations. Costs will vary by customer and location, he said.

Meanwhile, Taiwan-based Evergreen Line, the fourth-largest ocean container carrier in the world, confirmed Friday evening it has invoked force majeure clauses in contracts for cargo on three of its ships scheduled to arrive this week or early next week at the New York-New Jersey port, according to a company spokeswoman Barbara Yeninas. The clause is usually invoked when parties can’t fulfill their contractual obligations because of natural disasters.

The carriers’ customers have to factor in the additional time it would take to move the cargo from places like Norfolk to the New York area. The holiday shopping season looms, and it can take days for goods to make it from ship to store shelf. Many companies also maintain lean inventories.

“They’ve got to get this moving by Monday. They have to,” said Pat Moffett, vice president of International Logistics at Voxx International, a consumer-electronics company based in Hauppauge, N.Y.

Mr. Moffett said he had been expecting the arrival of containers filled with DVD players, headsets and speakers on several ships at the port authority’s Port Newark in New Jersey before it was closed Monday.

On Thursday, he learned most of his shipments had been diverted to Norfolk. Voxx has its own distribution center near Norfolk, but Mr. Moffett said getting the goods to retail customers in time for the holidays would be a sprint.

“A one- or two-day shutdown is a problem, but the delay can typically work through the system. But the longer ports shut down—the impacts begin to exponentially increase,” said John Martin, president of Lancaster, Pa.-based Martin Associates, port and maritimeeconomic planning consultants. When ships have to reroute, he said, logistics become more complicated. Delivery costs increase and perishable cargo can be lost, he said.

Mario Moreno, an economist with the Journal of Commerce, said he estimates that cargo will have been delayed in reaching its final destination “between 10 and 14 days if everything goes back to normal by Monday as expected.” East Coast imports are comprised mainly of home goods, along with auto parts and tires, toys and apparel, he said.

The Port of Virginia said Thursday it had received cargo from two vessels diverted from the Port of New York and New Jersey and was braced for much more. “We know we’ll be challenged to keep everything flowing, but we can handle that,” said Rodney W. Oliver, interim executive director of the Virginia Port Authority.

Norfolk port officials said they don’t have an estimate of the amount of cargo that may be diverted to their port, but they are putting additional harbor pilots, tugs, and U.S. Customs staff to work to manage the increase.

Minda Balcius, owner of Carmel, Ind.-based USA InterCargo LLC, which exports cars, auto parts and heavy construction equipment, said he wouldn’t send export shipments now stuck in his New Jersey warehouse to Norfolk because the cost would likely be prohibitive to customers.

Shipping a container full of auto parts to Dubai, with all expenses including duty fees, costs about $3,000 from New York, he said. Commissioning a truck to take the container to Norfolk to be shipped out from there would cost another $1,500 to $2,000, he said. “None of our customers will want this.”

Still, if the port in New York and New Jersey stays closed much longer, Mr. Balcius said he would have to consider it, since he is running out of warehouse space. “Next week will be a very important week for us,” he said. “If the port in Newark is still closed we will have to start rerouting everything.”

-By Betsy Morris And Cameron McWhirter. (c) 2012 Dow Jones & Company, Inc.
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