Post by homeboy on Dec 20, 2008 10:11:15 GMT -5
The Post and Courier
Maersk Shipping Out
Blames decision on ILA'S rejection of cost-saving arrangement
By Allyson Bird
Friday, December 19, 2008
Maersk Line, in a potentially staggering blow for the Port of Charleston and the South Carolina economy, followed through Thursday on a threat to pull all of its business from the local waterfront.
The Denmark-based company, which is the port's biggest customer, said it would phase out all operations in Charleston over the next two years because it was unable to reach a cost-saving arrangement.
Maersk containers soon will move through Port of Charleston terminals for the last time. The huge shipping line will phase out all operations here over the next two years after being unable to come to terms with port officials on a cost-saving deal.
A quarter of the service reductions will come in early 2009, according to Maersk.
The steamship line's impact on the port is huge. It accounts for 20 percent of Charleston's container business in a time when container volume is down 4 percent for the fiscal year.
In a written statement, Maersk spokesman Dana Magliola blamed the decision on the International Longshoremen's Association, which rejected the company's proposal to move to the so-called common area of the port and allow State Ports Authority workers to perform jobs that otherwise fall to union labor.
"The South Carolina State Ports Authority offered us a workable solution that involved a move into the common yard, but we need the consent of the local ILA to accomplish the move," Magliola said. "The ILA refused to consent, and so we are forced to move. By moving to other regional ports, we will once again be able to compete on a level playing field with other ocean carriers while continuing to provide excellent service to our customers."
Magliola declined to name where Maersk would reroute its ships.
Official statement
Read Maersk's official statement on its impending departure
Ken Riley, president of the ILA Local 1422, could not be reached for comment Thursday.
Riley has previously said that letting Maersk out of its contract with the ILA would cut dozens of jobs at a time when man-hours are down 10 percent. He also has said it would set a dangerous national precedent.
John Alvanos, president of Local 1771 Clerks and Checkers, said the unions and Maersk have worked cooperatively for three decades. "This issue is a non-ILA issue," Alvanos said. "We're being used as a scapegoat for a bad contract Maersk negotiated between the State Ports Authority and themselves."
Reflecting on Maersk pulling out of Charleston by 2010, James Pinckney Jr. said, 'That's a long time (for them) to think about leaving the best longshoremen in the country.' He was in the International Longshoremen's union hall on Morrison Drive waiting for the night's work assignments on Thursday.
Charleston-area resident Ron Brinson, a retired chief executive at the Port of New Orleans and a frequent commentator on local maritime issues, said he was surprised that Maersk publicly pinned all the blame on the ILA.
"Steamship lines posture all the time, and port managers have the skill sets to deal with that. This time it has to be taken seriously because the overall economy has rather suddenly delivered a blow to the ocean-carrying segment of this industry," Brinson said.
Gov. Mark Sanford's office reacted to the news of the shipping line's impending departure with talk of changing the SPA's structure. Terminals currently are managed solely by the ports authority, which for years has bucked industry trends by resisting efforts to lease its terminals to private industry.
"We can either start to heavily subsidize the port operation like they do in Savannah, or we can go toward a landlord-tenant-style partnership," said Sanford spokesman Joel Sawyer. "What we can't do is stay in the middle."
While Maersk currently accounts for 20 percent of the port's container business, it claimed nearly a quarter just months ago and more than 30 percent in years past. That sharp decline in volume helped bring the world's largest container carrier to this decision.
Previous story
Union members reject Maersk's cost-cutting request, published 12/13/08
Throughout this year, Maersk has faced "shortfall" fees for not meeting the volume it agreed upon in its contract with the SPA, which runs through Dec. 31, 2010. The SPA proposed two solutions: reducing Maersk's space and taking back some of the equipment it purchased for the carrier, or move to the common-use area.
Maersk publicly announced its choice to pursue the second option in October. After two tense months, hundreds of members of the three local maritime unions voted unanimously last week to reject that proposal.
Maersk sent a letter to the SPA Thursday afternoon informing the maritime agency it would return all its terminal space by the end of its contract.
The company will move one line service from Charleston — the South Atlantic Express — in early 2009. That service alone represents 25 percent of Maersk's local port calls, or two ships per week.
Bernard S. Groseclose, SPA president and CEO, said the SPA asked the company if it could provide any further assistance but that Maersk wanted the ILA to bend. He said SPA representatives have been in contact with Maersk almost daily since the situation intensified, but that Thursday's announcement came as a surprise.
"I hope that the service is not discontinued immediately, that they will have some presence here in the next few years — a sizeable presence," he said. "My hope is people would understand the overall impact and react to that."
Robert New, owner of Charleston Port Services, said rumors of Maersk's decision to pull out had been circulating on the waterfront for several weeks.
"The ripple effect is truly dramatic," he said. "It affects harbor pilots and tugs and line handlers and warehouse people and chandlers. It's a huge economic loss to the entire region all the way down to restaurant owners and car dealers. People may not realize it, but they're going feel it in months to come."
He said South Carolina's loss would likely be Virginia or Georgia's gain.
College of Charleston economist Frank Hefner said the shipping line's departure, especially one as large as Maersk, would likely delay any economic recovery in the Charleston area.
It could even exacerbate existing problems. "Unfortunately, this may not be the bottom of the market," Hefner said. "That's really a bad sign for us."
Eyeing potential container growth that's expected to follow the completion of a new terminal on the former Navy base and the widening of the Panama Canal, warehouse developers have unveiled plans to build additional space up and down the Interstate 26 corridor.
In the Jedburg area alone, several investment groups are proposing to develop more than 12 million square feet of warehouse space during the next decade.
And a Dubai investment group recently detailed its $600 million master plan to build an industrial hub with more than 4 million square feet of warehouse space in Orangeburg County, with most cargo expected to pass through the Port of Charleston.
Michael White, an El Paso, Texas-based logistics consultant who is familiar with Charleston's port operations, said those plans were based on container-traffic growth projections.
"If the port cannot replace Maersk with an equivalent number of containers through another shipping company, then I think we'd be in real trouble with developers canceling their previous plans because their plans were based on a faulty set of assumptions," White said.
Prentiss Findlay, John McDermott, Katy Stech and Warren Wise contributed to this report.
Reach Allyson Bird at abird@postandcourier.com or 937-5594.
