The need for a national port strategy in any country remains a topic of debate, as its necessity largely hinges on the government’s goals and objectives, as well as the potential advantages and disadvantages such a strategy might offer..
A National Port Strategy has the potential to stimulate economic growth, establish a framework for prioritizing and allocating resources for port infrastructure investments, address environmental concerns related to port operations, and identify potential vulnerabilities in a nation’s port system, which are crucial for national security and defense.. Moreover, it could help the country maintain its competitiveness in the global market..
In this article, industry veteran and expert John D. McCown shares his insights on the significance of a National Port Strategy for the United States and the importance of positioning U.S. ports for growth..
Given the current need to expand U.S. container port capacity to handle growing inbound volumes, we should learn from history. From Ancient Rome’s construction of Portus, the high-capacity port that fueled the Roman Empire, to President Eisenhower’s plan for a national interstate highway system, the U.S. must likewise respond to demand signals by creating an appropriate national plan of response.
More than two thousand years ago, Rome’s growing population outstripped the ability of Italian farms to meet the demand for grain to feed people. As a result, the first consistent international trade lanes were developed with grain and other food products coming from Egypt and other Mediterranean points.
While Rome was twenty miles inland on the Tiber, its curvature and shallowness did not allow those ships to access it directly. The river port of Ostia at the mouth of the Tiber that was established around 400 BC would prove inadequate after some four centuries.
Recognizing the limitations this would place on Rome’s future, Emperor Claudius ordered the building of Portus, a manmade port directly on the Mediterranean.
By digging out a 500-acre basin in the coastal dunes and constructing breakwaters with an entrance marked by a lighthouse, a massive, protected harbor where ships could dock was built, which Emperor Trajan would expand Portus by building another 100-acre hexagonal-shaped basin further inland.
With each side being 1,200 feet long, that addition could accommodate 200 ships at a time. Warehouses and other facilities associated with the registration and distribution of cargo ringed Portus and canals linked it with the Tiber where some cargo would be moved on smaller vessels directly to Rome.
Portus would involve more than 10,000 people moving grain and other cargo through it and unto Rome to feed a population of over one million. Further research detailed Archeology article highlights the key role that Portus played in Rome’s ascendancy, evolving from a mighty city to an empire.
That it was a port project resulting in significant benefits should resonate with policymakers today, as there is a need to expand U.S. container port capacity to handle the growth in inbound volume that is certainly going forward.
Previous actual growth gives us a window to the future. Below is a chart showing the total inbound twenty-foot equivalent units (“TEU”) at various points since 1995:
Figure 1. Total Inbound TEU Volume to Top Ten U.S. Ports in 5-Year Increments
Data assembled by John McCown.
Compared to 1995, we now have over four times as many inbound boxes with basically the same container terminals. That works out to a compound annual growth rate of 5.3%. There are clear signs the U.S. is approaching capacity limits with its present container terminal infrastructure.
The transportation sector is at the top in terms of products that governments can deliver. When President Eisenhower developed his plan for the interstate highway system in the 1950s, it was a national plan that laid out where all the highways would be. A data point that drove that was an early decision that any city with a population over 50,000 would be connected to the interstate network.
There was a realization that cars go to and from where people live. Once all those points were determined, connecting the dots with highway lines was straightforward. The factual data itself drove what would be the interstate map that benefited the entire nation.
That is a good template for setting up a framework to develop terminals that can adequately handle the inbound containers we will have 25 and 50 years from now. Planning should be based on what would deliver the largest collective benefits to the country. Containers and the goods they move in and out of our country are too important to the national economy for capacity decisions to not have greater federal government involvement.
The federal government should commission a detailed white paper that frames where inbound containers should come into the U.S., with factors related to costs, emissions, and congestion being the only guideposts. Such a systematic study would lead to parameters and priorities on the where and what and would become a framework for investment.
Container ports are the gateways to products equaling 29% of the goods portion of our GDP. The collective economic benefit from that trade is irrefutable. Anything that can be done to position our gateways for growth will result in more benefits.
Importantly, anything we can do to avoid a repetition of recent congestion must be a priority. More federal funds based on a national framework should become available with the expected return on investment being the ranking metric.
So what rate of overall growth can be expected over the next 25 and 50 years? That should be the North Star in terms of ensuring we have sufficient container terminal capacity. The chart below starts with total inbound volume in 2022 and shows what it will be in 25 and 50 years at different growth rates. For the minimum rate, 1.7%, or the lowest near-term U.S. GDP forecast was used.
That is below DNV’s forecast that worldwide container mile demand will grow 2.0% annually through 2050. For the maximum rate, 3.76% or the actual growth rate of inbound containers to the US from 2010 to 2020 was used. The midpoint of 2.73% is a reasonable growth rate to focus on and is slightly above the 2.3% growth in real GDP that the U.S. Bureau of Labor Statistics is forecasting for the US through 2030. It is also around half the actual growth since 1995.
Figure 2. Projected Total U.S. Inbound Annual TEU Volume in 25 and 50 Years
Data assembled by John McCown.
That 2.73% growth rate will have inbound boxes 1.96 times the current volume in 25 years and 3.85 times the current volume in 50 years. That is another 27 million and 80 million annual loads, equivalent to 5.4 times and 16.1 times the current total Los Angeles volume. That is a lot of boxes.
So, we will need more capacity. From the recent past, it is clear that many terminals are approaching capacity limits – or will be with growth. We have experienced extraordinary costs to our economy from hitting capacity ceilings. To preclude any repeat of that, we should call for a new federal initiative focused solely on catalyzing the new container terminal capacity, which the numbers show we will clearly need. In addition to the economic risk of being unable to address increased volume, it also becomes a national security risk. Our ports being in gridlock at a time of national emergency would have severe consequences.
The hard numbers are talking to us, and we need to be listening. Our existing container port system is approaching physical limits. Reasonable estimates show we will need additional terminal capacity in 25 years equal to 5.4 times the biggest U.S. port’s current volume and in 50 years that will be equal to 16.1 times that port’s current volume.
It is imperative for both the U.S. national economy and for national security that a long-term plan be developed at the federal level to address inadequate port capacity for increasing volumes.
Just as the Roman Empire determined that its capital city port needed to expand and directed resources to that effort, accordingly, the United States government needs to direct resources to expand U.S. port container handling capacity for a new century of trade and national security.
About the Author
John D. McCown is a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown co-founded a U.S. flag shipping company he led as CEO and he also formerly managed transport investments at a large hedge fund. He holds an MBA from Harvard Business School and his analysis centers on merchant shipping and maritime commerce.
This article first appeared on the Center for Maritime Strategy website..