US ports to feel the pinch

“The negative outlook is driven by the imbalance between supply and demand in the shipping-line industry, which ports rely on for revenue,” said Myra Shankin, analyst, Moody’s. “Fleets are growing in number and size, but demand isn’t keeping pace. This imbalance will put pressure on shipping lines and the rates they pay US ports.”

Container volume is on track to rise 2-3% overall in 2014, in line with growth in the US economy, according to the report, but, the average rate of volume growth will trail the 7% long term average.

In addition, the growing supply-demand imbalance will see shipping lines renegotiate port fees or seek concessions when port contracts come up for renewal, says Moody’s.

The negative outlook is also supported by trends in vessel design toward larger ships which will require capital investments by US ports to accommodate these new vessels.

While naturally deep ports like Los Angeles and Long Beach are prepared for the time being, those will less depth like Savannah and Jacksonville, will be at a competitive disadvantage as vessels get larger.

The expansion of the Panama Canal and potential shifts to the Suez Canal will also require new capital for ports to stay competitive, the report revealed.

Moody’s says the outlook could change if total vessel container capacity moves more in line with container-volume growth and demand for port services.