The CEO of Arawak Cay Port Development company yesterday defended the company against accusations that its fees had forced a shipping operator out of the market to the detriment of the construction industry, claiming that the "story is much bigger and deeper" than port costs.
Meanwhile, contrary to claims that Crowley's decision to leave the Nassau market after 19 years would lead to increases in the costs of construction materials coming out of Jacksonville, Florida, Michael Maura Jr. said that he anticipates that shipping giant MSC will pick up the demand left by Crowley in this area.
Overall, MSC, Tropical and the smaller Bahamian carriers are "sufficient to serve the (Bahamian) market" at large, he added.
MSC launched a Jacksonville to Nassau via Freeport route on June 28th and its rates, he said, are currently lower than those which were being offered by its competitor.
Speaking with Guardian Business in the wake of news that Crowley Maritime Corporation would ends its Jacksonville to Nassau service on August 2nd in light of an inability to cover "significant costs" that had made servicing the route "unsustainable", Mr. Maura said that Crowley had faced a "perfect storm" of factors that led to an erosion of its rates and was not simply a victim of higher port costs, as has been claimed.
Among these factors were the fact it had failed to win much of the business involved in shipping cargo for Baha Mar, losing out to Tropical and MSC; suffered overall lower container volumes as a result of the economic downturn, and was operating in a highly competitive, saturated market in which it went up against some of the world's biggest operators.
He added that the company had to some extent become a victim of the "almost non-existent" base costs it had benefitted from prior to the new port coming into effect and had not "conditioned itself" for the new fees which Maura said were reasonable in light of the $90 million investment in the port.
Nonetheless, these fees remain but one small portion of the overall environment which led to Crowley's decline, suggested Maura. He added that Crowley had informed him that they had not made money on their service into Nassau for seven years, with rates that are four per cent lower today than at that time.
"These are very difficult times for the shipping industry and they have been for a long time, and it was kind of the perfect storm when you have a situation where you have too many carriers in the market from a capacity perspective, then a global recession and volumes drying up on what is already an excess capacity situation, and everyone is then beating the hell out of each other in terms of rates just to keep cargo on their ships."
The nail in Crowley's coffin, suggested Maura, was the decision of MSC - the world's second largest shipping company - to begin its Jacksonville to Nassau service on June 28th.
"A carrier in a market targets a commodity or customer segment and introduces an additional vessel call at below market rates. This forces the carrier that had previously served the customer and/or provided a sailing from the specific origin to reduce rates in order to hold their volumes. The attacking carrier then further reduces their rates to achieve their objective," explained Maura of the MSC versus Crowley scenario.
As a much larger shipping company, MSC could afford to offer lower rates for the same service and cover the loss through business elsewhere. Crowley seemed "focused on profit" while MSC has been "focused on market share," suggest the port chief.
However, Maura claimed there is little reason for customers to be concerned about the dominance of MSC. "They can easily serve the Jacksonville, Florida demand," without causing costs to rise, he said, noting that MSC's weekly TEU (twenty-foot equivalent unit) capacity into Nassau increased from 470 at the beginning of June to 1,870 by the end, with the addition of the Jacksonville service via Freeport. In total, weekly TEU capacity coming into Nassau increased from 2,178 to 2,618 over the course of June. In response to those who fear that MSC may use its dominance to raise prices eventually, increasing costs for Bahamians, Mr. Maura said he sees this as unlikely. "There will be a point when MSC or Tropical adopts a profit focus. An increase in rates, however, also leads to new carriers entering the market so any effort to increase rates will likely be tempered by the threat of new players," said Maura. Messages left yesterday at Crowley were not returned up to press time yesterday, and MSC's Bahamas and Nassau managers were both said to be on vacation when this newspaper attempted to reach them for comment.
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