• M74 Editorial Team

Has the Port of New York and New Jersey Overcome the Pandemic?

By Jameson Ayers

The New York Harbor at sunset. Image provided by Lulwa Taqi.

As COVID-19 enveloped the Northeastern United States (US), forecasts for the Port Authority of New York (NY) and New Jersey (NJ)—which manages the two states’ seaports and airports, and shared roads and railways—read like worst case scenarios. With the global economy grinding to a halt, and the New York metropolitan area becoming the epicenter of the pandemic by March, it became clear that New York City would see a serious reduction in commerce and trade. The uncertainty of how long and how deep this decline would be hung over world markets like a gloomy cloud. Gradually, time revealed the resilience of society and businesses, and the storm clouds began to dissipate over the summer.

Trade in 2020 began on a bleak note in New York and New Jersey. The economic lockdown of China (where COVID originated) resulted in January imports growing at a rate of 0.5%, versus 6.4% one year before, according to IHS Markit data. Things only got slower as the year went on. By March, as COVID gained a foothold in the New York metropolitan area, maritime shipping between New York, China, and the rest of the world virtually collapsed. As a result, the (sea) Port of New York and New Jersey saw a large increase in “blank sailings” from China, especially from March to April. Blank sailings occur when shipping orders are canceled while at sea, forcing the container vessel to bypass certain ports, or, in some cases, return to where they came from. This strategy is used by shipping companies to increase rates by reducing the available capacity on its vessels. Many of these companies desperately sought to raise prices during the initial outbreak, in order to stabilize their balance sheets and avoid a steep drop in revenue.

While blank sailing may benefit shipping companies in the short term, this practice leads to lengthy delays and logistical headaches for businesses awaiting their cargo and sailors eager to return home (after months or years at sea). When ships get rerouted, or changed to different schedules, sailors’ disembarkment and payment dates are often stalled. COVID has worsened this trend. Strict COVID-related travel restrictions in many countries have prevented thousands of sailors from leaving their vessels, especially in instances when their vessel’s shipments are delayed or canceled. In late June, the number of sailors stranded aboard their ships was as high as 400,000—equivalent to the population of the 47th-largest city in the US.

The abrupt halting of cargo and sailors caused maritime trade to slow to a dismal pace this past spring. This matters because 90% of global trade occurs by sea. According to Port Authority Spokesperson Amanda Kwan, blank sailing was causing reductions in cargo volume at the NY-NJ Port by as much as 30%. Meanwhile, the cost of doing business at the Port continued to rise.

According to the New York Shipping Association, COVID-related safety measures to protect employees and cargo caused operational expenses to jump an extra $65,000 per week. For example, the Council for Port Performance (an oversight committee of government and business officials) implemented mandatory temperature checks multiple times per day for every Port employee. This, coupled with massive purchases of personal protective equipment (PPE), caused day-to-day business at the NY-NJ Port to skyrocket.

In May, the Port’s revenue losses over a 24-month period were projected to reach $3 billion. This prompted local lawmakers to call on both New York and New Jersey, along with the federal government, to provide support. In late March, the US Congress passed the $2-trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide assistance to individuals, businesses, and government agencies following the initial outbreak. Originally, the CARES Act did not offer any aid to multistate agencies, like the Port Authority.

However, the Port Authority’s vital role in the Mid-Atlantic region’s 15% contribution to the US GDP ensured that the Port Authority would receive a piece of the massive federal package. $450 million in aid was allocated from CARES for ongoing construction at NY and NJ’s key airports in Newark and Queens (which are overseen by the Port Authority). Still, revenue shortfalls remain a concern for a number of other Port Authority entities whose needs have yet to be addressed by CARES, including the NY-NJ Port. This prompted authorities to consider short-term financing for the Port through the Federal Reserve’s new Municipal Liquidity Facility, via which the Port could essentially receive loans from the Fed through the buying of municipal bonds. While the offer remains on the table, the Port has yet to take advantage of it, as it is still considering other, more attractive financing options from non-government lenders.

Today, the Port Authority as a whole has multiple means of financing available, along with CARES relief, to help cover some of its revenue shortfalls. This fact has allowed the Port Authority to maintain its high credit rating of AA3. In spite of the NY-NJ Port’s case-specific financial constraints, a report by the Federal Maritime Commission (FMC) in early August (as part of an investigation into the nation’s largest ports) found that operations and cargo volumes for the NY-NJ Port were “minimally impacted” by COVID-19. In other words, although times have been difficult for the Port, it could have been much worse.

To craft this report, industry leaders collaborated with government officials to examine the operations of ports nationwide and brainstorm solutions to efficiency problems. These “Innovation Teams” were deployed across the country to chronicle the experiences of port-related businesses affected by COVID. Compared to the logistical and operational problems encountered in the larger Ports of Los Angeles and Long Beach in California, FMC Commissioner Rebecca Dye reported: “Interviews with users of the [NY-NJ] Port, as well as the findings of Innovation Teams assembled for Phase Two, revealed that despite being situated in an early COVID-19 hotspot, Port Authority leadership responded effectively to the challenges that arose. Port users report that, as a result of this effort, facilities in the two states are working well. Especially helpful was the early and active intervention of Port leadership with local and state governments. Also cited was the effectiveness of stakeholder cooperation under the Council for Port Performance.”

By focusing on collaboration between government, industry leaders, and the workforce, through surveys and engagement seminars, the NY-NJ Port was able to better understand the problems in front of them and quickly implement effective solutions. With congestion in the Port mounting, the Port Authority conducted a mass sweep of the area in search of available warehouse space to relieve the tension. The additional 4.4 million square feet of warehouse space they managed to acquire recently has allowed cargo volumes to be managed more efficiently. Ensuring the fluid movement of cargo in the Port and into the market has allowed operations to run more smoothly. The stabilization of the NY-NJ Port in this time of crisis is a rare example of the public and private sector collaborating effectively.

The FMC’s report underscores important improvements made within the Port Authority over the past two decades, which strengthened the NY-NJ Port’s resilience. First, as Dye mentions, better governance—along with increased collaboration and oversight from various elements within the Port—allowed for a more effective and immediate emergency response to the crisis. This groundwork was established in 2014, when business leaders and government officials came together to establish the Council for Port Performance (CPP), a platform to facilitate better dialogue and issue resolution between stakeholders. Additionally, the continued investment in the NY-NJ Port allowed for substantial growth and increased efficiency. Almost $3 billion was spent to strengthen the Port’s infrastructure and raise its operations to modern standards. As a result, NY-NJ is the third-largest port in the US (after Los Angeles and Long Beach in California).

Two other key improvements made over the years were increasing storage space for cargo and port equipment, and investing in better roads and rails to transport goods from the NY-NJ Port to markets around the country. Continued investment since 2004 in the ExpressRail railway system has allowed for the easier transfer of containers from one mode of transportation to another (i.e. ship to truck or train), which has reduced container handling time. The expansion of ExpressRail has also connected cargo centers throughout New Jersey (such as in Newark, Elizabeth, Jersey City, and Bayonne). Additionally, by raising the Bayonne Bridge—a key thruway from Bayonne (NJ) to Staten Island (NY)—from 155 to 215 feet in 2019, a host of “mega ships” were able to bring in much larger volumes of cargo at a time. This prompted authorities to answer the aforementioned call for more storage space. These, among other developments, resulted in almost $5 billion of business activity at the NY-NJ Port from 2014 to 2019, along with the creation of tens of thousands of jobs.

Years of investment in infrastructure, coupled with strong management and leadership, ensure the NY-NJ Port’s resilience and future potential—even in the midst of an economic downturn. As a result, this Port has endured and remains an essential hub for commerce on the East Coast of the US. The renewed attention to the NY-NJ Port comes as the world economy anticipates growing cargo volumes, as e-commerce continues to explode in popularity. With increased activity will likely come increased costs, as shipping and storage space grows in demand (plus a number of new logistical problems that have yet to be seen). The ongoing rise of property costs in NY and NJ could push storage facilities, like warehouses, farther south (as far as Pennsylvania), which would force transportation networks to expand immensely. These developments will bring about new companies and strategies across the New York metropolitan area, as international businesses seek better ways to bring their products into the North American market via the Northeastern US. Soon, ever-improving logistics software and high-speed railways will be required to bring all of the Northeast up to speed with the NY-NJ Port.

The Port of New York and New Jersey will continue to grow in size, prominence, and complexity in the years to come. The two states remain willing to invest in expanding and improving the Port, while the economic trends in e-commerce point to the Port’s growing importance to the East Coast of the US. Still, the uncertain landscape brought on by the pandemic requires careful thought and understanding of market developments, as well as clear and open communications with the ever-changing assortment of businesses that thrive along the Port. The need for storage and transport channels will become more important as e-commerce expands the limits of business and facilitates exchanges from all over the world. This means Ports such as New York-New Jersey will become even more essential as nodes between companies and consumers around the world.

Jameson Ayers is an intern at M74 from New Jersey. He studies Economics at Fordham University in New York City. His interests include financial technology and its effects on behavioral economics.

The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.


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