Jamaica container hub suffers extended operational disruptions

The following article was written and first published by IHS Fairplay. Website: Fairplay.ihs.com. It is printed with their permission.

For almost the entire month of August, vessel interests using the Kingston Freeport Terminal Ltd (KFTL) container transshipment hub in Jamaica have suffered lengthy turnaround delays due to problems in transitioning to a new terminal operating system (TOS).

Mainline and feeder schedules have been disrupted, subsequent arrival windows have been missed and ships have been forced to speed up and spend more on fuel, services have been diverted to other hubs, and customer confidence in KFTL - an entity majority owned by CMA CG - has been shaken. The question now being asked by terminal users is whether current problems, which are not yet fully resolved, represent a one-off event or an ominous sign of things to come.

Over the past several weeks, Fairplay has spoken to numerous sources regarding the ongoing situation in Jamaica, including impacted carrier and shipper customers, individuals with direct knowledge of the situation within KFTL, and executives at competing ports who have been experiencing the ripple effects. Corporate policies and business sensitivities have prevented most sources from speaking on the record.

The problems began after a scheduled transition from the terminal's Cosmos TOS to a Navis TOS, conducted on August 5. "It turned into a complete disaster," claimed one customer, who said that moves per hour fell drastically in the following week, particularly for outbound containers. "It was clear that the whole in-yard location system was not accurate and people were wandering around, looking for boxes," he said.

NOT YET FUNCTIONING

Container ships backed up, and eventually, vessels were diverted - including at least three vessels sent to Cartagena, Colombia. Today, over three weeks after the TOS transition, the problems have still not been fully resolved, the terminal is not yet functioning normally, and network effects still extend beyond the island. As one source puts it, the situation in Kingston exemplifies how connected the Caribbean shipping network is: "The moment one of the terminals goes out, suddenly the whole system falls apart - it's a domino effect."

Internal correspondences among customer representatives provided to Fairplay and dated 25 August claimed that "KFTL is unable to locate containers in the yard"; "vessels are having to omit calls at Kingston owing to projected delays"; and "immediate action is required to restore the port operations to an acceptable level of productivity and to repair the damage that has been done to the reputation of the port of Kingston".

One of the largest services utilising the Kingston trans-shipment hub is a joint service from Asia, via the Panama Canal, comprising vessels from CMA CGM, Hapag-Lloyd, Hamburg Sud, and COSCO, which is called PEX2 by CMA CGM and JCS by Hapag-Lloyd. In the Caribbean Basin, this service calls at Panama's MIT; Cartagena, Colombia; Kingston, Jamaica; and Caucedo, Dominican Republic. The ships in the service, which were upgraded following the Panama Canal expansion, range in size from 8,400 to 10,000 teu.

Hapag-Lloyd's 8,411-teu Northern Jupiter was the first vessel in the service to arrive at KFTL after the TOS transition problems ensued. AIS Live data confirm that the vessel was in the vicinity of Kingston for five days. The next ship in the string, Hamburg Sud's 9,034-teu San Felipe, also ran into problems. Fairplay was provided a letter of protest signed by the ship's master, Captain Vartan Petrosyan, on 20 August, outlining issues during the Kingston call (see a copy of the letter below). "Fearing possible delayed arrival [at the] next port and unforeseen consequences [of a] sudden cut of cargo, I hereby lodge a letter of protest on behalf of the owners and managers of my good vessel and reserve the right to amplify or extend the same in the future as the need may arise," wrote Petrosyan.

With turnaround delays lingering for almost a month, multiple sources claimed to Fairplay that issues for customers have been compounded by a lack of sufficient communication on the part of KFLT. "We know they're in trouble, but what has been most annoying is that they [KFTL] do not seem to be able to give us a good forecast of what is possible, even for the next few days," said one source. According to another customer, "Communicating with the terminal is painstaking. Response time is extremely slow."

LABOUR ISSUES

The longer-term fear is that even after the TOS-related complications are resolved, KFLT customers will continue to face delays due to labour issues. The message from the terminal is that the problems in August have been unfortunate, but they fall in the category of growing pains, not long-term issues, with labour "100 per cent on board"; Navis technical support is on-site to help resolve the problems, which are not unusual in TOS transitions globally, and the new system will ultimately provide significantly better customer service. Regarding vessel diversions, Fairplay was told by a source with direct knowledge of the situation that CMA CGM suspended some calls to ease the pressure on related-party KFTL. Fairplay was also assured that the terminal is moving to address customer service issues "in a matter of days, not weeks".

The service breakdown in Kingston - one of the largest trans-shipment hubs in the Americas - has occurred as that facility is handling higher volumes and is expanding its facilities. KFTL began a 30-year concession at the Kingston terminal on July 1, 2016, taking over operations from the Port Authority of Jamaica (PAJ). Executives at MIT in Panama and Cartagena in Colombia confirmed to Fairplay that CMA CGM has shifted significant volumes from those terminals (particularly from Cartagena) to Kingston since the beginning of the KFTL concession. PAJ statistics confirm rising volumes. In July, prior to the TOS problem, KFTL's trans-shipment volume totalled 851,618 tonnes, the largest monthly total since October 2011.

KFTL-financed expansion of new terminal capacity as well as dredging has been underway since last year. Fairplay has been told that dredging is nearly complete and the facility's current capacity of 2.1 million teu/year will increase to 2.8 million teu/year by the middle of next year and to 3.2 million teu/year by 2019.

Asked by Fairplay to comment on the current problems in Jamaica, the Shipping Association of Jamaica, which represents local shipper interests, responded on 25 August, "The Shipping Association of Jamaica considers the current difficulties at the Kingston Freeport Terminal Limited as representing the challenge of transition and growth, and while it is arguable that there may have been better communication among the various stakeholders at the outset, we are pleased that all parties are working together to restore normal operations. We maintain dialogue with all the parties and while there are reports of ongoing operational difficulties, the consensus is that there is constant improvement in the operations of the terminal. We expect that within a few more days, domestic and international customers of the terminal will find their usual seamless service restored."