Posted on February 25, 2016
By Asaf Ashar, JOC.com
Charleston and Savannah are adjacent ports, serving similar ships and hinterlands and, therefore, highly competitive. Both were vying for deeper channels. After 15 years of relentless struggle, in 2012, the U.S. Army Corps of Engineers approved a 47-foot channel for the Port of Savannah; then, in 2014, the corps approved a 52-foot channel for the Port of Charleston, providing it with an important competitive advantage over Savannah. Strangely, the subsequent corps decisions to deepen adjacent ports handling the same ships to different depths was made by applying the same assessment methodology, based on national benefit/cost ratio.
The corps’ channel assessment methodology is based on speculative and, in some areas, flawed assumptions, especially on the benefit side. First, the methodology requires developing a highly detailed, 50-year forecast of a port’s traffic by trade lane, service pattern and vessel size in the notoriously volatile shipping market. Second, the forecast disregards port competition, resulting in an internal contradiction: deepening Charleston is likely to increase its market share, traffic and respective national benefits — and reduce Savannah’s. Should Savannah’s already-approved depth be reduced in line with the reduction in its benefits caused by Charleston’s deepening?
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