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January 1997

KORNEGAY

No. 1

2 Shipping in the 21st Century

America Africa Delmas Line 5

MAGAZINE is publishedAuthority, P.O. Box 2562,

7252-2562, and is distributedEndustrial and transportation

United States and foreign coun-

STAFF

.......... Ria Griffin............... Ann Bordelon

¯ . . Marcella Cabrera......... Susan Humphrey

...... Sheila Robbins................... Ray Soto

............ Georgia Smith

and permission isuse of any original mate-to the Port of Houston

address changes,may be obtained by

HOUSTON MAGAZINE. PHA Web

6 Edmonds Joins Port Commission

ON THE COVER

What will happen next in the world of transportation?

Tire Port of Houston Authority’s executive director dis-

cusses current trends in the industry, as well as predictionspublished during the past year. See Page 2.

COMMISSIONERS

FIELD OFFICES1650 Sycamore Ave.,

Suite 23Bohemia, NY 11716

Phone: (516) 244-7428Fax: (516) 244-3757

MONTERREYAv. San Pedro #801 Nte.

Local #27Col. Fuentes del Valle

San Pedro G. Garcia, N.L.C.R 66220

Phone: (528] 335-7341Fax: (528) 335-3641

PHA: (95-800) 468-7678

MEXICO CITYBosques de Duraznos #69

Desp. 1105Col Bosques de las Lomes

Mexico, D.F.C.I~ 11700

Phone: (525) 251-3622Fax: (525) 596-7909

JOHN WEBB JR.Commissioner

NED HOLMESChairman

ROBERT GILLE’n’ECommissioner

CHASE UNTERMEYERCommissioner

LEROY BRUNERCommissioner

VIDAL MARTINEZCommissioner

JAMES EDMONDSCommissioner

What’s Next?

Shipping in the 21st Century

f you think transportation hasundergone a revolution in recentyears, hold on to your seat. The

industry is still evolving, and morechanges are afoot as transportation com-panies prepare for the new millennium.

"I think the most significant develop-ments we’re seeing in the industry --and will continue to see -- can beattributed to four trends: technologicalinnovations, increased emphasis onintermodalism, the changing roles oftransportation service providers andchanges in world markets," says Tom

Kornegay, executive director of the Portof Houston Authority.

"All four of these factors already havehad a huge impact on the Port of Hous-ton and other segments of the industry,"adds Kornegay. "These trends are likelyto gain increased n~omentum, and inHouston we’re planning accordingly."

Electronic Data InterchangeOn the technological front, elecmm-

ic data interchange (EDI) will probablycontinue to spawn the most significantindustry advances. In a Distribution mag-azine article earlier this year, one consul-

rant suggested that changes in computertechnology will be as radical over thenext 15 years as they were during thelast decade and a half. Bob Crowley,senior vice president of internationalconsulting for Research Triangle Con-sultants, said he fi~resees a time whenvarious modes of transportation willcombine their communications into asingle, standardized network. Shipperswill be able to book freight through cen-tralized computer systems, and theremay be fewer distinctions betweencarriers.

It | 1 l! ! !

\

Kornegay agrees with Crowley’s spec-ulations and adds: "Port operators arelooking for more and more ways to inte-grate EDI functions into their services.A port that now uses EDI to communi-cate with only a dozen or so carriers willeventually rely on computers to ex-change data with nearly all its steamshiplines. At some point, truck and rail oper-ators and other service providers willprobably become an integral part of theEDI link, too."

It all adds up to seamless service forthe shipper. EDI increases the speed andaccuracy with which information ispassed along from steamship line tostevedore to port. With timelier andmore accurate data, every entityinvolved can perform better. Conse-quently, the transitions are smoother ascargo is passed from ship to rail to truck,or vice versa.

"More and more shippers are insistingthey will only move freight with oceancarriers that have EDI systems," saysKornegay. "They want to know preciselywhere their cargo is at any point in theshipping process, and they expect it toarrive right on schedule. At the Port ofHouston, we’ve offered EDI for severalyears now and are looking for new appli-cations for this technology."

Bigger and Faster VesselsAnother huge development in the

industry -- both literally and figurativelyspeaking -- is the emergence of biggerand faster ships. First there were Pana-max vessels, then post-Panamax. What’snext? The advent of vessels too large tonavigate the Panama Canal is one ofseveral factors that has prompted inter-

est in developing a Nicaraguan shipcanal. And the new administrator of thePanama Canal, Alberto Aleman Zubi-eta, says the Panama Canal Commissionis undertaking an $895 million modern-ization program aimed at keeping thecanal a viable transitway.

"Some of the newest container ships,called ’supercontainer’ vessels, can carry

It all addsup to

seamlessservice forshippers.

as many as 5,000 20-foot boxes, insteadof the standard 3,000 or so units,"Kornegay says. "As ships continue to getbigger, we can expect to see an increas-ing number of ocean carriers turning torationalization; they’re forming vessel-sharing agreements with other lines andconsolidating ports of call. As this trendcontinues, ports will have to respondwith larger cranes and deeper-draft facili-ties."

Preventing Terminal CongestionMost experts agree the coming years

will herald an increasing reliance onintermodalism. Port operators will haveto focus their attention on improvinglandside access and alleviating conges-tion within their terminals. At theannual convention of the AmericanAssociation of Port Authorities in Octo-ber, one breakout session was aptly titled"Landside Access to Ports -- Will TradeGrowth Outpace Infrastructure Involve-ment?" Panelists at the session criticizedports for focusing more attention onsteamship connections and the needs ofocean carriers than on the issues of land-side and intermodal connections.

"Some analysts predict intermodaltraffic will grow from its current level of8 million loads annually to as high as 15million loads in the next 15 years," saysKornegay. "This puts immense pressureon ports to turn trucks around fasterwithin their terminals and improve railaccess."

Intermodal improvements are a vitalpart of the Port of Houston Authority’sMaster Plan. The Port Authority hasmet regularly with motor carriers andrail operators to discuss ways to facilitatetraffic through PHA terminals. The PortAuthority also is receiving federal fundsunder the Intermodal Surface Trans-portation and Efficiency Act of 1991 tohelp finance two rail projects. Plans callfor expanding the rail ramp point at Bar-bours Cut Container Terminal and con-structing additional lead track to theterminal, which in turn should alleviate

(Continued on Page 4)

What’s Next?((~mtirzuecl from Page

truck traffic. In addition, the PortAuthority has built more truck entrylanes at Barbours Cut in recent years andexpanded the hours at the truck gates.

Many of the dramatic changes thatwill result in the years ahead will promptchanges in the roles traditionallyassuraed by port operators, steamshiplines and other segments of the industry.

Offering More Service"Port operators are having to become

more flexible in dealing with their cus-tomers if they wish to stay competitive,"says Kornegay. "Increasingly, ports areworking with the end-user -- the ship-per, the importer or exporter -- to workout competitive transportation packages.No longer do they just negotiate withthe steamship agent or carrier."

Shippers are becoming more selec-tive, too, and are looking more closely atthe way in which transportation costsaffect their bottom line. Some shippersare trimming the list of steamship linesthey use. General Motors Corp., fi)r

example, has reduced the number oflines it used from 54 to 22. Companyofficials say this allowed GM to simplifyits lines of communication, reduce trans-portation costs through w~lume dis-counts and make its logistical operationsmore efficient.

The marine transportation industrycan also expect to see more mergersamong ocean carriers and the formationof"megacarriers." Federal MaritimeCommissioner Joe Scroggins Jr. recentlytold an industry audience that heexpects to see a growing number ofmergers like the one announced byNedlloyd Lines and P&O Containersearlier this year.

Maturing World MarketsLast but certainly not least is the

matter of the many dramatic changestaking place in world markets. Theworld in which transportation operatestoday is not the same as it was 10 oreven five years ago; nor will it be thesame in another five years. The NorthAmerican Free Trade Agreement, Mer-cosur and other multilateral trade pactswill change the face of world trade andthat of transportation logistics as well. In

Latin America, Asia and other emergingmarkets, shippers are benefiting fromincreased economic stabilization; devel-opment of new transportation infrastruc-ture; and privatization of ports, railroadsand other industry segments.

Shippers are eager to establish a pres-ence in these developing markets; conse-quently they are placing increasingdemands on carriers. As an article inTrade & Distribution earlier this yearpointed out, shippers are counting oncarriers to transport a wider variety ofproducts and offer service to a growinglist of destinations. They want vesseloperators to handle increasingly com-plex logistical arrangements and providevalue-added services such as inlandtransport, electronic cargo tracking andeven coordination of warehousing.

"This is a time of incredibly rapidchange for shippers. The transportationindustry is having to move forward inhigh gear to stay competitive, and I don’tsee the pace slowing any time soon," saysKornegay. "The next few years no doubtwill be challenging fi~r all of us, but theyalso will be very exciting."

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conomic and political insta-bilities make West Africa oneof the world’s most challeng-

ing trade lanes for vessel operators.Some ocean carriers have tried theirluck in this region and failed, while oth-ers won’t even attempt sending shipsthere. Yet one company, Delmas, hasspecialized in the West African trade formore than a century.

Dehnas is a French steamship compa-ny owned by the Bollore Group ofFrance. Dehnas is also the parent com-pany of America Africa Delmas Line(AADL), headquartered in Houston,Texas.

AADL underwent significant changesin 1996, changing its name from DelmasAmerica Africa Europe Line, relocatingits headquarters from Iselin, New Jersey,to Houston and making changes in itstop management. John Pascoe wasnamed the company’s chief executiveofficer; he previously was vice presidentof North American operations for Aus-tralia-New Zealand Direct Line.

Although the company has a newname and a new home, AADL officialssay, it still offers the same reliable serv-ice AADL has always provided to WestAfrica.

"The West African trade has been aDehnas specialty for over 100 years, andthe infrastructure we have created with-in the various countries can only benefitour customers," says Pascoe.

AADL offers services for container-ized, breakbulk and perishable products

A truck bound for West Africa is loadedaboard AADL’s M/V PHAEDRA at the PHATurning Basin Terminal.

between the United States andWest Africa. Three AADL ships call atHouston, providing direct service every23 days. West African points of callinclude Abidjan, Takoradi, PointeNoire, Cabinda, Luanda, Matadi andPort Gentil.

Using Abidjan as a strategic hub,AADL can feed cargo to virtually anyother West African port through theextensive network of Dehnas vessels ply-ing the coast.

A Wide Array of Cargoes"We have designed our service to

meet the many needs of the Houston

transportation community including awide array of cargo-handling capabili-ties," says Pascoe. "AADL can handle alltypes of cargo including containers,breakbulk/project, rolling stock andoversize cargoes.

"Looking to the future, AADL haspositioned itself to service the GulfCoast transportation community wellinto the next century," he adds.

AAI)L has access to the vastresources of the Delmas network, whichincludes a fleet of more than 70,000

(Co,lti,med (m FaTe 9)

very Port of Houstoncommissioner brings a uniqueperspective to the Port of

Houston Authority’s governing body.One of Jim Edmonds’ strongest assets, nodoubt, is his extensive experience instate and local government.

A commissioner versed in the intrica-cies of state and local government bringsinvaluable leadership to Houston’s port.After all, the Port of Houston Authorityworks with state agencies and Texas leg-islators on a variety of transportation-related issues. And the Port Commis-sion’s seven members are appointed byofficials of Harris County, Houston andother communities along the HoustonShip Channel, communities that dependon the port as a source of employmentand revenues.

Edmonds, a Houston businessman,was appointed by Harris County Com-missioners Court recently to serve onthe Port Commission. He fills the posi-tion held by Howard Middleton, whoserved on the commission for 18 years.

"I hope that as a port commissioner Ican make a contribution, because of thenature of my business, by helping the

port with legislativeprocess issues that involve

local government,"Edmonds says. "The port is a

stable entity. It continues togrow and make a contribution to

the community. I think the PortCommission will give me an opportunityto give back to the community."

Years of ExperienceEdmonds has adopted Houston as his

home town. He grew up in Los Alamos,New Mexico, and originally came toTexas to attend Abilene Christian Uni-versity. While working on a baccalaure-ate degree in government, he becameacquainted with a son of Houston MayorLouie Welch and eventually with the

James Edmonds recentlywas appointed to representHarris County on the Portof Houston Commission.

mayor himself. Upon graduating fromcollege, he started his public servicecareer by accepting a position as execu-tive assistant to Mayor Welch. (The jobpaid $495 a month; that’s $495 a monthmore than he is paid as a port commis-sioner.) In fact it was Welch, a lay minis-ter, who said the inw~cation duringEdmonds’ swearing-in to the Port Com-mission recently.

Edmonds, who has been involved inlocal and state government in one formor another for three decades, served asadministrative assistant to Texas Gov.John Connally during his third term inoffice. When Connally decided not toseek a fourth term, Edmonds returned tothe Houston mayor’s office, then fol-lowed Mayor Welch to the Houston

-F .....................................................

Chamber ~f Comlnerce. Later he xw)rkedas a consulting principal with KPMG-Peat Marwick then became involved inpublic finance investment banking.

"Investment banking is a very politi-cal business, and I enj~y the politicalprocess," he says.

Three ycars ag~, Edm~nds started

Edmonds & C~., which assists corporateclients in dealinR with legislative andregulatory issues and business develop-ment matters, t le also helps orgm~izegrassroots supp~rt and lobbying ef}~rtsfi)r client needs.

Business-like ApproachEdmonds believes the n~le of a com-

missi~ner is to set policy fi3r the Port

Authority, provide overall guidance tothe staff and approve the authority’sfinancial structure. His rolc, he says, "isnot tc~ meddle in everyday manage-ment." Rather, hc hopes t(~ use his expe-rience to facilitate the Port Auth~rity’sinteractions with governmental entities.

"I also think a commissioner has aresponsibility to make surc the port isoperated m a businesslike manner and toshepherd those tax dollars to make sure

they arc not frittered away," he says.Edmonds points to several issues that

he sees as critical t(~ the Port of H~us-ton’s future. Topping the list is the Hous-ton Ship Channel widening anddeepening pr~)ject, which Congrcss

included in the Water Resou:ces Devel-opment Act of 1996. Althou:gh the act isn~w law, C~ngress will decide next }earwhether to earmark federal funds fi~r p’artof the project’s cost. Harris C~)unty vot-ers have approved the sale of b~nds to

Emd the local share ~| the pr~jcct c~,sts.Another pri(~rity, he says, is the

extension t~f interstate 69 ttnt~ugh t h)us-

ton as a "NAFTA highway.""The port needs to be inv,~lved in

this issue," he says. "Like the channelwidening and deepening project, 1-69

will mean new business fi~r tl te P~rt ~)tI l~uston."

Above: At his swearing-in,Edmonds (center) visitswith Harris County JudgeRobert Eckels (left) andNed Holmes (right), chair-man of the Port Commis-sion.Right: Edmonds addressesguests who attended theswearing-in ceremony.Behind him are (from left)Judge Eckels and Port ofHouston CommissionersVidal Martinez and RobertGillette.

Edmonds(Conth~;wd/~’om Page 7)

He also sees a need to develop acooperative relationship with tile Port ofGalveston. "1 think eventually there willbe one major Gulf port, and that willeither be Houston or New Orleans."

Do A Good JobAsked if Harris County commission-

ers, who appointed him, gave him anyparticular directions as to how he shouldproceed as a new commissioner,Edmonds laughs and replies: "They toldme to do a good job and said they wouldcheck on ille,"

Edmonds has several other civic activ-ities to his credit. He has served on the

San Jacinto River Authority board forseveral years and is currently the board’spresident. He is president of the GreaterHouston Association, which works withlocal officials on issues of importance tothe business community. He also serveson the board of the Memorial HospitalSystem and on the system’s FoundationBoard. The Memorial Hospital System isthe largest owner of nonprofit hospitalsoutside the Texas Medical Center.Edmonds says this service has been mostrewarding because the hospital operatesin a very businesslike manner, keepingcosts low and service high.

Edmonds’ wile, Kay, is a retiredschoolteacher. She taught in the Hous-ton Independent School District fi~r 30years. ~1

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West Africa(OmlimtedJ}’om Page 5)

containers. Dehnas furnishes equipmentat all major port and interior locations,and the company’s intermodal networkprovides transport from every major U.S.rail hub through Houston or New York;inland trucking services also are avail-able. The Dehnas fleet allows AADL tooffer a long list of transshipment optionsfrom nearly anywhere in the world toalmost any West African destination.Dehnas also operates a number of marineterminal and stevedoring operations inWest Africa.

Complementing AADL’s fleet of shipsand equipment is another vital resource-- the company’s staff, Pascoe says.AADL encourages its personnel to par-ticipate in the problem-solving and deci-sion-making process. The companymaintains a Total Quality Managementprogram that encourages input fromboth customers and staff. AADL’s cus-tomer service center is open from 7 a.m.to 7 p.m. Central Standard Time, so sup-port is available to clients throughoutthe business day.

People Make the DifferenceSuggestions from customers and em-

ployees inspired many of the features in-corporated into AADL’s mainframecomputer system. The system was de-signed in-house to accommodate thecompany’s particular needs; it allowsAADL to have real-time interactionwith vendors and agents and providefaster and better information to custom-ers.

As part of its commitment to quality,AADL has set a goal of turning aroundcustomer documents error-free within 24hours. Customers may fax bills of ladingto AADL toll-free for processing; the in-formation will be returned overnight bycourier.

"AADL is a people-oriented companydriven by quality and customer service,which can be obtained by having wellinformed and educated employees," Pas-coe says. "We have made a commitmentto train our employees to be more cus-tomer responsive and conscious of cus-tomer overall requirements. At the endof the day it is people that make a differ-ence, not ships or containers."

AADL may be contacted by tele-phone at (800) 447-2235 or by fax (800) 556-2235.

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Hamburg-Sud Observes 125th AnniversaryOn Nov. 4, 1871, eleven merchants

in Hamburg, Germany, decided to estab-lish a new shipping company in order tocreate new and faster trade links withSouth America. The new company’sname translated into English as Ham-burg-South America Steamship Co.,known also as Haruburg-Sud.

That company, now known as Ham-burg-Sud The Shipping Group, recentlyobserved its 125th anniversary. Ham-burg-Sud and its member lines, includ-ing North American subsidiaryColumbus Line, provides logistics andmarine transportation services linkingEurope, the Mediterranean, both coastsof North America and South America,the Caribbean and Australia/NewZealand.

Hamburg-Sud celebrated more thanits anniversary in 1996. The companyrecently received simultaneous certifica-tion fi~r both ISO 9001 and ISM codecompliance. Hamburg-Sud is one of thefirst major liner operators in the world toachieve full ISM certification.

Hamburg-Sud, a member of the Oetk-er Group of companies headquartered inBielefeld, Germany, initially grew steadi-ly into the first part of the 20th century.However, with the outbreak of WorldWar 1, all vessels in foreign ports wereseized. The Treaty of Versailles requiredthe surrender of all German vessels over1,600 gross registered tons, leaving Ham-burg-Sud without a single ship.

In the decades after World War I,Hamburg-Sud rebuilt its fleet and pros-pered, diversifying into the luxury oceanliner industry. In 1934, Dr. August Oetk-er acquired a 25 percent share in thecompany and by the late 30s, Hamburg-Sud’s fleet reached a new peak of 52 yes-

sels with four more ships under construc-tion.

But World War 1I again diminishedthe fleet, and Hamburg-Sud was fi)rcedto surrender its remaining vessels still inservice, in 1942, Rudolf August Oetkerjoined the Hamburg-Sud board of direc-tors and became instrumental in the sec-ond rebuilding of the organization. In1954, he established the company’sRudolf A. Oetker tramp services, whichincluded bulk carriers, tankers and con-ventional reefer vessels.

Hamburg-Sud established a NorthAmerican service in 1957 under thetrade name Columbus Line, which isbased on Hamburg-Sud’s telex address.Columbus Line’s service linked the eastcoasts of North and South America andin the early 1960s, Columbus begandeveloping services from the NorthAmerican East, West and Gulf coasts toAustralia and New Zealand.

In 197 l, Columbus Line placed ordersfor construction of a fleet of modern,fully containerized vessels to ply theAustralia/New Zealand trade. Con-tainerization of the company’s SouthAmerican services began in 1987.

Hamburg-Sud continued to grow inthe early 1990s, acquiring a British ship-ping firm, a group of Scandinavian linesserving Latin America and an interest ina Spanish shipping firm. In recent years,Hamburg-Sud and Columbus Line havccontinued to build upon their services.

Today, Hamburg-Sud’s member linesoperate an average of 60 vessels, 21 ofwhich are owned by the group. Thecompany maintains a global inventory ofcontainers totaling some 50,000 units,representing an investment of more than$350 million. The Hamburg-Sud groupemploys 1,900 people, with about 450 ofthem working at sea. ~1

The BELGRANO, launched by Reiherstieg Shipyard in 1888, was one of Hamburg-Sud’s early vessels. She sailed at a speed of 11.5 knots and carried 280 passengersand 47 crew members.

10

r

L, pl,,,,,

experts representing IICL, Triton Con-tainer International, Cronos, Transamer-ica and Trans Ocean. The new repairrecommendations featured in this edi-tion were reviewed and tested at the1995 and 1996 IICL reefer courses inSingapore and Miami.

New features in the 189-page guideinclude entirely new repair proceduresfor aluminun3 top and bottom rails; sepa-rate repair methods are outlined forrepairing damage according to its loca-tion. The book also includes new rccom-

(Continued on Page 14)

Ned Holmes Speaks at Seminaron Business Opportunities inArgentina

Ned Holmes, chairman of the Port ofHouston Commission, was a featuredspeaker at a recent seminar on businessopportunities in Argentina. The seminar,organized by the Greater Houston Part-nership, focused on new opportunities inthe energy, infrastructure and engineer-ing industries resulting from privatizationin Argentina. Co-hosts for the seminarwere the consulate general of Argentina,Fundacion Invertir Argentina and theTexas-Argentine Chamber of Commerce.

Inspection BookNow Available

The second edition of the GeneralGuide fi~r Container Refrigerated Inspectionand Repair is now available from theInternational Institute of ContainerLessors.

The guide is intended to help ship-ping lines, depots, leasing companies andsurveyors determine when repair is need-ed and how reefer bodies should berepaired. The new edition has beenextensively revised since publication ofthe first edition in 1992.

"The first edition sold out very quick-

ly, and we expect the second edition tobe in equal demand," said Linda Rae,IICL editorial director.

The second edition was prepared byan IICL technical subcommittee of

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11

Port of Houston Authority Hosts Annual Cus-tomer Receptions in Monterrey and MexicoCityReceptions were held recently in Monterrey and Mex-ico City for customers and suporters of the Port ofHouston Authority. While in Mexico, Port of Houstoncommissioners and PHA executives called on usersof PHA facilities, as well as key government officials.Above: Shown at the Mexico City reception (fromleft) are Tom Kornegay and George Williamson, PHA,with David Covin and Jaime Velex of Maersk Co.Left: The front of the Port of Houston Authority’soffice in Monterrey.Below: In Mexico City (from left) Rainer Lilienthal,PHA; Carlos Medina, Transportadora Proa; Humber-to Falcon Cervantes, PHA in Monterrey; MarcelaDiaz Infante, PHA in Mexico City; PHA ExecutiveDirector Tom Kornegay; Houston Port CommissionerVidal Martinez; and George Williamson.