Four weeks after Maersk Line, the world’s largest shipping company, announced it is abandoning service to the Port of Charleston, little progress has been made in getting the port’s largest customer to reconsider, despite extensive efforts by state and local maritime officials.

The shipping line, which has been a customer of the South Carolina State Ports Authority since the early 1950s, announced its decision on Dec. 18 after it couldn’t get longshoreman to agree to a cost-cutting plan that would have had its moved by non-union state employees.

It also announced plans to move its South Atlantic Express service-which represents 25 percent of its port calls-to Savannah, Georgia, Norfolk, Virginia and other nearby ports.

The phasing out of that service-which had been making about 104 calls on Charleston a year-began earlier this month. Maersk said it would fully discontinue using Charleston’s port after its contract expires at the end of 2010.

Immediately after the announcement, Bernard S. Groseclose Jr., the port’s authority’s president and chief executive officer said he was disappointed the union would not make the concessions necessary to keep Maersk in business there.

“Even though we had an enforceable contract through 2010, we made significant concessions and presented two contract options at Maersk’s request,” Groseclose said. “This Port, our region and our state will suffer greatly from Maersk’s departure. This will mean great losses for our economy at a time when we can least afford it.”

Since then the Maersk situation has been the subject of a series of emergency meetings, including one held in Columbia, the state capitol, during the second week of January.

Early on, many said they sensed progress in the talks which included representatives of the port, the shipping line, the union, and state and local government officials, but as they days have worn on, the mood has become increasingly pessimistic.

“The longer this thing drags out, the harder it will be to have Maersk reverse their decision,” said State Senator Larry Grooms, who represents the tri-county area around the port.

In recent weeks, the S.C. State Ports Authority met in a closed-door session with state Department of Commerce officials to again discuss the situation, but as of Jan. 14, there was not change in the situation, a Maersk spokeswoman said.

In the midst of all this activity, the ports authority imposed an across-the-board, 5 percent discount for Charleston’s container carrier customers. The authority called the move, which will be in place for three months and is something it has never done before, a “mid-winter rate rollback.”

“Our carrier customers are facing some very challenging market conditions,” Groseclose said. “We heard from them and we’re responding. This sends a clear signal that we are serious about their business today and in the future.”

Sergio Fedelini, vice president of the Mediterranean Shipping Co. (USA) Inc., the port’s second largest shipping customer, said the rollback could save his company an estimated $10,000 per ship.

“This was a very unusual move, and it is a nice amount of money,” he said. “But more than the money it is important the port is showing it is aware of the economy.”

Maersk downsizing started a year ago

With the rates that global shipping firms charge to transport cargo plummeting some 90 percent over the past year, Maersk had long been looking to cut costs, and in fact had already taken steps to reduce the costs of its operations in the Charleston.

Last winter, it closed its local call center and merged those operations with a customer service center it operates in Charlotte, North Carolina. Only 40 of its 140 Charleston workers accepted Maersk’s offer to move up the coast.

Shortly thereafter the line said that unless it could find a way to save money using ILA members at the dedicated terminal it operated in Charleston, it would have to switch to a non-union section of the port’s Wando Welch terminal in Mount Pleasant, South Carolina.

At the time, ILA Local 1422 president Ken Riley said the request would be in violation of an international contract between labor and shipping companies, and would potentially jeopardize the relationships between Maersk and the ILA up and down the coast.

In addition, the union said the move to a non-union section of the port terminal would result in the loss of 50 union jobs at the port. Maersk estimated the potential loss would be closer to 33 jobs.

The union issue is particularly sensitive in the Southeast, where ports generally are operated by government entities utilizing both union and non-union labor, and where economic develop hopes are often pinned, at least in part, to the low cost of non-union labor.

At the Port of Charleston, most of the labor is unionized, but about 370 state employees-workers who don’t belong to the ILA and its affiliated locals representing cargo checkers and clerks-handle terminal gate operations in common-user yards, and operate dockside cranes and all container-lifting equipment.

ILA workers by contrast are hired by stevedores to perform shipboard work and gate activities in terminal sections used exclusively by Maersk, Evergreen, and the CKYH carriers at dedicated spaces on port terminals.

Despite protracted negotiations, the stalemate between the shipping line, the ports authority and the ILA was never resolved. Riley could not be reached for comment after Maersk’s decision became public.

But in mid-December, Maersk spokesman Dana Magliola expressed the company’s regret.

“The South Carolina State Ports Authority offered us a workable solution,” Magliola said. “But the local ILA refused to consent, and so we are forced to move.”

“By moving to other regional ports, we will once again be able to compete on a level playing field with other ocean carriers while continuing to provide excellent service to our customers,” he said.

Maersk said it could no longer bear the cost disadvantage between its Port of Charleston arrangement and that of its competitors operating out of the common-user gate.

 “It would be unfair to our shareholders, customers and our employees to continue to operate in this environment,” Magliola said. “Our services will be transitioned strategically over the next two years in very close coordination with our customers.”

Far ranging economic impacts

Maersk’s announcement comes at a tough time for the Port of Charleston, which saw container traffic drop by 9 percent in 2006 and an additional 7 percent in 2007. As a result of that decline it dropped from being the fourth busiest port in the nation to the eighth, according to the statistics compiled by American Association of Ports Authorities.

In addition, the Evergreen Shipping Agency (America) Corp. has also announced that it will consolidate some North America administrative offices and cut its labor force due to the global slump in the ocean shipping business.

The firm's Charleston office on Daniel Island, South Carolina is among those being downsized. The downsizing affects customer-service functions and staffers responsible for logistics and marine operations, although the exact number of employees affected has not been announced.

Those functions are to be transferred to Dallas by March 15. Evergreen has not indicated that it is reducing any ship calls as part of this move.

Maersk’s decision to leave is expected to have a significant impact on the Charleston’s maritime industry and related businesses across the state, not least among them trucking firms and at least a half dozen commercial developers who have invested in land in the region intent on establishing warehousing and distribution centers in South Carolina.

“It’s certainly terrible news,” said Patrick Barber, president of the Charleston Motors Carriers Association and president/owner of Superior Transportation in Charleston.

“If they accounted for a quarter of the port’s business, it stands to reason they accounted for a quarter of the trucking and rail business generated by the port as well,” Barber said.

“But this has a far wider reach than just the Charleston region,” he continued. “Maersk has two company-owned trucking companies-Bridge Terminal Trucking and HUDD Distribution-that collectively contract with more than 140 truck owner/operators who live all over South Carolina.

“And think about the tax base that may be affected,” Barber concluded. “Think of all the fuel, tires, truck parts, and maintenance services that won’t be purchased-the trickle-down effect is going to be bigger than a lot of people think.”

Others responded more philosophically. 

Fedelini, for instance, said he wished his all of his company’s competitors well and he knew that everyone was being adversely impacted by the global economic downturn. At the same time, however, he also suggested that should Maersk ultimately stick to its decision, some of its Charleston-bound cargo would no doubt find its way onto other line’s ships.

And then there were those who suggested the impasse just might be the harbinger of even more significant changes on the Charleston waterfront.

Gov. Mark Sanford’s office, for instance, reacted to word of Maersk’s decision by suggesting it might be time to change the ports authority’s operating structure.

“We can either start to heavily subsidize the port operation like they do in Savannah, or we can go toward a landlord-tenant-style partnership,” said Joel Sawyer, a spokesman for the governor. “What we can’t do is stay in the middle.”