Port of Charleston gears up for big ships, export growth.
By Eric Kulisch
Get ready U.S. East Coast ports, the big ships are coming, warns James Newsome, president and chief executive officer of the South Carolina State Ports Authority.
Terminals with the right infrastructure and market attributes need to prepare for the arrival of super-sized containerships, because the Panama Canal’s expansion in 2014 will not lead, as many port experts predict, to the proliferation of transshipment hubs in the Caribbean, Newsome said.
A widespread belief among maritime analysts is that only a small percentage of the 10,000- to 14,000-TEU vessels entering liner service will call at East Coast ports from Asia, with most shipments being ferried on 4,500 to 8,000-TEU vessels to the mainland from connecting ports with deep harbors like Kingston, Jamaica. Many U.S. ports have navigation channels of 42 feet or more to handle those ship sizes.
Load centering, they argue, will allow carriers to serve multiple ports by using large vessels for economies of scale across the ocean and transferring shipments to smaller vessels, thereby saving many ports from making massive infrastructure investments.
|”You don’t want to blunt the big-ship economics by spending money on transshipment.”
president and chief executive officer,
South Carolina State Ports Authority
In a conference call with American Shipper’s
editorial team, Newsome challenged the notion that carriers don’t want to bring their megaships to the East Coast, noting transshipment adds cost to freight transportation because of the extra handling required.
“Nobody can really afford transshipment, unless you’re in Freeport. So I expect direct calls,” the port director said. “Every line I know is investigating harbor capabilities to handle those ships and they don’t want to handle them 50 percent full. They want to be reliable schedule wise. And with the expense of bunker fuel they need to be on time and not be half-full when they leave.”
Port Freeport, Bahamas, is a hub for Mediterranean Shipping Co., the world’s second-largest carrier, and has the advantage of low fees, efficient operations and proximity to the United States.
“You don’t want to blunt the big-ship economics by spending money on transshipment” and reducing transit time, said Newsome, who knows the carrier business from his days as an executive at Hapag-Lloyd.
Transshipment will mostly take place in certain ports to consolidate trade between North and South America, with some amalgamation of east/west trade possible on those feeder routes, he predicted.
Other ports, besides Kingston, trying to position themselves as transshipment centers include Rio Haina and Caucedo in the Dominican Republic; Port of Spain, Trinidad; and Manzanillo and Colon in Panama. Water depth, location, port productivity and other issues could limit the ability of some ports to become container hubs.
In a separate interview with American Shipper
, Rodolphe Saadé, executive officer of CMA CGM, underscored Newsome’s position, saying, the company will run feeders to smaller ports in Central and South America and the Caribbean, but make direct calls to Brazil and U.S. East and Gulf coasts ports.
“We believe the U.S. market is a very sensitive market — sensitive to transit time and service quality,” Saadé said. “I don’t believe we will be serving the U.S. with transshipment.”
The Port of Charleston has the deepest harbor in the Southeast, for the moment, and aims to get deeper if it can obtain federal funding to dredge the channel to the sea.
Charleston’s harbor is 45 feet deep at low tide and 50 feet at high tide, which allows it to handle 9,000-TEU vessels on a restricted basis. Newsome said the fourth-largest container port on the East Coast needs a 50-foot channel to be on par with the ports of New York-New Jersey, Norfolk, Va., and Miami.
The Army Corps of Engineers in May agreed to conduct a feasibility study for deepening Charleston harbor, at an estimated cost of $300 million.
The Port of Miami recently received funding commitments necessary to begin its own deepening project, although Newsome considers it a conduit for cargo in the Florida market despite a partnership with the Florida East Coast Rail to develop an intermodal pipeline up the Florida Coast that could link up with rail networks in the Southeast.
The Port of Baltimore also enjoys a 50-foot channel and soon will have a 50-foot berth to go along with it.
By 2014, half the ships in operation will be bigger than the current Panama Canal size limit of 4,800 TEUs.
Newsome reiterated his stance that the federal government should prioritize which ports get scarce resources for dredging based on technical and economic merits, and whether they have the wherewithal to matching contributions and other necessary infrastructure investments.
Securing funds for harbor deepening projects is a haphazard process that usually depends on a state’s congressional delegation exerting its influence when appropriations bills are drawn up. The money is allocated piecemeal over many years rather than being committed at once.
In July, the Port of Charleston welcomed a 9,200-TEU containership. Vessels in the 8,000-to-9,000 TEU range, which are slowly becoming more common at U.S. ports, require a draft of 48 to 52 feet when full, “and they need to be full in a low-margin business,” Newsome said.
Some industry officials have argued that big ships can still access many ports at current water depths because they will not be fully loaded.
Charleston will probably cost half as much to dredge as other ports because the project mainly requires lopping off ridges and shoals in certain spots rather than excavating the entire sea bottom, Newsome said. The port is also close to the ocean.
In addition to dredging to prepare for the big ships, Charleston’s $1.3 billion capital plan includes a new, $800 million container terminal to be built on a former Navy base by 2018 or early 2019.
The South Carolina State Ports Authority has spent $105 million so far on planning and to construct a containment wall structure around 65 acres of reclaimed land. The next major step is to fill that area with dredge material from previous harbor deepening projects now at an offshore disposal site, spokesman Byron Miller said.
The agency wants to complete all the site preparation work before it considers alternatives for financing and constructing the terminal itself, he added.
Infrastructure improvements are part of a broader strategy to restore the competitiveness and reputation of Charleston, which lost 40 percent of its container volume from 2005 to 2009. In the fiscal year ended June 30, container volume was up 8.3 percent from the previous year to 1.38 million TEUs. But traffic is still below the level it was in 2008 before the recession.
Experts say the long-term outlook for trade growth in the U.S. Southeast is very positive, with strong population growth and manufacturers taking advantage of lower labor costs, transportation connections, right-to-work laws and other business friendly policies to set up factories and distribution centers. Ports like Charleston and Savannah are experiencing continued growth in exports, which are near equilibrium with imports compared to other parts of the country where inbound containers outnumber outbound boxes more than two-to-one.
Charleston stands to benefit from Boeing’s decision to build an aircraft manufacturing plant north of the city, although a federal labor board ruling related to the non-union nature of the facility has construction on hold.
The Southeast is also attracting foreign investment from manufacturers, like BMW, interested in export production to hedge their exposure to high-value currencies and have more manufacturing costs in dollars, Newsome said.
Port officials are aggressively working to convince more carriers serving northern Asia to call Charleston, Newsome said. Having service coverage equivalent to other ports should attract more cargo because bringing shipments closer to their ultimate destination by water can reduce intermodal costs to many locations. Charleston, one of the top gateways for cargo from northern Europe, should be able to attract discretionary cargo outside the port’s local market because of its lower cost structure and productivity, he added.
Cranes at the port, for example, lift about 42 boxes per hour versus upwards of 27 moves per hour at many West Coast terminals. In one case last month, Charleston crane operators working one vessel moved 54.1 boxes per hour, according to data supplied by the port. The average turnaround time for trucks in the port is about 24 minutes.
More cargo diversion is possible, Newsome said, because there still is a significant amount of cargo that moves over West Coast ports by rail to places such as Atlanta and Charlotte, N.C., that could move through Charleston instead.
The port is also working hard to capture more export volumes. It has benefited from several new transloading facilities established by private companies during the past 18 months to transfer shipments from 53-foot truck and rail containers to 40-foot ocean containers. This process has become more popular in recent years as agricultural and industrial shippers face more difficulty finding empty ocean containers because imports tend to go to population centers, or are quickly unloaded into domestic conveyances and returned to the carrier to get the next import load.
“Facilities around the port have to keep up. It’s very difficult to grow a port without the supporting infrastructure,” Newsome said.
Port officials met directly with companies to encourage them to invest in nearby transfer facilities to consolidate commodities for export. Today there are multiple transloading operations on port property and off-site.
Last year, Scoular Co. established a grain handling facility at the Wando Welch Terminal, which Miller said enabled the port to export soybeans for the first time. A forest products shipper has also set up a transload facility at the Columbus Street breakbulk terminal to transfer lumber and paper products from railcars to ocean boxes.
Rail transloading makes economic sense because the typical length of haul between the ports and inland shippers in the Southeast is 350 to 400 miles, Newsome said. The paper transload center alone has taken off the road 5,000 trucks that previously made deliveries to various ports, he said.
Miller said the port also launched a loosely formed association of rail-served warehouses and transload facilities that meets regularly to discuss ways to improve operations and jointly promote their ability to efficiently handle international freight.
In the fiscal year ended in June, Charleston handled 560,000 loaded export TEUs and 580,000 import TEUs, which Newsome said reflects the growth in exports and demand for near-port transloading.
Charleston, like some other ports from Virginia on south, have seen their agricultural export volumes recently take a hit because of ongoing trade disputes with China over lumber and dried distiller grains, which are sold as animal feed after coming through the ethanol-making process.
Exporters too need a deeper harbor because exports tend to be two to three times heavier than import cargo and cause vessels to ride lower in the water.
Near-dock rail is another piece of supporting infrastructure critical for the success of ports. Most of the intermodal cargo that moves out of Charleston is trucked across the city to facilities operated by CSX and Norfolk Southern.
Newsome revealed that the port authority, which operates the terminals itself, is developing a plan to serve as a clearinghouse for drayage moves to and from the rail ramps to make it easier to match a truck with a load. Under the plan, the port would control the rail drayage and contract transport with local truckers to perform the moves instead of having the ocean lines make arrangements. Coordinating that dispatch will even out peaks and valleys in equipment supply or available cargo in the port, and reduce the movement of empty boxes by matching outbound exports with trucks dropping off import loads at the railhead, according to port officials.
The idea is to create a “virtual on-dock rail” with seamless service for customers and drive more rail usage, Newsome said.
The rail drayage program will still be necessary even if a new dual-rail intermodal site is eventually built by the railroads in North Charleston, he added. The project, which would allow railroads to more efficiently build trains with domestic and international containers, faces legal challenges.
The port authority’s marketing strategy for Charleston also continues to focus on getting companies to set up distribution centers geared to transload imports.
“It doesn’t just happen on its own. We have to be the catalyst to make sure all the pieces fit together and make sense,” Newsome said.