The Port of Baltimore told American Shipper it will offer ocean carriers financial incentives to use rail for inland moves.
Ocean carrier Maersk Line’s new container services to Baltimore reflect the desire of shippers to move cargo through a congestion-free port and signals the city’s potential as a major trade gateway, according to officials with the port and the Danish shipping giant.
The world’s largest shipping line pulled out of the Port of Baltimore in 1996, but quietly returned four months ago with three services originating in the Far East, the Mediterranean and Northern Europe. Maryland state officials on Wednesday held a ceremony at the modernized Seagirt Marine Terminal to officially welcome Maersk and highlight its importance to the local economy.
Maersk sought Baltimore as a port of call because shippers are looking for an efficient alternative to ports on both coasts that are experiencing backlogs because of growing trade and new shipping patterns that have stressed existing infrastructure and traditional operating practices, David Zimmermann, the company’s vice president of North American sales, said in an interview.
“Customers want their business to matter. They want to be able to move cargo fluidly through the port. And Baltimore is able to do that,” Zimmermann said. “We’re hearing a lot of folks that are frustrated, saying, ‘We can’t put our cargo and our customers at risk like what happened last year.’”
Many shippers in 2014 rerouted cargo from Asia to the East Coast via carriers utilizing the Panama and Suez canals in reaction West Coast port delays. Operational breakdowns, especially equipment shortages within terminal storage yards, have plagued load centers such as Los Angeles and Long Beach for nearly two years. But problems ballooned to near-gridlock conditions when a contract dispute between West Coast longshoremen and waterfront employers led to work slowdowns and stoppages before a settlement was reached in late February.
As a result, the ports of New York/New Jersey and Norfolk experienced a surge of new cargo business that overwhelmed existing capacity and led to long lines of shuttle trucks waiting to transfer containers in the yard. Ports in the South Atlantic have also enjoyed strong double-digit container growth in recent months, but have been able to handle the influx with few disruptions, according to industry officials.
Also playing into Maersk’s decision to add Baltimore to its network is its new alliance with Mediterranean Shipping Co, the number two container line in the world. The 2M alliance partners both provide vessels and carry each other’s cargo on joint services in the major east-west trades.
“Now that the 2M provides more cost-effectiveness to the East-West trades, we have a few more options to put in a Baltimore-type call,” Zimmermann told American Shipper in the shadow of a 15-story ship-to-shore crane capable of loading and unloading the largest box ships sailing today.
Baltimore is picking up some secondary cargo diversion from the West Coast and is on track for another record year in container business, said Joseph M. Greco, director of intermodal and trade development at the Maryland Port Administration.
“The beneficial cargo owners have been struggling with congestion in New York and Norfolk. They see the value of efficiency that Baltimore is offering – very aggressive truck turn times of less than 1 hour,” he said.
Truck drivers say it can take more than two hours to drop a container and pick up a new one at New York/New Jersey or the Port of Virginia, with frequent complaints of wait times in excess of five to eight hours at certain times of day.
Greco “The trucking community really appreciates it, where they’re seeing opportunities where cargo could potentially come over to Baltimore instead of places like New York and Norfolk where they know they can get the truck turns and have driver retention and be profitable,” Greco said.
Many truckers even refer potential leads to the port authority where it might make sense from a geographic or pricing perspective for a shipper to consider switching cargo through Baltimore, he added.
Last year, the Port of Baltimore set a record with 770,139 TEUs handled and is on track to surpass that figure in 2015, according to port data. Through May, container volume across Baltimore’s docks was up 5.2 percent to 323,052 TEUs compared to 307,014 TEUs during the same five-month period a year ago. In March, public terminals at the port handled a record 77,772 TEUs and Greco said early indications are that June’s results could exceed that monthly high.
Container traffic could also increase in the coming months with the arrival of a new transatlantic CMA CGM service – the Liberty Solo/Liberty Bridge.
Baltimore is ranked the 14th largest container port in the United States, according to the American Association of Port Authorities. It is the nation’s top port for processing automobiles and farm equipment.
The world’s top four carriers now call Baltimore, with MSC operating on five loops and Taiwan’s Evergreen Marine connecting Baltimore to the Far East with an all-water service through the Panama Canal. Other customers include Hamburg Sud on a joint service with Chile’s CSAV covering the West Coast of South America and a joint service by Hapag-Lloyd and Atlantic Container Lines between the East Coast and Northern Europe.
Greco said Maersk hasn’t provided any definitive projection of the amount of cargo it plans to move through Baltimore, but the port authority conservatively estimated 50,000 TEUs of volume in the first full year of operation based on shipper requests for a Maersk service.
“Once they penetrate the market, there’s potential for them to grow,” he added.
Through June 14, the shipping line has already moved more than 19,500 TEUs of cargo across Baltimore’s docks, according to Maersk spokesman Timothy Simpson.
Maersk’s TA5 service rotates between ports in Italy and Spain and also stops in New York/New Jersey, Boston, Norfolk, Savannah, and Charleston. Maersk operates four of seven vessels on the string.
The vessels have an average capacity of 6,689 TEUs, according to American Shipper research affiliate Bluewater Reporting.
The TA2 operates with four vessels, all from MSC, with an average vessel capacity of 4,408 TEUs with stops at major north European ports as well as New York/New Jersey and Norfolk in the United States.
The third Maersk service in Baltimore is its around-the-world pendulum loop, called the TP12/TP8, that operates with 17 vessels, nine from Maersk, with an average capacity of 8,504 TEUs. The TP12/TP8 picks up cargo at ports in China, Taiwan, Hong Kong, Singapore and the United Arab Emirates before transiting the Suez Canal en route to the United States. In the U.S. the loop also calls at New York/New Jersey, Norfolk and Long Beach, Calif.
Maersk subsidiary Safmarine, which operates on the Africa trade lane, has called on Baltimore for years.
Greco said people assume Baltimore is more fluid because it doesn’t have the same volume as other ports, but the reason it performs well is because of investments in technology at the truck gates to quickly identify trucks, verify their status and match them to the container on their invoice. When Baltimore received a wave of cargo following Superstorm Sandy because of damage to the Port of New York/New Jersey, truckers were still able to make a double move for boxes in less than 50 minutes, he said.
The Seagirt Marine Terminal is operated by Ports America, which won a long-term concession in 2010 in exchange for making infrastructure investments and payments to the state of Maryland. The company, which is backed by an investment fund, created a 50-foot berth capable of handling the new generation of vessels in the 14,000 TEU category and bought four super-post-Panamax cranes, among other upgrades.
In the past, ocean carriers considered Baltimore less desirable as a port because of the extra miles logged sailing up and down the Chesapeake Bay compared to stopping at a coastal port. But that calculation has changed somewhat as shippers look for options that can get international cargo as close as possible to distribution centers and consumers, and cut down on expensive truck transportation.
Another challenge at the Port of Baltimore is the constraint on double-stack intermodal rail service. CSX operates a rail yard adjacent to the Seagirt Terminal, but train cars can only carry one container because they have to pass under a tunnel in downtown Baltimore that doesn’t have enough clearance for twin-stacking.
Last August, the Maryland Department of Transportation terminated an agreement with CSX to build an intermodal facility in southwest Baltimore in the face of neighborhood opposition after five years of trying to find a suitable location. CSX planned to use trucks or trains to shuttle containers between the port and the intermodal terminal, where they would be topped off or dropped down, depending on if they were import or export boxes, with most of the traffic going on the mainline to the railroad’s sorting hub in Northwest Ohio.
Greco said the Maryland Port Administration has not given up on identifying a new location for a CSX intermodal terminal, but in the meantime plans to introduce an incentive for ocean carriers, who typically have responsibility for door-to-door delivery, to utilize the existing rail service.
“We have a pot of $3 million and we feel with how the program is set up we’ll be competitive from a double-stack perspective. Even though we’re single stack, we think there will be enough off-set [in price] where we’ll be attractive,” he said. The port authority will create benchmarks for carriers to achieve to be eligible for the subsidies.
Converting more cargo to rail will help ease truck traffic on city streets and diesel emissions. Ninety-five percent of cargo handled moves in and out of the port by truck, according to Greco.
“We see Baltimore has an opportunity to create another inland gateway,” Timothy O’Connell, vice president of inland operations for Maersk, told American Shipper. “Baltimore is an untapped opportunity. And there’s been a lot of work done behind the scenes with the major East Coast railroads to look at what might be some of the infrastructure changes that might need to happen to get to that double-stack. But the potential is still there single stack.”
O’Connell noted that CSX can only operate out of Norfolk with single-stack trains as well until the Virginia Tunnel in Washington D.C., on the railroad’s north-south mainline, gets raised.
“I think Baltimore has an opportunity to become a major inland gateway” as shippers look to diversify risk in their supply chains, McConnell said. “It will take time. It won’t happen overnight.”