Contender or pretender? Part 2
Pretenders
Philadelphia is too close to New York and Norfolk to really be a player in the transpacific trade, according to ocean carrier executives and maritime analysts.
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| Laurie B. Mahon financial analyst |
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| ‘It’s a very politicized process. The squeaky wheel gets the dredge.’ | |
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‘I don’t give much credence personally to Philadelphia’s plans to become a major international hub,’ Mahon said.
The state of Pennsylvania is pursuing development of a $400 million, privately financed container terminal on the Delaware River. It suspended the bid process last spring to allow the maritime industry and capital markets to recover from the global recession.
Local officials tout the fact that the City of Brotherly Love is the fifth-largest U.S. metropolitan area, with a population of 6 million residents, and that 100 million people live within a one-day drive. More than half of all U.S. heavy industry lies within second-day delivery distance of the port. Despite the long voyage up the Delaware River, the Port of Philadelphia has a slight cost advantage over New York and Baltimore on all trade lanes when terminal costs, port costs and time at port are considered, John Estey, chairman of the Philadelphia Regional Port Authority claimed during a transportation infrastructure conference two years ago.
The city is a relatively small market, has dredging issues and is easy to reach by truck or rail from New York-New Jersey or the Port of Virginia, Mahon said. Potential bidders say the terminal would be more viable if it was integrated with the adjacent Packer Avenue terminal.
Pennsylvania’s efforts to deepen the Delaware River from 40 to 45 feet have been stymied by the state of Delaware, which has sued to halt any dredging by the Army Corps until it can conduct its own environmental studies.
Philadelphia is best suited to being a specialty for certain kinds of commodities, such as citrus, Mahon said.
The North Carolina State Ports Authority is one of the entities that probably benefited from the forced re-evaluation of its ambitions due to the economic downturn, Mahon said.
The state plans to build a container terminal on a greenfield site downriver from the Port of Wilmington to handle the largest containerships. But the project faces severe challenges such as obtaining dredging permits and financing, a limited regional population and no supporting rail and truck infrastructure due to its location off a small two-lane road at least 20 miles from the nearest highway, according to industry officials.
The Army Corps is in the process of conducting a preliminary study for deepening the navigation channel to determine if there is a federal interest in the project, while the North Carolina Department of Transportation is doing a feasibility study for highway transportation to serve the new terminal. Although the port authority is laying the groundwork for development in the future it has slowed efforts to find a private financier and operator until the studies are complete.
‘So I think it’s fortuitous that project is not moving ahead,’ said Mahon, who at one point advised the port authority on its expansion plan.
One year ago the Port of Jacksonville opened a 158-acre terminal built and operated by Japanese carrier MOL and signed an agreement with Korean carrier Hanjin to build a $300 million, 90-acre facility slated to open in late 2011. The two terminals combined increase the port’s capacity by 1.5 million TEUs.
Jacksonville’s key selling point is its rail access, but the 41-foot water depth and a difficult bend in the river beyond the MOL and Hanjin terminals could limit the type of vessels that can call the Florida port. Port leaders want to dredge the channel to 45 feet by 2014.
‘I don’t see Jacksonville as a first port of call, but clearly as a second port of call’ or receiver of smaller ships, Mahon said.
Others view Jacksonville as a wild card that could overtake Charleston as a challenger to Savannah, if it can solve the river issues, because of its proximity to the populous northern Florida region and the potential to serve Atlanta at a similar cost.
The Port of Miami is expected to deepen its three-mile channel from 42 to 50 feet within the next few years and will benefit from a tunnel connecting its man-made island for cruise and cargo terminals to Interstate 95 so that trucks and buses don’t have to wind their way through crowded downtown streets to reach the port causeway. The tunnel, which will cost the state of Florida, city of Miami, Miami-Dade County and the port $1 billion, will relieve local congestion. But most observers question whether it will attract more cargo ships. Local officials are pushing the private builder and operator to complete the project by 2015.
Mahon said Miami’s location at the tip of Florida and its lack of expansion room disqualify it from becoming a regional or national distribution hub, and therefore from winning any share of new canal traffic.
Wainio, Tampa’s port director, frequently picks on Miami as an example of a port that is soaking up resources to become a deepwater port without the economic justification for its ambitions.
Miami, he said, needs billions of dollars in infrastructure, including the tunnel, $150 million for dredging, port upgrades, and better connector roads at the end of the tunnel.
‘They still need a large logistics center or inland port to serve the rail connections. You add up those costs. Is it worth it? The answer is maybe it is, maybe it isn’t. My point is everywhere in this country we need to take a harder look, more strategic look at projects we undertake,’ he said on the FHWA webinar.
Mahon also dismissed the possibility of Gulf Coast ports such as Gulfport, Miss., and Mobile, Ala. ‘ with the possible exception of Houston ‘ of converting from regional ports to national hubs because they lack sufficient population density or inland transportation connections.
The Port of Mobile opened a new 800,000-TEU container terminal in 2008 and has begun construction on a new turning basin designed to handle the larger ships. The terminal, which has three weekly vessel calls, is operated by a joint venture of APM Terminals and CMA CGM ‘ two of the world’s top three ocean carriers. Mobile also has a 160,000-TEU on-dock rail facility under construction with direct connections to the CSX and Canadian National railroads, to be completed in about three years. The Norfolk Southern and BNSF Railway will be able to access it through the port’s short-line shuttle railroad. The port also has a logistics park on the drawing board, and is helping promote development of warehouses outside port property, to help build up its container business.
Port Director James Lyons predicts that half of Mobile’s container business eventually will be driven by Far East trade because of the shift in foreign automobile manufacturing to Alabama and surrounding states. Mobile and other Gulf ports should also be attractive to carriers because they can provide two-way business by matching almost every import box with an export load, he said last year.
Mobile also opened a modern $100 million steel handling terminal this year that is projected to handle up to 6 million tons per year. Steel slabs initially will come from sources on the Atlantic Ocean, but in the future there is potential for steel ships from Asia to serve the facility through the Panama Canal, Lyons said in a separate industry webinar.
Other industry experts believe Houston will be a winner in the Panama Canal’s post-expansion era. Panamanian officials have said they envision a principal port call in Houston and another port of call on the West Coast of Florida or in Mobile.
Home Depot would be interested in considering all-water transport to Houston if services crop up and are competitive with current intermodal times and costs, said Jeff Siewert, the company’s director of logistics.
Lyons said Mobile considers Houston a complimentary port to Mobile. ‘We feel that ships that come through the Panama Canal will probably want to stay in the U.S. Gulf and most likely two to three port calls would be a good combination. And we view a Mobile-Houston or a Mobile-Houston-Tampa as a very good combination to continue to grow and make those carriers successful,’ he said, pointing to the regional population growth, good trade balance, low port costs and good labor environment as factors that favor southeastern ports.
Mahon and others also envision the Port of Tampa as a regional, second-call port. Tampa opened its first container terminal three years ago.
But Tampa faces new competition
for container traffic from its neighbor across the bay ‘ Port Manatee. Until now, Manatee has been strictly a breakbulk port that handles things like lumber, steel and refrigerated cargo. Wainio, who has been outspoken about the need for ports to understand their niche, has previously said Manatee should stick to its current role.
Port Manatee officials have other ideas. They are developing their first container terminal, scheduled for completion in late 2010, along with a 788-acre logistics park to be served by the CSX railroad. The Manatee County Port Authority on Feb. 18 approved the $4 million purchase of the port’s second mobile container crane with the help of outside funds and requested bids to dredge the berth.
The Tampa Bay region is Florida’s largest metropolitan market and the 10th-largest U.S. consumer market, with about 8 million people ‘ and growing ‘ within 100 miles of the port. Ocean carriers are looking at a secondary port on the West Coast of Florida to serve the entire South Florida region as well, said Rodolfo Sabonge, vice president of market research and analysis for the Panama Canal Authority, during the FHWA webinar.
The two ports themselves don’t foresee the very largest mega-containerships calling Tampa Bay. But officials at both say they will be able to attract smaller ships that will continue to use the canal, or ships that will shuttle cargo to and from the mega-ships via transshipment hubs in the Caribbean or Latin America.
Wainio bluntly stated on the webinar that a large part of his port’s growth goals are based on capturing a larger share of the local market served by long-haul truck from ports on Florida’s Atlantic Coast and outside the state, independent of the canal expansion. The Central Florida market generates more than 400,000 loaded containers per year. Tampa, he noted, expects incremental traffic increases due to all-water diversion through the canal because only 13 percent of that amount routes through West Coast ports.
‘We don’t operate on pie in the sky. We look at what baseline business we can clearly get that will make all our projects feasible,’ Wainio said, noting the port within three to five years is capable of going from a 40-acre to a 160-acre container terminal that could annually handle 700,000 to 1 million TEUs.
So who will win out in the local competition for direct vessel calls? The answer is not clear, but Manatee appears to be a viable contender.
Ocean carriers are looking with interest at Manatee, according to Sabonge.
Manatee’s advantage is that it has available land to expand. Many ports are constrained by the cities that surround them as well as public pressure to reduce neighborhood truck traffic, traffic congestion and air pollution, or to gentrify the waterfront by converting valuable industrial property to shopping, dining and residential use.
The maritime industry will increasingly align with ports (see Prince Rupert, Canada) that are less populated, especially for discretionary cargo destined for markets beyond the port of entry, Sabonge told American Shipper following a trade conference in Virginia last October.
‘So you may have new ports developed where there is not so much population, but is close to the population,’ he observed.