S.C. port director says Southeast ports like Charleston have built-in advantages to gain market share.
South Carolina Ports Authority CEO Jim Newsome, emboldened by double-digit growth in container volumes since 2010 and a significant infrastructure expansion plan now underway, has set a goal for the Port of Charleston to become the fifth-largest container port in the nation by 2020.
In February, Charleston moved 152,925 TEUs, 18 percent more container volume than in the same month last year, according to figures released this week. Since the beginning of the fiscal year in July, the port’s TEU volume is up 14.3 percent to 1.23 million TEUs.
Charleston last year maintained its spot as the ninth-ranked container port as volume grew 12 percent to 1.8 million TEUs.
In a phone interview while on vacation in Tennessee, Newsome said he is gunning for Charleston to become the number five container port, a position now held by the Port of Oakland with 2.4 million TEUs per year.
“We have the chance if we do our job well to get to number five because I think the Southeast is going to grow disproportionately to the U.S. port market” on the strength of greater population growth relative to other regions and a renaissance in manufacturing that leads to more exports. “People are looking to build factories in the Southeast that historically would have been built those factories overseas.”
Southeast container growth is about twice that of the overall port market, he said.
Manufacturers are increasingly attracted to southern states because of their pro-business regulatory environments, access to ports and skilled labor, and lower energy costs as U.S. domestic production of gas and oil increases. Companies are also reassessing the value of outsourcing as risks associated with overseas production, including labor and transportation costs, rise.
Charleston’s container volume is evenly balanced between imports and exports. Over time, some experts say exports will grow more than imports.
Cargo diversion from traditional West Coast gateways will gradually increase once the expansion of the Panama Canal is completed early next year, which will allow bigger, long-haul vessels from Northeast Asia to operate more cheaply on all-water routes to the East Coast, Newsome said.
West Coast ports control about 68 percent of the import market from Northeast Asia to the United States, with the ports of Los Angeles and Long Beach by themselves handling about 40 percent of all containers to the United States. But that figure was closer to 78 percent a dozen years ago before shippers began to diversify their import gateways following a damaging labor dispute and port lockout in 2002.
“We feel that the Southeast is going to be a particular beneficiary from this because of the good productivity and cost structure of the ports. We don’t have delays, so reliability is good,” Newsome said, referring to ports such as Savannah and Jacksonville.
The port director said most of Charleston’s growth the past year has been organic and sustainable, and less related to diversion by shippers trying to avoid the current backlogs at West Coast ports. As the labor strife and work slowdown by dock workers worsened from last July, many shippers had ocean carriers reroute more of their cargo to East and Gulf coast ports. A tentative settlement leaves open the question of whether shippers will return to their regular supply chain patterns once port operations fully return to normal or continue to move cargo directly to other ports, including ones in Canada and Mexico.
Newsome said much of Charleston’s volume tends to be focused on manufacturing sectors such as automobiles and tires. By contrast, Savannah and Norfolk are more oriented to retail commodities and, therefore, are seeing more of a temporary spike off of the West Coast.
Becoming the fifth-largest port in the United States would require leap frogging the Port of Norfolk in Virginia, which is currently ranked sixth with 2.3 million TEUs per year. Norfolk has also experienced rapid growth in the past three years, although it was not fully prepared and has suffered from rising congestion that has frustrated shippers.
Charleston, on the other hand, is congestion free. Extended gate hours, a program to coordinate drayage between marine terminals and intermodal rail yards several miles away, and other measures have enabled truck drivers to make double moves with containers in about 30 minutes on average, Newsome said.
Newsome believes the shift in market share from the West Coast is going to continue “because logistics is mostly about cost” and the Southeast has cheaper ocean transport rates compared to inland point intermodal off the West Coast and East Coast ports further north, as well as lower labor costs.
His staff is currently focused on attracting greater amounts of discretionary cargo bound for customers beyond South Carolina.
The South Carolina Ports Authority is managing a $2 billion capital spending plan for the state that includes deepening the harbor, building a new container terminal and an intermodal rail facility, and upgrading existing terminals with longer-reach cranes and stronger wharves to handle fully loaded 13,000 to 14,000-TEU vessels in the near future.
Last October, the U.S. Army Corps of Engineers released its draft feasibility study, which tentative recommended dredging the navigation channel from 45 feet to 52 feet. A final recommendation is expected by September. If all goes well, Newsome has previously predicted, the harbor deepening could be completed by the end of 2019.
Newsome eyes Charleston as No. 5 box port by 2020
