Team of rivals

Team of rivals

Charleston, Savannah, prepare for more Asia cargo, bigger ships.



By Chris Dupin

      Challenges and opportunities arising from continuing growth in Asian cargo moving through East Coast ports, especially after the expansion of the Panama Canal, are among the issues on the agenda of two new port directors in Georgia and South Carolina.

      'When we are looking to grow our business it's not about what can we take from Charleston or any neighboring port on the eastern seaboard,' said Curtis J. Foltz, the new

executive director of the Georgia Ports Authority. Instead, he said growth would come from identifying solutions for customers still using West Coast ports 'to service their cargo that is coming to the East Coast.'

      Foltz took over Jan. 1, filling a post held for the past 15 years by Doug Marchand, who will continue as an executive advisor to the port through the end of 2010.

      Though the two ports compete for cargo, the heads of each are decorous when talking about their rivals and share some views about the future.

Foltz

   Foltz, a former Sea-Land Service and CSX World Terminals executive, notes, 'I have worked in Charleston and Charleston does a good job of servicing their customers and servicing their client base.'

      James 'Jim' I. Newsome III, the Hapag-Lloyd executive who became president and chief executive officer of the South Carolina State Ports Authority on Sept. 1, expressed a similar sentiment: 'Savannah has done a great job. I have a lot of admiration for the Port of Savannah and consider myself to be personal friends with Doug Marchand.'

Newsome

      The two ports have traded places on the list of leading East Coast ports. A decade ago, Charleston was the second-largest East Coast container port behind New York-New Jersey. It has since dropped to fourth place while Savannah climbed to second place, behind New York and ahead of Norfolk.

      'Containerized trade is down, yet our volume is down more than the regular market. I think that as a general remark we have potentially not been as competitive as we need to be in some of our contractual relationships with customers,' Newsome said. 'I believe we can be cost competitive and profitable.'

      Early in Newsome's tenure, Charleston was able to score a victory, when Maersk Line in October reversed a decision to withdraw all its services from Charleston by the end of 2010.

      Maersk, which used a portion of the Wando Welch Terminal operated by its APM Terminals affiliate, complained that it was at a cost disadvantage to other steamship lines that use a common user facility at Wando Welch, and began moving services to other ports, including Savannah.

      'For me coming into this job, I did not consider it an option to lose Maersk,' Newsome said. 'Maersk is the largest line in the world and the most financially stable and they are in a position to grow more. And if you were going to be a major port in this country you need to have Maersk as a client.

      'We were able to address some of their competitiveness concerns. Their volume was significantly down since 2006 and they adjusted their footprint to their current volumes.'

      Gordon Dorsey, senior vice president and U.S. operations manager for Maersk Line, said Newsome's 'personal involvement and deep understanding of the key issues facing the carrier industry helped us to revisit previous sticking points,' and set the stage for the new agreement which allowed Maersk to place its cost structure in Charleston on a level playing field with other carriers so it can 'continue to provide reliable service for our valued customers in the South Carolina area.'

      With the Southeast of growing importance to U.S. commerce and the economy, Dorsey said Maersk's customers have indicated it is important for the carrier to provide service through both Savannah and Charleston.

      'While Savannah remains our predominate gateway in the region, there remain a number of destinations for which Charleston will continue to provide the most advantageous connections,' he said.

      Newsome is hopeful that over time, Maersk will bring other services to

Charleston.

      As he steps into the executive director's job, Foltz said he does not plan major changes. As chief operating officer at the port he has spent five years assisting in the development of the port's rolling 10-year strategic plan.

      'Customers should not experience any change whatsoever. We are going to continue to do things that have gotten us here,' he said.

      Savannah benefits from its location near Atlanta, 'the largest economic engine in the Southeast,' he said, 'second only on the eastern seaboard to New York-New Jersey.'

      But through road and rail services the port sees itself as serving a wide hinterland stretching northward to Charlotte and into the lower Midwest, south to mid-Florida, and west far beyond the Tennessee Valley, as far as Memphis, Dallas and Houston.

      'With the demographic shift to the Southeast part of the United States we are extremely well situated,' he said.

      Newsome has similar thoughts, believing an increasing proportion of cargo will be delivered through East Coast ports 'because this is where the population is and the lines are figuring out if they can save on intermodal costs ' that's a winner for them.'

      Most of Savannah's port activity is contained in the sprawling Garden City Terminal, and Foltz said this is an advantage because 'if you are a shipper of goods and you use five or six ocean carriers ' which is not uncommon ' you still come to this one terminal to deliver a load or deliver an empty and pick up a load. And it doesn't matter which carrier because it's one terminal, one system, all the synergies that come with that.'

      A new terminal operating system tied into equipment uses optical character recognition to read markings on containers, and radio frequency identification readers and global positioning satellite technology to track the movement of equipment. This aims to give customers better visibility of their cargo as it arrives and moves through the terminal.

      The port believes investment in new technology, and hardware like rubber-tired gantry cranes, will allow it to grow the amount of cargo moving through the Garden City Terminal from about 2.6 million TEUs to an eventual 6.5 million TEUs.

Aerial harbor map of Charleston, with facilities highlighted. The port has five shipping terminals, three of which are container facilities (Columbus Street, North Charleston and Wando Welch). The expansion area (280-acre container terminal underway) is noted in red.

      In contrast to Savannah, Charleston's port activity is spread out at several different locations ' including Wando Welch, the Columbus Street Terminal, North Charleston Terminal and Union Terminal.

      A big advantage for the port, Newsome said, is that it has permits to build a new container terminal at the former Charleston Navy Base

      'That gives us the ability to have a new container terminal at some point in this decade when we need it,' he said. That may also allow the port to focus container operations at the Wando, Columbus Street and the Navy Base terminal, when it comes on line, and have the North Charleston terminal focus on breakbulk cargo.



Distribution Centers. 'Population matters, and if you think of Atlanta as the centroid for economic activity for the Southeast the GPA has done a pretty good job of promoting Savannah,' said Paul Bingham, an economist for IHS Global Insight.

      'But I think the real key to Savannah's success has not been something like channel depth or anything about the functioning of the port terminal. It has been their very long-term, single-minded focus on attracting the shippers,' he said. 'Carriers have followed shippers and that strategy has worked very well.'

      Savannah calls itself 'the retail port' with 17 high-volume import distribution centers in the region surrounding the port. Bingham noted that other ports, including the Hampton Roads ports in Virginia, and Charleston, have followed with similar strategies.

      In November, South Carolina announced that Boeing will build a $750 million plant in North Charleston where it will assemble its 787 'Dreamliner' aircraft, said to be the largest industrial investment in the state's history. Earlier in the month, TBC Corp. said it would locate a 1.1 million-square-foot distribution center within 25 miles of the facility. The DC is being built by Rockefeller Group Development and MeadWestvaco.

      These are just the latest in a series of new factories and distribution facilities in South Carolina that could bring increased cargo to Charleston. Another is a 9 million-square-foot trade center being built north of Charleston on Route 26 by the Perot family's Hillwood group ' the same company whose 17,000 acre AllianceTexas development outside Ft. Worth includes one of the country's largest inland ports.

      'My opinion is that we are in the early stages of what I call purpose-built in port distribution buildings,' Newsome said. 'If you look at the way that manufacturing was offshored in this country, a lot of manufacturing went very quickly to China and a lot of the resulting import logistics were sort of ported onto a domestic distribution network, meaning that the companies just used the distribution network they had to distribute the goods that they made locally.

      'That is why you have so many distribution centers in the Midwest, that is why you have distribution centers in places that really don't make sense relative to import movement. They were built for domestic movement,' Newsome said.

      'I think we are in the first inning, and there are many more distribution centers and projects that are to be undertaken and that there are many opportunities to locate distribution centers in this state,' he added.



Dredging. Newsome believes Charleston's location and deep harbor may be of growing advantage in coming years.

      'If you looked around three years ago, every conference that you could go to in this industry had something to do with infrastructure. People were worried about if they could get cargo through ports, if they would have enough rail and truck capacity,' he said.

      With the global recession, capacity concerns have waned and instead concern has focused on 'whether harbors are deep enough and bridges are high enough to get these big new ships in,' he said.

      After the Panama Canal is completed in 2014 or 2015, ships of more than 16,000 TEUs will be able to transit the isthmus. It seems unlikely ships that large will soon call U.S. ports, but Newsome predicts 'as early as next year (2010) you're going to see 8,000-TEU ships on the U.S. East Coast.'

      Charleston should 'leverage our biggest natural advantage, which is the deep natural harbor that we have here, which allows two-way vessel traffic without the need for further dredging,' he said. 'We have 45 feet of water at low tide and we can get up to 48 feet of water on a tidal restriction and by our analysis in the strategic plan, that enables us to handle 99 percent of the ships below 9,000 TEUs that are built today or are going to be built.

      'I believe we will dredge deeper in the future, but the important message I'm trying to convey is that we do not have to dredge our harbor to handle the ships we anticipate are coming to this coast and we have two way traffic to our port.' Because the port's terminals are located near the ocean, the cost of dredging should be reduced.

      Savannah is also looking at channel deepening. Reconnaissance studies for the Savannah Harbor Expansion Project began in 1996 with Congress authorizing in 1999 the Army Corps of Engineers to look at deepening the river from its controlling authorizing depth of 42 feet to up to 48 feet in two-foot increments.

      Foltz said the port has spent about $38 million on studies so far.

      Billy Birdwell, a spokesman for the    Corps of Engineers office in Savannah, said the agency expects to issue a 'tier-two' environmental impact statement and general reevaluation report early this year, on whether the harbor should be deepened and if so, to what depth.

      Foltz hopes there will be a recommendation to move forward with the project by the end of 2010.

      Cost of the project would depend on dredged depth, but Birdwell said estimates, including deepening and environmental mitigation for a 48-foot channel are $500 million to $650 million. About 65 percent of the cost would be shared by the federal government and 35 percent by Georgia, though that could change depending on the recommended depth.

      For the project to move forward it will need not only approval from the Corps, but from the departments of Commerce and Interior and the Environmental Protection Agency.

      Foltz said the project is expected to take three to three and a half years and that the port authority's goal is to have deepening completed before opening of the expanded Panama Canal.

      Birdwell said ships calling Savannah can benefit from a seven-foot high tide. Four berths at the Garden City terminal were dredged this summer so that ships drawing up to 48 feet can ride the tide up and down the river at high tide but continue to be worked as the tide flows in and out.

      W. Thomas Browne Jr., president of the Savannah Pilots Association, said his organization backs the Savannah Harbor Improvement Project 'all the way,' and believes what the Corps is proposing is adequate.

      But John Cameron, a staff consultant for Charleston Branch Pilots, has raised a number of questions about the proposed dredging, especially as it relates to plans of the governors of South Carolina and Georgia to eventually build a new port on the north side of the Savannah River in Jasper, S.C.

      Cameron retired as captain of the port and sector commander at Charleston, and led all Coast Guard operations in both states.

      He said the Charleston pilots have an interest in the Savannah River project, both because they 'are the sworn officers of the state for navigational safety' and they would eventually navigate the ships in and out of the docks in Jasper since the terminal would be built on land in South Carolina.

'Rivals can make a very strong and effective team in the proper atmosphere. The team of rivals concept could work powerfully for both ports and the other industry stakeholders in the whole region if the right atmosphere is maintained.'

Gordon Dorsey senior vice president and U.S. operations manager, Maersk Line

      The river and approach channel is one-way, and Cameron believes it needs to be longer, wider and deeper. He said studies done in 2004 by the Corps at their laboratory in Vicksburg, Miss., found that even with a 52-foot channel, a ship drawing 47.5 feet would 'consistently ground in six-foot seas,' which he said are not unusual at the mouth of the river.

      He also thinks a 50-foot, two-way channel is necessary on the river to make South Carolina's investment in the Jasper terminal worthwhile.



Rail. Foltz said the Garden City Terminal's inland location, away from the historic waterfront and central business district of Savannah, has given it room to build intermodal facilities for both the Norfolk Southern and CSX railroads and good access to interstates 95 and 16

      A year ago, Savannah opened a second intermodal container transfer facility, the Chatham ICTF, at its Garden City terminal. The terminal is used by CSX, and supplements the Mason ICTF utilized by Norfolk Southern. Both facilities are on GPA property and are operated by the port authority.

      Today about 20 percent of cargo moves in and out of the port by rail, and Foltz believes that share could climb to 25 percent. Foltz said CSX makes up several trains a day that it sends from its ICTF, with even relatively close locations such as Atlanta served by rail. Norfolk Southern operates nine intermodal trains a week between Savannah and Atlanta.

      Newsome said, 'Rail access is ultimately an economic and reliability issue more than a physical issue. Whether a railyard is actually on or near a dock is less important than if you can get a container off a ship and on the rail the same day in a cost effective and reliable way.' He said the port may need to address the cost of rail drayage with some sort of a subsidy program, and that additional cargo volumes can be addressed through programs such as encouraging off-peak drayage.

      But he acknowledged there is 'probably a need for a greater Charleston area rail solution' to handle not just containers, but commodities such as steel, automobiles and chemicals moving in and out of the region.

      'With a beautiful town like this and the quality of life, there is a lot of reasons to look at rail and we would be happy to be a part of that,' he said.

      But if a rail facility is built, he said he would like to see it address all the port's terminals, not just a single one.

      John Vickerman, a Williamsburg, Va.-based port consultant, believes 'Charleston is perhaps of all the ports on the East Coast well positioned for seizing the larger vessels through the Panama Canal.'

      But he said to date the port 'has not embraced intermodal capability as a competitive factor in their approach to the market place.'

      Vickerman is working with a group of private developers who want to build two intermodal container transfer facilities ' one for CSX at what is called the Macalloy site, and another for Norfolk Southern at the Laurel Island site. The two facilities would have more than 300 acres combined, and the Laurel Island site would also have two berths for roll-on/roll-off ships.

      'My view is that the port of Charleston has a real chance to regain some of its previous prominence,' he said.

      Having recently read Doris Kearns Goodwin's book on Abraham Lincoln's cabinet A Team of Rivals, Maersk's Dorsey noted it 'pretty clearly drives home the point that rivals can make a very strong and effective team in the proper atmosphere. The team of rivals concept could work powerfully for both ports and the other industry stakeholders in the whole region if the right atmosphere is maintained.'

      Having two strong ports so close together will be a real advantage when the economic recovery takes place and help the region reach its economic potential, he said.