2012 U.S. Ports Update: Full steam ahead

The Panama Canal expansion isn’t the only factor driving infrastructure improvement efforts. Count population growth, increased exports, new trade agreements, global competition, and shifting trade lanes as other elements pushing aggressive U.S. port investment and expansion.

By · February 1, 2012

According to Kurt Nagle, CEO of the American Association of Port Authorities, a few important details are often missed when discussing the much anticipated Panama Canal expansion.

For example, he’s quick to point out that this development will not only better enable eastbound cargo to reach Gulf, Atlantic, and Great Lakes ports, but it will also encourage more east-west cargo flow by enabling larger ships from parts of Europe, South America, and Africa to more easily reach U.S. West Coast ports. 

“Additionally, West Coast ports are also actively looking to compete by investing in their infrastructure and keeping rail rates competitive,” Nagle says. “In 2010, West Coast seaports served more than 190 million consumers, or 63 percent of the total U.S. population, and are expected to serve more than 220 million consumers in 2030.”

Nagle also notes that as cargo volumes continue to rise, the expansion of the Panama Canal may serve as a “relief valve” by providing access to alternative seaport regions when cargo volumes periodically reach their peak during particularly busy times of the year. Meanwhile, ports on all coasts are readying themselves for projected growth based on a number of factors currently unfolding.

East Coast investment on track
Zepol Crop. a leading trade intelligence company, reports that the Port of New York/New Jersey saw a 2.6 percent increase in containerized imports in 2011 and is forecasting sustained throughput for 2012.

This explains why the New York/New Jersey plans to invest approximately $230 million this year. One major area of focus in 2011 was to greatly enhance the port’s existing internal road network. Work began to widen McLester Street in the Elizabeth-Port Authority Marine Terminal and to widen and realign Port Street and Brewster Road.

In addition, the Port Authority continues to work on the 50-foot harbor-deepening project that’s now 80 percent complete and continues the development of its ExpressRail intermodal system. These projects are all designed to provide unimpeded ocean and landside access capacity to and from the port for the expected future growth in cargo.?

Last June, the Port Authority also reached agreement on a restructured lease with Port Newark Container Terminal that will provide $500 million in private capital investment to upgrade the existing facility into a state-of-the-art terminal. “This will guarantee an annual increase in cargo container volumes from Mediterranean Shipping Company, the world’s second largest shipping company,” says Port Commerce Director Richard Larrabee. “We’re preparing for the future cargo growth we expect to receive, and the economic activity it will generate.”??

The Port of Baltimore continues to demonstrate tremendous progress despite a challenging global economy. Buoyed by a strong year in 2010, it now ranks 11th nationally (up from 12th) for the total dollar value of cargo and 13th (up from 15th) for the amount of cargo tonnage handled, according to recent statistics released by the U.S. Census.

And the news just gets better for 2012. Hapag-Lloyd, the world’s fifth largest container company, has launched a direct, weekly container service from North Europe to the port. Baltimore, which is positioned within the third-largest U.S. consumer market, is now the first U.S. port of call for this service. The new business is expected to bring about 30,000 containers annually through the gateway.

Maryland Governor Martin O’Malley praises public-private partner, Ports America Chesapeake, for “playing a vital role” in attracting this new business. “It demonstrates that our continued investment in the port of Baltimore is the right path to follow,” he says.

Ports America Chesapeake provides stevedoring and terminal services at Seagirt Marine Terminal, which has access to the CSX National Gateway. Seagirt Terminal is also constructing a 50-foot berth and purchasing four super Post-Panamax cranes. According to terminal officials, the berth is ahead of its original schedule and will be finished in August 2012, two years before the completion of the Panama Canal expansion.

Southern advantage
Like NY/NJ and Baltimore, the Port of Miami is also benefiting from importers’ desires to service the large population and consumption markets on the East Coast via all-water East Coast routings from Asia.

According to Kevin Lynskey, the port’s assistant director, importers are also diversifying their inbound strategies in order to minimize potential disruptions to their supply chains.

This enables them, says Lynskey, to take advantage of the shifting manufacturing points of origin from China to Southeast Asia, India, and Latin America.

“Miami will be the closest U.S. port of call to the Panama Canal, and will be the only port south of Norfolk to be at 50 feet, which is the water depth that the ocean carriers will use to evaluate which ports they route the larger and more economic vessels to,” says Lynskey. “Port Miami will also have on-dock rail service through Florida East Coast Railway (FEC).”

Lynskey adds that given the margin pressures that importers are facing in today’s economic environment, Miami and FEC will be in position to significantly reduce transportation expense, inventory investment, and carbon emissions.

Late last year, when U.S. Secretary of Transportation Ray LaHood met with Logistics Management (LM) in Atlanta to receive our 2011 Logistics Executive of the Year Award, he paid a special visit to the Port of Savannah to see how it’s expansion plans were coming along.

“The harbor expansion project is critical,” LaHood told LM. “Savannah is the fastest growing and fourth largest U.S. container port today.” He noted that with 44 percent of the U.S. population served by the Port of Savannah, the ocean cargo gateway is a natural for first inbound vessel calls. But other officials point out that infrastructure improvements will benefit outbound sailings as well.

Georgia Port Authority Board Chairman Alec Poitevint reports that Savannah’s export volume grew 12 percent in 2011 and represented 53 percent of its overall volume. “Export commodities translate into new jobs for our entire region,” Poitevint says. “And balanced trade will continue to drive development and commerce throughout the Southeast,” he says.

Last month, the port began work on a 6,000-foot extension of the Mason Intermodal Container Transfer Facility. This project, designed to add more than 4,000 linear feet of rail track at two rail yards serving CSX and Norfolk Southern, will be an intermodal link for the port’s Garden City Terminal. Last year, intermodal container transfers reached record levels, Poitevint adds.

Gulf growth
Enhanced intermodal projects are underway in the Gulf port of New Orleans as well thanks to U.S. Department of Transportation’s popular Transportation Investment Generating Economic Recovery (TIGER) grants program.

Currently, the money is being spent on rebuilding a specialized rail yard at the Louisiana Avenue terminal along the Mississippi River. The overall project has two components: construction of a new 12-acre freight rail intermodal terminal; and resurfacing and fortifying a four-acre storage yard that is used for ultra-heavy project cargoes. 

The project’s objective is to reduce congestion, facilitate the movement of marine and rail cargo, stimulate international commerce, and maintain an essential port asset in a state of good repair. “The timing for such a project for New Orleans could not be better,” says Walter Kemmsies, chief economist for Moffatt & Nicol, a port consultancy. “We anticipate a surge in demand for U.S. agricultural exports over the next 10 years; and if New Orleans did not get something underway now, it would risk losing business to neighboring ocean cargo gateways.”

At the same time, Port of New Orleans officials are hailing Louisiana’s Congressional delegation for their efforts to direct vital maintenance dollars to the U.S. Army Corps of Engineers to restore the Lower Mississippi River deep-draft channel to its authorized dimensions.

“This is tremendous news not only for the Port of New Orleans and the local maritime community, but for the growers, producers, and manufacturers in the 32 states that depend on the Lower Mississippi River to get their goods to global markets,” says Gary LaGrange, the port’s president and CEO.

West Coast resilience
Oddly enough, exports were the big story on the U.S. West Coast, too. For the second consecutive year, the Port of Los Angeles—a huge inbound destination—experienced record-breaking exports as outbound container volumes surged 14.5 percent in 2011 compared to 2010.

Furthermore, imports also increased 2.3 percent compared to the previous year. Total annual volumes, including empty containers, rose 1.4 percent. Not surprisingly, the port is investing $1.5 billion in capital improvements over the next five years.

“Last year was our second straight year of record exports, and it’s an example of how our port is prepared to handle a shift in global trade patterns,” says port Executive Director Geraldine Knatz, Ph.D. “We continue to facilitate export opportunities through our nationally-recognized TradeConnect Program while focusing our longer-term strategies on retaining and growing our position as the nation’s busiest container seaport.”?

The neighboring port of Long Beach is also positioning itself for more inbound calls. This is a good move, says Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation. “We’re headed into the slow season for cargo shipments, but forecasts indicate that retailers will be stocking up this spring in anticipation of a moderate recovery as the year progresses,” he says. “Cargo volume doesn’t translate directly into sales volume, but when retailers import more it’s because they expect to sell more.”

To that end, Long Beach is readying itself to extend its terminal lease with mega-carrier, Orient Overseas Container Line (OOCL) that represents the largest deal of its kind for any U.S. seaport. Leasing partners comprise Hong Kong-based OOCL and its U.S. subsidiaries OOCL LLC., and Long Beach Container Terminal (LBCT). The port is investing $1.2 billion to develop the new 300-acre Middle Harbor Terminal, while OOCL and LBCT will invest approximately $500 million in the latest cargo-handling equipment.

The Port of Oakland reached a major funding milestone of nearly $350 million for harbor deepening and maintenance late last year, thereby enhancing its position as the third largest California seaport.

Jock O’Connell, Beacon Economics’ International Trade Adviser, says he expects continued gains in California’s export trade through the remainder of the year as the U.S. and world economies overcome the negative shocks that hit in early 2011.

“Oakland is the only major container port on the U.S. West Coast that exports more than it imports, with the volume of its export business at 55 percent and imports at 45 percent,” he says. O’Connell adds that 2,000 container ships call Oakland each year, and many leave fully-loaded with California exports.

“Despite occasional dockside labor disruptions, Oakland has been, and continues to be, a premier U.S. export seaport for agricultural goods,” adds O’Connell. “Its terminals are relatively new and uncrowded. The port is also close to California’s Central Valley and the wine country. Furthermore, the port is the only U.S. West Coast gateway that has all top 20 ocean carriers providing regular service.”

The two major U.S. Pacific Northwest ports—which not only compete with California but also their Canadian neighbors, Vancouver and Prince Rupert—have some reasons for remaining upbeat.

The Seattle Harbor once again handled over 2 million TEU’s with 2.03 million containers moving through the harbor in 2011. The record was broken in 2010 with 2.1 million TEU’s. But last year marks the third year that the harbor has exceeded 2 million TEUs.

“We will continue to work with some competitive advantages,” says Linda Styrk, Seattle’s managing director. “We have the capacity and the facilities to handle 10,000 or more TEU container ships, we have excellent intermodal infrastructure and regional distribution facilities, and we continue to work with our customers collaboratively to keep the business here.”

Several factors contribute to Seattle’s increase in container volume. Exports continued to increase in 2011. The port also saw the addition of new shipping lines, services, and trade lanes while empty container positioning remained strong. The port maintains four world-class container terminals, with 27 cranes, 11 container berths up to 50 feet deep, along with close proximity to two major national rail hubs and two major interstate highways within minutes of all terminals for efficient truck access.

The Port of Tacoma, which recently celebrated the completion of a $32 million extension of the Washington United Terminals (WUT) wharf on the Blair Waterway, also remains resilient. The construction project added 600 feet to the terminal’s existing 2,000-foot berth to support two “super post-Panamax” container cranes the terminal added in January 2009.

The 273-foot-high cranes can serve a ship 24 containers wide, making them among the world’s largest. Built by Shanghai-based ZPMC, the cranes joined four others at WUT with an 18-container-wide reach. “This wharf extension provides WUT with the additional terminal capacity we need for our two largest container cranes, and allows us to handle two container ships at the same time at our facility,” says Y.I. Song, head of Hyundai Merchant Marine America, Inc. “It also gives us greater capacity to handle additional business at this terminal and accommodate the industry’s largest container vessels.”

John Wolfe, CEO of Port of Tacoma, speaks for many on the West Coast when he says collaboration is key: “This project is a great example of how we work together with our shipping lines and terminal operators to make investments that create additional capacity for our future growth,” he says.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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