U.S. ports expand keeping pace with import growth

U.S. ports remain confident that aggressive infrastructure expansion will keep pace with the relentless growth of the Asian trade that they wished for … and definitely got.

By John Paul Quinn -- Logistics Management, 3/1/2007

Despite the fact that in 2006, many U.S. ports fell short of the dramatic double-digit growth they had enjoyed since the mid-1990s, one thing remains constant: For many ports in North America, Asian imports and exports will continue to represent anywhere from 25 percent to more than 90 percent of their cargo volume, and no one anticipates that will change much in the near term.

The growth rate has slowed somewhat, but it’s still quite respectable. According to data from PIERS Global Intelligence Solutions, first-ranked Port of Los Angeles, for example, saw 18 percent growth in containerized traffic through November 2006. Long Beach was up 10 percent, and New York and Savannah, Ga., were up 9 percent and 8 percent, respectively. Wilmington, N.C., with a 26 percent increase, benefited from shippers’ decisions to take the all-water route to the East Coast.

Most sources forecast a return in 2007 to more normal growth patterns after five years of maneuvering by shippers in response to actual — and at times overestimated — congestion problems at some ports. “This year we expect a return to basic market growth rather than market-share growth on top of market growth,” says Paul Bingham, an economist at Global Insight Inc. in Washington, D.C. “For example, some ports in the Pacific Northwest and on the East Coast that profited from redirection of Asian cargo from the San Pedro Bay ports of Los Angeles and Long Beach will see a return to fundamental demand growth in the mid- to upper single-digit range.”

Another consideration for shippers is the emerging shift of traffic originating in Southeast Asia and India from the trans-Pacific to the Suez and Panama Canal routes. Whichever route shippers choose, the question remains: How will ports handle burgeoning cargo volumes?

The answers include new development projects, capital-equipment spending, marketing programs aimed at luring big-box retailers’ distribution centers (DCs), and the mundane but effective approach of making more productive use of existing space and capabilities.

Density and Dwell Time

Making the most of what they already have has allowed a number of ports to increase existing container capacity and to cut back the amount of time containers remain at dockside.

Key to augmenting container-stacking density is more powerful loading equipment; accordingly, investment in container cranes is soaring. The Port of Charleston, S.C., is purchasing 16 new rubber-tired gantry cranes (RTGs) as part of a $160 million improvement plan that will increase density by 25 percent. Currently, 25 percent of Charleston’s inbound shipments are from Asia.

The Port of Savannah, Ga., will be using more RTGs to improve stacking efficiencies and will add four post-Panamax, shoreside gantry cranes. Norfolk (Va.) International Terminals purchased eight of these units and has another three on order; the Port of Jacksonville will add six, and the Port of Oakland has brought in 12.

Charleston also instituted time management rules for full containers. As a result, in the last 12 months dwell time has been reduced by 40 – 80 percent, depending on the terminal and the type of cargo. “Going from ten days down to five, or fourteen down to ten, adds immediate capacity without additional expenditures or doing anything except using available space more efficiently,” says Byron Miller, South Carolina Ports Authority director of public relations.

Land Development and DCs

Ports that can offer sufficient terminal capacity and reasonably priced real estate in close proximity have embarked on intensive marketing efforts to convince more retailers to locate their DCs near container gateways.

At the Port of Savannah, where 65 percent of all imports and exports represent business with Asia, two new DCs are coming on stream now. Each will occupy 2 million square feet, with Target operational by the end of the first quarter and Ikea following at mid-year, according to Roberto Rodriguez, the port’s general manager for marketing and business development. In addition, Savannah’s strategic plan calls for boosting terminal space to nearly 6 million TEUs by 2020, keeping pace with the 6 – 8 percent annual increases forecast for the next 15 years.

The Port of Jacksonville, Fla., will see the establishment of a 300,000 square-foot southeast regional DC by craft-store giant Michaels Stores Inc. as well as a 400,000 square-foot DC by Laney & Duke Terminal Warehouse Co. An important bargaining chip in attracting them, says Robert Peek, the port’s director of communications, is the Mitsui O.S.K. Lines container terminal that is currently under construction and due to be completed in 2008. Initial capacity will be 250,000 TEUs, most of it moving to or from Asia. Throughput is forecast to eventually reach 800,000 TEUs, which will more than double Jacksonville’s present volume.

Growth Options

The Port Authority of New York and New Jersey is taking another approach to land development by focusing on the outer limits of existing warehouse facilities, some of which are 25 to 30 miles away, says spokesman Steve Coleman. In cooperation with the New Jersey Economic Development Authority, the port is identifying so-called “brownfield” sites—unused, abandoned, or under-utilized land that can be developed for warehousing and distribution space. Nearly 20 such sites have been located and development work will soon begin.

On the Gulf Coast, the Port of Houston last month opened its Bayport Container Terminal, which will have a designed capacity of 3.3 million TEUs. Houston is ahead of the curve when it comes to growth, says Chairman Jim Edmonds. “The port is working with developers to increase the number of retail DCs along the Houston Ship Channel,” he says. “We estimate there will be a 10 percent increase in container traffic this year, with half of it Asia-based cargo. We expect this growth to continue along with the addition of more DCs, which could ultimately result in Houston serving as a port of entry for eight to twelve states.”

A full 99 percent of the North Carolina State Port Authority’s container business is Asian. The agency is one year into a $143 million, five-year expansion program that will triple throughput and stay abreast of projected growth through 2015, reports Glenn Carlson, vice president of business and economic development. The program includes acquisition of four container cranes, installation of rail for the cranes, and upgrades to berths and fendering systems.

The Port of Seattle, where 97 percent of container traffic originates in or is destined for Asia, is seeking approval for a plan that would combine two terminals into one double-berth container facility. Mick Shultz, director of media relations, says that with minor augmentation of existing terminals and the addition of off-terminal container yards, the port could reach a capacity of up to 5 million TEUs relatively quickly.

Down Puget Sound in Tacoma, Washington United Terminals has been expanded by 22 acres to accommodate Hyundai Merchant Marine’s growing business. The complex now occupies 102 acres, with four post-Panamax cranes and an on-dock intermodal yard with more than three miles of trackage, says Doug Ljungren, Port of Tacoma’s business planning manager. About 96 percent of Tacoma’s foreign cargo originates from or is destined for Asia.

Federal Land Transfers

The transfer of government lands to port ownership also figures in a number of expansion programs.

The Port of Oakland, which depends on Asia for 80 percent of its containerized import and export traffic, has completed an expansion that doubled capacity, largely due to the return of the U.S. Navy’s 400-acre Fleet Industrial Supply Center to the port, says Public Affairs Director Marilyn Sandifur. And in August, the port received title to 189 acres of the former Oakland Army Base, which is earmarked for expansion of near-dock intermodal rail facilities and possibly an outer-harbor intermodal terminal.

The Virginia Ports Authority received approval in 2006 to take title to the Army Corps of Engineers’ dredge-disposal site across the Elizabeth River from Norfolk. When completed, the redevelopment will add 5 million TEUs of capacity. The port has already begun a $360 million development of its Norfolk International Terminals that will boost capacity by 30 percent. Currently, Asian traffic represents 30 percent of Norfolk’s business on a tonnage basis.

A major catalyst for development is the presence of retail distribution centers. “The major retailers — Target, Wal-Mart, Home Depot, and Lowes — are already here,” says Marketing Director Tom Capozzi. “There is similar DC development taking place at the inland port of Front Royal that will serve the Ohio Valley and northeastern markets.”

Expansion to Continue

Port administrators are optimistic that their development and expansion efforts will continue to meet the needs of the coming decades, and they see no constraints that would prevent this.

“Prime real estate in the Savannah area is enough to handle 2.5 million square feet of DC space per year for the next ten years,” says Rodriguez, “and, like a number of other ports, we have plenty of opportunities on the operational and technological side to better utilize the acreage we have.”

Miller in Charleston agrees: “There is untapped capacity within the existing marine terminal structure at most ports, and they have a long way to go to maximize utilization. And while there may be limits to existing technology, it is constantly evolving. Ports are doing things today they didn’t dream of fifteen years ago, and it’s more than likely that this scenario will play out into the future.”

Top 25 U.S. Ports: Containerized Imports
(in TEUs, Jan. through Nov. 2006)

Rank	U.S. Port	Total
1	Los Angeles	4,066,844
2	Long Beach	3,469,788
3	New York/N.J.	2,407,151
4	Charleston	818,507
5	Savannah	802,755
6	Norfolk	770,163
7	Oakland	759,348
8	Seattle	735,587
9	Vancouver (B.C.)	702,664
10	Tacoma	673,548
11	Houston	617,163
12	Miami	396,953
13	Port Everglades	270,946
14	Baltimore	231,673
15	Philadelphia	141,913
16	San Juan	139,394
17	Wilmington (Del.)	120,346
18	Gulfport	89,672
19	Portland (Ore.)	79,165
20	Boston	73,973
21	Wilmington (N.C.)	73,719
22	New Orleans	63,576
23	Chester (Pa.)	46,569
24	Jacksonville	45,242
25	San Diego	44,421
Source: PIERS Global Intelligence Solutions (www.piers.com)

Top 25 U.S. Ports: Containerized Exports
(in TEUs, Jan. through Nov. 2006)

Rank	U.S. Port	Total
1	Los Angeles	1,193,067
2	New York/N.J.	976,125
3	Long Beach	951,536
4	Savannah	672,153
5	Houston	573,834
6	Charleston	569,453
7	Oakland	545,069
8	Norfolk	532,259
9	Seattle	389,867
10	Tacoma	318,201
11	Port Everglades	311,524
12	Miami	290,264
13	Baltimore	137,389
14	West Palm Beach	106,990
15	Jacksonville	97,814
16	New Orleans	95,577
17	Portland (Ore.)	72,769
18	Gulfport	59,869
19	Boston	55,713
20	San Juan	53,326
21	Chester (Pa.)	47,041
22	Wilmington (N.C.)	43,584
23	Wilmington (Del.)	36,006
24	Newport News	28,786
25	Freeport (Texas)	25,883
Source: PIERS Global Intelligence Solutions (www.piers.com)