Delivering on Promises

Barry Parker discusses life after the expanded Panama Canal for ports on the US East Coast for Port Strategy

The now waning 2016 will be remembered as the year that the widened Panama Canal, with its new set of locks, finally opened. Against the backdrop of press releases trumpeting port calls of 8,000 teu ships, and larger, throughout July, the ongoing story is really about how ports along the US East Coast are preparing for the advent of regular calls of these neo-panamax vessels, and how they hope to capture a greater share of cargo bound for the middle of North America that might otherwise be routed through West Coast ports.

Dredging channels to 50 ft is part of each port’s strategies, as is re-jigging for more efficient flows through their ports, with more seamless interface with rail modes. Even though year-on-year comparisons show imports gaining, it’s too early to point to large enduring shifts in cargo.

Supply chains won’t change overnight: the Suez Canal is also attracting the larger ships and regional hubs are also on the horizon.

Port observers will remember that 2015 saw gains on the US East Coast due to the labour difficulties on the opposite coast. The Port of Savannah, a major beneficiary of the switching in 2015, estimates that it held on to 24% of the ‘diverted’ cargo, in 2016.

Megaport ambitions

Perhaps most indicative of the renewed optimism along the US East Coast are the revived plans being discussed for a greenfield megaport on the Savannah River between Georgia and South Carolina. In late October, the US Army Corps of Engineers announced that it would be developing an Environmental Impact Statement to be completed in 2020, the first step in a lengthy evaluation process. The timeline for the new port, if it comes to fruition, would be 2025, by which time the ports of Savannah and Charleston, both girding for deeper ships, will have maxed out.

Further down the coast, Florida has provided an excellent model of co-operation and funding between the State and local ports. In Miami, the southernmost port on the coast, its Deep Dredge project – which the USACE described as “the first Federal navigation project in the southeast built to a 50 foot depth” – was completed in late 2015. The project co-incided with construction of a new tunnel to route trucks to the port, and completion of an on-dock railway link to a major regional railroad. By virtue of its location, Miami is a hub for distribution of goods to the Caribbean, in smaller container and breakbulk vessels.

However, co-operation among stakeholders is far from perfect and USACE continues to be the subject of sniping by environmental groups concerned about damage to coral reefs, following Deep Dredge.

Nod for Everglades

Farther up the coast, in Broward County, Port Everglades’ plans for expansion passed muster with the Office of Management and Budget (OMB, part of the review process prior to the USACE’s dredging work) in early 2016. According to the port: “The harbour improvement plan includes deepening the inner entrance channel, main turning basin, Southport Access Channel and turning notch from 42 to 48 feet; deepening the outer entrance channel from 45 to 55 feet; and, widening select areas.”

Though Port Everglades is well known as a cruiseship port, its container throughput of nearly 1.1m teu – now benefiting from recently streamlined highway and rail access – rivals that of Miami and it plays a major role on the bulk side in the distribution of refined petroleum products into southern Florida, now the third most populous US state.

Both ports are leaders in the cruise sector; where they fiercely compete for business. Plans were recently announced for a major new terminal in Miami to serve newbuild cruise vessels in RCCL’s Oasis class (5,400 passengers). Two ships already on the water have been docking at Port Everglades and one sails from Port Canaveral, farther north.

In the northern part of Florida, Jacksonville, which, like Miami, has benefited from fast-tracked US permitting, has set its sights on deepening its channel, on the St. Johns River, to 47 feet. In 2016, the first steps were taken, as money to begin the project was included in the Port Authority budget.

Jacksonville’s closer proximity to the US highway and rail networks has called for a nuanced strategic approach- where it emphasises its ability to attract land-side logistics/processing facilities.
It has already completed rebuilding of heavy-lift facilities at its Blount Island terminal, where Jacksonville’s automobile processing facilities are based. The port’s strategic plans take a different stance on developments in Panama, acknowledging the growing possible role for hubs in Panama itself and in the Caribbean, with a new group of feederships able to call at the port’s terminals. Already at the hub of mainland trades with Puerto Rico, Jacksonville is also well positioned for new Cuban trades opening up.

Savannah attractions

Savannah and Charleston, meanwhile, compete intensely for cargo destined for the southeast US and the hinterlands deep into the Midwestern region, while also handling regional exports in containers and refrigerated/breakbulk cargoes such as poultry and forest products, a mainstay of the region.

Savannah, where its fiscal 2016 throughput exceeded 3.6m teu, has been very successful in attracting distribution centres for major consumer goods retailers, due to its proximity to the highway network.
Both ports are engaged in expansion programs, funded by combinations of Federal and State and Port Authority dollars. Georgia Ports Authority says: “Construction has begun on the Savannah Harbor Expansion Project (SHEP), which will deepen the 18.5-mile outer harbor to 49 feet at mean low water and the Savannah River channel to 47 feet. With construction underway, dredging will be completed as early as 2019.” Savannah is also looking deep inland, having recently announced its $128m Mid America Arc plans – which would configure on-dock rail to handle unit trains two miles long that would be able to travel to Mid America, distribution facilities within the Chicago-St Louis-Memphis corridor.

Up the coast, Charleston saw more than 1.9m teu move through its terminals in its just completed fiscal year, closely spread between import and export. South Carolina Port Authority (SCPA) talks about a $2bn program that will increase container capacity by 50%, with construction of a new terminal, and modernisation of existing terminals and infrastructure underway. Charleston is at the early stages of deepening its harbour to 52 feet, a project that it hopes to finish by 2020. Recognising the importance of rail linkages, SCPA is also partnering with Norfolk Southern – one of the Class 1 railways serving the region – to bolster its service from Greer (about 150 miles inland) to the port of Charleston, for containers and automobiles. The SCPA says: “Inland Port Greer achieved a record year of volumes, with 91,698 rail moves handled during FY2016 with 57% higher volume this fiscal
year compared to last year.”

Down the corridor

Elsewhere on the coast, Virginia, Baltimore and Philadelphia all benefit enormously from their proximity to the densely populated and heavily industrialised ‘I-95 Corridor’. Baltimore, which is busy with bulk commodities, breakbulk/automobiles and containers, showed its prescience with its Vision 2025 effort a decade ago, that made the case for dredging to 50 feet to match its channel depth alongside the container berth at Sea Girt Terminal. A SWOT analysis in the 2007 MPA document highlighted Baltimore’s excellent location atop Chesapeake Bay, but acknowledged the challenges from older railway infrastructure. A top action item in the 2015 Strategic Plan for the Port of Baltimore was to: “Identify and encourage all options for double-stack rail capabilities.”

The 2015 plan acknowledges that much of the import cargo stays within the region and has set a goal to “increase the amount of container imports and exports at a rate higher than the average annual growth for Mid-Atlantic ports overall. These ports include New York, Philadelphia, Wilmington, and Norfolk, which represent the most immediate competition for containerised cargo imports and exports within Baltimore’s market area.”

Philadelphia and the neighbouring ports of Camden and Wilmington on the Delaware River, also serve specialised niches. Ongoing dredging work here will deepen the river to 45 ft at a time when the Philadelphia Regional Port Authority (PRPA), an independent agency within the Commonwealth of Pennsylvania, is evaluating bids for development of its Southport Marine Terminal. In what would be the first expansion in decades, PRPA is hoping to partner with a private sector developer who would design, finance, build out and then lease the new terminal at a trio of existing sites. Philadelphia has also pursued the niche market of LPG exports, a growth area in shipping until the oil price collapse of 2014.

USEC top dog

The Port Authority of New York and New Jersey (PANYNJ), a landlord port with terminals leased to private operators, was the top port on the US East Coast with 4.6m teu moving through its facilities in 2015; 2016 is set to be nearly in line with these levels. Land and infrastructure are both constrained throughout the region, so planners have focused on optimizing available resources. Now that the multi-year dredging to 50 feet has been completed, all eyes are on the Bayonne Bridge, built in the 1930s and now seeing its roadway being raised to allow for transits of post Panamax vessels into the Port Authority’s container terminals on the New Jersey side. From late 2017, vessels with airdrafts of up to 215 feet (compared to the present 150 feet) will be able to transit underneath the bridge.

But after the ships come in, then what? With discretionary cargo at stake, where boxes can be delivered by rail to destinations deep within the heartland, PANYNJ continues to invest in its ExpressRail on-dock rail capability. $500m has already been spent, and another $250m is slated to be spent on a link to the Port Authority’s Global Container Terminal at Jersey City.

Planners here are also taking a look out into the more distant future. In late September, the Port Authority’s commissioners approved a $3.4m contract with Hatch Associates Consultants to develop a long-range master plan for the port with a regional focus that will peer out to 2045.

THE ATTRACTIONS OF HIGH TECH

Alinda Capital, an investment packager specialising in long-life infrastructure assets, is an owner – along with its investor partners, which are typically pension funds – of Virginia International Gateway.

Alex Black, a principal of Alinda, explained that technology can be an important determinant of the value of its investments. In a posting on Alinda’s website, he stated: “Last year, Alinda invested in Virginia International Gateway in the Port of Virginia. We were attracted to Virginia International Gateway because it is the most technologically advanced container terminal in the US. It offers shipping companies excellent turnaround times by loading their ships faster, automatically sorting containers overnight to bring forward in the stacks those containers to be loaded the next day. It also has a lower handling cost than any other terminal in the region, giving it an important position in the Port of Virginia.”

He continued: “The result is that the Port of Virginia, where volumes have been growing strongly, has announced that it is planning to expand the capacity of Virginia International Gateway, almost doubling it, in fact, as early as next year. That’s beneficial for the Commonwealth of Virginia and validates our decision to invest there.”

Terminals in New York/New Jersey have also seen investments in technology; its Global Container Terminal, in Jersey City, has moved towards some automated handling of boxes. But with congestion always threatening to suffocate cargo movement, late 2016 saw a return to an old technology, containers moving on barges, an important component of plans to reduce movements of trucks. The new cross-harbour barge service now brings boxes to Red Hook, Brooklyn from the Port Newark Container Terminal across the harbour, where the large container vessels dock.

The likes of Alinda, and other private equity investors, would not see value in such services. But the social benefits, such as reduced roadway congestion and reduced emissions, attract other finance sources. The infrastructure for such services is eligible for funding under the US Maritime Administration (MARAD) ‘Marine Highway’ program. Short sea shipping – which includes barge feeder services – has been a long-time goal of MARAD, albeit an elusive one.

Source: portstrategy