Posted on January 4, 2016
This spring, a new breed of super freighters will begin steaming through a widened Panama Canal, each hauling one-and-a-half times more freight than the ships that can move through the canal now.
But those new ships don’t come to the Port of Charleston because they can only pull up to and leave the busy Wando Welch terminal when the tide is high, resulting in costly delays.
The biggest ship to ever stop in Charleston carried the equivalent of 9,600 20-foot shipping containers. The new ships can carry as many as 13,000.
The S.C. Ports Authority is embarking on a staggering $1.6 billion expansion to lure the new super freighters into Charleston. The ships are deemed essential to continue South Carolina’s – and the Southeast’s – manufacturing boom. The project is expected to be completed by 2020.
“We’re getting this started in the nick of time,” Ports Authority chief executive James Newsome said.
Last week, the authority and the U.S. Corps of Engineers signed an agreement to start looking at dredging Charleston Harbor’s main shipping channel. The work will include ship simulation studies, refinement of cost estimates, coastal monitoring and analysis of beneficial use for dredged material.
Preparation for the big ships includes four separate projects:
– A $509 million plan to dredge Charleston harbor’s shipping channel to 52 feet from its current 45 feet
– A $750 million terminal at the old North Charleston Naval Base
– A $350 million rail line to the new terminal
– A $40 million project to strengthen the wharf at Wando Welch terminal to bear the increased weight of the new ships.
Work on the terminal and wharf is underway.
The General Assembly has already allocated $300 million for the dredging project, with the rest coming from port revenues and federal funds. The other projects are being funded by money they will generate.
Newsome estimated the expansion should increase earnings at the port, now at $30 million annually.
“I want to grow above the market,” he said.
Economies of scale
The Panama Canal expansion project is creating a new lane of traffic that will be big enough to accommodate the super ships.
The existing locks can only handle freighters that carry up to 5,000 20-foot equivalent units, or TEUs. The expansion will allow the canal to handle ships up to 13,000 TEUs, doubling the amount of goods that pass through it in a year.
That will greatly improve the economies of scale for international shipping, especially the lucrative lines between China, South Korea and Japan and the United States’ East Coast and Europe. Presently, the big ships from Asia take the much longer route to the East Coast through Egypt’s Suez Canal.
Those bigger freighters and shorter routes will mean bigger profits for both shippers and their customers.
“These ships are going to be the workhorses of the East Coast,” Newsome said.
Attracting those ships will have a huge impact on South Carolina’s ability to land future manufacturing plants, he said.
Transporting goods and raw materials over land costs more than over water, Newsome said. So manufacturers that import materials from overseas or market their products abroad are more likely to locate their manufacturing plants near ports.
If a port can’t handle the new ships, then those plants will likely locate closer to ports that can.
The trend in United States manufacturing is locating in the South to take advantage of lucrative economic incentives, free land and infrastructure, lower wages and a lack of labor unions, said Joey Von Nessen, a University of South Carolina economist who recently completed a study of the port’s economic impact.
South Carolina has proven it can take advantage of this trend with a string of major announcements from Boeing, Volvo and Mercedes Benz, and plant expansions from Michelin and BMW, he said. With the Port of Charleston moving to handle the larger ships, recruiters will have an important tool to continue to lure those companies.
“The expansion of the port will make South Carolina more competitive in the long run and enhance efforts to attract new companies and expand the manufacturing sector,” he said.
High economic impact
The authority operates two ports in Charleston and Georgetown, with Charleston by far the largest. The agency also has an inland port – a large rail yard – in Greer near the BMW plant.
Together, the ports have a $53 billion annual impact on South Carolina’s economy, the USC study reported, generating 187,206 jobs directly or indirectly and accounting for $10.2 billion in labor income.
The ports account for nearly 48,000 jobs each year in the 15-county area of the Midlands alone, the study said. Those jobs generate $2.6 billion annually in labor income.
“All of the rubber that we use to make tires has to come from somewhere overseas and this port is where we bring (in) the vast majority of that,” Roy Chamlee, Michelin North America’s S.C. governmental affairs director, said when the study was released last month at the company’s Lexington County plant. “To us, the port is extremely important.”
About 9.3 percent of the state’s gross domestic product – that is, all the goods and services produced in the state in a year – can be directly or indirectly tied to the S.C. Ports Authority, Von Nessen said.
Since the end of the recession five years ago, South Carolina’s economic growth has been dominated by export-oriented industries that are primarily large port users, Von Nessen said. For instance, the state has become the nation’s leading producer and exporter of tires, a title directly linked to the Port of Charleston.
Also, industries that heavily use the ports tend to spin off more jobs than businesses that don’t, the study found. For every 10 jobs that are directly supported by the port, an additional 14 jobs are created elsewhere in the state.
“And we’re already seeing more manufacturing firms locating in South Carolina because of the port,” Von Nessen said. “Volvo (which announced plans in May) is just the most recent example.”
Charleston is the fourth largest port on the East Coast behind New York, Savannah and Norfolk and among the 10 largest in the nation.
The dredging project will give it the East Coast’s deepest harbor, surpassing the 50 feet at Norfolk, New York and Miami. Several other ports in the Southeast also are deepening their harbors, including Charleston’s chief competitor, Savannah.
The U.S. Corps of Engineers has already given preliminary approval for the Charleston. And with the $300 million allocated from the S.C. General Assembly, “No other state has 60 percent of their project in the bank,” Newsome said.
Environmentalist groups signed off on the project early after the authority pledged to spend $25 million to preserve wetlands around Francis Marion National Forest and the Ashley River.
Unlike Savannah’s project to deepen the Savannah River to its inland harbor, Charleston’s dredging project will be less intrusive to the environment, said Barbara Melvin, the authority’s senior vice president for operation and terminals and the deepening project’s manager.
“It’s a gift of being an ocean harbor,” she said.
Final federal approval by Congress is expected in September. Two weeks ago, federal lawmakers approved $13.1 million for operations at the port, which included $695,000 for a federal feasibility study on the deepening project.
Beginning in 2017, work should begin on the project, which includes dredging a 38-mile, 52-foot-deep channel from the harbor’s entrance to the North Charleston Naval Base terminal, named after Senate Finance Committee Chairman Hugh Leatherman, R-Florence.
Newsome said attracting the big ships does more than benefit South Carolina. It also allows other states in the Southeast to attract industries and build their economies.