Tuesday, June 15, 2010

East Coast Ports: Cautious Optimism

By Jim Shaw
June 2010

Ports along the East Coast and within the Great Lakes have not had the best of years, but most are optimistic that the worst is behind and that better months lie ahead. A less-than-severe winter allowed navigation on the Great Lakes to be opened a little early this year as regional steel mills rushed to build up depleted inventories of raw materials while several ports long the East Coast reported near record surges in container traffic during the first quarter. This is seeing a number of ports, such as Halifax and Baltimore, continue to add new container handling capacity to their facilities while also giving bulk and breakbulk cargoes a closer look.

Within New York harbor a bulk cement importing terminal is now being planned for construction on Staten Island while at Philadelphia a recent modernization of older facilities has allowed the port to gain several new cargoes, some at the expense of neighboring ports. In the south, the Port of Charleston has been attracting new customers while Georgia and South Carolina’s Jasper County are continuing to work together on plans for a new Savannah River box terminal. In a move that is being watched closely by other ports, the Virginia Ports Authority (VPA) is negotiating to take over a privately-held container terminal while examining bids from three companies that would like to take over all of VPA’s terminal operations.

Good Start for Great Lakes
On the Great Lakes, traffic started off with a boom this year, with 32 of 55 US-flag Lakers employed by April 1 compared to only 17 at the same time last year. According to the Lake Carriers Association (LCA) these ships moved four times the amount of cargo moved in the same period of 2009 during the height of the recession. However, much of the early activity has centered around rebuilding stockpiles of coal and iron ore, and once these are up to the required levels the LCA has warned that things may quickly taper off. Glen Nekvasil, vice-president of the LCA, cautioned that part of the reason for the early surge was that “inventories were exhausted” and that further progress will depend on economic recovery and higher sales, particularly by such regional steel-consuming manufacturers as Ford and General Motors.

One bright spot on the Lakes was news that construction will continue on a new $270 million taconite processing facility to be built near Aurora, Minnesota by a joint venture consisting of Steel Dynamics of Indiana and Japan’s Kobe Steel. This project had been slowed during the depth of the recession but is now expected to be completed in its first-phase configuration before the end of this year, and with a footprint that will allow it to be tripled in size if demand warrants.

The new facility will initially have an annual production capacity of 500,000 metric tons of pig iron, and will operate the world‘s largest rotary-hearth furnace to produce nuggets with an iron content of almost 97 percent.

Halifax Expanding
On the East Coast, Canada’s Port of Halifax is one of several regional gateways that is expanding container facilities this year, despite the recession, but it is also taking a closer look at potential new businesses. Earlier this year the port began a C$35 million project to extend an existing berth at its South End Container Terminal, as well as deepen water depth at the facility from 14.5 meters to 16 meters (52.5 feet). This will allow the terminal to handle two full-sized post-Panamax container vessels simultaneously and make the berths the deepest on the Eastern Seaboard. However, the port is also working with the operators of the Halifax Grain Elevator, one of the largest in North America, to expand and develop new agricultural businesses, particularly pulse products moving from eastern Canada’s Maritime region.

In a trial move this past spring the elevator used new equipment to load several twenty-foot marine containers with locally grown soybeans for export. Jeff Brownlie, a manager with Halifax Grain Elevator Ltd, noted that the operation was “distinctly different” from previous handling practices at the facility because it represented the first time that the pulse product has been exported in containers through Halifax. “Before this container loading technology was installed,” said Brownlie, “these soybeans would have been transloaded more than 1,000 kilometers away from the Port of Halifax.” The port is now hoping to draw in more regional agricultural exports by using either bulk or containerized handling methods.

New York Cement
The Port of New York & New Jersey, while projecting only weak growth in container traffic this year, is looking at bulks as a possible new business opportunity. Using Recovery Act funding, and with port support, Staten Island Terminal Inc plans to move forward with the construction of a $51.7 million cement import and distribution facility to be located in the Elm Park section of New York’s Staten Island. The new terminal will include a 28,000-square-foot pier equipped with state-of-the-art handling equipment to off-load bulk cement from arriving ships.

A partner in the project is Cementos Lima, owner of one of the largest cement plants in the Americas and a major cement exporter to the US. The cement will be delivered to the new terminal by 40,000 dwt bulk carriers and distributed regionally by trucks capable of handling between 25 and 30 tons per trip. Construction projects within New York City alone are expected to take up to 800,000 tons of cement annually. The Board of the New York City Capital Resource Corporation (NYCCRC) is to make an allocation of up to $28 million in Recovery Zone Facility Bonds to assist in the construction of the terminal, with the project expected to get underway this year and be completed within 2012.

Baltimore’s New Berth
Maryland’s Port of Baltimore, like the Port of Halifax, is preparing to expand its container facilities while keeping a close eye on potential new bulk and breakbulk cargoes. In March, Maryland Governor Martin O’Malley joined Baltimore Mayor Stephanie Rawlings-Blake in groundbreaking ceremonies for the construction of a new berth at the port’s Seagirt Marine Terminal, which will be equipped with four container cranes and have a 50-foot depth of water alongside. The start of construction follows the signing of a 50-year lease and operating concession with terminal operator Ports America under which a newly formed Ports America subsidiary, Ports America Chesapeake, will manage the facility. Ports America has operated Seagirt since the 200-acre terminal was completed in 1990 and has also run operations at Baltimore’s Dundalk Marine Terminal since 1966.

Under the latest agreement, Ports America will provide the Maryland Ports Authority with an immediate payment of approximately $140 million for use on roads, tunnels and bridges, and will also provide annual lease payments while gaining the right to consolidate all current container business in Baltimore at Seagirt. Ports America plans to complete the new berth before the end of 2012, well in time to take advantage of the expanded Panama Canal. The cost of the berth and its four cranes is projected at about $105.5 million.

Philadelphia Gains Cargoes
The Port of Philadelphia, managed by the Philadelphia Regional Port Authority, is continuing to gain new business as a number of its older facilities are modernized and a project to deepen the Delaware River to 45 feet moves forward. In late April, the port authority, along with terminal operator Holt Logistics, came to an agreement with Hyundai Motor Co and its logistics affiliate, Glovis of America, to import and process 150,000 Hyundai and Kia vehicles annually through the port’s Packer Avenue Marine Terminal (PAMT). The vehicles will be processed at an auto finishing facility to be located at Pier 98 Annex and will be distributed by truck and rail.

Glovis, formerly known as Hankook Logitech but now part of the Hyundai Kia Automotive Group, previously moved these automobiles through facilities in Newark, New Jersey and Baltimore, Maryland. Thomas J. Holt, Jr., Chairman of Holt Logistics, noted that it has been more than a decade since Philadelphia last handled shipments of new automobiles, thus the Hyundai/Kia contract “represents a major step forward for Packer Avenue Marine Terminal and the Port of Philadelphia.”

In preparation for the new business the port authority has been working with Philly Ro-Ro Partners, a local company, to upgrade the authority’s 85-acre automobile processing facility at Pier 98. Under that program the authority is contributing $1 million in capital improvements while Philly Ro-Ro Partners, which will operate the facility, is making an investment of $3.7 million. Once all the infrastructure is in place a Glovis-operated auto carrier will be calling at Philadelphia every six days.

Puerto Rico and Paper
Just prior to the Glovis agreement, the Port of Philadelphia was chosen by the European paper company M-real, based in Finland, as its primary US port of entry for high quality paper products. This contract is expected to result in 150,000 tons of new cargo for the port and up to 24 additional vessels calls annually. The paper will be moved through Philadelphia’s Forest Products Distribution Center at Piers 78 & 80 operated by Penn Warehousing & Distribution Company. M-real previously used the Port of Baltimore for its imports, the bulk of which are carried by vessels operated by Holland’s Wagenborg Shipping Company.

Another new shipping line to call at Philadelphia is Sea Star, a major Jones Act carrier serving the US - Puerto Rico trade, which has begun using the Pennsylvania port’s Tioga Marine Terminal on a weekly basis. Sea Star handles containerized freight as well as roll on/roll off traffic and will make use of two container cranes and a mobile harbor crane at Tioga plus the facility’s on-site warehouse and reefer plug availability. The new Philadelphia call will replace the line’s former agreement with Horizon Lines to use terminal facilities at Elizabeth, New Jersey.

Virginia to Take Private Terminal
In Virginia, the Virginia Port Authority and APM Terminals have agreed to the basic framework of a 20-year lease agreement that would give the state agency the exclusive rights to operate APM’s two-year-old Portsmouth marine cargo terminal, which serves APM associated liner company Maersk Line. APM and port officials expect to have a final agreement in place later this summer under which the port authority and its operating arm, Virginia International Terminals, will be able to move cargo through APM’s $500 million facility for 20 years in exchange for annual payments and a profit-sharing provision.

The port authority views the APM lease as a “bridge” to the completion of the development of Craney Island as a major new marine terminal in order to give the port more cargo handling capacity. Craney Island, which is projected to cost $2.5 billion to build, is not expected be completed for another 15 years. In the meantime, the port authority will have the ability to handle more containerized cargo at the APM terminal while redeveloping its own facility at Portsmouth to handle bulk, breakbulk and unitized cargoes, including motor vehicles.

VPA May Take Richmond
As it moves to take over the privately held APM terminal, the Virginia Port Authority is also studying proposals submitted by The Carlyle Group, CenterPoint Properties, and Goldman Sachs to operate all its cargo facilities under long-term lease agreements. The three companies have offered bids of between $250 million and $700 million in upfront payments and annual profit sharing in exchange for the rights to operate the state agency’s three cargo terminals at Hampton Roads for between 30 and 60 years. However, Virginia Secretary of Transportation, Sean Connaughton, has cautioned that the VPA doesn’t plan to move forward with these negotiations until the APM lease is finalized. “We need to resolve the APM negotiations first,” he stressed. “As soon as that’s wrapped up, we’ll make a decision on the public-private partnership proposals.”

Connaughton also noted that the VPA might be interested in taking over the Port of Richmond located on Virginia’s James River. The small port is owned by the city of Richmond, managed by the Port of Richmond Commission and operated by PCI of Virginia, a private company. “Some conversations have already occurred between the VPA and the Port of Richmond,” Connaughton noted, “but at this point we’re just exploring whether they’re interested.” Richmond was once an important tobacco importing port but lost its largest customer, International Container Lines, last year and currently supports only a weekly container barge feeder service operating to Hampton Roads.

Georgia Awaits Dredging Verdict
In Georgia, the Georgia Ports Authority (GPA) has boosted four consecutive months of double-digit growth for its ports as the recession weakens but a long-awaited project to dredge the Savannah river remains tied up in environmental studies. This may affect plans to create a completely new port on the north bank of the Savannah, in South Carolina’s Jasper County, which has been under study for several years. To date, the river’s dredging, known as the “Savannah Harbor Expansion Project,” has taken over a decade in time and $36 million in reports but still appears to be at least a year from groundbreaking. During a project workshop held earlier this year Col. Ed Kertis, district commander of the US Army Corps of Engineers, indicated that the economic analysis of the project is almost complete and that a draft Environmental Impact Statement (EIS) will be available for public review shortly. A final decision on the project could then be made by as early as next spring.

Georgia’s Senators, Johnny Isakson and Saxby Chambliss, are seeking $105 million in federal funds for the deepening project while George Hood, chairman of the Jasper County Council, said a positive and early decision on the project is “vital” for the region. “We need a ruling on Savannah’s permit so we can move forward and ensure Jasper County and our region is ready to receive the larger ships,” he said, warning that continued delays would “jeopardize the future” of the proposed Jasper Ocean Terminal. Both states would like the project completed by the opening date of the widened Panama Canal but continuing reviews and studies could make this impossible.