Among the container ports on the U.S. East Coast, only the Port of Virginia can claim to be ready to handle the larger post-Panamax ships that will be able to transit the Panama Canal when a new set of locks opens at the end of 2014. With a channel depth already at 50 feet, two modern container terminals, and a new double-stack rail line to the Midwest, the Virginia port seems poised to take much of the expected increase in container volume.
But the Virginia Port Authority is hardly trumpeting its lead over the competition.
That’s because the Port of Norfolk’s position puts it alone ahead of other ports in a business built on the economies of scale and flexibility that come from multiple stops, making it all but impossible to break into a string as a sole point of service.
“We are ready. But it’s not a position that we relish as the only one that’s ready,” VPA Executive Director Jerry Bridges said. “I hope that others would get up to speed rather quickly so that there will be sustainable operations.”
Bridges worries if other ports, many of them still scrambling for the infrastructure to land bigger shippers, aren’t ready to handle post-Panamax container ships with capacities of more than 6,500 or 7,000 20-foot container units, shipping lines won’t send the big ships Norfolk’s way.
“The more slots they have on the bigger ships, the cheaper the box costs on those bigger ships. We want to encourage that, but we can’t do it if Norfolk is the only port that has the ability to handle those ships,” he said. “Overall, our situation is pretty sweet at the moment, but it could be bitter if the decision is made not to deploy those ships on the East Coast.”
The readiness is a work in progress at other East Coast ports. The Port of New York and New Jersey will complete deepening its channel to 50 feet by 2013, but still must find a way to raise the air draft of the Bayonne Bridge. The Port of Baltimore already has a 50-foot main channel and is ahead of schedule in deepening the berth draft to 50 feet at its Seagirt Marine Terminal, which is undergoing a $105 million renovation.
Savannah is still waiting for permits to dredge the Savannah River to 48 feet, which should follow completion of the U.S. Army Corps of Engineers’ Environmental Impact Statement next year, but the port still must raise the state and federal funding. Charleston is exploring whether to deepen its harbor beyond the current 45 feet. Miami has the permits to deepen to 50 feet, but is seeking funding.
But even before the expansion of the Panama Canal, the VPA is likely to increase its 13 percent share of the cargo handled by all East Coast ports because of two events this year that will lower its costs: The authority took over operation of the APM Terminal in Portsmouth in July, claiming the most automated U.S. terminal as its own; and Norfolk Southern opened its Heartland Corridor in September, providing double-stack intermodal access from Norfolk to the Midwest.
The VPA’s container throughput is rebounding from the 16.2 percent drop it experienced in 2009, when total volumes declined to 1.8 million TEUs from 2.1 million in 2008. Throughput through October this year increased 10.5 percent from the same period last year and should be up by about that amount for the full year.
“That pace, while good, is not going to get us back to our 2007-2008 high-water mark,” Bridges said. As the twin impact of the APMT takeover and the Heartland Corridor take full hold next year, Bridges expects the volume growth will return to the pace of 2007-2008. “Volumes should return to those peak levels next year, and we think that growth will occur in the second and third quarters,” he said.
The port already has shifted all but one of the container lines that used to call at its Portsmouth Marine Terminal to the much more efficient APM Terminal Virginia. “These are substantial companies that have the ability to turn freight on a heartbeat,” Bridges said. “When you go from a terminal where a ship was doing 28 to 30 moves an hour and you move that same ship into a terminal where you can get 45 to 50 moves an hour, that’s money to that carrier’s bottom line.”
He expects new carriers to call at APMT to take advantage of its lower costs. “We think it will produce incentives for shippers to increase their lifts through our port,” Bridges said. When demand grows, the VPA plans to launch a second expansion phase to double the terminal’s capacity.
And the shift of most container cargo to APMT Virginia gives the VPA the opportunity to move back into the booming breakbulk business, which the port authority had all but abandoned. It plans to convert the Portsmouth Marine Terminal to handle only breakbulk and roll-on, roll-off cargo.
“We see this as an opportunity for us to diversify into another mode and deal with different commodities,” Bridges said. “The timing is great because breakbulk is picking up.”
The only container line now calling at the terminal is ACL, because its ships also handle ro-ro cargo.
The VPA has another container terminal, Norfolk International Terminals, where NIT South just completed an eight-year, $300 million expansion project that brought a new berth, new cranes and a reconfiguration of backlands and the conversion to an all-straddle carrier operation. NIT North gained 1,900 feet of berth length and three more cranes.
Bridges expects Norfolk Southern’s new Heartland Corridor will draw more discretionary cargo bound for the Midwest away from other ports before the Panama Canal’s new locks are completed. “There will be pricing advantages that will come for customers using that corridor in the next few years,” he said.
And the port has another route in the works: The VPA is concluding a lease with the city of Richmond to take over the Port of Richmond, which has a container-on-barge service carrying about 150 containers a week to and from the VPA’s terminals, 60 miles down the James River from Richmond. The VPA and the city are on the verge of signing a five-year lease, renewable for three more five-year terms, under which the VPA would pay Richmond $75,000 a year.
Contact Peter T. Leach at email@example.com.