The two Class 1 railroads serving the ports of Virginia are playing musical chairs. When the music stops, the big winner will be the Virginia Port Authority.
Norfolk Southern Railway and CSX Transportation have started or are about to start new rail services to the two big container terminals the VPA operates, Norfolk International Terminals and APM Terminal in Portsmouth. Several ocean carriers have signed up for the new services, which could lure some cargo away from ports in the Southeast.
For ports up and down the Eastern Seaboard, the battle is on for the discretionary cargo — that not tied to local markets — moving to the Midwest for companies ranging from large retailers such as Lowe’s to smaller furniture and textile manufacturers. That cargo, most of which now moves through the West Coast, will be up for grabs when the Panama Canal opens its expanded locks in three years to 10,000-plus-TEU ships. With its 50-foot-deep channels — only Halifax, Baltimore and Charleston on the East Coast are as deep — the VPA can handle the largest ships afloat. It’s leveraging that advantage by rapidly improving its inland connections, including via NS’s year-old Heartland Corridor.
Now CSX is raising the stakes — and further bolstering the VPA’s position as the nation’s sixth-largest port, and third-largest in the East after New York-New Jersey and Georgia. The Jacksonville, Fla.-based railroad recently signed a contract to haul Maersk Line’s discretionary cargo between APM Terminals Portsmouth and the Midwest, starting next year.
The deal is a coup for CSX as it snatches a major piece of business in NS’s backyard. Mediterranean Shipping Co. and CMA CGM, which have contracts with CSX at other East Coast ports, also are likely to switch their business at APM Terminals Portsmouth to CSX.
“CSX has been CMA’s primary East Coast rail supplier for years and remains the same,” said Frank Baragona, president of CMA CGM (America).
“We have been using CSX for years,” said Allen Clifford, MSC (USA) executive vice president, “and intend to continue to utilize their good service.”
Under the Maersk contract, CSX will haul cargo from the terminal to its new $175 million intermodal rail terminal near North Baltimore, Ohio, which will serve the region’s heavy industrial shippers. The changeover is part of the VPA’s attempt to reach new markets by extending rail service to new regions in the Southeast and Midwest.
Maersk’s changeover, confirmed by a CSX executive who requested anonymity, will occur in the first quarter of 2012 when Commonwealth Railway, a subsidiary of Genesee & Wyoming, completes work on the track connecting a rail terminal near the APM terminal in Portsmouth with the rail terminal at the nearby Portsmouth Marine Terminal, now served by CSX. A Commonwealth rail link connects the Portsmouth Marine Terminal with the CSX rail hub at Suffolk, Va., from where double-stack railcars will be connected to CSX trains to and from the railroad’s Ohio hub.
“We are partnering with CSX starting Jan. 1,” said Timothy Simpson, a spokesman for Maersk Line. He declined to say whether the CSX deal was exclusive, but said Maersk would inform its customers of the move on Nov. 1.
Norfolk Southern, meanwhile, is developing new business for the Virginia port through a new double-stack service to Greensboro, N.C. The service, which connects with Norfolk International Terminals and APM Terminals Portsmouth through a linkup with trains at NS’s main north-south trunk line at Lynchburg, Va., will expand the market for NS’s ocean services into the Southeast. NS started the service at the behest of the VPA, which had identified shippers that would use rail to and from the port.
“It completes the supply chain for a lot of furniture customers that want to use Norfolk as a port of discharge,” VPA Executive Director Jerry Bridges said. The port handled 863,197 TEUs of laden cargo in the first seven months of this year, up 3.3 percent from the same period of 2010, according to Journal of Commerce sister company PIERS.
The service also will draw export business from North Carolina’s textile and agricultural shippers. It also could attract new retail import business from Lowe’s, which operates a 1.5 million-square-foot regional distribution center in Statesville, southeast of Greensboro.
NS may extend the service to Charlotte, N.C., Atlanta and even Memphis if demand warrants. “We have some larger customers in the Southeast that use our ports, but that has eroded over the years because of truck rates coming out of South Carolina and Georgia and rising diesel costs,” VPA spokesman Joe Harris said.
Two ocean carriers that call at the Virginia ports already have signed up for the new service, and several others are looking at whether it would help them gain more cargo. The port declined to name the ocean carriers involved.
The state of North Carolina helped lay the groundwork for the service, starting with a visit to Norfolk early this year, according to two sources who requested anonymity. In doing that, the state and shippers bypassed the Port of Wilmington, N.C., which has been frustrated in hopes of getting regularly scheduled CSX service to the port.
“We’re going to better align our terminals with our carriers,” Harris said. “The NS-heavy carriers are going to call at NIT, and the CSX-heavy carriers are going to call at APM. It will reduce the number of dray moves we have to make between the two terminals and will be a savings for us.”