NORFOLK, Va. — It’s been a rocky several years for the Port of Virginia, but the waves — including a leadership shake-up and unsolicited privatization bids — appear to have calmed. Now, the Virginia Port Authority and its arm, the Virginia International Terminals, can focus on a restructuring aimed at improving port customer service and better capitalizing on the port being one of two U.S. East Coast ports ready to handle post-Panamax ships, port leadership says.
Much attention to the port has focused on Virginia Gov. Bob McConnell’s dramatic restructuring of VPA board memberships in 2011, the departure of Executive Director Jerry Bridges, and, most recently, the VPA board’s rejection of two bids to buy the leases of the ports’ container terminals. In the long run, however, these events will likely be viewed as sideshows to the bigger story.
The more interesting arc taking shape is whether the port will be able to maximize its advantage as the only U.S. East Coast gateway other than Baltimore able to handle heavy-loaded post-Panamax vessels. The Port of New York and New Jersey hopes to be able to handle post-Panamax vessels, which are roughly three times the size of those that call there now, by 2015, when it finishes raising the Bayonne Bridge.
But for now the Port of Virginia has the advantage, as evidenced when the heavily loaded MSC Chicago set a U.S. East Coast record Friday, by calling at the port and requiring a 49-foot draft for its 9,200 20-foot-equivalent units of capacity.
The port regularly handles vessels with 8,000 to 9,000 TEUs of capacity that traverse the Suez Canal, said Thomas Capozzi, VIT’s vice president of global sales and customer service. When the expanded canal opens in mid-2015, vessels with 8,000 to 10,000 TEUs of capacity will be the norm, he said at the Virginia Maritime Association’s annual conference on May 9.
The deeper draft access has already helped the port become the first call for several East Coast strings, supplanting the Port of New York and New Jersey. In addition to getting the also sought-after last call billing on some strings, the port enjoys a rare double call via Mediterranean Shipping Co.’s Golden Gate service.
Improved rail connections and container lines’ ability to bring heavier ships to the port are already delivering results. The port saw its container traffic rise 9.8 percent year-over-year in 2012, making it the port’s second-best year in history. Of the major U.S. container ports, Virginia had the second-highest rate of growth last year, following the Port of Tacoma, according to Journal of Commerce research using PIERS data.
The pace of growth hasn’t been as aggressive this year, but the gains are still enviable within the U.S. port market. Container traffic rose 7.7 percent year-over-year in March, pushing volume up 6.2 percent year-over-year for the first quarter.
Streamlining Port Service
To further capitalize on these gains, the port realizes it needs to adapt while it still has the post-Panamax edge. Providing faster, more streamlined service to customers is one of the aims of the port’s further integration of the VPA and Virginia International Terminals. The latter allows the port to negotiate with the International Longshoremen’s Association, as the VPA can’t because Virginia is a “right to work” state.
The port is creating a customer service response team of four or five employees, and port customers will begin to see better service in as few as six months, VPA Interim Executive Director Rodney Oliver said in an interview with The Journal of Commerce. Employees from VPA and VIT already respond to customers’ needs, but the dedicated team will bring a higher level of service, he said.
“Customers need one place to go, and we want to speak to them in one voice,” VPA Chairman William Fralin said at the conference.
Starting July 1, the port will also be able to enter into public-private partnerships outside the port itself, thanks to new powers granted by the Virginia Legislature in its last session. The new industrial development capability will allow the port “to look outside of the fences” to help develop distribution centers, Fralin said.
“This is going to transform how we do deals,” he said. Martin Briley, CEO and president of the Virginia Economic Development Partnership, will also join the VPA board in an advisory role, a move intended to further integrate the state’s economic development arm with a major jobs creator.
The changes at first glance appear simply bureaucratic. But the port’s ability to work more closely with the state to attract major shippers to the area and enter into partnerships outside its gates is crucial. Unlike the ports of Long Beach, Los Angeles, and New York and New Jersey, the Port of Virginia doesn’t have a major local market, making attracting major shippers to build distribution centers in the region key. This makes the port particularly susceptible to any cargo fluctuations, as roughly one-third of the containers handled at the port are shipped via rail.
Targeting Southeast, Midwest Markets
Knowing this, the port is betting that improved rail service will help it better to reach markets along the the East Coast and in the Southeast. The port has benefited from Norfolk Southern Railway beginning double-stack service in fall 2010 from its two container terminals. By expanding tunnels through its Heartland Corridor initiative, NS was able to cut the trip from the port to the Midwest by 250 miles, reducing transit time by a day.
NS’s double-stack service between the port and Greensboro, N.C., has also helped the Port of Virginia gain market share in the Southeast. NS has direct-dock access at APM Terminals and retains virtual sole access at Norfolk International Terminals.
CSX Transportation has also gained better access to the port, increasing competition between the two Eastern Class I railroads to the benefit of shippers. CSX gained on-dock service at the port’s APM Terminals in January 2012 after the railroad snatched the Maersk Line contract from NS.
The Jacksonville, Fla.-based railroad previously had to dray its containers to a short-line connecting to its network. The railroad lacks double-stack access to and from the port until it expands a 100-year-old rail tunnel in Washington, D.C. CSX expects the Virginia Avenue tunnel project to be completed in two to three years.
Oliver admits that his major competitors for the Southeast market — the ports of Savannah, Charleston and Jacksonville, Fla. — have better access to the market because of their proximity. But he said the port can grab more market share by offering shippers faster unloading and loading, and on-dock rail service. These efficiencies could allow shippers to get cargo from the Port of Virginia onto tracks before the same vessels call southern competing ports.
With its strategy in place, the VPA is working on figuring out who should take the helm of the port permanently. Fralin said the board will announce on May 28 a firm tasked with searching for permanent executive director candidates. Oliver, he noted, is a strong candidate.
The addition of roughly 5 million additional TEUs of capacity through the construction of a new container terminal gives port leadership even more reason to drum up business. With APMT’s 20-year lease expiring in 2030, the VPA is preparing for the possibility that it won’t win the operating contract again for the state-of-the-art facility, and is building its own terminal. The first phase of the ultimately $2.2 billion Craney Island Marine Terminal is expected to be completed by 2020.