After strongest US growth, Philadelphia port to double capacity

After strongest US growth, Philadelphia port to double capacity

Port of Philadelphia.

The Port of Philadelphia's (above) deployment in May of two new cranes at the port’s only container terminal, Packer Avenue Marine Terminal, and the opening of an extended berth that will enable the port to handle three super post-Panamax vessels at once are the first parts of the expansion. Photo credit: Port of Philadelphia.

The Port of Philadelphia — whose 21 percent increase in loaded volume was the healthiest of the top 25 US container ports in 2017 — is looking beyond its traditional strength in refrigerated cargo to boost exports and rail-bound cargo, as it looks to fill capacity that will nearly double under its $300 million expansion.

The port’s deployment in May of two new cranes at the port’s only container terminal, Packer Avenue Marine Terminal, and the opening of an extended berth that will enable the port to handle three super post-Panamax vessels at once are the first parts of the expansion. By the end of next year, the port is expected to have increased capacity from 550,000 TEU to 1 million TEU.

In addition, with all but the finishing touches completed on a dredging project to take the port channel from 40 to 45 feet, the port has already begun accepting mega-ships, with the largest — the 12,200 TEU M/V MSC Shuba B — stopping at the port two weeks ago.

Yet even as the port — with just over 2 percent of the East Coast loaded container market — expands, it is facing potential competition just 30 miles down the Delaware River, with a proposed container under consideration for Wilmington by the state of Delaware.

Philadelphia officials are confident that additional capacity will be filled by future growth similar to the port’s 2017 surge in cargo volume — from 299,324 loaded TEU in 2016 to 362,812 TEU, according to data from PIERS, a sister product of JOC.com. That surge stemmed in part from an increase in exports, which rose by 23.3 percent in 2017 over the year before, stronger even than the 20.5 percent increase imports, the PIERS data show.

The data show the port’s compound annual growth rate for all cargo over the past 10 years has been 6.2 percent, with imports growing by 5.6 percent and exports rising by 8.9 percent.

The Philadephia advantage: abundant rail capacity

The recent export surge was driven in part by goods sent by train from the Midwest on their way to Europe or South America, said Sean Mahoney, spokesperson for the Philadelphia Regional Port Authority (PhilaPort). He said the port has attracted shippers with a message that it has abundant rail capacity, an efficient port and a variety of maritime routes to get cargo to Europe and South America, he said.

“It’s tapping into the rail infrastructure that we have, and haven’t been using to its full capacity, and tying that into North European services,” Mahoney said. The alliance reshuffle of last year, for example, brought the port an additional Northern European route, The Atlantic Loop (run by THE Alliance), which links the port and three others on the East Coast with Bremerhaven, Antwerp, and London. Mediterranean Shipping Co. is stopping at the port with a service that links Antwerp and Bremerhaven with South and Central America.

Jeff Theobald, the port’s executive director and CEO, sees rail being a key driver in the port’s future. About 10 to 15 percent of the Philadelphia’s cargo goes by rail, with near dock links to CSX Transportation and Norfolk Southern Railway. In contrast, about 36 percent of Virginia’s cargo went by rail in 2017, and 18 to 20 percent of Savannah’s cargo goes by rail. About 16 percent of the Port of New York and New Jersey’s cargo went by rail in 2017.

In the past, “I don’t think there has been a lot of focus on it,” Theobald said, of Philadelphia’s rail cargo volume. “I don’t think there was the capability and infrastructure on the terminal side to produce efficiencies for customers to come here in the first place. Now that we have got that rolling, I think they will come now. And if they are coming they might as well look at discretionary cargo for Philadelphia. I think that will kind of naturally grow as ships come through Philadelphia.”

The focus on rail is in addition to the port’s promotion of its long-held strength in attracting refrigerated container cargo, its location close to the heavily populated Northeast US consumer market, and its relative efficiency compared with larger ports, in particular the Port of New York and New Jersey. Philadelphia argues that it can provide quality small-port customer service from a location that is as close, or almost as close, as New York-New Jersey to the extensive warehouse areas of Central New Jersey and Lehigh Valley used by shippers served by the East Coast’s third-largest port.

Philadelphia’s expansion includes another three cranes that are expected to arrive in early 2019, an additional 45 acres for stacking containers, and 365,000 square feet of new dry and refrigerated warehouse space on 29 acres of land bought by the port last year.

Yet the need for that capacity could be undercut by a pending deal between the Gulftainer Group and the state of Delaware to create a new container terminal at Wilmington. The $580 million Gulftainer project includes an upgrade of the existing facility, which focuses on refrigerated container cargo, and the construction of a new terminal at a cost of $410 million.

Philadelphia: another strategic port in lucrative Northeast corridor

Wilmington and Philadelphia are ranked second and third in the East Coast refrigerated container market, with the Port of New York and New Jersey ranked first. But the proposed expansion of Wilmington comes after years of it losing market share as Philadelphia has added share. Philadelphia handled 149,658 refrigerated TEU in 2017, well behind the Port of New York and New Jersey, which handled 255,119 TEU in 2017, according to PIERS data. Wilmington handled 164,504 TEU the same year, the data show.

Philadelphia’s reefer cargo has increased by 32 percent since 2013, while New York-New Jersey’s has increased by 4.4 percent over the same period, and Wilmington’s has fallen by about 4 percent, the PIERS data show.

Philadelphia now has 11.2 percent of the East Coast reefer market, up from 8.7 percent in 2013. And while Wilmington had 12.3 percent of the East Coast refrigerated market in 2017, that was down from 14.6 percent in 2013. The Port of New York and New Jersey’s market share fell from 21.2 percent in 2013 to 19.1 percent in 2017.

Mahoney, asked about the prospect of competition on the port’s doorstep, said, “The amount of investment under way and being planned on the Delaware River is simply amazing.

“From PhilaPort’s perspective it’s proof of what we have known for long time: Philadelphia sits in the center of one of the world’s richest consumer markets; servicing that market directly makes a lot of logistical sense,” he said.

Contact Hugh R. Morley at Hugh.Morley@ihsmarkit.com and follow him on Twitter: @HughRMorley_JOC.