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Ports focus on growth in competition for Asian market
By Dan McCue
Staff Writer
The Port of Charleston is an outstanding service provider with a great workforce and a longstanding reputation as one of the world’s port productivity leaders, according to John C. Martin, an analyst who specializes in strategic planning for the port industry.
But residents’ opposition to the South Carolina State Ports Authority’s plan to build a new port terminal on spoil lands on Daniel Island has had repercussions that are proving to be a benefit to the port’s competitors, particularly across the Southeast, he said.
Public opinion largely swayed the state Legislature to pass the law three years ago that required the SPA to cease its pursuit of a port on Daniel Island.
Today the SPA is focusing its efforts on developing a port facility on the old Navy shipyard in North Charleston and perhaps overseeing a potential port in Jasper County, pending action by the South Carolina Supreme Court.
In the meantime, however, two critical things have happened. Trade with China and other Asian countries exploded, and congestion and labor problems on the West Coast have driven cargo volume east.
“Economic forecasts are nice, but in reality, most forecasts promulgated by academia are not very useful,” Martin said. “Lots of things differentiate one port from another and cause one port to grow while another languishes.”
In Martin’s view, a huge market force is how importers and exporters view a specific port as a cog in logistics plans and supply chains, something many “big picture” economic forecasts overlook.
“Up through the mid-1990s, there was a tremendous consolidation of Asian cargo on the West Coast, specifically at the ports of Long Beach and Los Angeles, and railroads invested heavily in improving transportation between those ports and Chicago,” Martin said. “Then came the labor shut down of those ports in 2002. That was a total shock to the system and one that cost importers and exporters dearly in terms of lost sales, holding costs and rerouting of their cargo. That’s caused them to rethink their strategies.”
The biggest change was that importers and exporters no longer thought it wise to deliver freight to only Southern California and expect it to move by rail or truck to other parts of the country.
“Water carriers once again became predominate and with them, ports in the Southeast, as well as other parts of the country,” Martin said.
Sophisticated shippers
But if Martin thinks the SPA’s inability to develop Daniel Island slowed the Port of Charleston’s ability to capitalize on the Asian market, others are having none of it.
“Personally, I think the Port of Charleston is in a great position to grow its volume in regard to trade from the Far East,” said Michael Maloni, an assistant professor of management at Pennsylvania State University and author of a recent survey regarding port capacity.
Among the factors Maloni cited were the depth of the navigation channel, local roads and their access to the highway systems, and the port’s proximity to major metropolitan areas such as Charlotte and Atlanta.
“Another factor that’s important to consider is what’s driving cargo from the West (Coast) to the East Coast—congestion,” he said. “That really plays to the Port of Charleston’s strength, which is its ability to move cargo quickly and efficiently.”
Byron D. Miller, the SPA’s spokesman, said no one was more frustrated by the SPA’s inability to develop Daniel Island than the SPA itself, but he doesn’t believe the situation outweighs other factors in Charleston’s favor.
“Ocean carriers are looking at more than that,” he explained. “They’re looking at the depth of your navigation channel, the distance of your terminals from the open ocean, what your customer services are like. Our customers deal with ports all over the world. They are very sophisticated.”
At the Port of Charleston, where about 28% of its current cargo volume comes from Asia, officials are anxiously awaiting final approval from the U.S. Army Corps of Engineers to build a new container terminal at the old naval shipyard.
The SPA expects to have a permit for the project in hand by August and the facility operational by 2011.
In light of its temporary inability to grow geographically, Miller said the Port of Charleston has emphasized improving gate productivity (how quickly truckers can get in and out a local terminal) and yard productivity (how quickly ships can be off-loaded, reloaded and sent on their way).
“As a result of that emphasis, we’ve had a 63% increase in the number of containers we handle since 1997, despite the fact that we added only 14 acres in new storage space in that time,” he said.
Still, Miller admits, “Port expansion is absolutely essential. It’s the only thing that can secure the port’s future. Because remember, neighboring states would love to take our lunch and eat it. We have a good thing here, and the way you keep it healthy is to grow it.”
Savannah eyes distribution centers
While the Port of Charleston has become an expert at using customer service as a growth mechanism, the Georgia Ports Authority is positioning itself as the center spoke in a wheel comprised of several large retail distribution centers.
Today, 13 such centers, including ones for Wal-Mart, Kmart, Home Depot and Dollar Tree, are located within a 50-mile radius of the Port of Savannah, and two more, owned by Ikea and Target, are on the way, said Curtis Foltz, the GPA’s chief operating officer.
“Over the past seven years or so, we’ve been very fortunate in regard to attracting retail distribution areas, and thanks to our connecting road system, we’ve been able to provide them with an outstanding level of service,” Foltz said. “Given the proximity of the distribution centers and our highway system, truckers are able to make eight to 10 turns, or return trips, a day to the port.”
Because the distribution centers also mean jobs for residents in the Savannah region, Foltz said the effort has a lot of support from the community.
“They view this growth as something that’s a direct benefit to them,” he said. “We’re not in conflict with the general public.”
Like the Port of Charleston, the Port of Savannah has also invested significantly in new equipment and revamped terminal layouts to boost productivity.
In addition to its long-time relationships with retailers, the GPA has actively embraced traders from mainland China, Taiwan and Singapore, Foltz said.
“We also see India as a tremendous developing market,” he said.
Virginia banking on expansion
Another significant player in the Southeast’s port explosion is the Virginia Port Authority.
Three significant factors have it poised to capitalize on the booming Asian market, Martin said. It aggressively markets its proximity to major interstates and its distribution potential to the growing Washington, D.C., area. It owns roughly 1,000 acres of underdeveloped land. And federal lawmakers recently allocated funds for the Heartland Corridor system, a series of intermodal transportation projects that will ultimately improve the link between the Port of Norfolk and Chicago and shave 250 to 300 miles off the trip.
“The Asian market is something we’re very, very interested in tapping,” said Jeff Keaver, the VPA’s deputy executive director. “Toward that end, we’ve already installed new cranes—cranes purchased from China, incidentally. We’re currently renovating our Norfolk facility, and we’re hoping to issue revenue bonds later this year to build another berth there.”
Virginia is also capitalizing on land leasing, having recently signed an agreement with the Maersk Group, which will open a new terminal in Virginia in summer 2007.
Like Savannah, the VPA is also encouraging the construction of distribution centers and warehouses.
“We already had a deep navigation channel and improved facilities in the works, but the Heartland Corridor has played a significant role in the state getting more than $700 million in investment in companies wanting to warehouse their products here,” Keaver said. “Not only will the corridor provide them with a shorter transit time to Midwestern markets, but because of expanded tunnel clearance in West Virginia and Kentucky, we’ll also be able to ship double-deck cargo trains through much of that route.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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