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Inland ports: Viable business or fantasy land?
By Dan McCue
Staff Writer
It’s no secret: Ports across the United States, and particularly along the East and Gulf coasts, are in the midst of a tremendous surge in container cargo volume.
Global Insights, an industry analyst, has projected cargo volume from Asia alone will grow by more than 320% over the next 15 years. The container cargo volume passing through the Port of Charleston is projected to increase by 257% during that same period.
But what appears to be the best of times for the port industry also happens to be the worst in terms of it having to confront such thorny issues as residents’ growing concerns regarding traffic congestion and a lack of available space for future expansion at coastal locations.
Port officials around the country are looking for sound, efficient and profitable ways to cope.
Against this backdrop, inland ports and intermodal transportation systems are fast emerging as the preferred alternative of port authorities, entrepreneurs and transportation officials to accommodate all the competing constituencies.
That notion is at the heart of a $250 million proposal by Carolinks, a one-year-old Charleston-based company, to link the South Carolina State Ports Authority terminals in North Charleston and Mount Pleasant to distribution centers in Orangeburg and the Greenville area.
But despite several public presentations by Lucy Duncan-Scheman, Carolinks’ founder and CEO, in the weeks since her intermodal plan was formally announced, numerous questions about the proposed project remain.
Who, for instance, will be Carolinks’ customers?
How will the company, after making such a huge investment, be able to keep its transport prices competitive with other transportation firms currently serving the market, including the port?
And finally, given that most inland ports that already exist in other parts of the United States are subsidized by public tax dollars, how will a private company pull off creating such a complex transportation network without similar subsidies?
How inland ports work
Just as port authorities come in all shapes and sizes, there is no single definition for what an inland port can be.
At their most basic, inland ports are facilities specializing in the staging and transfer of containerized freight that has been moved to the site in any number of ways, including truckloads on the highway, as well as by air, rail and water.
Examples include the H. Ross Perot-backed Alliance outside Fort Worth, Texas; the International Trade Processing Center in Kansas City, Mo.; the Inland Port in Front Royal, Va.; and the Port Inland Distribution Network in New York.
While each is unique in how it functions and the degree of success it has achieved, all were driven by a desire to position container facilities at uncongested inland locations, to enhance access to containers by rail and by truck, and to foster economic development where it has languished in the past.
“Regardless of the model settled upon or created, ultimately, inland ports should be about a few simple things,” said Robert Harrison, deputy director of the Center for Transportation Research at the University of Texas, Austin. “Those are creating local employment, enhancing corridor efficiencies and reducing costs at the traditional points of entry, like the Port of Charleston.”
Harrison has been studying inland ports across the country as a component of long-range planning since 1995, when the Texas Department of Transportation identified the concept as a priority on its research agenda.
The complications of streamlining
Harrison had not heard of the Carolinks proposal when he was contacted by the Business Journal, but the scenario that has been proposed by the company’s principals—barging containers to Shipyard Creek, loading them onto automated carriers and then onto rail, then sending the cargo to inland sites to be off-loaded again and sent on their way “sounds a bit complicated,” he said.
“Generally speaking, the inland ports that have achieved a measure of success have kept the process rather simple because what we’ve found is that the more times you handle a container, the harder it is to be cost effective.”
Yet Duncan-Scheman contends that the Carolinks process is no less streamlined than the process at the Port of Charleston’s terminals and that at most and in only one transportation scenario would there be even one additional lift of a cargo container than already occurs at the SPA’s Wando Welch terminal.
While the cost of transporting cargo by rail is quite low, Harrison said, the economics of rail transportation really doesn’t weigh heavily in favor of rail over trucks until the trip is in excess of 500 miles.
Joseph H. Boardman, head of the Federal Railroad Administration, echoed that statement during a recent visit to Charleston.
“Both trucks and rail are important parts of the transportation equation, but historically, what we’ve found is that it’s far more efficient and less costly to move cargo long distances by rail,” Boardman said. “On the other hand, when it comes to short-distance transport, the balance of efficiencies is far more favorable for trucks.”
Harrison also said he thinks Class 1 railroads such as CSX and Norfolk Southern, which service the Port of Charleston, would loathe transporting cargo to such nearby destinations as Orangeburg, a 110-mile round trip.
“There are short-line railroads, of course, but they transport goods at a much higher cost than the Class 1 rail companies,” he said.
But Duncan-Scheman said Harrison was “relying on out-of-date statistics” and said she thinks CSX and Norfolk Southern will be more than happy to take her business.
“The reality is, like the port, they don’t have room to expand their facilities to deal with higher cargo volumes,” she said. “As our intermodal site will have excess capacity, we intend to offer to put some of their trains together for them while we’re putting ours together. That’s a huge win for everybody.”
It’s not the distance that’s important, Duncan-Scheman said, but the volume of cargo that’s being moved.
“If you get the volume up, you can really pick up the velocity,” she said. “That’s what makes the magic.”
And she was adamant about another point: Rail transfer of cargo containers from Carolinks’ planned Shipyard Creek facility will begin on day one.
“We’re going to have the volume to warrant rail transfer or we’re not going to start this thing,” she said.
That comment surprised Harrison, who said Carolinks could logistically defend transporting everything from its North Charleston facility inland by trucks in the early going and make a move to rail incrementally.
“People will see what your intentions are from the start, and that will give you time to attract anchors to the inland site, bolstering the demand for rail transport and keeping your operating costs low,” he said. “Otherwise I don’t see how you can do it.”
But Duncan-Scheman was undeterred.
“The rail service is the easiest part to begin,” she said. “We’re deep into discussion with potential customers that already work with the Port of Charleston and several that currently don’t but will once we get started. The other thing is using rail will actually minimize our labor costs because we’ll be relying on two drivers to move every train load of cargo instead of one driver to move one container.”
The economics would come together because she intends to continue what she described as a “heavy-duty marketing effort” that began last summer, Duncan-Scheman said.
“Like I said before, if this isn’t a volume business, we won’t start, and I intend to start,” she said.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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