Mobile seeks strength by adding containers, steel to its cargo mix.
By Chris Dupin
The Port of Mobile said the Mobile Container Terminal at Choctaw Point that opened in 2008 helped stabilize container traffic at the port last year by attracting new services.
James K. Lyons, director and chief executive of the Alabama State Port Authority, said the new facility helped the port keep container volume about flat ' 121,803 TEUs in the year ending Sept. 30, 5.7 percent less than the 129,119 TEUs the prior fiscal year and more than the 108,572 TEUs handled in fiscal 2007.
It was a bright spot in a port where total volume fell about 20 percent to 22.4 million tons in fiscal year 2009.
'We have three regular services calling at the container terminal now, and volumes on those services continues to build. We feel real good about the direction that we are going,' Lyons said.
The port also benefited from parts arriving for a new $4.2 billion steel mill being built by Germany's ThyssenKrupp, about 40 miles upriver in Calvert, Ala.
The port authority is building a brand new terminal called Pinto Island near the container terminal, which will support the mill by transferring imported steel slabs that will be barged upriver and made into finished carbon steel products. Some of the 4.1 million tons of steel products that the mill will produce annually may also be exported through the port. ThyssenKrupp also has plans to eventually build a separate plant that will make up to 1 million tons of stainless steel a year at the same site.
|Alabama State Port Authority's Mobile Container Terminal, which opened in 2008, has helped the port attract new services.|
'The strength of the port and the strength of the leadership at Mobile was a large factor in the determination in coming to Alabama,' said Scott Posey, a spokesman for ThyssenKrupp.
The container and steel business is diversifying a port that has traditionally relied largely on coal and forest products, noted H.W. 'Win' Thurber III, president and CEO of Norton Lilly International, the Mobile-based steamship agency.
The port's McDuffie Coal Terminal is the largest coal terminal in the country handling both export metallurgical coal and imported steam coal. The terminal handled 16.8 million tons of coal in fiscal year 2009, 18 percent less than the 20.6 million tons handled the prior period.
'Steam coal pricing versus natural gas pricing contributed to a significant reduction in the use of steam coal and subsequently coal volumes through the terminal,' said Judith Adams, vice president of marketing at the port. Metallurgical coal exports were affected by the decline in global steel production.
Iron and steel volumes at the port in fiscal year 2009 were 511,354 tons less than half the 1.3 million tons handled the prior year, though the future is bright for that commodity because of the new ThyssenKrupp mill. The port's aluminum volumes were up as the port was named a London Metals Exchange port.
Drummond Co. is both a major importer of steam coal from Colombia, and exporter of metallurgical coal.
'Right now the stronger of the two appears to be the export metallurgical,' Lyons said. He noted a new long wall being added at a Jim Walter Resources mine could boost export volumes in the future.
Walter's Web site said its total coking coal production could increase from 6.2 million tons in 2009 to 8 million in 2010 and 9 million to 9.5 million tons in 2012.
'The future is kind of bright here, even in these turbulent times we are in,' said Thurber, who has lived in the city most of his life. 'You are in a fortunate place if you live here now in our business because there are a lot of opportunities that don't exist elsewhere.'
The Mobile Container Terminal, which opened in October 2008, was built at a cost of $300 million in a joint venture between the port, the APM Terminals unit of A.P. Moller – Maersk, and the Terminal Link Division of CMA CGM. The terminal has replaced Pier 2 as the center of container activity in the port.
The three services using the new terminal are:
' Maersk's service to North Europe, with slots chartered by APL and Hyundai Merchant Marine. The vessels have average capacity of about 4,082s TEUs, according to ComPair Data, an affiliate of American Shipper.
' Maersk's Expreso service to Central America and the Caribbean, using ships of about 1,187 TEUs.
' Zim's Atlantic Gulf Express (AGX) feeder service to Kingston, Jamaica, which calls Mobile, as well as Tampa and Houston. That gives shippers moving cargo through Mobile access to Zim's services in the Far East and around the world. The two shuttle ships have average capacity of 3,229 TEUs, according to ComPair Data.
Zim had brought ships from the Far East directly to Gulf ports including Mobile, Lyons said. 'But the volumes overall just were not good enough to continue the direct service. But they have the feeder timed so it connects with the Far East service very well.'
CMA CGM called at the Mobile Container Terminal with its PEX 3 service starting in January 2009, but then dropped the call after several months. CMA CGM also in September 2009 suspended the Mobile call from its Gulf Bridge Express service, which calls at ports in Mexico, Colombia, Venezuela and Jamaica.
Another breakbulk and container carrier that calls Mobile is Grieg Star Shipping and its affiliate Atlanticargo.
International Shipholding Group, through its CG Railway subsidiary, operates a cross-Gulf of Mexico rail ferry service from Mobile.
Kevin Wild, senior vice president for CG Railway, said his company is optimistic about the future of the port, citing cooperation between the port authority and its customers, city and state.
CG Railway moved its operation from New Orleans to Mobile in April 2007 and then added second decks to its vessels so that it could double capacity to 150 railcars each.
The company's ships sail every four days between Mobile and Coatzacoalcos in southern Mexico. In Mexico, it offers direct interchange with Ferrocarril del Sureste. In Mobile, its vessels are loaded and unloaded by Terminal Railway Alabama State Docks (TASD), which offers connections to CSX, Norfolk Southern, Canadian National, BNSF Railway, Kansas City Southern and the Alabama & Gulf Coast Railway.
Forest products, chemicals and consumer goods including sugar and beer are among the major commodities CG Railway moves.
As with land-based railroads, CG Railway has been hit by the recession. Revenue for the rail ferry decreased from $30.2 million in the first nine months of 2008 to $21.2 million in the first nine months of 2009 due to falling volumes and rates from the current weak economic conditions. The company had a loss of $1.3 million in the first nine months of 2008 compared to gross voyage profit of $1.4 million in the first nine months of 2008, according to International Shipholding's third quarter report filed with the Securities and Exchange Commission.
Turning Basin. While the Maersk ships are the largest container vessels calling the port presently, Lyons said CMA CGM had employed ships topping 5,000 TEUs. That presented an operational challenge, as the turning basin, located upriver near the Cochrane Bridge, is built for ships of about 850 feet long. While ships up to 950 feet turned around there, Lyons noted it takes extra tugs, extra pilots and is a slow maneuver.
So the port began construction in fall 2009 on a $23.9 million turning basin that will allow ships of 1,100 to 1,300 feet, including containerships of up to 8,000 TEUs, to easily turn around.
Located at the mouth of the Mobile River, where the Mobile Container Terminal, the Pinto Island steel terminal, and the port's McDuffie Island coal terminal are all clustered, the new turning basin could also save ships two to three hours in port and reduce expenses.
The ability to handle big ships could become increasingly important when the Panama Canal expansion is completed in 2014. Lyons said 600 to 800 ships a year may use the basin eventually, and there are some services waiting for its completion.
Mobile will supply $9 million for construction of the turning basin with the remainder coming from the federal government or Army Corps of Engineers.
The old turning basin will still be used for ships calling at terminals upriver.
Construction of the basin involves removing about 2.5 million cubic yards of material. Some will go to the Sand Island beneficial use project. A bucket dredge began work on the project in September 2009 and was expected to finish its part of the job in about three months. Then a hydraulic dredge will complete the job. Depending on availability of equipment, Lyons hopes the dredging will be completed by the first quarter of 2010.
Intermodal. 'The next step for us is the construction of an intermodal facility,' Lyons said. 'We are in the site work phase of that right now and it is moving along very nicely.'
The facility would have annual capacity for 200,000 to 300,000 containers. The port will use about 1 million cubic yards of dredge material to elevate a portion of the property.
Lyons said the port is applying for a $60 million grant under the American Recovery and Reinvestment Act of 2009, to bring rail into the facility and build a connecting road to the Mobile Container Terminal. He said the port is not banking 100 percent on the federal stimulus grant, 'but we feel pretty good about our application. We could have contractors on site in 30 to 60 days. We pushed ahead with all the engineering. We could put bid packages on the street as soon as we know we have the funding.'
The port has three companies working on proposals for building and operating the intermodal container transfer facility and a neighboring logistics park. Lyons declined to say who was bidding on the project, noting the three companies did not know the identity of each.
He said the facility would be 'a little different than you see with most on-dock rail. It is designed also to handle domestic intermodal ' there will be a connection to the container terminal and connection on the other end to the interstate.'
There is potential, he said, for the facility to link to the large new intermodal hub being built in McCalla, Ala., near Birmingham, one of three hubs Norfolk Southern is building along its Crescent Corridor. The other two hubs are in Memphis and Franklin Township, Pa., near Hagerstown, Md.
'It would be very natural for us to do a shuttle train into Birmingham where we have a huge concentration of customers,' Lyons said.
Greg Harris, a researcher at the Office for Freight, Logistics and Transportation at the University of Alabama, Huntsville, said the new container terminal has brought 'a whole new level of opportunities to the state to be a freight gateway.
'Some projections say trade with Latin America may triple and Mobile is a perfect location' for moving cargo into mid-America, he said.
He said the state needs to look at ways to move more cargo by rail to prevent congestion on Interstate 65 and in the Montgomery area, and the intermodal terminal could play an important role in that effort. In addition to imports, he said Alabama's steel and burgeoning automobile industry could also benefit from improved terminals by the railroads and the port.
The port has also been speaking to developers about the development of a logistics park adjacent to the intermodal facility.
'We have enough acreage to do somewhere between 1.5 million and 2 million square feet, and there is an adjacent industrial park that is owned by the Mobile Airport Authority where they have set aside acres and parcels for warehousing and distribution,' Lyons said.
'We have had a lot of developers interested in those logistics park properties. We haven't decided whether to do it with one master developer or individual parcels. If we are successful with the grant, we would push it forward so that the warehouses would come on line at about the same time the intermodal facility begins operation.
'The market right now is not ready for anything new, but I think people are trying to get themselves lined up so that when the market does turn back, they are ready to take advantage of it. And that's what we are trying to do.'
Steel. The new ThyssenKrupp steel mill is not slated to begin operation until spring 2010, but it has already been generating cargo for the port. Andreas Ebensperger, director of logistics for the mill, said the facility is generating about 30,000 crates of cargo ' mostly containerized, but some breakbulk shipments. Volumes increased in fall 2009 as construction activity at the mill peaked.
Equipment and parts for the mill have been mostly trucked from the port, though some has been barged because of weight restrictions, Ebensperger said.
When the mill gets up to full production it will receive about 75,000 tons of steel (about one Panamax ship) each week at the Pinto Island terminal.
The steel slabs, which average 25 tons each but can be as heavy as 36 tons, will be discharged and loaded onto standard river barges in a long narrow slip at Pinto Island, using gantry cranes fitted with electromagnets. Using electromagnets enables loading more quickly and the use of dunnage to separate the slabs can be eliminated, reducing the cost of transport.
Barges loaded with slabs will be pushed up river to the Calvert mill. ThyssenKrupp has contracted with AEP River Operations to perform the towing operation, which will require daily trips.
In November the port decided to ask for proposals from private sector partners to lease and operate the terminal.
Lyons explained that with labor requirements expected to swing greatly, with many more workers required on days when the ship is offloading slabs and a smaller number when the barges are being loaded, the port opted to subcontract rather than operating the terminal itself.
He said while 80 percent of the Pinto terminal's footprint will be devoted to ThyssenKrupp's requirements, the terminal could handle additional steel or other cargo.
In September, CSX said it awarded a $60 million contract to Scott Bridge Co. of Opelika, Ala., to modify the 14-Mile Bridge over the Mobile River from a pivoting bridge to a vertical lift bridge.
Ebensperger said the renovation of the bridge, named for its location on the river, will benefit his company and other shippers on the river because it will allow larger tows and make navigation more dependable during inclement weather.
Smaller gantry cranes will offload the slabs at the Calvert terminal. Ebensperger said the company is likely to hire a third party to operate the barge facility.
' Special heavy haulers that can lift up to 100 metric tons will move the slabs from the riverside to the rolling mill.
Ebensperger said finished product will be distributed using barge, rail and truck. The company may also export some products through Mobile.
Lyons feels the steel volumes have the potential to grow 10-fold from 600,000 tons to more than 6 million tons at the port.
'And the risk diminishes every day,' he said, as the ThyssenKrupp mill nears completion.
The state port authority's heavy investment in new facilities is not without risk, noted bond rating company Fitch Ratings, which downgraded the agency's facilities revenues from A- to BBB+ in September. It said the agency's long-term debt had more than doubled from about $173 million in fiscal year 2006 to $361 million.
But Fitch added the new projects have exponentially increased general cargo, intermodal and steel shipping capacity and will likely contribute to long-term business-line diversification. Coal handling accounts for 57 percent of the port's revenues, and had dropped from about 20.5 million tons in 2008 to an estimated 16.5 million tons in the current fiscal year, the rating company said.
'Should the revenue benefits of these projects materialize as forecasted, the port authority's risk profile could improve,' Fitch said. 'However, the large new facilities would be underutilized if they fail to attract sufficient volume.'
Lyons said Standard & Poor's has taken similar action, and that while the port would have preferred to have kept the A- rating it obtained in 2006, the port is confident it will regain it.
'We are a commodity port and things can go up and down,' he said. 'But we feel pretty confident that yes, there was a risk, but that it was a good, calculated risk and that the rewards are potentially very good.'