East side story
Ports, rails lure Asian cargo from the West Coast.
By Chris Dupin
Containerized imports from many Asian countries were down in 2008 because of the recession. But 'economic forces are combining to favor the growth of Gulf and East Coast ports for Asian trade,' said a white paper published recently by Drewry Supply Chain Advisors.
It predicts 'up to 25 percent of the U.S. West Coast ports' current cargo base (primarily hinterland cargo) could be lost to the East and Gulf ports in the decade to come.'
The growing size of ships, the increase in trans-Suez services, expansion of the Panama Canal, higher fuel costs which raise the cost of overland transport, and the ability of ports to expand all augur well for East and Gulf coasts ports.
'We've got real problems this year, but by late 2009, 2010 we should be back on that container upward glide path,' said John Vickerman, a Williamsburg, Va.-based consultant. Container trade may be one of the first parts of the economy to pick up, he contends.
Vickerman is enthusiastic about trans-Suez services and advises developers of a container facility in Melford, Nova Scotia, which would act as a Prince Rupert of the East Coast, discharging and loading intermodal cargo that would be primarily bound for the U.S. Midwest or Ontario. If production increases in Vietnam and India, trans-Suez services to U.S. East Coast destinations become more attractive, he said.
In 2007 the top five West Coast ports saw containerized cargo traffic fall 1.1 percent, while volumes at the top five East Coast ports climbed 4.9 percent, Drewry said.
Figures from Miami-based Datamyne show East Coast ports continuing to gain market share in the containerized shipping industry. In 2007 they handled about 19.6 percent of combined container volumes from East and West coasts; through Nov. 15, that share had jumped to 21.3 percent.
Philip Damas, division director at Drewry Supply Chain Advisors, has different statistics but they show a similar trend. He said the percentage of inbound boxes from Asia moving through East Coast ports has grown to 24 percent in 2007, from 20 percent in 2002. Gulf ports had a modest 0.2 percent market share in both 2007 and 2002.
For U.S. exports to Asia, the trend is similar. Exports through East Coast ports have grown to 27 percent in 2007 from 26 percent in 2002, while Gulf ports handled about 1 percent in 2007, up from almost nothing five years earlier.
Changes in intermodal rail traffic reflect East Coast port growth. Jeffrey S. Heller, assistant vice president-international marketing at Norfolk Southern, said earlier this decade, only about 30 percent of the international containers his company handled moved through East Coast ports; today it is 55 percent.
CSX reports a similar trend – with about 45 percent to 50 percent of international intermodal containers originating at East Coast ports, compared to 35 percent a few years ago, said Vance Bennett, director of intermodal port strategy.
The railroads do not have perfect visibility into where every international box they handle originates, but Asia accounts for 60 percent to 68 percent of the containers moving through East Coast ports, Bennett estimated.
Asia/U.S. East Coast traffic took off as shippers looked for alternatives after the labor dispute that shut down West Coast ports in 2002.
'Historically it was all focused on one area of the country and now it is spread around,' Heller said.
While much of that cargo is likely to be consumed by populations close to the port cities like New York, East Coast ports and railroads are beefing up their infrastructure to accommodate the increased cargo.
The Port Authority of New York and New Jersey will spend about $2 billion over the next couple of years on dredging and expanding annual rail capacity from 400,000 to 1 million containers. The port is looking at ways to raise or replace the Bayonne Bridge so that the big ships from Asia that traverse the expanded Panama Canal can call its major container terminals.
Jacksonville will open its TraPac container terminal for MOL this month and in December signed an agreement with Hanjin to build a new terminal slated to open in late 2011. Greenfield terminals in Wilmington, N.C.; Gulfport, Miss.; and Jasper County, S.C. all hope to benefit from Asia cargo.
Norfolk Southern expects the Heartland Corridor project, which will connect Norfolk with the inland terminals in the Midwest, to be completed by the second quarter of 2010. By raising tunnel heights and other overhead clearances to accommodate double-stack trains and making other improvements, shippers will be able to shave more than a day's transit time on the movement of international boxes – much of it department store merchandise from Asia to distribution centers in the Midwest.
CSX has committed $300 million to a similar corridor project it calls the National Gateway. The $700 million public-private partnership would create double-stack clearances, and reduce transit times from ports such as Baltimore and Wilmington, N.C., and more double-stack trains to reach cities such as Pittsburgh and Charlotte.
Just as Norfolk Southern has built a major intermodal terminal at the Rickenbacker International Airport outside Columbus, Ohio, CSX has plans to build a major intermodal terminal in the Columbus area and about 40 miles south of Toledo.
Heller said the improvements help make shorter distance intermodal services more attractive. Norfolk Southern already runs 11 trains a day between Savannah and Atlanta. As new double-stack routes open, he believes runs like Norfolk to Harrisburg, Pa., or New York to Pittsburgh may become possible. CSX serves Atlanta and Charlotte from Savannah, Charleston and Jacksonville, and plans to start up a service to Buffalo from New York.
Drewry argues as ship sizes grow, more Asian cargo will move through East Coast ports. If ship sizes through the Panama Canal grow to 6,400-TEUs 'most places east of the Mississippi will fall out of the West Coast's sphere of influence' and if 13,000-TEU ships ply the canal, West Coast ports 'will be ejected from the Midwest market altogether. Denver, Albuquerque and El Paso will be the border towns.'