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Port of Mobile will prosper from dredging, new growth

BlueWater Reporting looks at various projects underway that will support the Port of Mobile’s growth as well as how it stacks up to other U.S. Gulf Coast ports.

   The Port of Mobile already has massive potential, between its connectivity to five Class I railroads and two interstates, but various major projects in the works will further strengthen the port’s role as a major U.S. Gulf Coast port.
   The most notable enhancement that will benefit the port is the planned dredging of the Mobile Ship Channel. Other projects include the ongoing expansion at the container terminal, operated by APM Terminals (APMT), a temperature-controlled distribution center being built adjacent to the container terminal, as well as a vehicle processing roll-on/roll-off (ro-ro) facility that is being constructed at the port.

Massive expansion. The Port of Mobile currently has a channel depth of 45 feet to the tunnels and 40 feet in the river harbor, according to the Alabama State Port Authority (ASPA).
   Although the current dimensions of the majority of the channel are 45 feet deep and 400 feet wide, under the 1986 Water Resources Development Act, the authorized dimensions for the majority of the channel were set at 55 feet deep and 550 feet wide, according to the USACE Mobile District.
   Some of the funding from a state gas tax that will kick into gear this September is slated to be used toward dredging the Mobile Ship Channel. The gas tax is a result of Alabama Gov. Kay Ivey signing Act 2019-2, also known as the Rebuild Alabama Act, into law in March after it quickly passed the Alabama House and Senate in the wake of her announcing the plan in February.
   “These funds are to be used for transportation infrastructure improvement, preservation and maintenance projects,” Ivey said in February. “A separate portion of the revenues will go to pay a bond to be issued to finance improvements to the ship channel providing access to the facilities of the Alabama State Docks.”
   The Alabama Department of Revenue in March said that effective Sept. 1, the gasoline and undyed diesel excise taxes will increase by 6 cents per gallon to 24 cents per gallon for gasoline and to 25 cents per gallon for undyed diesel; effective Oct. 1, 2020, the gasoline and undyed diesel excise taxes will each be raised by 2 cents per gallon; and effective Oct. 1, 2021, the gasoline and undyed diesel excise taxes each will be raised by an additional 2 cents per gallon.
   “Effective Oct. 1, 2023, and on July 1 of every other year thereafter, the gasoline and undyed diesel excise tax rate will be adjusted by the percentage change in the yearly average of the National Highway Construction Cost Index and rounded to the nearest whole cent with the increase or decrease of the excise tax rate not exceeding $0.01 per gallon,” the Alabama Department of Revenue added.
   The dredging project is expected to deepen the Bar, Bay and River channels and add a passing lane, according to the ASPA. It will involve deepening the Bay and River channels to 50 feet, the Bar Channel to 52 feet and expand the Bay Channel by three miles in length and 100 feet in width. Additionally, the project is expected to result in bend easing on the upper Bar Channel and result in turning basin improvement.
   “The big shippers that are driving the modernization are our coal and containerized shippers on the deepening/widening and the petroleum terminal shippers (private terminals) mostly on the widener,” Judith Adams, vice president of marketing at ASPA, said in an emailed statement in early April.
   As far as the timing goes for the dredging project, Adams said, “The U.S. Army Corps of Engineers is in the final phase of the Mobile Harbor General Reevaluation Report/SEIS. The final report is expected to be released for public review in May.
   “Following a 30-day public comment period on the draft Supplemental Environmental Impact Study, an official Record of Decision could be signed by the USACE Division Engineer by midsummer. If the project receives federal approval, the Corps’ process then looks to engineering and design and contracting that would possibly start construction by fall 2020. The project is expected to take a minimum of three years to construct.”
   In terms of funding for the dredging, Adams said, “The state’s $150 million cost share for this project was approved during an Alabama special call legislative session held in early March,” and added that fuel tax proceeds from the Rebuild Alabama Act will cover the state’s cost share for the federally funded channel improvements.
   “The FY2019 Civil Works budget covers the remainder of the cost for the study and the cost for preliminary engineering and design,” Adams added. “The president’s FY2020 budget proposal also has the necessary funds to complete engineering and design work carried over into FY2020. We do not anticipate any obstacles to federal approvals or funding of this project.”
   Meanwhile, two major upgrades are underway at APMT’s Mobile terminal, the addition of 20 more acres of yard space and a dock extension project, Denson White, client services director at APMT Mobile, said in a phone interview.
   The additional yard space will become available in midsummer and will increase the terminal’s capacity by 30 percent, from an annual throughput capacity of 500,000 TEUs to 650,000 TEUs, White said, adding that the terminal has the potential to increase its annual handling capacity to 1.5 million TEUs if needed.
   The dock extension project, which will be completed by the end of 2019/early 2020, will increase the dock’s length from the current 2,000 feet up to 2,400 feet.
   Meanwhile, the Port of Mobile also will benefit from an international temperature-controlled distribution center that will handle import and export cargo and is expected to become operational next year.
   In September, ASPA and MTC Logistics announced in a joint press release MTC’s purchase of property adjacent to APMT Mobile’s container terminal for the new distribution center.
   “Under Phase 1, MTC will invest approximately $60 million and directly employ 50 to 70 associates at the new facility,” F. Brooks Royster III, vice president of international supply chain solutions at MTC, said at the time. “This new facility will be more than 12 million cubic feet in size with approximately 40,000 racked pallet positions. We will offer a comprehensive suite of services, including blast freezing, port drayage and LTL consolidation.”
   Royster said in an emailed statement in early April that although construction had not started, work was expected to begin in late spring  and the facility is expected to become operational in July 2020.
   The facility will largely handle imports of seafood, pork products and frozen juice and vegetables, as well as poultry exports.
   Initially, imports will come from South America, China and other Far East locations, India and Europe, while exports will go to Africa, Cuba, the Far East and the UAE.
   In regard to why MTC chose Mobile for its next temperature-controlled distribution center, Royster said the choice resulted from the port serving multiple shipping lanes, available land adjacent to the port, the nexus of I-10 and I-65, available energy supply at a reasonable cost and the support of state and local governments via incentives.
   Meanwhile, a vehicle processing roll-on/roll-off (ro-ro) facility is being established at the Port of Mobile.
   The ASPA and AutoMobile International Terminal, a joint venture of Terminal Zárate S.A. and SAAM Puertos S.A., signed a memorandum of understanding in April 2018 to develop and operate the facility at the port to meet the region’s growing demand for finished auto import/export facilities in the U.S. Gulf of Mexico, according to an April 2018 press release jointly issued by Terminal Zárate, SAAM Puertos and AutoMobile International Terminal.
   The $60 million project involves converting about 57 acres of a derelict bulk material-handling facility into an automotive processing and logistics terminal. 
   “Proceeds from the Alabama State Port Authority’s recently awarded $12.7 million (USD) Transportation Infrastructure Generating Economic Recovery (TIGER) grant and the $28.8 (USD) grant from the Alabama Gulf Coast Recovery Council as authorized under the Resources and Ecosystems Sustainability, Tourism Opportunities and Revived Economy of the Gulf Coast Act of 2011 would contribute toward the cost of the project,” the release had said. “The concessionaire agreement facilitates the private sector partner contribution toward the facility.”
   ASPD Director and CEO James Lyons said during the March 29 broadcast of “Capitol Journal” that demolition on the land began last year and will be finished in about three months, and construction will then begin. The facility will be open by the end of next year.

Stacking up. “The port’s greatest strength is its geographical location, which positions it close to coal mines, coal fired power plants, key transportation arteries that include inland waterways and five Class I railroads that connect Mobile to local and regional markets,” credit rating agency Fitch Ratings said last week. However, Fitch downgraded the rating on the ASPA’s approximately $273 million in outstanding revenue bonds to BBB+ from A-, but the rating outlook has been revised to stable from negative. Fitch said it “does not rate ASPA’s $30 million outstanding series 2008A docks facilities revenue refunding bonds and $50 million outstanding series 2018 short-term docks facilities revenue bonds, which are on parity with the rated debt.
   “The downgrade reflects the port’s exposure to a volatile commodity market and the potential for future volatility to weaken financial flexibility, making the rating no longer commensurate with the A- category,” Fitch added.
   Fitch also said the BBB+ rating reflects the port’s position as a secondary port of call with an elevated concentration of commodity cargo. “The port has relatively high exposure to commodities, particularly coal and steel, which comprise over 50 percent of total revenues and nearly 50 percent of overall tonnage,” Fitch said.  
   The BBB+ rating also reflects “the port’s volatile revenue profile as a result of limited fixed contractually obligated payments, partially mitigated by the availability of certain state tax revenues for debt service and the demonstrated ability of the port to substantially decrease operating expenses during periods of throughput decline,” Fitch said.
   In terms of cargo throughput, the Port of Mobile’s public and private marine terminals handled 58.2 million tons of cargo in 2017, including 250,319 TEUs of loaded imports and exports, according to data from the U.S. Army Corps of Engineers’ (USACE) Waterborne Commerce Statistics Center. 
   The port was the 11th-busiest U.S. port in terms of tonnage in 2017 and the 20th-busiest U.S. port in terms of loaded TEU volumes in 2017, according to the data, as illustrated in the charts below. The USACE’s Waterborne Commerce Statistics Center has yet to publish 2018 results and includes U.S. territories. 

   Although data is not available for how much cargo the port’s public and private terminals handled in 2018, the port authority’s owned terminals handled 28.4 million tons, largely consisting of coal, containers and steel, according to ASPD’s Adams. 
   Adams said the port authority’s owned terminals in 2018 handled 15.9 million tons of coal, up 21 percent year-over-year; 5.1 million tons of steel, with no gain over the previous year; and 346,732 TEUs of containers, up 9.5 percent year-over-year. 
   Other products, including grain, iron, nonferrous metals, forest products, cement, chemicals, project and over-dimension cargo volumes, bring in the balance of that 28..4 million tons, she said.
   In terms of liner services, the Port of Mobile is called by seven liner services that connect it to regions outside the U.S. and Canada, as illustrated in the chart below, which was built using BlueWater Reporting’s Port Dashboard tool. These consist of five fully cellular container services and two services that deploy open hatch vessels.

   A total of 11 U.S. Gulf Coast ports are called by liner services, as illustrated in the chart below, which also was built using BlueWater Reporting’s Port Dashboard tool. The data from this tool only includes services that also call regions outside the U.S. and Canada. Port Houston handles the most liner services at 36, followed by the Port of New Orleans at 15 and the Port of Mobile in third place.

   In terms of the largest containerships calling U.S. Gulf Coast ports, Port Houston comes in first place, with the largest vessel size calling the port at 9,200 TEUs, as illustrated in the chart below, which was built using data from BlueWater Reporting. The ports of New Orleans and Mobile come in second at 8,814 TEUs.

   “We will have coming in within the next month the biggest ship that has ever come into Mobile, which is a 9,500-TEU ship,” ASPA’s Lyons said at the end of March. “We’re getting them in, but they can’t fully load. We spent $10 million back in 2010 to build a basin where they can turn around. We can turn the biggest ship in the world. We’ve done everything that we can do, short of dredging the channel that extra five feet.”

© 2019 BlueWater Reporting ( Used with permission