After getting the Virginia Port Authority’s financial house in order, VPA Executive Director and CEO John Reinhart is implementing an aggressive capital expenditure program that will expand capacity and add new berth space for large containerships.
The Port of Virginia is making headway on various expansion projects as container volumes at the mid-Atlantic port continue to grow.
The port has the deepest harbor on the U.S. East Coast and 50-foot channels, inbound and outbound. Two Class I railroads, CSX and Norfolk Southern, serve the port via on-dock intermodal container transfer facilities at the Virginia International Gateway (VIG) and Norfolk International Terminals (NIT).
In 2016, the Port of Virginia set a record for containerized cargo, handling 2.66 million TEUs, up 4.2 percent from 2015, and 2017 is shaping up to be an even stronger year. During the first five months of 2017, container throughput at the port has grown another 8.6 percent from the corresponding 2016 period to 1.15 million TEUs.
Financial Triage. Despite the recent growth, operations were not always so rosy at the port, which had trouble building back cargo after the recession, although the West Coast port strike did lead to a boost in cargo volumes.
Prior to John Reinhart becoming chief executive officer and executive director of the Virginia Port Authority (VPA) in February 2014, the port was in dire need of maintenance, had older equipment and was plagued by chronic congestion issues.
Reinhart, who left his position as CEO of Maersk Line Ltd., the container industry leader’s U.S.-based shipping unit, to take the helm at the Port of Virginia, said in a recent interview with American Shipper one of his top goals when he came to the port was to stop the “financial bleeding.”
The port lost money for the sixth consecutive year in its fiscal 2014, which ran from July 1, 2013 through June 30, 2014. But after Reinhart took over, the VPA went through a corporate reorganization, changed its accounting, financing and human resources structure, and began heading in the right direction almost immediately, breaking even in the second half of the fiscal year.
Prior to the restructuring, the port authority had a board that operated separately from the VPA’s terminal operating arm, Virginia International Terminals (VIT), and although the Hampton Road Chassis Pool II operated under VIT, it was not fully integrated in the terminal’s reporting and metrics.
The VPA brought these three operations together to address port-wide issues in a holistic way, although they are still technically three separate legal entities.
On Aug. 8, 2014, the three parties executed an agreement for shared services “in an effort to streamline the administration of the Port of Virginia and reduce costs,” according to the Port of Virginia’s 2016 Comprehensive Annual Financial Report. The agreement took effect on Jan. 1, 2015. The port authority also reopened the closed facility at Portsmouth Marine Terminal during 2014, invested some capital into the terminal, and began using it as an outlet to deal with congestion, Reinhart said.
Currently, the Port of Virginia is called by 30 direct region-to-region container services, according to ocean carrier schedule and capacity database BlueWater Reporting. Those 30 loops operate with a total of 262 containerships with a combined deployed capacity of 1.88 million TEUs. By comparison, the port was frequented by 278 container vessels with 1.73 million total TEUs in capacity just last September, a couple months after the opening of the expanded third lane of the Panama Canal, which allowed the the important gateway between Asia and the U.S. Gulf and East Coast to accommodate post-Panamax containerships with up to 13,000-TEUs of capacity, nearly three times the previous 5,000-TEU limit.
Since then, the number of larger vessels with capacity for 10,000 TEUs or more calling the port on a regular basis has risen from 12 to 20. The VIG terminal in May received the 13,100-TEU COSCO Development, the largest ship to ever call a U.S. East Coast port.
Nineteen of the 30 fully cellular container services calling the port are operated by one of the three major east-west carrier vessel sharing alliances. In regards to the two new carrier groupings that set sail at the beginning of April, the OCEAN and THE alliances, Reinhart said the port worked very closely with the member carriers to make sure it could handle the adjustments in vessel berthing windows.
Aggressive Expansion. The VIG facility in Portsmouth, Va., is currently undergoing a $320 million expansion project that will nearly double the terminal’s annual handling capacity from 650,000 containers to 1.2 million containers, according to the port.
The project began in February and involves expanding the container stacking yard, doubling the on-dock rail operation, expanding the truck gate, and adding new berth space for larger containerships. An extended wharf, construction of which began in March and is scheduled for completion in winter of 2018, will make room for four new Suez-class container cranes.
As various projects are checked off the list, the VIG terminal will incrementally gain capacity, first during the second half of 2018, then again in 2019, and the project will be completed in 2020, Shawn Tibbetts, chief operations officer for VIT told American Shipper.
Last year, the VPA extended VIG’s lease at the terminal through 2065. VIG is owned by Connecticut-based infrastructure investment firm Alinda Capital Partners, and its U.K. pension fund partner, Universities Superannuation Scheme.
VIG’s owners will finance the terminal project, and the Commonwealth of Virginia will have the opportunity to own the terminal at the end of its lease, Reinhart said.
Meanwhile, over at NIT, the port’s largest terminal, civil works will begin this summer on a $350 million expansion of the south stack/container yard, which is also scheduled to be completed in 2020.
The commonwealth is funding that project, and it’s their largest single investment ever, VPA spokesperson Joe Harris said.
In June, the Port of Virginia christened its brand new 26-lane gate complex at NIT, dubbed North Gate, which is expected to speed the flow of trucks bringing containerized cargo in and out of the terminal. Reinhart explained that the port wanted to complete the gate project before bringing on more container volumes at the terminal so as to avoid any potential issues with truck congestion.
The I-564 Intermodal Connector, which will consist of ramps coming on and off the terminal, is expected to be completed by the end of 2017, further increasing efficiency for motor carriers, Reinhart said.
The VPA in November 2016 finalized a $217 million contract with Konecranes to build and deliver 86 rail-mounted gantry cranes. Sixty of the cranes will go to NIT and the other 26 cranes will go to VIG, with delivery beginning in 2018 and continuing through 2020.
In total, the projects at VIG and NIT will collectively increase the port’s overall annual container handling capacity by 40 percent, or 1 million container lifts, by 2020.
“We won’t stop,” Tibbetts said. “We will continue to take steps and strides to stay ahead of the marketplace.”
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Future Development. The Port of Virginia has congressional authorization for 55-foot channels, but the port is still undergoing review with the U.S. Army Corps of Engineers to justify the dredging project, Reinhart said.
The VPA expects to have the first level of that review done later this summer, and the U.S. Army Corps of Engineers’ final report is to be released in 2018. The port expects the project to be funded 50-50 between federal and state funding, Reinhart said.
Dredged materials will then be used to create solid ground at the site of the future 600-acre Craney Island Marine Terminal, with the eastward dykes already under construction.
The planned semi-automated terminal will be designed to handle ultra-large container vessels, will have direct interchange to the interstate highway system, and will offer double-stack intermodal rail service, according to the port. The Craney Island project is the largest fully permitted port expansion project on the East Coast.
The facility “will increase container throughput on the west side of the Elizabeth River, away from the region’s most congested tunnels and bridges, and in close proximity to rail facilities and distribution locations,” the port said in announcing the project.
Looking ahead, Reinhart said that in addition to building capacity, the VPA is focused on increasing rail volumes to inland areas, specifically the Midwest. The port wants to boost its on-dock rail capacity and is trying to design its new facilities for optimal efficiency in handling intermodal container shipments. Overall, around one-third of all loads in and out of the port move by rail.
In all, it’s only been about three-and-a-half years since Reinhart took over at the VPA. But it seems after righting the ship from an organizational standpoint, volumes are on the rise, and with an aggressive capital expenditure program in place, he is positioning the Port of Virginia to remain competitive and, perhaps more importantly, profitable for years to come.