High seas gambles

The new East Coast competition is spending to deepen its harbors, expand terminal facilities, build new warehouses and improve the ”last mile” connections between ports and highways and railroads.

By Jon Talton, January 10, 2014, Seattle Times


North Baltimore, Ohio, is some 2,300 miles from the Puget Sound area. But this tiny town south of Toledo is an important link in the CSX railroad’s National Gateway.


So far, CSX has spent $575 million, along with $280 million from state and federal governments and others, to create a speedy, high-capacity rail corridor that converges in North Baltimore. The railroad calls North Baltimore “the nerve center” of its intermodal network.


Specifically, container traffic is being routed to this Ohio town from East Coast ports, where it is sorted onto trains for Chicago and other major distribution centers in the Midwest. CSX is counting on much more of it when the widening of the Panama Canal is due to be completed next year.


That’s when huge container vessels from Asia can sail directly to the East and Gulf coasts of the United States. Now, 70 percent of this traffic comes through West Coast ports, including Seattle and Tacoma.


We’ve been in the habit of fretting about the rivalry here in the Puget Sound area. Or about Prince Rupert and Vancouver in British Columbia. And don’t forget the ports of Los Angeles and Long Beach.


It’s time to meet the new competition.


Say hello to New York/New Jersey; Hampton Roads, Va.; Savannah, Ga.; Jacksonville, Fla.; and Miami. Also, Philadelphia, Baltimore, Charleston, Wilmington, N.C., and others in Florida and on the Gulf Coast.


According to a 2012 survey by the American Association of Port Authorities, ports in these cities planned to make approximately $10 billion in capital expenditures by the time of the canal’s expansion. Also, private-sector respondents said they intended to invest more than $19.5 billion.


The new competition is spending to deepen its harbors, expand terminal facilities, build new warehouses and improve the “last mile” connections between ports and highways and railroads.


The latter are major partners because they expect a surge in containers from Asia. In addition to CSX, Norfolk Southern Railway is building its Heartland Corridor from Virginia to the Midwest. Florida East Coast Railway is improving its line from Miami to Jacksonville.


Government is giving a boost. Unlike Seattle and Tacoma, hardly any of these ports are natural deep-water harbors. They depend on federal funds for dredging.


For example, last year Savannah won $492 million from Congress to deepen its harbor and otherwise improve its navigation channel.


Much of this is paid for with the Harbor Maintenance Tax, dinged on containers coming into the United States, including Puget Sound.


It puts us at a marginal disadvantage on costs against Canadian ports. Worse, little of the money can be used for projects here.


The Puget Sound ports have made a good start in meeting the challenge by agreeing to become partners in a seaport alliance. Details are expected soon.


John Wolfe, chief executive of the Port of Tacoma and tapped to lead the alliance, told me, “We are responding to the competition by changing the game. Forming a seaport alliance between the ports of Tacoma and Seattle will unify our investment priorities to upgrade infrastructure for ever-larger ships.”


Together the two ports comprise the third-largest container gateway in North America. Wolfe said, “We will speak with a stronger voice to continue pushing for a national freight strategy that leverages the billions of dollars West Coast ports have already invested.”


Seattle and Tacoma can handle the new big ships and they don’t have to be a megaport like Southern California, only hold and expand their trade business from Asia.


How tough will that be?


A very real danger is that as container lines consolidate and move to ever-larger ships (“Post-Panamax” and “New Panamax”), they would make fewer port calls on the West Coast.


But all that money in the East is speculating that many ships will sail directly there once the wider Panama Canal is open, bypassing the West Coast entirely. Jones Lang LaSalle, the real-estate consulting and management firm, had estimated that as much as 25 percent of westbound container traffic could be lost.


However, the firm’s latest port outlook emphasized that many factors are at work. West Coast ports and railroads remain competitive on speed and price. Panama Canal transit fees have tripled over the past five years.


On the other hand, shippers take note of the current slowdown on the West Coast because of a labor dispute, as well as previous strikes and bottlenecks in L.A./Long Beach, and want to diversify their options.


Wolfe said it is important for the ports to be “a consistently reliable gateway.”


The big bets being placed on the East and Gulf coasts may never reach the most optimistic projections. But they present the biggest competitive challenge to the Puget Sound ports since the Panama Canal first opened a century ago.

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