By Mark R. Smith, Contributing Writer
The state of the port industry today, to hear industry insiders tell it, is solid.
Despite operating under the fog of COVID-19 for much of the past 18 months, it’s not hard to find an executive who’s feeling optimistic about what’s coming next. Consider, for instance, the viewpoint of William Doyle, executive director for the Maryland Port Administration.
“There’s lots of good news,” said Doyle. Perhaps most notably, “Our industry is waiting for final Senate approval of the Bipartisan Infrastructure Plan. This is a huge and significant piece of legislation that will provide much-needed funding to ports to upgrade and improve their marine terminals and facilities.”
Indeed, the big wheels in Washington are paying attention. U.S. Transportation Secretary Pete Buttigieg recently visited the Port of Baltimore to meet with Maryland Gov. Larry Hogan, Maryland Transportation Secretary Greg Slater, Doyle and other leaders. “It was a great meeting,” Doyle said, “and very reassuring to hear the commitment that he and the Biden administration have on infrastructure, and also on the important roles that seaports play in our economy.”
That’s what executives like Doyle want to hear, as observers from outside the industry often don’t grasp the intermodal connections of America’s seaports and how they bolster the U.S. economy, create and sustain jobs, enhance international competitiveness and pay annual dividends.
By the Data
To examine the numbers, the nation’s more than 300 coastal and inland ports supported 30.8 million jobs in 2018 and 26 percent of the total gross domestic product and ports’ tenants plan to spend $163 billion between this year and 2025 is up by more $8 billion in the last four years, according to data from the American Society of Civil Engineers (ASCE).
ASCE’s data also reveals that investments are focused on capacity and efficiency enhancements, as maximum vessel size has doubled during the last 15 years, and tonnage at the top 25 ports grew by 4.4 percent from 2015 to 2019.
The outcomes of those numbers can be heard in conversations with port executives around the country. “As we speak, our market is very good,” said Anthony Theriot, director of trade development for the Port of Port Arthur, which is located in Texas on the Gulf of Mexico. “We’re seeing gains in certain categories, such as forest products like wood pulp, dimensional lumber and plywood, fence pickets, etc. Demand is substantial in those markets.”
That’s important, especially since wood pulp is recession proof, as it goes into making always-in-demand items like tissue paper. “Also, there is solid demand for craft liner board and wood pellets (pulverized from pine) for alternative fuels in Europe that are used instead of coal, so that’s also a green use,” said Theriot. “That represents about 40 percent of our business.”
With another large tenant, the Port exports low Sulphur diesel to various locations around the world, which also represents another 40 percent of its business. “That’s mainly what we do here,” he said, adding that other ports are more oriented toward container cargo. While the Port of Port Arthur also occasionally handles containers, it also handles project (or “over-dimensional) cargo, which is large, complex or high-valued equipment, for the major refineries.
Adding that the Port’s status as a strategic military installation accounts for the remaining 20 percent of its market, Theriot said there are many projects being built around the Port that he hopes it will benefit from, such as the soon-to-be complete Birth 5 expansion, which was built on the heels of a $90 million bond; next up is Birth 6, is a $55 million project spurred by a $20 million grant from U.S. Department of Transportation.
As Doyle noted in Maryland, the Port of Port Arthur is also building for the future through improving its infrastructure with more on-dock rail and traditional rail, better roads in and out of the port for the last mile and adding backlands to the new births. “That will allow us to have more laydown space and to deepen the Sabine Neches Channel from 40 to 48 feet,” said Theriot.
So today, the Port is a busy place. “Our man hours are up by 40 percent from 2020 to 2021, for our 18 employees and the about 250 workers that work for our handling contractor,” he said.
It’s a similar story in northern Florida, “Ports are the gateways for global commerce and we’re seeing an unprecedented demand for capacity, overall,” said Aisha Eccleston, director, trade development and foreign trade zones for the Port of Jacksonville. “Ecommerce has been a huge driver of this demand and there is more interest in using ports with a strategic location, reliable transportation ecosystem and strong [last] mile network.”
“To meet customer demands shippers, expect ports to provide a customized approach and value added solutions like the complimentary ‘peel off’ program that our terminal operators offer at Jaxport,” said Eccleston.
The point of the ‘peel off’ strategy is to sort “the customer’s cargo into a designated space in the yard as it comes off the vessel. The benefits are higher velocity of cargo through the port, reduced turn times for truck drivers, and elimination or reduction of detention and demurrage fees,” she said.
“Right now, business here at the Port of Jacksonville is very good,” said Rick Schiappacasse, director, Latin America. “We’re up 10 percent from last year. We are not experiencing congestion and have a detailed docking system, so we charge by the hour. Some ports are having ships sit outside the port due to too many boats, but not ours.”
A glance around the industry will reveal that a number of ports don’t diversify, but the Port of Jacksonville does. “We ship automobiles, steel coils and the cargo for the U.S. Department of Defense, plus forest products like lumber, plywood, pulp, paper and paper board that is used for packaging,” Schiappacasse said.
As Theriot pointed out, part of the ongoing challenge for ports today is that the property they sit on “was established more than 100 years ago and in most cases, there isn’t much room to expand,” he said, “and if you do, it’s expensive.”
Schiappacasse offered the example of Baltimore’s Dundalk Marine Terminal (DMT), which is part of the Port of Baltimore and is surrounded by a residential neighborhood and which has made it tough to expand. “While they were able to add Point Breeze Business Center, none of the land at the nearby Tradepoint Atlantic became part of DMT – which is an administration, not an authority, meaning that expansion also requires legislative approval.”
One industry sector he’s seeing “blow up” is distribution warehouses. “Big companies will lease near a port to better facilitate distribution to a region. For instance,” he said, “we have seven Amazon warehouses near our port, as well as presence from Coach Leather Goods of about 200,000 square feet and 1A Auto Parts of about 100,000 square feet.”
And while you can still say size matters, it doesn’t matter as much as it once did. “Companies used to need bigger buildings, but now they can be smaller, due to the rack system,” Schiappacasse said, “where stacks can go two palettes wide and build up to a 60-foot ceiling. That can also mean more business for a port, depending.”
Also, despite the new spike in COVID-19 cases, volumes of imports increased as the pandemic has simmered in recent months, “so it’s important to accept new technologies to control inventory and flow control,” he said, adding that the uptick in ecommerce during the last 18 months has made it easier to acquire manufactured products, because most products are made outside of the U.S.
One bump in the road, said Schiappacasse, is that “the cost of shipping goods from China to the U.S. has tripled in price in the past year due to demand and limited space on ships for imports. We don’t see that improving any time soon.”
As healthy as the industry looks today, Doyle made the point that, “As an industry, we’re all still dealing with the impacts from COVID-19. It was a devastating time, especially in the early months when manufacturing facilities around the world temporarily or permanently closed. [However], we’re trending in the right direction.”
He, like Schiappacasse, noted that the sectors ports cater to can wildly vary; some only handle only a few commodities, but the Port of Baltimore “is one of the most diverse in the country,” Doyle said. “For instance, it’s the biggest car port in the U.S., and in 2020 handled more than 773,000 cars and light trucks.”
Baltimore “also handles more roll on/roll off heavy farm and construction machinery than any other port,” he said. “Our containers have been growing by leaps and bounds and will continue to do so, because of its additional 50-foot-deep berth and ultra-large cranes, which include four new ultra-large Neo-Panamax container cranes. In our most recent figures through June 2021, our containers were up three percent over last year.”
As for warehouses, the Port of Baltimore is geographically located close to many distribution, fulfillment and sorting centers such as Amazon, Floor N Décor, IKEA and Wayfair, which is coming online this year. “With more people making purchases online today than ever before,” he said, “we’ve become a giant eCommerce port with our close proximity to so many of these distribution centers.”
Given its diversity, it’s interesting to see how Doyle and company make the port work.
“We’ve seen incredible growth, especially with our containers and cars. We’ve really received a huge boost from what Tradepoint Atlantic, Baltimore’s inland port, has done at Sparrows Point – it’s been nothing short of remarkable,” he said. “It’s now handling Volkswagen and BMW vehicles, in addition to the distribution centers right on their land that include Under Armour, Amazon and Home Depot.”
Doyle said, “Expansion will continue by densifying property and operations, expanding through Maryland while attracting new fulfillment, distribution and sorting centers, and working with Tradepoint Atlantic.”
Keys to FTZs
Another aspect of the industry that can be of great benefit to port clients are the free trades zones (FTZs), notably for companies that import and finish products, then distribute to other regions for distribution.
“An FTZ is a secured site within the United States, but technically considered outside of U.S. Customs’ jurisdiction, allowing shippers to clear cargo as it leaves the FTZ while saving on import clearance costs,” said Eccleston. “[The] designation allows businesses to defer, reduce or eliminate costly U.S. Customs duties on products imported into the US.”
For example, large retailers such as Tapestry, Michael’s Stores, Bridgestone and Bacardi utilize a Jaxport FTZ to increase cash flow and save a significant amount of money on imported cargo shipments. “As the administrator for FTZ No. 64, I’m noticing increased interest from manufacturers,” she said, “as well as operators at storage and distribution sites, to analyze potential savings and to get them approved to utilize the FTZ program in 30 days or less.”
There are also benefits of just doing import or export only. “They can be located onsite at an ocean port or inland as well, and are often located by intermodal facilities. Although there are different types of FTZ structures, generally once an FTZ is established,” said Michelle Comerford, industrial and supply chain practice leader for Biggins, Lacy, Shapiro & Co., Princeton, N.J. “They’re relatively easy to extend or modify.”
Currently, there is not a great focus on FTZs in U.S. manufacturing site selection decisions “as much of the current domestic manufacturing investment activity is intended to serve the U.S. market,” she said.
“So, unless a company is a global shipper or intending to import a large amount of supplies or raw materials (such as in the automotive industry),” Comerford said, “we’re seeing FTZs as more of a nice-to-have” and not a “must-have” in the site selection process for many types of new manufacturing investment.”
Bio: Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
Concurrently, he’s written at length about the film and video industry for a variety of publications, and about his other loves, including music, sports and leisure.
Port of Baltimore
Richard Scher, PR, firstname.lastname@example.org
William Doyle, executive director
Port Arthur International Public Port
Anthony Theriot, director of trade development
409-983-2011 – email@example.com
Port of Jacksonville
Rick Schiappacasse, director, Latin America
904-357-3071/445-9281 cell – firstname.lastname@example.org
Aisha Eccleston, director, trade development and foreign trade zones
904-357-3070 – email@example.com
Biggins, Lacy, Shapiro & Co., Princeton, N.J.
Michelle Comerford, industrial and supply chain practice leader
216-973-8872 cell – firstname.lastname@example.org
Port of Brownsville
Tony Rodriguez, FTZ administrator
956-831-4592 – email@example.com