While the Port of Charleston’s volumes and earnings grew modestly during fiscal year 2016, the port plans to make record capital investments in fiscal 2017 to prepare for the future deployments of huge containerships.
The port plans to invest $1.3 billion over the next 10 years, and many of those projects are scheduled to be complete by 2020, S.C. State Ports Authority President and CEO Jim Newsome said during the State of the Port address on Monday.
“The main theme of the industry is that we are driven by big ships. ... I fully believe by the end of next year we will have two 14,000-TEU ship systems in this port,” Newsome said. “Big ships are the catalyst for port investment. They are the reason we have to do a lot of investment in deepening harbors, strengthening wharves and building taller cranes.”
The Wando Welch Terminal in Mount Pleasant is one year into its renovation project to strengthen its wharves to prepare for the wear and tear created by bigger containerships bumping up against the docks. Work should be completed by the end of 2017.
New equipment is also needed to handle cargo on larger ships. The first two 155-foot-tall cranes recently arrived at the port from China and are being assembled at the Wando terminal for use in November. That terminal will eventually have eight cranes with 155-foot lift off the ground, as two more cranes from China will arrive in December 2017 and four existing cranes will be raised.
Across the Charleston Harbor from the Wando terminal along the Cooper River, the Hugh K. Leatherman Sr. Terminal is under construction on the former Navy base in North Charleston. Major site prep work is ongoing and Phase I is scheduled to open in 2019.
Palmetto Railways, an arm of the state Commerce Department, has been preparing nearby land to build a 130-acre Intermodal Container Transfer Facility. The cargo transfer site is designed to support operations at the Leatherman terminal.
Outside of Charleston, the port, in conjunction with the Georgia Ports Authority, has begun the permitting process for the future Jasper Ocean Terminal along the Savannah River. The 1,500-acre terminal will serve as a relief valve in the future when the Savannah and Charleston ports reach capacity.
“This is the ticket to being a top-10 port,” Newsome said. “You have to invest these sums of money to be a top-10 port.”
Deepening the harbor
The port also is anxiously awaiting authorization and funding for its harbor deepening project. In September 2015, the project received final approval from the U.S. Army Corps of Engineers in the form of a Chief’s Report, greenlighting the deepening of the harbor to 50 feet, or to 52 feet with additional funding from the port.
The port opted to pay the extra $70 million to deepen the harbor to 52 feet. The additional depth means post-Panamax ships — larger ships that can transit the newly expanded Panama Canal — can access Charleston Harbor any time of day without tidal restrictions. The harbor is already wide enough to handle two ships simultaneously, Newsome said.
The deepening project now needs authorization in the 2016 Water Resources Development Act and some $175 million in federal money. The state already set aside $300 million of the $509 million total.
“If it’s not authorized this year, we could lose a year. ... We will have the deepest harbor on the East Coast when it’s finished,” Newsome said.
‘A troubled industry’
While the port works to bring those investments to fruition, the overall sector faces challenges.
The container shipping industry is expected to lose about $10 billion in 2016, according to Alphaliner, a data analyst for the port sector. One of the biggest shipping lines in the world, Hanjin, recently went bankrupt.
Slowing trade growth and a surplus of ship carriers “chasing a finite amount of freight” created lagging volumes at many ports over the past year, Newsome said.
“The industry we serve is a troubled industry today,” Newsome said.
Newsome likened the current state of the port industry to the aviation industry several years ago — before the major airlines consolidated.
“It was a very fragmented industry,” Newsome said. “Pricing was all over the place. Profits were all over the place. Then they merged, and then you had a much more stable industry. ... I just think less players selling services in the market brings a more stable industry.”
He expects the same consolidation to occur with ship carriers, possibly yielding 10 major carriers over time. Many shipping companies have already formed what are being called mega alliances.
‘Pockets of strength’
Trade growth continues to be slower than in the previous decade, down from 10% to 4%, but Newsome said he sees pockets of strength.
A strong U.S. automotive market, improving Asian economies and new distribution centers fueled by online shopping are all expected to revive dampened cargo volumes.
The continued foreign direct investments by international companies in the Lowcountry — such as Volvo Cars opening a facility and Mercedes-Benz Vans expanding its footprint — also help bring more cargo through the port.
Warehousing for refrigerated cargo has grown significantly in the past few years, up from 50,000 square feet to 600,000 square feet, boosting the volume of refrigerated products coming through the port.
Going forward, Newsome said the port looks to optimize its terminal space, possibly by stacking containers higher, for example. The implementation of the Advanced Gate System this summer at the Wando terminal is another of the port’s efforts to improve efficiency.
The new system enables port workers to inspect trucks and containers from images on a computer — which are captured by a camera when a truck pulls up to the terminal — rather than by manual inspections.
When the system is performing well, it cuts the inspection process from six minutes to 2 1/2 — but shortly after implementation, software crashes and learning curves left many truck drivers sitting in traffic for hours, and consequently cutting into their revenues. Those issues are now stabilizing.
Newsome said the port also needs more privately owned transloading facilities, which moves products out of rail cars and into containers. Forest, plastic and agricultural cargo would be ideal fits for such facilities, he said.
Through a new inland port in Dillon County, more economic development around the state and better infrastructure at the terminals, Newsome said he hopes to boost volumes at the port.
“I still think the Southeast is the best place to be in the port business. It is a rich combination of imports and exports. The population growth drives imports and the manufacturing sector drives exports,” Newsome said. “We have huge opportunities ahead of us. There’s a lot of freight we can grow into carrying. ... We have to be innovative and creative to capture that freight.”