In this improving economy, the South Carolina Ports Authority (SCPA) has good news. On August 20, SCPA reported 2014 fiscal year-end operating earnings of $14.3 million, 20.7 percent over the organization’s financial plan. From July through June, the SCPA posted operating revenues of $164.1 million, an increase of nearly 17 percent over the previous fiscal year. Fiscal Year (FY)2014 expenses totaled $149.9 million. SCPA operates the assets for the state’s Port of Charleston and Port of Georgetown, which are $45 billion assets for the state. In 2012, the US Census Bureau ranked the Port of Charleston eighth in the nation in terms of dollar value of goods handled. For container volume, SCPA handled 1,684,907 TEUs in FY 2014, which was 8 percent higher than the previous fiscal year and 2 percent over plan. These results follow 9 percent increases the previous fiscal year and continue the SCPA’s growth trend of more than double the market average. According to SCPA President and CEO Jim Newsome, the last quarter of FY 2014 was the strongest SCPA has seen in seven years. “With an 8 percent container volume increase and operating cash flow well above plan, we are well positioned to continue moving forward with key strategic projects and continued above market growth,” he said. In a recent exclusive interview with this AJOT reporter, Newsome revealed that he attributes SCPA’s success to its diverse growth and number of cargo segments. While containerized traffic accounts for approximately 80 percent of SCPA’s business, Newsome gave high marks to its break bulk business. “It’s an important part of our business,” he said. “We do not just want to be a container port.” Figures for the Port of Charleston’s break bulk activity for FY 2014 totaled 763,230 pier tons, which was 3.63 percent over plan. In fact, SCPA increased non-containerized cargo 62 percent in the last three years, and doubled non-container cargo in the last four. Break bulk for SCPA encompasses two components: roll-on roll-off (ro-ro) cargo, which is heavily centered on BMW exports, and project cargo. Some of the more recent project cargo at the Port of Charleston encompasses Westinghouse nuclear power plant parts, and General Electric and Siemens gas turbines. “These are what I would call high end manufactured break bulk cargo,” he said. “We refurnished our Columbus Street terminal about four years ago to handle the growth in that segment. That has really paid off.” SCPA’s automotive industry has particularly seen increased volumes. “It is widely reported that the automotive industry nationwide is strong both for imports and exports,” Newsome told AJOT. In fact, overall demand is now reaching close to nearly 16.5 million vehicles in the United States, according to JD Powers figures for 2014. Demand for US automobile exports is also escalating. Newsome revealed that in a recent meeting with BMW, the senior executives reported that they are pleased with SCPA’s ability to handle their growth. Other Sectors FY 2014 figures also indicated 17percent growth in SCPA’s refrigerated cargo segment. Contributing to growth is the Charleston area’s cold storage capacity, which is on the rise. Newsome reports that three private cold storage companies are significantly adding to cold storage capacity in Charleston for both import and export business. “This means we are going from 50,000 to 600,000 square feet of refrigerated cold storage capacity in the area,” he said. Products include imported meat—mainly from Australia, and exported poultry and pork from the US Southeast mainly. “Even all the way from Arkansas,” Newsome added. Despite recent squabbles with China regarding poultry, Newsome maintains that China’s rising middle class is creating demand for American food products. Most of the food products move by truck since they are time sensitive and railroads do not provide refrigerated cars. The port is also seeing an increase in its coffee business, which traditionally was source loaded in containers. “But now more is being brought in domestic refrigerated trailers near the port to transload facilities,” Newsome said. He sees coffee as an important niche trade. “It is a growth business,” he said. Coffee volumes at the Port of Charleston are up 60 percent over the last two years, due largely to demand by US coffee roasters and consumption by the Southeast’s growing population. Dupuy Storage and Forwarding, LLC recently opened a 100,000 square foot coffee warehouse and handling facility in North Charleston to serve the rising levels of imported coffee beans through the SCPA. Both Arabica and Robusta beans are imported through the SCPA from coffee growers primarily in Latin America and Africa. Beans imported in Charleston are distributed throughout the Southeast and Gulf Coast. Rail Movements Other good news, SCPA is experiencing increased use of rail. In fact, according to SCPA statistics, the Port of Charleston increased its intermodal rail volume by 50 percent since 2011. International intermodal rail lifts in Charleston increased 18 percent in 2013 to nearly 145,000 containers. This followed a 27 percent increase in 2012. A major contributor is the Port of Charleston’s mix of on-dock and near-dock rail options. The port is served by daily express intermodal and merchandise rail by two Class 1 railroads – CSX and Norfolk Southern (NS)— with connections across the Southeast, Gulf and Midwest, including the key markets of Memphis, Atlanta, Birmingham, Nashville, Charlotte, Louisville, Huntsville and beyond. CSX and Norfolk Southern both operate large, well-equipped rail yards in Charleston served by double-stack intermodal trains. SCPA officials have been working hard to increase rail-general cargo from the US hinterland that utilizes the Port of Charleston. This includes containerized and discretionary cargoes such as agricultural products that transload at the port for export. “There has been broad growth in a number of segments,” Newsome said. Newsome reveals that SCPA’s goal is to grow its port’s volumes significantly above other US port markets that grew about 3 percent in the last fiscal year. He sees rail as being a big contributor to that. Helping to encourage rail use at the Port of Charleston is SCPA’s rail drayage program called RapidRail, which SCPA implemented a few years ago to match loads of containers to and from the intermodal rail yards in North Charleston. The program provides cost-competitive, efficient and seamless connection between the marine terminals and rail yards. “It really got its legs in last fiscal years,” Newsome stated. According to a recent press release, SCPA’s rail drayage program saw expanded participation by all major shipping lines in FY 2014. Rail dray volume increased 136 percent over the previous fiscal year. Consequently, rail volumes have increased significantly. In fact, the Port of Charleston’s intermodal rail container volume has grown 50 percent in two years. “This demonstrates Charleston’s capabilities as a rail-competitive port,” Newsome said. “A couple of years ago we started coordinating the drayage for the various shipping lines that need to move containers between the railroad and our terminal. That created a lot of efficiencies for them and has lead to growth of our rail lines.” Part of a port’s ability to grow is its ability to capture cargo that can move by multiple gateways. “You want to capture all of the cargoes that should move via your port because of cheap inland costs, but you also want to get a growing share of cargo that has choices of where it can move.” Market Trends China and Europe remain the big markets for cargoes moving to and from the Port of Charleston. While China’s trade volumes have been diminishing due to a slowing economy, Newsome remarks that by comparison to other world economies, China is still moving at a rapid clip. “Everyone talks about China’s economy slowing, but that is from 10 to 7.5 percent, so it is still growing fast,” he said. Giving US exports to China a push is that nation’s growing middle class. Consequently, there’s increased demand for US agricultural products and foodstuff. Europe is traditionally the Port of Charleston’s largest trade lane. While Europe has been experiencing economic problems, Newsome stresses that certain segments of Europe’s economy – such as automotive, plastics and chemicals, are doing well. “Just look at BMW’s financial results,” he said. The BMW Group recently recorded its best-ever sales volume figures. BMW, which operates a huge manufacturing base in South Carolina, is the largest US manufacturer of vehicles for export. “They export more vehicles that are made in United States than anyone else,” Newsome exclaims. A bigger issue impacting the port – as others – is the trend toward mega-size ships and mergers between steamship lines. The mega ships, which steamships are now or will be deploying, continue to be a major focus at SCPA. “There was recently an order by Mediterranean Shipping Co. (MSC) for a 19,000 TEU ship,” Newsome reports. Newsome predicts that ships the size of 18,000 TEUs will be the competitive minimum size ship, particularly in the Asia-Europe trade where such big ships are first deployed. “That will throw off a lot of 13, 000 and 14,000 TEU ships to other long haul trades of which the United States will be one of those,” he said. Those ships will come to the US East Coast once the new locks are opened at the expanded Panama Canal. “We will have more big ships and fewer small ships,” he said. “We are preparing for big ships. That is what drives us today.” While there has been some debate as to such ships limiting their port calls on the East Coast and transshipping cargo in the Caribbean, Newsome maintains that multiple East Coast port calls are necessary as to not overwhelm the infrastructure of the seaport and surrounding area. “If they all went into one port, the impact on infrastructure would be overwhelming,” he said. “Plus, if you go from 8,000 to 10,000 TEU ships, you’ve increased your capacity by 60 percent. Freight is not growing that fast. There has to be some adjustment in number of slings to align about again to what cargo is available. Infrastructure Update Key to meeting continued and future demand is the Charleston’s Harbor Deepening Project, better known as SHEP. The US Army Corps of Engineers began studying the harbor deepening project in 2011 with a local partner. The project received a huge boost this May when Congress approved the Water Resources Reform and Development Act (WRRDA). This legislation takes measures to streamline the study, permitting and authorization process and increases the threshold for federal harbor maintenance funding for Charleston’s harbor from 45 to 50 feet to meet the depth needs of mega ships. “That Act gave us the ability to move forward when we get our environmental impact study completed,” Newsome said. The Harbor Deepening Project is the first major project that has been implemented with smart planning by the Army Corps of Engineers. “It is very timely,” he remarks. “We expect to draft an environment impact statement by the end of the third quarter and then a report a year later. It means we will have completed a study in four years time. That is fast. Then we move on to construction.” Newsome anticipates that the study should be completed in 2015. “The time table is on target,” he said. He anticipates that by the end of 2018, SCPA will have at least access to one major terminal completed. “We are building a new container terminal – the Navy Base Terminal—and that access will come next,” he remarked. “It’s a large investment.” The total cost of the terminal, excluding the cost of the access road, is $800 million, and SCPA has already spent $150 million. Of course there is an extra expense for the access road. “We’re going to need that capacity to handle the big ships,” he said. The first phase of the 300-acre, greenfield Navy Base Terminal is expected to be ready in 2019. Farther afield is the Jasper Ocean Terminal, a new deep water port on the Savannah River that is very much on the drawing board and a partnership between SCPA and the Georgia Ports Authority (GPA). “It’s the next major terminal infrastructure once both ports run out of existing capacity,” Newsome explained. The large 1,500-acre terminal to be located in Jasper County, SC, represents a net $5 billion investment. Once completed, it would become one of the largest terminals built in North America, capable of handling 550,000 to 1.1 million TEUs in its first decade of operation. “We believe that it will take a further deepening project in the Savannah River to justify building that terminal,” Newsome added. “We think the 50 foot harbor is a minimum standard for a competitive harbor.” The port is to be located approximately eight miles from the sea buoy that marks the entrance to the Savannah River’s shipping channel. The terminal’s location would enable the channel to be readily dredged, opening the way for the region to serve new container traffic that cannot be accommodated in either the port of Charleston or Savannah. Port officials estimate that demand will require a terminal that size by 2030-2035. To meet that time frame, Newsome reports that work needs to start immediately in order to complete all studies, obtain permits and commence construction.