Ro/Ro ports positioning for rebound

The ro/ro sector has been flat reflecting a listless global auto market. But there are signs that business could be improving very soon and the ro/ro ports are trying to get in front of the market. Planning for the Rebound North America has an impressive array of large, ro/ro facilities, some based in well-known hub port areas like New York/New Jersey and the San Pedro ports of LA and Long Beach. Others are located in lesser recognized port regions such as the Port of Davisville in Rhode Island or the Port of Hueneme, California. One thing the ro/ro ports, large and small, share is they are often treated as a bit of a sideshow to the box business. While it is certainly an unfair rendering of the most versatile of seaborne services, it’s true nonetheless. While some of the rationale of this oversight is the ubiquitous nature of the box, another is purely business. Simply, the OEM side of the ro/ro business has been flat for a long time. After a pre-recession crest in 2008 of 21.3 million seaborne vehicles shipments, according to London-based analysts Clarkson’s, the annual growth between 2013-2015 has been a tepid 1.4% with the tally yet to crack the 20-million-unit threshold. And this year [2017] looks to be no better. But a ro/ro sector rebound might be coming soon fed by more vehicle movements and project and breakbulk freight (see Matt Miller’s story on Whilhelmsen-Wallenius merger for comments on the potential for break bulk and project freight on page 16), and ports are trying to get in front of the trend. No place is this more evident than the Port of Davisville Rhode Island, one of the largest, (if not well-known outside the sector) ro/ro ports in North America. In November 2016, Rhode Island voters approved “Question 5”, a $50 million bond measure for infrastructure projects at the Port of Davisville. With question 5 in the rearview mirror, the port embarked on the $90 million modernization plan for Pier 2. Pier 2 is central to the modernization plan for the Port of Davisville. Pier 2 is an earth filled cofferdam cell structure built by the US Navy in 1956. It was designed to last 50 years, a period that has come and gone. The pier is the primary facility in the Port of Davisville and due to its style of construction [earth filled rather than timber supported], it is the pier best suited to handling heavy “deck” project cargo. In addition, the pier is the easiest to expand into another berth allowing multiple vessels to berth simultaneously. Also, the increased size will enable the port to handle the new generation of Pure Car Carriers (PCC). Besides the Bond Question and Pier 2 mentioned above, there has been significant recent investment made in the facilities. Back in June 2016, the port announced an investment of $1.25 million in paving and stripping Terminal 5, which covers over 13-acres, to provide more capacity and operational flexibility, particularly on days when two ships are in port. Another port investment was to support a project that involved installing new marine hardware to allow the port to more fully utilize Terminals 4 and 5. Port of Davisville is in the top ten in vehicle handling in the US. Unlike many North American ports, the ro/ro business is the main calling card and it has been an ace. In 2016, a record breaking 214,350 vehicles arrived by sea and another 40,870 by rail and truck. NORAD, the port’s auto processor, handled 258,740 vehicles and another 305 metric tons of project cargo (principally wind) in 2016. Port of Philadelphia Invests in Vehicle Terminal Another indication that ports are trying to get out in front of a ro/ro rebound is Pennsylvania’s investment in the Port of Philadelphia’s vehicle terminal. The State is investing $93 million in the Port of Philadelphia’s ro/ro facilities, which will then double annual import capacity from around 160,000 units to around 350,000 vehicles. The investment is part of an overall $300 million government investment at the port through to 2020.

The port authority said part of the funding would see a former seaplane hangar converted into a second vehicle processing center for Hyundai-Kia, along with the addition of 155 acres for vehicle storage and handling at the former Navy Yard. State investment will be supported by private investment in the vehicle handling facilities at the port. Philadelphia currently handles around 160,000 imported vehicles per year for the Korean carmaker, with services provided by Glovis America. No vehicles are currently exported. It first started handling Hyundai-Kia volumes back in 2010 when the carmaker switched imports there from the ports of New York and New Jersey, and Baltimore. Up until now, vehicle volumes have been unloaded at the Packer Avenue Marine container terminal and moved to a vehicle handling facility at Pier 98. The conversion of the Navy Yard will mean vehicles can be directly unloaded onto a dedicated auto handling facility. The Port of Philadelphia’s ro/ro services include weekly Eukor calls from Busan in Korea and Veracruz in Mexico. Port of Hueneme: Going 40 feet In February 2017, the Port of Hueneme entered into a Project Partnership Agreement (PPA) with the United States Army Corps of Engineers to deepen the Port’s general navigation areas to 40-feet Mean Lower Low Water. The dredging project which has been in the works for a couple of years is key to the Port’s goal of handling the larger post-Panamax ro/ro vessels (The port handled its first post Panamax ship last year.) According to the documents, the proposed project’s berth deepening effort “would include dredging activities to deepen Berths 1 and 2 along Wharf 1 to approximately -40 feet MLLW, to provide deep draft vessel continuity from the harbor, through the channel and to Berths 1 and 2 along Wharf 1. Through implementation of the project, vessels would no longer need to wait for higher tide to transit the channel and come to berth, increasing operational efficiencies.” The Port of Hueneme is a niche port handling perishables and ro/ro cargo. in 2016 at the Port of Hueneme, automobile imports totaled approximately 300,168 tons. In 2016 over 300,000 autos were imported and 37,873 autos were exported through the Port of Hueneme, a record high year for vehicle imports and exports. For the same period, fruit and vegetable imports stood at over 108,000 tons and liquid bulk fertilizer hit 160,145 tons. Overall, cargo increased by 10.6% to 1,574,903 tons, a new record at the Port. Port of San Diego Plans for More Ro/Ro In December of 2016, the Port of San Diego commissioners voted unanimously to remove two warehouses on the Tenth Avenue Terminal. One of the biggest beneficiaries of the new plan was the port’s robust ro/ro business. Under the plan, multipurpose general cargo (ro/ro) would rise the most, from 85,131 metric tons to 733,050 metric tons. The Port’s ro/ro sector already handles in excess of 400,000 vehicles annually. According to the report: “The plan provides a long-term road map for the terminal, outlining key cargo business markets. Certification allows construction on phase 1 of the Plan to begin in 2017. This plan is anticipated to increase the terminal’s cargo capacity, create jobs and implement clean technology to reduce pollution.” The first phase of the terminal’s new master plan, costing $24 million, includes the demolition of transit sheds 1 and 2 on the west side of the 96-acre terminal, a new area for temporary equipment storage and the completion of several rail improvements. Future phases would include: • a 100,000-square-foot dry-bulk storage container • improved conveyor systems • demolition of Warehouse C in the middle of the terminal • and five new 270-foot gantry cranes. The terminal improvements are projected to increase cargo from 1 million metric tons in 2014 to 4.7 million metric tons by 2035. An earlier projection showed an increase to 6.2 million metric tons. Construction on Phase 1 is anticipated to begin by summer 2017 and is anticipated to take 33 months. Phase 1 will entail $24 million in Port and federal investment, which includes a $10 million TIGER grant. “National City Marine Terminal (NCMT)… has begun seeing automobile volumes that rival pre-recession numbers, signaling continued strength in this cargo sector. The District is working closely with port tenant, Pasha, to accommodate both international and Hawaii volumes, and proactively manage business growth. These efforts include recent inducement-calls at NCMT of Pasha’s newest vessel, Marjorie C, which typically calls in Los Angeles.” Port of Portland, Oregon Ro/Ro Business Bright Spot On March 31, 2017 ICTSI Oregon, Inc. and the Port of Portland mutually agreed to terminate a 25-year lease agreement to operate the container facility at the Port’s Terminal 6. But the bad box news was mitigated by the good news on the ro/ro sector. In 2016, more than 50,000 export autos were handled at Portland, the largest total on the U.S. West Coast. What’s more impressive is the total of auto imports and exports. Combined vehicle handling hit 291,000 units, an 11% increase over 2015. “With our proximity to Asia, Portland has become a leading auto distribution hub…We’ve seen significant growth in exports since 2012 and expect that positive trend to continue in 2017,” Keith Leavitt, chief commercial officer said. The Port of Portland and Auto Warehousing Company received a state funding grant for $7 million expansion of the auto facilities in Rivergate Industrial District near Terminal 6. The plans are for AWC’s development of a new 18.9-acre storage and staging yard to support export vehicles. San Francisco Improvements Pave the Way for More Ro/Ro San Francisco is beginning to roll. Part of the reason for the improvement is decisions made by the Port Authority over the last few years are beginning to fulfill their promise. At the top of the list is Pier 80. Pier 80 is the port’s principal cargo terminal, a 60-acre facility with two warehouses and four deepwater berths. The facility had been in a downward spiral since the Great Recession of 2008, but the location has always held great promise. Last August things began to turn around as Pasha, a major auto handling group, took over the operations of Pier 80 after inking a 15-year lease with the Port Authority. Almost immediately the facility began filling with autos, both on the import and export side of the ledger. While the ships are calling, it is a $10 million work in progress as the Pier shifts from being an emergency homeless shelter to a hub ro/ro port of call for Pasha’s vehicle customers in the Bay Area. Part of the attraction of the Pier 80 deal for Pasha was the underutilization when compared to other West Coast auto ports like Benicia and Richmond which are already operating near capacity. Ports like San Diego are expanding their ro/ro facilities in anticipation of an increase in auto imports over the next decade. Pasha believes that when Pier 80 is completely renovated, it will be able to handle 150,000 vehicles a year and around 100 ships. But there is another intriguing aspect to the facility revitalization. One of the first big export items was Teslas – perhaps the most recognizable brand name in the electric powered automotive sector. The Port of San Francisco is the closest port to the auto manufacturing facility in Fremont and hopes to become the primary export gateway for their vehicles – an important balance to an industry heavy on imports. An important, related project to Pier 80 renovation is rail track improvement. Back in 2011, the Port of San Francisco was awarded a $2.9 million grant from the US Department of Transportation’s Federal Rail Administration (FRA) to rebuild Quint Street Lead, the connector track from the main line to the Port. The upgraded track enables heavier locomotives and large unit trains to come directly to the Port instead of stopping off in South San Francisco to switch out to smaller trains. On January 12, 2017, the Port Commission approved a five-year lease extension for San Francisco Bay Railroad. SFBR invested $1.3 million dollars for 4,000 feet of new track in the rail yard. This replaces some of the track that was lost to Pier 80 due to the Pasha facility, and additionally helps stage trains needed for the Warriors Arena project. With a grant received from the Bay Area Air Quality Management District (BAAQMD) and the US Environmental Protection Agency (EPA), the Port replaced an old locomotive to a newer and cleaner 90% cleaner locomotive. In a related move on January 5th, Caltrain announced Union Pacific would turn over their freight rail rights to Caltrain for the San Francisco-San Jose corridor and in turn Caltrain will hire a shortline operator. The operator will take over interchanging with the Port and all other freight and rail stakeholders on the Peninsula.