Your idea to use the Port of Baltimore’s cargo strategy, focusing on exports and roro/breakbulk cargoes, as a possible model for building business at The Port of Virginia proceeds from several inaccuracies and misconceptions. Allow me to explain.
More than a decade ago, the Port of Baltimore had no choice but to find an alternative to handling containerized cargoes because Virginia successfully competed for the majority of Baltimore’s container business. The reason we secured that cargo was, in large part, simple geography: A container ship can arrive in Virginia, have its import and export boxes handled and get underway to its next destination, often before a ship can complete its inbound trip up the Chesapeake Bay to the Port of Baltimore. The operations savings to the ship line can be in excess of $75,000 per voyage by making its call in Virginia vs. Baltimore.
In the port business, you desire balanced trade, and by this I mean you want 50 percent imports and 50 percent exports. Up until the world’s economy soured in 2008, The Port of Virginia was one of the few ports in the nation that maintained anything approaching that mix: on average we were 51/49 (imports vs. exports – containerized cargoes).
Because the American dollar is weak, our goods are more affordable to overseas buyers, thus US exports are up across the board and Virginia is benefiting. When the dollar strengthens, the export business shrinks as American-made goods are suddenly more expensive. The hedge against these swings is a strong – balanced – import portfolio. Virginia would be ill-advised to engage in a business plan focused heavily on exports; a plan that hinges on the dollar remaining weak for the next 10 to 20 years or that labor costs in the US will become competitive enough to bring manufacturing back to our nation.
Any maritime industry economist will tell you that in the port business, profit is made on the head-haul route – import containers from Asia to the U.S. That model is based on these facts: 1) the fixed costs 2) ease of handling 3) throughput and 4) container volumes vs. labor-intensive non-containerized cargoes. Moreover, no ship line would build a service focused on moving American exports because of the volatility associated with the market segment. One thing is certain: America remains a consumer society and regardless of economic challenges: brick-and-mortar operations will continue to feed, clothe and entertain our citizens.
At Newport News Marine Terminal we handle paper, steel, machine tools and any manner of breakbulk cargo. In fact, at that terminal last week we took delivery of the first of many shipments of Infinity automobiles. At Norfolk International Terminals there is interest in setting up a transload operation for grain and across the harbor at Portsmouth Marine Terminal we have several companies interested setting up bulk cargo operations.
Our strategy is seeking balance and building business based on sound planning, logic and capitalizing on our geographic assets.
My post was based on the mistaken assumption that Virginia ports handle significantly more container imports than exports. If the container traffic is nearly balanced, as Harris says it is, then my argument — that one way to avoid the necessity of expanding transportation capacity out of Hampton Roads would be to build a more balanced import/export container traffic mix — breaks down. — JAB