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SITE SELECTION COVER STORY • SEPTEMBER 2003
Expanded Bonus Web Edition
2003 Global Infrastructure Report, page 2

SEA

Ports of Plenty
There is no shortage of proof that port projects drive corporate projects. The Pacific Northwest offers one case study.
        In April, Virginia-based Dollar Tree Stores broke ground on a US$40-million, 650,000-sq.-ft. (60,385-sq.-m.) distribution center in Ridgefield, Wash., in order to capitalize on its access to the port in Vancouver, Wash., as well as the Port of Portland in Oregon, which Steve White, the company's senior vice president of logistics, called "a key import gateway for Dollar Tree." The new facility will replace one in Stockton, Calif. Combined with a new $70-million, 1.2-million-sq.-ft. (111,480-sq.-m.) center in Joliet, Ill., the facility will bring the company's distribution network to nine buildings. The Ridgefield facility will benefit the port as well, offering more "empties" for filling with the region's exports.
        The Port of Seattle saw that its 1,400 acres (567 hectares) was important enough that it added to its Seaport and Aviation divisions by creating an Economic Development division in late 2002. Chief among its aims is the proper positioning of its real estate – for instance, the more than 50 acres (20 hectares) once used for storage by Asian car manufacturers, but now little used by them as they have opened up North American plants of their own. At the same time, the port has gradually opened up its berths to non-industrial economic opportunities, seeing some success with increased cruise ship calls and mixed-use waterfront development.
        That's just one regional snapshot of port dynamics. But everywhere, that image is suffused with concerns from all parties about port security: the danger posed by a relatively lax inspection regimen vs. the costs imposed by making it more strict. Such widespread worry only plays up even more the prominence of port facilities in the corporate real estate and transportation picture.

Container Context
London-based Drewry Shipping Consultants predicts that global container trade will increase by 6-7 percent to reach some 360 million TEU (20-foot container units) by 2007. The battle to process those containers is more fierce than ever, especially when one considers that "slot" capacity was to have increased by more than 10 percent in 2002 while net slot use was expected to have dipped slightly, exerting downward pressure on shipping rates. Drewry expects global port capacity to reach 450 million TEU by 2007, with expected high use in South and Southeast Asia driving several expansion plans.
        Drewry projects the need for some $14 billion in port expansion projects in order to satisfy the growing demand (as well as $2.8 billion in equipment "to provide the 144km [89 miles] of additional quayline, 930 ship-to-shore cranes and over 5,000 hectares [53,821 acres] of container yard that would be required to meet forecast global demand."
        Such projections are not lost on port authorities – even entire nations – looking to raise their profiles.
        Brazil is making a $12-billion investment, backed largely by state-owned Petroleo Brasileiro SA, in its electricity, port and highway infrastructure. The comprehensive improvement push is an important part of the country's new export incentives and subsidy program, which is targeting fast-growing global industries.
        At the Georgia Ports Authority (GPA), there is an unceasing current of corporate activity, reflected in container volume that has grown by more than 100 percent in the past decade to nearly 1.2-million TEUs.
        Among the most recent projects is the ongoing construction of a $32-million, 55,000-sq.-ft. (sq.-m.) fractionation plant for Osaka-based Fuji Vegetable Oil, on five acres adjoining the company's existing 40,000-sq.-ft. (sq.-m.) refinery. The new plant will make a cocoa butter alternative, a key ingredient in the world's chocolate market.
        "The oils we process must be transported from the Pacific Rim countries by deep sea tanker and subsequently efficient port operations are a major selection consideration in order to minimize land freight issues," says plant Manager Nick Baker, adding that the GPA site beat out global competition in besting sites in Singapore and Belgium.
        Since establishing operations at the port in 1991 with a $5-million investment, the company, after the opening of this plant in March 2004, will have grown to 82 employees with an accumulated investment of some $68.5 million. Baker says that the company is considering further expansions beyond its existing portfolio of facilities in China, Singapore, Philippines, Malaysia, Belgium and Japan.
        Baker says that Fuji Oil was swayed not only by the inclusion of Georgia's Quick Start training program, but by the fact that the GPA was able to lease additional land for the expansion. When online, the plant will add an additional two TEU per day in export growth to the company's current three per day.
        The latest internal investment for GPA was the $11.6-million purchase of two super post-Panamax cranes, which increase operating speeds by approximately 50 percent. The port now has 14 cranes, with an option to buy two more of these behemoths.
        Further south, the GPA's Port of Brunswick facility, in contrast to the Port of Seattle, has added more than 51 additional paved acres for auto processing – an indication of the region's automotive momentum. It also indicates the growth rate of the port, which has seen the number of auto and machinery units increase by more than 150 percent in the past seven years.
        That regional "auto-nomy" is given further credence just to the south in Jacksonville, which this spring claimed the title of the country's No. 1 vehicle processing port. The port is actively marketing more than 500 acres (hectares) of greenfield property at its Dames Point Marine Terminal, 11 miles from open ocean.
        Several Gulf of Mexico projects are under way. In Alabama, the state's port authority has authorized up to $8.5 million to improve the container terminal at the Alabama State Docks in Mobile, in preparation for a vaunted $300-million terminal project. Again, the automotive industry can be seen as a prime mover: Mercedes supplier Eisenmann is constructing a paint shop as part of the German carmaker's $600-million expansion in Vance, and has sent up to 600 containers through the Mobile facilities in the past six months.
        Next door in Mississippi, Northrop Grumman Corp. broke ground in June on a $64-million modernization project at its Ship Systems sector's Gulfport Operations. Key to the go-ahead was April 2003 legislation signed into law by Gov. Ronnie Musgrove that secured a $48-million bond issue to complement Northrop Grumman's capital investment for Ingalls Operations in Pascagoula and the Gulfport facility.
        The modernization will dedicate $30 million to increasing capacity for composite construction, $19 million for ship construction and outfitting improvements, $8 million for additional support facilities, and $7 million to upgrade distributive systems. The growth will create the first large-scale advanced composite manufacturing facility to produce U.S. Navy and U.S. Coast Guard ships.
        "The facilities here are the first phase of a project for Gulfport Operations designed not only to increase output in composites, but also to vastly improve the quality of service for the dedicated shipbuilders gathered here today," said John B. (Jay) Foley III, vice president of Ship Systems' Gulfport Operations. "This mission we are undertaking required countless hours of planning, meeting and negotiating and without the leadership of the governor's office, the legislature, the Mississippi Development Authority and other organizations, this project would never have gotten started."
        "This facility creates a future for shipbuilding on the Mississippi Gulf Coast," added Philip A. Dur, Northrop Grumman corporate vice president and president of the Ship Systems sector. The sector operates major facilities in Pascagoula and Gulfport, Miss.; and in New Orleans and Tallulah, La.

Hamburg to Le Havre
Among many shipping channels seeing an increase in activity, the passage into Europe via the North Sea – often defined by Le Havre, France, on one end and Hamburg, Germany, on the other – is seeing a deepening of services and a rise in volume.
        France's Port of Dunkirk is making a name for itself in logistics as much as its namesake city is known for its steel. Cargoes ranging from petroleum products to grain to steel are up by double digits in many cases. Stoked to a large degree by the port's positioning as a logistics hub for the British market, companies like MGF Logistique and Maersk have located operations there. Such is the logic behind the 470-acre (190-hectare) "Dunkirk International Logistics" development being built under the moniker "Logistimmo." The first 108,000-sq.-ft. (10,000-sq.-m.) building is now complete, and others are in the works.
        Around the bend, the Port of Antwerp in Belgium saw 2002 TEU surpass 4.7 million, while also setting records in barge freight, bringing it into the top ten worldwide. The port invested approximately $45 million in a new container terminal, and continued to push for further deepening of the channel – a familiar theme for ports worldwide. Meanwhile, the port's neck-and-neck race for market share with Rotterdam and Hamburg has meant that the three handle about three quarters of the entire region's TEU.
        It's also meant corporate investment in Antwerp, led by BASF Corp., which is opening both a superabsorbent polymer plant and another plastics operation, while being backed by new on-site electrical and industrial gas plants being installed by supplier firms. The port's tank storage portfolio (including the world's largest stainless steel capacity) has also grown, with both A4S and LBC building tank farms.
        Tank farms are the answer in Amsterdam too. Oiltanking Amsterdam, part of German conglomerate Marquard & Bahls, is expanding to 91 acres (37 hectares), adding a fourth jetty and increasing its storage capacity to handle the company's double-digit growth. The company has also launched terminals in Finland, Latvia and Malta, handling everything from petroleum to molasses. Such growth has been part and parcel of Amsterdam's increasingly visible role as a viable port in relation to its bigger worldwide and in-country rival Rotterdam.

Asian Ports in a Storm of Activity
Port development is at the prow of Asian infrastructure projects, ripped straight from the headlines.
        As part of the company's much-discussed $680-million Iraq Reconstruction In Iraq, Bechtel is turning around $300 million toward the dredging of the the port of Umm Qasr, which reopened to commercial traffic in June.
        In China as of this writing, the newly formed mega-lake caused by the Three Gorges Dam is simultaneously drowning the ancient economy and, in many people eyes, lifting up the new. The Chinese government projects that by 2015, 25 to 30 million domestic TEU will be handled in the Yangtze River corridor.
        "It is unclear to what extent the [Three Gorges] project will impact the logistics business," says Dr Mark Goh, Director Business Development Solutions, APL Logistics Asia/Middle East. "But there will obviously be new inland markets, which will need to be served both for imports and, in the longer term, exports."
        The speed of the waterway's infrastructure development is reflected in the country's modal split: while a minuscule 0.1 percent of freight is moved by air, only 14.4 percent is moved by highway, 32.2 percent by rail, and 53.3 percent by waterway. It stands to reason that rail and road will take bigger shares as their respective infrastructures improve.
        According to "China's Transport Infrastructure & Logistics Industry," published in April 2003 by Drewry Shipping Consultants, APL and APL Logistics, the ports of Nanjing and Wuhan stand to be among the fastest-growing in the entire country. By 2010, Wuhan's TEU could climb as high as 250,000, from only 55,000 today. And in Nanjing, the current capacity of more than 500,000 TEUs could easilty triple by 2013, thanks to the newly expanded port, where two domestic chipping terminals and three deep-sea berths at the Longtan Container Terminal are being added by the end of 2003.
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