t used to be that site selection was a fairly straightforward calculation when it involved shipping of raw materials and products from overseas locations, at least from a regional perspective. If a company was targeting the Asian market, it would usually opt for a West Coast manufacturing or distribution facility; if it involved European markets, then an East Coast location normally got the nod; and if it involved Latin America,
then a Gulf Coast site likely had the upper hand.
However, now there’s an enormous engineering project underway in Central America that will have a significant impact on how U.S. businesses calculate transportation costs in site selection projects for at least the next 50 years.
The Panama Canal is in the midst of a multi-billion-dollar expansion that will build a new lane of traffic along the Panama Canal through the construction of a new set of locks. The new “super canal,” which is expected to be open for business in 2014, will double the tonnage capacity and allow more traffic and longer, wider ships to transit the Isthmus of Panama.
Given the economic importance a maritime port brings to coastal communities, it is not unreasonable to expect port access to become a major battleground in the competition for business attraction and retention.
“It’s definitely going to have an impact,” says Don Schjeldahl, vice president and director of Austin Consulting, a Cleveland-based site selection division of The Austin Company.
In a recent site location project that Austin Consulting undertook on behalf of a manufacturer engaged in shipping goods from Asia to markets in the Eastern United States, their analysis looked at three basic transportation scenarios: arriving from Asia on large ships to the ports at Los Angeles and Long Beach and then transshipping by rail to the East Coast; transferring to smaller ships on the West Coast and transiting through the Panama Canal;
or sailing all the way around South America and up to the East Coast.
“The widening of the Panama Canal would definitely change those cost structures,” said Schjeldahl.
Ports along the East Coast – and the West Coast – are already beginning to respond to the new opportunities a wider Panama Canal will present.
According to the U.S. Maritime Administration, roughly 40 percent of the container business to the U.S. currently passes through the West Coast ports of Los Angeles and Long Beach. The enormous congestion at those ports, along with concerns about the capacity of our domestic rail system, has long had businesses looking for alternatives.
“We will begin to introduce direct Asian service later this year,” said Jerry Mallot, executive vice president of the Jacksonville, Fla., Regional Chamber of Commerce. “Mitsui, a Japanese shipping carrier, is building a $250-million terminal that will double overall terminal volume in first year. In addition, Hanjin, a South Korean carrier, will build an even larger terminal that will triple our container activity.”
Hanjin is one of the world’s biggest container carriers, moving more than 100 million tons of cargo annually while operating in more than 50 countries. In the U.S., Hanjin’s subsidiary, Total Terminal International, currently operates dedicated terminals in Long Beach and Oakland, Calif., and Seattle, Wash. The 170-acre Hanjin Shipping Terminal in Jacksonville will begin operations in 2011, with capacity to handle 1 million twenty-foot equivalent units (TEUs) annually.
Tokyo-based Mitsui O.S.K. Lines has already begun construction on a new container terminal at Dames Point in the Port of Jacksonville that is set to begin operations in late 2008. The 158-acre facility is intended to load and unload container ships sailing to and from ports in Asia.
“We also have about 5 million square feet of distribution space under construction for companies that want to use these Asian services,” said Mallot.
Other ports along the East Coast are also expanding their capabilities in anticipation of the improved access to Asian markets.
“The Port of Charleston is already positioned well for the Canal expansion, with its deeper water channels ready to accept post-Panamax ships,” said David Ginn, president and CEO of the Charleston, S.C., Regional Development Alliance. “In preparation for the Canal expansion, some of the nation’s most prominent developers are investing in port-related projects in our region. In fact, more than 20 million square feet of class A industrial distribution capacity is planned for within 30 miles of the Port.”
According to officials at the Port of Charleston, major investments in the Charleston area by Hillwood Investment Properties, Childress Klein, Johnson Development, Rockefeller and others are moving along, taking advantage of the proximity of the Port of Charleston. In nearby Orangeburg, Jafza International has purchased 1,300 acres to develop a $600 million logistics, manufacturing and distribution hub.
Development of a new, 280-acre terminal at the former Charleston Navy Base is moving ahead, with permits issued in April of last year. Building demolition and site prep started last year, and PB Americas was awarded a more than $8-million contract to provide construction management services during the site preparation phase. The $550-million Phase I of the project is expected to open in 2013, and the terminal at build out will increase Charleston’s port capacity by about 50 percent.
Well, to gauge the economic impact of a maritime port on the local community, one need look no farther than an economic impact study recently completed by the College of William & Mary’s Mason School of Business, which determined that the Port of Virginia’s three general cargo marine terminals in fiscal 2006 accounted for more than 340,000 jobs and $41 billion in total revenues across the state of Virginia. The report measured the port’s impact for fiscal 2006 on three levels: direct, indirect and induced.
“The Port plays a mega-role because of the significant international connection, the growth of the Port in imports and exports, and all the maritime-connected industries located in the region,” says Jones Hooks, president and CEO of the Hampton Roads Economic Development Alliance, the regional economic development for the Virginia Beach-Norfolk-Newport News metropolitan statistical area. “It also gives us tremendous name recognition internationally, as well.”
Bill King is the former chief editor of Expansion Management magazine. He is currently managing partner of B&L Research and can be reached at billking@bandlresearch.com.