Donald Fry: Port surge in 2010, Seagirt improvements spawn optimism around the waterfront

By Donald C. Fry

 

While much of future economic growth in the Baltimore region and the state is projected to lie in our potential for bioscience industry development and high tech innovation, business is surging and a bright future looms for an original and long-standing economic engine in Maryland – Baltimore’s port.

 

 

After a disappointing year in 2009, the Port of Baltimore rebounded in 2010 when 33 million tons of foreign commerce came through its public and private terminals – a 47 percent increase over the previous year, according to data released last month by Governor Martin O’Malley and port officials.

Imported cargo totaled 15 million tons in 2010, a 26 percent increase, while exports accounted for 18 million tons, which amounts to a 72 percent increase from the previous year.

Bulk cargo handled primarily by the port’s private terminals – including sugar, salt, coal, and gypsum – accounted for 24 million tons, a 61 percent increase. Coal exports alone accounted for 14 million tons, according to the Port Administration. “We’re going to have probably our best year in coal in three decades,” James J. White, executive director of the Maryland Port Administration, recently told Greater Baltimore Committee board members.

The sharp increase is due to escalating overseas demand for coal, largely from developing far-eastern countries. The Baltimore port’s two berths for coal exports are running 24 hours a day to service a backlog of bulk cargo ships that can be seen waiting at anchor near the Bay Bridge, says White.

The business of exporting coal and other commodities from Baltimore has a history of being cyclical and is subject to overseas developments relating to both supply and demand, but Baltimore’s port is clearly enjoying a potentially historic boom cycle, port watchers agree.

Meanwhile, construction of a new 50-foot container berth at the Seagirt Marine Terminal is ahead of schedule, and should be ready by 2012, White reports. The 50-foot berth will significantly strengthen Baltimore’s ability to attract new east coast container business expected to be generated by the widening of the Panama Canal.

In July 2014, when the Panama Canal project is scheduled for completion, only two east-coast ports – Baltimore and Norfolk – will be able to handle the larger mega-container ships that the canal is being built to accommodate. “There’s a tremendous market that we’re not getting today,” says White.

Studies show that the potential container-handling market in the mid-Atlantic region could amount to more than four times the number of container units the Port of Baltimore handled last year, says White.

That’s what prompted Ports America, the nation’s largest independent stevedore company, to respond to the state’s RFP two years ago seeking a public-private partnership for Seagirt, said White. Through the partnership, which was established in November 2009, Ports America is leasing and operating Seagirt for 50 years and is investing an estimated $105 million in dredging and construction costs to develop the 50-foot berth and to buy four new cranes estimated to cost $50 million.

In addition to the 50-foot berth, Ports America is also committed to more than $460 million in other capital improvements, maintenance and system preservation at the Seagirt facility.

The potential for new business that this project represents is so enticing that representatives from more than 120 companies showed up for a May 18 conference hosted by the Maryland Port Administration to review new container business opportunities. Conference participants included firms ranging from manufacturers to retailers and parts suppliers.

The Panama Canal widening, coupled with the increased Seagirt container handling capabilities, is also attracting the attention of national retailers who see potential for new warehouse facilities in the region. They are eying advantages to be derived from shipping products bound from the Pacific for the eastern U.S. directly through the canal to Baltimore, rather than offloading the super ships on the west coast.

At least three major national retailers have visited the Baltimore region recently to “look around” the port and gauge potential warehousing options. “They know that we’re going to be ready,” White says.

Under the partnership agreement, Ports America made a $140 million up-front payment to the state for port-related road projects and will make annual fixed and variable payments to the state that are estimated to total as much as $1 billion over the life of the lease.

The total value to be derived by the state from the lease, in terms of capital improvements to Seagirt and payments from Ports America, will range between $1.3 billion and $1.8 billion, according to official state estimates.

White says these estimates are conservative and that variable payments from Ports America, based on the amount of business it attracts to Seagirt, could drive the total value to the state to as much as $3 billion over the life of the lease.

The partnership will ultimately create 3,000 construction jobs and 2,700 permanent port-related jobs. Baltimore’s port currently generates 16,700 direct jobs, $3.7 billion in personal wages, and $400 million in state and local taxes, according to state data.

The partnership at Seagirt strikes a good balance between the public mission and private entrepreneurship, creating a “win-win-win” for government, business partners, and taxpayers.

It effectively deploys private capital for critical infrastructure improvements that enable Maryland’s government to seize a unique opportunity to build on the strengths of a port that continues to be a major generator of income and jobs in our state.

It also appears to demonstrate that well-crafted partnerships with the private sector can be viable options for government leaders seeking to overcome fiscal and infrastructure challenges and to strengthen Maryland’s ability to be competitive.

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