Z Z. NCSPA Port Business Case Project. DRAFT February Piedmont Triad Inland Terminal. Charlotte Inland Terminal. Port of Morehead City

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1 Z Z Charlotte Inland Terminal Piedmont Triad Inland Terminal Z Z Port of Morehead City Port of Wilmington DRAFT February 2011 NCSPA Port Business Case Project

2 Disclaimer This report has been prepared on the basis of a scope of work agreed with the North Carolina State Ports Authority. In preparing this report Moffatt & Nichol has used both internal and publicly available data sources. Moffatt & Nichol can accept no liability for the accuracy of data sourced in good faith from third party sources. Moffatt & Nichol undertakes no obligation to notify recipients of events occurring after the date on the front cover that might change the content or conclusion of this report. It should be noted that market outlooks are based on currently observed market structures and their interpretation. Moffatt & Nichol can also accept no liability for the consequences of this document being used for a purpose other than for which it was commissioned and should not be relied upon for any other project without an independent suitability analysis being undertaken and the prior written authority of Moffatt & Nichol being obtained.

3 NCSPA Port Business Case Study Executive Summary Presented to: February 2011 Prepared by:

4 Statement of Report Findings Report Background Growth in containerized world trade, and expansion of the Panama Canal targeted for 2014, is prompting ocean carriers to expand their fleets with ever larger vessels, which in turn requires ports to make preparations to accommodate this trend. Ports that are not able to handle the increased volumes arriving on larger ships are likely to lose shipping services to those facilities that are better equipped and capable, thereby depriving regions of the benefits of low cost access to world trade. Given the mission of the North Carolina State Ports Authority (NCSPA) is to enhance the economy of North Carolina and based on the expected trends in the global containerized trade industry, Moffatt & Nichol was commissioned to review NCSPA facilities to identify how coming shipping and port industry changes will affect their mission. This report provides the NCSPA with a review of the future freight market, competing port infrastructure expansion and shipping industry changes to help determine how existing NCSPA facilities are positioned and what improvements should be made to accommodate these changes to improve how its ports maintain and attract business. According to the Institute for Transportation Research and Education (ITRE) at North Carolina State University in Raleigh, NC, container activity is responsible for around 85% of NCSPA economic impacts when measured in terms of output, employment and taxes. Containers moving to the Mid and South Atlantic region includes discretionary cargo that could pass through different ports if the supporting transportation infrastructure and waterway access is in place. Cargo moving in containerized form represents higher sustained growth on a global trade basis to/from the US compared to cargo moving via bulk/breakbulk shipping. Existing NCSPA cargo-handling facilities, comprising the Port of Wilmington (POW), Morehead City (MHC) and Radio Island (RI) collectively handle, or have potential to handle, a mix of different cargo types, including containers, breakbulk and bulk commodities. POW regained lost container market share after the 2004 Cape Fear channel deepening process and subsequent investment in berth improvements and new cranes. This allowed the second CKYH the Green Alliance string to commence calls, plus the Independent Container Lines transatlantic service and a Maersk Line Central America service to relocate to POW. The ability to attract additional container services to POW demonstrates how investment in port infrastructure increases competitiveness. NCSPA Economic Impacts The key findings of the Economic Contribution of the North Carolina Ports study by ITRE are that the container operations at POW contributed a total of 1.4% of North Carolina s Gross State Product (GSP) of $400.2 billion in 2008 and approximately 35% of North Carolina s transportation and warehousing industry output. Moffatt & Nichol Page 1

5 POW activities supported $473 million in tax revenues for the state and local governments, while NCSPA activities supported 65,300 jobs in North Carolina, or about 2% of total employment in the state, with container operations at POW accounting for approximately 89% of the 65,300 total jobs generated by NCSPA activities. While NCSPA s container operations in overall terms accounts for a small fraction of overall state income and employment, it is more than a third of the state s transportation sector output and therefore a major part of North Carolina s economic infrastructure. NCSPA container activities directly generate 38,400 jobs. Direct jobs are those jobs with local firms providing support services to POW, such as railroads, trucking companies, longshoremen, dockworkers, administrative staff, agents, freight forwarders, warehouse operators, and financial and legal services. These jobs are dependent upon this activity and would suffer immediate dislocation if the port s activity ceases. Another conservative estimate of an additional 19,900 jobs across the state are either induced or are indirectly a result of NCSPA container activity. In total, over 58,000 direct, indirect and induced jobs exist in North Carolina because of container activities at POW. These jobs do not exist because of the port but they are supported by port activities due to the provision of access to import and export trade with countries in Asia, Europe, the Middle East and South America. It is likely that companies that depend on the low cost access to the global markets that NCSPA offers would shift operations closer to other ports, and very likely out of state, if NCSPA were to cease container operations. Besides base jobs and other industries supported by base activities that would be impacted by the loss of NCSPA port activity, there is potential for future business investment in North Carolina to be lost if there is lack of investment in port activities and supporting infrastructure. In short, the likely potential economic disruption that would result if POW were unable to remain a viable point of access for cargo imports and exports is significant and very likely to have long-lasting effects. Competitive Regional Market & Key Industry Dynamics There is an established port market serving the Mid and South Atlantic region and NCSPA facilities remain an integrated part of this competitive area. Ports in the region continue to look to serve their own respective hinterlands but also rely on intermodal rail to ensure that more distant locations can also be served. This is something the likes of Virginia Ports Authority (VPA) and Georgia Ports Authority (GPA) are doing more successfully than NCSPA because of the lack of comparable hinterland rail connectivity from NCSPA ports. Competing ports in this region are also investing in their facilities by improving equipment and infrastructure. There are some obvious challenges as well. Savannah and Charleston, for example, need to ensure that they successfully dredge the Savannah and Cooper rivers to be able to receive larger container ships in the future and any delay they incur in this process will negatively impact the competitiveness of their port facilities. It is imperative for NCSPA to be perceived as a competitive option and to do that the NCSPA facilities must offer comparable water depth, terminal capacity, levels of efficient service and vastly improved hinterland connectivity to service market demand in order to match other facilities in its competitive Mid and South Moffatt & Nichol Page 2

6 Atlantic region. This investment is required for POW and/or MHC/RI to be more competitive against other regional ports currently serving discretionary hinterland locations that are within NCSPA facility service areas. If the overall trend in a container trade lane is for ship sizes to continue to increase, as is evident in those cargo routes served by Mid and South Atlantic ports, then competitiveness offered amongst different ports vying to receive ocean carrier calls will only intensify. Those facilities offering the deeper water, better terminal operating efficiencies and pricing and benefitting from the stronger hinterland connectivity will succeed in terms of attracting cargo. There is unlikely to be a sudden change in the size of ships transiting the Panama Canal after completion of the expansion in However, the ongoing trend for use of bigger ships will continue but it will remain driven by volume demand and, depending on geographic location, capability of ports to handle larger tonnage and the Panama Canal expansion will help increase the pace of this trend. The East Coast of South America is, for example, a region generating strong cargo demand but the majority of its ports lack sufficient water depth or infrastructure to receive ships that ocean carriers wish to deploy. Many of these ports are in the process of developing facilities that will accommodate larger vessels. The permitting and construction process is shorter than for US ports, so the completion of projects in Latin America markets will further impact opportunities available to US ports which will not be able to accept the larger ships. As such, the trend for deeper draft ships serving the US Mid and South Atlantic region will be driven by the capability of the port infrastructure, which includes water depth. Figure A notes the range of vessel drafts for various vessels entering the Port of Long Beach/Los Angeles where the depth is not restrained. These two ports have been selected as a good example of where larger container ships enter port facilities with no water depth restrictions. All elevations are measured relative to Mean Lower Low Water (MLLW) because this is the controlling factor and does not account for tidal influences, which can increase the draft capabilities of POW/MHC facilities by up to 2ft. Figure A shows how the transition to larger vessels will affect the shipping opportunities available to the POW. Lines A through D represent the vessel draft, channel depth (vessel draft plus 4 ft) and the percentage of 6,000 TEU to 8,000 TEU ships that can be typically accommodated at that depth. In review of NCSPA facilities, POW has a channel depth of 42ft and MHC/RI has 45ft. Current ship transit criteria for NCSPA ports require 4ft of underkeel clearance, so this extra 4ft must be added to the vessel draft. For example, line A shows that 20% to 45% of 6,000 TEU to 8,000 TEU vessels can access POW via its current 42ft channel (based on 38ft of water draft and 4ft of under keel clearance). If the channel at POW were deepened to 45ft, the same depth as MHC/RI, the POW would be able to receive vessels needing 41ft of draft, this water depth almost triples the 8,000 TEU vessel potential to over 70%. Going to a channel depth of 47ft to accept 43ft draft ships more than quadruples the ability to receive the larger vessels to over 90% of the 8,000 TEU size classification. This channel deepening process will be crucial to the NC ports remaining competitive. The channel depths noted can be reduced by up to 2ft to account for tidal influences if restrictions on traversing the Cape Fear River are enacted. However, shipping lines prefer to have no restrictions and this is an important factor that Moffatt & Nichol Page 3

7 can influence their decision relating to port selection, since early or late arrivals do not have to wait for the tidal cycle. Figure A: Typical Vessel Draft Analysis of Unimpaired Arriving Ships 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Line A 20%to 45% Line B 68% to85% Line C 91% to 96% Line D 99% to 100% Vessel Draft (ft) - Mean Lower Low Water (MLLW) Note: Add 4 ft to vessel draft to determine required channel depth for underkeel clearance 8000 TEU 7000 TEU 6000 TEU Source: Moffatt & Nichol The major ocean carriers have existing shipping fleets and new tonnage on order to introduce larger ships into service in the future to call to the US East Coast. Key trading routes, such as the East-West transpacific All-Water via Panama Canal (and Asia to US East Coast via Suez Canal) and North-South routes from Latin America, will see future demand necessitating the introduction of bigger ships. Ports on the East Coast that offer up to 50ft of water depth, larger cranes, good road/rail access and sufficient terminal capacity will be regarded as the preferred ports of call by shipping lines. For NCSPA to be competitive it will need to satisfy the key criteria in the same way that other regional facilities are acting to remain viable gateway cargo options. 1. There are some airdraft restrictions impacting ship access to POW and none at MHC. The existing airdraft for POW is 170.5ft (186.5ft minus 16ft per OSHA) at the center of the access channel. The 16ft clearance is required for vessels to safely pass under Progress Energy Powerlines. As the gradual trend towards larger ships occurs, this restrictive airdraft for container ships may impact the competitiveness of NCSPA ports and may require mitigation. As Section 3 of this report outlines, there are large-scale port improvement projects planned over the course of the next years along the East Coast. These plans include a mix of additional port capacity and dredging to gain deeper water to serve larger ships likely to enter service along with improved road/rail connections. Even though some ports may not be fully positioned to accommodate larger vessels, it is Moffatt & Nichol Page 4

8 evident that the industry as a whole is focused on this event and NCSPA needs investment in its ports and supporting infrastructure in order to stay competitive. Cargo Forecasts & Potential for NCSPA Potential population growth in the state of North Carolina is one of the biggest factors influencing the need for NCSPA to expand its ports. The strong outlook for population growth underlies the overall outlook for higher future consumption trends, meaning that the development of NCSPA facilities to meet demand will be less controlled by the activities of adjacent, competing ports and more by NCSPA being able to offer facilities that allow shippers and ocean carriers to bring cargo to markets NCSPA serves more cheaply. US container trades are expected to continue to grow. By 2030, US imports will have risen to almost 38 million TEU per annum, with US exports totaling nearly 31.5 million TEU, as Table A identifies. North Asia will remain the largest trade lane, growing to 23.5 million TEU for imports and almost 13.5 million TEU for exports. Table A: Summary of US Import and Export Trade Lane Demand to 2030, in TEU CAGR* Imports 16,614,334 37,919, % Exports 11,809,325 31,438, % Note: Compound Average Growth Rate (CAGR) reflects the average annual growth in percentage terms. Source: Moffatt & Nichol Moffatt & Nichol uses a process called the Least Cost Market Analysis (LCMA) to identify the least cost port and mode of transportation to serve an inland hinterland market designated by zip code. It is estimated that the 2010 container volumes at POW accounted for 31.8% of the total container demand of the LCMA believed to be potentially available to the port. Of this total, 85% of the POW s import container volumes originate in North Asia and 60% of POW export container volumes are destined for shipment to North Asia. Figure B shows the total potential container market opportunity for NCSPA based on the LCMA analysis for the region in which NCSPA is the lowest-cost port. Assuming that the share of container traffic per trade lane and direction (import and export) for POW is maintained throughout the forecast period to 2040, base case projected container volumes using NCSPA port facilities will increase to approximately 480,000 loaded TEU by 2030 and 600,000 loaded TEU by If the historical share of empty containers handled remains around 33% of total loaded boxes, total case container throughout for NCPSA is projected to be almost 640,000 TEU by 2030 and almost 800,000 TEU by For comparative purposes, three alternatives were investigated. The scenario labeled maintain current facilities is based on no improvements made by NCSPA. At the other extreme, fully competitive facility, the scenario includes full intermodal rail connectivity and a deep water facility of at least 47ft and proper landside infrastructure. The moderate facility improvements scenario assumes some marginal deepening along with minor port and rail capacity improvements to maintain current market share. Moffatt & Nichol Page 5

9 Figure B: NCSPA Loaded Container TEU Volume Forecasts to 2040 for Various Conditions TEU Maintain Current Facilities TEU Moderate Facility Improvements TEU Fully Competitive Facility Improvements Source: NCSPA; MarAd; Moffatt & Nichol Addressable Market Estimated Container Volumes Moffatt & Nichol Page 6

10 With a current nominal container yard capacity of 500,000 TEU at POW, including berth and gate upgrades, congestion is anticipated before Any ability to increase trade lane market share through improved NCSPA facilities, such as water depth and intermodal rail connectivity improvements could see container volume projections increase faster and put extra pressure on the existing facilities unless additional capacity is made available. Assessment of NCSPA Infrastructure In order to deliver a summary of the market potential for POW and MHC/RI, Table B provides an overview of the existing NCSPA port facilities for several key components, such as water depth, road/rail hinterland connections and shipping dynamics. Table B: Summary Assessment of NCSPA Port Infrastructure Assessment POW MHC/RI Summary Future opportunities for the facility will be strained unless channel improvements are gained to accommodate larger ships notably deeper water (45ft to 50 ft), improvements to the S-curve alignment and enlargement of the turning basin. Improved rail service and development of a nearby intermodal facility are the single most important improvement to POW for interim and future operations, along with progressing to gain deeper channels. Road connectivity will be improved with Skyway Bridge construction project. Currently has 45ft channel depth at RI but only 35ft at one third of MHC berths. Nominal rail service and future road connectivity will be improved if Highway 70 improvements are completed. Major facility upgrades required to accommodate larger ships. Could probably meet demands of a dedicated user. Rail improvements required to minimize impacts to Morehead City. Improvements required to infrastructure to increase berth capacity. Water Depth/Channel Deeper water needed minimum of 45ft to 50ft necessary to accommodate larger ships. As noted, 47ft is the recommended minimum depth. Planned channel realignment at entrance will assist in current and future ship maneuvers. Planned enlargement of the turning basin will accommodate larger ships and meet PIANC standards. Ocean bar will likely require blasting due to RI channel deepening possible previous EIS addressed 45ft depth. Deeper water (such as 47 ft+) may be possible due to short ocean channel and beneficial reuse of material. Cost of infrastructure would be significant to develop a new terminal at RI or deepen channel and improve berths at MHC. Capacity constraints at MHC/RI due to size of property and a major hurdle for potential investors. Moffatt & Nichol Page 7

11 Assessment POW MHC/RI the presence of rock at the entrance channel extending oceanward. Larger ships have to carry lighter loads or drop cargo elsewhere first to access POW if deepening not performed. Likely outcome is that POW will be relegated to serving a small share of the available market through 5,000 TEU and smaller vessels. Naturally deep channel in front of Berth 4 through 7 would require little dredging to get to 45ft. No airdraft restrictions at MHC Current airdraft of 170.5ft may not be sufficient for all vessels. As the gradual trend towards larger ships occurs, a restrictive airdraft for container ships accessing POW would impact competitiveness. Road/Rail Inland Connections Improved rail connections at competitive rates to hinterlands essential. Nearby intermodal facility to allow makeup of unit trains is essential. Unit trains through Wilmington will impact City due to current route and number of atgrade crossings. Improved rail connections at competitive rates to hinterlands essential. Nearby intermodal facility to allow make-up of unit trains essential. Unit trains through MHC will impact City due to location in center of road and number of at-grade crossings. NCDOT Road improvements planned would improve connectivity. Class 1 railroad, NCRR and NCDOT investment required. Completion of Highway 70 improvements means RI will be located on the right side and gain from improved roadway connectivity. Significant Class 1 railroad, NCRR and NCDOT investment required Shipping Dynamics Larger ships entering service will reduce serviceability for POW (containers and bulk/breakbulk). Current operating facilities not adequate for container operations. Major facility upgrades are required. Market Potential Better intermodal rail access and deeper water of at least 47ft essential to allow POW to be more competitive and help increase container volumes. Deeper water and future hinterland connectivity makes RI attractive to a dedicated user but major investment is required. Source: Moffatt & Nichol Moffatt & Nichol Page 8

12 The Need for a Competitive Port in North Carolina North Carolina needs a competitive port capable of handling larger ships and serve industry that is moving closer to the supply chain to reduce shipping and transportation costs. The current estimated POW market share, and the ability to serve more distant discretionary markets, is threatened by capacity and better hinterland connections at competing Mid and South Atlantic regional ports. The Bureau of Economic Analysis (BEA) determines BEA regions as areas economically related, clustered around centers of high residential and/or commercial economic activity. There are five BEA regions local to NCSPA ports where an existing cost-competitive advantage is retained over other regional ports. However, if these BEAs are not met by NCSPA due to a lack of hinterland infrastructure or inability of ships to call to POW or MHC/RI, then other Mid and South Atlantic regional ports will quickly meet this cargo demand instead. Previous investment in port and supporting infrastructure helped improve the regional competitiveness of NCSPA facilities and POW gained container market share in the latter half of the past decade after the channel deepening occurred in However, other Mid and South Atlantic ports continue to expand, improve the quality of facilities and increase capacity. Therefore, to maintain competitiveness NCSPA has to gain better hinterland connectivity to its intermodal rail services because improved access will further enable its ports to compete more effectively for existing and future discretionary markets. This connectivity vastly increases the competitive footprint of any port and is an essential component that must be provided. The minimum water depth to access NCSPA cargo facilities should be 47ft, to accommodate 8,000 TEU-size ships, which are anticipated to be the future container vessel workhorse. The opening of the enlarged Panama Canal from 2014 will see shipping lines commence the transition to larger vessels for Asian services. Although this process will be gradual, a shift is nonetheless expected. Without sufficient water depth and rail connectivity, the state of North Carolina will be negatively impacted by a loss of shippers and ocean carrier customers at its ports. Moffatt & Nichol Page 9

13 Report Conclusions An option available to the NCSPA of doing nothing, or maintaining the status quo, is not realistic as the opportunities available to the NCSPA are likely to be severely impacted by the industry movement towards use of larger ships. The ocean liner fleet changes, coupled with the current channel water depths at competing ports, could relegate NCSPA to competing to serve only for smaller shipping lines. Without a deeper channel depth and better supporting hinterland connections, major volume industries will relocate out of North Carolina to other states to be closer to the supply chain to reduce their costs. This industrial migration is much more likely if there is an absence of a viable port integrated into the regional and national logistics transportation chain; Besides base jobs and other industries supported by base activities that would be impacted by the loss of NCSPA port activity, there is potential for future business investment in North Carolina to be lost if there is lack of investment in port activities and supporting infrastructure. In short, the likely potential economic disruption that would result if POW were unable to remain a viable point of access for cargo imports and exports is significant and very likely to have long-lasting effects; Current NCSPA ports are not positioned to accommodate the expected transition to larger vessels. The opportunities to maintain current and acquire new services using larger ships will be impacted. Smaller shipping lines are also likely to be negatively impacted by the increased capacity of bigger shipping lines and face the potential threat of struggling to retain volumes themselves; Increasing the channel depth from the current 42ft to depths equal to, or greater than, 47ft and other possible channel improvements (such as the S-curve realignment and turning basin enlargement) will allow NCSPA ports to remain competitive and expand opportunities. Deepening to 50ft of water depth would place NCSPA ahead of many other regional facilities as it would then allow all 8,000 TEU class ships to access its ports with no restrictions; Each NCSPA port suffers from insufficient hinterland connectivity. Even if channel depth and port infrastructure is improved, the current road and rail connections require major improvements to help NCSPA attract additional business and generate additional volumes; A viable rail connection with competitive rates to allow access to intermodal operations is the single most important landside infrastructure improvement required to assist the NCSPA to maintain/gain market share for containerized products; NCSPA is threatened by the containerization of some bulk and breakbulk materials. These commodities will be impacted by the transition to larger vessels as the container shipping capacities increase and container service providers continue to target bulk/breakbulk materials; The typical shipping industry standard for serving the East Coast will change with the opening of the Panama Canal. The introduction of larger ships and the move towards a much greater share of 8,000 TEU vessels in service is expected over time. Almost all ports serving the US East Coast are planning to deepen their channels to accommodate the deeper draft vessels by deepening access channels to 47ft to 50ft depths; The speed of change in vessel size and the economies of scale for ocean carriers that will prevail from the use of bigger ships, will be dictated by many factors such as fuel prices, competitive Moffatt & Nichol Page 10

14 pressures from shippers, industrial/manufacturing requirements, speed of port infrastructure improvements, cargo demands and the economy. Moffatt & Nichol Page 11

15 NCSPA Port Business Case Study Report Presented to: February 2011 Prepared by:

16 Background to Project Growth in containerized world trade, and expansion of the Panama Canal targeted for 2014, is prompting ocean carriers to expand their fleets with ever larger vessels, which in turn requires ports to make preparations to accommodate this trend. Ports that are not able to handle the increased volumes arriving on larger ships are likely to lose shipping services to those facilities that are better equipped and capable, thereby depriving regions of the benefits of low cost access to world trade. Given the mission of (NCSPA) is to enhance the economy of North Carolina, and on the basis of the expected trends in the global containerized trade industry, Moffatt & Nichol was commissioned to review NCSPA facilities to identify how coming shipping and port industry changes will affect their mission. This report provides NCSPA with a review of the future freight market, competing port infrastructure expansion and shipping industry operations to help determine how existing NCSPA facilities are positioned and what improvements should be made to accommodate these changes to improve competitiveness of ports to maintain and attract business.

17 Table of Contents 1.NCSPA Infrastructure and Role in Cargo Transportation Network Objective of the Study Review of Previous Reports Historic Development of NCSPA Cargo Volumes Container Traffic Non-Container Traffic Volumes NCSPA Economic Impacts Background and Methodology Output Impacts Employment Impacts Tax Impacts Geographic Distribution of NCSPA Economic Impacts Additional Considerations Concerning POW s Contribution to the North Carolina Economy Forecast Volumes Moving Through NCSPA Facilities Sensitivities Influencing Cargo Forecasts Internal forces External forces Policy issues LCMA Trade Lane Analysis US Container Trade Lane Forecasts LCMA Methodology North Asia Moffatt & Nichol Page i

18 South East Asia Transatlantic East Coast South America West Coast South America NCSPA Container Forecasts to Methodology and Approach Container Trade Lane Forecast Potential NCSPA Container Forecast Summary NCSPA Bulk and Breakbulk Forecasts to Port Opportunities/Obstacles Existing Facility Analysis Previous Capital Investment Supporting NCSPA Port Facilities Wilmington Harbor Channel Conditions Morehead City Harbor Channel Conditions Port Berth Review Backlands Capacity Existing / Programmed Road and Rail Connectivity Future Obstacles and Overcoming Bottlenecks Channel Depth Requirements Channel Depth Alternatives Ship Maneuvering Study APPENDIX Container Trade Lane Market Potential North Asia Trade Lane Container Potential Moffatt & Nichol Page ii

19 South East Asia Trade Lane Container Potential Transatlantic Trade Lane Container Potential Latin America Trade Lane Container Potential Port Codes Figures Figure 1.1: Summary Overview of POW Facilities... 2 Figure 1.2: Summary Overview of MHC Facilities... 3 Figure 1.3: Comparison of GDP Growth and Selected Mid and South Atlantic Port TEU Volumes, Figure 1.4: POW Share of Mid and South Atlantic Loaded TEU Port Volumes, Figure 1.5: NCSPA Bulk & Breakbulk Combined Volumes, in Tons Figure 2.1: North Carolina Regional Impacts Map for Output and Number of Jobs Figure 3.1: Employment growth in the US, North Carolina and Wilmington MSA Figure 3.2: Personal income growth in US and North Carolina, Figure 3.3: New residential construction permits in North Carolina (12-month rolling sum), Figure 3.4: US industrial production by industry, Figure 3.5: Retail sales, inventories and inventory/sales ratio, Figure 3.6: Industrial Production, January 1967 July Figure 3.7: Overview of Major Road and Rail Routes for Ports in Mid and South Atlantic Region Figure 3.8: Impact of Size of Crane for Handling Containers to/from Larger Ships Figure 3.9: Development of Container Volumes at Mid and South Atlantic Ports, , in TEU Figure 3.10: Development of Share of Traffic in Mid and South Atlantic Region, , in % Moffatt & Nichol Page iii

20 Figure 3.11: Summary of Global Container Fleet Based on Ship Size & LOA, Q Figure 3.12: Summary of Global Container Fleet by Size & Draft, Q Figure 3.13: Confirmed Container Ship Orders by Size and Year of Delivery, Q Figure 3.14: Confirmed Container Ship Orders by Size and Operator, Q Figure 3.15: Share of Bulk Global Ship Fleet and Order book by Size, Q Figure 3.16: Share of Multipurpose Global Ship Fleet and Order book by Size, Q Figure 3.17: Share of Ro-Ro Global Ship Fleet and Order book by Size, Q Figure 3.18: East West Container Shipping Trade Routes Serving North America Figure 3.19: Summary of Weekly Calls per Atlantic Port for East-West Trade Lanes, Q Figure 3.20: Summary of Weekly Calls per Atlantic Port for North-South Trade Lanes, Q Figure 3.21: Key Container Shipping Line Routes with the Panama Canal as the Focal Point Figure 3.22: Development of Transpacific and Transatlantic Container Volumes and Slot Capacity, , in 000 TEU Figure 3.23: Transportation Cost Examples from LCMA Modelling Process Figure 3.24: North Asia Trade Lane to POW No Rail Improvements and 4,500 TEU Ship Figure 3.25: North Asia Trade Lane to POW No Rail Improvements and 8,000 TEU Ship Figure 3.26: North Asia Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.27: North Asia Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.28: South East Asia Current Least Cost Market Area Figure 3.29: South East Asia Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.30: South East Asia Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.31: Transatlantic Trade Lane to POW No Rail Improvements and 4,500 TEU Ship Figure 3.32: Transatlantic Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.33: Transatlantic Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Moffatt & Nichol Page iv

21 Figure 3.34: East Coast of South America Current Least Cost Market Area Figure 3.35: East Coast of South America Theoretical Call to POW Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.36: East Coast of South America Theoretical Call to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.37: West Coast of South America Current Least Cost Market Area Figure 3.38: West Coast of South America Theoretical Call to POW Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.39: West Coast of South America Theoretical Call to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Figure 3.40: Market Demand & NCSPA TEU Volume Forecast Scenarios to Figure 3.41: Summary of Bulk and Breakbulk Cargo Forecasts for POW and MHC to Figure 4.1: Competing Container Terminals with Similar Last Mile Road Configuration as POW Figure 4.2: USACE Wilmington District, Wilmington Harbor Channel Alignment Figure 4.3: Channel Alignment, Port of Morehead City Figure 4.4 Inset of MHC Facility Figure 4.5 Current Leased Areas within POW boundaries Figure 4.6: Confirmation of Net Storage Area Potential Figure 4.7: Project Area for Container Terminal on Radio Island, Showing Areas on the Site Currently Leased Figure 4.8: Container Vessel Calls at POW in Figure 4.9: Existing and Proposed Roadway System near POW Figure 4.10: Existing Rail Route Through City of Wilmington (Route shown is approximately 13 miles) Figure 4.11: Proposed and Planned US 70 Improvements between MHC/RI and I-95 (Super 70 projects) 154 Figure 4.12: Proposed and Planned Roadway Connections to MHC/RI Figure 4.13: Existing Rail Route Through Morehead City Moffatt & Nichol Page v

22 Figure 4.14: Salinity at Wilmington Harbor Figure 4.15: Cumulative Probability of Actual Vessel Draft Panamax and Smaller Vessels Figure 4.16: Cumulative Probability of Actual Vessel Draft Post Panamax Vessels Figure 4.17: Vessel Draft Analysis for Container Ships Arriving Unimpaired Figure 4.18: Wind Vector Applied to Transit Maneuvers Figure 4.19: Vessel Maneuvering Track Configuration Figure 4.20: Vessel Maneuvering Track Configuration Existing Vessel Shown Figure 4.21: Inbound Maneuver Existing Containership Figure 4.22: Inbound Maneuver Existing Containership in Red; Future Containership in Gold Figure 4.23: Inbound Maneuver Future Containership: No Environment in Gold; Flood Tide with 20 knots Wind in Red; Ebb Tide with 20 knots Wind in Blue Figure 4.24: Inbound Maneuver Reach Figure 4.25: Outbound Maneuver Future Containership in Red; Existing Containership in Gold Figure 5.1: LCMA by Port for North Asian Imports, Figure 5.2: LCMA by Port for Exports to North Asia, Figure 5.3: Hypothetical LCMA by Port for North Asian Imports, Figure 5.4: LCMA by Port for South East Asia Imports, Figure 5.5: LCMA by Port for South East Asia Exports, Figure 5.6: Hypothetical LCMA by Port for South East Asian Imports, Figure 5.7: Share of Import Volumes by Port for Transatlantic Trade Lane, Figure 5.8: Share of Export Volumes by Port for the Transatlantic Trade Lane, Figure 5.9: Hypothetical LCMA by Port for Transatlantic Trade, Figure 5.10: Share of Import Volumes by Port for the ECSA Trade Lane, Figure 5.11: Share of Import Volumes by Port for the WCSA Trade Lane, Moffatt & Nichol Page vi

23 Figure 5.12: Hypothetical LCMA by Port for Latin America Trade, Tables Table 1.1: Documents and Reports Reviewed by Moffatt & Nichol... 5 Table 2.1: Output Impact of POW Container Operations Table 2.2: Employment Impact of POW s Container Operations Table 2.3: Tax Revenues Generated By POW Container Operations Table 2.4: Regional Impacts Estimates Table 2.5: POW Containerized Volumes and Base Employment in Supported Industries Table 3.1: Overview of Free Trade Agreements Table 3.2: Comparison of Cargo Activities at Ports Serving the Mid and South Atlantic Region Table 3.3: Summary of Facilities at Ports Handling Containers in Mid and South Atlantic Region, Table 3.4: Confirmed Information Relating to Expansion Projects in Mid and South Atlantic Region Table 3.5: Confirmed Channel Depths/Berth Depths for Container Ports on the US Atlantic Coast, Q Table 3.6: Reported 2009 Container Volumes and 2010 YTD Totals for Mid and South Atlantic Ports Table 3.7: Mid and South Atlantic Port Region Bulk and Breakbulk Cargo ex Fuel, E Table 3.8: Mid and South Atlantic Port Region Imports by Commodity, E Table 3.9: Mid and South Atlantic Region - Exports by Commodity, E Table 3.10: Strenghts, Weaknesses, Opportunities and Threats Analysis of Competing Mid and South Atlantic Ports Table 3.11: Historic Development Outlining Typical Container Ship Characteristics Table 3.12: Container Fleet Operated by Top 20 Container Shipping Lines, Q Table 3.13: Typical Bulk Ship Characteristics Table 3.14: Average Size of Ship Calling to Mid and South Atlantic Ports per Trade Lane, Moffatt & Nichol Page vii

24 Table 3.15: Largest Size of Ship Calling to Atlantic Ports per Trade Lane, Q Table 3.16: Mid and South Atlantic Port Range - Deep Sea Trade Lanes Served Table 3.17: Weekly Atlantic Liner Shipping Services Transatlantic Mediterranean, Q Table 3.18: Weekly Atlantic Liner Shipping Services Transatlantic North Europe, Q Table 3.19: Weekly Atlantic Liner Shipping Services Asia All Water via Panama Canal, Q Table 3.20: Weekly Atlantic Liner Shipping Services Asia All Water via Suez Canal, Q Table 3.21: Weekly Atlantic Liner Shipping Services Mid East, Q Table 3.22: Weekly Atlantic Liner Shipping Services RTW/Multi-Region, Q Table 3.23: Weekly Atlantic Liner Shipping Services North-South Profile, Q Table 3.24: Summary Development of Supply & Demand TEU Utilization for Transpacific and Transatlantic Trades, Table 3.25: Strengths, Weaknesses, Opportunities and Threats Analysis of Transpacific and Transatlantic Trade Lanes from a Port Perspective Table 3.26: NCSPA Cargo Currently Handled Table 3.27: Key NCSPA Strategies Accompanying Confirmed Strategic Initiatives Table 3.28: US Import Container Trade Lane Forecasts to 2030, in TEU Table 3.29: US Export Container Trade Lane Forecasts to 2030, in TEU Table 3.30: Cost Components for Serving Zip Code from POW and San Pedro Ports Table 3.31: Projected Size of LCMA Markets Potentially Available to NCSPA in TEU, Based on Current Infrastructure and If Infrastructure Improvements Undertaken, 2010 to Table 3.32: Estimated 2010 Share of Regional LCMA (TEU) for NCSPA Table 4.1: Completed & Planned Investment Projects Affecting NCSPA Facilities, from Table 4.2: Wilmington Harbor Authorized Channel Dimensions in Feet Table 4.3: Morehead City Harbor Authorized Channel Dimensions in Feet Table 4.4: Parameters Used in Yard Capacity Calculations Moffatt & Nichol Page viii

25 Table 4.5: Radio Island Throughput Distribution and Model Parameters Table 4.6: Assumed Vessel Services for RI Based on 1 Million TEU Annual Throughput Table 4.7: Assumed Vessel Services for Radio Island (1.2 million TEU Annual Throughput) Table 4.8: Assumed Vessel Services for RI for 1.2 million TEU Annual Throughput, High Case Scenario Table 4.9: Typical Container Ship Characteristics Table 4.10: Typical Container Ship Characteristics Calling at POW Table 4.11: Ship Drafts for Container Ships Calling at POW Table 4.12: Comparison of Turning Basin Requirements per Container Ship Size Calling at POW Table 4.13: Wilmington Harbor Authorized Channel Dimensions Table 4.14: Summary of Environmental Conditions Applied and Subsequent Impact Table 4.15: Vessel Characteristics of Design Vessels Moffatt & Nichol Page ix

26 NCSPA Infrastructure and Role in Cargo Transportation Network Z Z Z Z NCSPA Economic Impacts Forecast Volumes Moving Through NCSPA Facilities Port Opportunities/Obstacles APPENDIX

27 1. NCSPA Infrastructure and Role in Cargo Transportation Network 1.1. Objective of the Study The expansion of the Panama Canal in 2014 is going to fundamentally change the ports and shipping industry in the US, especially for trade moving from Asia to North America in containers. Therefore it is imperative that NCSPA understands how the expected changes in waterborne freight movement to the US East Coast will be affected. Even more critical is an understanding of how these changes will impact NCSPA port facilities and how its cargo-handling terminals compare to other adjacent competing Mid and South Atlantic ports (between Hampton Roads (Virginia Port Authority (VPA), including Norfolk) to the North and Jacksonville to the South). This Study assesses the economic benefits to North Carolina that are attributable to the ports and will assist the NCSPA and State in determining the possible next steps to meet changing industry conditions. In particular, various scenarios have been reviewed and assessed that include taking no action (i.e. doing nothing ) through to making the necessary modifications to be a viable, competitive port facility for the State and industry. This Report will provide the NCSPA with a snapshot of how the different possible scenarios will impact its port operations and assist NCSPA in its future decision-making processes. Strong focus is placed on the potential for NCSPA to look to increase the number of containers it handles each year. This is because cargo moving in containerized form represents higher growth on a global trade basis to/from the US, compared to traditional cargo moving via bulk and breakbulk shipping. The Institute for Transportation Research and Education (ITRE) at North Carolina State University in Raleigh, NC, has estimated that container activity is responsible for supporting around 85% of NCSPA s economic impacts when measured in terms of output, employment and taxes. The volumes of discretionary container cargo moving to/from the Mid and South Atlantic port region has a choice of a number of different ports. Offering good transportation infrastructure and waterway access at a competitive cost will dictate the success of ports in attracting containers. Bulk and breakbulk cargo is much less discretionary because it is influenced more by the localized demands closer to the port. However, if the changes cause industry to relocate, the need for the types of materials within the bulk/breakbulk classification are also likely to be impacted. This Study also addresses NCSPA potential for bulk and breakbulk cargo but a greater emphasis is placed on competitive requirements for attracting container traffic. NCSPA handles containers at the Port of Wilmington (POW) on the Cape Fear River. The river is currently 42ft deep with a 1,200ft turning basin, which is smaller than industry standards. As Figure 1.1 shows the current container facility has a berth length of approximately 2,650ft but only 1,300ft is fully functional and capable of utilizing its newest 100ft gage cranes. With the current channel conditions, the largest ship currently calling at POW is a 4,900TEU vessel and it requires operational restrictions on vessel draft. The channel is also constrained and the current shipping calling that are 965ft long are near the maximum length that can traverse the S curve at the entrance to the Cape Fear River. As a consequence, these Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 1

28 restrictions severely limit the competitive position of POW to receive larger ships being introduced into service after the Panama Canal expansion is completed in Figure 1.1: Summary Overview of POW Facilities Source: NCSPA The Port of Morehead City (MHC) does not currently service any container vessels and is utilized for bulk and breakbulk goods. The channel is 45ft deep and there are three berths which are 45ft deep but the quay lengths (of approximately 500ft and 1,000ft) are not sufficient to accommodate 5,000 TEU container ships. The other berths offer water depths of 35ft to 41ft and are adequate for bulk and breakbulk ships, although there are no container cranes. As identified in Figure 1.2, MHC offers 5,500ft of continuous wharf across nine separate berths. Water depth at Berths 1, 2 and 3 is 45ft, but between Berths 4 and 9 only 35ft to 41ft is available. MHC maintains four cranes, including one 40-ton multipurpose bridge crane, two 115-ton gantry cranes, and one 125-ton mobile crane. There is a fleet of 39 lift trucks with up 70,000lb capacities, capable of handling an array of cargo types. MHC is an established cargo-handling operation but significant improvements are needed to make it suitable for competitive container operations. Radio Island (RI) is located adjacent to MHC and is partially developed for liquid bulk activities. It represents an alternative terminal option that could be considered for utilization for other cargo operations but requires improved rail and highway connections. The first section of highway improvement, the Gallant s Channel bridge, is underway but the rail connection and significant site improvements (total construction) are still required along with the completion of an updated Economic Impact Statement (EIS) assessment. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 2

29 Figure 1.2: Summary Overview of MHC Facilities Source: NCSPA After the Panama Canal expansion is completed in 2014, it is expected that there will be changes to the size of ships operated by ocean carriers. The current confirmed ship order book comprises a greater proportion of larger ships being constructed for use in major container trade routes. As ships increase in size, the opportunities available to NCSPA at POW and MHC will be reduced because these ports will not be able to accommodate the larger ships without dredging to achieve deeper water. Continued growth of the All Water Suez Canal option and increased demand on key North-South trades, such as to/from Latin America and Brazil, are other examples of shifting industry dynamics impacting the competitive environment for all US East Coast ports. The East and West coast ports in Latin America in key locations such as Brazil and Peru are also adding, modifying or building container terminals with channel depths of 50ft that will accommodate vessels with drafts of up to and including 46ft. Therefore, POW and MHC need to be best-placed from a competitive perspective to maximize potential to successfully serve existing and future customers with respect to container and bulk/breakbulk activities. Moffatt & Nichol understands that there are several potential alternatives available to NCSPA and the objective of this Study is to assess changing industry dynamics and provide cargo forecasts to allow NCSPA to assess its preferred option for increasing future competitiveness from the following: 1. Maintain Current Facilities - No action; continue with the present course of action at POW and MHC; 2. Moderate Facility Improvements - Perform incremental improvements to existing POW container facilities to determine how feasible the improvements are to extend the viability/life of POW as a container terminal; Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 3

30 3. Fully Competitive Facility Improvements - Make improvements to existing POW container facilities (i.e., build-out of the existing footprint, deepen channel, etc) to accommodate larger vessels (6,000 TEU to 8,000TEU) or make incremental improvements to existing POW container facilities to maintain and possibly expand interim capacity while planned new container development is completed elsewhere to accommodate larger vessels (6,000 TEU to 8,000TEU). The key considerations undertaken by Moffatt & Nichol in this report includes an assessment of the following items based on the current and potential opportunity offered at POW and MHC, together with any known constraints regarding future development of these facilities to successfully meet changing shipping and freight transportation dynamics: Using research completed by ITRE, a determination of the economic impact on North Carolina if North Carolina does not have a port capable of receiving larger ships; A comparison of existing port facilities and infrastructure improvements required to maintain a viable competitive port able to receive larger ships Review of Previous Reports Moffatt & Nichol has reviewed a number of previously produced reports to better understand the competitive position retained by facilities handling containers and bulk/breakbulk operated by NCSPA. Existing or known bottlenecks within the logistics transportation network, which includes waterway access to NCSPA ports for ships, hinterland connections between NCSPA ports and origins/destinations of cargo and the amount of capacity available at NCSPA terminals have also been assessed, along with other notable areas of interest impacting NCSPA ports, including: Cargo volumes importance of NCSPA port facilities to the State of North Carolina, the origin & destination of cargo moving through NCSPA facilities and potential cargo/markets not currently served by NCSPA ports; Influence of industry dynamics relevant issues impacting the competitiveness of NCSPA facilities, including: o Shipping industry drivers (trade lanes served, ocean carrier strategies, ship size in service, make-up of liner alliances/independent operators, development of ship size etc); o Role of railroads and trucking in the State (with specific emphasis on how NCSPA facilities are served); o Costs of cargo moving to/from origin/destination through NCSPA operations; o Role played by NCSPA in relation to the movement of cargo through Mid and South Atlantic ports between origin and destination. Capacity understanding any existing bottlenecks at NCSPA facilities and the impact on regional port competitiveness, specifically: o Size of ships able to call at ports via access channels and at berths; o Ports/terminals where cargo is handled or could be handled; Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 4

31 o Road and rail transportation network linking NCSPA cargo facilities and hinterland demand. Table 1.1 provides a summary of the previously completed reports reviewed by Moffatt & Nichol, together with a summary synopsis of content and any key conclusions. Table 1.1: Documents and Reports Reviewed by Moffatt & Nichol Report Title/Date /Author Summary Synopsis and Key Conclusions Port of Wilmington Container Yard Improvements Report (Reach Stacker ALT) Moffatt & Nichol May 2006 A detailed assessment of POW s ability to increase efficiency and throughput of containers to maintain market share until a proposed new terminal development dubbed (at the time of the report s undertaking) in 2006 Southport became operational in, approximately, 10-years time. As POW would remain NCSPA s only container facility it needed to offer maximum efficiencies possible while keeping expenditures to a minimum, which the port operator has continued to seek. Moffatt & Nichol generated all necessary measures and associated required improvements that would enable NCSPA to meet its objectives of operating an efficient interim POW while other facilities were investigated and developed. Economic Impact Study of the North Carolina State Ports Authority Martin Associates June 2006 Conducted to quantify the regional and state-wide economic impacts generated by the cargo, vessel and barge activity at the public and private terminals in Wilmington and Morehead City. The study estimated that in calendar year 2005, 84,833 jobs were related to maritime activity at the NCSPA terminals in Wilmington and Morehead City, and the private terminals in Wilmington. This included 4,899 direct jobs, 5,322 induced jobs (supported by the local purchases of the direct jobs) and 1,214 indirect jobs (supported by the local purchases of firm s dependent on marine activity in the two ports). In addition, the study estimated 73,388 jobs that are related to port operations with users of the ports, although the degree of dependence could not be precisely estimated. The study also estimated $5.6 billion of economic activity in North Carolina generated by the public and private terminals in addition to $317 million of direct business revenue generated by providing maritime and transportation services to the cargo and vessel activity. The average salary estimated for direct jobs of $42,721 was nearly 40% higher than the manufacturing wage in North Carolina. A comparison to a previous study done in 2002 indicated increases in economic impact were commensurate with increases in tonnage at the ports. The Projected Economic Impacts of the North Carolina International Terminal Martin Associates March 2008 Uses the economic impact methodology developed for the 2006 study described above to estimate the economic impact of the proposed NCIT. Based on CH2MHill input, the terminal was assumed to begin operation in 2017 with 916 thousand TEU, reaching 3 million TEU by It was assumed that modal split would be 50% rail and 50% truck. The terminal is projected to generate 5,269 direct, induced and indirect jobs in the start-up year. By 2030 it was estimated that 16,534 direct, induced and indirect jobs would be generated by the full build-out of 3 million TEU. At full build-out personal income is projected to reach $1.1 billion annually and local businesses are projected to receive $1.6 billion of direct annual revenue. State and local tax revenues are projected to reach $115 million annually at full build-out. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 5

32 Report Title/Date /Author Summary Synopsis and Key Conclusions North Carolina State Ports Authority Strategic Business Plan FY North Carolina State Ports Authority August 2009 NCSPA developed a Strategic Business Plan in order to capture the changes in attitude and thinking required to attain its vision of economic prosperity for North Carolina. This Strategic Business Plan specifically provided organizational direction, identified growth opportunities for both NCSPA and the State of North Carolina and suggested effective ways in which the organization dealt with, and overcame, the serious impacts felt by the global economic recession of Specific emphasis was placed on the ability, and placement, of NCSPA when the global economy and international trade inevitably rebounded. Ports of Wilmington & Morehead City Feasibility Report Moffatt & Nichol February 2010 Provision of cargo throughput and operating performance forecasts at POW and MHC as part of NCSPA bond offering documentation for Port Facilities Senior Lien Revenue Bonds, Series 2010A and Series 2010B. The Report provided independent forecasts for prospective purchasers and offered a high-level facility overview, a detailed macro economic outlook for global container trade, confirmation of recent infrastructure investment by NCSPA, container and bulk/breakbulk forecasts, supplemented by LCMA analysis of the port s container market and a summary review of NCSPA s financial forecast. North Carolina International Terminal Review of Planning Concepts and Privatization Options PF Richardson Associates/TEC Inc June 2010 Report provided a review of the development plan for NCIT prepared by CH2MHill. Identified cost savings options that might make the project more attractive to private investors. While the report found no major flaws in the development plan, it did evaluate alternative development scenarios and identified capital cost reduction opportunities, largely impacting the phase one development costs. These included adjusting the terminal footprint and reducing grading and site preparation costs by using a containment dike to modify the wharf alignment. The report also proposes an RTG concept for phase 1 as compared to the original plan s use of RMG. Some changes in assumptions were made, notably reducing the assumed rail share from 50% to 30% by phase three. The net impact of these changes in a reduction in the capital cost estimate for phase one of approximately $375 million. No significant cost changes were identified for phases two or three. The Proposed North Carolina International Terminal A Perspective (No Port Southport) Risingwater Associates September 2010 Opinion-based report generated to argue against the need for the proposed NCIT/Southport development. The document was created to provide the North Carolina Governor s Logistics Task Force with what the report described as an evaluation of why POW could meet what it projected to be future container demand. Economic Contribution Study of North Carolina State Ports Authority, 2010 ITRE/NC State University January 2011 The final report outlining the economic impacts will be published in February ITRE estimated the impacts of both container and bulk handling activities generated by the NCSPA cargo-handling facilities of POW and MHC. The report outlines that container activity is responsible for around 80% to 90% of NCSPA s economic impacts when measured in terms of output, employment and taxes. Source: Moffatt & Nichol Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 6

33 1.3. Historic Development of NCSPA Cargo Volumes Container Traffic Container volume growth at POW and other Mid and South Atlantic ports, as identified in Figure 1.3, has historically been driven less by global and national macro economic variables and more by local market demand, with infrastructure improvements at ports and to supporting inland connections and waterways influencing cargo volumes at competing facilities. Moving forward, Moffatt & Nichol believes that key macro factors, such as vessel fleet changes associated with the widening of the Panama Canal, have the greatest potential to impact the competitive Mid and South Atlantic port environment and the ability to retain and attract container traffic. Figure 1.3: Comparison of GDP Growth and Selected Mid and South Atlantic Port TEU Volumes, Index: 1981 = 100 2,000 1,800 1,600 1,400 1,200 1, Savannah Norfolk Charleston Wilmington Real GDP Source: Moffatt & Nichol As Figure 1.4 identifies, by the end of 2010 POW accounted for approximately 3.5% of the total loaded container volumes handled at Mid and South Atlantic ports (including Norfolk (Virginia Ports Authority (VPA), Charleston and Savannah). POW s market share did decline between 1997 and 2004 as other competing ports attracted greater volumes due to investment in infrastructure and facilities and improved their respective port competitiveness. However, POW recaptured the lost market share following investment and improvements in infrastructure that included a channel deepening program in 2004, berth improvements and new cranes. These improvements also helped to support the addition of a second CKYH service, which further increased POW s container volumes being handled. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 7

34 Figure 1.4: POW Share of Mid and South Atlantic Loaded TEU Port Volumes, % Wilmington Share of Regional Total 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Import Total Export Source: Moffatt & Nichol The intense escalation of worldwide container traffic in the past decade began to slow in A full blown worldwide economic recession started in late 2008 and significantly impacted international container trade demand throughout Container shipping lines, major contributors to the ocean-going fleet capacity, were heavily impacted by the global recession through falling demand volumes and lower freight rates, resulting in significant financial losses, especially for In the US, the West Coast felt the biggest brunt of the container downturn because of its large-scale exposure to the transpacific trades, a shipping route significantly impacted by the weaker demand to move Asian goods to the US to meet consumer demand. (The other trade lane to have endured the greatest losses due to weaker demand was between Asia and Europe, via the Suez Canal, another key consumer-led route). The West Coast, especially Southern California, has been the traditional gateway from Asia to the U.S. and although around 65% of Asian-originated cargo presently enters the U.S. through West Coast port gateways, two-thirds of the U.S. consumption demand is actually based east of the Mississippi, requiring that high volumes of cargo be delivered to eastern destinations via the intermodal rail system. Over the past decade, shippers have diverted an increasing percentage of cargo from the West Coast ports to facilities on the East Coast to avoid increased regulation and cost issues and to maintain inventory levels closer to consumption areas. The ocean carrier industry reacted positively in support of its shipper customers by developing All-Water services from Asia to the US East Coast via the Panama Canal. Hence, the Panama Canal expansion is a major factor that supports this eastward migration, and is forcing East Coast ports to improve infrastructure to accommodate the newer, larger and deeper draft vessels coming into service after the construction of the waterway in Panama is completed during Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 8

35 Non-Container Traffic Volumes With respect to non-container traffic volumes at NCSPA facilities, there was short-term growth of 50% overall between 2003 and However, for combined non-container volumes at POW and MHC there has been a steady decline since 2006, as Figure 1.5 shows. This drop can be attributed to a number of factors, including the slowdown in the US housing market, weaker demand in US auto manufacturing and sales, lower demand for coal, less demand from a European customer for breakbulk wood pulp and the increased containerization of traditional breakbulk commodities. Bulk volumes at POW have been primarily driven by imports of chemicals, cement, and fertilizer related products. There were sizable volumes of coal imports in FY2006 and FY2007, but these ceased thereafter. Chemical imports have demonstrated the most consistent recent volumes, averaging 10.6% growth during this same time, while import volumes of cement grew substantially during years of the housing boom but have subsequently declined thereafter due to weaker demand in this sector overall. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 9

36 Figure 1.5: NCSPA Bulk & Breakbulk Combined Volumes, in Tons Tons (Million) Break Bulk + Bulk Source: Moffatt & Nichol As the long-term demand for containers increases on a global basis, so does the need for port capacity and vessel space to accommodate breakbulk commodities and project cargo. Terminal operators face a growing dilemma of committing space for additional container throughput volumes at higher margins or protecting traditional terminal space for breakbulk commodities that require greater acreage per ton handled. However, some of the stress is being relieved by the transition from standard bulk / breakbulk cargo handling to these goods being moved via containers due to favorable shipping rates. With the change to larger vessels, the open capacity on container vessels could further this transition. It should also be noted that there has not been any increase in the size of vessels handling bulk / breakbulk cargo. With strong economies worldwide, sufficient volumes existed for both the container operators and the breakbulk project cargo vessel operators to co-exist, enabling both segments of the ocean transportation industry to earn good returns on their capital investments of vessels and terminal development. Ports with sufficient property available to provide continued support for both lines of business would be successful in leveraging breakbulk clients that are losing their facility options at other ports. Commodities such as semi finished or finished aluminum and steel products, semi-bulk in large bags, and a great variety of project cargos continue to embrace the use of breakbulk transport, as vessel designs and improved cargo handling technologies evolve to provide more efficient stowage, better in-transit cargo protection, and improved stevedore productivity. However, wood pulp, finished paper and dimensional lumber are very quickly shifting to containers driven by lower ocean freight rates offered by the container operators. The weak demand in the construction market continues to erode the steel, lumber and other breakbulk commodities imported and exported. There will be a positive improvement in the demand for Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 10

37 these commodities as the effects of the 2009 global recession are overcome, although this recovery will be a gradual and slow process, as 2010 identified. Bulk cargoes are much more regional and commodity dependant than other types of cargoes. Thus, market forecasting is dependent on a variety of factors that are difficult to predict in the long term. In addition to geographic location dictating the preferred trading routes for these types of commodities, agriculture and manufacturing-based regional economies, supporting rail infrastructure and the efficiencies of receiving marine terminal capabilities have a tremendous impact in ensuring that bulk commodities are cost competitive. On a nationwide basis across the US, market data suggests that most sectors of dry bulk cargo are growing very minimally. The economic crisis has impacted the import and export of bulk cargoes in a variety of ways, with bulk commodities associated with the housing and construction industry declining. Other recent key trends impacting those types of cargoes handled at POW and MHC include: Fertilizer demand is derived from agricultural activity and is seasonally oriented. This seasonality requires supporting storage capabilities as the application of fertilizer occurs in a relatively short period of time each season. Rising natural gas prices have driven production of nitrogen bearing fertilizers offshore. Therefore, future growth of imports of both liquid and dry nitrogen bearing fertilizers can be expected to occur. Domestic pricing requirements, railroad capacity and the world s production of fertilizer have a strong impact on annual volumes moving via POW; Grain production is largely weather dependent and the U.S. is a net exporter of grain. NCSPA facilities are strategically positioned to handle imported grain in support of the swine and poultry industry in North Carolina and it has seen recent increases in grain import due to higher inland transportation costs. Wood chips, or replenishable fuels, have the potential for volume growth. Export to Europe is likely because of Kyoto Accord requirements that are resulting in increased use of this commodity as a source of fuel for electrical generation. Other producing segments of the world, including South America and Canada will be competition for this business; Coal production in the Appalachian Mountains peaked in 2001 at million tons. Various burn characteristics and increasing inland cost for Western U.S. sourced coal is creating opportunities for the utility companies to source coal internationally. Capital investment in port properties would be required for the Authority to participate in this commodity segment. Summary Conclusion: Existing NCSPA cargo-handling facilities continue to handle a mix of different cargo types, including containers, breakbulk and bulk commodities. POW regained lost container market share after the 2004 channel deepening process and subsequent investment in berth improvements and new cranes (which allowed the second CKYH the Green Alliance string to commence calls). The ability to attract a second major container service to POW confirmed how investment in the port increased its competitiveness and the ability to attract new customers. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 11

38 Bulk volumes have grown in the recent past, driven by local hinterland import demand for chemicals, cement and fertilizer. Breakbulk activity has decreased, though it is important to note that this is not because of any specific lack of investment, failure to provide sufficient infrastructure or offer efficient service levels. Instead, there have been forces that the port authority cannot directly control, such as the slowdown in US automobile manufacturing and lower demand for coal, plus increased demand for containerization of traditional breakbulk commodities. The global recession that commenced in late 2008 and continued throughout 2009 severely impacted cargo volumes being shipped on key trading routes, such as between Asia and the US, and met by ports in the Mid and South Atlantic region. In addition there are also other industry wide trends to consider, such as balancing the need to commit space to products like breakbulk that simply need more land, or bulk commodities that generate significantly higher totals of product but at much lower revenues because they are based on critical mass. Moffatt & Nichol 0BNCSPA Infrastructure and Role in Cargo Transportation Network Page 12

39 NCSPA Infrastructure and Role in Cargo Transportation Network Z Z Z Z NCSPA Economic Impacts Forecast Volumes Moving Through NCSPA Facilities Port Opportunities/Obstacles APPENDIX

40 2. NCSPA Economic Impacts 2.1. Background and Methodology Moffatt & Nichol has included the key conclusions of the economic impact of the POW and MHC container and bulk/breakbulk activities, based on research conducted by the Institute for Transportation Research and Education (ITRE) at North Carolina State University in Raleigh, NC, a study which has been funded by NCSPA. The final report outlining the economic impacts generated by cargo-handling activities at NCSPA facilities will be published in February ITRE concluded that the container activity generated at POW is responsible for contributing to 85% of North Carolina s economic impacts when measured in terms of output, employment and taxes. The key findings of the Economic Contribution of the North Carolina Ports study by ITRE are that the container operations in Wilmington in total contribute 1.4% of North Carolina s Gross State Product (GSP) and approximately 35% of North Carolina s transportation and warehousing industry output. NCSPA activities generate $473 million in tax revenues for the state and local governments and contribute towards 65,300 jobs in North Carolina, or about 2% of total employment in the state. Container operations at POW account for approximately 89% of the 65,300 total jobs generated by NCSPA activities. While NCSPA s container operations in overall terms accounts for a small fraction of overall state income and employment, it is more than a third of the state s transportation sector output and therefore a major part of North Carolina s economic infrastructure. NCSPA container activities directly generate 41,100 jobs. Direct jobs are those jobs with local firms providing support services to POW, such as railroads, trucking companies, longshoremen, dockworkers, administrative staff, agents, freight forwarders, warehouse operators, and financial and legal services. These jobs are dependent upon this activity and would suffer immediate dislocation if the port s activity ceases. Another conservatively estimated 19,900 jobs across the state are either induced or indirectly a result of NCSPA container activity. In total, over 58,000 direct, indirect and induced jobs exist in North Carolina because of container activities at POW. These jobs do not exist because of the port but they are supported by port activities due to the provision of access to import and export trade with countries in Asia, Europe, the Middle East and South America. It is likely that companies that depend on the low cost access to the global markets that NCSPA offers would shift operations closer to other ports, and very likely out of state, if NCSPA were to cease container operations. The estimates in the ITRE analysis are derived from IMPLAN (IMpact analysis for PLANning) multipliers provided by MIG, Inc. These multipliers are based on data compiled from a variety of sources, mostly local and census information, as opposed to being estimated from national averages. IMPLAN is widely used in the analysis of the economic contribution of ports and other transportation facilities by most analysts. Economic studies for ports in Georgia, Virginia and New York/New Jersey, to name a few examples, are also based on IMPLAN multipliers. Moffatt & Nichol 1BNCSPA Economic Impacts Page 13

41 Economic impact analysis typically consists of output, employment, income and tax revenues generated by the activity being analyzed and are presented here in that order. The impacts are disaggregated into direct, indirect and induced components: Direct impacts: result from firms that are directly engaged in the movement of goods through the NC Ports; Indirect impacts: represent spending by port-related firms on services provided by support businesses (such as office supply companies, property maintenance, etc.); Induced impacts: result from payroll expenditures from directly- and indirectly-related firms that produce successive spending Output Impacts North Carolina cargo facilities, POW and MHC, support $7.5 billion in output (gross revenues) by businesses located in NC, of which $5.7 billion is due to container terminal operations at POW alone, as Table 2.2 shows. Of this total, the majority is generated by imported goods, accounting for a 90% share, with exports contributing just 10%. Of note is the fact that container activity is responsible for generating around 85% of NCSPA s economic output contribution, with bulk and breakbulk accountable for the remaining 15% share. Table 2.1: Output Impact of POW Container Operations Output (US$) Type of Goods Port Direct Indirect Induced Total Container POW 2,907,520, ,350,000 1,306,840,000 5,156,710,000 Imports MHC 148,180,000 48,970,000 37,090, ,240,000 Bulk/ Breakbulk POW 210,730,000 68,370,000 54,040, ,140,000 Container POW 330,430, ,170,000 88,470, ,070,000 Exports MHC 572,200, ,790,000 91,190, ,180,000 Bulk/ Breakbulk POW 206,530,000 90,800,000 51,890, ,220,000 Moffatt & Nichol 1BNCSPA Economic Impacts Page 14

42 Output (US$) Type of Goods Port Direct Indirect Induced Total POW Subtotal 3,655,210,000 1,240,690,000 1,501,240,000 6,397,140,000 MHC Subtotal 720,380, ,760, ,280,000 1,141,420,000 NCSPA Total 4,375,590,000 1,533,450,000 1,629,520,000 7,538,560,000 Source: ITRE, IMPLAN North Carolina s GSP in 2008 was $400.2 billion dollars, of which the total impact of container operations at POW contributed 1.4% of this total. In addition, approximately 35% of North Carolina s transportation and warehousing industry output of $9.3 billion for 2008 was directly generated by container operations at POW Employment Impacts In total, NCSPA activities help support 65,300 jobs in North Carolina, or about 2% of total employment in the state. The container operations at POW attribute approximately 89% of the 65,300 total jobs generated by NCSPA activities, as Table 2.3 and the following overview summary indicate: NCSPA container activities directly generate 38,400 jobs. Direct jobs are those jobs with local firms providing support services to POW. These jobs are dependent upon this activity and would suffer immediate dislocation if the port s activity ceases. These direct jobs include employment with railroads and trucking companies moving cargo to and from the marine terminals and private terminals, longshoremen, dockworkers, administrative staff, agents, freight forwarders, warehouse operators, as well as supporting financial and legal services; The 7,800 indirect jobs represent employment generated in the state economy as the result of local purchases by the firms directly dependent upon container seaport activity. These jobs include employment retained in such examples as local office supply firms, equipment and parts suppliers, maintenance and repair services, insurance companies, consulting and other business services. If port operations were discontinued, these indirect purchases and the associated jobs and income would also greatly decline; Induced employment of 12,100 consists of jobs created locally and throughout the state economy due to purchases of goods and services by those directly employed. These jobs are with private and public sector goods and services providers to those directly employed. Production of these goods and services would greatly decline if seaport activity ceases. Moffatt & Nichol 1BNCSPA Economic Impacts Page 15

43 Table 2.2: Employment Impact of POW s Container Operations Employment (Jobs: Full-time and Part-time) Type of Goods Port Direct Indirect Induced Total Container POW 36,900 6,900 11,300 55,100 Imports Bulk/Breakbulk MHC ,000 POW 1, ,100 Container POW 1, ,200 Exports Bulk/Breakbulk MHC 600 1, ,500 POW ,400 POW Subtotal 40,100 8,700 13,000 61,800 MHC Subtotal 1,000 1,400 1,100 3,500 NCSPA Total 41,100 10,100 14,100 65,300 Source: ITRE, IMPLAN 2.4. Tax Impacts With respect to the impact of POW container operations in terms of taxes, corporate, personal, and business taxes totaling $499 million were paid to state and local governments as a result of the goods moving through NC ports. Of this total of $499 million of tax revenue, approximately 95% was generated by container activities at POW, as Table 2.4 indicates, with business sales tax and local business property tax representing the two largest components by a significant margin and collectivity responsible for more than 85% of the POW container total. Moffatt & Nichol 1BNCSPA Economic Impacts Page 16

44 Table 2.3: Tax Revenues Generated By POW Container Operations Tax Description POW (US$) MHC (US$) Total (US$) Business Sales Tax 238,416,000 11,894, ,310,000 Local Property Tax 170,011,000 8,508, ,519,000 State Corporate and Personal Tax 64,377,000 5,870,000 70,247,000 Total 472,804,000 26,272, ,076,000 Source: ITRE, IMPLAN 2.5. Geographic Distribution of NCSPA Economic Impacts Besides estimating the total statewide economic impacts of NCSPA s activities, ITRE has used PIERS data to estimate the economic impact distribution within North Carolina on a regional basis in order to show the split between the different constituent parts of the state. PIERS is a global import and export information service that provides port import export cargo and volume data. It is a division of UBM Global Trade, and a sister company of The Journal of Commerce. The results of this aspect of the ITRE research are identified in Table 2.5, which reflects the regional share retained by both imports and exports and by POW and MHC to container and bulk/breakbulk commodities. Figure 2.6 then outlines the geographic spread throughout North Carolina for both output and number of jobs. Table 2.4: Regional Impacts Estimates Southeast East Northeast Research Triangle Piedmont Triad Charlotte West Container POW 10% 6% 7% 16% 21% 22% 18% Imports Bulk/Breakbulk MHC 25% 52% 23% 0% 0% 0% 0% POW 32% 15% 8% 11% 15% 9% 9% Container POW 26% 13% 3% 22% 13% 16% 8% Exports Bulk/Breakbulk Source: ITRE, IMPLAN, PIERS MHC 0% 3% 97% 0% 0% 0% 0% POW 81% 14% 1% 1% 1% 1% 1% Moffatt & Nichol 1BNCSPA Economic Impacts Page 17

45 Figure 2.1: North Carolina Regional Impacts Map for Output and Number of Jobs Output $1B 10k jobs $1.3B 13k jobs $1.2B 12k jobs $0.9B 10k jobs $0.6B 5k jobs $1.3B 7k jobs Employment $1.1B 8k jobs Source: ITRE, IMPLAN, PIERS 2.6. Additional Considerations Concerning POW s Contribution to the North Carolina Economy An economic impact model estimates the number of jobs supported in the regional economy based on interindustry linkages. An examination of the types of products imported to, and exported from, POW provides an indication of the types of industries supported by its activities and this in-turn allows some insight into the composition of industry employment that POW s activities support. The results provided in Section 2.6 are direct estimates of the number of jobs in the top 20 industries supported by container operations at POW, based on the IMPLAN estimates in the Economic Contribution study by ITRE. In total the IMPLAN model estimates that a little over 58,000 jobs are supported by the import and export container operations, with the top 20 industries accounting for a little over 47,000 jobs or 81% of the total estimated. The majority of these jobs are supported by imported container volumes through POW. Moffatt & Nichol 1BNCSPA Economic Impacts Page 18

46 Table 2.5: POW Containerized Volumes and Base Employment in Supported Industries IMPLAN Sector Exports Imports Total 322 Retail Stores - Electronics and appliances 6 8,484 8, Retail Stores - Furniture and home furnishings 7 8,291 8, Retail Stores - Clothing and clothing accessories 15 5,655 5, Retail Stores - General merchandise 29 5,501 5, Retail Stores - Motor vehicle and parts 21 2,815 2, Wholesale trade businesses 224 2,232 2, Retail Stores - Health and personal care 12 1,887 1, Real estate establishments 74 1,628 1, Food services and drinking places 108 1,567 1, Retail Stores Miscellaneous 14 1,362 1, Retail Stores - Building material and garden supply 13 1,295 1, Textile and fabric finishing mills , Employment services Retail Stores - Sporting goods, hobby, book and music Offices of physicians, dentists, and other health practitioners Animal production, except cattle and poultry and eggs Services to buildings and dwellings Private hospitals Nursing and residential care facilities Retail Stores - Food and beverage Source: Census Bureau, Bureau of Labor Statistics, Moffatt & Nichol TOTAL 1,598 45,546 47,144 All but three of the top 20 industries (electronic, appliance and clothing retail and real estate establishments) listed in Table 2.6 are considered to be part of the economic base of the North Carolina economy. This means Moffatt & Nichol 1BNCSPA Economic Impacts Page 19

47 that the estimates provided offer a potential indication of base employment that could be lost if NCSPA port facilities were permanently impaired and/or industry in the state relocates. Some of these industries, such as furniture, are undergoing significant structural change, as the following highlights, and these trends are included within Table 2.6. Operations and activities at POW directly impacts sectors of employment, including, for example; The furniture industry employed 61,000 people in North Carolina in 2003 but the total began to decline as companies intensified manufacturing outsourcing to foreign locations and by 2009 slightly less than 35,000 people were employed in this industry. Adjusting this industry to take into account income generated from production and/or activities that are sold outside the region, it is estimated that almost 24,000 employees should be considered part of the base employment. If POW could not handle containers to support the furniture industry it is possible that more than the 8,297 jobs listed under item 321 in Table 2.6 above would be lost because changes in competitive conditions due to inadequate port infrastructure could motivate many companies to relocate; To estimate the total loss of employment due to industrial dislocation that would likely result from POW becoming permanently unable to handle containerized freight on larger vessels is a complicated and difficult process, for a number of potentially relevant reasons, including: Smaller vessels could still call at POW and provide some limited services that could support ongoing activities in the various industries; Specific industries could react differently to the change in freight movement services provided by POW. For example, as the furniture industry increases its outsourcing, its activities in the US become less like those of a manufacturer and more like those of a distributor. Distribution-oriented enterprises are by definition more logistics-oriented; While many of the jobs in the furniture industry are not likely to be entirely dependent on POW s activities, if the port became permanently unable to handle container vessels the industry could conceivably relocate to another state in order to be near another port to enhance its distribution efficiencies. In other words, the noted 24,000 furniture industry-related jobs could be lost if the port were to cease handling container ships and the manufacturers were to relocate operations. This scenario would relevant for each industry accepting goods through the port. Aside from the 47,000 jobs listed in Table 2.6 that support the top 20 NC industries, many other industries that are supported by base activities would also be impacted by the loss of income from the disruption. There is even the potential for future business investment in North Carolina to be negatively impacted if a lack of investment in port activities compromises current industrial and commercial requirements generating employment. In short, the likely potential economic disruption that would result if POW were unable to remain a viable point of access for cargo imports and exports is significant and very likely to have long-lasting effects. Moffatt & Nichol 1BNCSPA Economic Impacts Page 20

48 Summary Conclusion: In total, over 58,000 jobs in North Carolina are supported by container activities at NCSPA because NCSPA provides access to export and import trade with countries in Asia, Europe, the Middle East and South America. According to ITRE estimates, the cessation of cargo-handling activities at NCSPA will have direct consequences and the total effects will be discernible in North Carolina economic data and throughout the entire state. It is likely that companies that depend on the low cost access to the global markets that NCSPA offers would shift their operations closer to other ports, potentially out of state, if NCSPA were to cease container operations. This could have a permanent and wider spread effect than that estimated in the ITRE report. Moffatt & Nichol 1BNCSPA Economic Impacts Page 21

49 NCSPA Infrastructure and Role in Cargo Transportation Network Z Z Z Z NCSPA Economic Impacts Forecast Volumes Moving Through NCSPA Facilities Port Opportunities/Obstacles APPENDIX

50 3. Forecast Volumes Moving Through NCSPA Facilities 3.1. Sensitivities Influencing Cargo Forecasts Moffatt & Nichol has utilized a number of quantitative and qualitative sensitivities which influence the container and non-container cargo forecasts to Section to Section outline these relevant factors, which have been sub-divided into internal forces, external forces and policy issues Internal forces Local economic issues, including regional population growth forecasts and demographic migration throughout the North Carolina region Throughput cargo volumes at POW and MHC will continue to be driven predominantly by demand and production output stemming from the local North Carolina consumer base and manufacturing industries. Hence, economic indicators which signal the relative strength and weakness of these groups can help provide guidance relating to the outlook for the commodity flow through NCSPA ports. In terms of the local consumer base, employment growth in North Carolina has recently returned into positive territory on a year-over-year (YOY %) basis, and has led the national average as noted in Figure 3.1. It should be noted that despite this relative out-performance in growth, the State s unemployment level is currently equal to the national 9.6%, and has recovered from a trough level of 11.2% which was almost a full 1% weaker than the national low. However, the State has a $3.5 billion deficit and is expected to consider a program of retirements and possibly redundancies that will see the level of unemployment increase. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 22

51 Figure 3.1: Employment growth in the US, North Carolina and Wilmington MSA Source: Bureau of Labor Statistics; Moffatt & Nichol While perhaps not a signal of outright economic strength, the upturn in employment figures remain suggestive of a level of stabilization and further corroborate the evidence of other national economic indicators, such as retail sales and manufacturing output. Moreover, the relative growth of the North Carolina employment sector suggests that the strength of the local consumer should continue to remain in-line with the national average of the US, as Figure 3.2 shows. Figure 3.2: Personal income growth in US and North Carolina, Source: Bureau of Labor Statistics; Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 23

52 In addition to the employment sector, the strength of the North Carolina consumer can be gauged by the growth rate of personal income. In nominal terms, income growth in the State over the past three quarters has increased by an average rate of 2.7% compared to the average 1.1% experienced nationally during the same time period. As a result, the relative strength in North Carolina s personal income growth suggests that the local consumer base should continue to produce demand for household related goods in-line with or greater than the national average. It is important to note that while the growth rates in both employment and income in North Carolina signal that the worst of the economic recession is over, there is still some way to go to be completely free of the downturn: Pressure on employment sector is expected to continue through 2011 as a result of relatively slow job growth (slow compared to previous post-recession periods) as well as increased layoffs from the public sector. As a consequence, this does not indicate any significant increase in consumer spending in the first half of The possible termination of longer-term unemployment benefits if Congress fails to ratify extensions could also have an adverse effect on the outlook for the local consumer sector. However the current insured rate in North Carolina is 3.1% relative to the national average of 3.5%, thereby suggesting that the State will fare better if such an event occurs. Residential construction demand in North Carolina has declined dramatically over the past four years and consequently the throughput volumes of construction-related commodities, including lumber, handled at POW and MHC have also decreased. As noted in Figure 3.3, new residential construction permits in the State have been at the lowest levels experienced over the past 20 years, and while some improvement is expected, it will take an average growth increase of 15% per annum over the next five years for permit levels to reach the approximate average of 450,000 experienced over much of the past decade. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 24

53 Figure 3.3: New residential construction permits in North Carolina (12-month rolling sum), Source: US Census Bureau; Moffatt & Nichol Nevertheless, the population growth forecasts for North Carolina over the next decade are well above the national average and, therefore, demand for housing and construction related goods is estimated to remain stronger in the long-term, improving projections for construction-related commodities to be handled at NCSPA facilities. An indication of the relative strength of some other key industries which drive demand for cargo through the North Carolina ports can be established by comparing the national industrial output statistics for those respective industries, as illustrated in Figure 3.4, allowing some key conclusions to be drawn, including: Pork and poultry industries are the top performers of those identified. This is because output from these respective industries has remained relatively stable over the past three years, driven by strong demand for meats from increasingly wealthier developing nations, particularly in East Asia and the Middle East; Pulp production appears to have picked-up following a slowdown in The long-term demand for fluff pulp is estimated to remain strong; Tire production in the US has also seen a marked rebound beginning in 2009 and has spawned demand for rubber. The recovery can partially be attributed to the imposition of US tariffs on Chinese produced tires; Furniture production remains at historically low levels. While this may limit the prospect of export for these commodities, it does imply the necessity of import substitution to meet demand. One specific potential downside concerns frozen chickens. In September 2010 China imposed a tariff on imported frozen chickens from the US, which it maintains is a result of the US imposing tariffs on tires Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 25

54 produced in China. Regardless of the complexities, Moffatt & Nichol estimates that US exports of this commodity are likely to suffer as result in overall terms. Figure 3.4: US industrial production by industry, Source: US Federal Reserve; Moffatt & Nichol Summary Conclusion: NCSPA s ports handle a wide range of different commodities that can expect to see a slow and steady improvement in the volumes (breakbulk, bulk and containers in the short to medium term) due to the influence of factors in North Carolina, such as personal income and stronger demand improvements in key industries such as construction. However, both POW and MHC need to maximize the quality of facilities offered and infrastructure available to current and potential customers. For some cargo activities, notably containers, there are other ports already able to serve key hinterlands within North Carolina, so it is imperative that NCSPA port facilities fully maximize any advantages available, including favorable economics helping to serve future cargo growth and demand External forces Key economic factors influencing cargo demand, such as outsourcing of manufacturing and Free Trade Agreements Over the Past 60 years world trade in manufactured goods has grown on average slightly twice as fast as global gross domestic product. This means economic growth isn t the only driver of trade growth. If anything, there is a virtuous feedback cycle whereby trade growth drives economic growth, which in turn results in more trading activity. The catalyst of this cycle is a confluence of structural trends that has increased both Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 26

55 the demand for and efficiency of trade. More efficient or lower cost trade allows the world economy to reduce inefficiencies and therefore reach a higher level of output. The main structural catalysts are shifting demographics, falling trade barriers and transportation infrastructure improvements such as the containerization of trade. These factors induced companies to relocate production facilities to areas with higher demand growth and/or lower labor costs. This trend is referred to as outsourcing or off-shoring. Outsourcing was a major driver of U.S. imported container volume growth over the past decade. Consumption of goods was increasingly met by products made in other countries. This is fairly evident from a few casual observations, such as the jobless recovery of , and North Carolina, long a U.S. furniture manufacturing center, becoming for the first time a net importer of furniture in Most outsourcing was and continues to be profit-motivated as opposed to simply focused on cost reduction Developing economies have younger populations than mature industrialized nations. Younger people are paid less than older people and also spend more of their income on goods than on services. Companies operating in aging developed economies needed to shift their operations to countries with younger populations because those markets were growing faster. It is difficult to sell products produced with expensive developed market labor to workers in emerging markets earning far lower wages. Companies that have moved their production operations offshore to access faster growing markets have also been able to increase their profits by importing their foreign-made goods into the US. This has been helped by declining transportation costs and increasing the reliability of supply chains. Outsourcing of low-value products such as apparel and disposable plastic utensils began decades ago. This has been extended to higher value goods such as furniture and automobiles and continues on a global scale. Fiat plans to launch the conventional combustion engine version of its 500 model in America. The car will be manufactured by Chrysler in Mexico, with engines supplied from a Michigan plant. Japanese companies have been making new investments in China even as they continue to retrench and restructure at home. Nissan Motors plans to open a design studio in Beijing in 2011 the first Japanese automaker to do so in China. Isetan Mitsukoshi, Japan s largest department store, announced plans to open its fifth department store in China next year, while closing a long-established store in Tokyo. Other Japanese retailers are also planning their first outlets in China. Data for domestic output and employment by manufacturing industries indicates this process is not yet complete in the US either. An examination of employment trends in 17 manufacturing industries whose output is usually transported as maritime freight indicates that since 1990 only three have reduced payrolls by 60% to 80%. Lagging industries, such as automakers, have only reduced U.S. employment by 15% to 40%. Only the food manufacturing industry, which seems to be the least vulnerable to outsourcing, has maintained employment close to its 1990 level. Companies whose products are frequently redesigned may find that outsourcing to Asia makes less sense than to near-source to Mexico, Central America or the Caribbean. Seasonal apparel is a good example. New Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 27

56 apparel usually begins to show up on store shelves about six weeks before the next season begins. Frequently redesigned products such as consumer durables could be delivered more cheaply if parts are shipped to Central America or the Caribbean for final assembly. Products that are intended solely for the U.S. market are also not good candidates for outsourcing to Asia since the costs of a complex supply chain may outweigh the benefits of labor cost savings. Thus, some of what was outsourced to Asia is likely to be relocated to near-source locations in North and Central America, and possibly the Caribbean. It is possible U.S. industries that have not outsourced a lot so far may do so, but that could conceivably be near-sourced as opposed to outsourced to Asia. Outsourcing trends must be followed closely because they will be a major driver of change for the freight movement supply chains. Some of that change may not benefit all segments of the transportation industry. If some outsourced production is located in Mexico that would help railroad and trucking company volumes grow, but not port volumes. The outlook for the US economy in 2011 is positive if compared to By the end of the 2011 decisionmakers are likely to feel that the risk of falling behind their competitors exceeds the risk of committing to an expansion or strategic development plan. Evidence that volumes in many, but not all, industries have regained or surpassed their previous peaks will prompt the decisions to shift from cost-cutting to investment. This is important because investment increases productivity and therefore growth. Moreover, the economies of those regions with whom the US trades are growing supports US export growth and reinforces the recovery trend in place. While the economy for 2011 will sail more smoothly than in 2010, some potential obstacles remain in place and worthy of note, including: The real estate markets and the banking system are not fully recovered and stability may still elude these sectors for some time after the rest of the economy has healed and moved on; China s unsustainable currency policy may be the greatest threat to full recovery of the US and global economies. The longer the pegging to the US dollar policy is allowed to continue, the fewer the options available to resolve matters with the least amount of volatility. China is too dependent on export growth to allow the Yuan to appreciate to a more market-based value very quickly. On the other hand, if China continues to de-industrialize other economies at the rate that it has over the last decade (the US isn t the only country to see manufacturing relocate to China), it will drain purchasing power from the markets it depends on in order to keep developing. Meanwhile many emerging market economies will suffer as the Federal Reserve takes actions that indirectly will lower the exchange value of the dollar and worsen the effects of Yuan s peg. Figure 3.5 shows retail sales and inventories not adjusted for inflation since Retail sales peaked in November 2007 and troughed during the December 2008 to April 2009 period. Since then retail sales have Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 28

57 been recovering and at the pace of the past 12 months, will regain the November 2007 peak in May of This could happen sooner if the recent improvements in the labor market pick up some momentum. However, it is important not to count too much on improving employment to boost retail sales. Credit card delinquencies have peaked but remain close to historically high levels. Mortgage delinquencies remain close to 10%, which is the historical peak. It will take some time for consumer finances to stabilize, even if employment were to rise very quickly. Inventories have reacted to retail sales with a lag, they reached a peak three months after sales peaked in November 2007 and troughed seven months after sales troughed. Since November 2009 inventories have increased, but far more slowly than sales. The inventory to sales ratio, shown on the right hand axis is past its trough but still below trend. It seems that there is further inventory rebuilding to come as consumer spending continues to hold up. The poor consumer spending trends are evident in the industrial production and capacity utilization indexes published by the Federal Reserve. Both troughed in the second quarter of 2009 and have been recovering steadily. However, they remain well below average or trend levels. Given the current pace of recovery the previous peaks of 2007 would not be reached until the middle of Figure 3.5: Retail sales, inventories and inventory/sales ratio, $ Billions Inventory/Sales Ratio Inventory Retail Sales Inventory/Sales Ratio (right axis) Source: US Census Bureau Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 29

58 Between industrial production, retail sales and inventory building trends, the economy is climbing out of the deep recession during the periods, as Figure 3.6 shows. This is quite remarkable considering that consumers suffered a decline of house values and home ownership has been the core of household wealth for decades. It is also notable because the banking system has been devastated by excess exposure to the housing sector. Since the financial crisis began in 2008 banks have been reducing loan portfolios and leaving little support for companies needing to finance inventories or make capacity investments. In terms of projections for 2011, a 2.4% growth rate looks likely. This would be less than the 2.7% growth rate that 2010 is likely to finish with, but the lower annual growth rate masks a pattern whereby growth in the first half of the year is lower than in the second half. In short it looks like 2011 will be another story of two halves low growth to start with but acceleration as the year progresses. The key trading partners of the US, Europe, Asia and Latin America are also likely to see a deceleration of growth which may have the opposite pattern of the US. However, this deceleration is not likely to keep the US economy from accelerating during This outlook bodes well for the overall freight movement industry, notably ports. With low interest rates and inflation policymakers should not engage in practices to slow growth down during As companies and public sector authorities gain confidence in the recovery, investment could increase more than anticipated, with growth in investment spending likely to be higher than consumer spending. Figure 3.6: Industrial Production, January 1967 July Jan-67 Jan-70 Jan-73 Jan-76 Jan-79 Jan-82 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Capacity Utilization (left axis) Industrial Production (right axis) Source: Federal Reserve Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 30

59 Global trade agreements help to facilitate trade. There have been nine such agreements completed between 1947 and 2008, which began with the Global Agreement on Trade and Tariffs at the Geneva Round and most recently the failed Doha Round, which began in Other notable examples include the Maastricht Treaty in Europe and North American Free Trade Agreement (NAFTA), which has contributed significantly to trade growth impacting the US, as did China s ascension to the World Trade Organization (WTO) in 2001, which boosted demand for goods from that country to the US and Europe. In 2007 the Business Roundtable estimated that 50% of world trade takes place under free trade agreements, with about one-third of them having been established in Asia since Table 3.1 offers a summary of Free Trade Agreements on a global basis. The US remains an important participant in the FTA process as both a consumer and producer of commodities involving international shipment. Table 3.1: Overview of Free Trade Agreements FTAs negotiated globally Aproximately 300 FTAs negotiated since 2002 in Asia-Pacific 119 Percentage of world trade occurring through FTAs 50% Countries with which China is negotiating or has proposed FTAs 28 EU FTAs 21 US FTAs 10 Source: Moffatt & Nichol Summary Conclusion: The role of trade barriers is worthy of mention because the signing of free-trade agreements help to generate more cargo potential overall. However, all competing ports in the same region still need to ensure efficient service levels are maintained at competitive prices and cargo demand hinterlands can be effectively served. In essence, these are crucial factors which place NCSPA in the same position as any competing port, seeking to attract additional cargo volumes and customers through being the most cost effective and efficient facility to link hinterland demand of which shipping is the essential component. Investment in any infrastructure and facilities supporting POW and MHC is needed to maintain or enhance regional competitiveness and hinterland connectivity requirements that are not going to change in the future Summary of Competing Mid and South Atlantic Ports Ports fall into different categories as far as their natural market is concerned with the geographic location and quality of facilities dictating which type of traffic they are competitive for attracting. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 31

60 Figure 3.7 provides a summary overview of the location of each port competing to serve Mid and South Atlantic markets, plus the major Interstate road and rail connections currently provided. Savannah and Norfolk enjoy the benefit of receiving rail service from both NS and CSX, with other listed ports seeing more limited rail connections. Figure 3.7: Overview of Major Road and Rail Routes for Ports in Mid and South Atlantic Region Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 32

61 It is important to note that many of the competing ports in the Mid and South Atlantic region handle more than just containerized freight and offer facilities for general cargo, ro-ro, project cargo and forest products. Of the listed terminals, only Seagirt (Baltimore), APM Terminals (Portsmouth/Virginia) and Garden City (Savannah) state that the facilities are dedicated for containers and do not mix the operational activity. The ability to offer stand-alone, dedicated facilities for different cargo handling does improve potential for operating efficiencies and can mean productive use of land for box activities. However, there is a requirement to ensure that all supporting infrastructure is in place and effectively contributes to the overall competitiveness of the terminal. The type of cargo being handled at a port will also influence the competitive environment: Container trade handled by competing ports in the South Atlantic region varies to reflect cost and time factors, road, rail and highway infrastructure, as well as long-standing patterns of trade connecting regional shippers and certain industrial sectors with regional ports. It is important to understand the inland regions served by the port, with markets in close proximity typically those where the port retains the biggest competitive advantage and the highest market share among competing ports. More distant inland regions, (such as the US Midwest for Atlantic ports), would be more competitive regions, i.e. discretionary markets, and are frequently served by rail. These discretionary markets are typically viewed as opportunities for growth by other ports. Shipping lines publish schedules and make weekly calls at designated ports on a roundtrip voyage basis; For bulk cargoes being shipped, port choice is driven by the hinterland requirements. This means that the commodities are transported to where the end user needs it and is located. As such, the routing option is not a decision of the shipping lines. In this respect the use of a port is dictated by where the buyer needs/wants the cargo and cost to transport through the port itself. The other major differential with bulk cargo is that once all facilities are in place at the port it is unlikely to move to another facility unless the end-user s geographic location changes. It is, therefore, unsurprisingly that mixed-cargo use remains commonplace throughout many ports serving the Mid and South Atlantic region, as Table 3.2 shows. Ultimately the customers being served will help to dictate the optimal operating environment. Larger ships seeing bigger load/discharge exchanges of containers will prefer a pure container-only facility but a shipping line with more of a mixed-cargo service will require a facility capable of successfully handling all types of cargo while a bulk carrying ship will need special equipment, such as a conveyor to dedicated storage warehousing. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 33

62 Table 3.2: Comparison of Cargo Activities at Ports Serving the Mid and South Atlantic Region Port Terminal Containers Breakbulk/General Cargo/Project Cargo Forest Products* Ro-Ro Liquid/dry bulks Baltimore Seagirt Dundalk North Locust Point South Locust Point Virginia Ports Auth. APM Terminals (Portsmouth) Newport News Norfolk International Terminal Portsmouth NCSPA POW NCSPA MHC Charleston Columbus Street North Charleston Wando Welch Savannah Garden City Ocean Terminal Brunswick Jacksonville Blount Island Talleyrand Dames Point Note: * = includes wood pulp, paper products, lumber, plywood etc Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 34

63 Table 3.3 provides a summary overview of the basic container-handling infrastructure provided at ports and individual terminals that aim to serve the Mid and South Atlantic region. Key competitive parameters outlined include size of each facility, water depth, length of quay for ship berthing, number and size of cranes, availability of on-dock rail to help precipitate better intermodal connectivity. Table 3.3: Summary of Facilities at Ports Handling Containers in Mid and South Atlantic Region, 2010 Port Terminal Size (acres) Quay Length (feet) Number of cranes Est d Container Capacity On-Dock Rail ( 000 TEU) Px PPx SPPX Baltimore Seagirt 284 3, Dundalk 570 9, North Locust Point 89 1, South Locust Point 79 3, VPA APM Terminals (Portsmouth) 230 3, ,300 Newport News* 141 3, Norfolk International Terminal 800 7, ,100 Portsmouth** 285 4, ,300 NCSPA Existing POW 200 6, Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 35

64 Port Terminal Size (acres) Quay Length (feet) Number of cranes Est d Container Capacity On-Dock Rail ( 000 TEU) Charleston Columbus Street 120 3, North Charleston 130 2, Wando Welch 325 3, ,650 Savannah Garden City 1,200 9, ,500 Ocean Terminal** 200 5, Jacksonville Blount Island 754 5, Talleyrand 173 4, Dames (Trapac) Point 158 2, ,000 Note: * = A breakbulk/ro-ro facility, all container operations centralized at other VPA facilities in August ** = Designated as a mixed-use facility, handling containers, ro-ro and general cargo/breakbulk. *** = Listed as a potential option. Px = Panamax, PPx = Post Panamax, SPPX = Super Post Panamax. Source: Moffatt & Nichol Although Table 3.3 provides a synopsis overview of the basic cargo-handling facilities at ports and terminals, the following summary outlines key components for each competing ports serving the South Atlantic region. Specific emphasis is highlighted in relation to two of the most important factors helping to influence this competitiveness, and therefore potential ability to attract and retain cargo, of the different ports, namely hinterland (road/rail) connectivity issues and maritime access for shipping. Baltimore: Baltimore is located close to the northern extremity of Chesapeake Bay on the Patapsco River. Its location 150 miles further inland than other regional facilities means iti hinterland access is good geographically, which is endorsed by its terminals being very close to I-95, with I-70 also within very quick access and allowing a direct route to the Midwest. However, this port s location does Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 36

65 necessitate a longer sailing time from the main shipping routes and to put the fact into perspective, a ship sailing from (for example) Savannah to New York will need to account for an additional distance of around 320 nautical miles for an inbound call added at Baltimore (and the same distance to exit). The port offers a variety of cargo-handling facilities, covering containers, ro-ro, forest products and project cargo across a wide-variety of terminals. Yet there are no-known large-scale plans to expand capacity for any specific commodity based on the port authority s confirmation that it possesses sufficient tracts of land to undertake any expansion, if or when required. The greatest challenge Baltimore faces in terms of connectivity is the necessity for CSX to establish consistent rail connectivity through all bridges on existing corridors, such as: o o o The I-70/I-76 Corridor between D.C. and northwest Ohio (via Pittsburgh); The I-95 Corridor between North Carolina and Baltimore (via Washington D.C.); The Carolina Corridor between Wilmington and Charlotte, N.C. With reported figures to complete the work in excess of $700 million, clearly significant investment is required and even if achieved with the likes of New York/New Jersey immediately to the north and Virginia to the south, significant port competition will remain. Virginia Ports Authority: The Virginia Port Authority (VPA) owns a major network of cargo handling marine terminal facilities in the Hampton Roads region. VPA develops, maintains, and, through its affiliate VIT, operates container and breakbulk cargo facilities. Virginia International Terminals, Inc. (VIT), the not-for-profit affiliate of VPA, operates the VPA s three existing marine terminals in the Hampton Roads region of Virginia and its intermodal facility located at Front Royal, Virginia. The construction of VPA s fourth marine terminal, Craney Island Marine Terminal ( Craney ), is in the design phase and is expected to add up to 5 million TEU of extra container capacity as it is introduced on a phased-basis between 2022 and In addition, the VPA recently signed a 20-year lease agreement with APM Terminals America that effectively gives the agency control over all operations at the 291 acre terminal APMT Virginia, a facility claimed by the port authority to be the most technologically-advanced facility in the world. Regardless of the validity of this claim, the lease agreement does unify all marine cargo terminals in the Hampton Roads harbor under VIT operating control for the next two decades. The containerized cargo capacity for Hampton Roads port facilities, including APMT s new terminal, increased to over 4.0 million TEU in FY There is sufficient short-term capacity for growth above the FY 2009 total port volume and the subsequent introduction of Craney Island in phases after 2022 means that the port is extremely well catered for in the future. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 37

66 The Port of Virginia is already well-positioned to receive deeper draft ships because of its existing 50 foot channels, no air draft restrictions, supporting terminals infrastructure and cranes capable of servicing the largest ocean-going vessels in service. The port s terminals also benefit from substantial intermodal rail connections and services from both NS and CSX, enabling the facilities to be competitive for those markets more distantly located from the terminals. All locations where cargo is handled benefit from on-dock rail and the central rail yard at NIT is currently undergoing a reconfiguration that is due to be completed in 2012 and provide an annual capacity of 500,000 on-dock lifts. This is in addition to the 50-acre rail facility at PMT and the large-scale operation at the APMT operation that has six tracks. Charleston: The Port of Charleston is primarily served by Interstate 26, which is just two miles from all of its terminals. This connectivity also allows access to other key interstates, such as I-95, I-77, I-20, I-85 and I-40. The port maintains daily container express services from both NS and CSX, with both railroads operating yards in Charleston. There is dockside rail access at the Columbus Street and North Charleston terminals but not the Wando Welch facility which only offers access to rail via a direct-dray system. While the port authority suggests that this drayage option allows for more generous cutoff times there is a cost and time implication involved that should be noted and the current method of operating is less preferable to a direct on-dock connection, There are three terminals in Charleston that handle cargo: o o o Wando Welch Terminal is a 325 acre terminal which is the main container terminal in Charleston. While it represents about 52% of the terminal acreage in Charleston, it is estimated that it handles about 65% of the container volume. Wando Welch Terminal has acres of container storage space and 3,800 continuous ft. (1,128 m.) of berth space, making up four vessel berths. These berths are served by 10 container cranes, six of which are Super Post- Panamax, with the remaining four being Post-Panamax. North Charleston Terminal is a 175 acre which represents about 28% of the total acreage and is estimated to handle less than 25% of the total container volume. With almost 130 acres of open storage, the North Charleston Terminal also handles breakbulk and ro-ro cargo. The terminal has three container berths totaling 2,500 feet of berth space. There are six container cranes, two Super Post-Panamax and four Post-Panamax. Columbus Street Terminal is a 120 acre terminal which represents about 19% of the total acreage and is estimated to handle less than 15% of the total container volume. Columbus Street Terminal has 78 acres of open storage for containers and other cargo. With 3,500 feet of continuous berth space it has six berths, two container berths and four breakbulk berths. There are five container cranes at the terminal including two Super Post-Panamax, two Post-Panamax and one Panamax. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 38

67 There are additional facilities for other types of cargo in addition to the container facilities, further supporting the need to be able to offer capacity for loading/discharging a wide range of different commodities in the Mid and South Atlantic region: o o o o Union Pier Terminal, a dedicated breakbulk and ro-ro operation across four berths to give 2,470ft of berthing, linked to I-26; Veterans Terminal, a 100-acre bulk, breakbulk, project cargo and ro-ro facility located 1.5 miles from I-26 and has rail service from both NS and CSX; The Port of Georgetown, a dedicated breakbulk facility offering 1,800ft of quay across four berths and specializing in the handling of metals, cement, chemicals, aggregates, paper/forest products and ores, with direct access to Highway 17 and on-terminal rail support from CSX; Recently announced plans for construction of a new intermodal terminal, with both NS and CSX to get access. The inner channel in Charleston was deepened to 45 feet Mean Lower Low Water (MLLW) in 2004, and the Army Corps of Engineers is conducting a feasibility study of further deepening. There are no serious airdraft issues in Charleston with the Cooper River Bridge offering 186 feet of clearance at Mean High Water (MHW). Savannah: The two cargo-handling operations at Savannah, Garden City Terminal and Ocean Terminal, both enjoy good road and rail connections. Immediate access to both I-95 and I-16 is available and both facilities are served by NS and CSX. Garden City also offers an on-terminal ICTF to allow for unrestricted double-stack access to a wide geographical area in the South Atlantic region and further afield. The Garden City Terminal in Savannah, operated directly by the Georgia Ports Authority, at 1,200 acres is the largest single terminal container operation in North America. The terminal has 9,693 linear feet of berth, comprising nine berths. Five berths have 42 feet depth alongside, while four have 48 feet depth. These berths are served by 19 quay cranes, 17 of which are Post Panamax while the remaining two are Super Post-Panamax. Garden City Terminal has two on-dock intermodal terminals, one served by CSX and the other by Norfolk Southern. The facility represents the major on-site investment project being undertaken by GPA, with its stated objective being to increase container TEU capacity to around 6.5 million TEU The main channel has a depth of 42ft at MLLW with a 7.5ft tidal range, which provides some opportunity for larger vessels to serve the terminal, though clearly it is limited in terms of overall vessel depth. There is a multi-year Army Corps of Engineers effort The Savannah Harbor Expansion Project (SHEP) evaluating the deepening of the main channel to 48ft MLLW. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 39

68 In November 2010 the Army Corps of Engineers released its Draft General Reevaluation Report and Draft Tier II Environmental Impact Statement documents and the public comment period is expected to run until the end of January GPA is hopeful that the SHEP will gain approval before the end of 2011, with construction commencing thereafter and being completed by The Garden City Terminal has nearby access to two Interstate Highways, with both I-16 and I-95 less than six miles from the terminal. In addition, there are more than 20 major importer distribution centers (DC) in the immediate vicinity of the Terminal, one of the largest such concentrations on the east coast. This facilitates the rapid movement of containers from the terminal to the DC, with a positive impact on terminal capacity and increases the competitiveness of the facility to shippers and the ocean carrier industry. GPA also operates or leases other facilities within its local area that specialize in different commodities but which benefit from the similar hinterland connectivity, including o o o Mayor s Point Terminal, a 22-acre operation with 1,750 ft of berthing for such products as wood pulp, linerboard, plywood and paper products: Colonel s Island Terminal, a dedicated operation specializing in the ro-ro movement of automobiles and the handling of agri-bulk commodities; Marine Port terminals, a 145-acre terminal leased to Logistec Inc and handling a diverse mix of bulk and breakbulk commodities. Jacksonville: Located in Northern Florida, the Port of Jacksonville handles a combination of container, automobile, bulk, breakbulk and refrigerated cargoes, across a number of different terminals. The Blount Island Terminal and Dames Point Terminal are connected to I-95 via seven miles of State Road 9A, while Talleyrand Marine Terminal is located adjacent to I-95 directly. There are three terminals at Jacksonville, as the following confirms: o o Blount Island Terminal is a 754 acre terminal with about 250 gross acres (150 net) dedicated to container operations with four container terminal tenants. The terminal also handles ro-ro, breakbulk, project cargo and liquid bulks. Although it is located just nine nautical miles from the Atlantic Ocean, with 5,280ft of berth offering a depth alongside of 40ft and 1,350ft of berth having just 38ft of draft, the size of vessel able to call is clearly restricted. Talleyrand Marine Terminal is located 21 nautical miles from the Atlantic Ocean on the St James River and the 173-acre facility serves as the common user terminal for containerized cargo as well as autos, liquid bulk and various breakbulk cargoes, including steel, lumber and paper, and a variety of frozen and chilled goods. Talleyrand Marine Terminal has 4,800 feet of berth recently deepened to 40 feet alongside, serviced by six container cranes (one 50-ton, two 45-ton, three 40-ton) as well as 120,000 square feet of refrigerated/freezer space. On-dock rail facilities are Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 40

69 operated by Talleyrand Terminal Railroad, Inc., which provides direct switching service for both NS and CSX, plus this facility is located less than 30 minutes from Florida East Coast Railroad's intermodal ramp; o Dames Point Terminal comprises 585 acres of land owned by the port authority, located just 10 nautical miles from the Atlantic Ocean and is the location of the port authority s major investment initiatives. It represents the site of the recently developed 158-acre MOL/TraPac terminal, which has a stated capacity of 1 million TEU, and provides two 1,200ft berths with a water depth alongside of 40ft. The facility is served by six Post-Panamax cranes (two 50 ton, four 40 ton). Dames Point is also the site of the planned 90-acre Hanjin Terminal, originally expected to open in 2014, with a stated capacity of 800,000 TEU. This project has now stalled and the port has said that the facility is now aiming to receive its first ship in 2016, not This decision reflects yet another delay to the project and follows a one-year delay while Hanjin reached agreement with the International Longshoremen s Association (ILA) union regarding staffing requirements at the proposed automated terminal. While both Hanjin and the port authority have publicly stated their commitment to the project, the continued delays do question if this project will ever be constructed. In addition to these two container facilities, this terminal also handles bulk aggregate cargo on a 34-acre land parcel. The main channel in Jacksonville, which runs 23 miles from mouth of river to Talleyrand Terminal, was recently deepened to 40ft, with plans outlined to seek 42ft in the short-term. The long-term objective of the Authority is to achieve 48 feet by 2016 and it has stated that it intends to use the delay to the Hanjin terminal to undertake this deepening project with the new container facility opening. The dredging plan will require a $60 million jetty to control intra-coastal waterway flow for navigation purposes and authorization by the Army Corps of Engineers, so the ability to finish the deepening project by 2016 may also be questionable. Based on the acreage available for containers, and a conservative estimate of 5,000 TEU per gross acre, Jaxport would have a capacity exceeding 3 million TEU, and likely higher with additional development and higher storage density. There are also a number of other cargo activities being undertaken, enforcing the requirement for all ports in the South Atlantic to offer more than just container operations. While the federal channel along the St. Johns River is maintained at a depth of 40ft, USACE is currently considering two harbor projects: 1. To improve the flow of the St. Johns River at Mile Point, where intra-coastal and river currents pose navigational hindrances during certain tidal conditions. The Mile Point study is slated to be released in early 2011; 2. To help meet the needs of larger cargo ships entering the container trades in the future, especially after the Panama Canal expansion is completed in 2014, USACE is undertaking what Jaxport defines as a comprehensive, years-long economic, engineering and environmental study to find the optimum depth of Jacksonville's federal channel. If favorable results are provided, Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 41

70 and these are currently unknown, the port authority is hopeful that the project completion could coincide with the expansion of the Panama Canal. Deeper water would help better position Jaxport as a potential first call for larger ships on All Water routes from Asia via the Panama Canal and further outlines the potential competitive benefits available to ports benefitting from investment in better quality facilities and infrastructure. Mid and South Atlantic Port Regional Container Expansion: With respect to known or confirmed container expansion plans at existing ports serving the South Atlantic, there are several large-scale projects anticipated over the course of the next years, as Table 3.4 shows: o At Virginia the current box total of 4.7 million TEU per annum could be joined by up to 5 million TEU introduced in phases between 2022 and 2040 as the Craney Island project is developed; o The Naval Base project at Charleston will increase the existing 3 million TEU capacity by 1.4 million TEU per annum, with the first phase from 2018; o The Georgia Ports Authority has confirmed plans to raise the Garden City terminal from the current 2.5 million TEU per annum to around 6.5 million TEU by 2020; o Further expansion at Jacksonville will see around 800,000 TEU per annum of capacity added to the current estimated figure of just under 2 million TEU per annum; o Baltimore has announced its belief that it retains an adequate supply of land to support anticipated cargo growth to 2045 and has no-known expansion plans publicly available. Table 3.4: Confirmed Information Relating to Expansion Projects in Mid and South Atlantic Region Port Current Port TEU Capacity 2010 Expansion Summary Plans Key Dates Baltimore 1,450,000 No known specific expansion projects Virginia 4,700,000 Craney Island 5 million TEU 4-phased introduction between 2022 and 2040 Charleston 3,000,000 Naval Base project 1.4 million TEU From 2017 Savannah 2,500,000 Garden City expansion million TEU in total By 2020 Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 42

71 Jacksonville 1,950,000 New Hanjin terminal 800,000 TEU From 2016 Jasper County N/A Initial capacity of 550, million TEU. Ultimately could develop 7 million TEU per annum Operations currently scheduled to commence in 2025 Note: Expansion summary and Key dates based on information publicly available. Source: Moffatt & Nichol In addition to these existing port expansions, the Jasper County project in South Carolina is also worthy of inclusion. Based on current public information the proposed container terminal at Jasper County has a scheduled opening in It is due to be built on 2,000 acres of land slated for industrial development on the South Carolina side of the Savannah River, and is expected to offer 10 berths, a turning basin and road and rail infrastructure on approximately 1,100 acres of the site. When completely built out, the Jasper terminal will have a capacity of 7 million TEU. In the first of four phases, expected to be complete in 2025, the terminal will have two berths, six to eight ship-toshore cranes, rubber-tire gantry cranes to work the container stacks and a small, two-track intermodal yard. It will be capable of handling between 1.2 million and 1.4 million boxes. The Jasper site was acquired jointly by the Georgia and South Carolina ports authorities from the Georgia Department of Transportation in July Although the two states own the land, the U.S. Army Corps of Engineers holds a permanent easement on the property, which it uses to store dredge spoils. Role of Larger Cranes: Another important factor influencing a terminal s competitiveness, especially for container activities, is the size of crane able to serve the ship. As a guide, Figure 3.8 outlines the typical differences between Panamax, Post-Panamax and Super Post Panamax cranes in terms of the size of vessel that can be handled. A generic rule of thumb is that larger ocean going ships require cranes that are taller and have a longer reach across the ship. As container ship sizes increase after the Panama Canal expansion is completed and larger ships are transiting the waterway, there will be greater demand for Post Panamax and Super Post Panamax cranes at terminals and less requirements for Panamax cranage. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 43

72 Figure 3.8: Impact of Size of Crane for Handling Containers to/from Larger Ships Note: Number of containers each crane must span is offered as an indicative guide. Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 44

73 Water Depth Issues: As Table 3.5 identifies, the facilities handling containers on the eastern seaboard offer a range of different water depths, and it is important to note that the restricting factor may be the port s berth or the access channel to reach the port s terminals or in some instances a combination of both. Looking at the Mid and South Atlantic region specifically, and based on current water depth offered, VPA (through Norfolk and the APMT facilities) can receive the largest ships in service and are wellplaced to serve Super post-panamax units after the Panama Canal expansion is completed in 2014 and bigger ships continue to enter service. Other competing ports are more limited. Charleston can also receive larger ships because of its channel depth of 47ft and river channel and berth depth of 45ft at the Wando Welch facility, although its other terminals offer just 40ft at the berth. By way of comparison, Savannah can provide a consistent 42ft at the Garden City terminal and has some tidal range to assist but needs to dredge its channel to accommodate larger ships. In fact, the port recently saw the shift of an MSC service that incorporates ships of up to 8,400 TEU in size to Charleston where such units are able to be accommodated. The water depth to access POW is restricted and, as a consequence, the size of vessel that can be accommodated is also lower, though it is also clear that with the exception of terminals at VPA, many other ports in the Mid and South Atlantic region also need to attain deeper water to be in a position to receive the projected larger vessels entering service in the future. With the trend for bigger ships set to continue after 2014, the pressure on ports to be able to offer sufficient water depth in access channels and at berths will only intensify and NCSPA facilities need to keep pace with this demand. Table 3.5: Confirmed Channel Depths/Berth Depths for Container Ports on the US Atlantic Coast, Q Port Terminal Channel Depth Range ft Berth Depth Range - ft Boston Conley Container Terminal NY/NJ Maher Terminals APMT Port Newark Red Hook Marine Global Terminal NY Container Terminal Philadelphia Packer Avenue Tioga Marine Terminal Tioga Cont. (ro-ro berth) Wilmington DE Port of Wilmington Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 45

74 Port Terminal Channel Depth Range ft Berth Depth Range - ft Baltimore Seagirt Dundalk, North Locust Point South Locust Point Virginia APM Terminals (Portsmouth) Newport News Norfolk International Terminal Portsmouth North Carolina POW MHC/RI Charleston Columbus Street North Charleston Wando Welch Savannah Garden City Jacksonville Blount Island Talleyrand Port Everglades Midport/Northport Southport Container Terminal Miami Lummus Island Seaboard Marine Terminal Note: Ports deemed as outside of the competitive region of the Mid and South Atlantic, such as Boston. NY/NJ, Port Everglades and Miami, are listed for full comparisons and to highlight the need for deeper water depth on much of the US eastern seaboard. Source: Moffatt & Nichol Container Volume Development: With respect to the recent development of container volumes at ports competing to serve the South Atlantic region, total container volumes have increased from almost 4.99 million TEU in 1999 to over 6.78 million TEU by the end of 2009, reflecting an average growth of 3.1% per annum. Figure 3.9 provides an overview of traffic handled between 1999 and 2009 on an individual port basis. The rapid development of containers moving through Savannah reflects growth of 11.5% per annum, although the second-highest annual increases occurred at Wilmington, with 5.3%, albeit from a low starting point, followed by just under 3% per annum at Hampton Roads. However, Charleston (-2.2% per annum) and Jacksonville (-0.2% per annum) have all seen negative growth during this 10-year period, while Baltimore has seen negligible increases of just 0.5% per annum. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 46

75 Figure 3.9: Development of Container Volumes at Mid and South Atlantic Ports, , in TEU 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 - Baltimore Hampton Roads Wilmington(NC) Charleston Savannah Jacksonville Note: Jacksonville, Savannah and Wilmington report on a fiscal year basis. Volumes for 2009 are used because they reflected the last full year of traffic available at the time of writing (Q4 2010). Source: Moffatt & Nichol, derived from AAPA data In terms of the share of existing traffic retained by competing ports, based on volumes handled, Figure 3.10 provides an outline of recent developments for the South Atlantic region. It can be seen that this port range has accounted for a consistent 17%-18% of total US box throughput, which is based on growth in the South Atlantic averaging 3.2% per annum as opposed to 2.9% for the US overall. The developing share retained by Savannah is unsurprising, based on the port s rapid growth as the dominant container facility in the region, from just over 15% to 35% during the assessment period. This change has occurred largely at the expense of Charleston which has seen a share of over 30% in 1999 to around 17% by By way of comparison, POW has seen a small, but steady, rise in share since 2003, albeit that the port still only commands less than 5% of the regional container market. Hampton Roads has continued to account for around 25% of total regional container activity, with Baltimore seeing a continued slow decline away from 10% held in 1999 to about 7% during Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 47

76 Figure 3.10: Development of Share of Traffic in Mid and South Atlantic Region, , in % 40.0% 35.0% Mid & South Atlantic share of US 30.0% 25.0% 20.0% Baltimore Hampton Roads 15.0% Wilmington(NC) 10.0% Charleston 5.0% 0.0% Savannah Jacksonville Note: Jacksonville, Savannah and Wilmington report on a fiscal year basis Source: Moffatt & Nichol, derived from AAPA data Based on container volumes reported by ports serving the Mid and South Atlantic region, the economic recovery during 2010 has aided ports to recover from the 2009 decline. As Table 3.6 identifies, all regional facilities that release monthly or fiscal year data can point to a major upturn in the number of containers handled, with all seeing double-digit percentage increases. POW has recorded the largest overall percentage increase for its FY period to the end of June 2010, albeit from the lowest starting total, with Savannah seeing the highest number of TEU handled. It should be noted that the POW figure does not take into account the traditionally stronger peakseason surge for containers that has been included by Hampton Roads, Charleston and Savannah. During 2010 there was an early peak season and it finished in August. This compares with the traditional position in which the stronger growth normally continues to include September volumes. Table 3.6: Reported 2009 Container Volumes and 2010 YTD Totals for Mid and South Atlantic Ports Port Reported 2009 Volumes Reported 2010 Volume Data Baltimore 525,296 No YTD info released Hampton Roads 1,593,355 To End of Oct = +10.7% Wilmington(NC)* 217,000 FY to End of June = +29% Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 48

77 Port Reported 2009 Volumes Reported 2010 Volume Data Charleston 1,146,919 To End of Oct = +16.3% Savannah 2,384,425 To End of Oct = +19.3% Jacksonville 754,352 End of FY Sept = +10% Note: * = Reflects loaded TEU total only. All other port figures are for all TEU activity, including empties. Data based on information available in Q Source: Moffatt & Nichol, derived from ports, AAPA. Bulk and Breakbulk Cargo Volume Development: With respect to bulk and breakbulk volumes handled at ports serving the Mid and South Atlantic region, total trade (excluding fuel) has remained flat, with only nominal growth of just 0.1% per annum since 2003, as illustrated in Table 3.7. However, it is important to note that this overall weakness can be attributed to the reduction in trade volumes over the past two years. Since 2008 demand for these goods has fallen dramatically as a result of the collapse of the US construction and steel manufacturing industries as well as the onset of the global recession. Though 2010 is has experienced a partial rebound (data through October) import volumes remain approximately 20% below 2006 s high level which coincided with high activity in US residential construction, global steel demand and agriculture consumption. NCSPA facilities at POW and MHC have historically accounted for 10% of the identified districts. Baltimore has traditionally been the largest, led by import volumes of salt and iron ore. General cargo trade at Norfolk has grown the fastest, led by increases in exports of cereals. Growth achieved at POW and MHC has been led by increases in coal and chemical imports and most recently grain imports and fertilizer exports. Table 3.7: Mid and South Atlantic Port Region Bulk and Breakbulk Cargo ex Fuel, E Tons (1,000s) E Baltimore 11,303 11,806 12,034 12,301 11,048 11,831 7,032 9, % Norfolk 3,791 3,685 4,822 5,600 6,124 6,722 4,896 5, % POW/MHC 2,874 3,502 3,812 3,640 3,859 3,913 3,590 3, % Charleston 5,751 6,067 5,806 7,185 5,619 4,448 3,439 4, % Savannah 6,939 7,978 8,554 10,008 10,554 9,571 7,791 8, % Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 49

78 Tons (1,000s) E Jacksonville 4,081 4,628 4,621 5,170 4,909 4,778 2,880 3, % Total 34,739 37,667 39,649 43,903 42,112 41,263 29,629 34, % Share E Baltimore 33% 31% 30% 28% 26% 29% 24% 28% Norfolk 11% 10% 12% 13% 15% 16% 17% 15% MHC/POW 8% 9% 10% 8% 9% 9% 12% 11% Charleston 17% 16% 15% 16% 13% 11% 12% 12% Savannah 20% 21% 22% 23% 25% 23% 26% 25% Jacksonville 12% 12% 12% 12% 12% 12% 10% 10% Source: US Census Bureau; Moffatt & Nichol In terms of specific commodities handled by competing ports in the Mid and South Atlantic region, the imports of minerals (excluding fuel) have historically accounted for 47% of the total weight of imported general cargo commodities, as Table 3.8 shows. Other notable commodities continue to be chemicals and fertilizers, and iron and steel. POW and MHC have traditionally accounted for 11% of the regional import volume of general cargo with high concentrations have been in chemicals, rubber and wood products. The NCSPA facilities have increased their share of grain imports (primarily animal feed) and this cargo type should continue to be a strong source of demand given the regional production of swine and poultry. However, it appears that NCSPA ports have been losing share of the region s noncontainerized rubber imports, though in part these have been recovered through increased containerized volumes at POW. Table 3.8: Mid and South Atlantic Port Region Imports by Commodity, E (Tons 1000s) E CAGR Ag incl Feed & Beverages 1,130 1,390 1,711 1,890 1,529 1,402 1,546 1, % Minerals ex Fuel 12,488 13,764 14,632 15,774 12,948 12,296 6,059 9, % Chemicals & Fertilizer 3,753 3,841 3,807 3,729 4,567 4,257 3,399 3, % Plastics & Rubber % Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 50

79 (Tons 1000s) E CAGR Textiles, Furs & Skins % Wood Products 818 1,260 1,501 1, % Paper & Pulp 1,383 1,393 1,303 1,627 1,711 1,670 1,259 1, % Iron & Steel 3,237 4,035 3,009 4,085 2,641 2,366 1,540 2, % Metals % Machinery % Vehicles 1,736 1,786 1,730 2,096 2,107 1,730 1,239 1, % Apparel & Consumer Goods % Total 26,113 29,155 29,629 32,470 27,525 25,095 15,916 20, % North Carolina (Tons 1,000s) CAGR Ag incl Feed & Beverages % Minerals ex Fuel % Chemicals & Fertilizer 1,043 1,148 1,123 1,133 1,574 1,425 1,359 1, % Plastics & Rubber % Textiles, Furs & Skins % Wood Products % Paper & Pulp % Iron & Steel % Metals % Machinery % Vehicles % Apparel & Consumer Goods % Total 2,295 2,768 3,039 2,991 3,117 2,707 2,245 2, % Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 51

80 (Tons 1000s) E CAGR North Carolina Share Ag incl Feed & Beverages 15% 18% 11% 2% 2% 6% 14% 7% Minerals ex Fuel 4% 5% 7% 6% 6% 6% 7% 4% Chemicals & Fertilizer 28% 30% 29% 30% 34% 33% 40% 39% Plastics & Rubber 36% 41% 36% 31% 37% 23% 16% 21% Textiles, Furs & Skins 7% 32% 12% 1% 1% 0% 0% 1% Wood Products 22% 27% 28% 32% 34% 41% 42% 24% Paper & Pulp 0% 0% 0% 0% 0% 0% 0% 0% Iron & Steel 5% 3% 5% 7% 11% 11% 10% 8% Metals 0% 0% 0% 0% 1% 0% 0% 1% Machinery 2% 0% 0% 1% 2% 0% 1% 1% Vehicles 0% 0% 0% 0% 0% 0% 0% 0% Apparel & Consumer Goods 11% 3% 4% 8% 3% 1% 2% 12% Total 9% 9% 10% 9% 11% 11% 14% 11% Source: US Census Bureau; Moffatt & Nichol Non-containerized export volumes through the Mid and South Atlantic region have become increasingly related to the agriculture industry and the port facilities which have exposure to this sector have experienced the strongest growth. As Table 3.9 highlights, although POW and MHC handle limited volumes of these commodities, the ports do see significant, and growing, volumes of wood product exports as well as fertilizers, which have also been sources of strong regional growth. Given the proximity of both POW and MHC to sources of lumber and a dedicated fertilizer production operation, Moffatt & Nichol would expect that continued global demand for lumber, fertilizer and frozen meats (though containerized at NC Ports) to continue to support export volumes through NCSPA ports. Nevertheless, the need to offer sufficient hinterland connectivity via road and rail and provision of efficient port-handling operations remain a pre-requisite to maintaining a satisfied customer base for NCSPA. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 52

81 Table 3.9: Mid and South Atlantic Region - Exports by Commodity, E (Tons 1000s) E Ag incl Feed & Beverages 1,732 1,486 2,353 3,127 3,723 3,794 4,003 3,924 Minerals ex Fuel 1,307 1,199 1,356 1,523 1, Chemicals & Fertilizer ,041 1,790 1,897 Plastics & Rubber Textiles, Furs & Skins Wood Products ,126 1,252 1,328 1,674 Paper & Pulp 2,060 1,979 2,301 2,581 3,428 2,281 2,066 2,009 Iron & Steel ,144 1,291 1,001 Metals Machinery Vehicles ,075 1,261 1,711 1,970 1,271 1,539 Apparel & Consumer Goods Total 8,625 8,511 10,020 11,432 14,586 16,167 13,712 14,448 North Carolina (Tons 1000s) Ag incl Feed & Beverages Minerals ex Fuel Chemicals & Fertilizer ,178 Plastics & Rubber Textiles, Furs & Skins Wood Products Paper & Pulp Iron & Steel Metals Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 53

82 (Tons 1000s) E Machinery Vehicles Apparel & Consumer Goods Total ,206 1,345 1,557 North Carolina Share Ag incl Feed & Beverages 2% 2% 1% 1% 1% 0% 0% 0% Minerals ex Fuel 0% 0% 1% 0% 0% 0% 0% 7% Chemicals & Fertilizer 2% 12% 15% 2% 2% 30% 54% 62% Plastics & Rubber 0% 0% 1% 0% 2% 1% 3% 3% Textiles, Furs & Skins 0% 0% 1% 0% 1% 2% 4% 8% Wood Products 6% 5% 6% 7% 9% 7% 14% 8% Paper & Pulp 21% 28% 24% 19% 16% 5% 5% 4% Iron & Steel 6% 5% 8% 11% 6% 4% 3% 4% Metals 6% 6% 5% 8% 7% 4% 4% 5% Machinery 1% 1% 2% 1% 0% 1% 1% 1% Vehicles 0% 1% 0% 0% 0% 0% 1% 1% Apparel & Consumer Goods 4% 3% 2% 2% 2% 2% 2% 3% Total 7% 9% 8% 6% 5% 7% 10% 11% Source: US Census Bureau; Moffatt & Nichol Summary Conclusion: There is clearly an established, and competitive, port market serving the Mid and South Atlantic region and NCSPA facilities remain an integrated part of the competitive market. Ports in the region continue to look to serve their own respective hinterlands but also rely on intermodal rail to ensure that more distant locations can also be served, which is something the likes of VPA and Savannah are doing much more successfully than NCSPA (which lacks comparable hinterland connectivity). Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 54

83 Moreover, competing ports in this region are all looking to invest in their facilities, through improved equipment and infrastructure. There are existing plans to increase container capacity and the Mid and South Atlantic port region will not see a shortage of container space into the next decade based on known and confirmed expansion strategies being adopted. There are some obvious challenges as well. Savannah and Charleston, for example, need to ensure that they successfully dredge the Savannah and Cooper rivers to be able to receive larger container ships in the future and any delay incurred in the process will negatively impact the ability to receive larger ships entering service. For NCSPA facilities to improve competitiveness there is a need to at least offer comparable facilities to other ports in the Mid and South Atlantic region. This is not currently being achieved, especially with respect to intermodal rail. This is investment that needs to be made for the POW and/or MHC to be more competitive to other regional ports currently serving hinterland locations that NCSPA facilities should be looking to serve instead Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis of Competing Regional Ports. Table 3.10 provides a summary Strengths, Weaknesses, Opportunities and Threats assessment of all competing regional ports, which for the purpose of this assessment includes the San Pedro ports of Los Angeles and Long Beach (due to their high volumes of discretionary Asian cargo serving markets that the Mid and South Atlantic ports seek to serve too). Table 3.10: Strenghts, Weaknesses, Opportunities and Threats Analysis of Competing Mid and South Atlantic Ports Port Strengths Weaknesses Opportunities Threats Baltimore Deeper water at berths (albeit access deviation is an issue) Deviation from open water for ships Loss of MSC traffic Container volumes largely underpinned by MSC Some rail capability issues No known expansion or significant investment plans Diverse cargo base and terminals Uncertainty over rail double-stack resolution Virginia Ports Auth. Deep water and good rail Limited local markets Heartland Corridor More expensive port Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 55

84 Port Strengths Weaknesses Opportunities Threats access aiding competitiveness costs Diverse liner customer base Significant exposure to container traffic, little other cargo base Large scale future capacity Craney Island and APM Terminals NCSPA POW Some captive liner customers Water restrictions depth Hinterland connectivity greatly increases cargo potential Trend towards larger (container) ships will reduce liner customer potential Poor rail connectivity No investment in hinterland from NCRR and NCDOT Water depth of 50ft not attained NCSPA MHC Better water depth and rail service than POW Not currently a container terminal retrofit would be required New road bypass will further improve hinterland connectivity No investment in hinterland from NCRR and NCDOT Better maritime location than POW for shipping access Size of RI and cost to develop property 50ft draft more likely due to shorter length needed and beneficial use of dredge material Water depth of 50ft not attained Use of Radio Island for box activities Charleston Deeper water than Savannah/Wilmington Lack of Asian services Competitive rates, deeper water lines to consider switch port calls Perception as secondchoice port to Savannah Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 56

85 Port Strengths Weaknesses Opportunities Threats Secured MSC Golden Gate string because ship (8,400 TEU) too large to access Savannah Loss of share of regional volumes Potential to serve North Carolina markets Lack of supporting DC activity compared to Savannah Savannah Fast-growing volumes, critical mass of cargo and customers Deviation/location from open water Continue to grow share of traffic, especially from West Coast ports Inability to finish Savannah River dredge program Successful implementation of supporting DCs Current water depth limits Diverse cargo base (not just containers) Jacksonville New Hanjin/MOL terminals Poor water depth/draft restrictions Staple future traffic provided by Hanjin/MOL No improvements to water depth Los Beach* Angeles/Long Location to serve Asian trades Higher structure/union presence cost Diversion of cargo to East Coast ports/stronger demand for All Water option Continued shift of Asian cargo to East Coast, especially after 2014 Critical mass of cargo/customers/dc s Could gain from any ILA East Coast issues impacting ports Note: * = Although the San Pedro ports of Los Angeles and Long Beach are not located in the South Atlantic region, they are listed to ensure completeness of research and because collectively around 40% of their cargo is discretionary from Asia and moves to markets US East Coast ports can also serve. Source: Moffatt & Nichol Key Shipping Trends, including introduction of Larger Ships, Expansion of Panama Canal and Operating Strategies of Ocean Carriers Shipping Line Port Choice There are a number of key factors that attract a shipping line to a port and this is somewhat generic for any facility in almost any region. It is certainly applicable to the Mid and South Atlantic region in which Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 57

86 POW/MHC competes/would compete for container traffic and include the following (which are not listed in any specific order): Geographic location ability to be close to, and serve, hinterland demand; Facility criteria requirements - water depth, size of terminal, cranes (size/type), capacity/future expansion potential, security/environmental policy; Operating capabilities berth guarantees upon ship arrival, crane speed/capacity, productivity guarantees, gate turn-times, hours of operating and working flexibility, yard equipment, use of IT/EDI/technology; Cargo demand potential and markets served size of hinterland markets, future potential, ability to help increase demand (through DC/warehousing, added value etc); Competitive pricing terminal handling charges, use of tugs/pilots, storage rent-free periods and subsequent costs etc; Inland transportation provision of efficient and cost-effective road/rail connectivity between port and regions of hinterland demand. While this list of key factors is not exhaustive, it certainly helps to understand the assessment process that a container shipping line will undertake when looking at which ports are to be called and in which order the facilities will appear on the published schedule. POW (or MHC) is judged against the criteria and compared to all other regional facilities also hoping to secure calls from the shipping line and shipper customers. One alternative some shipping lines have considered is the development of dedicated terminals. This is because this option does offer some benefits, such as: Guaranteed access to berthing; Guaranteed access to own terminal operation and thereby tailor the service to meet specific operational needs/demands; Better efficiencies gained by integrating the terminal into the liner operators wider service network, which includes the ability to consolidate services in a central location; A leverage tool to existing port operators during contract negotiations. The strategy adopted by a container shipping line is the primary driver of the amount of market share a port will command because, in somewhat simplistic terms, the ocean carrier is responsible for moving cargo volumes to/from the port. This certainly applies to the Mid and South Atlantic region and the quality of facilities, water depth and quality of hinterland connectivity represent the port s ability to help influence the decision-making process of shipping lines. However, it is also worthwhile assessing the process from the perspective of the ocean carrier. It is important to note that the ocean carrier strategy adopted will be slightly different depending on the shipping line in question and the market itself. Nevertheless, key examples of the decisions a liner operator will look to make can include: Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 58

87 Direct calls versus transshipping to/from a regional hub, All Water or direct transpacific etc; Size, speed and type of ships deployed fully cellular containerized, ro-ro etc; Capacity provision number of ships and amount of slots/capacity deployed; Ship scheduling weekly port calls, fixed-day scheduling, additional calls on inducement ; Working independently or in alliances/partnerships with other ocean carriers; Directly operating services or purchasing slots on other operator s ships; Choice of port and order of calls, plus volumes for each facility; As a result of these basic choices, shipping lines look to best match known cargo demand with the most cost effective manner of getting cargo from origin to destination. The ability of a port to offer good quality infrastructure and competitive pricing is fundamental in helping to secure traffic, especially as the criteria listed here is typical and would apply equally to NCSPA as any other operating terminal in the South Atlantic region. Historic Ship Size Development Taking this basic criteria into account, probably the most noticeable trend impacting shipping line operations historically, and which continues to be at the center of the industry is the development of ship size, especially for the shipment of containers and this trend is of prime importance for any port looking to handle cargo volumes. As Table 3.11 identifies, the key characteristics of container ships show a continued increase in size and overall dimensions. From smaller multipurpose units with capability to successfully carry boxes, to the current behemoths linking Asia Europe and Asia US West Coast, ships have continued to increase. The trend looks set to continue although there is a ceiling that will eventually be reached, curtailed by the need for deeper water, larger cranes and long quays, factors that fewer ports are able to successfully accommodate - the bigger the ship gets, the fewer the number of ports that can receive it. Historically as ships have increased in size, the ports serving the vessels have also modified and updated their supporting infrastructure and superstructure, which includes water depth at the berth and in access channels, size of cranes and supporting equipment and terminal size, yard size and configuration and gatehouse operations. In essence the need to grow with the size of the ships, which have brought higher cargo volumes, has been, and will remain, a challenge of port operators, authorities and agencies that own and support cargo-handling facilities. Table 3.11: Historic Development Outlining Typical Container Ship Characteristics Year Length (ft) Beam (ft) Design Draft (ft) Gross Tonnage , , ,540 Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 59

88 Year Length (ft) Beam (ft) Design Draft (ft) Gross Tonnage , , , , , ,000 Note: Dimensions quoted are approximate, based on typical characteristics for vessel averages for year listed Source: Moffatt & Nichol Container Fleet and Orderbook With respect to the current global container fleet being operated, based on size of vessel and length of ship, Figure 3.11 outlines the make-up of the existing position identified by the industry s shipping lines. There is, unsurprisingly, a clear trend in which the larger sized ships are much longer, and, by definition, bigger but the vast majority of the existing fleet is concentrated in the size range of up to 6,000 TEU and with a length of less than 1,000ft. This further indicates that a much smaller proportion of the fleet in Q is currently too large to call at ports in the Mid and South Atlantic range but does highlight the known trend towards larger ships cascading into new markets. Figure 3.11: Summary of Global Container Fleet Based on Ship Size & LOA, Q ,400 1,200 1,000 LOA (Feet) ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Vessel Size (TEU Capacity) Source: Moffatt & Nichol, derived from Clarksons Another useful reference for the global container fleet that can be identified is the size of ship in relation to water depth draft requirements. As expected, and shown in Figure 3.12, the larger vessels will need deeper water and the majority of the existing fleet is under 8,000 TEU and require between 30ft and 50ft of water depth. However, it is important to note that this overview includes the largest shipping line trade being Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 60

89 intra-asia, which uses a high proportion of smaller ships, with only Asia-Europe trades serviced by the very biggest vessels. However, the Atlantic port region is seeing the size of vessels calling continue to grow and it should be noted that the global container fleet is sufficient in size and critical mass to be able to introduce larger ships to Atlantic ports if both cargo demand and port infrastructure (notably water depth) were able to accommodate the vessels. Much larger ships already exist on a global basis and while it is not reasonable to expect to see the very largest ships in service calling to eastern seaboard facilities, due to growing cargo demand, it is prudent to expect to see bigger units in the future. This means that there will be continued pressure on the port infrastructure and dredging initiatives being completed in order to accommodate the larger vessels. Figure 3.12: Summary of Global Container Fleet by Size & Draft, Q Draft (Feet) ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Vessel Size (TEU Capacity) Dashed Line = 38ft Draft Number of vessels above line represents share of design draft, not actual. Source: Moffatt & Nichol, derived from Clarksons As Table 3.12 identifies, the current world fleet for container ships surpasses over 9,600 vessels, giving a total TEU slot space capacity in excess of 15 million TEU. The list of the top 20 ocean carriers highlights the existing fleets and number of ships operated. MSC continues to rapidly expand its existing fleet. Maersk Line retains the number one position, albeit that the gap between the two operators is currently small, with the Danish operator s container fleet totaling 401 units, compared to 394 for MSC and offering almost 1.75 million TEU slots, with MSC currently at 1.64 million TEU. The information is listed is for each shipping line on an individual basis and helps to also convey the depth of tonnage potentially available, including to the key alliances in force, such as CKYH The Green Alliance, which remains a key customer of NCSPA. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 61

90 This fast-growing carrier alliance collectively controls 400 ships, over 1.6 million TEU and retains a share of the global fleet that totals 10.3% and 4.1% share of ships in operation these figures are comparable to both Maersk Line and MSC (albeit that it should be remembered that the total ships and TEU slots provided are for the global operations of all shipping lines listed). Table 3.12: Container Fleet Operated by Top 20 Container Shipping Lines, Q Shipping Line Rank Total Fleet TEU Total Fleet Ships % share of fleet % share of ships World Fleet 15,826,349 9,646 Maersk Line 1 1,748, % 4.2% Mediterranean Shipping Co 2 1,635, % 4.1% CMA CGM SA 3 1,014, % 2.9% Evergreen Line 4 575, % 1.7% APL Co Pte Ltd 5 574, % 1.5% Hapag-Lloyd AG 6 567, % 1.3% Cosco Container Lines Ltd 7 546, % 1.5% China Shipping Container Lines 8 467, % 1.3% Hanjin Shipping Co Ltd 9 424, % 1.0% Mitsui OSK Lines Ltd , % 1.0% OOCL , % 0.8% K Line , % 0.9% NYK Line , % 0.7% Hamburg Sud , % 1.0% Yang Ming , % 0.8% CSAV , % 0.9% Hyundai Merchant Marine , % 0.6% Zim Integrated Shipping Services , % 0.7% Pacific International Lines Pte , % 1.0% CSAV NORASIA , % 0.4% Source: Moffatt & Nichol Moving forward the demand for larger ships is an important consideration. This is because a larger container ship that retains a high utilization will deliver better economies of scale for the shipping line. This means that although the operating costs are higher for the ship, because it is carrying higher numbers of boxes the total revenue gained less the higher operating costs will still deliver a more positive net gain to the ocean carrier. This very basic outline applies to any container trade lane, including those routes served by Mid and South Atlantic ports, and is an indication of why all ocean carriers remain keen for larger ships to be placed into service if warranted by cargo demand. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 62

91 While the current orderbook of almost 3.65 million TEU represents 23% of the total current fleet of 15.8 million TEU slots, the role of larger container ships in the existing container order book is evident. Figure 3.13 outlines the size of confirmed new-builds and delivery by year, based on confirmed data available during Q from ship yards and other acceptable sources of such data. The order book figures show the future of the containership fleet continuing a trend towards larger vessels. For example around 46% of the current order book capacity relates to vessels in excess of 9,500 TEU, and many of the major global operators are investing in ships of this classification. For example, MSC has 24 ships of 13,000 TEU and 13 orders for units in the 14,000 TEU size, which alone is likely to add around 490,000 TEU of new slots. This carrier is not alone in its strategy, with Cosco preparing for 16 ships of 13,000 TEU and both Maersk Line and Hanjin also waiting for nine units each. Figure 3.13: Confirmed Container Ship Orders by Size and Year of Delivery, Q Count of Vessel ,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 13,000 14, TEU Capacity Source: Moffatt & Nichol, derived from ship yards, PR Newswire, Alphaliner, Containerisation International While this snapshot of the order book further emphasizes the continued shift in container shipping towards a greater use of bigger container ships, it should be noted that the largest vessels are only for deployment between Asia and Europe and, to a lesser extent, on the transpacific between Asia and the US West Coast. This is because these are the only trade lanes where sufficient demand exists to have to move such high volumes of containers on a per shipment basis. Moreover, this position is not going to change in the future, which means that 14,000 TEU size ships will not be seen at ports on the US eastern seaboard for a very long time. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 63

92 However, the introduction of larger ships on the two key trade lanes highlighted here does have an impact on the cargo routes served by Mid and South Atlantic ports, including those with which NCSPA competes with for cargo. This is because the existing vessels in service between Asia-Europe and in the transpacific will be cascaded into other trade routes. This means that there will be a greater number of vessels in the 8,000 TEU size classification becoming available which can be moved into other routes, which could include cargo routes served by Mid and South Atlantic ports. At the same time many shipping lines are also continuing to order a high number of units in the 7,000 TEU to 9,000 TEU size range. For example, there are 38 confirmed orders for 7,000 TEU ships, 20 for 8,000 TEU and 45 for 9,000 TEU (if those orders from unknown parties are included of this figure 39 can be attributed to specific ocean carriers), all from a wide-range of different shipping lines, including some niche specialists like Hamburg Sud, CSAV and Pacific International Lines (PIL). This endorses the view that these ocean carriers see further opportunities in their specialist markets that require the use of bigger ships or that they are seeking to enter into the core East-West trade lanes, like the transpacific (and, thereby, after 2014 All Water via the Panama Canal to the US East Coast Atlantic region). As Figure 3.14 shows, almost all major shipping lines have, or can make available, tonnage to deploy to almost any East-West or North-South trade routes in the future, as needed, which naturally includes the All Water option using the Panama Canal. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 64

93 Figure 3.14: Confirmed Container Ship Orders by Size and Operator, Q Container Vessel Order Book by Capacity and Shipping Line Count of Vessel APL China Shipping CMA CGM COSCON CSAV Evergreen Hamburg-Sud Hanjin Hapag Lloyd HMM K Line Logistical Intermodal Maersk MISC MOL MSC NYK PIL STX-Pan Ocean UASC Wan Hai Yang Ming Zim Unkown Source: Moffatt & Nichol, derived from ship yards, PR Newswire, Alphaliner, Containerisation International Many of the major ocean carriers remain tied to a high percentage of bigger new ships. This is because these shipping lines will continue to look for opportunities to deploy new, larger ships in trade lanes that offer potential for acceptable cargo utilization. However, this means that those ports willing to be competitive will need to offer sufficient infrastructure in the form of Post Panamax and Super Post Panamax cranes and water depth, ideally in the region of 50ft on the US East Coast and South Atlantic region to receive these bigger ships. As such, any port not matching (if not surpassing) competing facilities will not be viewed as an acceptable call location by the ocean carrier industry. It remains a delicate balance for shipping lines between ordering new tonnage, maintaining cost-effective control of the freight demand/slot supply balance and wanting to see freight rates continue to rise without Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 65

94 any possible danger of over-commitment. This position was clearly seen during the 2009 global economic recession when many shipping lines had committed to large-scale ordering of new ships but demand for slot space suddenly fell, resulting in significant operating losses for the ocean carriers but still having to meet costs for new tonnage and having to find a location in which such ships could operate. As a consequence a high proportion of new ships were laid-up while waiting for cargo demand to return or existing orders were unfulfilled or cancelled. The current order books of the major container operators, as shown in Table 3.12, indicates which ocean carriers have been more aggressive in the recent past. Moving forward, with confidence returning to the shipping market during 2010 many ocean carriers are again looking to order new tonnage for the future, with larger ships representing an integral part of the orders being placed. Nevertheless based on the known shipping line fleets and order book data, it can be concluded that the ocean carrier industry will continue to look to increase vessel size where demand allows, while seeking to optimize the supply of TEU slot space with container demand. This will apply to all geographic regions, including the Mid and South Atlantic region and those terminals with the deeper water and better infrastructure will remain the preferred ports of call in the future. On this basis, it is imperative for NCSPA to be viewed as a competitive option and to do that the NCSPA facilities must offer comparable water depth, terminal capacity, levels of efficient service and acceptable hinterland connectivity to service market demand as other facilities in its competitive Mid and South Atlantic region seek to do. Failure to be viewed as a viable alternative to the likes of Charleston or Virginia, for example, will see the port lose cargo and will exacerbate the struggle to secure additional cargo. Non-Container Ship Fleet and Orderbook The situation with respect to non-containerized ships is a little different because many of these vessels do not operate on published schedules in the same way that the container ships do and are often carrying cargo related to specific contracts. This means that ships are chartered by the shipper directly, especially for the movement of specific bulk product contracts and that the location of the shipper in the hinterland to the nearest port remains the major driving factor influencing the shipping process. In addition this also means that the cargo is not discretionary and able to move through other competing regional ports, especially once all supporting facilities are in place to handle the cargo at the desired location. However, the pressure on a port to offer good quality facilities, adequate water depth and efficient hinterland connectivity does remain, regardless of the type of cargo, and this is a situation that is not going to change in the future. Hence the hinterland requirements for bulk commodities moving through NCSPA facilities will continue to dictate demand for port facilities within North Carolina. Looking at the bulk shipping fleet on a global basis, in order to help highlight the pool of vessels available to serve these cargo requirements, Figure 3.15 identifies that currently over 30% of vessels fall in the 15,001 Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 66

95 35,000 deadweight (dwt the largest weight that a ship can carry when fully loaded and the classification by which non-container vessels are measured) classification. Moreover, a similar share of vessels fell between 50, ,000 dwt size. In terms of the confirmed order book the demand is clearly for larger ships, with almost 50% currently falling between 50, ,000 dwt and over 20% actually being even larger at more than 100,001+ dwt size in size. Figure 3.15: Share of Bulk Global Ship Fleet and Order book by Size, Q % 50% 40% 30% 20% Fleet Orderbook 10% 0% 0-15,000 15,001-35,000 35,001-50,000 50, , ,001+ Note: Ship size based on deadweight (dwt) Source: Moffatt & Nichol, derived from Clarksons data To put these vessel dwt sizes into perspective, Table 3.13 provides a typical overview of the likely length and draft requirements for bulk vessels. While this information should be noted as covering the most likely dimensions of vessel length and water depth requirements, because there will always be some degree of variance based on specific ship design and construction, the summary offers a usable reference guide nonetheless regarding the size of ships that bulk ports must look to cater. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 67

96 Table 3.13: Typical Bulk Ship Characteristics Size Range Typical LOA Range - ft Typical Draft Range - ft 0 15,000 dwt ft ft 15, ,000 dwt ft ft 35,001 50,000 dwt ft ft 50, ,000 dwt ft ft 100,000 dwt ft ft Source: Moffatt & Nichol, derived from Clarksons data With respect to the multipurpose global ship fleet and order book, over 85% of all ships are less than 15,000dwt, as Figure 3.16 shows, reflecting that ports need to cater for units requiring less water depth than other forms of shipping already identified. Moreover, the current order book for this type of vessel reflects a similar trend for units of this same size classification, with around 70% of future vessels 15,000 dwt and under. As such, no significant change to the make-up of the current multipurpose fleet is anticipated in the short to medium term, at least, and ports handling vessels of this classification will not be under any additional pressure to cater for larger ships in the same way that container ships and, to a lesser extent bulk tonnage, is increasingly in terms of typical ship size on a global basis. However, while the vessel fleet size is expected to remain stable, the ability to provide good material handling capabilities (including equipment and terminal area) and have hinterland connectivity so that cargo is able to efficiently reach its origin/destination markets remains in place. Figure 3.16: Share of Multipurpose Global Ship Fleet and Order book by Size, Q % 80% 70% 60% 50% 40% 30% 20% 10% 0% 0-15,000 15,001-35,000 35,001-50,000 50, , ,001+ Fleet Orderbook Note: Ship size based on deadweight (dwt) Source: Moffatt & Nichol, derived from Clarksons data Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 68

97 Of the global Ro-Ro ship fleet and order book, the units in service are also almost entirely smaller than 35,000 dwt. As Figure 3.17 identifies, currently over 70% of the existing fleet operated is less than 15,000 dwt and over 60% of the known confirmed order book for ships of this type remain under the 15,000 dwt threshold, with the remainder less than 35,000 dwt. Once again, ports serving the ro-ro fleets will not be under pressure to offer deeper water in the short to medium term as there will be no influx of larger units entering service. However, while water depth may be less of an issue, the ability to provide good terminal efficiencies and have hinterland connectivity so that cargo is able to reach its origin/destination markets remain in place. Any port failing to meet any of the basic criteria will simply not be viewed as a competitive alternative, whether it is bulk, breakbulk or ro-ro commodities that are being shipped. Figure 3.17: Share of Ro-Ro Global Ship Fleet and Order book by Size, Q % 70% 60% 50% 40% 30% Fleet Orderbook 20% 10% 0% 0-15,000 15,001-35,000 35,001-50,000 50, , ,001+ Note: Ship size based on deadweight (dwt) Source: Moffatt & Nichol, derived from Clarksons data To put the size of these ships into perspective, the 0 15,000 DWT units are typically between 100ft 600ft in length and require a water depth of up to about 26ft, whereas the larger units of over 15,001 dwt have lengths of between 500ft 700ft, drawing a water depth of around 26ft to 32ft. It is important to note that a large proportion of the bigger vessels comprise specialized pure-car-carriers (PCC) units. Container Trade Route Analysis Ports on the eastern seaboard of the United States, including NCSPA facilities, serve several key East-West trade routes, including All Water options via the Panama and Suez Canals, as highlighted by Figure 3.18 which shows key East-West trade routes. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 69

98 Competing facilities on the East Coast have traditionally served the transatlantic trades to/from North Europe and the Mediterranean, but over the past 10 years number and frequency of Asian shipping line services have significantly increased to meet demand in the US for Asian-sourced goods. These different shipping line connections highlight the connectivity of a port with overseas trade regions. Although Europe and the Mediterranean remain a key part of trade moving to/from US East Coast ports, North and South East Asia have clearly taken a more dominant role. Trades to/from North-South locations, such as Latin America, Australia/New Zealand and Africa are significantly smaller in terms of vessel activity, deployment and volumes, often requiring niche specialism, for example as Philadelphia has strived to develop with respect to handling refrigerated cargo. Figure 3.18: East West Container Shipping Trade Routes Serving North America Source: Moffatt & Nichol Looking at the average ship size on a trade lane basis, Table 3.14 outlines the recent development of routes served by Atlantic ports. In most cases the average size of ship operated has continued to increase, with the Far East, Mediterranean and Mid East & Red Sea seeing the largest increases and the biggest average size of container ship by Q Obviously this continued increase in size of vessel being operated means that the access channel and berthing depth at terminals offered by ports must be sufficient draft naturally, or is dredged and maintained, to allow the ships to continue to call. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 70

99 Hence, any port that cannot offer deep enough water to meet the anticipated future size of ship likely to be in service will cease to appear on the schedules offered by liner companies. Table 3.14: Average Size of Ship Calling to Mid and South Atlantic Ports per Trade Lane, Average ship size Q Q Q Far East 4,044 4,495 4,722 North Europe 3,087 3,112 3,199 Mediterranean 3,524 4,080 4,058 Caribbean/Central America 2,661 2,211 1,950 Mid East & Red Sea 3,874 4,388 4,530 North Coast of South America 2,083 2,082 2,298 East Coast of South America 2,560 2,895 2,921 Australia/New Zealand 2,638 2,824 2,824 West Coast of South America 1,530 1,043 1,088 Source: Moffatt & Nichol, derived from published shipping line schedules Q Shipping line services operate with ships of a constant size in the string because the majority of the demand for space is based on consistent contracts with shippers. This means that a service using 5,000 TEU vessels is highly unlikely to include one vessel of 8,000 TEU in the string. Hence from a port perspective it will need to be able to successfully accommodate all vessels in the service but the key point to note is that all of the ships will be of approximately the same size. Any ocean carrier will look to best match known demand for TEU space (for containers) on its ships with the slot capacity of vessels in order to derive the most efficient operating methodology, while seeking any economies of scale provided by using the largest ships possible. The same applies to a ro-ro vessel or any other type of cargo to be moved. Container services and shipping line schedules are more fluid than a bulk consignment that has been chartered to fulfill the requirements of the cargo that needs to be moved as part of the pre-agreed contract. So for ocean carriers carrying containers any opportunity to interchange tonnage to best suit demand requirements will be undertaken, but only once the shipping line is confident that it will gain sufficient utilization from the vessels in service. In short, if a container liner operator does not gain the generally accepted minimum figure of 90% utilization, then it will seek to use a smaller ship or charter space from another ocean carrier. Moreover, if the overall trend in a trade lane is for ship sizes to continue to increase, as is evident in those cargo routes served by Mid and South Atlantic ports, then competitiveness offered amongst different ports vying to receive ocean carrier calls will only intensify. This position applies to NCSPA equally as to all other ports in the Mid and South Atlantic region and those facilities offering the deeper water, better terminal Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 71

100 operating efficiencies and pricing and benefitting from the stronger hinterland connectivity will succeed in terms of attracting cargo. Based on Q published container shipping line schedules, Table 3.15 provides a summary overview of the largest individual vessel in service on each of the key trade lanes served by Atlantic ports, together with the individual operator and the maximum vessel draft that the specific ship will require (assuming it is fully loaded). There are several key conclusions to note: The current largest vessel able to pass through the Panama Canal is generally accepted to be around 5,000 TEU to 5,500 TEU, depending on the exact vessel specifications, until the expansion is completed in 2014; The Suez Canal routing represents less of a bottleneck for ship size and the largest container ships currently in service, of up to 15,000 TEU (on the Asia-Europe route) can pass through this waterway; Ship sizes on North-South routes are generally smaller because of the restricting port infrastructure and water depth available in ports in Latin America and Africa. As ports in Brazil, for example, continue to dredge deeper, the largest vessels operated between North America and Latin America will also get larger. Table 3.15: Largest Size of Ship Calling to Atlantic Ports per Trade Lane, Q Trade Lane Largest Ship in TEU Shipping Line Operator Maximum Vessel Draft ft East-West Transatlantic Mediterranean 5,117 MSC 44.4 Transatlantic - North Europe 6,742 MSC 47.5 All Water Panama* 5,500 Yangming 44.4 All Water Suez 8,400 MSC 47.6 Mid East 5,980 NYK Line 42.3 Other: Multi-region/RTW 8,200 Zim 47.6 North-South East Coast of South America 5,050 MSC 44.3 West Coast of South America 4,809 MSC 44.3 Australia/New Zealand 3,100 Maersk Line 39.4 Africa 3,022 MSC 38.5 Note: * = The largest ship in service in Q3 2010, operated by Yangming, has a maximum vessel draft in excess of what can transit the Panama Canal. It has to be assumed that the ship does not operate at its maximum vessel draft. Source: Moffatt & Nichol, derived from published shipping line schedules Q Ports on the Eastern seaboard of the United States serve a multitude of both East-West and North-South deep-sea trade lanes, consisting of links to key locations including Asia, Europe and the Mid East. Table 3.16 outlines each of the various container trade lanes that are linked to the Mid and South Atlantic port range. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 72

101 Table 3.16: Mid and South Atlantic Port Range - Deep Sea Trade Lanes Served East-West Trade Lanes Transatlantic Mediterranean Transatlantic North Europe Asia All Water via Panama Canal Asia All Water via Suez Canal North-South Trade Lanes East Coast of South America (ECSA) West Coast of South America (WCSA) Australia/New Zealand Africa Mid East (& Red Sea, including India) Round-the-World/Multi-region Note: Regional/coastal services, such as to/from the Caribbean/Central America, have been excluded. The listed trade routes are regarded as deep sea Source: Moffatt & Nichol As Figure 3.19 shows, current shipping line strategy is to utilize a range of different ports on the Atlantic Coast across a number of different trade routes being served. For the purposes of this assessment, all ports on the Atlantic coast have been included because it is important to be able to understand that the Mid and South Atlantic region remains part of a common two-region call being undertaken by shipping lines. Hence exclusion of calls made at New York/New Jersey (NY/NJ) will not offer full completeness of port rotations and first inbound/last outbound calls and strategies. Indeed it can be seen that it is commonplace for NY/N J, Virginia Port Authority (VPA) and Savannah, for example, to each see a higher proportion of weekly calls from shipping lines in overall terms. However, these three ports do not satisfy all shipping line cargo demand, with a number of regional ports also called regularly, endorsing the existing inability of the largest ports to serve all hinterland cargo demand for East Coast ports. In addition it can also be concluded from the current strategies regarding the shipping line calls to Atlantic ports that: Only NY/NJ, VPA, Charleston and Savannah serve all trade lanes, which is reflective of the higher volumes handled at each of these facilities; All Water routes via the Panama and Suez canals remains dominant in terms of the number of weekly port calls being generated; In the Mid and South Atlantic region, Charleston has a traditional role of serving the transatlantic trades and this is reflected in its number of strings to/from North Europe, though the port is now known to be heavily targeting Asian services as well. Savannah has had great success in serving the Asian routes also therefore evident; Shipping lines prefer to have several alternatives for serving overlapping hinterland regions rather than just be restricted to a few port options. This ensures that some degree of bargaining position remains and also allows them to offer different first-in or last-out ports of call where multiple strings are offered; Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 73

102 The importance of intermodal rail services and facilities remain of paramount importance to shippers and ocean carriers because of the ability to serve discretionary and localized markets; Moffatt & Nichol does not expect significant changes to the current position in the future, though ports that continue to invest in capacity and operating efficiencies, while providing sufficient water depth to meet the increase size of ships, and offer good inland road/rail/intermodal connectivity to service hinterland demand will continue to be viewed as preferred gateways. Figure 3.19: Summary of Weekly Calls per Atlantic Port for East-West Trade Lanes, Q Mediterranean North Europe All Water - Panama All Water - Suez Mid East RTW/Multi region 0 BOS NYJ PHL BAL VPA WNC CHS SAV JAX PEV MIA Note: The same shipping line service will call to more than one port, so the total calls reflect multiple port calls in the same region on each service string. Source: Moffatt & Nichol, derived from published shipping line schedules Looking at the liner shipping services on a trade lane basis in more detail, Table 3.17 through Table 3.20 provide an outline of the various shipping lines offering services on each East-West trade route. The following information is provided for each example: The full port rotation, in order of ports being called; Which ports on the Atlantic Coast appear in schedules; Which shipping lines provide ships per service (which is important because the ocean carrier supplying ships then gets to influence the ports called and the order of the rotation). As Table 3.17 identifies, between the Atlantic port region and Mediterranean, Maersk Line, MSC and, to a lesser extent CMA CGM, remain the dominant operators, but calls are generally scheduled to both North and South Atlantic regions. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 74

103 Table 3.17: Weekly Atlantic Liner Shipping Services Transatlantic Mediterranean, Q Actual Operator/grouping Operation Operator Full Port Rotation (no of ships) Maersk Line/CMA CGM MSC MSC West Med/ Amerigo Exp. Med/US Loop A Med/US Loop B Maersk CGM (2) MSC MSC (3)/CMA MXX, GIT, LIV, GOA, FOS, ALG, NYJ, NFK, SAV, MIA, ALG, MXX SPE, VLC, SNS, BOS, NYJ, BAL, NFK, SAV, CHS, VLC, GIT, NAP, SPE SPE, BCN, VLC, SNS, PEV, VER, ATM, HOU, NOL, FPT, BCN, GIT, NAP, SPE Turkon Turkon Turkon GEM, IST, IZM, SAL, NYJ, NFK, SAV, MER, GEM Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. Source: Moffatt & Nichol, derived from published shipping line schedules Table 3.18 outlines published shipping line services between the Atlantic Coast and North Europe. This is a mature trade lane and that is reflected in the number of well-established ocean carrier services and operators. There is a mixture of independent operations, such as those offered by Maersk Line and MSC, but also strings provided by major alliance groupings, such as the Grand Alliance (although Hapag Lloyd is the provider of all ships in its GMX and GAX strings). Co-operation between shipping lines is also common-place and is expected to continue. Port coverage is again relatively well-spread, with both North and South Atlantic facilities often being called on the same service. Table 3.18: Weekly Atlantic Liner Shipping Services Transatlantic North Europe, Q Operator/grouping Operation ACL ACL ACL Evergreen/CKYH grouping TAE/TAS1 Actual Operator (no of ships) Evergreen (2)/Hanjin (1) Grand Alliance GMX Hapag Lloyd Full Port Rotation GOT, ANR, LPL, HFX, NYJ, BAL, NFK, NYJ, HFX, LPL, ANR, HAM, GOT ANR, BRV, RTM, LEH, NYJ, NFK, CHS, ANR BRV, LEH, VER, ATM, HOU, NOL, CHS, THP, ANR, BRV Grand Alliance GAX Hapag Lloyd BRV, CHS, MIA, HOU, SAV, NFK, ANR, THP, BRV Grand Alliance/Zim ATX OOCL (2)/ Zim (1) HAM, LEH, SOU, NYJ, NFK, CHS, RTM, HAM Hapag Lloyd AES (Transatlantic Shuttle) Hapag Lloyd ANR, NYJ, ANR Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 75

104 Actual Operator/grouping Operation Operator Full Port Rotation (no of ships) ICL ICL ICL ANR, LPL, CSR, WNC, ANR Maersk Line TA2 Maersk BRV, CHS, HOU, NFK, RTM, FXT, BRV MSC N.Atlantic MSC BRV, FXT, ANR, LEH, BOS, NYJ, PHL, BAL, NFK, NYJ, BRV MSC/CMA CGM S.Atlantic/Gulf/ MSC (6)/CMA CGM BRV, LEH, CHS, SAV, PEV, FPT, VER, ATM, HOU, Mexico/Victory (1) NOL, FPT, SAV, CHS, ANR, FXT, HAM, BRV Bridge Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. Source: Moffatt & Nichol, derived from published shipping line schedules The fast-growing All Water services from Asia are undertaken via the Panama Canal and Suez Canal, as Table 3.19 and Table 3.20 both show. According to PIERS data, the proportion of cargo moving from Asia to the US using All Water shipping line services via the Panama and Suez canals has increased from 21% in 2003 to around 29% by This is evidence of the changing dynamics of how the US Atlantic Coast region has benefitted from the diversion of cargo from West Coast ports. Indeed, as Table 3.20 shows, there are a number of well-established All Water strings via the Panama Canal being offered by almost all major alliance groupings (CKYH the Green Alliance, Grand Alliance, New World Alliance) and the biggest independent ocean carriers, such as Maersk Line, MSC, CMA CGM and Evergreen. In terms of port coverage, facilities in both North Atlantic and South Atlantic regions benefit from liner calls, with NY/NJ, VPA and Savannah notable choices for ocean carriers. However, with the Suez Canal offering no size restrictions for the current ships in service and the Panama Canal expansion delivering the ability to allow ships of up to 12,000 TEU transit, once the scheduled completion date of 2014 is met, there will be pressure on ports on the Atlantic Coast to be able to receive bigger vessels. This is because all shipping lines will be keen to extract better economies of scale available from a fullyutilized larger ship and ports that are able to receive the larger tonnage will be a more competitive option. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 76

105 Table 3.19: Weekly Atlantic Liner Shipping Services Asia All Water via Panama Canal, Q Actual Operator/grouping Operation Operator Full Port Rotation (no of ships) CKYH grouping AWE2/AWC Cosco SHA, NBO, YOK, LZC, CTB, SAV, NYJ, BOS, QIN, SHA CKYH grouping AWE3/AWY Yangming KHH, HKG, YTN, KHH, PUS, SAV, WNC, NYJ, KHH CKYH grouping AWE1/AWH Hanjin SHA, PUS, NYJ, WNC, SAV, PUS, PYO, QIN, NBO, SHA CKYH grouping AWE5/AWN Hanjin, Yangming YTN, SHA, PUS, NYJ, NFK, SAV, KHH, YTN CMA CGM PEX3 CMA CGM CWN, SHA, PUS, BLB, MIT, HOU, MOB, MIA, JAX, SAV, CHS, PTM, JEA, SIN, CWN CSAV AMEX CSAV SHA, QIN, XGG, PUS, KIN, PEV, NYJ, CHS, CAU, CTG, NBO, SHA CSCL/Evergreen AAE1/AUE2 CSCL (4)/Evergreen HKG, LZC, NYJ, NFK, SAV, MIA, LZC, SHA, XMN, YTN, (3) HKG Evergreen AUE Evergreen HKG, YTN, KHH, CCT, SAV, NYJ, BAL, CCT, TAI, HKG Grand Alliance NCE K Line/MOL AWE4/SVE K Line Maersk Line TP7/TA3 Maersk Maersk/CMA CGM TP3/ Columbus NYK (8)/Hapag Lloyd (1) Maersk CGM (9) (8)/CMA New World Alliance NYX APL (3)/HMM (5) QIN, NBO, SHA, NYJ, NFK, SAV, PUS, QIN YTN, SIN, HFX, NYJ, NFK, JAX, SAV, SIN, HCM, SHK, HKG, YTN HKG, PUS, YOK, BLB, MIA, BRV, FXT, RTM, LEH, HFX, NYJ, SAV, MIA, BLB, LAX, OAK, KHH, DCB, YTN, HKG HKG, YTN, TPP, NYJ, NFK, SAV, TPP, HKG, YTN, SHA, PUS, SEA, VAN, YOK, SHA, NBO, HKG HKG, KHH, MIT, NYJ, NFK, SAV, JAX, MIA, MIT, BLB, PUS, SHA, NBO, SHK, YTN, HKG Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. Source: Moffatt & Nichol, derived from published shipping line schedules Table 3.20: Weekly Atlantic Liner Shipping Services Asia All Water via Suez Canal, Q Actual Operator/grouping Operation Operator Full Port Rotation (no of ships) Grand Alliance/Zim Grand Alliance MSC SCE AEX Transpac (Golden Gate) NYK (3)/OOCL (2)/Zim (3) Hapag Lloyd (4)/OOCL (6) MSC SHK, HKG, KIN, NYJ, NFK, SAV, KHH, SHK LCH, SIN, CMB, CAG, HFX, NYJ, SAV, NFK, NYJ, HFX, CAG, JED, CMB, SIN, HCM, LCH SHA, NBO, CWN, YTN, SIN, SLL, NYJ, BAL, NFK, CHS, FPT, JED, SIN, CWN, HKG, SHA Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 77

106 Actual Operator/grouping Operation Operator Full Port Rotation (no of ships) New World Alliance SZX APL SIN, CMB, NYJ, CHS, SAV, NFK, JEA, PKG, SIN Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. Source: Moffatt & Nichol, derived from published shipping line schedules The Mid East trades, including the Red Sea and Indian regions, is a well-established trading route that has no size restrictions on the vessels in service. This is because access is via the Suez Canal and the transit waterway can receive the largest vessels currently in service. This trading route will benefit from growing demand in the Mid East, especially as the current liner schedules incorporate cargo demand to/from India. However, with water depth a major issue at many Indian ports it means that containers have to be transshipped at hub ports en-route, such as Colombo, or the size of ships in service need to be restricted. This is currently what is happening, based on the largest ship in service between the Mid East and Atlantic Coast ports being 5,980 TEU, which equates to a draft of around 42.5ft and requires a channel depth of around 46.5ft depending upon under-keel clearances. As Table 3.21 identifies, with two services Maersk Line is the largest ocean carrier in this trade. The company centralizes all North Atlantic cargo at NYNJ and Norfolk (where there are facilities operated by, or developed by, AP Moller sister-company, APM Terminals (APMT), with Charleston and Savannah securing one service each for the South Atlantic region. In addition, Savannah is well represented in this trade lane, appearing on all but one of the total number of service strings. Table 3.21: Weekly Atlantic Liner Shipping Services Mid East, Q Operator/grouping Operation Actual Operator (no of ships) Full Port Rotation Indamex (Hapag-Lloyd, CMA CGM, NYK, OOCL) ECNA Hapag-Lloyd (3)/CMA CGM (2)/NYK (2) NYJ, NFK, CHS, SAV, PSD, JED, BQM, JNP, MUN, PSD, DAM, NYJ Maersk Line MECL 1/SZX1 Maersk CHS, NFK, NYJ, JEA, BQM, JNP, SLL, NYJ, CHS Maersk Line MECL 2/SZX2 Maersk HOU, NFK, ALG, PSD, alt.jib, JEA, CMB, SLL, JED, AQB, PSD, ALG, NYJ, SAV, HOU NSCSA N.America service* NSCSA HOU, SAV, WNC, NYJ, HFX, PSD, JED, MNQ, JEA, JUB, DMM, SWK, BQM, MUM, JED, LIV, NYJ, BAL, HOU Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 78

107 Operator/grouping Operation Actual Operator (no of ships) Full Port Rotation UASC/Hanjin/K Line MINA/IMU/SIA UASC (6)/Hanjin (2) NYJ, NFK, SAV, VLC, GOA, PSD, JED, KLF, BQM, JNP, JED, PSD, SPE, GOA, BCN, VLC, ALG, NYJ Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. The Mid East region includes Red Sea and Indian ports. * = a 21-day frequency using multi-purpose vessels with some container carrying capacity. Source: Moffatt & Nichol, derived from published shipping line schedules There are several current shipping line services that utilize several major regions, most notably linking Asia with North America before onward sailing to North Europe or the Mediterranean. For the purposes of this assessment, these strings have been referred to as Round-the-Word (RTW) or Multi-Region, as Table 3.22 identifies. The Atlantic port region represents an integral part of all schedules, with calls made on both eastbound and westbound legs of the services. This enables Asian cargo to be discharged at US ports, before US goods bound for North Europe/Mediterranean can be loaded, with the reverse happening on the return leg. With this type of service covering a greater nautical distance than other trading routes previously identified, it means that there is a need to utilize more ships to maintain a weekly frequency. On almost all schedules, the ocean carriers are adopting calls in both the North and South Atlantic regions, with NYNJ, Norfolk, Charleston and Savannah the preferred port partners though it is noticeable that the first-in or last-outbound port of call is often varied on eastbound and westbound legs of the service. This further reflects the need to maintain calls in both regions but means that competition between ports situated in that area, such as Charleston and Savannah, is maintained to attract the liner operator s calls, as the ocean carrier looks to maintain leverage and secure more competitive costs and terms for undertaking port calls. Table 3.22: Weekly Atlantic Liner Shipping Services RTW/Multi-Region, Q Operator/grouping Operation Actual Operator (no of ships) Evergreen NUE Evergreen Grand Alliance PAX Hapag Lloyd Ports called SHA, NBO, QIN, PUS, LAX, CCT, CHS, NFK, NYJ, ANR, BRV, THP, RTM, LEH, NYJ, CHS, CCT, LAX, OAK, TOK, SHA YOK, KOB, KHH, YTN, HKG, DCB, KOB, NGY, TOK, SEA, OAK, MIT, SAV, NFK, NYJ, HFX, THP, ANR, BRV, RTM, HFX, NYJ, NFK, SAV, MIT, LGB, OAK, YOK Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 79

108 Actual Operator/grouping Operation Operator Ports called (no of ships) New World Alliance APX/CNY MOL (6)/APL (6) Zim ZCS Zim TOK, KOB, CWN, HKG, KHH, PUS, KOB, TOK, BLB, MIT, MIA, JAX, SAV, CHS, NYJ, ANR, FXT, BRV, RTM, LEH, NYJ, NFK, CHS, MIT, LAX, OAK, TOK DCB, HKG, NBO, SHA, PUS, BLB, KIN, SAV, NYJ, HFX, TGN, HFA, PIR, LIV, GOA, TGN, HFX, NYJ, SAV, KIN, LAX, OAK, DCB Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. RTW/Multi- Region services are defined as strings calling to a combination of different regions, namely Asia, North America and North Europe/Mediterranean. Source: Moffatt & Nichol, derived from published shipping line schedules The North-South trades to/from the Atlantic Coast carry smaller volumes, use smaller ships and generate fewer weekly calls. This is on account of smaller volume demand and a traditional situation that has seen lower quality of facilities in some locations, ostensibly water depth, size of cranes and connectivity to the cargo hinterlands. As Figure 3.20 identifies, shipping lines are still utilizing a variety of ports across the Atlantic port range overall but the number of weekly calls in total and for all ports is much lower than for the East West trades, reflecting lower overall demand. Other notable conclusions include: NY/NJ is the only port receiving vessels serving all trade lanes and its terminals also see the highest number of calls overall; Savannah and Philadelphia are on all schedules except to/from Africa; Boston, Port Everglades and Miami all only seeing one weekly call (with each of these strings on different trade routes); Current use of smaller ships means that nearly all ports are viable options, though even the key North-South trade lanes continue to see increases in ships deployed as the quality of facilities and water depth in previously less-developed locations (such as Brazil) are seeing major improvements; Key ports in Latin America, such as Santos in Brazil, are building and improving port facilities. Being able to offer up to 50ft of water depth is part of the process in order to be able to accommodate vessels of up to 8,000 TEU in size. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 80

109 Figure 3.20: Summary of Weekly Calls per Atlantic Port for North-South Trade Lanes, Q ECSA WCSA Aus/NZ Africa 0 BOS NYJ PHL BAL VPA WNC CHS SAV JAX PEV MIA Note: The same shipping line service will call to more than one port, so the total calls reflect multiple port calls in the same region on each service string. Intra-regional services are excluded. Source: Moffatt & Nichol, derived from published shipping line schedules With respect to the North-South trading routes that include the Atlantic Coast port range, these are outlined in Table It is noticeable that the number of different services is limited but the port range covered, based solely on the overall number of different facilities utilized, is substantial. In serving both the East Coast of South America and the West Coast of South America the ocean carriers are calling to several ports in the same region, such as NYNJ, Philadelphia and Norfolk (on the Hamburg Süd/Alianca/CSAV-Libra USEC-ECSA string) and Savannah, Charleston and Jacksonville on the MSC WCSA service. Obviously local cargo demand and type of cargo in the hinterlands each port serves will dictate where the ships will call, but the use of smaller vessels requiring a more shallow water depth does allow a wider range of ports to be considered. Although not listed because it is an intra-regional service, POW does currently receive a weekly Maersk Line string to/from Central America (Nicaragua and Honduras), that also calls at Miami, Savannah and VPA using small 1,369 TEU size ships. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 81

110 Table 3.23: Weekly Atlantic Liner Shipping Services North-South Profile, Q Operator/grouping Operation Actual Ports called East Coast of South America Hamburg Süd/Alianca/CSAV-Libra USEC-ECSA NYK ANS NYK MSC/CSAV-Libra West Coast of South America Hamburg Süd/CSAV/ CCNI Loop A ECNA- WCSA/Americas Hamburg (2)/CSAV-Libra (4)/Alianca (1) MSC (2) MSC US-WCSA MSC Australia/New Zealand Hamburg Süd/ Maersk CMA Lines CGM/Marfret/US Africa MSC/Safmarine/Maersk Line Grimaldi Lines Trident/ Oceania PAD/NASP* AMEX North America/ West Africa* Süd (5)/CSAV-Libra Hamburg Süd (2)/CSAV (2)/CCNI (2) Maersk (3)/Hamburg Süd (4) CMA (5)/Marfret (1) CGM MSC (4)/Safmarine (4)/Maersk (1) Grimaldi NYJ, PHL, NFK, CHS, JAX, PEV, CAB, SUA, SSZ, BUE, RIG, NAV, SSZ, RIO, SSA, SUA, PEC, NYJ NYJ, SAV, MIA, CAU, NAV, SSZ, VIX, SUC, CAU, NFK, NYJ NYJ, BAL, SAV, FPT, CAU, SSZ, RIO, SUA, CAU, FPT, CHS, NFK, NYJ NYJ, BAL, CHS, PEV, CTG, MIT, GYE, CLL, SAI, SVE, CLL, GYE, CTG, PEV, NYJ PHL, NYJ, CHS, SAV, JAX, FPT, PEV, CTB, BLB, CLL, ARI, COR, VAP, BLB, CTB, CTG, FPT, PHL PHL, SAV, CTG, BLB, AKL, SYD, MEL, TIU, PCH, NPE,TRG, AKL, MIT, CTG, PHL TIL, RTM, DKK, LEH, NYJ, SAV, KIN, MIT, PAP, Lautoka, NOU, SYD, MEL, NPE, TRG, MIT, KIN, SAV, PHL, TIL NYJ, BAL, NFK, CHS, FPT, CPT, PLZ, DUR, CPT, NYJ NYJ, BOS, DKR, COT, LAG, LOM, TEM, JAX, BAL, NYJ Note: Atlantic ports called are listed in bold text. Information correct at time of writing. Shipping schedules are subject to change. Number of ships is listed per operator if more than one shipping line is contributing tonnage because supply of vessels influences port choice and rotation. * = Frequency of 14 days. ** = Frequency of 14 days while using multi-purpose vessels that have capacity to carry containers. Source: Moffatt & Nichol, derived from published shipping line schedules Risk assessment in relation to serving the Trans-Pacific and Trans-Atlantic markets Traditionally, the Panama Canal routing has competed with intermodal rail service from West coast ports to East Coast destinations and, to a lesser degree, with the Suez Canal. Asian services calling Atlantic ports have, by and large, reached these ports by way of the Panama Canal. The Canal s limitations with respect to the length and width of vessels that may transit the Canal (i.e. Panama class vessels maximum TEU capacities of between 5,000 and 5,500 TEU) has led to the Canal Authority undertaking an expansion of its facilities that will, from 2014, allow ships up to 12,600 TEU in size (according to the Panama Canal Authority) to transit the waterway. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 82

111 However it is important to note that there is unlikely to be a massive or sudden change in size of ships transiting the Panama Canal. Over time the trend for use of bigger ships will continue but it will remain driven by volume demand and, depending on geographic location, capability of ports able to handle larger tonnage. The East Coast of South America is, for example, a region generating strong cargo demand but its ports lack sufficient water depth or infrastructure to receive ships that ocean carriers wish to deploy. As such, the trend for deeper draft tonnage serving this region will only be driven by the capability of the port infrastructure, including water depth. By way of comparison, the US Atlantic Coast, and mid and South Atlantic port region, is different because there are some ports already offering deeper water and larger cranes, couple with good hinterland connectivity to cargo producing and consuming locations. On this basis it means that those facilities more competitively placed, with the water depth and hinterland connectivity (such as VPA) are more viable options than at POW which lacks these important competitive components. As Figure 3.21 identifies, the location of the Panama Canal is clearly optimum to a number of major trade routes on both the East-West and North-South axis on a global basis. The situation is mirrored to some extent by the Suez Canal, which already has deeper water and plays a key role in maritime access connectivity between key cargo production in Asia and consuming locations in Europe and North America. The importance of the geographic position of the Panama Canal is only going to intensify in the future once the expansion has been completed because it will allow, in time, larger ships to be introduced to meet longer-term anticipated cargo demand. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 83

112 Figure 3.21: Key Container Shipping Line Routes with the Panama Canal as the Focal Point Source: Moffatt & Nichol For the US markets the enlarged Canal will help continue the viability of choice for trade wishing to shift from West Coast ports to their East Coast counterparts that gained momentum as a reaction to the labor lock-out at West Coast ports in the peak season of 2002 and resulted in the emergence of the All Water shipping option from Asia to the East Coast. Many shippers and ocean carriers wanted multiple options for serving the eastern regions of the US without having to rely solely on the potential bottlenecks and disruption to supply chains that occurred when using West Coast ports and intermodal rail. The shift of Asian cargo to the US East Coast is undeniable. In 2008 the Panama and Suez Canals handled more than 28% of Asian trade in this manner, reflecting an increase on 21% just 5 years earlier. The All Water route is now a firmly established cargo option, with many shipping lines and alliances offering direct services from Asia to the East Coast, most notably the CKYH Alliance, which provides five weekly strings using ships in the 4,000 TEU 4,500 TEU range. Almost all major liner companies linking Asia with the US East Coast now offer All Water services, whether via the Panama or Suez canals. The past increase in container ship sizes represented a problem for the Panama Canal, along with other issues, including: Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 84

113 Size of ship that can actually transit; Amount of ships that want to transit; Growth of key shipping line routes via the Panama Canal. The Panama Canal has stringent size limitations. The lock chambers are 33.5 meters (110 ft) wide by 320 meters (1,050 feet) long, with a usable length of meters (1,000 ft), consequently meaning that the largest container ship size that can safely transit is a maximum of around 5,000 TEU to 5,500 TEU, depending on vessel design classification. Although there are slight variations in this figure depending on the exact design specification of the ship itself, line of sight/vision through the canal and, of course, the locks, but this is the generally accepted ceiling for ship size. Therefore, as demand for access has increased ships have been limited in the size that can safely access the transit waterway in Panama so shipping lines have been forced to introduce more frequent sailings and new services as the recent introduction of additional All Water strings has proved. The confirmed expansion of the canal, due by 2014, brings the ability to introduce larger ships and with it greater volumes of cargo. To put the position into context from the shipping line point of view, Moffatt & Nichol research has indicated that for a 6,000 TEU size container vessel the saving by being able to use a larger vessel with more containers (while taking into account ship operating costs etc) would be in the region of 8% per service rotation the figure rises to 16% if an 8,000 TEU size ship was employed, so the ability to see ships as large as 12,000 TEU transiting the Canal offers potential for better economies of scale to be obtained by the liner companies assuming, of course, cargo demand warrants ships of this size being placed into service. From a shipping line perspective, the ability to utilize larger ships offers better economies of scale. Although the operating costs for a larger ship are higher, the ability to carry greater box volumes generates revenues that off-set the higher operating costs, ultimately allowing better results for the ocean carrier. While the traditional role for the Panama Canal will not change in the future, there are also other (changing) liner operating and cargo demand dynamics that mean the traditional role for the Panama Canal, as outlined above, is going to be supplemented by factors that will be of relevance. Not least of which is the desire of shipping lines to look for additional ports of call en-route between Asia and the US East Coast. Clearly, before the economic difficulties of 2009, the speed of a liner service was one of the factors by which its attractiveness was judged. Now, however, speed is less of an issue, with cargo utilization and schedule integrity taking on a much more important role. There are other reasons why Moffatt & Nichol believes that the Panama Canal will change current shipping industry dynamics, which include: The ability to serve Latin America by transshipping cargo at a Caribbean/Central America port will enable additional cargo to be carried from Asia en-route to the US East Coast on larger ships. This means extra containers loaded at Asian ports on services sailing to the Mid and South Atlantic region Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 85

114 but will stop at a Caribbean/Central America port and exchange cargo that has moved from Latin America. Clearly, demand for Latin America markets in the future will be of great attraction to all ocean carriers but transshipping via a Caribbean/Central America hub means that a more expensive deployment of ships to maintain regular strings can be off-set by transshipment using mother vessel calls to a port like Cartagena and feeding cargo to key ports in South America. This option is especially valid until ports in Latin America can receive calls directly from larger ships once improved infrastructure and deeper water depths are available; Existing import-export cargo of some Caribbean/Central American ports means shipping lines are already interested in calling to service the local demand, plus the port has staple transshipment cargo already. This helps to boost cargo utilization factors on ships; An efficient terminal operation is integral to all shipping lines because they need to ensure that schedule integrity is maintained, irrespective of slower steaming times now employed by ocean carriers. The number of ships in a string is immaterial to the need to port calls to be made as scheduled. While the transatlantic is not currently impeded in terms of ships size or access, as applies to the Panama Canal, this trade route is more mature than the transpacific All Water option via the Panama Canal and has seen lower growth over the past 15 years, a trend that seems unlikely to drastically change. This position is reflected in Figure 3.22 which shows how the total transpacific, which includes both the All Water option and the cargo routes serving the US West Coast, has grown by an average of 6.6% per annum between 1995 and 2010, to reach around 20 million TEU. This compares with average growth of 4.9% for the transatlantic trades over the same time period, as the total trade reached almost 5.5 million TEU by the end of However, growth has slowed more recently, with the 2000 to 2010 period reflective of 6% in the transpacific and 4% for the transatlantic. In terms of TEU slot capacity, the continued growth of the transpacific trade lanes between 2000 and 2005 saw a dramatic rise in the vessel slots being made available, further reflecting strong ordering of new and larger ships. The emergence of the All Water option would also have greatly contributed to the trend for more TEU capacity and helped see slots rise by an average of 6.8% between 1995 and However, the latter part of the last decade did see the liner industry slow-down with its deployment in ship space on the transpacific trade route, culminating in vessel slot capacity reaching the current capacity total of around 30 million TEU slots to serve a market demand with volumes of 20 million TEU per annum. This slowed annual growth of slot capacity to 6.1% per annum between 2000 and The growth in transatlantic capacity was 4.4% between 1995 and 2010, though it too slowed between 2000 and 2010 to 3.7%, further reflecting the greater maturity of the trade lane and economies being served in the US and North Europe/Mediterranean. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 86

115 Figure 3.22: Development of Transpacific and Transatlantic Container Volumes and Slot Capacity, , in 000 TEU 35,000 30,000 25,000 20,000 15,000 10,000 Transpacific - capacity Transpacific - volumes Transatlantic - capacity Transatlantic - volumes 5, Notes: Figures for 2010 are estimated. Transpacific includes volumes moving via All Water routes from Asia. Transatlantic includes volumes moving to/from both North Europe and Mediterranean and to/from North America. Source: Moffatt & Nichol Table 3.24 identifies that significant capacity remains in the transpacific trades, though it should be noted that the position is reflective of both the All Water options (via the Suez and Panama canals) and services just to the US West Coast. It is also evident that by the end of 2010 this trade lane will be back to its more traditional utilization figure, of around 65%, as compared with the position five years ago when large-scale ordering of new tonnage continued to occur. It is hoped that the difficult economic trading conditions endured during 2009, in which almost every ocean carrier saw significant losses, will be heeded and that rapid over-ordering of future tonnage does not occur again. However, with the rebound in financial fortunes seen by the shipping lines in 2010 there are already signs of growth in the existing container ship order book and the competitive nature of the ocean carrier industry means that a repeat scenario cannot be completely excluded. The transatlantic trades have been less volatile historically, with the ocean carrier industry maintaining a utilization of between 70% and 75%. This position is not expected to change significantly in the future, reflecting the mature level of the trade and stability being maintained. However, with shipping lines continuing to seek better economies of scale from using larger vessels, the move towards 8,000 TEU vessels is still likely because it will enable fewer ports of call to be made in each rotation, further emphasizing that even in smaller trades those ports with the water depths of 50ft will be viewed as more competitive options. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 87

116 Table 3.24: Summary Development of Supply & Demand TEU Utilization for Transpacific and Transatlantic Trades, Utilization - % Transpacific* 65% 65% 54% 64% Transatlantic 70% 73% 75% 75% Note: * = Reflective of services between Asia/US West Coast via Transpacific Ocean and Asia/US East Coast via Panama/Suez canals Source: Moffatt & Nichol By way of a summary of these two key East-West trade lanes, Table 3.25 offers a summary Strengths, Weaknesses, Opportunities and Threats analysis of current and future operating dynamics. Where applicable, the impact to the US South Atlantic region has been included and noted. Table 3.25: Strengths, Weaknesses, Opportunities and Threats Analysis of Transpacific and Transatlantic Trade Lanes from a Port Perspective Trade Lane Strengths Weaknesses Opportunities Threats Transpacific Serves higher-growth Asian demand to US All Water Panama ship size restrictions to 2014 Growing US exports back to Asia Potential Panama Canal cost increases Well-established trade lane, significant volumes USWC ports are unionized/expensive Panama Canal expansion for bigger ships potential for competitive South Atlantic ports Outsourcing to Mexico/India changing shipping dynamics No ship size restrictions between Asia/USWC Reliant upon efficient, cost-effective rail services West Coast rail congestion/ capacity issues Served by all major independent and alliance carriers Operating inefficiencies of West Coast ports Prone to larger cargo demand and freight rate fluctuations Transatlantic Well-established trade Mature trade, lower growth potential Russia and Eastern Mediterranean growth potential Weak cargo demand between North America and North Europe Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 88

117 Trade Lane Strengths Weaknesses Opportunities Threats No ship-size restrictions Growth of Suez Canal services/demand Source: Moffatt & Nichol Summary Conclusion: There are several important considerations involving shipping line trends and activities of note to NCSPA. Container ships continue to increase in size across all major trade lanes and the expansion of the Panama Canal is going to help ensure shipping dynamics change in the future over a longer-term basis. The major ocean carriers all have the shipping fleets and new tonnage on order to introduce bigger ships into service in the future to call to the US East Coast. Key trading routes, such as the East-West transpacific All-Water via Panama Canal (and Asia to US East Coast via Suez Canal) and North-South from Latin America, will see future demand necessitating the introduction of bigger ships. Competing ports in the Mid and South Atlantic region that offer 50ft of water depth, larger cranes, good road/rail access and sufficient terminal capacity will be regarded as the preferred ports of call by shipping lines in the future. For NCSPA to be competitive it will need to satisfy such key criteria in the same way that other region facilities seek to remain viable gateway cargo options. Non-container ships are less likely to see increases in vessel size, with the fleet and orderbooks for these types of ships generally remaining more similar to the current dimensions. This will place less pressure on ports in the Mid and South Atlantic region to seek deeper water to handle the units. The Panama Canal is also likely to remain a key focal point within the shipping industry. While there will be likely phased introduction of larger ships, there is also the potential for more cargo to be transhipped between East-West and North-South trade lanes, further helping to entice more cargo to be shipped through this waterway. Growth in the transatlantic trade is likely to be lower than the transpacific routing, due to its maturity and economies of countries involved in that higher cargo demand will still be generated more from Asia than North Europe. The key role for ports in the Mid and South Atlantic region is to be positioned and capable of receiving larger ships in the future, while maintaining efficient service levels at competitive prices, with good connections to inland locations of cargo origin/destination. Ports that are able to meet this criteria are the facilities likely to be more successful in the future. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 89

118 Policy issues Objectives of State government agencies, including investment in infrastructure (especially road/rail); In response to House Bill 1005, Session Law , the North Carolina Office of State Budget and Management coordinated the development of a formal report entitled The Statewide Logistics Plan which is aimed at addressing the state s longer-term economic, mobility and infrastructure needs and identified several port improvements and opportunities: Identifying priority commerce needs; Enumeration of transportation infrastructure actions, including multimodal solutions that will support key industries vital to the state s longer-term economic growth; A timetable to meet identified needs, based on inputs received from stakeholders, including state agencies, shippers, freight carriers and other private sector organizations. Consequently, in December 2009 Governor Perdue signed Executive Order No.32, which established the Governor s Logistics Task Force, a process with the following goals and objectives: Assess all existing resources and project future needs of the State s multimodal transportation systems, including aviation, highway, rail and transit, (as well as water, sewer and broadband capabilities); Investigate reductions or transfers of funds from existing governance structures to aid efficiency and avoid duplication; Identify regional programs and infrastructure that support industries vital to the State s longer-term economic viability; Explore public-private partnerships in transportation and economic development that support the overall plan; Recommend short, medium and longer-range plans to the Governor and General Assembly which will integrate their operation seamlessly and manage State funds more strategically. To achieve these key objectives, four specialist subcommittees have been established in order to undertake the process, with specific aims: Best Practices to examine successful logistics plans in other states and countries to help determine what might work in North Carolina; Governance objectively looking at the organization of current state agencies dealing with logistics matters; Commerce determine the emerging and existing agencies which are critical to North Carolina s economic development and how these industries can thrive; Inland Port Design relevant research teams and universities will assist in exploring the feasibility of regional transportation hubs to improve the flow of goods and services throughout the State. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 90

119 In August 2010 the Department of Transportation in the State of North Carolina released its Policy to Projects document, which outlined the proposed investment of transportation funding between 2011 and 2020, as the following key components outline: Program and Resource Plan - revenue projections and proposed allocation of funds across all modes of transportation for Construction and Engineering, Maintenance, Operations and Administration from Over this 10 year period the Department of Transportation is anticipating spending around $45 billion in transportation funding. Over 60% of this amount is allocated for construction and engineering and approximately 25% for maintenance, leaving 15% split between operating the transportation network and administrative functions of the Department. In addition, there is a multiyear investment strategy for a subset of the Construction & Engineering Program. This strategy illustrates the investment the Department considers the best balance among the goals of safety, mobility and infrastructure health across different modes of transportation (aviation, bicycle and pedestrian, ferry, highway, public transportation and rail). The strategy also establishes Levels of Service and corresponding investment amounts to meet those levels. NCDOT staff recommended allocating 15% of construction & engineering resources to non-highway modes. The remaining funds are allocated to highway safety, mobility, and infrastructure health. The aim is to achieve a level of service B for Interstate pavements, level of service B for highway mobility on the statewide and regional tiers, and a level of service A for bicycle and pedestrian mobility on the statewide tier. A 5-Year Work Program to identify proposed spending for of approximately $23 billion and a detailed impact of how the investment will be allocated at a program level. This amount is being split as follows: o 56% - improving mobility; o 34% - improving what is deemed as the health of the infrastructure; o 3% - improving safety. Draft Statewide Transportation Improvement Program (STIP) lists the projects included in the 5 Year Work Program and the Program & Resource Plan. It provides costs and schedules for each project. The draft STIP was generated by applying the investment strategy described above to a prioritized list of transportation needs identified by our stakeholders. Actual projects selected to meet this strategy were subject to funding, legal, and scheduling constraints. After outreach to our stakeholders, the Department will release the final STIP in the fall of Once adopted, changes to the 5 Year Work Program or the Program & Resource Plan will require an amendment to be approved by the Board of Transportation. With respect to specific projects that involve the movement of freight in the state, the quality of road and rail connections serving the port will impact the competitiveness of POW and MHC to attract cargo. Given that the majority of the state s population is located in the center of North Carolina, investment that improves rail connectivity will have a much more positive impact than what will be offered by improved road connections. However, it should still be assumed that shippers will want to see investment made in both modes of transportation. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 91

120 There are several specific references to investment in rail in North Carolina in the NCDOT Policy to Projects document, contained within the 5-Year Work Program. However the program is almost exclusively focused on improving safety and promoting economic development for the operation of intercity passenger train services, with the exception of the following: Industrial access NCDOT provides financial incentive to business to locate or expand their facilities in North Carolina. This grant funding helps to ensure companies have the railroad spur tracks needed to transport freight. Projects are authorized based upon the amount of private investment, number of jobs created and number of rail cars added to the network Aims and objectives of NCSPA The NCSPA operates several well-established cargo-handling facilities, including maritime ports (POW and MHC) and inland terminals at Charlotte and in the Piedmont Triad region in Greensboro, plus potential for development at RI. The authority currently plays an important role in the flow of a diverse range of different types of cargo, as Table 3.26 identifies. Table 3.26: NCSPA Cargo Currently Handled Type of Cargo Where Currently Handled Basic Description Bulk POW & MHC Flows or fits the shape of its container, such as dry cement or fertilizer, can also be dry bulk or liquid bulk Breakbulk POW & MHC Bundled, palletized, in bales or crates, or otherwise unitized, such as coil steel, paper products or lumber. Handled using forklifts and other specialized lift equipment Containers POW Boxes cargo loaded into at point of origin. Containers then moved by truck/rail to a port and onto a ship before sailing across the ocean, being removed at a port and transported to shipper s preferred location by truck/rail. All activity undertaken with container ever being unloaded Source: Moffatt & Nichol The overall strategic direction of the Authority, as identified by its leadership, is to maximize the utilization of existing facilities through engineering of infrastructure, process improvements, and technology, before then seeking to acquire and develop property to meet forecasted demand. In order to meet this direction, three major strategic initiatives have previously been adopted, namely: 1. Achieve planned business and revenue growth, maximize utilization of existing facilities; 2. Maximize velocity and throughput capacity of existing ports facilities to accommodate planned market growth, grow net operating income; 3. Successful and timely development of new terminal facilities to meet market demand. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 92

121 In more detail, the three initiatives adopted by NCSPA are utilizing specifically-identified strategies in order to meet these objectives, as Table 3.27 explains. Table 3.27: Key NCSPA Strategies Accompanying Confirmed Strategic Initiatives Initiative Key Confirmed Strategies 1 Integrated and collaborative planning process that focuses and drives and organizational commitment to achieving business and economic development strategies Competent and strategic execution of operations, capital, engineering and maintenance planning Build consensus and develop partnerships with State agencies and economic development agencies state-wide Generate market demand to establish and support an intermodal service to Charlotte 2 A structured and enduring program/process to optimize operations and program management and reliability of service Implement appropriate technologies, new thinking and engineering, plus measure and reduce cost and improve performance Employee participation in process improvement and corrective action, and achieving customer service benchmarks 3 Strategic and on-point communications with state-wide public outreach Source: NCSPA, Moffatt & Nichol Influential and persuasive advocacy at the State and Federal government level Key members of NCSPA team and other influential participants fully involved Development of a financial business model for projects that prove acceptable financial returns POW is currently limited in its capabilities for localized expansion but has been the subject of an expansion program aimed at increasing the throughput capacity of the existing container facility. This expansion is aimed at meeting the demand of increasing container traffic, and correspondingly looking to increase business and revenues at POW over the next ten years. The project includes: Purchase of four new 100-ft gauge container cranes and other container handling equipment (completed); Purchase and implementation of a new terminal operating system to support a high density, high velocity operation (completed); Berth, dock, and paving improvements to accommodate post-panamax vessels and higher throughput capacity (ongoing); Infrastructure improvements including yard paving, gate improvements, and utility enhancements (planned). MHC and Radio Island have previously been deemed to be well suited to handle the bulk and breakbulk markets and recent capital project improvements have included completion of a new 177,000ft 2 warehouse at MHC to accommodate current cargo needs. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 93

122 Summary Conclusion: NCSPA is well-aware of the need to maximize its competitiveness as it strives to attract additional cargo. The port authority has several well-defined objectives and it has previously invested in its facilities in order to help meet its aims. However, NCSPA needs assistance from other national and state bodies LCMA Trade Lane Analysis US Container Trade Lane Forecasts Before assigning a share of containerized traffic potentially available to NCSPA, and irrespective of the need for the port authority to have improved hinterland connectivity and shipping access available, the overall size of future container traffic on a trade lane basis must be projected. Table 3.28 provides a breakdown of the forecasted imported containers to be shipped to the US to 2030 on a trade-lane basis, with the following key conclusions: Average growth of 4.2% per annum is expected overall between 2011 and 2030, with almost 38 million TEU projected by the end of 2030 ; North Asia will remain the largest trade lane by a significant distance, responsible for over23.5 million TEU by 2030, reflecting growth of 4.3% per annum, South East Asia and South Asia the second and third largest trade lanes in terms of volumes, though much lower than what is generated by North Asia; Combining the Mediterranean and North Europe as the transatlantic trades will see total imports rise to almost 3.7 million TEU per annum by Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 94

123 Table 3.28: US Import Container Trade Lane Forecasts to 2030, in TEU Trade Lane CAGR CAGR CAGR Aus & NZ 151, , , , % 4.4% 3.5% Canada 29,418 34,102 48,033 60, % 3.5% 2.9% Caribbean 267, , , , % 3.0% 2.5% Cent. America 618, , ,896 1,270, % 4.6% 3.6% EC Africa 9,182 9,282 13,371 16, % 3.7% 3.0% ECSA 324, , , , % 3.8% 3.2% Europe 1,397,026 1,534,545 2,066,704 2,526, % 3.0% 2.5% Med 626, , ,853 1,171, % 2.8% 2.4% Mexico 68,538 71,288 94, , % 2.8% 2.3% Middle East 45,068 45,114 75, , % 5.3% 4.2% North Asia 8,716,702 10,225,237 17,477,325 23,570, % 5.5% 4.3% Other 20,026 32,895 36,580 42, % 1.1% 1.3% South Africa 37,852 44,477 59,480 73, % 2.9% 2.5% South Asia 542, ,168 1,632,278 2,771, % 10.4% 7.9% Southeast Asia 1,378,593 1,488,636 2,575,445 3,969, % 5.6% 5.0% WC Africa 16,472 17,143 23,392 28, % 3.2% 2.6% WCSA 315, , , , % 4.9% 3.9% Total 14,565,971 16,614,334 27,753,281 37,919, % 5.3% 4.2% Source: Moffatt & Nichol Table 3.29 outlines US container trade export volumes and annual growth until 2030, with total traffic increasing to almost 31.5 million TEU because of the 5% per annum improvements. Notable key conclusions include: North Asia will remain the largest market, with traffic rising to 13.3 million TEU by 2030, reflecting growth of 4.9%; Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 95

124 North Europe continues to be the second largest market, with the 2030 total of 3.3 million TEU increasing by 3.9% per annum over the forecast period. However, if the Mediterranean is also included, total US export transatlantic volumes will reach almost 5.5 million TEU by the end of 2030; Southeast Asia, with just under 6% growth, will see exports from the US rise to nearly 3.2 million TEU but stronger growth of 8.4% per annum will be generated by demand in South Asia, notably India, for US goods and this is an increase that will help to boost ships returning to Asia via the Suez Canal. Table 3.29: US Export Container Trade Lane Forecasts to 2030, in TEU Trade Lane E 2030E CAGR CAGR CAGR Aus & NZ 233, , , , % 4.2% 4.4% Canada 4,776 7,009 7,765 10, % 1.0% 2.2% Caribbean 710, ,777 1,138,424 1,711, % 3.2% 3.7% Cent. America 485, , ,333 1,229, % 3.6% 4.0% EC Africa 20,462 24,814 45,527 79, % 6.3% 6.0% ECSA 309, , , , % 3.1% 3.6% Europe 1,173,579 1,544,259 2,160,363 3,319, % 3.4% 3.9% Med 637, ,123 1,276,187 2,133, % 5.5% 5.4% Mexico 41,303 57,416 68,300 98, % 1.8% 2.7% Middle East 356, , ,667 1,463, % 7.8% 7.0% North Asia 4,684,402 5,106,425 8,404,032 13,343, % 5.1% 4.9% Other 64,378 76, , , % 3.0% 3.5% South Africa 43,630 61,841 92, , % 4.1% 4.4% South Asia 414, ,886 1,031,497 2,047, % 9.7% 8.4% Southeast Asia 918,079 1,006,215 1,813,936 3,195, % 6.1% 5.9% WC Africa 107, , , , % 9.1% 8.0% WCSA 218, , , , % 4.2% 4.3% Total 10,423,141 11,809,325 19,297,203 31,438, % 5.0% 5.0% Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 96

125 LCMA Methodology The LCMA process identifies the least cost port/mode of transportation option to serve any inland hinterland market designated by a zip code. Figure 3.23 depicts the various ways a zip code, 40505, could be served by two competing ports, which for the purposes of the example outlined compares if a container enters the US via the West Coast ports of Los Angeles/Long Beach against the use of POW as a Mid and South Atlantic port. In this example, zip code can be reached from either of the ports via truck or rail (using an intermodal container transfer facility (ICTF) by one of four potential options: 1. All Water Panama Canal and all truck from POW; 2. All Water Panama Canal and rail Move from POW (Rail to Evansville, IN ICTF and then a local truck drayage to zip code 40505); 3. Transpacific to West Coast and all truck from Los Angeles/Long Beach; 4. Transpacific to West Coast and rail from Los Angeles/Long Beach (rail to Evansville, IN ICTF and then a local truck drayage to Zip 40505). Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 97

126 Figure 3.23: Transportation Cost Examples from LCMA Modelling Process Note: Assumes a hypothetical rail link between POW and the ICTF in Evansville, IN. The rail option does include a rail and truck combination because a final truck journey is required to deliver the container from the ICTF to the final destination. Source: Moffatt & Nichol Each of the different transportation routes outlined has an associated cost and for this example the total cost to ship a box from the foreign country of origin to the final zip code destination comprises the following: Ocean Cost (OC) The ocean voyage cost for the shipment of a container takes into account key influencing factors such as size of ship, sailing distance and speed, port rotations, fuel costs and canal tolls; Terminal Handling Costs (THC) For import containers these represent the cost associated with lifting a container from the ship, placing it in the container yard and processing it out the terminal gate; Inland Costs (IC) Costs involved in delivering a container to its final destination. Components include local drayage from the terminal yard to the on-dock or off-transfer site, to and from rail car and truck drayage to the final destination. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 98

127 Taking into account the relevant cost component for each of the specific scenarios for the movement of this container, the least cost mode and gateway for serving Zip is from POW by rail, as Table 3.30 shows. Table 3.30: Cost Components for Serving Zip Code from POW and San Pedro Ports To Zip Code (Lexington, KY) From POW From SPB Ports All Truck Rail All Truck Rail Ocean Cost $1,775 $1,775 $884 $884 THC $170 $170 $275 $275 Trucking Cost to Zip $2,205 Not Required $6,848 Not Required Rail Cost to ICTF then Truck to Zip Not Required $877 Not Required $2,095 Drayage from ICTF to ZIP Not Required $767 Not Required $767 Total $4,150 $3,589 $8,007 $4,021 Source: Moffatt & Nichol Summary Conclusion: LCMA Process: The LCMA process models a range of different cost sensitivities that impact the logistics transportation chain, including ocean shipping, port activities and road/rail transport. This is achieved by repeating the process outlined in the example serving zip code for all zip codes in the regions served by Mid and South Atlantic ports, NS and CSX railroads and ICTFs. Moffatt & Nichol s approach for each container trade lane is to generate a base case map for all ports located in the Mid and South Atlantic region. The same size of ship is used for all competing ports, but slightly different ocean costs will be generated, based on extra/less sailing time needed to reach each port. Then port costs for handling containers are included, plus costs for truck and rail access from the port to the final zip code. This also means that ports with both NS and CSX access benefit from whatever is the cheaper rail option and access to the ICTFs in both rail networks, but a port with only one railroad service provider is restricted in terms of costs and network. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 99

128 LCMA Deliverables: The deliverable is a color-coded map showing zip codes attributed to the port representing the lowest-cost option. Once all the zip codes are grouped together a block of color for each port is then provided for easier visual interpretation of how the region is split amongst different port LCMAs. A different LCMA map is created for each container trade lane. This is undertaken so that differences in components making up the trade lane can be shown. For example, the ocean cost for a North Asia shipping service is different to transatlantic shipping services because the sailing cost is a higher proportion of the total cost due to a greater distance that has to be sailed. Therefore, because the LCMA analysis is based solely on the cost components of moving a container any changes to costs, even if very small, will impact the overall results and this embedded sensitivity, although slight, is included within the modeling process. Container Trade Routes: Moffatt & Nichol has assessed the largest container trade lanes calling to the Mid and South Atlantic region. It is possible to create LCMA maps for much smaller trades, such as from Australia/New Zealand or the Mid East, but the amount of containers potentially available to POW/MHC on smaller trade routes is limited and will be insufficient to warrant a ship calling to the ports. This is because there needs to be a weekly critical mass of containers for a shipping line to make a call at a port, normally around 90% of the total ship capacity. If there are insufficient containers to warrant a port call, then the container will be dropped at another port where there is already a call being made and the containers will then be moved to final zip code destinations using inland road/rail transport. Scenarios: Once the base case maps have been created it is possible to model different potential scenarios. For example, for this project the size of the ship was increased to 8,000 TEU and for POW/MHC it was assumed that improved intermodal rail services and access to different ICTFs are gained. These differences change the make-up of the base case LCMA maps, with revision of the colored regions for ports acting as the least-cost option for zip codes. NCSPA Analysis: In the LCMA analysis for NCSPA ports shown in Section to Section each container trade lane map generated includes confirmation of the factors used in the scenario, including base case results and revised scenario using larger ships, the NCSPA facility called (i.e. POW or MHC) and intermodal rail infrastructure. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 100

129 North Asia Base Case POW Taking into account the LCMA methodology, as outlined in Section 3.2.2, Moffatt & Nichol has generated two different scenarios for POW in serving the North Asia trade lane: Figure 3.24 assumes that 4,500 TEU ships are transiting the Panama Canal and calling at POW, although there is no intermodal rail service from the port. It can be seen that the LCMA region for POW is limited to localized trucking only, with more distant regions served by the likes of Savannah and Norfolk because of their better intermodal rail connectivity; Figure 3.25 assumes that 8,000 TEU ships are introduced to the same North Asia trade lane, with the same assumption regarding POW s lack of intermodal rail. There is relatively little difference in the LCMA region applicable to POW. This is because it is the intermodal rail connectivity issue that is helping to dictate the ability of competing regional ports to serve more distant hinterlands and the better rail access via other Mid and South Atlantic ports, especially Savannah and Norfolk, are allowing these ports to be more cost-competitive. In essence the lack of intermodal rail and reliance upon localized trucking means that POW cannot compete with other regional ports because of a lack of connectivity access. If there are no improvements to intermodal rail access from POW, the port will continue to see cargo that it could compete to attract move through other facilities in the Mid and South Atlantic region. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 101

130 Figure 3.24: North Asia Trade Lane to POW No Rail Improvements and 4,500 TEU Ship Base Case Wilmington: North Asia 5,500 TEU Transpacific, 4,500 TEU via Panama Canal to East Coast No Intermodal Rail Service from Wilmington Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 102

131 Figure 3.25: North Asia Trade Lane to POW No Rail Improvements and 8,000 TEU Ship Base Case Wilmington: North Asia 8,000 TEU Transpacific and Via Panama Canal to East Coast No Intermodal Rail Service from Wilmington Source: Moffatt & Nichol Improved Intermodal Rail Connectivity for POW and MHC With no intermodal rail connectivity to cargo consuming/producing hinterlands, the competitiveness of NCSPA facilities are negatively impacted, resulting in ports being less able to compete with other regional facilities. However, if it is assumed that there are improvements to the quality of rail connectivity to/from NCSPA ports, then the LCMA will generate significantly different results, as the following confirms: Figure 3.26 assumes that 8,000 TEU ships are serving the North Asia trade route through the Panama Canal but POW now benefits from improved, and competitive, intermodal rail connectivity via access to the CSX network. The impact can clearly be seen, with better access to more distant hinterlands previously served by other competing regional ports; Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 103

132 Figure 3.27 also assumes that 8,000 TEU ships are in serve to/from North Asia through the Panama Canal but for this example MHC and not POW was modeled. The difference is the use of the NS intermodal network instead of CSX and the outcome is that NCSPA then becomes the least cost port for serving additional key markets. Figure 3.26: North Asia Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 104

133 Figure 3.27: North Asia Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship Source: Moffatt & Nichol South East Asia Base Case POW Figure 3.28 provides confirmation of the current LCMA for trade moving from South East Asia to the Mid and South Atlantic region. Based on existing services calling to regional ports, it can be seen that the lack of shipping lines calling to POW from South East Asia means that the least-cost port options for serving North Carolina are Charleston (for truck markets) and Savannah (for rail markets). However, as Section identifies, with improved hinterland connectivity and water depth, POW has potential to be a least-cost port option for this trade lane. This means that if investment in infrastructure Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 105

134 supporting NCSPA is undertaken it will enable the authority s ports to be more effective in competing to increase container volumes, as Section shows. Figure 3.28: South East Asia Current Least Cost Market Area POW Trade Lane : South East Asia CSX Rail Service Source: Moffatt & Nichol Improved Rail Connectivity for POW and MHC The South East Asia trade lane offers some scope to NCSPA for its facilities to serve cargo moving to more distant hinterlands in the region, as the following confirms: Figure 3.29 assumes that POW is able to receive an 8,000 TEU ship and that there is intermodal rail connectivity available via the CSX network. This enables NCSPA to compete to serve hinterland markets by both truck and intermodal rail, accessing local cargo areas close to the ports and more distant hinterlands needing to use intermodal rail; Figure 3.30 outlines the LCMA for the South East Asian import market to the US using 8,000 TEU ships, with MHC selected as the port of call at NCSPA. The truck market served in North Carolina is slightly larger in geographical size than if POW is utilized. It has been assumed that intermodal rail via NS is also an option for shippers; Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 106

135 The difference in rail markets that can be served is reflective of the different rail networks operated by CSX and NS and the geographic locations each operator s routing takes inland. Figure 3.29: South East Asia Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship POW Trade Lane : South East Asia CSX Rail Service Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 107

136 Figure 3.30: South East Asia Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship MHC Trade Lane : South East Asia NS Rail Service Source: Moffatt & Nichol Transatlantic Base Case POW As Figure 3.31 identifies, for the transatlantic trade lane POW is currently the least cost port for its local hinterland truck markets only. Without improvements to its intermodal rail infrastructure more distant rail hinterlands will continue to fall within the least cost auspices of other competing regional facilities, most notably Savannah, which is shown to be the least-cost port for some hinterland markets within North Carolina. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 108

137 Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 109

138 Figure 3.31: Transatlantic Trade Lane to POW No Rail Improvements and 4,500 TEU Ship POW (4500 TEU) Trade Lane : Trans-Atlantic No Intermodal Rail Service Source: Moffatt & Nichol Improved Rail Connectivity for POW and MHC Taking the projections of the transatlantic trade lane into account, Moffatt & Nichol has developed LCMA maps for both POW and MHC, while assuming that container imports arrive in the Mid and South Atlantic regions on larger ships. In the Base Case scenario for this cargo route, it was assumed that the existing average size of around 4,500 TEU was applicable. However, for the revised scenario in which rail improvements are made to give POW and MHC better hinterland connectivity, it has also been assumed that the average ship size should be 8,000 TEU. Taking into account these parameters, the following LCMA conclusions can be provided: Figure 3.32 identifies the regions for which POW acts as the best-cost port. The local truck market in North Carolina can clearly be seen and actually regains a little territory from the truck market for which Norfolk was the lower-cost option in the Base Case scenario. However, it is the improved Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 110

139 intermodal rail connectivity which really makes a difference because with access to the CSX network, POW is able to draw upon a number of additional regions, including Charlotte (NC) and also in Ohio; Figure 3.33 utilizes the same assumptions for size of ship and improved intermodal rail connectivity but assumes MHC as the NCSPA port-of-call and not POW. The same truck market is served as the revised POW option, but MHC has access to the NS network and not CSX and this is reflected in the size of the rail market for which MHC can act as the lowest-cost port option. Figure 3.32: Transatlantic Trade Lane to POW Intermodal Rail Connectivity and 8,000 TEU Ship POW (8,000 TEU) Trade Lane : Trans-Atlantic CSX Rail Service Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 111

140 Figure 3.33: Transatlantic Trade Lane to MHC Intermodal Rail Connectivity and 8,000 TEU Ship MHC (8,000 TEU) Trade Lane : Trans-Atlantic NS Rail Service Source: Moffatt & Nichol East Coast South America Base Case POW Figure 3.34 identifies the current LCMA for the East Coast of South America trade lane, based on the ports called by container shipping lines in Q There are no liner services currently calling at NCSPA facilities. Existing local cargo demand is not being met by POW but instead through Charleston (for truck) and Savannah (for rail) offering better hinterland rail connectivity and therefore serving as the lowest cost ports for hinterland markets, including some in North Carolina. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 112

141 Figure 3.34: East Coast of South America Current Least Cost Market Area POW Trade Lane : East Coast of South America Source: Moffatt & Nichol Theoretical Call to POW and MHC It is possible to model the impact on of potentially changing dynamics on an existing trade lane, both in terms of core components of infrastructure and also ports of call. On this basis, Moffatt & Nichol has undertaken the impact of a call to both POW and MHC as part of East Coast of South America import trades. The basic assumptions adopted include that POW and MHC have improved intermodal rail connectivity and that ocean carriers introduce ships as large as 8,000 TEU and these units can successfully call to NCSPA facilities. The following key conclusions can be stated: Figure 3.35 assumes that a port call is made at POW. As a consequence of the improved intermodal rail connectivity, the port creates significant changes to the least-cost Mid and South Atlantic competitive port region for intermodal rail markets, as previously identified in Figure The ability of Jacksonville, Savannah and Virginia to compete for large part of the US Midwest markets are Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 113

142 negatively impacted, with POW representing the best-cost port option for Columbus and much of Ohio because of access gained to the CSX intermodal rail network; Figure 3.36 uses the same basic parameters for ship size and access to improved intermodal rail. The main difference is rail service provided by NS as opposed to CSX. The localized truck market and more distant rail markets that MHC remains the least-cost port to serve both largely remain. Figure 3.35: East Coast of South America Theoretical Call to POW Intermodal Rail Connectivity and 8,000 TEU Ship POW (8,000) Trade Lane : East Coast of South America CSX Rail Service Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 114

143 Figure 3.36: East Coast of South America Theoretical Call to MHC Intermodal Rail Connectivity and 8,000 TEU Ship MHC (8,000) Trade Lane : East Coast of South America NS Rail Service Source: Moffatt & Nichol West Coast South America Base Case POW It is possible to model the impact on of potentially changing dynamics on an existing trade lane, both in terms of core components of infrastructure and also ports of call. On this basis, Moffatt & Nichol has undertaken the impact of a call to both POW and MHC as part of West Coast of South America import trades. The basic assumptions adopted include that POW and MHC have improved intermodal rail connectivity and that ocean carriers introduce ships as large as 8,000 TEU and these units can successfully call to NCSPA facilities. Figure 3.37 identifies the current LCMA for the West Coast of South America trade lane, based on the ports called by container shipping lines in Q Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 115

144 There are no liner services currently calling at NCSPA facilities, which is why any local market for POW is served by Charleston via truck, with Charleston s hinterland rail connectivity allowing it to be the lowest cost port for some hinterland markets in North Carolina. Jacksonville also represents a strong least cost port for some regions through the Mid and South Atlantic port market too. For NCSPA ports, a lack of viable intermodal rail connectivity is allowing competing regional ports to serve hinterlands for which it could be competitive. Quite simply, better rail access via other Mid and South Atlantic ports, especially Jacksonville for this trade lane, allows ports other than POW to be more costcompetitive and serve regions that NCSPA could be a potential option to access, if it had improved hinterland connectivity. If there are no improvements to intermodal access from NCSPA ports, POW/MHC will continue to see cargo that it could compete to attract, as identified in Figure 3.38 and Figure 3.39, move through other facilities in the Mid and South Atlantic region. Figure 3.37: West Coast of South America Current Least Cost Market Area POW Trade Lane : West Coast of South America Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 116

145 Theoretical Call to POW and MHC It is possible to assess the impact of a theoretical call to NCSPA facilities from Latin America. In this instance, the West Coast of South America trades have been considered to outline the regions in which both POW and MHC can be regarded as the least-cost port for imported containers, as the following concludes: Figure 3.38 outlines the theoretical shipping line call option using POW and the improved rail connectivity via the CSX network, with the result showing access to markets for NCSPA ports which reach as far as some key areas of the US Midwest region; Figure 3.39 assumes that MHC and not POW is the suggested port of call for the imported containers on this trade lane. Access to the NS rail network enables access to a notable least-cost market area from MHC, which is in addition to the existing local truck markets within North Carolina, which are currently served by other Mid and South Atlantic ports. Figure 3.38: West Coast of South America Theoretical Call to POW Intermodal Rail Connectivity and 8,000 TEU Ship POW (8,000) Trade Lane : West Coast of South America CSX Rail Service Source: Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 117

146 Figure 3.39: West Coast of South America Theoretical Call to MHC Intermodal Rail Connectivity and 8,000 TEU Ship MHC (8,000) Trade Lane : West Coast of South America NS Rail Service Source: Moffatt & Nichol Summary Conclusion: The LCMA analysis conducted indicates that NCSPA facilities act as the lowest-cost port of entry for a large hinterland, though the ability to be competitive to attract cargo moving to these regions is strongly reliant upon gaining deeper water to receive larger container ships and, most importantly of all, being able to offer better intermodal rail connectivity. This position is similar for every container trade lane modeled and emphasizes the key role that inland intermodal rail access plays for a play in the Mid and South Atlantic region competing for discretionary markets, especially for containerized cargo moving from North Asia to US markets via competitive ports in the region where POW/MHC/RI are located. Unless NCSPA can offer deeper water for larger ships and better intermodal rail connectivity, its ports will not be competitive in retaining and/or attracting cargo for which it is the lowest cost regional port. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 118

147 3.3. NCSPA Container Forecasts to Methodology and Approach Based on the LCMA process completed in Section 3.2, Moffatt & Nichol estimates cargo volumes consumed in the areas in which each port is identified as the point of entry in the lowest-cost supply chain for each container trade lane. The LCMA modeling process was undertaken using over 3,000 counties within the US, with a single zip code designated as representative of the county. Since a BEA area comprises a number of counties, the amount of cargo supplied to/destined from each BEA is estimated using measurements of GDP, population and income. The LCMA is constructed using which BEA regions are won by POW or MHC on a lowest-cost basis and aggregated demand represents the total market opportunity for the port, on the following. Other key parameters include: For the trade lanes which POW currently services, including North Asia, a market share capture assumption is applied against the aggregate demand to produce a throughput estimate for POW; For trade lanes currently not served by POW, including ECSA and WCSA, Moffatt & Nichol is identifying the LCMAs of the competing ports to estimate the existing competitive structure; A new set of LCMAs are then produced incorporating a hypothetical service call at POW (or MHC), and thus a region belonging to POW is established; The demand of this new hypothetical LCMA is then estimated, and a measure of market share capture is applied against the total demand to produce the container volume forecast Container Trade Lane Forecast Potential Taking into account the LCMA methodology and approach to outline the size of a container trade lane market potentially available to NCSPA ports, Moffatt & Nichol has generated projections outlining the impact of infrastructure improvements on the size of the LCMA market potential that NCSPA ports can compete to attract, between 2010 and In short, if infrastructure improvements are made, NCSPA ports have a much larger LCMA market to seek to attract. Table 3.31 provides confirmation of the size of the LCMA market for which NCSPA facilities are currently competing to attract, based on existing infrastructure and if POW/MHC had better intermodal rail traffic and could successfully receive 8,000 TEU class ships: Based on current NCSPA infrastructure, the size of the North Asia trade lane LCMA available in 2010 is just over 384,000 TEU. This trade lane LCMA region with no infrastructure improvements at NCSPA ports is expected to reach 1.1 million TEU by 2040; Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 119

148 If NCSPA had improved infrastructure, the size of the LCMA region it could seek to attract is increased to just under 2.2 million TEU in 2010, and rises to nearly 5.2 million TEU by 2040 if infrastructure is improved; For the transatlantic trades, the current port and inland connectivity infrastructure restricts the size of the NCSPA LCMA to almost 71,000 TEU in 2010, whereas with improvements to water depth and inland access the 2010 LCMA market could be as large as 208,432 TEU. By 2040, this trade lane is projected to reach 123,188 TEU (based on the current facilities offered by NCSPA) but almost 330,000 TEU, if better intermodal rail and water depth are attained. Table 3.31: Projected Size of LCMA Markets Potentially Available to NCSPA in TEU, Based on Current Infrastructure and If Infrastructure Improvements Undertaken, 2010 to 2040 North Asia 2010E 2020E 2030E 2040E Current 384, , ,207 1,114,158 With Improvements 2,840,767 4,457,492 5,735,317 6,737,168 Percent Increase Trade Lane 740% 690% 645% 605% South East Asia 2010E 2020E 2030E 2040E Current With Improvements 127, , , ,899 Percent Increase Trade Lane ~ ~ ~ ~ Transatlantic 2010E 2020E 2030E 2040E Current 70,805 91, , ,188 With Improvements 270, , , ,920 Percent Increase Trade Lane 380% 370% 360% 350% East Coast South America 2010E 2020E 2030E 2040E Current With Improvements 110, , , ,125 Percent Increase Trade Lane ~ ~ ~ ~ West Coast South America 2010E 2020E 2030E 2040E Current With Improvements 108, , , ,596 Percent Increase Trade Lane ~ ~ ~ ~ Percent Increase in Potential Market - Total 760% 720% 680% 650% Note: With improvements is defined as better intermodal rail connectivity and the ability to receive 8,000 TEU class container ships. Source: Moffatt & Nichol A more detailed breakdown of the size of the LCMA regions by various container trade lanes is provided in Section 5.1 of the Appendix. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 120

149 NCSPA Container Forecast Summary Moffatt & Nichol has identified five separate BEA locations as being most representative of the hinterland market that NCSPA s port facilities can serve most effectively and these remain the basis of future container projections: Greensboro-Winston-Salem-High Point, NC; Charlotte-Gastonia-Salisbury, NC-SC; Greenville, NC; Raleigh-Durham-Cary, NC; Myrtle Beach-Conway-Georgetown, SC (Includes Wilmington, NC). The total container demand generated within this region comprising both loaded import and export containers was estimated to total approximately 680,000 TEU in This total demand is calculated by aggregating all estimates for import and export container demand of the five individual BEAs, using the following methodology: Import Demand using a combined measurement which incorporates GDP, population and income growth applied against the MarAd data for import volumes by trading partner; Export Demand using the confirmed 2007 PIERS data as well as estimates of durables goods manufacturing activity. Using this data and approach, Moffatt & Nichol estimates that 2010 container volumes for POW accounted for 31.8% of the total container demand of the LCMA believed to be potentially available. This share is constructed from the observations by trade lane noted in Table 3.32 and consists of two key assumptions: 85% of POW s import container volumes originate in North Asia; 60% of POW s export container volumes are destined to North Asia. Table 3.32: Estimated 2010 Share of Regional LCMA (TEU) for NCSPA Imports Exports Total Grand N. Asia Other Total N. Asia Other Total N Asia Other Total LCMA 297, , ,096 86, , , , , ,636 NCSPA 101,247 17, ,114 58,263 38,842 97, ,510 56, ,219 NCSPA % 34.0% 9.6% 24.6% 67.5% 34.3% 48.7% 41.5% 18.9% 31.6% Source: NCSPA; MarAd; PIERS; Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 121

150 Moffatt & Nichol has assumed that the share of container traffic per trade lane and direction (import and export) for NCSPA is maintained throughout a forecast period , at just under 32% of the total container demand of the LCMA believed to be potentially available and subsequently grows in line with the total demand from the LCMA. Under these set of assumptions, the base case forecast of container volumes to use NCSPA port facilities will increase to approximately 480,000 loaded TEU by 2030 and 600,000 loaded TEU by 2040, as noted in Figure This figure does not include a provision for empties but historically empty container volumes at POW have equated to around 33% of total loaded boxes and it is reasonable to expect this trend to continue. Hence the base case total container throughout for NCPSA is projected to be almost 640,000 TEU by 2030 and just under 800,000 TEU by There are other qualitative factors that help explain the rationale behind the container forecasts in Figure 3.40: Market Opportunity: The market opportunity is based on the potential LCMA region available to NCSPA ports; The presence of infrastructure improvements significantly expands the addressable hinterland of NCSPA facilities. Low Case Container Projections Maintain Current Facilities: Assumes that first CYKH service leaves POW in 2014 following expansion of Panama Canal as increased use of 8,000+ TEU size vessels are brought into service; Assumes second CYKH string leaves POW in 2020; No intermodal rail volumes are handled at POW. Base Case Container Projections Moderate Facility Improvements: Assumes that market share is maintained within the total addressable market opportunity; Implicit in this forecast is that additional services are attracted to POW as organic growth would only support trade in-line with regional economic growth; Assumes that some use of existing intermodal connectivity is made as higher volumes promote a shuttle-type service between POW and Charlotte, but remains relatively limited; Assumes channel depth is 45ft and vessel size does not increase to 8,000 TEU quicker than current industry expectations. High Case Container Projections Fully Competitive Facility Improvements: Assumes channel depth can accommodate a greater proportion of larger vessels, including those in the 8,000 TEU size classification, by 2017; Assumes that POW intermodal routing becomes fully integrated into CSX s National Gateway service by 2017, to complement access to the NS intermodal rail network; POW captures additional container volumes within the addressable market, above that captured in the base case, by 2040; The share of POW s regional market potential increases from the current 8.1% to 18% by Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 122

151 Figure 3.40: Market Demand & NCSPA TEU Volume Forecast Scenarios to 2040 Source: NCSPA; MarAd; Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 123

152 Summary Conclusion: With total base case container throughput for NCPSA, based on loaded TEU and empty units, projected to be in almost 640,000 TEU by 2030 and around 800,000 TEU by 2040, a current nominal yard capacity at POW of approximately 500,000 TEU will be tested by the mid 2020s under the base case scenario. However, the yard expansion as noted in Section 4 along with other improvements can expand the footprint to meet the new requirements. Any ability to increase share of trade lane market share by improved NCSPA facilities could see the container volume projections increase further NCSPA Bulk and Breakbulk Forecasts to 2040 The NCSPA facilities at POW and MHC both represent well-established ports for the handling of bulk and breakbulk commodities. Figure 3.41 presents the development and forecast of throughput tonnage for both bulk and breakbulk cargo at POW and MHC to It is reasonable to expect these volumes to remain relatively stable and grow on a consistent basis. This is because bulk and breakbulk activity is serving mature markets and, therefore, unlikely to see much volatility, especially as commodity demand is to largely satisfy hinterlands close to the ports. There is little, if any, discretionary cargo available that could potentially be handled at other ports in the region, which is different from discretionary container demand that does have alternative gateways in the Mid and South Atlantic region. Figure 3.41: Summary of Bulk and Breakbulk Cargo Forecasts for POW and MHC to Tons (Million) E 2013E 2015E 2017E 2019E 2021E 2023E 2025E 2027E 2029E 2031E 2033E 2035E 2037E 2039E MHC Break Bulk MHC Bulk POW Break Bulk POW Bulk Source: NCSPA, Moffatt & Nichol Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 124

153 In generating the bulk and breakbulk cargo forecasts for POW and MHC to 2030, Moffatt & Nichol has taken into account a number of key assumptions for each port and type of cargo. It is worth noting that there is little overlap between the two ports in terms of the same commodities being handled, further identifying that the existing cargoes are well-established activities serving local hinterland demand, as the following highlights: Assumptions for POW Bulk: Chemicals Upside potential is limited by tank capacity at the Vopak facility. Discussions with Vopak suggested that utilization neared 95% with throughput of approximately 600,000 tons. The forecast includes roughly 660,000 tons of chemicals and related product and assumes some increases in utilization capabilities; Grain Primarily animal feed imports, and have risen sharply in part to high price for domestically produced Ag products. Import volumes are estimated to increase by an average 1.3% in line with the USDA annually during the forecast period. Global demand for frozen meats including swine and poultry is assumed to be the primary driver of feed imports; Cement Import volumes associated with regional construction activity. The forecasts incorporate a return to long-term historical levels by 2015, and reflect stabilization following the collapse and recovery in the regional construction industry. Moffatt & Nichol estimates that budgetary pressures will continue to weigh on infrastructure spending in the coming years; Wood Chips ICL woodchips have been destined to Turkey for use in particle board manufacturing however, changes to the fumigation regulations have put a halt to shipments. NCSPA expects shipments to recommence in 2013, which is a reasonable assumption, hence this factor has been built into the forecast. Along with demand for construction materials, global us of biomass for fuel is estimated to grow and is assumed to support demand for wood chips and wood pellets. Assumptions for POW Breakbulk: Metal Products ex Scrap Import volumes associated with CSX s track replacement program. By 2015 it is estimated that demand will drive import volumes to an historic average of 125,000 tons; Wood Pulp Export volumes of bailed pulp have declined dramatically as a result in shifts of both the type produced and increased demand for fluff pulp. However, International Paper and Domtar continue to produce bailed pulp for export, and an annual 100,000 tons of breakbulk pulp is included in the forecast. Breakbulk throughput volumes at POW are determined by business decisions of the producers and their carriers, and therefore given NCPSA relationship with existing clients, Moffatt & Nichol has deferred to the Authority s estimate; Forest Products Import volumes have fallen significantly as a result in lower demand from regional construction activity, particularly in the residential sector. Building permits in North Carolina remain near 20-year lows, however appear to have bottomed. The forecasts assume that demand returns to average historic levels by 2015, and proceed to grow in-line with the North Carolina s growth estimates. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 125

154 Assumptions for MHC Bulk: Phosphate Export volumes are estimated to increase by an average 1.5% annually during the forecast period. This is reflective of the global growth in demand for fertilizer products as well as increased production in China, South America and Northern Africa. Currency appreciation of developing economies should continue to support export volumes; Sulfur Products Import volumes of sulfur products used for sulfuric acid is estimated to move in line with demand for fertilizer products; Scrap Steel Products Used by Nucor for steel manufacturing, assumed to be driven by regional construction demand. Therefore, within the forecast a return to average historic throughput is assumed by 2015 with demand growing in line with North Carolina s forecast estimates. Budgetary constraints to keep q downward pressure on a full rebound in nonresidential construction. Assumptions for MHC Breakbulk: Rubber Import volumes are handled in both breakbulk and containers, and shippers have used both forms to hedge against swings in the relative rates. Regional tire demand is estimated to continue to grow as a result of population growth, auto production and trade policies. Therefore, though total demand is estimated to grow, there could be shifts to and from containers given the preference of the shipper. The forecast assumes that by 2013 breakbulk volumes of rubber reach approximately 130,000 and grow to roughly 170,000 by 2020; Metal Products ex Scrap Import volumes associated with the Norfolk Southern track replacement program, with estimates for average annual growth of 1.9% reflecting the historic average; Forest Products Estimate to increase to historic average by 2015, following a rebound in regional residential construction. Additional growth is expected in line with real State GSP estimates. Summary Conclusion: Future bulk and breakbulk cargo activities at both POW and MHC will continue to be largely driven by the demand requirements of key shippers located in the local hinterlands of each port. This is cargo that is largely not-discretionary, which means that there are few, if any, alternative ports competing to attract the volumes. The upside to NCPSA is that bulk and breakbulk is a relatively low-risk cargo unlikely to relocate to an alternative port in the Mid and South Atlantic region is if the shipper relocates and re-establishes its operation as well, which can be an expensive undertaking. The downside to this position is that bulk and breakbulk is a well-established and mature port activity, so it is unlikely to see higher levels of annual growth that can be offered by the handling of cargo moving in containers. Moffatt & Nichol 2BForecast Volumes Moving Through NCSPA Facilities Page 126

155 NCSPA Infrastructure and Role in Cargo Transportation Network Z Z Z Z NCSPA Economic Impacts Forecast Volumes Moving Through NCSPA Facilities Port Opportunities/Obstacles APPENDIX

156 4. Port Opportunities/Obstacles 4.1. Existing Facility Analysis Previous Capital Investment Supporting NCSPA Port Facilities There has been some known recent previous capital investment projects aimed at improving POW s ability to handle container volumes and contributing to increasing the level of cargo throughput handled at the port authority s facilities. Examples of some of these investments are outlined in Table 4.1 and include improvements made directly at POW, the surrounding road and rail infrastructure and supporting warehouse/distribution developments near to the port waterside facilities. The purpose of the infrastructure investments outside of the port is to provide it with greater access to hinterland markets via rail and truck. The importance of offering efficient and good quality road/rail connections between the location of the marine facilities and the destination/origin of cargo are extremely important, especially with other competing Mid and South Atlantic region ports seeking to also offer good road and rail access to serve hinterlands markets. Table 4.1: Completed & Planned Investment Projects Affecting NCSPA Facilities, from 2005 Where Investment Undertaken Benefits and Outcome Objectives Road I-140 Wilmington Bypass Improved port s connectivity to I-40, a major thoroughfare to the Raleigh-Durham region I-73 Interstate New Interstate Route which improves connectivity to Greensboro I-74 Interstate Upgrade of existing route to interstate quality improves connectivity to I-85 and Charlotte Gallants Channel Bridge New Structure to provide access to future Havelock Bypass to reduce traffic through Morehead City Rail Co-operative effort with CSX New CSX rail initiative will provide improved connectivity to the national gateway network, which links to the South and Midwest regions Moffatt & Nichol 3BPort Opportunities/Obstacles Page 127

157 Where Investment Undertaken Benefits and Outcome Objectives Removal of clearance restrictions for double-stack NCSPA Ports Channel deepening Deepening to 42ft allows POW to handle larger vessels transiting the Panama Canal and replicates the same depth as offered at Savannah 2,650ft of berth upgrade Accommodates four new 100ft-gauge cranes and 42ft channel depth Yard handling equipment New, large reach stackers allow five-high container storage Post Panamax cranes Four 100ft-gauge cranes Terminal operating system Allows container tracking on behalf of customers Available acreage 100+ acres of container yard 150 additional acres available for development Distribution/Warehousing At-Port Distribution Centers 75 acre warehouse/distribution facilities, comprising 5 facilities, rail-served, 10 miles from POW Source: NCSPA Moffatt & Nichol strongly believes that previous improvements made to NCSPA ports and the supporting road and rail networks has helped POW to be more competitive and able to attract higher throughput volumes, especially over the latter part of the past decade, such as the second CKYH Alliance container service after However, there is a need to continue to invest in all aspects of infrastructure and facilities serving cargo in North Carolina, not just at the port directly, to help POW and MHC/RI maintain, and potentially capture, greater regional share of the hinterland cargo market share. This is especially true because of investment continuing at other Mid and South Atlantic ports and in neighboring states to the north and south. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 128

158 NCSPA has studied its last mile relative to other container terminals in the Mid and South Atlantic region. Its conclusions suggested that four of a total of seven terminals studied had similar road configurations leading to the approach of the gate, and as Figure 4.1 confirms, Moffatt & Nichols broadly agrees with this opinion. The distances from the terminals in Figure 4.1 in comparison to POW are slightly shorter, within only one or two miles of a connecting interstate, less than what has to be undertaken for POW. Also, the distance from POW s gates to the interstate road system does pass through residential areas. Trucks are required to traverse either Burnett Boulevard (a two lane road) in order to reach I-74, or Shipyard Boulevard and College Road, four lane roads (two in either direction) with a series of stop lights in order to reach I-40. Figure 4.1: Competing Container Terminals with Similar Last Mile Road Configuration as POW Charleston Columbus Street Terminal North Charleston Terminal Wando Welch Terminal Virginia Norfolk Intl Terminal Portsmouth Marine Newport News Marine Source: Moffatt & Nichol Savannah Garden City Terminal POW is approximately 75 miles from I-95 and 200 miles from I-85, the two large interstates which run North- South through North Carolina. These are primary transportation corridors for both passengers and freight, and within the State of North Carolina connect the largest population centers of Charlotte, Greensboro and Raleigh/Durham. By comparison, the Port of Charleston is 50 miles from an I-95 connection as is the Port of Norfolk and the Port of Savannah is approximately 10 miles away and the new connector will cut that to approximately five miles. While not a significant difference relative to Norfolk and Charleston, POW is at a slight disadvantage in terms of distance and time connectivity to I-95. The North Carolina port facilities are also impacted by tourist traffic in the Summer months. MHC is currently constrained from a road and rail perspective since both run through the middle of Morehead City. NCDOT has recently let the Gallants Channel Bridge design and that project is underway. However, until the Northern Carteret Bypass and Havelock Bypass is completed, this link would not be a viable alternative to accessing MHC. In the meantime, all traffic would have to continue through Morehead City and this route during the summer months with the tourism associated with the Outer Banks coastal regions makes this section very difficult since it is more than six-miles from the port to beyond the Moffatt & Nichol 3BPort Opportunities/Obstacles Page 129

159 intersection of NC24 and is the only way out of MHC to gain access to US 70. I-95 is approximately 120 miles from MHC along US70. After construction of the Gallants Channel Bridge, there would be an opportunity to follow NC 101 but this roadway is a typical rural two-lane road and would not effectively reduce travel time. Summary Conclusion: Investment to POW infrastructure has helped the facility attract higher container volumes in recent years and without the improvements it is highly likely that this is cargo that would have chosen an alternative regional port instead. Although the existing configuration at POW will be sufficient to accommodate higher cargo volumes, the increase of containers moving by truck to/from POW could create a potential bottleneck at the south gate and along the road where the containers enter and leave the port. The recent investment for the Gallants Channel bridge at MHC is desperately needed to provide an alternative route from MHC/RI to US 70 to eliminate having to route trucks through Morehead City. This improvement in accessibility could help MHC in maintaining and attracting new volume Wilmington Harbor Channel Conditions The authorized channel dimensions for Wilmington Harbor for the various different reaches are outlined in detail in Table 4.1, based on information provided by the USACE Wilmington District. Figure 4.2 provides a visual interpretation of the channel alignment in a map format. Table 4.2: Wilmington Harbor Authorized Channel Dimensions in Feet Channel Name From Ocean to Upstream Channel Length Channel Width Width 1 at Widener or Basin Channel Depth2 Required Overdepth for Rock Allowable Overdepth for Dredging Inconsistencies Total Allowable Dredging Depth Baldhead Shoal 49, Channel bend widener Smith Island 5, Baldhead- Caswell 1, Moffatt & Nichol 3BPort Opportunities/Obstacles Page 130

160 Channel Name From Ocean to Upstream Channel Length Channel Width Width 1 at Widener or Basin Channel Depth2 Required Overdepth for Rock Allowable Overdepth for Dredging Inconsistencies Total Allowable Dredging Depth Southport 5, Battery Island 2, Lower Swash 9, Snows Marsh 15, Channel bend widener Horseshoe Shoal 6, Reaves Point 6, Lower 8, Midnight 3 Upper 13, Midnight 3 Lower Lilliput 3 10, Channel bend widener Upper Lilliput 9, Keg Island 7, Moffatt & Nichol 3BPort Opportunities/Obstacles Page 131

161 Channel Name From Ocean to Upstream Channel Length Channel Width Width 1 at Widener or Basin Channel Depth2 Required Overdepth for Rock Allowable Overdepth for Dredging Inconsistencies Total Allowable Dredging Depth Channel bend widener Lower Island Big 4, Channel bend widener Upper Island Big 2, Channel bend widener Lower Brunswick 8, Channel bend widener Upper Brunswick 4, Forth East Jetty 8, Between 2, Anchorage Basin 8, , Mem. Bridge Hilton RR 12, Moffatt & Nichol 3BPort Opportunities/Obstacles Page 132

162 Channel Name From Ocean to Upstream Channel Length Channel Width Width 1 at Widener or Basin Channel Depth2 Required Overdepth for Rock Allowable Overdepth for Dredging Inconsistencies Total Allowable Dredging Depth Bridge Hilton RR Bridge 750 upstream above Hilton RR Br. Project Limit 5, Total Length in Feet 211,250 Total Length in Miles 40.0 Notes: 1 Width shown is widest point at wideners and basins, and includes the channel width. Widened areas taper down through transition areas to the adjacent channel widths. 2 Channel depths are at mean lower low water. 3 This channel reach includes the Passing Lane. Source: Environmental Assessment Wilmington Harbor, USACE Wilmington District, February Airdraft may be an issue at POW as the vessel sizes increase. The existing airdraft for POW at center of channel is 170.5ft (186.5ft minus 16ft per OSHA in order to safely pass under Progress Energy powerlines). This impediment may need to be addressed in order to accommodate the larger and therefore taller container ships. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 133

163 Figure 4.2: USACE Wilmington District, Wilmington Harbor Channel Alignment Source: USACE Wilmington District, Wilmington Harbor Moffatt & Nichol 3BPort Opportunities/Obstacles Page 134

164 Summary Conclusion: The existing channel has two distinct reaches with different depths. The ocean channel has a depth of 44ft and the Cape Fear River has a depth of 42ft. Airdraft may be an issue to accommodate larger/taller vessels Morehead City Harbor Channel Conditions With respect to the current channel conditions for accessing the cargo-handling facilities located at MHC, Table 4.2 provides confirmation of the authorized length, width and depth dimensions for the different reaches, with the channel depth based on water depth at MLLW and an allowance included for the turning basin, based on confirmation provided by USACE. In addition, Figure 4.3 outlines from a visual perspective the channel alignment for accessing the port s cargo-handling facilities and Figure 4.4 offers a more in-depth view. Table 4.3: Morehead City Harbor Authorized Channel Dimensions in Feet Channel Name From Ocean to Upstream Channel Length Channel Width Channel Depth1 Allowable Overdepth for Dredging Inconsistencies Total Allowable Dredging Depth Range A 34, to Cutoff 3, Range B 6, Range C 3, to 1, East Leg 1, to West Leg 2, Northwest Leg 2, to Notes: 1 Channel depths are at mean lower low water. 2 Includes turning basin 1,350ft in diameter Source: USACE Moffatt & Nichol 3BPort Opportunities/Obstacles Page 135

165 Figure 4.3: Channel Alignment, Port of Morehead City See Figure 4.4 for additional detail of MHC Facilities Source: USACE There are no airdraft issues associated with the MHC channel. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 136

166 Figure 4.4 Inset of MHC Facility Source: NCSPA The west leg (the portions in front of Berths 4 through 7) of the existing channel is a naturally deep channel with sections having depths in excess of 47ft. The NCSPA has gotten approval for portions of the channel to be deeper than the 35ft noted in USACE data published and the inset of the facility shows the location of the approved depths in more detail. Summary Conclusion: The MHC ocean channel is relatively short compared to competing ports at only 6 miles and is 47ft in depth. The section from the mouth of Bogue Inlet to the channel fronting Berths 1-3 has a depth of 45ft. The section along Berths 4 through 7 varies from 35ft to 41ft in depth and Berths 8-9 are at 35ft. The facility has two turning basins one at the corner of Berth 7-8 with a depth of 35ft and one at the Y of the channel and the Newport River with a depth of 45ft. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 137

167 Port Berth Review Background Cargo-handling facilities at both POW and MHC have been reviewed and an assessment of the existing features and the upgrades required to accommodate larger vessels and deeper water at the face have been generated. For both ports, depths between 45ft to 50ft at the face of the berth have been used as the required parameters POW The current berths at POW proposed for container operations are Berths 7, 8 and 9 and each has a different operational configuration. Working south to north, following are descriptions of the existing berths and the impacts or improvements required to accommodate 45ft to 50 ft of water at the face: Berth 9 is approximately 900ft long and currently accommodates 50ft and 100 ft gage cranes. The deck is rated for 1,000 pound force per square foot (psf). This berth handles the majority of the container traffic currently calling at POW. The structure was designed for 40ft of water at the face. In order to deepen the channel to 45ft or 50ft, the structure would need to be analyzed to determine if 45ft is possible. A toe wall would likely have to be added to get to 50ft of water. Berth 8 currently has two areas; a recently constructed portion (400ft) and an existing portion (650ft). The new portion accommodates 50ft and 100ft gage cranes, has a deck capacity of 1500 psf and is designed for 47ft of water depth. The old portion has poor serviceability due to the structural deficiencies, a deck load rating of 500 pound force per square foot (psf), and accommodates only 32ft and 50ft gage cranes. This portion of Berth 8 is scheduled for replacement and the new construction would match the new Berth 8 criteria. For the new portion of Berth 8 to accommodate 50ft of water depth, the structure would need to be analyzed to determine if a toe wall was required or if the deepening resulted in an acceptable factor of safety. Berth 7 is 700 ft long and currently accommodates only 32ft and 50ft gage cranes. A portion of the deck behind the back crane beam of the 32ft gage crane was reconstructed in 2000 and has a service load rating of 1000 psf. The portion of deck between the face and the back 32 ft gage crane beam (~38 ft wide) is only rated for 540 psf. To bring this facility up to operational requirements for a container facility, the front 38ft would have to be reconstructed along with the installation of a new back crane beam and rail for the 100ft gage crane. Transit Shed 7 would have to be removed along with the ramps on either side of the transit shed. The existing facility was designed for only 38ft water and a toe wall was already installed to accommodate 42ft. However, the new front section along with the new back crane beam could be designed to accommodate 45ft to 50ft of water at the face and the retrofit or installation of a new toe wall, if required, could be incorporated into the design. This would require the relocation of some product from Transit Shed 7 to other facilities. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 138

168 MHC/RI MHC/RI is comprised of two different land masses on either side of the Newport River. MHC is a bulk / breakbulk terminal and RI is currently used for liquid bulk. MHC has 9 berths while RI has a T-head dock for off-loading liquids. The development of a turning basin at the Y of the Bogue Inlet Channel and the Newport River would be required for larger vessels since the impacts of enlarging the turning basin at the corner of Berth 7 / 8 would be significant. MHC Berths 1 through 3 are currently utilized to transfer bulk product. Berth 1 has a lay-down area associated with its 500ft berth length while Berths 2 and 3 are served via a conveyor system located directly adjacent to the berth. These three berths can accommodate 45 ft of water depth. However, the configuration of these berths is not conducive to berthing container vessels longer than approximately 950 ft (vessels of the larger classes of 6,000 TEU and up). The conveyor system also would have to be removed to open up the waterfront. The installation of crane rails for 100 ft gage cranes would also be required. MHC Berths 4 through 9 are only able to accommodate 32ft gage cranes and are designed for 35 to 41ft of water depth. Berths 5, 6, 7 are at 41ft and Berth 4 is at 35ft. The ability to deepen these berths to 45ft would require a channel deepening study but it should be noted that the natural channel in this area has depths exceeding 47ft of depth. In order to accommodate the larger container vessels the structures would need to be analyzed to determine the retrofits required but this issue can be mitigated somewhat by the installation of a waterside crane rail which would likely extend out into the current channel and berth area to retain as much of the existing structure and to reduce the need for a toe wall. However, extending into and deepening the channel will require the completion of an environmental impact statement. Transit sheds would have to be removed to accommodate the installation of a back crane beam. Due to the size of the MHC site, it is unlikely that there will be a need to utilize Berths 8 and 9 as the 2,600ft of quay on Berths 4 through 7 provide the berth area needed and providing access along Berths 8 and 9 would just reduce yard capacity. The only facilities at RI currently in use are a tank farm and a storage rail yard. In order to accommodate a container facility, a berth and the associated infrastructure would have to be constructed. The site does not require any surcharging, could be developed without impacting the current operations, could be configured to suit a client for a long term lease and the dredged materials have a beneficial use for beach nourishment. The site has been permitted for a facility but the permit has expired so either a new EIS would be required or the agencies would have to be contacted to determine if another supplement could be performed. The channel depth in front of Radio Island is 45 ft and will accommodate the larger vessels. Any new facilities on the island could be designed with the possibility of going to 50ft of water depth in the future. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 139

169 Summary Conclusion: Figure 4.5 Current Leased Areas within POW boundaries Source: NCSPA/Moffatt & Nichol POW: Figure 4.5 shows current leased areas within POW boundaries. Investment to POW berth infrastructure has helped the facility attract higher container volumes in recent years and the next phase of Berth 8 improvement would provide the port with additional area to work the smaller container vessels. The reconstruction of the front 32ft along Berth 7 at POW will provide the port with the space to accommodate two of the largest vessels currently calling on POW and will help them maintain and attract business. Any deepening beyond 47ft MLLW at POW may require some retrofit to Berth 9. The proposed channel improvements (alignment and turning basin) coupled with the berth improvements will significantly help POW remain a viable niche port. MHC/RI: MHC/RI berths to accommodate container ships are non-existent and would have to be constructed and container cranes would have to be acquired or moved. Costs associated with developing berths of sufficient capacity and depth will be high. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 140

170 Backlands Capacity In order to evaluate the viability of the current NCSPA facilities to be able to serve as a container operation, it is necessary to determine the approximate capacities of each port. A review and development of a high-level model to determine what throughput volumes each facility could sustain on an optimal basis was completed. For this analysis it has been assumed that the shipping vessels calling were able to access each site POW Capacity From work previously completed for NCSPA, Moffatt & Nichol developed a set of criteria to determine the possible throughput for the upgrades proposed to the container operation. It is assumed that future upgrades would maximize the potential of the container operations. A high level analysis of the container yard capacity was developed for the POW based upon the previously developed criteria, with the exception that a 1-over-5 stacking height was utilized for this evaluation. Reach stacker and rubber tire gantry operations were reviewed. Table 4.3 offers a summary overview of the key parameters used in the yard capacity calculation. Table 4.4: Parameters Used in Yard Capacity Calculations Reach Stacker Operations RTG Operations Import 47% 47% Throughput Distribution Export 24% 24% Empty 29% 29% Import 5 5 Dwell Time (Days) Export 7 7 Empty Import Storage Density (TEU/Acre) Export Empty Moffatt & Nichol 3BPort Opportunities/Obstacles Page 141

171 Reach Stacker Operations RTG Operations Vessel Peaking 90% 90% Modeling Factors Seasonal Peaking 90% 90% Shape Factor 80% 80% Import Utilization 85% 85% Storage Utilization Export Utilization 65% 85% Empty Utilization 85% 85% Chassis percentage 4.5% 4.5% Source: Moffatt & Nichol The resulting storage densities for the two operational modes are: Reach Stacker Operation - Approximately 4,565 TEU/Acre of Net CY storage RTG Operation - Approximately 7,125 TEU/Acre of Net CY storage Figure 4.6 shows the proposed container yard and the current leased areas that would be impacted. The two leased areas within the operations area can easily be relocated without impacting any significant long term leases or other operations. The available net storage area is highlighted in yellow in Figure 4.6. The storage area is estimated at 88 acres and includes demolition of the Transit Shed 7 in the northwest corner of the highlighted area, demolition of other buildings and relocation of short-term lease areas, and unpaved areas. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 142

172 Figure 4.6: Confirmation of Net Storage Area Potential Source: Moffatt & Nichol Using the above parameters, the estimated annual throughput capacity for the considered storage configurations are as follows: Reach Stacker Operations: Approximately 400,000 TEU per year; Rubber Tired Gantry Operations: 625,000 TEU per year. These volumes could be increased by expanding the container yard area by moving empty containers to vacant areas located east of River Road or by expanding the container yard to the north assuming that the long term leases could be modified to allow the expansion and the impacts to the bulk and breakbulk could be accommodated both operationally and financially. It is estimated that a maximum container throughput of approximately 750,000 TEU could realistically be achieved at the POW with minimal changes to the plan or operating criteria. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 143

173 MHC / Radio Island Capacity In looking at the facilities located at MHC/RI, there are several factors to keep in mind concerning the utilization of Radio Island. Infrastructure items such as being larger than the existing MHC facility, having a previously approved channel depth of 45ft along the berths that could accommodate larger vessels, the potential impacts to the bulk conveyors at MHC, the major retrofits to MHC facilities to accommodate larger vessels, the project letting of the Gallants Channel bridge and the Havelock Bypass to improve connectivity out of Morehead City should be weighed against the cost to develop and render the site operational. While the site is larger in land mass, there are local residential tenants on the island that will need to mix with the port traffic. The Gallants Channel bridge would allow direct access to Radio Island and a way to reduce the truck traffic across the high-rise structure over the Newport River to access MHC. Figure 4.7: Project Area for Container Terminal on Radio Island, Showing Areas on the Site Currently Leased Source: NCSPA/Moffatt & Nichol Since MHC has several long term leases, the model was undertaken for RI to determine throughput capacity. The available terminal area for Radio Island was assumed to be similar to the site previously defined within the EIS but assumed some future expansion toward the north in order to maximize through-put volumes. Figure 4.7 shows the assumed project area for the container terminal development overlaid with the current lease map information provided by NCSPA. The two existing leases shown have long term agreements. The first lease area, designated as 15 (the yellow area in Figure 4.7) is with PCS Phosphate. The PCS lease has approximately 20 years remaining. The second lease area, designated as 17 (the blue area in Figure 4.7) is with Carteret County and has about 25 years remaining. However, the PCS lease currently does not have many active operations and therefore it is considered as a soft constraint. The project area in Figure 3.6 is estimated to be approximately 130 acres in overall size. The following two possible operational scenarios have been considered: Rubber Tired Gantry Crane (RTG) Operation: o RTG handling import, export and empty containers; Moffatt & Nichol 3BPort Opportunities/Obstacles Page 144

174 o Side-pick/Top-pick handing empty containers. Automated Stacking Crane (ASC) Operation: o ASC mounted on railways handling import, export and empty containers; o Side-pick/Top-pick handing empty containers. The following assumptions and parameters have been used for the MHC/RI analysis: Target terminal throughput of between 1 million TEU and 1.2 million TEU; Berth to allow for berthing up to 8,000 TEU class vessels; Total berth length 2,600 linear feet; QC gross productivity: 30 moves per hour: o Net productivity 35 moves/hr based on Wilmington vessel call data. Average vessel call size 22% of vessel capacity; TEU factor: 1.8 TEU/Container: o RTG stacking mode - 6 wide, 1-over-5 for import and export containers; o ASC stacking mode - 9 wide, 1-over-6; o Empty stacking model - 8 wide, 5 high. Intermodal Yard (IY) is assumed to be located off-terminal: o IY throughput is about 25% of the terminal throughput. Table 4.5 provides a summary overview of the key parameters used in the yard capacity calculation. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 145

175 Table 4.5: Radio Island Throughput Distribution and Model Parameters RTG Operation ASC Operation Local Import 35% 35% Local Export 15% 15% Throughput Distribution Empty 25% 25% IY Import (Off-terminal) 15% 15% IY Export (Off-terminal) 10% 10% Local Import 5 5 Dwell (Days) Time Local Export 7 7 Empty IY Import (Off-terminal) 2 2 IY Export (Off-terminal) 5 5 Modeling Factors Vessel Peaking 90% 90% Seasonal Peaking 90% 90% Shape Factor 80% 70% Storage Utilization Import Utilization 85% 85% Export Utilization 85% 85% Empty Utilization 85% 85% Source: Moffatt & Nichol The modeling factors that have been used can be defined as follows: Vessel Peaking Factor: This factor accounts for the variation in terminal inventory due to vessel arrivals/departures and vessel loading/unloading activities. Seasonal Peaking Factor: This factor accounts for seasonal peaking, when a higher number of vessel calls is expected than the rest of the year. Such a period typically occurs before the winter holiday season. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 146

176 Container Yard Shape Factor: This factor accounts for the shape of the terminal. A square or rectangular shape is considered having higher inherent utilization; other shapes provide lower utilization. In Table 4.5 the ASC operation has a lower shape factor than the RTG operation. This is because the irregular shape has more impacts on the ASC layout as automated RMGs cannot be shared by multiple blocks thus each block cannot be too long or too short. The RTG operation does not have such a constraint thus is more flexible on the block size and a better use of the irregular area shape Berth Analysis Figure 4.8 shows all container vessels calls at POW in Among the total of 221 vessel calls, approximately 50% represented 4,000 TEU vessels, with the share of 1,000TEU and 2,000TEU ship calls collectively accounting for slightly more than 40%. This meant that the share of 5,000TEU vessel calls is less than 10% of the overall total. Figure 4.8: Container Vessel Calls at POW in Percent of Total Vessel Capacity (TEU) Source: Moffatt & Nichol, derived from NCSPA data Moffatt & Nichol 3BPort Opportunities/Obstacles Page 147

177 The vessels services in Table 4.6 are assumed in the calculation of the berth capacity, based on the actual observed vessel size patterns at Wilmington and additional 8,000 TEU vessel calls assumed for Radio Island. Table 4.6: Assumed Vessel Services for RI Based on 1 Million TEU Annual Throughput Vessel Size LOA (ft) # Services/Week Percentage On & Off # Cranes per Vessel 8,000 1, % 4 5, % 3 4, % 3 2, % 2 1, % 2 Source: Moffatt & Nichol Each vessel is assumed to unload and load 22% of its capacity at Radio Island. This percentage is based on total terminal throughput and total vessel capacity of Wilmington terminal in 2008 and Examining data from other ports in the region also indicates similar percentages. The larger the vessel, the greater number of quay cranes assumed for loading and unloading operations. The quay cranes are assumed to have gross productivity of 30 moves per hour which is consistent to the observed quay crane productivity currently at POW. There are also four hours mooring and unmooring time assumed for each vessel berthing. This vessel schedule assumes the worst case scenario which has low percentage on and off at the port and many smaller vessel calls as currently observed. In the future, the percentage on and off at the port and the percentage of big vessel calls may be increased if the shipping company maximizes the throughput going to this port as part of its optimized strategy for operating the port. For the calculated berth occupancy at 49%, the annual terminal throughput is estimated at approximately 1 million TEU. This throughput is generated from the combined vessel services as shown in Table 4.5. The berth length of 2,600 linear feet is large enough to simultaneously accommodate any combination of two 4,000 TEU to 8,000 TEU vessels, or any combination of three 1,000 TEU to 2,000 TEU vessels, or one 8,000 TEU and two 1,000 TEU or 2000 TEU vessels. For typical container operation, the larger vessels have the higher berth priorities over the smaller vessels Container Yard Analysis The gross acreage of the terminal is about 130 acres for the assumed project area. This leaves about 88 acres of net container storage area (net CY) based on the following estimated area composition: Berth area: 18 acres; Moffatt & Nichol 3BPort Opportunities/Obstacles Page 148

178 Gate: 5 acres; Road: 8 acres; Building, parking etc.: 10 acres; Net CY: 88 acres. To reach 1 million TEU of container capacity, it has been calculated that total static storage capacity of approximately 31,000 TEU will be required. This requires approximately 81 acres of net CY for the RTG layout and 87 acres of net CY for the ASC layout based on the following static density assumptions: RTG stacking: 530 TEU/acre; ASC stacking: 620 TEU/acre; Empty stacking: 525 TEU/acre; Wheeled: 93 TEU/acre. Since the calculated net CY acreage required for 1 million TEU of container capacity is less than the available acreage for both RTG and ASC operations, it is estimated that the container storage yard for both RTG and ASC operations could reasonably support an annual box throughput of more than 1 million TEU Sensitivity Analysis This sensitivity analysis evaluates the berth and storage requirements to achieve 1.2 million TEU annual container throughput. Table 4.7 presents the assumed vessel schedule for generating 1.2 million TEU annual throughput. The schedule still has two weekly services for the 8,000 TEU vessel but the number of weekly services for smaller size of vessels are increased compared to the schedule shown in Table 4.5. Table 4.7: Assumed Vessel Services for Radio Island (1.2 million TEU Annual Throughput) Vessel Size LOA (ft) # Services/Week Percentage On & Off # Cranes per Vessel 8,000 1, % 4 5, % 3 4, % 3 2, % 2 1, % 2 Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 149

179 The calculated berth occupancy is 61% for the vessel schedule in Table 4.7. The 61% berth occupancy is generally considered at the high end for the planning purpose. However if the smaller vessels can wait for the services at the port, the berth may support the annual capacity of 1.2 million TEU. The schedule in Table 4.7 represents the worst case scenario based upon a small percentage of containers on and off at the port and relatively high percentage of smaller vessels are assumed. An optimistic vessel schedule, as shown in Table 4.8, is also created to only include 8,000 TEU vessels with the increased percentage on and off each vessel call to replicate a dedicated port operation. It should also be noted that with a dedicated facility, the percentage on and off could easily be higher and could reduce the number of vessel calls while maintaining the higher throughput volumes. Even with the optimistic schedule shown, the calculated berth occupancy is 39% and will not negatively impact operating efficiency. Therefore the berth can support 1.2 million TEU within either of these scenarios. Table 4.8: Assumed Vessel Services for RI for 1.2 million TEU Annual Throughput, High Case Scenario Vessel Size LOA (ft) # Services/Week Percentage On & Off # Cranes per Vessel 8,000 1, % 4 Source: Moffatt & Nichol For the 1.2 million TEU annual throughput the required net container yard is calculated at 97 acres for the RTG operation or 105 acres for the ASC operation. The required area for this volume is slightly more than the assumed available area in the project area. However, additional area is available or the operating criteria could be modified (i.e. - the empty dwell time is relatively long) for a facility at RI to reasonably support a maximum annual throughput of 1.2 million TEU. While specific numbers for MHC were not modeled, an approximate evaluation to determine what throughputs could be expected there was performed. Assuming that the bulk conveyor was retained along with a small area along berths 8 and 9 to handle some breakbulk, this resulted in approximately 55 to 60 acres of available container storage area. Using the same densities and parameters used for the RI model, it is reasonable to extrapolate that the MHC site could accommodate somewhere between 450,000 to 550,000 TEUs. This would require the long term leases at MHC to be broken or the service lines relocated and the backlands redeveloped for a container facility. These projected volumes and the cost of the infrastructure upgrades would make this option questionable. Summary Conclusion: All sites will require the development of backlands. POW s facility upgrades would consist of the expansion of existing container storage areas while the MHC/RI facilities require the development of Greenfield /Brownfield sites to meet throughput projections Moffatt & Nichol 3BPort Opportunities/Obstacles Page 150

180 POW could reach approximately 750,000 TEUs with minimal improvement and this quantity should satisfy the current facility needs for at least 15 years. RI could potentially reach over 1.2 million TEU of capacity but the development of a Greenfield site is likely to be cost prohibitive. MHC could reach just over 500,000 TEUs but would require breaking long term leases and relocation, removal of warehouses and reconstruction of backlands Existing / Programmed Road and Rail Connectivity Road and rail connectivity to/from any port is of vital importance so that an efficient and smooth flow of cargo is maintained. Therefore the existing roadway and rail connections to NCSPA sites have been reviewed, while the impacts of possibly adding or integrating an intermodal service into the current operations which would accommodate unit trains has also been included in the assessment process for both POW and MHC/RI POW The issues associated with road access to POW are significant in that the distance from the port s gates to the interstate system is largely greater than competing ports in the Mid and South Atlantic region and passes through residential and highly urbanized areas. These are factors impacting the competitiveness of POW. However, the plan that NCDOT has put in place for the Skyway Bridge to access the port from the south would have a significant impact for the port for truck traffic traveling along the US74 corridor. This project would provide almost a direct connection to the port via a four-lane facility, as shown in Figure 4.9. For I-40 truck traffic, the distance along I-140 over to River Road via the bypass and Skyway Bridge to access the port from the south is more than double the distance than traveling along Shipyard Boulevard and College Road. The time of year (such as during the tourist season) plays a bigger role in whether this alternative route is utilized because the time differential may not vary much during certain times of the year. Moffatt & Nichol has determined that the preferred route from the south gate at POW is east on Shipyard Blvd, north on Carolina Beach Rd (Rt 421) to Front Street, and then connect to I-74 where trucks head west on I-74 towards Charlotte, or head north continuing towards I-140 and I-40. This route requires traversing several roads which are just two lanes wide. However, some trucks continue to use the Shipyard Blvd to College Road to reach I-40 even though this route is approximately nine miles long with numerous traffic lights, it is approximately seven miles shorter than the noted preferred route. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 151

181 Figure 4.9: Existing and Proposed Roadway System near POW Source: NC Turnpike Authority The rail connections and serviceability at POW are impacted by the route through the City of Wilmington. Nearly every crossing within the City is an at-grade crossing and the rail takes a circuitous route which impacts nearly every major thoroughfare through the city, as shown in Figure The speed of the train is noted to be a maximum of 10 miles per hour on the train charts and the speeds are probably less than that due to the number of crossings and the sharp curves that must be navigated. Some of the major thoroughfares within the city would be blocked for more than 12 minutes if a unit train was assembled at the Wilmington yard. It would also take more than 80 minutes from the Port to clear the Davis Yard at Navassa as train speed on the northern leg is limited since they have to approach the two river crossings at stopping speed. The safety, operational and functional impacts on city traffic of moving a unit train along the current route would be severe and have a negative impact due to the long clear time at intersections. The line also passes through residential areas so the noise impacts associated with moving the trains at night would have to be dealt with. In looking at the rail activity for the POW facility, it would be reasonable to assume a possible split of around 25% rail and 75% truck haul allocation for a facility with a throughput of 750,000 TEU. This equates to approximately 460 unit trains (based on 6,000ft long trains) or 18 trains per week (nine out and nine in) with 100% double-stack cars. If the percentage of cargo moving on rail was increased to 40%, this jumps to 736 unit trains or 28 trains per week (14 in and 14 out). While this could be accomplished at night, the city would need to be aware of the Moffatt & Nichol 3BPort Opportunities/Obstacles Page 152

182 train schedule and the subsequent impact it could have on the community for rescue/fire/police action along with associated traffic and noise issues. Figure 4.10: Existing Rail Route Through City of Wilmington (Route shown is approximately 13 miles) Source: Google Earth In the review of the LCMA and competing ports in the Mid and South Atlantic region, the single most influential hinterland factor for POW to attract additional cargo volume is the need to improve the rail connection and/or utilization of rail to/from the port. These improvements could be undertaken through the trucking of cargo to a nearby, out of town Distribution Center (DC) and warehousing complexes which has approximately 3,300 acres of developments so the unit train issues are resolved or by making improvements to the rail line. An initial assessment completed by Moffatt & Nichol indicates that a truck shuttle service to a DC with an Intermodal connection is the most feasible alternative. While this would solve the train issue for the City of Wilmington, other improvements along the rail line would need to be resolved as the issues stated for the City of Wilmington would still apply to those small towns located along the line. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 153

183 MHC /RI The roadway issues associated with the last mile pertaining to port access are a significant factor in the competitive position retained by the ports. Previous research completed by Moffatt & Nichol involving MHC and RI has highlighted how access remains a key obstacle to being able to attract business. The Gallants Channel Bridge and the associated work for the Havelock Bypass are currently slated for completion in the current NCDOT TIP. The addition of the Northern Carteret Bypass would complete the link to MHC / RI and give the port a viable roadway connection. The completion of these facilities changes the previous conclusions about truck access to and viability of these facilities. All of the proposed improvements on the Super 70 Plan (extends from I-95 to Beaufort) greatly increase the accessibility aspect via trucks to the MHC/RI facilities. These improvements would eliminate trucks having to transit through towns currently located along US 70 and would increase the speed of delivery via truck. Of particular note is the location of the Radio Island property. The development of this site would eliminate the need to cross the two-lane high rise bridge between Morehead City and Beaufort. For rail access, the rail yard adjacent the RI site could be utilized for storage and the development of an intermodal facility could be included on the current Radio Island property to provide complete rail service. The rail bridge over the Intra-Coastal Waterway would have to be upgraded. Figure 4.11: Proposed and Planned US 70 Improvements between MHC/RI and I-95 (Super 70 projects) Source: NCDOT / Kimley-Horn Moffatt & Nichol 3BPort Opportunities/Obstacles Page 154

184 The development of DCs is also possible due to the large tracts of vacant land. These projects would provide almost a direct connection to the port via a four-lane facility, as shown in Figure 4.11 and This would also increase the capacity of US 70 to the coast as trucks headed to the port would be removed from that traffic route. The funding of the highway projects are in outer years with the Gallant s Channel bridge project being the only project let for final design. Figure 4.12: Proposed and Planned Roadway Connections to MHC/RI Source: NCDOT The rail connections and serviceability at MHC are impacted by the route through the center of Morehead City. As Figure 4.12 identifies, it is approximately 3.5 miles from the port to the point where the train crosses Arendell Street and every crossing is an at-grade crossing. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 155

185 Figure 4.13: Existing Rail Route Through Morehead City Note: Route shown is approximately 3.5 miles. Source: Google Earth The speed of the train is noted to be a maximum of 10 miles per hour on the train charts and the speeds are probably less than that due to the number of crossings. Arendell Street is the major thoroughfare through the City and the median crossings would be blocked for more than 12 minutes if a unit train was assembled at either the MHC or more likely a Radio Island rail yard. It would also take about 20 minutes from MHC to clear the median crossing on the east end of Morehead City. The safety, operational and functional impacts on city traffic of moving a unit train along the current route would be severe and have a negative impact due to the long clear time at intersections. The line also passes through residential areas so the noise impacts associated with moving the trains at night would have to be dealt with. The only possible scenario to remedy this situation would be to remove the median crossings and install a grade separation at two or three locations along the line. Doing this would eliminate the at grade conflicts or at-grade crossings could be left in place between the grade separations with the understanding of rescue and safety personnel that the train movements could be overcome by utilizing the grade separations. In looking at the rail activity for the MHC/RI facility and assuming the RI facility was developed to accommodate a through-put of 1,100,000 TEU, it is reasonable to assume a split of 30% rail and 70% truck haul allocation. Assuming double stack capability, this equates to about 810 unit trains (6,000 ft long) or about 30 unit trains per week (15 out and 15 in). If the percentage of cargo moving on rail was increased to 40%, this jumps to 1,080 unit trains or 42 trains per week (21 out and 21 in). Moffatt & Nichol 3BPort Opportunities/Obstacles Page 156

186 While this could be accomplished at night, the city would need to be aware of the train schedule and the impacts it could have on the community for rescue/fire/police action along with the associated traffic and noise issues and the grade separations would need to be programmed and installed. Summary Conclusion: POW: As noted in the LCMA and port competition commentary in Section 3, the development of a viable rail connection is the single most important item that will help NCSPA facilities to be competitive. The current rail alignment and configuration will severely impact traffic within the City of Wilmington. A system where smaller trains are made-up outside of Wilmington city limits into unit trains is an option needing further study to determine feasibility. This alternative will require investment by NCRR or CSX to provide better rail connections and service to POW. The road connectivity to POW has been improved by the US 140 bypass and connection to US 17 providing a route around the City of Wilmington and College Road. The future Skyway Bridge will provide another link to provide almost direct access to the POW. MHC/RI: The MHC rail access through the middle of Morehead City will remain an issue as there is no way to realistically construct a rail bypass. The only alternative is the development of a truck shuttle via the Gallants Channel bridge and Northern Carteret Bypass to the east side of the Intra-Coastal waterway, which can then serve potential distribution centers in the hinterlands and the loading of containers/trailers onto railcars. However, the development of the Northern Carteret Bypass is not currently funded and any rail connection would require investment by NCRR or NS to provide adequate rail service to MHC. The Gallants Channel bridge, Northern Carteret Bypass and Havelock Bypass would allow MHC/RI to maintain and attract additional business and the funding for these projects along with the other Super 70 projects would need to be procured for development and/or construction Future Obstacles and Overcoming Bottlenecks All cargo projections for future volumes at NCSPA facilities and other relevant drivers, such as shipping industry developments, have been assessed. In conjunction with the LCMA process, this has helped to determine potential additional cargo that could be attracted to the port and which obstacles and constraints will need to be overcome. More importantly, if the future obstacles and bottlenecks are not overcome, then the potential / likely loss of cargo can be assumed. In achieving this objective it remains imperative that the relationship of connectivity and its effects on the ability of the port to retain/attract cargo are fully understood, especially in relation to existing and potential Moffatt & Nichol 3BPort Opportunities/Obstacles Page 157

187 cargo volumes and type of cargo (containers and bulk/breakbulk) accessing the Mid and South Atlantic region port market Channel Depth Requirements All channel depths and drafts are measured relative to MLLW which is the average of the lower low water height of each tidal day observed over the National Tidal Datum Epoch. The required river channel depth is typically 4ft more than the vessel draft and the ocean channel is typically 6ft more than the vessel draft to account for squat, roll, waves and other ship movements during transit to provide the appropriate underkeel clearance. With respect to accepted channel depth requirements for shipping access to a port or terminal, ASCE Manuals and Reports on Engineering Practice No. 107, entitled Ship Channel Design and Operation confirm this draft vs. channel depth clearance: The depth of the project design channel should be adequate to safely accommodate ships with the deepest drafts expected to use the waterway. Normally, depth is based on the development of one or more design ships with an appropriately loaded or ballasted draft. Selection of the design ship and project design depth is determined by an economic analysis of the expected project benefits compared with project costs; The two most commonly used methods for channel depth selection are the Permanent International Association of Navigation Congresses (PIANC) guidance report and the U.S. Army Corps of Engineers engineering manuals; The design details of these two methods are very similar. Site-specific wind, wave, and ship motion are evaluated with the use of vessel simulators or other mathematical or physical model; The PIANC method, used to estimate channel depth for concept design, is presented in PIANC (1997), page 20. This supplement states the following: o Depth is estimated from: at-rest draft of the design ship; tide height throughout transit of the channel; o squat; o wave-induced motions; o a margin depending on type of bottom; o water density and its effect on draught (draft). The values for draught (draft), which include water density effects, squat, wave-induced motions, and margin, are additive. After the depth / draught (draft) ratio has been calculated, it should be checked to ensure that it is not less than a safe minimum. A minimum of 1.10 should be allowed in sheltered waters, 1.3 in waves up to 1.0 m in height, and 1.5 in higher unfavorable waves. Another consideration worthy of note is the ability to see an increased draft due to freshwater conditions. Measurement data of salinity recorded near the water surface at the POW terminal has been obtained and generated the exceedance curve outlined in Figure 4.13, with the following key conclusions noted: Moffatt & Nichol 3BPort Opportunities/Obstacles Page 158

188 Salinity exceeds 5 ppt less than 50% of the time and exceeds 10 ppt less than 25% of the time; It should be noted that since these are surface measurements, the average salinity through the water column is likely to be higher since saline water is denser; A vessel s displacement will increase about 2.5% in freshwater, resulting in about one foot of additional draft required; A detailed analysis of wave-induced motions was not performed, but an additional 2ft allowance of channel depth is provided to accommodate wave motions in the ocean channel. This seems to be on the low side as the PIANC minimum recommendation for waves up to 1m would result in an increase of over 7ft of allowance for wave motions for a vessel drafting 38ft (1.3 times with waves versus 1.1 times draft without waves). However, since vessels are currently safely transiting with this 2ft allowance at both Cape Fear and Bogue Inlet, it may be acceptable for these locations. Figure 4.14: Salinity at Wilmington Harbor 100% 90% 80% 70% Percent Exceedance 60% 50% 40% 30% 20% 10% 0% Salinity (ppt) Source: PIANC, US Army Corps of Engineers Impact of Typical Ship Characteristics Table 4.9 provides confirmation of typical ship characteristics for containerships, with a comparison to known ships calling at the Port of Long Beach to validate the generic vessel dimensions. By way of comparison Table Moffatt & Nichol 3BPort Opportunities/Obstacles Page 159

189 4.10 offers data relating to two of the largest vessels that currently call at POW, with specific emphasis outlined for water depth requirements. Table 4.9: Typical Container Ship Characteristics Clarkson POLB LOA (ft) Beam (ft) Draught (ft) TEU Class Avg Min Max Avg Min Max Avg Min Max 6, , ,000 1, , ,000 1,091 1,016 1, ,000 1,107 1,036 1, ,000 1,130 1,104 1, ,000 1,161 1,138 1, ,000 1,192 1,192 1, ,000 1,276 1,199 1, ,000 1,200 1,200 1, , ,000 1,073 1,016 1, Source: Clarksons, Moffatt & Nichol Table 4.10: Typical Container Ship Characteristics Calling at POW Ship TEU LOA (ft) Beam (ft) Draft (ft) YM New Jersey 4, Hanjin Nagoya 4, Source: Moffatt & Nichol Taking into account known information relating to water depth and ship draft requirements of container vessels, Moffatt & Nichol has undertaken a specific assessment of actual ships calling at POW, based on length, share of containers to be loaded/discharged and the difference in maximum and minimum water depth. This summary has determined actual maximum and minimum draft needed by the ships for both arrival and departure. A comparison has also been conducted for non-container vessels as well, with Table 4.11 outlining the position for vessel calls. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 160

190 Table 4.11: Ship Drafts for Container Ships Calling at POW POW Ship Calls - Container Vessels MAX Depth MIN Depth Vessel Length % Containers Arrival Departure Arrival Departure % % % % POW Ship Calls - Other Vessels MAX Depth MIN Depth Vessel Length % Containers Arrival Departure Arrival Departure % % % na na na na % na na na na Note: All dimensions relate to feet Source: Moffatt & Nichol, derived from NCSPA Base Data Figures 4.14 and Figure 4.15 outline the actual known drafts of vessels making their first call at the Port of Long Beach in recent years. This information is very useful in helping to determine real shipping water depth requirements based on vessel size and TEU carrying capability because the ships arriving would not have experienced any draft restrictions due to the large channel depths present. As such it is possible to enable a useful comparative analysis to be completed. Figure 4.15: Cumulative Probability of Actual Vessel Draft Panamax and Smaller Vessels 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Draft (ft) 5000 TEU 4000 TEU 3000 TEU 2000 TEU 1000 TEU Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 161

191 Figure 4.16: Cumulative Probability of Actual Vessel Draft Post Panamax Vessels 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Draft (ft) 8000 TEU 7000 TEU 6000 TEU Source: Moffatt & Nichol Summary Conclusion: The published design drafts of vessels are not good indicators of the actual arrival / departure drafts. In order to arrive at an optimal channel depth, these actual arrival / departure drafts should be analyzed to determine the relative percentage of vessels that can safely transit to either terminal for various proposed channel depths Channel Depth Alternatives Three interior channel MLLW depths (42ft, 45ft and 50ft) have been assessed with respect to their impact on the ability of various sized vessels to call at NCSPA s cargo-handling facilities. These alternatives represent the existing (42ft), the minimum (45ft) and the ultimate channel depth (50ft). See Figure 4.15 for additional information. As stated previously, both the Cape Fear River and Bogue Inlet will accommodate vessels with a draft 4ft lass than their respective channel depths of 42ft and 45ft. It should be noted that the port of entry is largely irrelevant in this assessment because the aim is to specify the water depth required for ships entering a port where there are no draft restrictions (which is why the Port of Long Beach was used as a good indicative example). Moffatt & Nichol 3BPort Opportunities/Obstacles Page 162

192 Existing 42ft Channel For the existing 42ft channel depth at POW, and using the PIANC recommended minimum for water depth to draft ratio of 1.1, a typical maximum vessel draft of 38 feet MLLW can be accommodated. However, based on discussions with the Cape Fear Pilots, vessels usually transit the river at knots. For the typical maximum length of vessels (Panamax vessels in the 4,000 TEU to 5,000 TEU size range) currently serving the Wilmington terminal, this would result in a maximum squat at MLLW of over 3ft, which in combination with a recommended safety clearance of 2ft for sandy bottoms and accounting for fresh water effects would limit vessels to approximately 37 to 38ft ft of water depth draft. Thus, these vessels have to undertake one of the following sailing options: Arrive at reduced drafts; Ride the tide; Transit more slowly; Accept a lower safety clearance; Some combination of all of these. Consequently it can be concluded that the 42ft channel depth available will cause restrictions on these vessels transiting the channel. This can be validated when looking at Figure 4.13 which notes that about 45% of the 5,000 TEU vessels and just over 60% of the 4,000 TEU ships arrive at Port of Long Beach with drafts of 37 to 38ft. In addition, Figure 4.16 indicates that larger vessels have significantly lower percentages arriving with such drafts only 20% for 8,000 TEU vessels Proposed 45ft Channel If the POW channel is deepened to 45ft then approximately 70% of the typical arrivals at the Port of Long Beach for a 5,000 TEU vessel would arrive with acceptable drafts of 39ft to 40ft. However, the total falls to less than 50% of a 6,000 TEU ship and just 25% of an 8,000 TEU unit for acceptable drafts under the 45ft channel. Thus, some restrictions, such as load and/or water depth, will still need to be applied for these larger vessels to call at a port with a 45ft channel depth. MHC currently has 45ft of water depth available, but there remains a need to develop costly infrastructure to allow this facility to be able to receive container ships and offer a competitive and efficient level of service Proposed 50ft Channel If the channel is deepened to 50ft then, for all practical purposes on the basis of typical container ships in service, almost all vessels (98%) up to 8,000 TEU in size could arrive without any restrictions being placed on the vessel or cargo loads. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 163

193 Figure 4.17: Vessel Draft Analysis for Container Ships Arriving Unimpaired 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Line A 20%to 45% Line B 68% to85% Line C 91% to 96% Line D 99% to 100% Vessel Draft (ft) - Mean Lower Low Water (MLLW) Note: Add 4 ft to vessel draft to determine required channel depth for underkeel clearance 8000 TEU 7000 TEU 6000 TEU Source: Moffatt & Nichol Proposed 47ft Channel Since deepening the channel to 50ft may be problematic from environmental and cost viewpoints and the 45ft channel severely limits the ability to accommodate a significant portion of fully laden 8000 TEU vessels, the minimum preferred channel depth would equate to 47ft MLLW - the same depth sought by the Georgia Port Authority for the Savannah River. This depth would accommodate over 90% of all vessels in the 8000 TEU vessel class and smaller. Therefore, if for nothing more than economic reasons alone, the 47ft channel would likely prevail as the best overall depth for either facility. Summary Conclusion: In order for larger vessels to safely transit to the POW, the inner and outer channels will likely have to be deepened. The existing 45ft inner and 47ft outer channel at MHC would allow for larger ships to access portions of MHC and RI. However, the optimal depth would be a 50ft inner channel for both facilities although a 47ft inner channel (and an appropriately deepened outer channel) would allow approximately 90% of all vessels in the 8,000 TEU class in service still have access to either terminal. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 164

194 Channel Width and Turning Basin Requirements Water depth is only one important factor influencing the size of ship that can call at a port. The width of an access channel and the space available via a turning basin are also if importance. The official ASCE Manuals and Reports on Engineering Practice No. 107, noted as Ship Channel Design and Operation, endorses this view and states the following: Channel widths should be designed to provide for the safe and efficient movement of vessels that are expected to use the channel. The minimum channel width will depend on the size and maneuverability of the vessels, channel shape and alignment, traffic congestion, wind, waves, currents, visibility, quality and spacing of navigation aids, and whether one-way or two-way traffic is required; Channel widths have to provide for the width of the maneuvering lane, clearances between vessels when passing, and bank clearances, particularly in a restricted channel; A set of values for channel-width selection is presented in PIANC report Approach Channels, A Guide for Design Supplement to Bulletin No. 95, June Applying this typical approach criteria to the interior channels at POW yields a one-way width of about 300ft for the largest vessels currently calling at the port and about 660ft for two-way traffic. Given that the existing channel is 400ft wide it can be interpreted as one-way traffic only for the larger commercial vessels with an additional 100ft of width to allow for passing of recreational or small commercial vessels. The existing passing lane of 600ft, though, is on the low side, but if used intermittently, or vessels slow when passing, then it is likely to be acceptable to allow shipping safe access to/from the current cargo berths. For 6,000 TEU and 8,000 TEU vessels, the main channel needs to be widened by approximately 95ft and 125ft, respectively, while the passing lane requires widening by 200ft and 250ft for the two vessel sizes, respectively, for a similar level of service. If vessel traffic increases, the additional widening will likely be a required objective. With respect to the turning basin, a minimum of 1.25 times the length of a ship is typical, with 1.5 times the length a more desirable figure. On this basis, Table 4.11 compares both the acceptable and desirable turning basin lengths for the largest ship currently calling at NCSPA facilities and also for both 6,000 TEU and 8,000 TEU vessels. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 165

195 Table 4.12: Comparison of Turning Basin Requirements per Container Ship Size Calling at POW Vessel Length Acceptable Turning Basin Desired Turning Basin Current largest ship 965ft 1,200ft 1,500ft 6,000 TEU ship 1,044ft 1,300ft 1,570ft 8,000 TEU ship 1,214ft 1,520ft 1,820ft Source: Moffatt & Nichol Summary Conclusion: In order for larger vessels to safely transit to POW the channel will likely have to be widened and the turning basin enlarged Ship Maneuvering Study An initial study has been undertaken by Moffatt & Nichol in order to examine the effects of bringing existing and larger containerships from the entrance of the Cape Fear River approximately 42,600ft along the waterway in order to berth at the NCSPA cargo-handling facilities located at POW. Due to the current configuration of this waterway a particular focus of the impact caused by the bend at Battery Island has been included Existing Navigation Conditions The existing navigable channel of the Cape Fear River varies in width from 400ft to 500ft for the areas examined in this report and it has an approximate depth of 44ft. Table 4.12 outlines the authorized channel dimensions for the sections of Wilmington Harbor that have been evaluated in this analysis. Table 4.13: Wilmington Harbor Authorized Channel Dimensions Channel Name From Ocean to Upstream Channel Length Channel Width Width at Widner or Basin Channel Depth (feet) (feet) (feet) (feet) Baldhead Shoal 49, Moffatt & Nichol 3BPort Opportunities/Obstacles Page 166

196 Channel Name From Ocean to Upstream Channel Length Channel Width Width at Widner or Basin Channel Depth (feet) (feet) (feet) (feet) Channel Bend Widener Smith Island 5, Baldhead Casswell 1, Southport 5, Battery Island 2, Lower Swash 9, Source: USACE According to local pilots, ship speeds up river are approximately knots and no tug assistance is provided for the areas examined in this assessment Environmental Conditions Table 4.13 provides a summary of the key environmental conditions applied as part of ships maneuvering activities and the subsequent impact of the outcome during the vessel sailing process. Figure 4.17 offers an outline of the wind vector also applied to a shipping transit maneuver. Table 4.14: Summary of Environmental Conditions Applied and Subsequent Impact Condition Winds Currents Waves Impact The tight turn between Battery Island and Lower Swash presents the largest obstacle in manoeuvring a larger containership up the Cape Fear River. A conservative wind direction, which is applied beam on to the containership Currents are tidal driven and assumed to follow the direction of the channel. Flood current is assumed at 1.5 knots; while Ebb current is 2.5 knots Waves were not considered in these analyses Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 167

197 Figure 4.18: Wind Vector Applied to Transit Maneuvers Source: Moffatt & Nichol Fast-Time Analysis Moffatt & Nichol has utilized the fast-time, autopilot simulation software SHIPMA, developed by MARIN (Maritime Research Institute Netherlands) to perform a cursory computer-based simulation of the approach and departure maneuvers required for the larger containerships at the Cape Fear River entrance. The SHIPMA software uses a mathematical description of the hydrodynamics of a given vessel to simulate the maneuvering of the ship in approach channels and harbors. The hydrodynamic vessel description includes vessel response to waves, current forces, turning radius, maximum engine speeds and rudder angles. In model formulation and hydrodynamics the software is identical to the full mission bridge simulators used for pilot training. The fast time simulator uses an autopilot algorithm in place of the human pilot to simulate control of the vessel. While the autopilot routine is no substitute for a human pilot, it does allow maneuvering simulations to be conducted quickly and for less expense. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 168

198 The model uses the autopilot to control the vessels propeller, rudder, and tugs. The hydrodynamic model accounts for shallow water effects, bank suction effects, and forces due to winds, currents, and waves. A description of the desired maneuver is input by specifying the coordinates of an ideal track line. For each segment of the track, the user specifies desired vessel speed and orientation, the number and power of tugs, and the autopilot settings. The autopilot settings control such factors as pilot reaction time, look ahead distance, primary control method (rudder, propeller, or tugs), and the program then steps through the maneuver with the autopilot routine determining the required propeller speed, rudder angle, and tug commands. Fast-time simulations can act as a screening tool to identify the most critical conditions. In the case of the present study, the tool is used to evaluate potential difficulties encountered by transiting the larger, 8,000 TEU, containership up and down river Vessel Characteristics The principal dimensions outlining the key characteristics for existing 5,000 TEU ships and larger 8,000 TEU vessels are outlined in Table However, because the ship characteristic data is limited to whatever is provided by the software developer exact dimensions could not be used. Nevertheless, for the purposes of this Study the level of information modeled is sufficiently detailed in order to generate usable conclusions. Table 4.15: Vessel Characteristics of Design Vessels Container Ship Existing 5,000 TEU Future 8,000 TEU LOA (ft) 948 1,043 LBP (ft) Beam (ft) Depth (ft) Draft (ft) Displacement (tons) 66, ,200 Dead Weight Tonnage (tons) 59,500 84,000 Source: Moffatt & Nichol, derived from MARIN data Moffatt & Nichol 3BPort Opportunities/Obstacles Page 169

199 The mathematical vessel models provided by MARIN describe the hydrodynamic and handling characteristics of the ships used in the simulations. These models are based on measurement data from model tests and validated with model maneuvering tests, thereby allowing those to be used for the whole speed range between slow astern to full speed ahead during normal ship maneuvering River Bathymetry The bathymetry of the river is based on Corps of Engineers (COE) survey files for the appropriate reaches of the Cape Fear River Simulation Methodology The SHIPMA simulations compare the relative maneuverability between the existing and future containerships transiting the existing channel. A vessel maneuver simulation case is determined to be a success when the vessel navigates its course with little or no deviation from its intended track. The process includes such parameters as acceptable under keel clearance which takes vessel squat into consideration. Each inbound simulation covers almost 43,000 ft of distance traveled from the entrance to the Lower Swash. The vessel begins its course just outside of Baldhead Shoal at a speed of 10 knots; the vessel then transits past Smith Island, Baldhead-Caswell, and up the Southport channel. The vessel slows to approximately 7-8 knots for the turn at Battery Island and proceeds 1,000 meters along the Lower Swash channel before the maneuver is terminated. The navigable turns past Lower Swash do not impose any immediate concern and are not analyzed. Figure 4.18 and Figure 4.19 present a basic description of the vessel maneuver. The ideal, user defined, trackline which the vessel is programmed to follow is in located in the center of each channel. Each outbound simulation covers the same 43,000ft distance as the inbound track path, only with direction reversed. The vessel begins its course at 10 knots and slows to 7-8 knots for the turn at Battery Island; once the turn is completed, the vessel regains speed to approximately 10 knots for the remainder of the transit. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 170

200 Figure 4.19: Vessel Maneuvering Track Configuration Source: US Army Corps of Engineers Moffatt & Nichol 3BPort Opportunities/Obstacles Page 171

201 Figure 4.20: Vessel Maneuvering Track Configuration Existing Vessel Shown Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 172

202 Results of Inbound Maneuvers Figure 4.20 presents the inbound maneuver of the existing containership with no environmental conditions applied. This maneuver provides a calibration that the existing containership is able to maneuver successfully within the existing bathymetry in the SHIPMA program. The 43,000ft track is separated into four reaches, each of around 10,750ft in length, which provide greater graphical detail of the maneuver. Figure 4.21 outlines the inbound maneuver of the future containership superimposed on the track plot of the existing containership; no environmental criteria are applied. Results indicate the tactical turning radius and maneuvering capabilities of the larger container vessel result in the vessel traveling on top of the existing channel limits in Reach 4 (Battery Island). Figure 4.22 provides confirmation of the combined track plots of the inbound maneuver with the future containership for flood and ebb currents with an East South East wind of 20 knots. Figure 4.23 offers presents a close up of Reach 4 and indicates that for Flood and Ebb current maneuvers, the vessel transits approximately 264ft outside of the existing channel boundaries. Expanding the channel boundaries to accommodate for this sharp turn would make the turning maneuver for future container vessels possible. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 173

203 Port Business Case Project Figure 4.21: Inbound Maneuver Existing Containership Note: Plots are arranged Left to Right: Overall Track Plot; Reach 1; Reach 2; Reach 3; Reach 4. Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 174

204 Port Business Case Project Figure 4.22: Inbound Maneuver Existing Containership in Red; Future Containership in Gold Note: Plots are arranged Left to Right: Overall Track Plot; Reach 1; Reach 2; Reach 3; Reach 4. Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 175

205 Port Business Case Project Figure 4.23: Inbound Maneuver Future Containership: No Environment in Gold; Flood Tide with 20 knots Wind in Red; Ebb Tide with 20 knots Wind in Blue Note: Plots are arranged Left to Right: Overall Track Plot; Reach 1; Reach 2; Reach 3; Reach 4. Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 176

206 Port Business Case Project Figure 4.24: Inbound Maneuver Reach 4 Note: Hatched area indicates vessel has transited outside of existing channel boundaries. Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 177

207 Port Business Case Project Results of Outbound Maneuvers Figure 4.24 presents the outbound maneuver of the existing containership superimposed on the track plot of the future containership; no environmental criteria are applied. As with inbound maneuvers, the turn at Battery Island poses the largest obstacle for vessel maneuvering. The existing vessel approaches the bend on the high side of the channel, transits past Battery Island on the apex of the turn, and then exits wide to the Southport channel. The future containership encroaches on all the existing channel limit boundaries for the maneuver which excludes applied environmental conditions. It is reasonable to assume the maneuver would become more difficult and the vessel would transit outside the channel boundaries with environmental conditions applied. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 178

208 Port Business Case Project Figure 4.25: Outbound Maneuver Future Containership in Red; Existing Containership in Gold Note: Plots are arranged Left to Right: Overall Track Plot; Reach 4; Reach 3; Reach 2; Reach 1. Source: Moffatt & Nichol Moffatt & Nichol 3BPort Opportunities/Obstacles Page 179

209 Port Business Case Project North Carolina State Ports Authority Summary Conclusion: The SHIPMA numerical modeling tool indicates that the existing channel alignment at the Battery Island Reach is not satisfactory to safely transit an 8,000 TEU vessel. Moffatt & Nichol 3BPort Opportunities/Obstacles Page 180

210 NCSPA Infrastructure and Role in Cargo Transportation Network Z Z Z Z NCSPA Economic Impacts Forecast Volumes Moving Through NCSPA Facilities Port Opportunities/Obstacles APPENDIX

211 Port Business Case Project North Carolina State Ports Authority 5. APPENDIX 5.1. Container Trade Lane Market Potential Section 5.1 is an expansion of the summary outlined in Section North Asia Trade Lane Container Potential Moffatt & Nichol estimates that container volumes on the North Asia trade lane associated with the respective LCMA regions of the East Coast ports totaled approximately 6.8 million in Figure 5 outlines the share of imported traffic for this trade lane by port of import for the US East Coast, while Figure 5.2 shows the likely share for exported volumes per eastern seaboard port. With respect to cargo demand originating in the NCSPA LCMA region is estimated to account for 7% of the total import demand of the identified region, and 4% of the total export demand. Therefore, it is estimated that within the POW LCMA, there is currently a total demand for North Asian container volumes of 385,500 TEU, roughly double that of estimated 170,000 North Asian loaded container currently handled at POW. Figure 5.1: LCMA by Port for North Asian Imports, % 2% 7% 23% 14% 1% 49% NY/NJ Baltimore Norfolk Wilmington Charleston Savannah Miami Total 2010 = 4,500,000 Source: Moffatt & Nichol Moffatt & Nichol APPENDIX Page 181

212 Port Business Case Project North Carolina State Ports Authority Figure 5.2: LCMA by Port for Exports to North Asia, % 27% 33% 8% 4% 14% 0% NY/NJ Baltimore Norfolk Wilmington Charleston Savannah Miami Total 2010 = 2,300,000 TEU Source: Moffatt & Nichol Under the hypothetical scenario, where ship size on the North Asia trade lane averages 8,000 TEU, and where the NCSPA ports have intermodal connectivity using the CSX intermodal rail network, the LCMA region for NCSPA expands dramatically. Based on this set of assumptions, total import demand for the NCSPA LCMA is estimated to increase to 2.2 million TEU by 2015, or 32% of the total 7.2 million. As Figure 5.3 shows, NYNJ captures share from Baltimore, while NCSPA is likely to attract share of the market primarily from Norfolk and Savannah. If the assumed intermodal connection is ignored and just the larger ship size is included, the LCMA region for NCSPA in 2015 is estimated to account for approximately 302,000 TEU, or roughly equal to the current level of demand. As a consequence, it can be concluded that it is the ability of NCSPA s cargo-handling capabilities to connect via intermodal rail is one of the key factors determining the ability of ports in North Carolina to attract greater volumes of container traffic. It remains important to be able to effectively receive, and service, larger ships but the influence of hinterland transportation connections is clearly evident with respect to helping extend the boundaries of the LCMA regions for which NCSPA remains the least-cost port. Moffatt & Nichol APPENDIX Page 182

213 Port Business Case Project North Carolina State Ports Authority Figure 5.3: Hypothetical LCMA by Port for North Asian Imports, % 13% 4% 38% NY/NJ Baltimore Norfolk 32% Wilmington 11% 1% Charleston Savannah Miami Total 2015 = 7,200,000 TEU Source: Moffatt & Nichol South East Asia Trade Lane Container Potential The South East Asia trade lane via the All Water route through the Panama Canal remains an important option that ports in the Mid and South Atlantic region continue to compete to secure. On a wider eastern seaboard basis, as Figure 5.4 and Figure 5.5 both currently show, there is an estimated 1.3 million TEU of demand moving to/from the South East Asia region that is currently handled at ports on the US East Coast. In more specific detail, the ports of NYNJ and Savannah appear to serve the regions of strongest demand, suggesting that these facilities act as the most northern and southern preferable ports of call on this trade lane. At the same time, VPA also serves a significant volume of demand in the Mid and South Atlantic region. Moffatt & Nichol APPENDIX Page 183

214 Port Business Case Project North Carolina State Ports Authority Figure 5.4: LCMA by Port for South East Asia Imports, % 41% 3% 23% NY/NJ Norfolk Charleston Savannah Total 2010 = 815,000 TEU Source: Moffatt & Nichol Figure 5.5: LCMA by Port for South East Asia Exports, % 52% 7% 18% NY/NJ Norfolk Charleston Savannah Total 2010 = 535,000 TEU Source: Moffatt & Nichol While NCSPA ports currently do not serve a South East Asian container service, Moffatt & Nichol estimates that there is potential that NCSPA facilities could do so in the future, assuming that the ports are able to be a competitive option in the region and are able to benefit from required infrastructure development needed to meet this overall objective. Moffatt & Nichol APPENDIX Page 184

215 Port Business Case Project North Carolina State Ports Authority Under a hypothetical set of assumptions, most importantly including intermodal connectivity to/from NCSPA facilities, and an average vessel size of 8,000TEU by 2015, POW s potential LCMA could account for approximately 133,000 TEU of demand, or 7% of regional total, as noted in Figure 5.6. Figure 5.6: Hypothetical LCMA by Port for South East Asian Imports, % 31% NY/NJ Baltimore 5% 7% 17% 0% Norfolk Wilmington Charleston Savannah Total 2015 = 1,900,000 TEU Source: Moffatt & Nichol Transatlantic Trade Lane Container Potential The total container volumes associated with the LCMA regions of the major East Coast ports for the transatlantic trade lane was just under 1.5 million TEU in 2010, as identified by Figure 5.7 and Figure 5.8, with a relatively even split between import and export box traffic. The LCMA region where NCSPA is currently the lowest-cost port option accounts for approximately 10% of the total identified demand. Hence there is a potential market available to the port authority of around 150,000 TEU per annum. Although POW has been successful in securing the ICL service, it should be noted that the majority of the potential container volumes that NCSPA could be handling is still moving through other Mid and South Atlantic ports, notably Savannah and, to a lesser extent, Norfolk. Moffatt & Nichol APPENDIX Page 185

216 Port Business Case Project North Carolina State Ports Authority Figure 5.7: Share of Import Volumes by Port for Transatlantic Trade Lane, % 3% 3% 6% 50% NY/NJ Baltimore Norfolk Wilmington 8% Charleston 7% Savannah Miami Total 2010 = 775,600 TEU Source: Moffatt & Nichol Figure 5.8: Share of Export Volumes by Port for the Transatlantic Trade Lane, % 30% NY/NJ 31% 5% Baltimore Norfolk Wilmington 7% 4% 10% Charleston Savannah Miami Total 2010 = 719,600 TEU Source: Moffatt & Nichol Based on the growth outlook for transatlantic container trade volumes, Moffatt & Nichol estimates that total TEU traffic moving between the US and Europe through the identified ports could total approximately 1.75 million by 2015, as identified by Figure 5.9. Moffatt & Nichol APPENDIX Page 186

217 Port Business Case Project North Carolina State Ports Authority This forecast scenario has assumed that the average vessel capacity continues to increase from the existing average size of 4,500 TEU in 2010, with the introduction of ships up to 8,000 TEU by By being able to accommodate the larger vessels, the LCMA for POW and NCSPA increases quite considerably compared to the position in 2010 and it is estimated by Moffatt & Nichol that NCSPA could attract a share of this trade of up to 14%, or approximately 245,000 TEU, based on the LCMA assessment and the ability of NCSPA facilities to handle larger ships and offer improved intermodal rail connectivity to/from the port. Figure 5.9: Hypothetical LCMA by Port for Transatlantic Trade, % 19% 40% NY/NJ Baltimore Norfolk 4% Wilmington 14% 8% 5% Charleston Savannah Miami Total 2015 = 1,748,000 TEU Source: Moffatt & Nichol Latin America Trade Lane Container Potential The combined total demand for imported container volumes from the South American trade lanes, of East Coast South America (Figure 5.10) and West Coast South America (Figure 5.11), moving to the US is estimated to be approximately 715,000 TEU for all geographic regions served by competing ports on the US Gulf and East Coasts. Overall, given the proximity enjoyed by the Port of Houston in serving existing shipping services to Latin America, this port reflects the largest least-cost facility, as defined by the respective port LCMA assessments of the two North-South trade lanes. In general, the northern ports of New York and Baltimore and southern ports of Savannah, Jacksonville and Houston enjoy the largest market potential for South American import trade. The southern-mid Atlantic including Norfolk, Charleston and therefore Wilmington appear to be capable of serving comparatively Moffatt & Nichol APPENDIX Page 187

218 Port Business Case Project North Carolina State Ports Authority smaller regions. This is reflected by the fact that the estimated demand within the LCMA areas for Norfolk and Charleston, the areas closest to NCSPA and which represents the amount of cargo that NCSPA will be competing to attract, totals approximately 70,000 TEU per annum. Figure 5.10: Share of Import Volumes by Port for the ECSA Trade Lane, % 51% 5% 8% NY/NJ Baltimore Norfolk 3% 3% 6% 4% Charleston Savannah Jacksonville Miami Houston Total 2010 = 397,000 TEU Source: Moffatt & Nichol Figure 5.11: Share of Import Volumes by Port for the WCSA Trade Lane, % 52% 10% NY/NJ Baltimore 7% Charleston Jacksonville 2% 7% Miami Houston Total 2010 = 316,700 TEU Source: Moffatt & Nichol Moffatt & Nichol APPENDIX Page 188

219 Port Business Case Project North Carolina State Ports Authority Based on the outlook for Latin America trade with the US, Moffatt & Nichol estimates that total container demand through the identified ports on the US East Coast and Gulf Coast could reach almost 1.7 million TEU in total by 2015, as shown by Figure This figure is based upon import and export containers moving to/from both the ECSA and WCSA regions, with the Port of Houston remaining the dominant gateway facility, based on the least-cost analysis. Although no NCSPA port currently services Latin America trade lanes, it is estimated that the LCMA for POW will generate around 12% of the total volume by 2015, approximately 209,000 TEU. This is interesting because it means that NCPSA could attract the third largest share of these trade lanes, behind both the ports of Houston and NY/NJ. More specifically, this estimated share would propel NCSPA to being the largest port serving these key North-South trades in the Mid and South Atlantic region, surpassing both Savannah (an 8% share) and Jacksonville (a 7% share). Therefore, this north-south trade route offers a significant opportunity for incremental throughput growth for NCSPA, though it would only be gained on the basis that sufficient water depth exists to successfully receive ships of up to 8,000 TEU in size and can offer efficient intermodal rail hinterland connectivity. Figure 5.12: Hypothetical LCMA by Port for Latin America Trade, % 5% 7% 16% 8% 1% 3% 12% 3% Total 2015 = 1,690,000 TEU NY/NJ Baltimore Norfolk Wilmington Charleston Savannah Jacksonville Miami Houston Source: Moffatt & Nichol Moffatt & Nichol APPENDIX Page 189

220 Port Business Case Project North Carolina State Ports Authority 5.2. Port Codes The following table is of port codes used in the container shipping profile in Section Port code Port name Country AAR Aarhus Denmark ABJ Abidjan Cote d'ivoire ACJ Acajutla El Salvador ADH Abu Dhabi UAE ADL Adelaide Australia ADN Aden Yemen AKL Auckland New Zealand ALG Algeciras Spain ALY Alexandria Egypt AMB Ambarli/Avcilar Turkey AMS Amsterdam Netherlands ANF Antofagasta Chile ANR Antwerp Belgium APA Apapa (Lagos) Nigeria AQB Aqaba Jordan ARG Argentia Canada ARI Arica Chile ASH Ashdod Israel ASS Assaluyeh Iran ATM Altamira Mexico BAL Baltimore USA BAQ Barranquilla Colombia BAT Bata Equatorial Guinea BCK Brunswick USA BCN Barcelona Spain BEI Beirut Lebanon BEL Belem Brazil BIK Bandar Imam Khomeini Iran BIO Bilbao Spain BIS Bissau Guinea Bissau BJL Banjul Gambia BLB Balboa Panama BLF Bluff New Zealand BND Bandar Abbas Iran BNE Brisbane Australia BNK Bandar Khomeini Iran BOL Puerto Bolivar Ecuador BOM Boma Congo (D.R.) BOS Boston USA BQM Port bin Qasim Pakistan BRM Bremen Germany Moffatt & Nichol APPENDIX Page 190

221 Port Business Case Project North Carolina State Ports Authority Port code Port name Country BRS Bristol UK BRV Bremerhaven Germany BUE Buenos Aires Argentina BUN Buenaventura Colombia BWN Belawan Indonesia CAB Puerto Cabello Venezuela CAD Cadiz Spain CAG Cagliari Italy CAL Caldera Costa Rica CAS Casablanca Morocco CAU Caucedo Dominican Republic CCT Colon Container Terminal Panama CHE Chennai India CHS Charleston USA CIO Corinto Nicaragua CKY Conakry Guinea CLL Callao Peru CMB Colombo Sri Lanka CNR Chanaral Chile CNZ Constantza Romania COR Coronel Chile COT Cotonou Benin CPT Cape Town South Africa CSR Chester (Pa) USA CTB Cristobal Panama CTG Cartagena Colombia CTN Castellon Spain CWN Chiwan Taiwan DAL Dalian PRC DAM Damietta Egypt DAR Dar-es-Salaam Tanzania DCB Dachan Bay China DDC Degrad de Cannes French Guiana DHR Dutch Harbor USA DKK Dunkirk France DKR Dakar Senegal DMM Dammam Saudi Arabia DOU Douala Cameroon DUB Dublin Ireland DUR Durban South Africa DXB Dubai (Port Rashid) UAE EDK El Dekheila Egypt ELD East London South Africa EMD Emden Germany ESE Ensenada Mexico Moffatt & Nichol APPENDIX Page 191

222 Port Business Case Project North Carolina State Ports Authority Port code Port name Country EVE Everett (Washington) USA EVM Everett (Mass.) USA FNA Freetown Sierra Leone FND Fernandina (FL) USA FOR Fortaleza Brazil FOS Fos France FPT Freeport Bahamas FRE Fremantle Australia FRP Fraser River Port Canada FUJ Fujairah UAE FUQ Fuqing PRC FXT Felixstowe UK GEB Gebze Turkey GEM Gemlik Turkey GIT Gioia Tauro Italy GIZ Gizan Saudi Arabia GOA Genoa Italy GOT Gothenburg Sweden GUM Guam (Naha) Japan GYE Guayaquil Ecuador HAI Rio Haina Dominican Republic HAM Hamburg Germany HAV Havana Cuba HAY Haydarpasa (Istanbul) Turkey HCM Ho Chi Minh City Vietnam HFA Haifa Israel HFX Halifax (NS) Canada HKG Hong Kong Hong Kong HKT Hakata Japan HNK Hitachinaka Japan HNL Honolulu USA HOD Hodeidah Yemen HOU Houston USA HUA Huangpu PRC IBB Imbituba Brazil IKF Izmit Korfezi (Eyvap) Turkey ILK Ilyichevsk Ukraine IMB Imbituba Brazil IQQ Iquique Chile INC Inchon South Korea ITJ Itajai Brazil IZM Izmir Turkey IST Istanbul Turkey JAX Jacksonville USA JEA Jebel Ali UAE Moffatt & Nichol APPENDIX Page 192

223 Port Business Case Project North Carolina State Ports Authority Port code Port name Country JED Jeddah Saudi Arabia JIB Djibouti Djibouti JKT Jakarta Indonesia JNP JNPT India JUB Jubail Saudi Arabia KAN Kandla India KEE Keelung Taiwan KHH Kaohsiung Taiwan KHI Karachi Pakistan KIN Kingston Jamaica KLF Khor al Fakkan UAE KOB Kobe Japan KOC Kochi India KOP Koper Slovenia KUA Kuantan Malaysia KUM Kumport (Istanbul) Turkey KUN Kunsan South Korea KWS Kawasaki Japan KWT Kuwait Kuwait KWY Kwangyang South Korea LAG Lagos Nigeria LAP La Pallice France LAR La Rochelle France LAU Lautoka Fiji LAX Los Angeles USA LCH Laem Chabang Thailand LEH Le Havre France LEI Leixoes Portugal LGB Long Beach USA LGN Longoni Mayotte LGU La Guaira Venezuela LIB Libreville Gabon LIM Limassol Cyprus LIO Puerto Limon Costa Rica LIS Lisbon Portugal LIV Leghorn Italy LOB Lobito Angola LOM Lome Togo LPA Las Palmas (Gran Canaria) Spain LPL Liverpool UK LQN Lirquen Chile LST Launceston Australia LTK Lattakia Syria LUA Luanda Angola LUD Luderitz Namibia Moffatt & Nichol APPENDIX Page 193

224 Port Business Case Project North Carolina State Ports Authority Port code Port name Country LVN Le Verdon France LVW Longview USA LYG Lianyungang PRC LYT Lyttelton New Zealand LZC Lazaro Cardenas Mexico MAL Malaga Spain MAT Matarani Peru MBA Mombasa Kenya MCV Mindelo Cape Verde MDC Marina di Carrara Italy MDV Male Maldives MEJ Mejillones Chile MEL Melbourne Australia MER Mersin Turkey MIA Miami USA MIS Misurata Libya MIT Manzanillo Panama MLO Malabo Equatorial Guinea MLW Monrovia Liberia MNQ Port Sultan Mina Qaboos Oman MNS Manila South Harbour Philippines MOB Mobile USA MOJ Moji Japan MON Montoir France MPM Maputo Mozambique MRN Marin Spain MRS Marseille France MTA Manta Ecuador MTD Matadi Congo (D.R.) MTR Montreal Canada MUM Mumbai India MUN Mundra India MVD Montevideo Uruguay MXX Marsaxlokk Malta MZT Mazatlan Mexico NAH Naha Japan NAM Namibe Angola NAP Naples Italy NAT Natal Brazil NAV Navegantes Brazil NBO Ningbo PRC NDB Nouadhibou Mauritania NEW New Westminster Canada NFK Norfolk (Va) USA NGY Nagoya Japan Moffatt & Nichol APPENDIX Page 194

225 Port Business Case Project North Carolina State Ports Authority Port code Port name Country NKC Nouakchott Mauritania NNS Newport News (Va) USA NOL New Orleans USA NOU Noumea New Caledoonia NOV Novorossiysk Russia NPE Napier New Zealand NPL New Plymouth New Zealand NSA Nansha PRC NYJ New York/New Jersey USA OAK Oakland USA ODS Odessa Ukraine OJS Oranjestad Aruba OMZ Omaezaki Japan ONN Onne Nigeria OSA Osaka Japan PAI Paita Peru PAP Papeete Tahiti PCH Port Chalmers New Zealand PCR Puerto Cortes Honduras PDG Pointe des Galets France (Reunion Island) PEC Pecem Brazil PEN Penang Malaysia PEV Port Everglades USA PHB Philipsburg St.Maarten, NA PHL Philadelphia USA PIP Pipavav India PIR Piraeus Greece PKG Port Klang Malaysia PLD Portland USA PLS Point Lisas Trinidad PLU Port Louis Mauritius PLZ Port Elizabeth South Africa PMD Puerto Madryn Argentina PMH Portsmouth (Va) USA PNG Paranagua Brazil PNR Pointe Noire Republic of Congo POG Port Gentil Gabon PPR Port-au-Prince Haiti PRA Praia Cape Verde PRQ Puerto Quetzal Guatemala PRV Prince Rupert Canada PSD Port Said Egypt PSP Port of Spain Trinidad PSU Port Sudan Sudan PTM Port Tanger Med Morocco Moffatt & Nichol APPENDIX Page 195

226 Port Business Case Project North Carolina State Ports Authority Port code Port name Country PUS Pusan South Korea PYO Pyongtaek South Korea QIN Qingdao PRC RCM Richmond (Va) USA REY Reykjavik Iceland RIG Rio Grande do Sul Brazil RIJ Rijeka Croatia RIO Rio de Janeiro Brazil ROU Rouen France RTM Rotterdam Netherlands SAI San Antonio Chile SAL Salerno Italy SAV Savannah USA SCT Santa Cruz (Tenerife) Spain SDG San Diego USA SEA Seattle USA SEN Sendai Japan SEP Sepetiba Brazil SET Sete France SFS Sao Francisco Brazil SHA Shanghai PRC SHE Shelbourne Canada SHK Shekou PRC SHT Shantou PRC SIN Singapore Singapore SJJ Sharjah UAE SJU San Juan (Puerto Rico) USA SLL Salalah Oman SMZ Shimizu Japan SNS Sines Portugal SOH Sohar Oman SOK Sokhna Egypt SOR Sorel Canada SOU Southampton UK SPE La Spezia Italy SPI San Pedro Cote d'ivoire SSA Salvador Brazil SSZ Santos Brazil STB Setubal Portugal STC Santo Tomas de Castilla Guatemala SUA Suape Brazil SUC Puerto Sucre Venezuela SUV Suva Fiji SVE San Vicente Chile SVI San Vicente Cape Verde Moffatt & Nichol APPENDIX Page 196

227 Port Business Case Project North Carolina State Ports Authority Port code Port name Country SVL Savona (Vado Ligure) Italy SWK Shuwaikh Kuwait SYD Sydney Australia TAC Tacoma USA TAL Talcahuano Chile TAR Taranto Italy TCI Tin Can Island (Lagos) Nigeria TEM Tema Ghana TGA Tanga Tanzania TGN Tarragona Spain THE Thessaloniki Greece THP Thamesport UK TIL Tilbury UK TIU Timaru New Zealand TKD Takoradi Ghana TMK Tomakomai Japan TMM Tamatave Madagascar TOK Tokyo Japan TPC Tampico Mexico TPF Tampa USA TPP Tanjung Pelepas Malaysia TRG Tauranga New Zealand TRS Trieste Italy TUT Tuticorin India TXG Taichung Taiwan ULS Ulsan South Korea USD Umm Said Doha USH Ushuaia Argentina VAN Vancouver Canada VAP Valparaiso Chile VCE Venice Italy VDC Vila do Conde Brazil VER Vera Cruz Mexico VGO Vigo Spain VIC Port Victoria Seychelles VIX Vitoria Brazil VLC Valencia Spain VSK Visakhapatnam India WEL Wellington New Zealand WMS Willemstad Curaçao WNC Wilmington (NC) USA WVB Walvis Bay Namibia XGG Xingang PRC XMN Xiamen PRC YKK Yokkaichi Japan Moffatt & Nichol APPENDIX Page 197

228 Port Business Case Project North Carolina State Ports Authority Port code Port name Country YOK Yokohama Japan YTI Yantai PRC YTN Yantian PRC ZAE Zarate Argentina ZEE Zeebrugge Belgium ZLO Manzanillo Mexico Source: Moffatt & Nichol Moffatt & Nichol APPENDIX Page 198

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