Room to grow
APM’s new container terminal will double capacity at Virginia port

by Otesa Middleton Miles
for Virginia Business
September 2006

Even with a bird’s eye view from atop a mountain of stone, it takes more than a little imagination to envision the future taking shape along Portsmouth’s waterfront. Yet, in less than a year, the trailers, imported dirt and concrete piles along the Elizabeth River will morph into one of the largest private projects ever built in Hampton Roads.

Each day 300 to 600 workers fan out across nearly 300 acres to lay conduit wires and pour concrete as they transform soybean and wheat fields into the newest import/export gem of the East Coast.

With its newly dredged deep channels, the $450 million marine terminal under construction by APM Terminals Virginia will be able to welcome the largest cargo ships on the planet — assuring Hampton Roads’ dominance as a port for the 21st century.

Even though the new facility will compete with neighboring terminals of the Virginia Port Authority (VPA), port officials say it’s the big picture that counts. As VPA’s senior marketing director Tom Capozzi points out: “APM Terminals puts us on the map as a port that can continue to take additional volume of cargo because we have this huge amount of capacity coming on line.”

How huge? Double the existing cargo capacity of Hampton Roads — already the second busiest general cargo port on the East Coast.

APM Terminals Virginia, a subsidiary of the Danish conglomerate A.P. Moller-Maersk Group, is one of the world’s largest operators of container ports. It plans to open the first phase of the Portsmouth terminal next July. By then, 3,200 feet of a planned 4,000-foot wharf will be in place along with six new ship-to-shore cranes and on-dock rail tracks to enhance the port’s ability to quickly unload vessels. From the start, the facility will be able to handle half the container volume of the Virginia Port Authority. When completed, it will match the state’s annual cargo capability of 2.1 million TEUs — or 20-foot equivalent units, half the length of the typical 40-foot shipping container. In other words, the new terminal will, at its peak, handle about 1 million tractor-trailer loads each year.

Consequently, Virginia will be poised to snag top retail distribution centers and other supporting businesses, say port experts. Plus, it expects to win coveted container traffic over other East Coast ports based on the convenience of a brand-new terminal with plenty of available space.

Adding capacity is a smart move if Virginia wants to stay out front as one of America’s top ports. “Available land and sufficient channel depth is important. Not every port can handle those large vessels,” says Paul Bingham, an economist in Washington, D.C., who focuses on trade and freight transport for Global Insight, an economic and financial analysis firm.

Easy access via water gives Virginia another edge, adds Bingham, as does its central location and roadway and railway access to points north and south and the Midwest. A company shipping via Virginia’s ports could “feed an enormous percentage of customers in the eastern part of the country. Virginia is in a great position,” says Bingham.

Making the state more attractive is the federal government’s Heartland Corridor Project. The federal transportation venture with Norfolk Southern will shave 250 miles off the present route from the port to Midwestern markets. By linking railways and raising tunnel and bridge heights to allow larger, double-stacked trains, cargo will move swiftly through three states — Virginia, West Virginia and Ohio — into the country’s heartland. Virginia is contributing $22 million to the project, which could cost as much as $251 million and take five years to complete.

Another boon for the new terminal is direct rail access. Common Railway Inc. plans to transport westbound cargo to Norfolk Southern Corp. in Suffolk, which will move the cargo into the country’s midsection.

Intermodal traffic, or shipping that uses more than one method to get goods to their destination, is the fastest-growing segment of Norfolk Southern’s business. “We look forward to having the Maersk facility there,” says company spokesman Robin Chapman. “It will obviously feed container traffic into our system.”

One rail car has the capacity to carry the cargo of two to four trucks. Yet while a beefed-up rail system will remove some truck traffic, there continues to be concern that the port’s growth will overburden the area’s already clogged roads and add to congestion along Interstate 64, which is jam packed in the summer with tourists on their way to Virginia Beach and North Carolina’s Outer Banks.

To help alleviate local chokepoints, the Virginia Department of Transportation last year opened the $150 million Pinners Point Interchange. The 1.5 mile-stretch of road provides a direct route to and from the terminal area and the Midtown Tunnel — taking traffic out of the Port Norfolk neighborhood. “The whole point of this project is to make the roads better for the increased trucking and cargo traffic,” says Bryan Moore, a spokesman with VDOT. “It widens the highway and moves traffic through that area faster and easier without causing other traffic delays.”

Once APM’s terminal is up and running, the company plans to relinquish its current lease of 70 acres at the Port of Virginia — opening more capacity at the state-owned port. The new terminal’s first customer will be one of APM’s sister companies. After that, Griffith Lynch says APM Terminals Virginia and the Port of Virginia will vie for some of the same customers. However, the senior director of APM’s Virginia operations makes clear that the terminal “wasn’t built to compete with the Virginia Port Authority, but to grow our business.”

Statewide, Lynch expects it to be an economic engine, enticing large retail and manufacturing companies to open distribution, assembly and manufacturing operations in Virginia. “They know if they locate in Hampton Roads or anywhere in the commonwealth they would have a very viable port to move their product,” says Lynch.

In fact, the commonwealth already is benefiting from APM’s decision to expand in Virginia. Michael Lehmkuhler, head of the transportation team for the Virginia Economic Development Partnership, says the APM project was a factor in decisions by Wal-Mart and Target to locate distribution centers near the port. Wal-Mart opened its distribution center in James City County in 2000 and Target opened its center in 2003 in Suffolk. “That was done in anticipation of Maersk opening that terminal.”

APM says it chose Portsmouth because of its location, deep-water access and the company’s relationship with the International Longshoreman’s Association in the city. The state sweetened the deal by offering a $500,000 incentive grant, tax credits, plans to improve railway access to the site and $17.5 million in improvements to Virginia Route 164 by VDOT.

The new terminal will employ the latest technology and equipment. For example, says Lynch, most of its equipment will operate on electricity rather than diesel power, which will be “much, much quieter.” The terminal will cover 291 of the 576 acres purchased by APM for the project. Of the remaining land, 110 acres will be preserved. The company also is creating 30 acres of wetlands, and it is crushing old naval piers for the tons of stone needed for construction.

Portsmouth, long in the shadow of the larger Hampton Roads cities of Norfolk and Virginia Beach, is ecstatic about snagging a high-profile terminal of one of the world’s largest shippers. “This puts the city not only on the national map, but on the international map. Everybody is watching to see how successful it will be so it can be replicated,” says Steven Lynch, director of economic development in Portsmouth.

Yet the state-of-the-art terminal won’t budge Virginia from its No. 2 position. The largest general cargo port along the East Coast is the New York/New Jersey conglomerate of ports. With 4.5 million TEUs, these ports have more than twice the capacity of the Port of Virginia. Expansion plans for the New York ports include adding rail access and boosting efficiency so more cargo can be handled in the same space, says Insight’s Bingham. However, at some point, he expects New York to suffer from space constraints, which will force some companies to begin favoring other ports. “Hampton Roads is the next closest, big port complex,” notes Bingham.

Further south, the Georgia Ports Authority has announced a $700 million expansion over the next 10 years to expand container-storage capacity at its Savannah port. While other ports may try to compete with Virginia, they’re not getting the sizeable investments because of the plum location of the Virginia ports, says Paul Svindland, director of transportation and logistics at King of Prussia, Pa.-based ICG Commerce. Compared with navigating the Delaware River to get into Philadelphia’s ports or the Chesapeake Bay to reach Baltimore, calling on ports in Virginia takes 24 hours off of travel time. “That’s very, very valuable,” says Svindland.

In 2005, the U.S. imported 1.4 billion metric tons of goods worth $1.1 trillion — a figure that far surpassed its exports. Not surprisingly, the nation’s ports are spending $2.1 billion in capital expenditures to improve facilities and update equipment and software. “Seaports across the country have to expand to meet the ever-increasing demand for their services,” explains Aaron Ellis, communications director at the American Association of Port Authorities in Alexandria. For Hampton Roads, it looks like their ship has already come in.