Two future Portsmouth terminals make room to handle increased demand for foreign goods

by Donna C. Gregory
for Virginia Business
May 2007

Realtors often hype the importance of “location, location, location.” Now, the Virginia Port Authority (VPA) and APM Terminals Virginia are singing the same mantra as the two competing ports steam ahead on major expansions in Portsmouth.

When complete, Craney Island will be home to VPA’s fourth terminal, which could eventually move 5 million TEUs (20-foot equivalent units, the standard measurement of cargo containers) annually while APM’s new $450 million port facility will become the nation’s largest privately developed shipping terminal. Phase one of the APM terminal is expected to open in July 2007.

So, what’s driving this construction boon on Virginia’s coast? “The massive consumption of the American public who consume everything from plasma TVs to Nike tennis shoes. Consumption is the driver, and it’s all being produced in China,” says Jerry Bridges, VPA’s executive director.

And that’s where location comes into play.

China and the Indian subcontinent are becoming the primary producers of all things that Americans covet: apparel, electronics, automobiles and inexpensive housewares sold by big box retailers such as Wal-Mart and Target. As the American appetite for foreign goods increases, so do the ships needed to transport these goods — so much so that a popular trade route, the Panama Canal, may not hold them much longer. “The vessels are outgrowing [the Panama Canal],” explains Joe Harris, VPA’s spokesman.

Shipping cargo to California where it would need to be loaded onto trains and then trucked to its final destination is a lengthy and expensive option.

The Virginia ports believe there’s a better solution: the Suez Canal allows these larger ships to bypass a trip around Africa, providing easy access to ports along the East Coast, including those at Hampton Roads. “It’s a quicker transit, and it’s a more direct route to the East Coast from China and the Indian subcontinent,” says Harris.

Ports in Charleston and Savannah saw the same East Coast potential. South Carolina and Georgia recently announced plans to create a joint terminal near the border of Georgia and South Carolina. “That clearly will present some new opportunities for Southeast ports and some challenges for us,” says Bridges.
But the deal still faces many hurdles and agreements. By the time those are cleared, VPA’s Craney Island expansion will likely be well under way.

Bridges isn’t losing sleep over potential competition from APM’s new terminal, either. “While there is always a chance they will compete with us, we believe Maersk [APM’s parent company] has enough ships to fill the port with their own ships and cargo. We see them as a complement to what is currently going on in the port.”

With six mammoth cranes, APM Terminals will initially be capable of handling 1 million TEUs annually with plans to eventually expand to 2 million. Almost 300 acres will be developed while 110 acres are being preserved for wetlands. This termanal will be one of the most environmentally friendly ports in the country. “This expansion is projected to bring $5.4 billion to the region,” says Andy O’Hearn, spokesman for Maersk Inc. “The present terminal in Portsmouth has been operating at capacity for years, so expansion seemed like the only move for a trade industry that will only double over the next 10 years.”

While APM prepares for its grand opening this summer, VPA is currently working to gain congressional approval for its Craney Island expansion.
“The project has cleared all the necessary environmental hurdles and a final review by the U.S. Army Corps of Engineers,” says Harris.

Right now, Craney Island is “just a big sand pile,” he says. But the plan is to start construction in 2010. Total funding for the project is still in flux and will come from many sources: the federal and state government, terminals revenues and bond sales. “At its build-out in 2032, [Craney Island] will double the capacity of the existing port,” says Harris.

And if predictions are any indication, VPA and APM will need the extra room to grow.

“Cargo forecasts show that import cargo to the U.S. will double by 2020 and the majority of that cargo will be coming to the East Coast,” says Harris. “Virginia is in a very good position to capture a large piece of that business — but only if it is ready.”