Casting a wider net
An expanding Port of Virginia considers new revenue opportunities
- September 3, 2019
Updated Aug. 28
From frozen foods to massive offshore wind-turbine components, the Port of Virginia is stepping up efforts to attract new and diverse cargo, bolstered by expanded terminal capacity and a long-awaited project to deepen Norfolk’s commercial shipping channels.
“Part of our plan is to be an economic engine,” says John Reinhart, CEO and executive director of the Virginia Port Authority. “We’re fortunate to play on fields where opportunities exist.”
The third-largest port on the East Coast behind New York/New Jersey and Savannah, Georgia, and the fifth-largest in the U.S., the Port of Virginia is one of the commonwealth’s dominant economic drivers. More than 160 port-related business announcements have been made over the past four years, with almost $4 billion in investments and 15,000 jobs created throughout Virginia. In fiscal year 2019, the port played a role in generating 2,800 new jobs, developing nearly 3 million square feet of space and driving $2 billion in investment across the commonwealth. The port has handled a record 3 million TEUs (twenty-foot equivalent containers) of cargo this year, up from 2018’s annual volume record of 2.85 million TEUs.
Since Reinhart took the port authority’s helm in 2014, the port has set yearly cargo volume records and will have invested almost $1.5 billion through 2024 for terminal expansion, dredging and infrastructure improvements. “We’ve been growing every year,” he says. “We want to grow faster than the market at large. If market growth is forecast at 3%, we’re trying to grow [by] 5%.”
Diversifying cargo is part of the port’s overall strategic plan to enhance volume in multiple areas of business as a way of building strength in good trade environments, while offering stability during uncertain times.
Providing direct service to more than 45 countries and two-thirds of the U.S. population, the port is positioning itself as both a point of origin and destination for cargo the world over, including freight from emerging economies such as Africa, India and Latin America. According to the International Transport Forum, an intergovernmental think tank, global demand for cargo transport is expected to triple by 2050. “The world is continuing to get connected,” Reinhart adds, noting that ocean carriers calling at the port provide regular services to both emerging and established ports and economies.
‘Wider, Deeper, Safer’
A $700 million expansion project at the port’s two largest terminals, Virginia International Gateway (VIG) in Portsmouth and Norfolk International Terminals (NIT), will increase the facilities’ annual container throughput capacity by 46% by 2020 and position Virginia as the East Coast’s main container shipping port. VIG’s upgrades include an 800-foot wharf expansion, four 170-foot-tall ship-to-shore cranes (the largest in the Western Hemisphere), 26 additional rail-mounted gantry cranes, four extra inbound gate lanes for trucks, almost 20,000 feet of new rail track and 13 additional container stacks. NIT is getting 60 rail-mounted gantry cranes, 30 semi-automated container stacks and two new Suez-class ship-to-shore cranes. The upgrades and increased capacity have already led to record-setting volumes in fiscal year 2019.
“Before our modernization and expansion of Virginia International Gateway and Norfolk International Terminals, there was not a lot of footprint to work on diversification of cargo,” Reinhart notes. “Now we have the capacity.”
Then there’s the port’s $350 million Wider, Deeper, Safer project to deepen and widen the Norfolk harbor. Engineering and design work are underway, with construction slated to begin in early 2020. When completed in 2025, the main Norfolk shipping channel will be 55 feet deep, while the Thimble Shoal Channel will be 1,400 feet wide, allowing the Port of Virginia to reclaim its status as the deepest port on the East Coast and making it easier for the ultra-large container ships already calling at the port to navigate through its shipping channels.
On the same page
Along with the upgrades, the port has been working more closely with the Virginia Economic Development Partnership on marketing endeavors. “We see the Port of Virginia as one of the most important economic assets in the commonwealth of Virginia,” says VEDP President and CEO Stephen Moret. “Its increased capacity makes it one of the most advanced ports in the world.”
Moret sits on the port’s board of directors, and Reinhart is a member of VEDP’s board. It’s an arrangement both say has increased collaboration between the organizations.
“Our strategies are aligned,” Reinhart says, adding that port representatives regularly travel with VEDP officials on overseas trade missions. “We call on some of the same customers to try to attract them to the commonwealth.”
That’s a big shift from just a few years ago when the port sent representatives on an overseas visit without knowing that VEDP staffers were visiting the same country a few days later. “Now we share notes, work projects and regularly talk about how to support each other,” Moret says.
Each organization also has staff embedded in the other’s offices, and they are working together on the commonwealth’s first-ever international trade plan, an effort to increase the number of Virginia companies involved in global commerce, help expand into new markets and attract programs associated with significant international trade. The plan is slated to be published this fall.
“The port is knocking it out of the park,” Moret says, noting that it is one of Virginia’s strongest economic selling points, particularly for the manufacturing and distribution sectors.
So far, the expansion at VIG and NIT has resulted in a 66% increase in refrigerated cargo capacity. Reinhart seeks to position Virginia as an export and import center for refrigerated cargo. Earlier this year, the port completed the U.S. Department of Agriculture’s Southeast In-Transit Cold Treatment Program, paving the way for Virginia to compete with Northeastern U.S. ports for refrigerated cargo. Through the program, containerized imports can enter the port directly after completing a two-week cold-treatment process to safeguard against pests.
That paid off for Virginia this April when the commonwealth beat out Georgia in landing Preferred Freezer Services’ new cold-storage warehouse. It will be branded as Lineage Logistics, the Michigan-based warehouse and logistics company that acquired Preferred Freezer Services in May. Lineage is investing $60 million to build the 200,000-square-foot cold facility in Portsmouth. Meanwhile, InterChange Cold Storage is building a cold-storage and blast-freezing facility in Mount Crawford, 90 minutes south of the Port of Virginia’s Virginia Inland Port in Front Royal.
As an offshoot, more equipment and jobs related to the cold-storage industry could be making their way to the region, including refrigerated containers and workers to maintain them, as well as additional USDA inspectors.
“We’re the U.S. East Coast’s leading vegetable exporter, and this designation positions us to achieve the same success with imported fruit,” Reinhart notes. “Refrigerated import and export freight are opportunities for strong growth for us.” The port also handles refrigerated cargo on its thrice-weekly Richmond Express barge, which connects Hampton Roads terminals to the Richmond Marine Terminal via the James River.
The port launched the James River barge service in 2008. Last year, carriers shipped almost 30,000 containers from Norfolk cargo terminals to the Richmond terminal via the barge, a record volume. More than a dozen ocean carriers also list Richmond as the destination or origin for cargo. The port added a second barge in 2016 for refrigerated containers.
“We have refrigeration and freezer space all over the commonwealth,” Reinhart says. “More refrigerated containers are going up to Richmond and back by barge. People want these products close to where they are.”
Freight increased last year by 31.5% at the Richmond Marine Terminal and by 7.8% at the Virginia Inland Port. The Richmond terminal is investing $570,000 to purchase new top loaders for moving containers on and off tractor-trailer trucks. The Port of Virginia is investing $36 million in two projects at the inland port to improve traffic flow and safety on a local road and to expand the terminal’s overall cargo-handling capabilities. The port is funding the road project through a U.S. Department of Transportation BUILD (Better Utilizing Investment to Leverage Development) grant. Inside the terminal, the port is investing $3.3 million to be matched by $7.7 million from Virginia’s Rail Enhancement Fund. The $11 million project will expand capacity and improve cargo flow at the inland port.
Growing with the wind
Along with refrigerated cargo, the port is setting its sights on the nascent offshore wind-energy industry. Between 2,000 and 3,000 wind turbines could be installed off the East Coast over the next two decades, and the port is marketing itself as a logistics and staging center for the construction and maintenance of the massive turbines. Dominion Energy is working with Denmark’s Ørsted Energy on a $1.1 billion project to build two 6-megawatt wind turbines about 27 miles off the coast of Virginia Beach. Slated to be up and running next year, the 600-foot-tall turbines are projected to power about 3,000 homes with emissions-free energy. They will be the first to be built in U.S. federal waters and the first to be operated by a regulated utility. (A private energy development group owned by Ørsted operates a five-turbine offshore wind farm in state waters off Rhode Island.)
Reinhart notes that the port is only 35 miles from federal waters where the wind turbines will be erected and has no bridges or overhead obstructions to hinder the movement of turbine components, including massive towers and blades. “When you look at the strategic logistics and natural attributes of the port, we can evolve to be an important player in the offshore-wind supply industry, and be a good central point for wind farms north and south of here,” he adds. “But we have to be ready to dip our toes in the water in 2020.”
‘An offshore-wind super port’
A 2018 report produced by consulting firm BVG Associates cites Virginia’s central location on the mid-Atlantic seaboard, as well as its pro-business environment, deep-water port free of overhead obstructions, large maritime workforce and dock capacity as advantages in driving the offshore-wind supply chain.
After evaluating 10 Virginia terminals for their readiness to accommodate offshore-wind manufacturing and construction, BVG Associates determined that Portsmouth Marine Terminal and Newport News Marine Terminal are the best-prepared port facilities to meet the demands of offshore-wind activities. Container traffic is shifting to the upgraded and expanded NIT and VIG facilities, leaving the Portsmouth and Newport News terminals with ample space to store the wind turbines’ massive foundations before they’re shipped to the offshore construction sites. BVG Associates concluded that each terminal will require up to $10 million in upgrades to be prepared for use as logistics centers for offshore-wind operations.
Portsmouth Marine Terminal would be especially well-suited for housing components because of its 287-acre footprint, says George Hagerman, a senior project scientist in Old Dominion University’s Center for Coastal and Physical Oceanography.
“Portsmouth Marine Terminal has the potential to be an offshore-wind super port,” Hagerman says. “There’s nothing that has that large of an area and access to the open sea without a bridge in the way. There’s probably nothing like it on the East Coast.”
However, the terminals’ ground-bearing strength would have to be reinforced to withstand the weight of the colossal components. “That could take up to 24 months to see what would be required and then to do it,” he adds.
Global offshore-wind project developers, procurement and logistics specialists, foundation and substation fabricators and offshore platform builders have visited the port over the past two years to scope out its potential as a staging ground for building wind farms. Port officials have pointed out to the visitors that the Port of Virginia is the only East Coast port with federal authorization to dredge channels to 55 feet deep.
“Offshore wind is definitely picking up speed,” Hagerman says. “But there’s still a risk that there is not going to be a steady demand for the product. That’s the real challenge for everybody looking at that investment.”
Strategic military asset
Meanwhile, the port is also expanding its military cargo. Over the last five years, PMT, NIT and Newport News Marine Terminal have been used about a dozen times to load and offload military vehicles. In addition, the army unloaded approximately 400 vehicles at the port in August. Last year, the port began working with the U.S. Army Surface Deployment and Distribution Command (SDDC) to strengthen its role as one of the nation’s 16 strategic ports for deploying military personnel and equipment. The port has run several test trials for the SDDC involving the shipment of military kit vehicles.
“We exercise the capabilities at East Coast ports to determine the flexibility to use multiple ports to move cargo as fast as possible,” explains Lt. Col. Altwan Whitfield, commander of the 841st Transportation Battalion in Charleston, South Carolina. “During the test runs, we send vehicles, including track vehicles, which are larger, bulkier and awkward in size and shape. We look at cranes, stevedores and rail to determine maximum capacity and which port would be best to use. Each port has its own oddities, but everyone must be on the same sheet of music.”
Whitfield says the SDDC has an excellent relationship with the port, which has also deployed airplanes used in Afghanistan military operations: “It’s a great partnership that allows us to do our job. Overall, the Port of Virginia provides us the capacity we need to get our military as far forward as fast as possible by being available to us.”
Seeking new opportunities
The Virginia Maritime Association also has joined forces with the port and the VEDP to aggressively market the port for other new lines of cargo business.
“Opportunities to diversify the port are important to us,” says David White, the association’s executive vice president. “It’s not just about positioning ourselves to be attractive to steamship lines but positioning ourselves to get more cargo traded through our port and use our port as a gateway to the global marketplace.”
However, Virginia faces stiff competition from other East Coast ports for certain freight such as automobiles. “Baltimore and Jacksonville, Florida, are large auto ports, but there are opportunities for Virginia [to expand],” White notes.
However, Moret of the VEDP contends that the port’s ability to capture automobile freight has to some extent been constrained by Virginia’s lackluster past economic development efforts surrounding the automobile industry.
“We need to reset our economic toolbox,” Moret says, pointing out that recent automobile assembly plants opted to set up shop in Georgia and South Carolina. To capture that business, Moret says, the state must offer corporate incentives, customized workforce training, marketing solutions and site development plans. The General Assembly and VEDP have been addressing these issues over the last few years, he adds, with the legislature allocating $2 million to the VEDP this year for site characterization plans.
And that is starting to pay off, according to Reinhart. “I’m tickled with where we’re sitting,” he says. “I think some other ports will be surprised at how efficient we’ll be with the peak season coming up. It’s all coming together at the right time.”