The following transcript is the third part of our interview with with two officials from the Maryland Port Administration – Donovan Murray, General Manager, Intermodal/Trade Development and Richard Scher, Director of Communications. It has been edited for length and clarity. Miss the first two parts of this blog series? Read them here and here
DTJ: In addition to those natural advantages that you had mentioned, what types of initiatives are MPA making in order to keep the port competitive and take advantage of the current trends in trade?
Mr. Murray: Well, there are a couple things in the short term – specifically in the containerized world, the tremendous global consolidation of the ocean carrier market.
Thirty years ago, there used to be 50 ocean carrier options that shippers had. Through consolidation, liquidations, et cetera and the alliance structure – in which several ocean carriers have joined together and offer one service, even though they all contribute vessels to that service – when you spin that forward to today, shippers are really left with only three choices in ocean shipping for the primary trade lanes, what are called East-West trade lanes.
There will always be niche carriers in smaller trade lanes, particularly the North-South trade lanes, but for the bulk of the ships – almost 90% of the world’s tonnage – it’s controlled by three main alliances.
We have now started since April with this continued consolidation in the marketplace, and Baltimore will have two of the three global alliances that will call our port here.
DTJ: Right along with that, you had mentioned at our chapter meeting initiatives that the state is pursuing to build infrastructure – including rail – handle some of those flows.
Mr. Murray: In the longer term we know we’re growing cargo volume here and we know we’re attracting the alliances. Baltimore is really about a 95% truck port. We want to be able to expand our reach. We tick off every single major box, when you look at Class A or premier port infrastructure and capabilities, save double-stack rail.
Looking at the two Class 1 railroads that serve Baltimore, the CSX option through the Howard Street Tunnel was the one that the state decided to pursue. We are in roughly equal thirds contributing [funds] as the State of Maryland, CSX, and we’ve petitioned the federal government for a FASTLANE grant for the final third to give us double-stack clearance through the Howard Street Tunnel.
That tunnel currently handles both international and domestic freight. It can handle almost every manner of cargo including multi-level auto racks, which are the cars that are carried via train. But unfortunately, there’s clearance at times as slight as three inches. We need to go through either the undercutting or the notching and reinforce process inside the tunnel to give us double-stack clearance.
What’s exciting about the project is the technology that’s now in the market will enable us to use the existing tunnel and just undercut a little or reinforce above, which does two primary things. It greatly reduces expenditure, and it greatly reduces the timeline for that project to come to fruition.
So the total project expense is about $425 million. We did not receive the first round of FAST Lane grants in April , but we understand that the project was very well received in Washington. We were strongly encouraged to submit our project again. We don’t have a timeline on the second round of FASTLANE grants, but we expect that to come sometime in 2017. Again that’s just a feeling we get, that’s not a hard date we have.
But the important thing with that is while the FASTLANE grant application to the federal government was pushed back, the timeline for the project has not been. There are key preparatory steps that needed to happen within the Howard Street Tunnel, most notably a drying out of the tunnel, a reconfiguration of the water-sewer system that runs through that area. And so CSX with their leadership in good faith has gone forward with millions of dollars to continue that project timeline forward. So when the FASTLANE grant is awarded, we’re not starting from day one. We’re already in the project timeline. So that five year completion date, when we originally mapped out the project timeline, should remain relatively unaffected.
DTJ: Shifting subjects and pivoting a bit, how does the port affect employment opportunities in Maryland, both directly and indirectly?
Mr. Scher: First of all, the port of Baltimore is one of Maryland’s largest economic generators. We’re responsible for about 13,600 direct jobs, right at the port itself, and nearly 130,000 jobs in the state of Maryland that are linked to activities at the port of Baltimore. So basically, those are your second and third-removed qualifiers. We have a formula that we use. And these are jobs that are impacted by activities at the port of Baltimore. So if the port was not here, physically, or not as successful as it has been, then those jobs throughout the state would be impacted.
The port itself is not a standalone company or standalone entity. It’s made up of not only public marine terminals but privately owned marine terminals and other businesses. [But] if you were to take the port of Baltimore as one company, it would rank ninth in the state of Maryland among other standalone companies such as Northrop Grumman, such as Johns Hopkins, Giant Food.
DTJ: And beyond that, the port’s activity touches on a number of relevant current issues – infrastructure, trade and as you mentioned, local jobs. What do you see as the biggest challenges facing the port?
Mr. Murray: So starting off locally, growth for us is a wonderful thing to have, but we also need space to manage that growth. One thing we don’t want to do is jeopardize the business that helped get us into the position that we are in right now by not being able to accommodate those companies’ growth plans and having the infrastructure and land to effectively manage that growth.
We recently went through a reauthorization of MIZOD, the Maritime Industrial Zone Overlay District that was created 11 years ago by this collaborative effort. Mixed use of residents and heavy industrial doesn’t really go so well, so what MIZOD is intended to do is really protect the jobs on the waterfront where many Marylanders earn their living.
If you expand outside of the local footprint, and we start to look at what the port is really all about, it’s about global trade. All ports are susceptible to the alliance structures that we spoke of earlier. Baltimore is in a wonderful position that we have two of the three main shipping options, but it can be good news/bad news. If you get three of the three, then you are suddenly challenged to be able to accommodate a much more rapid increase of freight in which your infrastructure, your service providers, this entire network that makes up the port community needs to be able to respond to very quickly.
Of course the downside is that with only three global choices, if you go from two to one, all of a sudden you have a massive virtual hole in volume that’s moving through. One thing that none of us can control at this point is obviously trade policies, irrespective of anything that the port may do, and irrespective of anything the carrier alliances may try to do. Trade policies can have far reaching effects on the port, and all ports’ ability to not only manage volume but be able to predict and project where that volume need will come from, what the customers’ needs may be. If it changes import/export flow, if it changes commodity mix…there are many variable that would be outside of our control, but ultimately our customers expect us to be able to respond to and have the facilities in place to accommodate their needs.