Source: The Post and Courier
The shipping industry is increasingly moving to bigger, wider and heavier containerships, forcing ports to deepen their waterways and make other big-ticket improvements. FILE/WADE SPEES/STAFF
University of Tennessee graduate Jim Newsome is, naturally, a diehard Volunteers fan.
But these days, the State Ports Authority chief executive officer is borrowing a catchphrase from the Clemson Tigers’ football playbook: “All in.”
He made that crystal clear over the past week, which included his annual “State of the Port” address in North Charleston and the three-day S.C. International Trade Conference held at Wild Dunes Resort.
“If we’re going to be a top 10 container port in the U.S., we must invest heavily,” Newsome told the Propeller Club of the Port of Charleston on Monday.
After five years at the helm, Newsome is steering the SPA through a tricky transition, one being driven by bigger ships and requiring very deep pockets.
The former Hapag-Lloyd senior executive joined the authority as president and CEO in September 2009. His first order of business was to recapture the cargo volume that had started drifting to other ports before he arrived.
“We did that,” he said.
Now, the heavy lifting really begins.
X times two
One of Newsome’s top priorities and biggest challenges will be to boost cargo volume in Charleston while also squeezing out higher profits to finance a raft of big-ticket projects.
“Our earnings are not sufficient given the capital requirements we have,” he said Monday in his sixth State of the Port speech. “We need to earn more money to be successful in the future.”
The port, along with federal agencies and the state, will be investing about $1.3 billion over the next five to 10 years to deepen Charleston Harbor, modernize key facilities and build a new container terminal, all to accommodate the industry’s growing fleet of cost-efficient “megaships.”
Container volume growth in Charleston is running about 9 percent this year, more than twice the U.S. rate. While that pace isn’t sustainable forever, it’s “critical” that the port maintain it at least until 2020, Newsome said.
“If the national growth rate is ‘X,’ we must grow two times ‘X,’ ” he said.
Newsome added that, “We have a plan to get to” the numbers the SPA will need to hit.
That includes the possibility of bringing in, for the first time, cash-flush outside investors, such as pension funds, to supplement SPA bond sales and other traditional borrowings.
“Basically, they would invest money, and they would take a benefit from our returns,” Newsome said.
He was quick to note this would not be a step toward privatizing the port, an idea that’s been floated and shot down before. The authority would still own and operate its terminals, he stressed.
“Several firms are interested in investing in this space, and we hope to do a deal with them,” Newsome said. “There’s a lot of long-cycle money chasing infrastructure.”
The SPA also is looking to beef up its bottom line, while reducing a bunch of invoices and other paperwork, by rolling out a flat “ancillary fee.”
“So we’re talking about trying to get $20 more per container basically in our bottom line,” Newsome said.
The fee would replace a list “that’s about a mile long” of nickel-and-dime charges that create budgeting headaches for SPA customers, Newsome said.
“It’s like all-you-can-eat buffet: You order what you want and we’ll provide the service,” he said
The SPA is now approaching customers about the new surcharge. Newsome acknowledged it won’t be an easy sell.
“It’s not easy to get a dime out of anybody,” he said.
In the same boat
The push to expand Charleston and other big containerports parallels what Lars Jensen of Denmark’s SeaIntel Consulting called the “bifurcation” of the container business.
Smaller lines that now haul goods on the high-volume East-West trade lanes that link the major ports in Asia, Europe and the U.S. are being forced to make a choice if they don’t own any big ships: Either find a way to remain relevant on the mainline route, perhaps by joining a vessel-sharing alliance or by merging, or accept a lesser role as a lower-volume niche carrier.
“It might require swallowing a bit of pride,” Jensen said Tuesday at the Isle of Palms trade conference.
Port executives are in the same boat, except they need deeper harbors, taller cranes and more dock space to compete.
Newsome is well-aware that not every port is going to come out ahead in this “big ship, cost-focused industry.” For Charleston, the No. 9 U.S. containerport by volume, its only option is to be all in.
“I think the top 10 containerports that are willing to invest have a future,” he said. “I think if you’re below that level, it’s going to be very hard to catch up.”
Contact John McDermott at 937-5572.