Regional Report Eastern February 2010
When it opened more than two years ago, a privately owned container port in Portsmouth, Va., was widely hailed as a model for others — including North Carolina’s international terminal, planned near Southport. Now, with the sprawling terminal in Virginia more than half empty, it serves as a warning about the perils of poor timing. APM Terminals Management B.V., part of Danish shipper A.P. Moller-Maersk A/S, opened the port amid projections that international trade would double by 2020. The company boasted that the container terminal — third-largest in the U.S. — would tap new technology to move cargo faster with less fuel and pollution. It’s capable of handling 1 million containers a year.
But shipping declined as the global economy sank into recession, causing Maersk to post a $706 million loss in the first nine months of 2009. Allison Enedy, a spokeswoman for APM Terminals Virginia, says the Portsmouth terminal is operating at only 40% of capacity. “We can handle boxes more efficiently than anyone, but the boxes aren’t out there.”
The downturn prompted the company to seek help from the Virginia Port Authority, which operates state terminals in Norfolk, Portsmouth and Newport News. Joe Harris, a VPA spokesman, says state officials are considering a lease whereby the state would operate the terminal, relieving APM of those headaches and costs.
North Carolina port officials remain undaunted by APM’s problems. Spokeswoman Karen Fox says the State Ports Authority still plans to open the first phase of the $2 billion international terminal in 2017 and is seeking investors for a public-private partnership. It would handle as many as 1 million containers a year initially. At 50 feet deep, it could handle larger ships than can now call on state ports in Wilmington and Morehead City. Port officials are counting on a rebound in shipping and perhaps a dearth of East Coast ports able to handle the larger vessels shippers are building.
Curt Stiles, associate professor of management at UNC Wilmington, says shipping volume will increase but questions whether that will be enough to provide plenty of business for a new terminal. “It’s such a risky thing for the state — and it’s such a large thing — that such a decision should only be made after thorough economic analysis. And the economic analysis that has been done has been paper-thin.”
Fox says the State Ports Authority so far has only done an economic forecast to develop a business plan it can take to investors. “The project is in the very preliminary planning stages. There are significant environmental studies, design studies and economic analyses that remain to be done.”