When a $205 million dredging project is completed this summer at the Port of Miami, allowing large ships that will soon transit the expanded Panama Canal to call at the Southeast port, Florida Gov. Rick Scott will likely be there — perhaps with giant ribbon-cutting scissors in hand — to trumpet Florida ports as gateways for international containerized cargo.
Scott has made a giant bet that Florida, and, in particular, Miami, will muscle its way into the container port gateway business, moving cargo to and from points well beyond the port confines. Miami is a blip on the map of East Coast port gateways, but the scale of the investment being made suggests that the state’s leaders want that to change. Whether they grow their container port business to gateway status remains an open question.
No one can accuse the governor of not trying to help Florida ports attract more of the cargo destined to and from the state and beyond its borders. Scott has budgeted roughly $1 billion in spending for ports ranging from Jacksonville to Tampa. And later this week, he heads to California to make the case to major shippers that Florida ports can get them access to inland markets without the congestion and uncertainty that affected West Coast ports for nearly a year until a tentative longshore labor agreement was reached on Feb. 20.
However, despite the massive investment Florida is making in its ports, doubts persist that the state will be able to achieve the governor’s goal of establishing itself as a new and visible Southeast gateway for container cargo. Miami has a long way to go to catch up to established players such as Savannah, which over the past year has shown itself capable of absorbing significant growth with little or no congestion.
Capturing new business is a tall order for any of Florida’s ports, whose cumulative market share of total U.S. container traffic still lag behind other coastal regions. Florida ports last year handled 10.2 percent of the U.S. export container traffic, according to data from PIERS, a sister company of JOC.com with IHS Maritime & Trade. That’s 0.4 percent less than the port handled in 2009. Florida ports’ share of the import container market improved slightly, rising from 4.6 percent in 2009 to 4.8 percent in 2014.
The lag in growth compared to the national average is largely due to Florida ports’ being outmatched by their Southeast rivals for Asian imports, the fastest growing segment of container trade. Last year, 47 percent percent of Asian imports to the Southeast flowed through Savannah, 25.5 percent came through the Port of Virginia and 14 percent went through Charleston. Miami only handled 6.5 percent of U.S. imports from Asia to the region in 2014, while 5.4 percent of the volume came through Jacksonville. Port Everglades and Tampa each handled less than 1 percent of Asia imports to the region. There are signs, though, that Florida ports are making headway in growing their share of Asian imports. The Port of Jacksonville, for example, boosted its Asian container traffic 20 percent year-over-year. Jacksonville is also working to deepen its own harbor to 47 feet, an 18-month project expected to start in early 2016. Not only has Florida ports’ market share of imports and exports remained virtually unchanged, but volume growth since 2009 has lagged the national average despite the state’s robust population growth. Since 2009, Florida ports’ volume had a compound annual growth rate of 3.7 percent. U.S ports total saw a CAGR of 4 percent in the same five-year period.
Scott and other state officials remain adamant that Florida has what it takes to become an international transportation hub.
“We have made strategic investments in our seaports and transportation infrastructure,” Scott wrote in a letter to West Coast shippers in March. “Florida has already provided over $850 million in state funding directly to seaports over the last four years, and we will keep funding our ports throughout the next four years.”
There’s been significant pushback to Scott’s letter, with many in the industry arguing that Florida isn’t in the strongest position to support an international gateway.
And a recently released report from the Florida Ports Council shows just how far the state ports have to go just to reclaim Florida cargo that moves to or from the state through other gateways. In 2013 alone, the study said, more than 308,000 TEUs were imported into Florida through non-state ports.
“The total potential import and export market for Florida origin/destined goods available as additional cargo to Florida ports is approximately 3.5 million TEUs,” according to the report. “Florida ports are capturing about one of every two available TEUs.”
Florida’s detractors have argued the state is simply too far away from inland logistics hubs and its infrastructure isn’t yet capable of closing the cost and time gap between it and other East Coast ports. The hundreds of millions of dollars Florida has spent on its ports in recent years pales in comparison to the billions of dollars California ports have invested, John McLaurin, president of the Pacific Merchant Shipping Association, which represents marine terminals and carriers operating in California and Washington, wrote in a recent Los Angeles Business Journal editorial.
California ports can offer shippers 100 intermodal services daily and plentiful industrial warehousing, with 1.8 billion square feet of industrial space alone outside of the Los Angeles-Long Beach port complex, he said.
“Florida doesn’t have anywhere near the demand, proximity to markets or infrastructure needed to support major port operations even remotely close to California’s port complexes,” McLaurin said. “I think Scott’s visit to California is premature, but still it’s a good thing. He’ll see exactly what it takes to build and maintain a world-class logistics system.”
Florida officials, however, disagree that their ports aren’t up to snuff.
“Florida can certainly handle it,” Doug Wheeler, president and CEO of the Florida Ports Council, told JOC.com. “We’ve done a lot in the past several years to address those issues.”
Florida port improvements will face one of their first tests in early 2016. That’s when the Panama Canal expansion, allowing the new locks to handle container vessels three times the size of the waterway’s current limits, is expected to be completed. With its harbor set to be ready to handle the larger ships because of completion of the deepening project to 50 feet, Miami could more than double its throughput by 2025, port officials say.
The Port of Miami currently moves 950,000 TEUs annually, and it expects to move somewhere between 950,000 and 975,000 TEUs by the end of this fiscal year, according to Port Director Juan Kuryla.
“We are currently berthing at the port vessels of up 9,600 TEUs, which are coming in partially laden. Once we get to 50 feet, those vessels will be able to come through Miami full,” he told JOC.com. “We believe we will double our throughput over the next eight to 10 years.”
“We put a lot of money on the table, did some major infrastructure work at the port, and doubled our input capacity up to 2.6 (million) and 3 million TEUs,” Kuryla said.
The question is whether Miami can make the case that it’s a more cost-effective option, not just over other ports on the East Coast, but out West, too. Florida state officials have been keen to draw business from the Pacific ports struggling with congestion.
Come July, Miami will be the only port south of Virginia with a 50-foot channel depth.
Vessels leaving the Panama Canal could travel to Virginia’s deep waters, Kuryla said, but “why go to Virginia when you have a state like Florida?
“It is a quick and less expensive alternative than to keep sailing that vessel farther up the East Coast, unload and get (shipments) in a truck or train to get final destination,” Kuryla said.
Through Miami’s partnership with Florida East Coast Railway, Kuryla said, goods can enter the U.S. through Miami and a day later be in Jacksonville, within four-days travel of 70 percent of the U.S. population. From there, goods can be trucked or moved on the rail networks of Norfolk Southern Railway and CSX Transportation.
The notion that Miami, or any other Florida port, is too far south to support an international gateway is “an old-school thought,” Wheeler said.
In the first place, Wheeler and Kuryla said, Florida is now the third-most populous state in the U.S.
“That makes us one of the biggest consumer markets in the country,” Wheeler said. So many of the goods coming into ports farther north are finding their way south regardless of their point of entry, he said.
“Over 50 percent of the products that are consumed in Florida are coming in through Savannah or L.A. and Long Beach,” Kuryla said. “We’re not shy about saying we want to reverse that trend. Why go to Virginia when you have a state in Florida close to 20 million residents and approximately 100 million tourists?”
Then there’s the other matter of simple geography, Wheeler said.
“When you’re speaking internationally, you need to broaden your scope,” he said. “Florida is the geographic center of the globe. It’s two days to get a product in from Miami. It’s a 20-hour drive from Port Miami to Chicago; that’s in a truck much less a train.”
Wheeler acknowledges that certainly wasn’t the case 10 to 15 years ago, before Scott’s billion-dollar investment in the state’s maritime and transportation industries.
But the onus is on the state and Florida’s ports to make sure shippers know that’s changed.
“That’s on us. That’s on us to change that perception,” he said.
That’s all Scott’s “trade delegation” amounts to, Wheeler argued.
“Florida and Miami and our other ports are not doing anything exclusive in terms of marketing,” Wheeler said. “Trade missions, marketing missions, business trips are standard in our industry.”
Wheeler likened Scott’s role in California this week to that of a storyteller, not a salesman.
“Some of this has gotten off to a negative start, but, in reality, Florida does have a lot to offer,” he said. “We have a great story to tell. We’ve invested a billion dollars. We would be silly to invest those dollars and not tell those stories.”