Economic Development at the Port of Brunswick: The Economic Impact of Harbor Deepening and other Infrastructure Projects.

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1 Economic Development at the Port of Brunswick: The Economic Impact of Harbor Deepening and other Infrastructure Projects Ashley Rivera Georgia Innovative Economic Development Internship Science Technology and Innovation Program Georgia Institute of Technology August 8,

2 Contents Executive Summary Methodology Acknowledgements Glossary of Technical Terms Introduction Ports and the Global Economy Niche Ports Ports impact on Georgia s Economy Port of Brunswick History Industries at the Port of Brunswick Infrastructure Projects Case Studies Port Hueneme, Oxnard Harbor District, City of Oxnard, California Copenhagen Malmo Port, Copenhagen, Denmark and Malmo, Sweden Impact of Infrastructure Projects Auto AgriBulk Forest Break Bulk Economic Impact Analysis Opportunities for Georgia Auto Industry Grain Industry Forest Industry References

3 Executive Summary This report is based on research into the impact of some recent infrastructure projects undertaken at the Port of Brunswick in Brunswick, Georgia. The infrastructure projects include: Harbor and channel deepening Replacement of Sidney Lanier Bridge Rail and road improvements The specific research question guiding this work is how has the recent deepening and other infrastructure projects impacted port activity in Brunswick and what economic development implications does this have for the State of Georgia? This report addresses this question in the following sections Methodology this analysis relied heavily on expert interviews for data on the Port of Brunswick and the industries it serves. Additional sources include a literature review and industry databases. Introduction an overview of the role of ports in both the US economy and the economy of the state of Georgia illustrates the importance of research in this area. Port of Brunswick the port of Brunswick is a niche port serving auto, dry bulk and break bulk cargoes. At Brunswick, the main cargos are new cars, grains and forest products. While typically thought of as a small port, Brunswick is the 6 th largest port for new car trade in the US. Case Studies two case studies are presented to provide perspective and lessons for the Port of Brunswick. Port Hueneme, the first niche port in the US, in California demonstrates a common struggle for ports finding available land for expansion. Copenhagen Malmo Port in Denmark and Sweden is an interesting case for is unique management structure that combines port facilities in two different countries into one port unit. Copenhagen Malmo Port also illustrates the European approach to shipping, short sea shipping, which is not used in the US model. Impact of Infrastructure Projects finding on the impact of infrastructure projects include opening Brunswick up to larger vessels and thus increasing the market for good in and out of the port. An analysis of the economic implications for this increased business in the areas of output, gross state product, income and employment is included. Opportunities for Georgia finally, further opportunities for the state of Georgia are explored in each of the three industries served by the port. 3

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5 1 Methodology To determine the impact of the infrastructure projects on port operations and Georgia s economy it was necessary to first determine exactly what infrastructure projects were undertaken, how each impacted the port in terms of operations, realized new business and potential growth, and then associate increased cargo volumes, realized and potential, with economic indicators such as gross state product and employment. To determine the details of the infrastructure projects and their impact on the port, I relied on expert interviews with Georgia Ports Authority personnel in management positions at the Port of Brunswick. The Georgia Ports Authority also provided data on cargo volumes and port operations through their External Affairs office. In addition to the ports authority, I interviewed experts at the Georgia Logistics Innovation Center on the Georgia Institute of Technology s campus in Savannah, Georgia, the Brunswick and Glynn County Development Authority and industry representatives in private organizations working at the port. Because there is little day to day involvement of Georgia Ports Authority personnel in the operations at the auto facilities because of the nature of the industry, International Auto Processing Inc. provided perspective on the impact of the infrastructure projects on their operations. The data presented in this report come primarily from Georgia Ports Authority records, the American Association of Port Authorities, and the Port Import Export Reporting Service database (PIERS). The economic impact figures are based on the author s analysis using data from The Economic Impact of Georgia s Deepwater Ports on Georgia s Economy in FY 2006, published in 2007 by the Selig Center in the University of Georgia s Terry College of Business. The case study ports presented here were chosen based on a literature review and industry recommendations for ports relevant to the Port of Brunswick. Data on Port Hueneme come from existing literature, the port s official website and interviews with port personnel. Data on Copenhagen Malmo Port come from existing literature and internal publications on the port s official website. 5

6 2 Acknowledgements The author would like to thank the managers of the Georgia Innovative Economic Development Internship Program, Jan Youtie and Robert Lann, as well as the program s sponsors, the Enterprise Innovation Institute, the School of Public Policy at Georgia Tech and Georgia Power, for supporting the program that made this research possible. The industry experts who made themselves available for personal interviews and phone correspondence were an indispensible part of this research. A special thanks to Bill Dawson, Manager of Operations of the Port of Brunswick, the Georgia Ports Authority staff at the Port of Brunswick, T.J. Norvell, Director of Business Development at International Auto Processing on Colonel s Island, Nathan Sparks, Executive Director of the Brunswick and Glynn County Development Authority, Paige Siplon, Executive Director of the Logistics Innovation Center, and Will Berg, Director of Marketing & Public Information, Port of Hueneme, Oxnard Harbor District. 6

7 3 Glossary of Technical Terms 1 berth: The wharf space at which a ship docks. breakbulk cargo: Non containerized general cargo stored in boxes, bales, pallets or other units to be loaded onto or discharged from ships or other forms of transportation. Examples include iron, steel, machinery, linerboard and woodpulp. bulk cargo: Loose cargo (dry or liquid; e.g., grain, coal and oil) that is loaded (shoveled, scooped, or pumped) in volume directly into a ship s hold. cargo: The freight (goods, products) carried by a ship, barge, train, truck or plane. container: A box made of aluminum, steel or fiberglass used to transport cargo by ship, rail, truck or barge. Common dimensions are 20' x 8 x 8' (see TEU). container terminal: A specialized facility where ocean container vessels dock to discharge and load containers, equipped with cranes with a safe lifting capacity of tons, with booms having an outreach of up to 120 feet in order to reach the outside cells of vessels. containerization: The technique of using a container to store, protect and handle cargo while it is in transit. This shipping method has both greatly expedited the speed at which cargo is moved from origin to destination and lowered shipping costs. Corps of Engineers: This department of the U. S. Army is responsible for flood protection and providing safe navigation channels. The Corps builds and maintains the levees, flood walls and spillways that keep major rivers out of low lying communities. The Corps is vital to keeping navigation channels open by dredging sand, silt and gravel that accumulate on river and harbor bottoms. draft: The depth of a loaded vessel in the water, measured from the level of the waterline to the lowest point of the hull of the vessel. dredge: The process of removing sediment from harbor or river bottoms for safety purposes and to allow for deeper vessels. 1 Adapted from AAPAs Glossary of Maritime Terms, viewed at on August 1,

8 dry bulk: Minerals or grains such as potash, industrial sands, wheat, soybeans and peanuts stored in loose piles moving without mark or count. harbor: A port of haven where ships may anchor. intermodal shipment: When more than one mode of transportation is used to ship cargo from origin to destination, it is called intermodal transportation. Intermodal transportation uses few laborers and speeds up the delivery time. ISO: International Standards Organization. Worldwide organization formed to promote development of standards to facilitate the international carriage and exchange of goods and services. landlord port: At a landlord port, the port authority builds the wharves, which it then rents or leases to a terminal operator. The operator invests in cargo handling equipment, hires longshore laborers to operate lift machinery and negotiates contracts with ocean. (See also: operating port.) mean low water (MLW): Lowest average level water reaches on an outgoing tide. mean high water (MHW): Highest average level water reaches on an outgoing tide. operating port: At an operational port, the port authority builds the wharves, owns the cranes and cargo handling equipment and hires the labor to move cargo in the sheds and yards. (See landlord port.) port: This term is used both for the harbor area where ships are docked and for Port Authority: The agency which administers use of public wharves and port properties. ro/ro: Short for roll on/roll/off. A ro/ro ship is designed with ramps that can be lowered to the dock so cars, buses, trucks or other vehicles can drive into the belly of the ship, rather than be lifted aboard. short ton: A short ton equals 2,000. Lifting capacity and cargo measurements are designated in short tons. terminal: The place where cargo is handled is called a terminal (or a wharf). Twenty Foot Equivalent Unit (TEU): A unit of measurement equal to the space occupied by a standard twenty foot container, used to describe the capacity of a container vessel or storage area. 8

9 4 Introduction 4.1 Ports and the Global Economy Ports play a key role in the global economy. As a cost effective method of moving goods around the world, 99% of US overseas cargo is moved on ocean transport. As global trade grows, demand for international shipping and port capacity is growing as well. The global economy has grown such that in 1960 international trade accounted for 9% of US gross domestic product, and now accounts for nearly 30 percent of US GDP. To that effect, U.S. ports and waterways currently handle more than 2.5 billion tons of domestic and international trade annually a figure that is expected to double in the next 15 years (AAPA America s Ports Today). The growth in the global economy was fueled in large part by containerization an innovation in shipping first invented in 1957 whereby goods are packed into standardized containers that can be loaded directly from truck to rail to ship. For example, boxes of hot sauce from Louisiana are stuffed into containers at the factory. That container is put onto a truck chassis (or a railroad flat car) and moved to a port. There the container is lifted off the vehicle and onto a ship. At the receiving port, the process is reversed. Currently, more than 50% of the worlds trade moves via containers. Non containerized cargoes include liquid bulk (i.e. crude oil), dry bulk (i.e. grains), rolling cargo (i.e. vehicles and machinery, also known as ro/ro for roll on/roll off), and break bulk (i.e. goods not in any of the above categories that do not fit well into containers). Containerization has both greatly expedited the speed at which cargo is moved from origin to destination and lowered shipping costs (AAPA). With more than 50% of the worlds goods traded via containers, containerized cargo has become an important revenue source for US ports. Each type of cargo, liquid bulk, dry bulk, ro/ro, breakbulk and containers, has unique dockside infrastructure necessary to load, unload and store that particular type of cargo. For example, dry bulk requires special machinery to scoop or pump the dry grain between grain cars and the hold of a bulk ship. Containers require tall gantry cranes capable of lifting many tons. Because of the specialized infrastructure, once a berth or terminal is developed to handle containers, other types of cargo are eliminated. As growing container traffic congested the traditionally large US ports ports of entry, Los Angeles/Long Beach and New York/New Jersey, secondary ports such as Savannah jumped to capitalize on container trade. Savannah is a good example of growth in containerization. Savannah is now the fourth largest container port in the US, and the fastest growing (PIERS 2008). 9

10 4.2 Niche Ports As larger regional ports around the US grew by focusing on container cargo, this created opportunities for ports like Brunswick to specialize in non container cargo. This trend is not limited to Brunswick. Known as niche ports, smaller ports developed terminals to absorb the volume of non container cargo that was being pushed out of nearby larger ports. Port Hueneme in California, one of the case study examples studied later in this report, was the first niche port, entering the new car import market in the late 1970 s (Oxnard Harbor District, 2008). 4.3 Ports impact on Georgia s Economy In addition to playing an important role in the US economy, ports are a source of local economic development in the regions they serve. In Georgia, the two deepwater ports of Savannah and Brunswick impact the economies of all communities in the state by supporting manufacturing exports, import/export businesses, and industries that support port related commerce. The Selig Center at the University of Georgia published a study in 2007 on the economic impact of Georgia s deepwater ports in fiscal year 2006 (Humphreys, 2007). According to the study, measuring the ports impact on Georgia s economy through port activity and the activity of port users found that the ports resulted in $56 billion in sales in the state and $25 billion in Gross State Product. The activity of the ports and port users also resulted in 287,000 full and part time jobs throughout the state. The top sectors for these port related jobs are manufacturing, transportation and warehousing, wholesale and retail trade, and professional and technical services. The impact of Georgia s ports on the state s economy comes from both direct port activities and indirect port users. The majority of the impact comes from port users. For example, of the $56 billion in sales generated from port related activity, $3 billion comes from the port industry itself. Port users are distributed throughout the state, meaning that the economic impact of Georgia s ports extent beyond the immediate communities of Brunswick and Savannah. To illustrate the distribution, Figure 1 shows the approximate value of cargo that transited Georgia s deepwater ports in fiscal year 2007 to and from the different regions of the state. In the map, regions are defined by regional development centers. Coastal Georgia is a leading beneficiary of port activity, receiving approximately $4.5 billion in cargo value. However, the Atlanta Regional Commission sees more import/export activity than any other region in Georgia at $5.7 billion. Following Coastal Georgia and the Atlanta area are the Georgia Mountains at $1.3 billion and the Central Savannah River Area at just over $1 billion. 10

11 Figure 1 11

12 5 Port of Brunswick 5.1 History Brunswick was recognized as a US port of entry by the Fifth Act of Congress, which was signed into law by President Georgie Washington in This act established Brunswick as a seaport along with New York, Boston, Philadelphia, Charleston, Savannah and others. Until the Civil War ( ), Brunswick prospered as a point of export for American agriculture products. During the Civil War, the City of Brunswick was evacuated and port facilities burned to prevent use by the Union Army. After the war, the region suffered from depression and port activity in Brunswick recovered slowly during Reconstruction. The timber boom of the late 1800s fueled a return to prosperity for the port, with the largest lumber mill in the country opening on St. Simon s Island adjacent to the Brunswick port. The Brunswick port saw peak levels of throughput just before the Great Depression, but was waylaid by the economic turmoil of the Depression almost not to recover. The only activity at the port for decades was shipbuilding operations during World Wars I and II. After World War II the port nearly closed until the Brunswick Port Authority built facilities, today s Mayor s Point terminal, to again ship agricultural and paper products, two main regional industries, through the port (Brunswick Historical Preservation Society, The Brunswick Port Authority was absorbed into the Georgia Ports Authority shortly after WWII. The Georgia Ports Authority is a quasi state agency with a thirteen member Board of Directors appointed by the Governor of Georgia from the state at large. The Georgia Ports Authority manages the four ports within the state; the two ocean ports, Brunswick and Savannah, and two river ports in Bainbridge and Columbus. 5.2 Industries at the Port of Brunswick At this time, Brunswick specializes in three types of cargo: Break bulk, dry bulk and ro/ro. Located in downtown Brunswick, the Mayor s Point terminal handles the break bulk cargo which is made up of paper product exports from the regional forest industry. The dry bulk and ro/ro facilities are located on a part of the Port of Brunswick called Colonel s Island. The bulk facility, often referred to as the Agribulk facility, handles agricultural bulk mainly for export including wheat, corn and soybeans. Brunwick s ro/ro facility was developed mainly for new car imports, and as such is usually referred to as the Auto port. Table 1 shows the volume of cargo processed in each of these facilities since Further analysis of growth and decline in each industry is included in the final sections of this report. Since its development in 1986, 12

13 Brunswick has risen to be a major car port, and is currently the 6 th largest car port in terms of units of cars in the US (Georgia Ports Authority, 2008). With international trade growing rapidly and containerization dominating traffic at large regional ports such as Savannah and Jacksonville, the Ports Authority built two new cargo facilities on Colonel s Island, a GPA owned 1300 acre property across the channel from Mayor s Point. The auto port, built in 1986, was developed in response to congestion at major auto port Jacksonville. The grain facility was built on Colonel s Island when a similar facility in Savannah was removed to make way for expansion of the container terminal. The auto port was developed to attract foreign car makers who were frustrated with congested, older facilities at established auto ports in the region. In the new car supply chain, car imports are finished by auto processors located at the port of entry. This includes fitting audio systems and other options, as well as cleaning and preparing the cars for shipment to dealerships. Because new cars are prepared for the final market at the port, environmental concerns such as dust or pollution are as much a concern as space. At the time, Jacksonville was one of the largest auto ports in the US, but had limited space for expansion to accommodate growing foreign car sales. A paper mill adjacent to the car storage facilities in the Port of Jacksonville also caused auto importers problems with damaged finishes due to pollution. When the auto port at Brunswick opened for business, the first customer was Yugo, who was newly importing cars to the US southeast. After the industry saw that the auto facility at Brunswick was operational, several major brands followed shortly thereafter, including BMW, Mitsubishi and Mazda who all moved import operations from Jacksonville to Brunswick in The majority of Brunswick s first car customers came from business that moved import operations from Jacksonville, citing the availability of space, lack of congestion and clean environment that was unique to ports on the east coast. The grain facility came to Brunswick in 1996 as a result of increasing container traffic at the Port of Savannah. The grain facility was built in Brunswick to replace a similar facility in Savannah which was removed to accommodate additional container berths. The grain facility has seen consistent growth since 1998, fueled by world grain markets and dedicated management at the Port of Brunswick to make the grain facility as modern and efficient as possible. The oldest commodity processed at Brunswick, forest products at the Mayor s Point facility, has been in steady decline, as table 1 illustrates. The reasons for this decline and prospects for the future are discussed in later sections of this report. Table 1 Cargo Volumes Port of Brunswick Cargo FY 1998 Volume FY 07 Volume FY 08 Volume 1 yr Growth 10 yr Growth Auto 163,726 units 373,708 units 368,350 units 1% 125% 13

14 Grain 280,052 tons 438,843 tons 814,223 tons 86% 191% Forest Breakbulk 522,663 tons 172,291 tons 126,794 tons 26% 76% Source: Georgia Ports Authority 6 Infrastructure Projects To accommodate increasing traffic, ports adapt by increasing the size of their operations and by increasing the efficiency of their existing space. As cargo increases and ships become ever larger, ports must adapt the technology and infrastructure to keep and increase their cargo volumes. Harbor deepening projects are widespread as ports worldwide try to keep up with the increasing size of ocean going cargo ships. As global trade grows, ports also feel the pressure to expand their physical footprint to accommodate larger volumes of cargo. To maintain a competitive advantage in the global shipping market, ports must demonstrate their ability to take in and efficiently route cargo from landside transport to vessels for export, and from vessels to landside transportation to get imported goods to market. The project most often associated with port infrastructure is deepening the navigable harbor and channels through dredging. In the case of the Port of Brunswick, harbor deepening was one of a series of infrastructure projects undertaken by the Georgia Ports Authority, the State of Georgia and the Army Corps of Engineers to bring the Port of Brunswick in line with industry needs. The full infrastructure package includes: harbor and channel deepening to 36 feet mean low water (mlw) replacement of the old Sidney Lanier lift bridge with fixed span bridge dredging loading basins expansion of Berth 1 at the auto terminal expanded rail capacity and new direct rail connections construction of an overpass on US Highway 17 The deepening project began in 1960 when Congress authorized a feasibility study on harbor deepening at the Port of Brunswick. The Army Corps of Engineers handles harbor deepening projects at all US ports with federal funding, and requires an environmental feasibility study prior to authorization. The proposed project included deepening the Brunswick Harbor and the channels of the Brunswick River and East River (see image of corps plan). During the ongoing feasibility study on the Port of Brunswick, the Corps of Engineers determined in 1990 that the existing Sidney Lanier Bridge, a narrow lift bridge over the southern end of the Brunswick River through which all approaching ships passed, was too narrow to structurally withstand dredging. In conjunction with the Georgia Department of Transportation, a new bridge was planned to replace the old lift bridge. With the new Sidney Lanier fixed span bridge underway, Congress authorized the deepening project in

15 Replacing the Sidney Lanier Bridge with a wide, fixed span bridge also eliminated the possibility of large ships striking the old lift bridge. Ships had to thread the needle when passing through the lift of the old bridge, and on two occasions in its history the bridge was struck. The new bridge has an air draft of 185 feet mlw and width of 500 feet, making an unrestricted passageway for all ships. In addition to deepening the harbor and channels, loading basins at both the Colonel s Island terminal on the Brunswick River and the Mayor s Point terminal on the East River were dredged to 40 ft. A loading basin is an area alongside a terminal s berths that is dredged in order to ensure adequate clearance under a ship as it is loaded with cargo. Maintaining deep clearance under ships in the terminal allows large vessels with a draft of more than 36 feet to sail in and out of the harbor at high tide, but be fully loaded while in the terminal regardless of tidal changes. To be competitive, a port must be able not only to accommodate larger ships, but also have quick access to intermodal transportation to deliver cargo from incoming ships to the market or to deliver goods to the ship for export. Two rail infrastructure projects were completed as part of the Port of Brunswick infrastructure update: the construction of a new connection on the west side of the port, Overton Junction, and the expansion of the existing Anguilla Junction north of the port. The Port of Brunswick is located near Interstates 95 and 10, providing maximum two day truck access to the entire eastern seaboard, Midwest and the Gulf. Brunswick is also serviced by two class I rail providers, CSX Transportation and Norfolk Southern Railroad (08 Guide and Directory). Trucks have efficient access to and from the Port of Brunswick via Highway 17, which has minimal traffic lights between the port and Interstate 95. However, rail connections into Colonel s Island were not as efficient. The Mayor s Point terminal, because of its location adjacent to historic downtown Brunswick, is connected directly into both Norfolk Southern and CSX rail lines via the Brunswick terminal. Trains destined for port facilities on Colonel s Island go to the island s Midharris rail terminal. CSX and Norfolk Southern connect into Midharris from the north through Anguilla Junction. Trains coming into Colonel s Island from the west use Norfolk Southern, but had to be routed out of the way through Anguilla Junction to access the grain and auto facilities on Colonel s Island. With Mercedes using Norfolk Southern trains to ship SUVs to Brunswick for export, the trains were broken down and routed out of the way to come through Anguilla Junction. As a result, trains from Vance Alabama took 3 5 days in route to Colonel s Island on Norfolk Southern. With the addition of the Overton Junction, Norfolk Southern trains have a direct line into Colonel s Island, reducing transit time to 24 hours and eliminating the need to break down and reconnect train cars during transit. 15

16 The final infrastructure project undertaken at the Port of Brunswick is the construction of an overpass on Highway 17 where the highway separates the existing facilities on Colonel s Island from 900 acres of GPA owned property. Creating an overpass allows expansion of auto processing and storage facilities by eliminating an at grade crossing whereby new car shipments were shuttled through local traffic across highway 17 to newer storage facilities on the south side of the island. A small amount of auto storage already exists south of Highway 17, but crossing the local highway with new car shipments meant holding up local traffic (which included trucks bound for port facilities) and risking damage to new car cargo by driving on public streets. The new overpass allows local traffic to pass unhindered while new car shipments can be shuttled freely under Highway 17 to existing and future storage and processing facilities. 16

17 7 Case Studies These case studies are included to provide some perspective on port operations. Each port was chosen for the lessons it can provide in the ways it is both similar to Brunswick and different. 7.1 Port Hueneme, Oxnard Harbor District, City of Oxnard, California Figure 2 Port Hueneme was chosen as a comparator port because it was one of the first niche ports. Like Brunswick, Port Hueneme is owned and operated by a public port authority, the Oxnard Harbor District. Established in 1937 for local agriculture, Port Hueneme is located approximately 60 miles north of Los Angeles on the California coast (see Figure 2). Located across the Pacific from Asia, a source for many US imports, and adjacent to a large and developed population center, LA/Long Beach is still the largest and most congested port in the US. As LA/Long Beach and ports across the US turned their attention to containerization, an opportunity was created in break bulk and Ro/Ro cargos. Hueneme pioneered the niche port trend in the 1970 s with Mazda new car imports arriving in 1977 and Del Monte choosing Hueneme as their west coast distribution hub in 1979 (Oxnard Harbor District website). As an earlier entrant in the niche port trend, Hueneme is in a different stage of development than Brunswick. At 135 acres, the Port of Hueneme has developed all the land available for port operations. Although not in an urban population center, the real estate market in coastal California has restricted opportunities for port expansion. While Brunswick is not facing land restrictions at this time, competition for land with adjacent communities is a common challenge 17

18 for ports across the US and is an issue that Brunswick will likely face in the future. As a port of similar size and industry, Hueneme offers lessons for Brunswick in this area. The Port of Hueneme deals with its relatively small size and land restrictions with 100% offsite cargo processing. As a new car and fruit niche, this means that all auto processing companies and fruit importers maintain offsite processing facilities in the adjacent Oxnard community. When Brunswick first entered the new car niche and took its first clients from the Port of Jacksonville, one of the reasons car maker made the switch was the availability of on site processing. The less handling and movement a new car has to make before making it to market, the less opportunity for damage. While offsite processing is less than ideal, both the small size of the port and the surrounding community mean that offsite processors at Port Hueneme are 1 2 miles down the road whereas at larger ports such as Jacksonville offsite processing means a 20 mile commute. Two additional distinctive practices notable to Hueneme are its environmental policy and a radiation security feature. Port Hueneme has a formal environmental policy that is part of their three legged stool approach to new development. When planning a new development on port facilities, the project is evaluated on the criteria that is must be good for the port, good for the community, and good for the environment. If all three legs are not in place, the project is not considered viable. In security, Port Hueneme has the distinction of being one of the only ports in the US through which all port traffic passes through a radiation radar portal. Designed to detect hidden radioactive articles, such as a dirty bomb, the radiation portal is designed to prevent terrorists from sneaking radioactive material through Hueneme. As a smaller port, Hueneme has one gate exiting port facilities, making it easier to implement such a security measure for all port traffic. 7.2 Copenhagen Malmo Port, Copenhagen, Denmark and Malmo, Sweden Figure 3 18

19 Copenhagen Malmo Port (CMP) was chosen as a comparator port because it receives similar cargos and volumes as Brunswick, but has a unique management structure and illustrates the European model of regional shipping. As such, it offers distinctive practices in management, environmental policy and approach to regional supply chain. The management structure of Copenhagen Malmo Port makes it totally unique in the world. As its name suggests, CMP is a port composed of port facilities in both the City of Copenhagen in Denmark and the City of Malmo in Sweden. One port authority managing port facilities in two different cities is not unusual, but in the case of CMP each city is in a different country, making it the first international port. CMP is a limited liability company registered in Sweden as Copenhagen Malmö Port AB, equally owned by City and Port Development (Copenhagen, Denmark) and Port of Malmö (Sweden). Established in 2001, the management of both ports as one unit is designed to allow both ports to compete as one unit to become a hub port for the Baltic region. Copenhagen and Malmo are located on opposite sides of the Oresund ( the sound in Swedish), one of a series of sounds around the Danish islands that are the only connection between the Baltic Sea to the Atlantic Ocean (see map). Combining management allowed CMP to compete effectively for hub status for shipments into the Baltic region. European distribution channels include a form of shipping called Short Sea Shipping. Short Sea Shipping involves a hub and spoke system where large shipments come into a hub port on trans oceanic class vessels. This cargo is reloaded onto smaller vessels for delivery to regional ports where the goods reach their final market. Table X indicates the main commodities through CMP with FY2007 volumes and growth rates over FY2006. The strong growth comes from growth in the developing Baltic economies of Latvia, Lithuania, and Estonia as well as Russia. Car and oil shipments in particular are driven by new demand for foreign made cars in Russia and transshipments of Russian oil to Europe and the US. Regarding environmental initiatives, CMP is involved in environmental organizations, implements environmental practices and is ISO certified. CMP is a member port of two environmental organizations, EcoPorts and NoMEPorts. EcoPorts is an organization of European ports committed to environmentally conscious management practices. The organization serves as a best practices exchange for member ports with the overall goal to create a level playing field in Europe in port related sustainable management issues ( NoMEPorts is a project in which European ports, universities and other participants cooperate to reduce noise pollution and noise related health problems of people living around port industrial areas through demonstration of a noise mapping and management system. This project is funded by the LIFE Environment Programme of the European Commission. The project published a Good Practices Guide as a result of their May, 2008, 19

20 conference, available at CMP has achieved ISO 9001 Quality Management and ISO Environmental Management certifications at both Copenhagen and Malmo to demonstrate commitment to customer satisfaction and environmental sustainability. 20

21 8 Impact of Infrastructure Projects 8.1 Auto The automobile industry on Colonel s Island realized immediate benefits from the infrastructure projects. The 7,500 foot connector track on the Norfolk Southern (NS) line allows trains to come directly into Colonel s Island whereas previously all trains bound for Colonel s Island had to go through Brunswick where they were broken down and rebuilt before routed into Colonel s Island. As a result, Mercedes Benz sport utility vehicles produced in the Vance, Alabama plant for export to Germany took 3 5 days in transit to Colonel s Island. With the completion of the NS connection, trains now go direct to Colonel s Island in 24 hours. Each train spends 24 hours in transit to Colonel s Island, 24 hours in the terminal for unloading, and 24 hours in transit to return to the Mercedes plant in Alabama to load up again. This allows a schedule of 3 60 railcar hot trains a week to come into Colonel s island with SUVs for export. This improvement alone means 98,000 cars per year in additional throughput for the Port of Brunswick (Georgia Ports Authority Interview). The smaller scale project of the Hwy 17 overpass completed on Colonel s Island in spring of 2007 has a large potential impact on the auto operations by opening up 900 additional acres for development. Hwy 17 bisects Colonel s Island into two halves, the north side where the three deepwater berths of the auto and grain facilities operate on 390 developed acres, and the south side of the island where the Georgia Ports Authority owns 900 additional undeveloped acres of property. The overpass allows an access road to connect the two halves and allows for direct, more efficient and safe transit of cargo from storage on the South side to the North side without crossing local traffic on Hwy 17 at grade. This undeveloped land is slated for the automotive industry to expand its operations on Colonel s Island. With 360 acres of paved auto storage available currently, the 900 additional acres represent a great capacity for expansion and increased volume. As a result of this available space and the other improvements at the auto port, Mercedes Benz USA announced plans to consolidate their Southeast Import Center at a new facility in Brunswick. Expected to open in 2009, Mercedes plans to break ground on their processing center in August, 2008, on the south side of Colonel s Island. To take advantage of this available space, the harbor deepening and construction of the new Sidney Lanier Bridge allow bigger vessels to reach Colonel s Island and greater volumes of cars to transit the facility. At a new mean low water depth draft of 36 feet, Colonel s Island is now open to all Ro/Ro vessels in service to date. In March, 2008, approximately one year after the deepening was completed, the Morning Caroline, the largest class of Ro/Ro vessels in service capable of carrying 6,000 vehicles, made her maiden voyage from Osaka to Brunswick. The 21

22 lower slot costs and delivered prices that are realized through the economies of scale of using larger vessels combined with the available land for expansion and improved rail transport position Brunswick as a competitive option for auto imports for regional distribution to the Southeast and potentially the Midwest. 8.2 AgriBulk The agribulk facility on Colonel s Island has also seen increased throughput volume as a result of the infrastructure expansion projects. Major new business has come to Brunswick through a deal signed with Bunge North America to ship at least 500,000 tons annually through Brunswick. In FY2008, the first full year of operation with all new infrastructures in place, saw an increase in volume of more than 500,000 short tons over 2006 levels, or a 262% increase (GPA). The increase in volume already seen at the Port of Brunswick s agribulk facility comes from the Bunge agreement and increased efficiency realized by access to larger bulk vessels and improved rail access for speedier movement of grain shipments into the port. The harbor deepening and bridge expansion projects opened the harbor up to a depth of 36 feet mlw and opened the agribulk facility up to an additional 45% of the world s bulk vessels. While some vessels in the world fleet would still be restricted from calling on Brunswick, Panamax class bulk vessels require a draft of feet. Panamax vessels could not previously call on Brunswick, but the harbor deepening project allows these vessels to call on Brunswick with the tide. The capacity to handle larger ships of Panamax class is necessary for the port to be competitive on long distance routes. With the growing economies in Asia importing more wheat and other agricultural products at increasing rates, opening the port of Brunswick to Panamax bulk vessels allows new routes to this growing market, securing markets for Georgia s agricultural products as well as a competitive place for Brunswick in worldwide grain distribution. 8.3 Forest Break Bulk The break bulk facility on Mayor s Point has a long history exporting forest products from Georgia and the Southeast. Built in the 1950 s to prevent the port from closing after WWII, the Mayor s Point terminal has provided consistent revenue for the Georgia Ports Authority in Brunswick and a consistent market for the region s pulp and paper industry. In recent decades, the growth in vessel size and demand outpaced Brunswick s depth restriction. At the time the deepening project began in 2002, the ships calling on the break bulk terminal already exceeded mean low water. Brunswick was able to accommodate these vessels by timing their calls with high tides, but was still prevented from fully loading the ships because of depth restrictions in the channel and loading basins. 22

23 Star Shipping, of Bergen, Norway, is the long standing and sole shipping service calling on Brunswick s break bulk terminal. Star s route that calls on Brunswick initiates its circuit in the UK, and then calls on Houston, Brunswick, Wilmington and Charleston before delivering the acquired cargo to Rotterdam in the Netherlands. In recent years, the size of ships and capacity of other ports outpaced Brunswick s. As ships became larger and could be heavily loaded with cargo in Houston, the vessels would be low in the water upon arrival at Brunswick. With the mean low water restrictions and shallow loading basin in Brunswick, this often meant the ship could not load as much cargo in Brunswick as desired. As a result, cargo volumes through Mayor s Point have steadily declined in the last 10 years (see table X). With the pace of the dredging project proceeding slowly, Star considered dropping Brunswick from their service. To secure the service into Brunswick, the Georgia Ports Authority funded a $1 million project to dredge the channel and loading basing at Mayor s Point ahead of the proposed project by the Army Corps of Engineers so ships could take on more cargo even while the harbor deepening was ongoing. With the completion of all dredging projects, larger vessels can call on Brunswick and accept full loads. Along with the possibility of regaining past volumes of regional pulp and paper exports through Mayor s Point, the harbor expansion brings the possibility of forest industry imports through Brunswick. Long an export staple of the US, forest product imports have been increasing in recent years and are outpacing forest exports at some US ports (Anchorage, 2008). Foreign producers such as Russia, China and Vietnam have entered the export market with products such as dimensional lumber, veneers, plywood and flooring. The Georgia Ports Authority has the opportunity to position Brunswick for these imports because of both the increased capacity of the port as well as the experience of handling forest products. 8.4 Economic Impact Analysis The new business realized at the Port of Brunswick through infrastructure improvements does not just represent increased revenue for the port itself, but has economic development implications throughout the state. The Selig Center at the University of Georgia published an analysis of the impact of the deepwater ports at Brunswick and Savannah on Georgia s economy in fiscal year Jeffrey Humphreys, the author of the report, describes the way Georgia s ports impact the whole economy: The total economic impact of Georgia s deepwater ports consists of direct spending by the port industry, direct spending by pots users, and the secondary or indirect and induced spending often referred to as the multiplier effects created as direct expenditures by either the ports industry or ports users are re spent (Humphreys, 2007 p.6). 23

24 Using Humphrey s analysis, which is broken down by port and by commodity, the author s analysis produced per unit data on how the increased volume at the auto and grain facilities translates into additional sales, gross state product, personal income, and jobs for the state of Georgia. The volume increases at the auto and grain facilities are used because these are measurable increases in volume directly attributable to the infrastructure improvements. Volume at the Mayor s Point facility is not included because no increase in volume as a result of the infrastructure improvements can be determined. In theory, since the infrastructure improvements prevented the sole shipping company calling on Brunswick from leaving, all volume at the break bulk facility could be considered an impact of the infrastructure improvement projects. However, since this represents existing business (and therefore existing impact on the economy), it is not included in this analysis. The infrastructure improvements at the Port of Brunswick has resulted in $276 million in additional output, $113 million in gross state product, more than $90 million in personal income and more than 2500 full and part time jobs. Table 2 below outlines each infrastructure project, with expenditures, and the impact each project had on the three industries at the Port of Brunswick. Table 3 allocated new volume realized as a result of the infrastructure projects and calculates the individual impact of each project on output, GSP, income and employment. The figures quoted above are the sum of the values presented in Table 3. 24

25 Table 2: Infrastructure improvement Project Impact by Sector Infrastructure Project 2 Auto Agri Bulk Forest/Break Bulk Harbor Deepening $100 mil (federal & state funds) for Harbor Opens to all Ro/Ro vessels in service today Opened harbor and loading basin so ships can fully load $1 mil dredge Mayor s Point Terminal & E River GPA paid to keep Star Bridge Expansion $100 mil Hwy 17 Overpass $6.9 mil (Fed & State) Allowed Harbor expansion, larger ship access 900 acres available for auto development. Opened port to addt l 45% of world bulk fleet including Panamax vessels 40ft loading basin allows to fully load ships Allowed Harbor expansion, larger ship access n/a Allowed Harbor expansion, larger ship access n/a allows access to and from N and S sides of Colonel s Island w/out crossing Hwy 17 local traffic Rail Capacity $3.9 mil Overton Junction on NS line. Current paved auto storage = 368 Acres 3 Decrease time from Manufacturers. Reduces congestion. Decrease Time from grain exporters. Increase rail efficiency in terminal. n/a $4.5 mil add 13,500 feet of storage & bypass track to Anguilla Jct 2 Source: Georgia Ports Authority 3 Georgia Ports Authority Guide & Directory

26 Table 3: Economic Impact on State of Georgia from Port infrastructure Improvements Development Results: Auto Agri Bulk Forest/Brk Bulk 1. 98,000 Mercedes 1. Bunge North SUVs 4 America agreed to ship Have 3 60 railcar at least 500,000 tons/yr Hot trains a week = through bwick. 98,000 cars last year FY2008 throughput to Germany. 5 up 502,945 tons over FY Mercedes SE import center at Brunswick (2009) 50,000 cars annually 2. Opens grain berth to Panamax size vessels and new opportunities 1. Retained Star Shipping, long standing service calling on Brunswick 2. Creates opportunity to develop additional shipping services through Brunswick acres for new auto use 913,959 potential units 6 Economic Impact 1 & 2 Output: $37 mm GSP: $18 mm Income: $12 mm Emp: 336 jobs 3. Now exporting grain from Midwest 1 Output: GSP: Income: Emp: $11 mm $5 mm $3.4 mm 92 jobs 3 Output: GSP: Income: Emp: $228 mm $112 mm $75 mm 2075 jobs 4 Exports from the Vance, AL, plant took 3 5 days to Colonel s Island. Because of NS connection, now takes 24 hrs. 5 Interview with Manager of Operations for Port of Brunswick 6 Author s analysis calculated by multiplying FY2007 auto volume of 373,708 by percentage increase in acreage. 7 US Short Tons. Bunge agreement was in place for the last 8 months of FY2008, but more than doubled volume in FY2008 over FY2006. This volume comes from Midwest Grain. 26

27 9 Opportunities for Georgia In addition to the new volume already seen as at the Port of Brunswick, the completion of the infrastructure projects also position the Port of Brunswick for future growth by allowing the port to accommodate new opportunities as they arise. In the course of this research, potential opportunities for the state of Georgia were posed in the course of expert interviews and in the literature. 9.1 Auto Industry The increased capacity at Brunswick s auto port as a result of the infrastructure projects strengthens the auto industry in the state and the southeast by providing a reliable venue for imported car components and/or exported new cars. Specifically, opportunities for Georgia and the region as a whole are created to attract foreign brand auto assembly plants, called transplants. The Southeast is already a popular location for transplants, an automobile assembly plant established in the US by a foreign automaker, typically to supply the US market (Hall, 2004; Flint 2008). In the Southeast, existing transplants include Kia in Georgia, Toyota and Mercedes in Alabama, BMW in South Carolina, and Volkswagen recently announced plans to open a facility in Tennessee. Concerns have been expressed that the growth of transplants to supply the US market with foreign brand cars will result in lost volume at US ports as transplant production replaces imports. Interviews with car industry representatives indicate that this is not a concern for their operations at Brunswick. For one thing, car assembly plants typically produce one or two established models out of the portfolio of models offered by the manufacturer. New models are introduced from abroad, creating a renewed supply of cars for import. An example of the relationship between ports and foreign car manufacturers is that of the Port of Brunswick and Mercedes. As illustrated in the previous section, Mercedes does not just import cars to the Southeast, but also exports SUVs made in the Vance plant through Brunswick to Germany for the European market. Particularly in the current economy, with the US dollar at record lows to the Euro, production of foreign brands for export to Europe is realistic. 9.2 Grain Industry The increased capacity at the grain facility has broad implications for Georgia because agriculture is a main industry in the state. At this time, according to GPA interviews, approximately 95% of the wheat exported through the Port of Brunswick is grown in Georgia. The increase in volume illustrated in the previous section does not come from Georgia, but is mostly soy and corn from the Midwest. The new agreement with Bunge directed this increase in volume from the Midwest and has the potential to impact the grain industry in Georgia by opening new markets for Georgia grains. By opening the Port of Brunswick to larger ships, grain exports via Brunswick can now go to Asian markets where previously that market was restricted. Larger vessels make shipments to Asia viable because of the economies of scale realized by using a large vessel on longer hauls. While the Port of Brunswick has long shipped Georgia agriculture to markets in Europe, now this grain has a wider market in Asia. This is not insignificant considering the large and rapidly growing economies of Asian countries. 27