GPA's rail expansion project to take aim at West Coast port share, Lynch says

The Georgia Ports Authority's (GPA) ambitious four-year plan to expand containerized on-dock rail service to the Midwest and Ohio Valley is an effort to grab market share from West Coast ports struggling with congestion-driven service issues, the GPA's executive director said today.

The $128 million "Mid-American Arc" project, so named because it will establish an arc of coverage across Memphis, Atlanta, Chicago, St. Louis, and the Ohio Valley, will link the two rail yards at Savannah's Garden City intermodal terminal, creating enough traffic density to allow 10,000-square-foot-sized unit trains to be built at the terminal. The additional infrastructure will make it attractive for Jacksonville, Fla.-based CSX Corp. and Norfolk, Va.-based Norfolk Southern Corp., both of which serve Savannah, to run unit trains in heretofore untapped markets to and from the Georgia port, said Griff Lynch, who took over as GPA's executive director on June 30, succeeding the retiring Curtis J. Foltz.

The project is expected to be completed by 2020, said GPA, which runs the Port of Savannah, the country's fourth-busiest containerport, and the Port of Brunswick, which handles roll-on/roll-off and breakbulk traffic. GPA announced the project last week.

A unit train carries the same commodity from the same origin to the same destination, without the cars being split up or stored en route. According to GPA, 25 trains each week serve the Mid-American Arc locations. However, Chicago and the Ohio Valley do not receive unit train service, while Savannah's share is 40 percent at Atlanta and just 23 percent at Memphis—levels Lynch has vowed to boost. "We currently don't have the ability to fully build a unit train to Memphis," said Lynch, intimating that the project will change the calculus. The project represents "a complete overhaul of our system," he said.

The project is taking aim at West Coast ports, whose unit train operations have traditionally served Chicago and the Ohio Valley. West Coast ports, buffeted by labor productivity issues and capacity constraints, remain vulnerable to diversion of shipments, enabled by the opening of the expanded Panama Canal, which can accommodate vessels capable of sailing to the East Coast with capacity of 10,000 twenty-foot equivalent units (TEU) and higher, Lynch said.

By contrast, the 1,200-acre Garden City facility has enough available capacity to scale up quickly to meet additional demand, Lynch said.

While relatively time-sensitive shipments will continue to call at West Coast ports, Savannah, which is expected to be first U.S. East Coast port of call for much freight moving through the Canal, will be an attractive alternative for cargo owners accepting shipments from Asia, Lynch said.

The larger ships sailing through the canal will offer businesses lower costs per container slot, according to GPA. This, in turn, will shift Savannah's market westward by lowering the overall cost to reach inland points, the ports authority said. "The canal makes the (Arc) project viable," Lynch said.

Savannah hopes to bank on its geographic position as the furthest west of the so-called East Coast ports. It will also attempt to leverage Garden City's reputation as the one of the best intermodal facilities of any U.S. port. Containers generally move from vessel to railcar within 24 hours, enabling overnight service to Alabama, Georgia, Florida, North Carolina, and South Carolina.

GPA is investing $80 million in the project, while $44 million will come from a grant made under the Department of Transportation's "FastLane" program, under which DOT awarded $800 million in grants to 18 infrastructure projects nationwide.

Lynch, who disclosed the program at last week's "State of the Port" address, said GPA's two ports moved 31 million tons of cargo and 3.6 million TEUs in its 2016 fiscal year, which ended June 30. It is the second straight year that TEU volumes topped 3.6 million.

Container volumes declined 1.3 percent year over year in FY 2016. Combined TEU growth over the past two fiscal years hit 15.4 percent, helped in part by a migration of cargo from the West Coast in late 2014 and early 2015 due to concerns over escalating labor-management tensions at West Coast ports, as both sides attempted to hammer out a new collective-bargaining agreement. A new five-year pact took effect in May 2015.

Though GPA has said it retained some of the diverted business, it has never disclosed how much. However, Lynch, in announcing that it set a record for August container traffic, said that "loaded imports continue to perform well, demonstrating a high level of diverted cargo retention." August container unit volumes, which rose 5 percent year over year, were the third-highest of any month in GPA history, Lynch said. It was only surpassed by traffic in April and May 2015, which was the peak of cargo diversions from the West Coast, he added.