Port year ‘memorable,’ with choppy seas ahead SPA celebrates strong cargo growth, new companies coming to S.C., but faces traffic woes, shipping slump

The 990-foot-long container ship MOL Maneuver heads out to sea after a call to the Port of Charleston last week.

Even as the State Ports Authority celebrates a near-record year for cargo, a soon-to-start harbor-deepening project and above-average growth, trends beyond the agency’s control are helping to shape its future, for good and bad.

The good includes a new Dollar Tree distribution warehouse in the Upstate and a Volvo automobile plant in Berkeley County that will, starting in 2018, export an estimated 65,000 cars each year through the Port of Charleston.

At the other end is growing congestion on area roads, sometimes trapping truckers in long lines along Interstate 26 and I-526, and a slumping worldwide shipping industry that’s struggling to turn a profit.

“I think we’ve done a good job of addressing the issues that we can control,” Jim Newsome, the SPA’s president and CEO, said Wednesday as the maritime agency announced its fiscal year-end numbers.

Newsome called the 12-month fiscal period that ended June 30 “a real memorable year.”

Among the highlights:

The Port of Charleston handled almost 1.1 million cargo containers during the 2015 fiscal year. That’s the most since 2006 and was within reach of the all-time record of 1.13 million set in 1995.

The port set a record for the number of vehicles shipped through the Columbus Street Terminal — 253,338 of them — thanks largely to the Spartanburg County BMW plant, which exports more cars than any other U.S. manufacturer.

Operating earnings topped $30 million, more than double last year’s profit.

The SPA has increased efficiency with extended gate hours for truckers and a burgeoning rail service that takes cargo from Charleston to an inland port in Greer.

Outside the port’s gates, though, trucks fight congestion caused by the Charleston region’s fast-paced growth and a Legislature that has been reluctant to fund a solution. To improve roads and increase the capacity of its highways, the S.C. Department of Transportation says it needs to add $1 billion in annual funding. Lawmakers this year approved $225 million for road maintenance.

“There are some places, like when you come across I-526 at 5 o’clock, that’s more traffic than you would like and clearly there needs to be work on I-26, but that’s not our responsibility,” Newsome said. “We believe the improvement of key freight arteries on the road system has the attention of the Legislature, and I believe that they will come up with a plan to improve those roadways.”

Farther from home are economic worries in the cargo shipping industry, where a glut of carriers has caused freight rates to fall to record lows on numerous routes. Joel Lewin, an analyst with Drewry Shipping Consultants, said last week that the industry “will be lucky to break even this year.”

That’s worrisome to Newsome.

“The carriers are starting to lose money again, and when that happens they might reduce capacity,” he said. “We’re very dependent on them providing capacity to lift cargo, so that concerns me.”

Newsome said load factors on some ships at the port appear to be lower than earlier in the year, “so we need to watch that.”

At the same time, the costs for companies that ship goods are rising because truckers, railroads and ports are demanding more money for their services. Trucking firms are raising wages as much as 18 percent to attract qualified drivers, the International Association of Movers said in March, and passing those costs along to shippers.

The SPA also plans to increase the rates it charges shippers by 2017 to help pay for capital improvements, such as a new cargo terminal at the old Navy base in North Charleston. The SPA currently earns a 3 percent return on capital, a ratio of how effective a company is at turning capital into profits. Newsome said the agency needs to earn twice that to pay for its planned projects.

“We’ve got to earn more money,” he said. “We can do some of that through volume growth and efficiency, but we have to do some of that through rates because everything you do with rates goes to the bottom line.”

There is good news as well. An expansion of the Panama Canal will be completed early next year, allowing ships carrying up to 18,000 cargo boxes to make their way to East Coast ports. A report by the Alphaliner shipping newsletter shows 35 percent of cargo coming from Asia now goes to East Coast ports, and a study by Boston Consulting Group said that percentage will climb significantly once the canal is expanded.

Those bigger ships — in addition to bringing more cargo here — will no longer be able to call on smaller ports, such as the one in Wilmington, N.C. Future shipping diversions from North Carolina ports could bring an extra 200,000 cargo boxes to the Charleston port each year.

The SPA expects the Army Corps of Engineers to complete a final report in September on a plan to deepen Charleston Harbor to 52 feet, paving the way for federal funding to help pay for the $509 million project.

The automotive sector is booming in South Carolina, with BMW and Volvo joining a Mercedes-Benz cargo vans plant in North Charleston that will use the port to import parts and export vehicles.

Dollar Tree’s distribution center, which will import millions of dollars in merchandise through Charleston, is the first of several regional retail warehouses Newsome expects will be built in coming years.

South Carolina manufacturers of machinery, chemicals, plastic, tires and electric equipment export nearly $30 billion of products through Charleston each year, with further growth expected.

“I think it’s fair to say that this state has really punched above its weight in terms of manufacturing development,” Newsome said. “For a small state, we’ve done really well.”

The SPA’s ability to take advantage of positive trends while minimizing the negative ones ultimately could determine the Charleston port’s ability to compete with larger East Coast rivals. The Port of Charleston was the ninth-busiest in the nation last year, according to Zepol, a global trade analysis firm.

Newsome said success in facing the coming challenges will determine whether Charleston remains among those elite facilities.

“The next five years are decisive for the port, the most decisive in our history” he said. “The top 10 ports will solidify their presence as top 10 ports — or they will never be top 10 ports.”

Reach David Wren at 937-5550 or on Twitter at @David_Wren_