An Endless Winter … Written on January 27th, five years ago today.
We’ve said it a hundred times … By retrofitting existing container ports with our patented high density mobile storage and retrieval system, only one-tenth of the acreage presently being used by container terminals would be required. That would allow the other nine-tenths to be released and used in other more practical ways. Real Estate developers would be stepping on each other’s toes for the opportunity to acquire, and pay handsome prices for, such valuable coastal properties.
Just this month, however, we’ve read announcements indicating that port authorities are moving in the exact opposite direction. Valuable tracts of land are being eyed by these officials with the intention of annexing these expensive properties in order to expand their conventionally-structured and primitive terminal operations.
– The North Carolina ports, for example, are already expanding operations and are preparing to purchase an additional 600-acre parcel on the Cape Fear River. Officials are hoping to increase operations by 2.5 million containers, or thereabouts, in the upcoming years. At most, after expending several hundred million dollars of the taxpayer’s money, throughput for the port’s terminals would be at about the 3.5 to 4 million TEU level, but that’s the volume our system would handle on less than 150 of the acres now being used by the port.
– Earlier this month, an executive of the Virginia Port Authority announced that the port’s ever-expanding operations could increase Virginia’s port capacity to a point where NY/NJ would be replaced as the leading port along the East Coast. Referring to the expansion at the Norfolk International Terminal and a giant terminal to be built at Craney Island, the executive stated that, “The Big Apple is on top, but Virginia is poised to take over the No. 1 position.” If Virginia hopes to exceed NY/NJ volumes in the coming years it will be necessary to hit the 6 to 7 million TEU mark, but if Virginia’s officials insist upon relying upon primitive methods of container terminal operations, the taxpayers will pay dearly.
In both of the above cases, instead of the port authorities going to the well again and dipping into taxpayers’ pockets, our firm could be paying all construction and operating costs, and the money obtained from the sale of the released acreage would be directed to the states’ treasuries. Furthermore, the cost-effective operations of our systems would make possible higher profit margins all along the maritime supply chain. Instead of being alternatives for vessels diverted from “the Big Apple”, both ports would then become highly profitable attractions and legitimate contenders to be No. 1 along the East Coast.
Let’s see now. Instead of paying billions of dollars to expand existing operations, acquire land, and engage in disputes with union and non-union workers, and environmentalists as well, wouldn’t it be easier to allow our firm to build and pay for a condensed, efficient, money-making, revolutionary terminal? No longer would the port community be faced with complaining neighbors, high overhead and declining profits. It would be an upbeat dream, all day, every day. Like an endless summer.
Then in our (“Miniports = Jobs”) commentary of January 27th … four years ago today … we emphasized the logic of developing nearby smaller container ports as opposed to expanding distant “king-ports”, or “hub-ports”, as insiders like to call ’em.
“Judge Daniel Pellagrini of Pennsylvania’s Commonwealth Court made it official last week,” we began. He authorized the sale of waterfront property to Sysco Corp., the global food-service company, by the Philadelphia Regional Port Authority.
Sysco had outgrown its 30-acre site at Packer Avenue in South Philadelphia and had previously been granted permission to build a 50-acre produce terminal at Pier 98 annex. A temporary injunction had been sought by maritime industry business and labor interests, who contended that the site should be reserved for port-related activities. The port authority’s chief counsel, Gregory V. Iannarelli, said the opinion received from Judge Pellagrini means, “there is nothing stopping us from going forward with the sale.”
Judge Pellegrini did his homework. The maritime and labor interests didn’t. “Maritime consultants” and political personages had misled job-hungry workers into thinking that Pier 98 should be part of a projected 3,500,000 TEU container terminal in busy Philadelphia so that giant container ships could be serviced and “100,000 jobs” would be created. “Dredging = Jobs” was the tricky slogan.
There’s more to it than that, of course, but Judge Pellegrini knew from the start that dredging was out of the question. In spite of what the consultants were promoting, he knew that:
– an APL official had publicly stated that terminals servicing megaships need to be located near shipping lanes, not 100 miles from the sea, as is the case with terminals in Philadelphia;
– dredging an 800′-wide channel would not allow for safe passing or for emergency mid-channel turnarounds;
– five feet of sludge dredged from a channel more than 100 miles in length, and having a more reasonable width of 1,320 feet, would require a disposal area of about 85,000 acres. This volume of sludge and slime would be enough to cover an area roughly equal in size to the 19,000 acre Island of Manhattan to a depth of approximately four-and-a-half feet;
– the cost to transport this volume of spoil to widely scattered Pennsylvania communities would exceed the cost of dredging operations.
Judge Pellegrini also knew that dredging projects aren’t cut and dried procedures. Such operations consume lengthy and indeterminate amounts of time, and invariably end up costing far more than submitted estimates, as Australian officials have just realized.
Senior transport experts and economists have reversed their thinking about dredging the Port of Melbourne. In an earlier assessment they were told that channel deepening was a far cheaper alternative than developing two smaller ports. Since the original estimate of $ 590 million, however, the cost has risen sharply, to approximately $ 1 billion, making the development of alternate ports a more attractive option. They also knew that costs would keep rising during the lengthy and indeterminate time period required to complete the project. A no-brainer. Therefore, no dredging.
[Smaller ports instead of a gouged out and costly megaport? Isn’t that what we’ve been advising?]
And finally, two years ago today in our January 27th commentary, Prolonging the Agony, we touched briefly upon the widespread disarray in this so-called “recession”. Authorities were telling us back then that our “jobless recovery” efforts were already underway. Remember?
In order to deal with the effects of the “recession” …
– … Britain announced, on January 19th, a second massive bank bailout;
– … Grant Thornton Consultants predicted that U.S. auto makers may close about 2,500 U.S. dealerships in 2009;
– … 12,000 workers were laid off last month by AT&T Inc.;
– … Sprint Nextel Corp. announced the elimination of some 8,000 positions yesterday;
– … also yesterday, Home Depot announced the elimination of 7,000 jobs;
– … and yesterday, the country’s three largest railroads admitted that 107,000 freight cars have been idled;
– … by February 1st, shipping lines will have idled container ships with capacities totaling more than 750,000 TEUs;
– … and a key economic adviser to President Obama stated that a commitment of several trillions of bailout dollars will be required.
Although officials see the stimulus plan as the only option available, it just cannot work. It can prolong the agony, but a stimulus program just won’t save us. The evidence is out there.
1. The day after Britain announced its second bank bailout (see above), Jim Rogers, chairman of Singapore-based Rogers Holdings – and the analyst who correctly predicted the start of the commodities rally in 1999 – said, “The UK is finished. I hate to say it, but I would not put any money in the UK.”
2. A New York-based economist with Stanley Morgan likens the $ 90 billion U.S. public works package to the infrastructure-spending program in Mexico. Too little, too late, too small, too slow. It won’t work because construction projects, which can take months to initiate, aren’t the best way to provide a quick stimulus to an economy. The construction industry has a limited effect on the economy and is three times smaller than manufacturing.
3. And according to the director of regional research at Beacon Economics in Los Angeles, “What infrastructure spending can do is bolster employment in a group of industries, like construction … What it can’t do is stop the unemployment rate from rising currently because there are a lot of forces coming at consumers, who are holding back on spending.”
[Let’s see now – How did we get out of this mess 75 years ago? We built ships, didn’t we?]