- THE MAGAZINE
The Great Lakes have many attributes that any shipper or carrier would find pleasing.
They serve a prosperous marketplace, with a base of about 150 million consumers within an eight-hour drive. Ports on the Great Lakes are as efficient as any other port in handling and moving cargo, and there is not the congestion that can be found at coastal ports. In addition, shippers can save on logistics costs by keeping their cargo on the water longer.
The Great Lakes is the upper Midwest’s link to the global economy, and that is a role the region wants to expand and promote.
Despite these positive attributes, the Great Lakes can be described as the best kept secret in logistics. The Great Lakes-St. Lawrence Seaway is the last major untapped maritime route anywhere in the world. All the other shipping lanes are open and utilized effectively.
“I cannot find an example anywhere where you have an all-water route to what is arguably the most important market in the world — the industrial and agricultural heartland of North America — and it is so underutilized,” insists Will Friedman, president and CEO of Port of Cleveland and president of the American Great Lakes Port Association. “While it will take some time, I believe this will inevitably change because market forces, in part, will demand it.”
Part of the problem is some inherent issues (and misperceptions) that surround the Great Lakes.
Seasonality: The St. Lawrence Seaway System usually shutters for the first three months of the year. Carriers are hesitant to expand service to Great Lakes ports because of the lack of business for one-quarter of the year, says John C. Taylor, chairman of the department of marketing and supply chain management at Wayne State University and an expert in Great Lakes logistics.
Seaway locks: Lock dimensions on the St. Lawrence Seaway limit ships to 35,000 deadweight ton bulk carriers, a disadvantage considering today’s modern fleet.
Lack of federal subsidies: Railroads and East Coast ports have gotten their fair share of federal subsidies. Friedman says it is incumbent on executives of Great Lakes ports to convince lawmakers that they deserve a share of that funding. “We compete with the inland transportation leg of the journey,” he points out.
These issues don’t deter Friedman from seeing great potential for the Great Lakes.
“There is no question in my mind that there is a lot of upside potential [to Great Lakes ports],” he stresses. “We need to unlock that potential.”
Commodity and Natural Resources
While container cargo goes to the coastal ports, it is the Great Lakes ports that handle cargo used in construction of physical structures. Cargo from containers may sit on the shelves of a warehouse or big-box retailer, but cargo from Great Lakes ports actually builds the warehouses and transportation infrastructure that serves them.
“We may not handle or produce the goods of retailers, but we like to think we help produce their customers,” asserts Jeff Borling, director of industrial and economic development for Duluth (Minn.) Seaway Port Authority.
Most service to Great Lakes ports comes from chartered vessels that transport steel inbound and grain outbound.
“More than 50 years [after the opening of Great Lakes-St. Lawrence Seaway System], this remains the key utilization,” says Adolph Ojard, executive director of Duluth Seaway Port Authority.
Port of Duluth-Superior has seen success by transporting bulk material to U.S. and Canadian markets, along with iron ore exported to European and Asian markets and coal bound for Europe. There is also expertise in handling heavy-lift and project-based cargo.
The port is located in proximity to the oil reserves of North Dakota, oil sands of Alberta and wind fields of North America.
Port of Milwaukee, located at the northernmost point where barges can travel down the Mississippi River toward the Gulf of Mexico, has strengths handling cement, salt, grain and coal. The port saves salt manufacturers millions of dollars in logistics costs — money they would have to spend by railing their cargo to a coastal port, says Paul Vornholt, acting director for Port of Milwaukee.
“We prove to our customers that they can save money using our port,” he maintains.
The port has the capability to handle large cargo such as shovels manufactured by Caterpillar Mining and P&H Mining, helping these and other large manufacturers to be globally competitive.
Working with the state of Wisconsin, over-dimensional cargo, such as wind turbines, can be moved efficiently.
The port is rehabilitating a liquid cargo pier in a $2 million project that officials hope will expand biofuel and crude oil cargo.
Energy cargo is a sector Port of Toledo (Ohio) is looking to develop. It has a built-in advantage.
All major pipelines that feed refineries in the northern portion of the United States cross not only in Toledo, but on port property. In 2008, the port purchased a 182-acre property of a former Gulf Oil refinery, where the pipelines cross.
“We’re looking at opportunities to bring products in by ship and rail for refining,” acknowledges Paul L. Toth Jr., president and CEO of Toledo-Lucas County Port Authority. “Moving product by rail and trans-loading into pipes is an emerging opportunity.”
The port is spending about $23 million to upgrade the property, including dredging, improving rail access and building a new dock face. The last phase of the project is construction of a warehouse. Additionally, there is still 110 acres available for future warehouse and manufacturing facilities, Toth says.
The space is important because the Port of Toledo is nearly at capacity in its current 700,000 square feet of warehouse space.
As a way to change the status quo, Cleveland’s Will Friedman wants to establish a regularly scheduled liner service between Port of Cleveland and the Northern European ports of Rotterdam (Netherlands) and Antwerp (Belgium). An initiative is underway to study and launch such a service. (See The Great North Atlantic Trade, World Trade 100, July 2013)
Essentially, it would be a non-stop, all-water service between the manufacturing and consumption heartland of the United States and the cargo hub of Europe, carrying commodities of more value and even consumer goods.
“It can be a reliable service and serve a wide range of shippers,” Friedman explains. “We can be competitive on freight rates and transit times, and we can see a combination of containerized and non-containerized freight.”
There are issues to resolve before a regularly scheduled liner service can be instituted. Great Lakes ports compete with East Coast ports and the railroads that carry cargo once it is unloaded. East Coast Ports have invested to improve their landside access, and CSX (National Gateway) and Norfolk Southern (Heartland Corridor) have invested to ensure their infrastructure can move cargo quickly and efficiently to the Midwest.
Shippers need to be convinced that a Great Lakes liner service is more cost-competitive.
But Friedman, who is quick to point out that a Great Lakes liner service would only increase cargo activity by a small percentage of the total sea-based volume, has no doubts that a regularly scheduled liner service can be successful.
“In the end, freight rates and other service characteristics win the day,” he declares. “Cargo will flow on the path of least resistance. I think we will succeed.”
Capacity is a primary reason why Duluth Seaway Port Authority is working to acquire brownfield real estate (some of which has been vacant for decades) and other sites that may be cost-prohibitive to develop by the private sector. The goal is to partner with regional and state economic development agencies and the federal government to clean up the sites and eventually build manufacturing and distribution facilities.
One such project has the Port Authority working with United States Steel to acquire a portion of the former Duluth Works, a 500-acre property in West Duluth, Minn. It is the state of Minnesota’s largest Superfund site. Working with federal EPA and state environmental agencies, Duluth Seaway Port Authority and United States Steel are working to clean up the site, with the aim of having it delisted.
The hope is for a plan to be ready for review by early 2014, followed by remediating contaminated soil and building out the infrastructure, e.g., roads, utilities, etc.
That would allow Duluth Seaway Port Authority to “turn a brownfield property into a thriving industrial park that is beyond anything currently available in the Duluth region,” Borling declares.
“It’s lengthy and costly,” he insists. “But we also have a steady stream of inquiries into the property.”
Supply Chain Efficiencies
The goal is to make the supply chain of companies that utilize Great Lakes ports as efficient as possible.
Port of Duluth-Superior is showing it has the necessary infrastructure in place to help shippers improve their supply chain efficiencies.
In 2012, ceramic proppant (fracturing sand) manufactured by Fores from Saint Petersburg, Russia, began arriving at the port, with a final destination of the Bakken oil reserves in North Dakota. By using Duluth-Superior, the company saw a 20 percent reduction in costs and 20 percent reduction in transportation time.
“That is huge, compared with using a coastal port,” Ojard says. “Companies have to start looking at ways to access as far inland as possible by water. That’s one way to get separation from your competition.”
Another example is clay produced by Imerys coming from Brazil to be used in the paper industry. Instead of using a Gulf or East Coast port and a third-party logistics provider, the company comes directly to Duluth-Superior.
“The company is challenging its supply chain and moving the ship as far inland as possible,” Ojard says.
Port of Toledo’s investment in its infrastructure has allowed it to lure business back that had left for coastal ports, most notably sugar from South America.
“Our ability to be cost competitive is directly related to the speed in which we can load, unload and manage cargo,” Toth points out. “We pass those savings onto our customers, which go right to the bottom line. One of the most important things that companies will look at during the next several years is to continue to drive costs out of the supply chain.”
Port of Cleveland’s Friedman emphasizes, “We want shippers to not only cut costs out of their supply chains, but make those supply chains perform better. That’s the Holy Grail. Our goal is to help companies run better.”
By helping companies achieve this goal, Great Lakes ports will increase their business and be less of a best-kept logistics secret.