RLL Container Report - 11 June 2014
From: John Keir, Ross Learmont Ltd Email: john.keir@telia.com Date: 11 June 2014
Turning swords into ploughshares.
Some sixty kilometers to the south of Chicago lies Centerpoint Intermodal Center, one of the biggest private developments ever undertaken in the United States. With a total investment of USD 1 Billion and covering 10 square kilometers, a state-of-the-art intermodal and industrial business park was built on the site of the former Joliet Arsenal. One of America’s biggest rail companies, BNSF constructed a large intermodal park occupying an area of 3 square kilometers, next to which is a business park with over 1.8 million square meters of industrial and distribution facilities. In addition to Burlington Northern Railway, Union Pacific, Wal-Mart Stores, DSC Logistics, Georgia Pacific, Potlatch, Sanyo Logistics, Partners Warehouse, California Cartage and Maersk have all taken up residence at the giant intermodal facility.
A budget of USD 125 million was set aside simply to improve the road network in the area plus another USD 35 million to clean up the land. Big projects require big bucks. The reason for such mega-intermodal complexes is quite simple – freight volumes are expected to grow by 80 percent in the next 20 years. Already in April, the ports of Los Angeles and Long Beach recorded increased throughput of 10.26% and 2.8% respectively. Rising box traffic will put enormous pressure on the transport infrastructure in North America, especially at the vital rail hub around Chicago. The Centerpoint facility is one of two major intermodal projects involving former military bases. The other is in Oakland, California, where a former marine base is being converted into an intermodal hub handling agricultural products. Swords are, indeed, being turned into ploughshares.
All but one of America’s seven biggest railroads pass through Chicago, a testament to the city’s economic dominance in the second half of the nineteenth century, when rail tracks were being laid at breakneck speed to unite the nation after the Civil War and to reduce journey times and cut transport costs. As in Russia, the mighty river systems of North America generally flow north or south, while the population was intent on leaving the cities of the Eastern seaboard to search for fame and fortune out West. As a result, a quarter of all rail traffic passes through Chicago and the surrounding State of Illinois. Crucially, almost half of this is in the form of intermodal traffic, which is directed to or through “Chi-town”.
To tap in to the ready availability of containers and attractive rail freight tariffs, several agricultural storage facilities have been established near the Centerpoint complex to load containers with corn, soybeans, and dried distillers grain. The rail companies offer a 48-hour service to and from the major container ports on the West Coast, a key element in the attractiveness of Centerpoint facility to the huge agribusiness located in the Mid-West. However, the problem is not with transit times to the major ports, rather the problem lies closer to home – in Chicago itself. Simply transiting the greater Chicago metropolitan area can take almost as long as the journey to Los Angeles. Studies show that outside the Chicago area, freight trains average up to 58 kilometres per hour but once they hit the Illinois metropolis speeds drop to less than that of an electric wheel chair.
In time-honoured fashion, the authorities at national, state and local level are throwing money at the problem - all USD 3.2 Billion of it. For this money, you get 25 new rail intersections with overpasses and underpasses that will speed up the 1,300 freight and passenger trains that every day compete with each other for the limited train slots across the city. In addition, some eight kilometres of new track will create a parallel east-west line to relieve pressure on the creaking transport infrastructure.
At the same time, the Burlington Northern is launching a daily train-truck container service from Chicago to Silao in Mexico. The service is run in partnership with Mexico’s largest rail carrier, Ferromex. Ferromex has invested USD 20 million to upgrade the line from Silao to the border crossing at El Paso, New Mexico. The new services gives car manufacturers in both countries access to the improved service times, which will reduce both freight costs and transit times on the 3,000 km journey. Coincidentally, Union Pacific just opened its USD 400 million intermodal facility in El Paso providing a faster connection on the 1225 km route between New Mexico and Los Angeles.
Meanwhile, over on the eastern seaboard, container throughput at the Port of Charleston continues to benefit from investments being made by BMW. In April of this year, container throughput via the Port of Charleston rose by 12.7% on last year´s total to 151,790 teu. The German car manufacturer announced that it will invest an additional USD 1 Billion in its plant at Spartanburg, S.C. to bring production capacity up to 450,000 by 2016. At the same time, the number of employees will grow tenfold to 8.800 workers. Currently, the USA is BMW’s second largest market after China, which accounts for 20 percent of the group’s sales. American buyers account for 19% of BMW sales, while the company’s home market is in third place with 13%.
In October of last year, the South Carolina Inland Port opened in Greer, next to the BMW and Michelin tyre plants. More than 95 million consumers live within a one-hour drive of the inland port, in addition to which several car manufacturers have set up plants in the neighbouring states. Ironically, the rise of the South in the automobile manufacturing league comes at the expense of the traditional automotive centres in Northern rust-belt cities such as Detroit and Chicago.
John Keir, Ross Learmont Ltd.
11 June 2014
Copyright ©, 2014, John Keir