Battle with Va. over Maersk Line is crucial to port

February 24, 1991|By John H. Gormley Jr.

It's a winner-take-all game for high stakes, as the ports of Baltimore and Hampton Roads, Va., vie for the business of Maersk Line.

Maersk handles more cargo than any other container line in Baltimore's port -- about 500,000 tons a year, more than 12 percent of the containerized traffic handled here.

If Maersk chooses Baltimore, it would return to Baltimore the weekly ship now calling on Hampton Roads. That would mean an additional 250,000 tons of cargo coming here annually.

But much more than cargo hangs in the balance. If Maerschooses Baltimore, the Maryland Port Administration would be able to make a much more convincing case that the port has turned the corner. The psychological boost after years of decline and loss of business to Hampton Roads would be enormous.

Maersk's departure, in contrast, would make it very hard to persuade other lines that Baltimore is really the place for them to be.

Because Maersk is so highly regarded in the industry, its decisions are closely watched by other lines, Edwin F. Hale, owner of Baltimore-based barge and trucking companies, explained. If Maersk chose Maryland over Virginia, "Baltimore's appearance in the world would be enhanced dramatically," Mr. Hale said.

In late 1989, Maersk announced that it was diverting a third of its vessel calls from Baltimore to Hampton Roads. The principal reason for the shift, the Danish line said, was problems it was having keeping its ships on schedule. Calling at Baltimore adds about a day to a ship's schedule because of the port's position near the head of the Chesapeake Bay. Hampton Roads, by contrast, is just a few miles from the mouth of the bay and the open Atlantic.

Splitting its operations between Baltimore and Hampton Roads has increased Maersk's costs, and the line is trying to decide where to consolidate its mid-Atlantic operations. Whichever port wins out will get all of Maersk's ship calls, according to people familiar with the negotiations.

"It's all or nothing," Mr. Hale said.

Hampton Roads, which has been steadily eroding Baltimore's cargo base, passed Baltimore in total general cargo tonnage for the first time in 1989. Baltimore has tried to maintain its position by marketing its advantages: immediate access to the large Baltimore-Washington consumer market and easy rail access to the nation's industrial heartland, an excellent highway system and a huge public investment in modern port facilities.

"There are a lot of good reasons why Maersk should be here," said John T. Menzies III, the chairman of the Private Sector Port Committee, a group of business executives who advise the Port Administration.

But those claims of advantages tend to ring hollow after a while if steamship lines keep taking their ships elsewhere. A decision by Maersk to send all of its ships to Baltimore would help Maryland market the port with much more confidence and conviction.

"Some good news would go a long way," Mr. Menzies said. "It would lift the spirits of the players."

In testimony before the General Assembly Wednesday, Brendan O'Malley, executive director of the MPA, said the state was ready to spend $12 million to $25 million on terminal and cargo-handling facilities in exchange for a commitment from Maersk to remain in Baltimore. The MPA is offering Maersk its own custom-built terminal, from which it could offer terminal services to others as well as serve its own ships.

"We're giving them our best shot in every way we can," he said. "They are an extremely important customer for us."

Maryland's secretary of transportation, O. James Lighthizer, said expects Maersk to make its decision known within about two months. He described the prospects of keeping Maersk as "pretty good."

"Winning would be nice for a change," he said. "It would mean at least one objective party looked at the two ports and said we're superior."

The consequences of losing are almost too painful to contemplate. "It would be something like the United States losing General Motors," said Paul F. Connor, president of John S. Connor Inc., freight forwarders and steamship agents in Baltimore.

Because of the competitive nature of the negotiations, port officials have provided few specifics of what they are offering Maersk.

Given the stakes, Mr. Connor said, he expects the state to make the best offer within reason and "maybe beyond what they should offer."

"If they still turn that down, where do we go?" Mr. Connor said.

Rejection by Maersk of the best offer the state could muster would call into question the ability of the port agency to to sell the port to other, less crucial lines. "We couldn't," Mr. Connor said simply.

That underscores just how important Maersk's decision will be for the future of the port. "It's momentous," Mr. Connor said.

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