Port seeks business for future

State officials chase far-reaching deals with 3 companies

`It's kind of scary'

New era of shipping creates sign-or-die pressure on talks

November 28, 1999|By Robert Little | Robert Little,SUN STAFF

The port of Baltimore is competing with its East Coast neighbors for three large shipping contracts, promising enough combined new business that one state official said they could "change the future of the port completely."

The state government would need to spend about $150 million improving the Baltimore waterfront to land the three deals, an official with knowledge of them said. But authorities are expected to seek 10- or 20-year contracts in any deals to secure that investment.

As negotiations with the three companies progress, port officials say Baltimore is reaping the benefits of its failed bid for the mammoth Maersk/Sea-Land alliance during the spring. Baltimore lost that contest to New York, but the process caused many shipping companies to look to the port of Baltimore with renewed seriousness, they say.

The shipping industry is changing, and business is increasingly awarded in huge, multimillion-dollar deals, industry observers say. The contracts could mean a big boost for the port and test whether it will rise or fall in an industry that is growing and consolidating -- and perhaps leaving some ports behind.

"Carriers are trending toward rationalization and consolidation, and Baltimore will have to compete on that basis," said James Dolphin, principal with Booz, Allen & Hamilton Inc., a consulting firm based in McLean, Va.

"It's kind of scary for all ports," he added. "Huge volumes will be won and lost in a single swoop."

State officials declined to discuss the contract negotiations in detail, nor would company officials who could be reached. But some of the details emerged in interviews with port and company officials involved.

Each of the three potential contracts involves a company or a commodity that transportation officials in Maryland consider vital to the port's growth. The potential deals include:

Wallenius-Wilhelmsen Lines, the world's largest carrier of automobiles and "roll-on, roll-off" cargo such as farm and construction equipment, is considering Baltimore as the site for a hub port. Wallenius-Wilhelmsen is one of the port's largest customers, and the automobile and rolling cargo operations are considered among the port's most promising niches.

The steamship line was created in March, with the merger of the Norwegian Wilhelmsen Lines and the Swedish Wallenius Lines. Baltimore is the largest East Coast port of call for Wallenius-Wilhelmsen, but the company is seeking dedicated terminal space of at least 50 acres.

State officials say that preparing the Dundalk Marine Terminal for Wallenius-Wilhelmsen would cost about $15 million, mostly spent on paving roads and storage lots and erecting some buildings. One source close to the negotiations said, however, that the costs would eventually be higher -- that the initial estimate was only for "phase one."

UPM-Kymmene, a paper-manufacturing company based in Helsinki, Finland, is looking for a hub port for consolidation of all its imported paper. The company primarily imports rolls of magazine paper that are sold to printing companies throughout the country.

Most of UPM-Kymmene's cargo goes into the port of Philadelphia, but the company has diverted some of it to Baltimore recently. James White, executive director of the Maryland Port Administration, said the company has been using the port of Baltimore to "test" the stevedoring firm that handles most of the port's paper cargo -- Balterm.

The port of Baltimore's trade in paper and other forest products also has been one of its strengths. The cargo is rarely time-sensitive, so Baltimore's in-land geographic location is less of a hindrance.

And what paper importers need most from a port is efficient labor and sufficient warehouse space. White said that since he took over the Maryland Port Administration in January, the port has spent $3 million building and renovating warehouses.

The port can accommodate some increased business from UPM-Kymmene, White said. Most of the ships that the company uses have their own cranes, so the port would not need new ones. But some construction would probably be necessary, and perhaps there would need to be improvements to the terminal's road and rail connections.

The port of Baltimore's largest customer, the Taiwanese container shipping company Evergreen Line, is expected to consolidate all of its mid-Atlantic cargo into either the port of Baltimore or the port in Norfolk, Va.

For Baltimore, which has struggled to maintain its share of the container trade over the past decade, the consequences are vast.

The container business is among the most economically lucrative for a port -- creating more jobs and more spin-off businesses than most other cargo. Evergreen ships about 50,000 containers a year into Baltimore, and another 50,000 a year into Norfolk.

Baltimore handles about 300,000 containers a year, so winning the Evergreen contract could bring a nearly 17 percent boost to the port's container business. Losing it would cut into that business on an equal scale.

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