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Tag: Key Bridge

Rock and a hard place

The global shipping industry is currently juggling crises taking place more than 7,000 miles apart: Houthi rebels’ attacks on ships in the Red Sea, and a drought that has slashed ship crossings in the Panama Canal. And those came before the East Coast was hit with additional supply chain stresses following the collapse of Baltimore’s Key Bridge.

For the most part, the Houthis’ attacks, which started in October 2023, are mainly impacting ships traveling between Far East Asia and Northern Europe, not the Port of Virginia, says Ricardo Ungo, director of Old Dominion University’s Maritime, Ports and Logistics Institute. “We are not in the … line of impact.”

Port officials agree with that assessment.

“Outside of a very small handful of delayed vessels in early January, we haven’t had any negative effects,” Port of Virginia spokesperson Joe Harris says, and Aubrey Layne Jr., board chair for the Virginia Port Authority, notes that the Houthi-related local slowdown “sort of adjusted itself out” by March. 

The Panama Canal drought, which has prompted a 30% decrease in the number of ships passing through the canal as of late last year, is also causing minimal disruption at the Port of Virginia.

“Really, it’s bulk carriers that have been really restricted in the Panama Canal,” Layne says. “We don’t do much of that in our terminal.”

But Virginia’s cargo volumes are likely to increase considerably this year because of vessels and cargo redirected from the Port of Baltimore, which was disrupted in late March after a deadly container ship collision destroyed Baltimore’s Key Bridge.

Meanwhile, Yemen’s Houthi rebels, who are backed by Iran’s government, have been launching drones and missiles at Israel, in response to the Middle East nation’s war on Gaza that began in October 2023. According to news reports, the group said it was attacking ships in the Red Sea and the Gulf of Aden that were connected to Israel.

However, as months have passed, and the U.S. and United Kingdom have launched airstrikes on Houthi positions beginning in January, rebels have attacked more ships tied to the U.S. and the U.K., and now have launched weapons at civilian and military vessels at least 50 times, according to the U.S. Department of Defense.

The situation became grimmer in early March, when a missile hit a bulk carrier in the Gulf of Aden, killing three crew members and injuring others.

That leaves ships a difficult choice.

About half of the carriers that previously traveled the Red Sea have rerouted around Africa, causing significant delays, Ungo says, and the other half “are risking it.”

Meanwhile, reports emerged this year that Somali pirates have begun hijacking ships in the western Indian Ocean again, about a decade after a string of Somali pirate attacks on ships that ran from 2008 to 2014.

The Panama Canal drought, meanwhile, forced authorities to cut the number of vessels allowed to pass per day in December 2023, but conditions have improved in 2024, following higher rainfall. Reuters reported in February that the canal did not expect to place further limits on transit until at least April, and the region’s rainy season is expected to arrive in May.

Although the Red Sea and Panama crises’ impact on the Port of Virginia appears to be minimal, U.S. Sen. Tim Kaine’s office is watching both situations, especially as they “could cause uncertainty and increase costs to consumers,” Kaine said in a statement to Virginia Business in March.

In January, Kaine signed a bipartisan letter pressing the Biden administration on its plans for responding to the Houthi attacks, advocating for “smart steps” to hold the Houthis accountable while encouraging the administration to develop a strategy to reduce escalation of the crisis.

“It’s crucial that the steps we take to address the threats posed by the Houthis are multinational — because other countries are impacted, too — and part of a larger strategy that protects commerce in Virginia and helps de-escalate tensions in the region,” Kaine says.

Ungo and Rafael Diaz, director of ODU’s Maritime Research Cluster, say that consumers buying overseas goods will likely be hit with higher costs as a result of the two shipping disruptions, and the compounded effect of the drought and rebel attacks is larger than the individual disruptions, Diaz says.

Also, economists at J.P. Morgan Research estimated in February that shipping disruptions could increase overall core inflation by 0.3 percentage points during the first half of 2024.

Still, Harris says that the shipping industry is making necessary adjustments, “to ensure ample capacity and reduce delays in service. … The industry is settling into a new pattern that is keeping the cargo flowing.”

It would be valuable for Port of Virginia leaders to carefully study the impact of the shipping crises, Ungo and Diaz agree, since there are bound to be more challenges facing the industry in the future.

“Probably the most important question going forward,” Ungo says, “is how we can improve the management of the disruptions.”  

Crisis in Baltimore

Since the March 26 container ship collision that collapsed the Francis Scott Key Bridge in Baltimore, ships previously bound for the Port of Baltimore have been diverted to other ports, including the Port of Virginia.

The Singapore-flagged container vessel Dali hit the Key Bridge at about 1:30 a.m. March 26 after issuing a mayday following an onboard power outage. The Dali, chartered by Maersk, had previously called at Virginia International Gateway’s terminal and left March 22 for Baltimore, its next scheduled port of call. Six road construction workers were killed in the accident.

Baltimore’s port was closed to ships after the bridge collapsed, with supply chain experts warning it could have a major impact on East Coast trade. In early April, the Port of Baltimore opened temporary shipping lanes to accommodate smaller boats and essential cargo. The U.S. Army Corps of Engineers Baltimore District planned to open a limited access channel for larger vessels by late April and restore full service to the port’s main navigation channel as soon as late May.

According to Rachel Shames, vice president of pricing and procurement for CV International, a Norfolk-based international logistics and transportation company, the collision was expected to create a temporary increase in cargo volume at other East Coast ports, including Norfolk’s terminals.

“It’s likely that nearby East Coast ports, including Norfolk, Philadelphia, New York and others will absorb cargo traffic from Baltimore in the short term,” she wrote. “This sudden increase in volume may strain operations at other ports.”

As National Transportation Safety Board investigators looked into the cause of the crash in late March, the Biden administration pledged federal support to rebuild the bridge, calling on Congress to authorize billions of dollars in funding likely needed for the bridge’s replacement, an undertaking that could take at least a year.

In an interview with Virginia Business, Shames said that the impact of the port’s temporary closing “could end up rippling down to Wilmington, [North Carolina], Charleston, [South Carolina], and Savannah, [Georgia],” although, she noted, “Norfolk is probably the most practical place to absorb most of the capacity. You want to keep the cargo that was supposed to go to Baltimore … as close as possible to Baltimore.”

Apart from the human toll, the port’s closure means a temporary stop to about $15 million a day in daily economic activity for Baltimore, and experts estimated that the ripple effect on railroads, distribution centers and trucking will also cost the city tens of millions of dollars.

Shames also noted that Baltimore’s port is the top U.S. port for the import and export of automobiles, light trucks, wheeled farm vehicles and construction machinery, which often move on specialized vessels.

The Port of Virginia’s Newport News Marine Terminal has facilities that accommodate vehicles, including ramps that allow workers to load and unload rail cars and ships, but not on Baltimore’s scale, Shames said.

“There is capacity at [Newport News Marine Terminal] … but not a lot, nothing like what Baltimore can do. It will not be as simple as just shifting. Unfortunately, I think we are going to be looking at congestion, and I just don’t know how long. That can mean delays for cargo [and] probably extra costs. It’s a ripple, a domino effect.”

As of early April, the Port of Virginia had received about 43% of all redirected container traffic from the Port of Baltimore, more than any other East Coast port, according to supply chain tracker Project44.

However, the increased traffic won’t impact the Port of Virginia’s service levels, Port of Virginia spokesman Joe Harris said. “This is a modern, 21st-century port that has a significant amount of experience in handling surges of import and export cargo.”  

Deep dive

The Port of Virginia has set the stage to offer the widest and deepest harbor on the East Coast by 2025, with the recent widening of Thimble Shoal Channel West allowing for two-way traffic for all vessels, including ultra-large container vessels (ULCVs).

Completed in March, the shipping channel is now as much as 1,400 feet wide in some areas, allowing for two ULCVs to pass at the same time. Previously, the U.S. Coast Guard had one-way restrictions in the area. The widening, which began in 2019, reduces the time large vessels spend on berth by up to 15%.

That’s coupled with the ongoing dredging of the channel and Norfolk Harbor to 55 feet deep, with an ocean approach to 59 feet deep, the only channel on the East Coast with congressional authorization for that depth. Deeper channels can accommodate vessels with deeper drafts, enabling the port to handle a wider range of ships and cargo types, says Cathie J. Vick, the port’s chief development and public affairs officer.

Shipping companies are putting much larger vessels in their East Coast port rotations. The ULCVs coming through the Port of Virginia, though, don’t need to be concerned about channel width, overhead draft restrictions, capacity or cargo handling infrastructure.

The wider channel allows for consistent vessel flow, contributes to greater berth and container yard efficiencies and further improves harbor safety. In addition, the port is quick to load cargo. The turnaround time to load a truck is about 30 minutes. Loading cargo onto a train takes about 36 hours.

The entire dredging project was initially expected to be finished by the end of 2024. However, federal permits allowing local beach replenishment using the dredged material, had to be renewed, delaying completion until fall 2025. Once work is finished, the Port of Virginia will possess the deepest and widest channels on the East Coast.

This is just one part of the port’s $1.4 billion strategic infrastructure investment package to accommodate larger cargo volumes on ULCVs, which have become more frequent port visitors in recent years. The widening and entire dredging costs $450 million, according to Vick. “It will increase the speed of cargo moving through the gateway,” she adds.

Some $72 million of that $450 million is federal funding from the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law. The federal government and the port agreed to split the cost in 2015 when the U.S. Army Corps of Engineers began evaluating the potential economic value of expanding and upgrading the port.

U.S. Sen. Mark Warner, Virginia’s senior senator, says the project is 20 years in the making and will benefit the port “for years to come. The infrastructure bill is the first big one to happen since the Eisenhower administration, when the interstate system was built. We limped along on making improvements, but the money didn’t allow for big projects like this one.”

The Port of Virginia has also been working on developing Craney Island into a major marine terminal to handle container, bulk, and break-bulk cargo. Upgrades planned for Norfolk International Terminals include new ship-to-shore cranes and an expansion of its central rail yard, set for this year, cementing Virginia’s status as home to the East Coast’s largest intermodal rail port.

“The target is for shipping companies to choose to come to Virginia first when coming to the East Coast,” Vick notes.

Virginia Pilot Association President Capt. Whiting Chisman says the wider channel will provide container and Navy ships with safer travel conditions. This is an even bigger consideration following the March 26 container ship collision with Baltimore’s Key Bridge, which has led to Baltimore-bound ships being diverted to the Port of Virginia and other East Coast ports.

The short-term environmental impact of the dredging will be minimal, according to Joe Rieger, deputy director of restoration for the nonprofit Elizabeth River Project, which supports the environmental health of the river and its role in the local maritime economy. Rieger evaluated the dredging plan because the Elizabeth River is part of the port’s main shipping channel. Dredging and widening is not taking place in shallow water, six feet or less, where the most productive sea life is found, he notes. Benthic organisms, also known as bottom feeders (like worms and shellfish), are typically found at higher densities in shallow water and are the base of the marine food chain. Since the dredging is deepening waters already at 45 feet to 50 feet deep, there’s limited environmental impact.

 “As long as they are not going into shallow water,” he says, “there is no threat.”

Scott Swan, the David L. Peebles Professor of Business at William & Mary’s Raymond A. Mason School of Business, applauds the port taking action to ensure future growth.

“This is a major and impressive feat and unusual for the government to do something before there’s a problem. The port is being proactive and customer-focused,” Swan says. “They have been for 10 years. … It’s amazing they can pull it off. Saving 15% on their time when a vessel is at berth will save money, making the port a profitable choice.

“It’s a large cost savings for these ultra-large container vessels, making the port a better option than others along the East Coast. No other port on the East Coast will have this combination of width and depth.”

Top Five May 2024

The top five most-read daily news stories on VirginiaBusiness.com from March 13 to April 12 were led by news that Altria would sell a large portion of its stake in Anheuser-Busch InBev.

1   |   Altria plans to sell 35 million Anheuser-Busch InBev shares

The Henrico County-based Fortune 500 tobacco manufacturer holds about 197 million shares, or about a 10% stake, in the world’s largest brewer. (March 13)

2   |   Baltimore bridge collapse drives ships to Port of Virginia

After the deadly container ship collision that collapsed the Francis Scott Key Bridge, many cargo ships previously bound for the Port of Baltimore were diverted to the Port of Virginia. (March 26)

3   |   Youngkin removes tax cuts, RGGI mandate in budget

Gov. Glenn Youngkin’s slate of 233 budget amendments removed language mandating Virginia’s participation in the Regional Greenhouse Gas Initiative. (April 8)

4   |   Virginia real estate industry weighs in on $418 million Realtors settlement

In Virginia, industry experts took a measured response to news that a landmark industry legal settlement will change how Realtors set commission rates. (March 18)

5   |   William & Mary receives $30 million anonymous donation

An alumna made the gift to renovate and rename a building in honor of former U.S. Secretary of Defense Robert M. Gates, the university’s chancellor. (March 20)

 

Baltimore bridge collapse will drive ships to Port of Va.

After a container ship struck the Francis Scott Key Bridge in Baltimore early Tuesday, causing the bridge to collapse and possibly claiming multiple lives, ships bound for the Port of Baltimore will be diverted to other ports, primarily the Port of Virginia and the Port of New York and New Jersey.

The Virginia Port Authority, which oversees the Port of Virginia, issued a statement Tuesday morning, saying that the container vessel that hit the Key Bridge at approximately 1:30 a.m. Tuesday, called at Virginia International Gateway’s terminal and left March 22 for Baltimore, its next scheduled port of call.

“Our operating team is already working with ocean carriers whose vessels were due to call Baltimore and offering the capability of our port to discharge cargoes as requested,” Port of Virginia spokesman Joe Harris said in a statement. “The Port of Virginia has a significant amount of experience in handling surges of import and export cargo and is ready to provide whatever assistance we can to the team at the Port of Baltimore.”

Danish shipping company Maersk confirmed in an email that it chartered the Dali container vessel — owned by Grace Ocean and operated by Synergy Group — that collided with the Key Bridge. As of 10 a.m. Tuesday, six people who were repairing the bridge at the time of the collision were unaccounted for, according to The Washington Post.

Maryland Gov. Wes Moore said the ship lost power and issued a mayday call shortly before crashing into the bridge, which immediately fell, the Post reported. The ship was traveling at eight knots at the time of the collision, Moore told reporters.

According to an email Tuesday from Rachel Shames, vice president of pricing and procurement for CV International, a Norfolk-based international logistics and transportation company, the collision is expected to create a temporary increase in cargo volume at other East Coast ports, including Norfolk’s terminals.

“The full impacts of this disaster are not yet known, but it’s likely that nearby East Coast ports, including Norfolk, Philadelphia, New York and others will absorb cargo traffic from Baltimore in the short term,” she wrote. “This sudden increase in volume may strain operations at other ports.”

All vessel traffic in and out of Baltimore’s port has been suspended until further notice, Maryland’s transportation secretary announced Tuesday morning, though the port is still open and trucks are being processed within marine terminals.

Maersk sent its customers an email notifying them of the collision and said that due to the bridge collapse, ships will not be able to reach the Baltimore port “for the time being. In line with this, we are omitting Baltimore on all our services for the foreseeable future, until it is deemed safe for passage through this area. For cargo already on water, we … will discharge cargo set for Baltimore in nearby ports. … Delays may occur, as they will need to discharge in other ports.”

“I think there is definitely a concern that we will see some congestion on the East Coast now, because other ports are having to absorb traffic,” Shames said later in an interview with Virginia Business.

She said that the impact of the port’s temporary closing “could end up rippling down to Wilmington, [North Carolina], Charleston [South Carolina] and Savannah, [Georgia],” although, she noted, “Norfolk is probably the most practical place to absorb most of the capacity. You want to keep the cargo that was supposed to go to Baltimore…as close as possible to Baltimore.”

Shames also noted that Baltimore’s port is the top U.S. port for the import and export of automobiles, light trucks, wheeled farm vehicles and construction machinery, which often move on specialized vessels and not in containers.

The Port of Virginia’s Newport News Marine Terminal has facilities that accommodate vehicles, including ramps that allow workers to load and unload rail cars and ships, but not on Baltimore’s scale, Shames said. “There is capacity at [Newport News Marine Terminal] … but not a lot, nothing like what Baltimore can do. It will not be as simple as just shifting. Unfortunately, I think we are going to be looking at congestion, and I just don’t know how long. That can mean delays for cargo [and] probably extra costs. It’s a ripple, a domino effect.”
Wider channels

Earlier this month, widening of the Port of Virginia’s shipping channel was completed, allowing two ultra-large container vessels to pass at the same time. The shipping channels are now up to 1,400 feet wide in some areas, although the completed deepening of the commercial shipping channel and the Norfolk Harbor to 55 feet and the ocean approach, set to be 59 feet deep, has been delayed until fall 2025, the port announced.

David H. Sump, a Norfolk-based maritime attorney with Willcox Savage and a former Coast Guard officer, says it’s too soon to tell what exactly happened to the ship in Baltimore, but after he watched a video of the collision, he noted, “This vessel appeared to lose power. It appeared to go dark for about a minute,” shortly before crashing into the bridge. If there were a power outage on the ship, “you don’t have control of the vessel during that time. It’s floating. The momentum of the vessel was proceeding, [and] there may not have been anything the pilots could have done.”

The Dali, with 22 crew members on board, had made its scheduled import deliveries to U.S. ports and was likely heading back to Asia when the collision occurred. No Maersk crew and personnel were on board the vessel, according to an email from Maersk to customers.

Sump and fellow maritime attorney Deborah Waters of the Norfolk-based Waters Law Firm note that large container ships in Maryland and Virginia are required to have local ship pilots on board when the vessels are moving in and out of rivers, bays or harbors — basically guiding them safely past structures such as bridges or other ships. “Pilots are the expert navigators of the local waters,” Sump said.

Local pilots often require five years of training in Virginia to be licensed to navigate vessels in tighter quarters. Sump acknowledges that ultra-large container vessels stopping at the Port of Virginia’s major terminals — the Norfolk International Terminals and Virginia International Gateway — do not go near or through bridges like the Key Bridge in Baltimore, although ships moving up the James River to the Richmond Maritime Terminal would encounter bridges.

Frank Rabena, vice president of the Virginia Pilot Association, told Virginia Business that this improvement and the port’s other recent infrastructure changes allow the port to assist in a situation like this. “The Port of Virginia is already prepared,” he said. “We are already in that position to handle pretty much any ship that comes our way.”

In terms of local impact, Rabena said, it’s too soon to tell what will happen.

“We’re not sure how shipping companies would reroute cargo,” he said. “That will unfold in the next couple of days.”

In 2022, the Port of Virginia processed more than 3.7 million 20-foot-equivalent units at its terminals, and cargo tonnage was up 11% from 2021. For fiscal 2022, the port generated $124.1 billion in output sales, $41.4 billion in Virginia labor income and $5.8 billion in state and local taxes and fees.

David White, executive director of the Virginia Maritime Association, said he’s already had some members reach out to offer assistance, but it’s going to take a little while to understand how the industry can best help. “It’s going to be a prolonged incident,” he told Virginia Business.
“Right now, it’s just so early, everyone’s minds are focused on the search and rescue,” he added. “We stand by as needs are identified to facilitate the capabilities our member companies have. … It’s just still too early, but we are ready, as those needs are identified, to reach out to our members [and] to get information to our members, so they know how they can … support our maritime friends in Baltimore.”