In May 1997, a group of federal Department of Transportation staffers convened in a hotel meeting room outside the Memphis airport with a selected cluster of academics from the then-smattering of universities offering programs in transportation and logistics. Their mission was simple enough, yet audaciously ambitious: revolutionizing the way imported consumer goods move into the American Midwest.
The Container Revolution
The invention of the shipping container in the 1960s and its quick proliferation in the following decade had spelled the greatest freight transportation development since steam locomotives gave way to diesels. The ocean freight industry had transformed itself virtually overnight with a fleet of container ships that could move finished goods intact from overseas origins to eager U.S. consumers in standardized 20-foot and 40-foot steel boxes. Containers could be lifted from a ship’s deck to railcar to truck chassis without disturbing the merchandise. And even back then, it quickly became clear that the dominant trade route for this business would be from manufacturing plants in Asia to megaports in southern California, with the freight railroads handling the inland movement of these cargoes from Los Angeles/Long Beach to America’s heartland, using local trucks for final delivery.
So the gathering in Memphis sought nothing less than to bring about a fundamental change in the aforementioned supply chain. The attendees knew that one river barge can carry as many containers as 25 railcars or 90 trucks, all while consuming about one-third the fuel. They theorized that if the container ships from the Far East could be lured to ports on the U.S. Gulf via the Panama Canal, the containers could move via a scheduled container-on-barge service that would steam northward on the Mississippi River and its tributaries to markets like Memphis, St. Louis, Kansas City, Chicago and even Minneapolis. And even with the somewhat glacial pace of barge transportation (about 11 miles per hour on average), they reasoned that importers would embrace the concept of a “floating warehouse” that could reduce inventory carrying costs. The result of their deliberations was a groundbreaking report issued in 1998 by the Maritime Administration, a unit of the Transportation Department, laying out a plan for commercializing the container-on-barge concept. It was compelling reading and made a stirring case.
Perhaps the Memphis organizers should have heeded the warning signs when virtually no invitees from the major retailers or the barge industry showed up at their confab. The big box chains were already comfortable with the ship-to-rail California connection, and this new idea was way outside the comfort zone of barge lines that made their revenues hauling bulk grain and coal. So the report sat on a few shelves. A couple of enterprising firms initiated container-on-barge services over short hauls, but quickly pulled the plug when they couldn’t match northbound and southbound volumes and the services failed to cover costs.
How the Peoria Region May Benefit
The expanded Panama Canal will debut in 2013 and almost immediately bring Gulf of Mexico deepwater ports into the big leagues for containerized cargoes. It’s also expected to jumpstart container-on-barge (COB) as an economically viable proposition, and an opportunity for the private sector to pursue a profit moving those steel boxes up and down the river system.
So what’s in all this for the Illinois Waterway and central Illinois? There’s no question that the Peoria area represents a big concentration of heavy manufacturing and a moderate-sized consumer market, especially when other cities along I-74 are factored in. A lot of containers are already being handled here, but they have to be trucked to and from the giant intermodal hubs operated by the railroads in the Chicago area. If the container trades indeed shift substantially to the Gulf ports, and especially to a facility like Sea Point, a startup of direct COB service to existing and planned terminals along the Illinois could likely happen once shippers and importers get comfortable with the concept and shed any skepticism about slow river transit times and reliability, especially during the harsher weather months. Another key will be balancing northbound and southbound container volumes: Peoria has long been an export town, so the key to profitability will be in finding sufficient import loads to equal the business moving downriver to foreign markets.
Even if COB flourishes, there will still remain a heavy base of import containers arriving by rail from the west coast. Today, all those big boxes have to rely on costly trucking services to move between Peoria and the Chicago rail yards. Therein lies Peoria’s other big opportunity: a COB shuttle service linking the River City with barge docks in the Chicago region, mainly at Lemont and Channahon. From those facilities, the boxes could be trucked locally to the rail hubs, with the bottom line being significantly reduced total transportation costs. Again, it would have to be a punctual service lane that the railways, ocean carriers and cargo interests could count on.
The six-county Heart of Illinois Regional Port District (branded as TransPORT) counts over 40 privately-operated barge docks along its stretch of Illinois Waterway, many of which could be deployed on the front lines of the COB revolution. TransPORT is also beginning design on a barge terminal as part of its acquisition of the former Caterpillar foundry tract at Mapleton, 13 miles southwest of Peoria.
A Dream Terminal
Enter W.J. “Jim” Amoss. About the time of the session in Memphis, Amoss was retiring from a distinguished and globetrotting career with the venerable Lykes Brothers Steamship Company of New Orleans. Lykes had been dragged kicking and screaming into the container revolution, so Amoss knew the impacts and imperfections of intermodal transportation. After capping his tenure with the title of CEO, Amoss was itching for a new challenge, and, as he gazed from his New Orleans Trade Mart window onto the Mississippi River, he realized his next venture was right out there.
The Port of New Orleans is 110 miles and nine hours’ steaming time from the open waters of the Gulf of Mexico, a fact that has served to marginalize the city as a container port. By definition, ships carrying finished goods are in a hurry, and the time commitment alone was sufficient to discourage them from calling there. It occurred to Jim Amoss that the big vessels would come to Louisiana only if a port could be built really close to the Gulf, but unfortunately, the road ends 50 miles short of the river’s mouth, and the railways are even further away. Even more daunting is the marshy nature of the land along the river’s final miles. So this dream terminal would have to be located without road or rail access, and could not be constructed on land. Employing the old Al McGuire basketball adage that “you dance with who you brung,” Amoss conceived exactly such a facility. It would be built on a platform in the midstream Mississippi River less than an hour from the Gulf, and it would lift all those container cargoes to river barges! What other choice was there?
Jim Amoss may have been on the far side of retirement, but he wasn’t short on patience. In the early 2000s, he set about the business of selling his concept to potential investors and to the ocean carriers who would call at the terminal. He even gave it a name: Sea Point.
To suggest there was skepticism would have been an understatement. Entrenched port district bureaucrats saw the project as a threat to their underutilized docks and convinced state policymakers to withhold seed capital. Other potential investors kicked the tires but dismissed the idea as too risky. All the while, Amoss kept plugging away, teaming with a local engineering firm to design a first-of-its-kind river platform with specialized cranes that could zip cargo containers from an oceangoing vessel to the hold of a river barge in minutes. He brought aboard Jonathon Red, a former U.S. Navy officer, to structure the project’s critical path and secure commitments. The Sea Point team produced a schematic video showing exactly how the technology would work. And all the while they kept pursuing capital dollars.
A Concept Worth Waiting For
Fast forward to the current day. The world economy is reeling from an unprecedented recession and world trade has retracted by double digits. Yet the prospects for Sea Point have never been brighter. It could be argued that a “perfect storm” of circumstances is conspiring to render Sea Point and the whole container-on-barge concept viable.
Those southern California terminals that enjoy all the lucrative import business are choking with congestion, a costly and unstable labor environment, vastly increased rail rates and a new round of clean-air initiatives that the cargo ultimately pays for. The Panama Canal, currently able to handle only medium-sized container vessels in an era when ships are getting progressively bigger, is widening its channel in a behemoth capital project that will be complete in 2013 and enable the canal to handle the largest hulls in the world. Jonathon Red explains that “the river barge industry has seen the opportunity of container handling in the last few years to the extent that one operator, Ingram Barge, has signed on as an official river carrier for Sea Point.”
Meanwhile, two major ocean carriers have inked memoranda of understanding to call regularly at the facility once it’s open. River terminal operators such as the Heart of Illinois Regional Port District in Peoria are scrambling to build docks to handle the new barge traffic. And most importantly, Sea Point has signed on a major European investor to furnish seed money and has secured a line of credit from the State of Louisiana Bond Commission.
Sea Point LLC expects to break ground on construction late this year and handle its first vessel during 2011. It’s all heady stuff, and so auspicious is the future that even the big retail stores that bring in hundreds of thousands of containers yearly are beginning to take notice. Positive results are not written in stone, however, and there will be challenges aplenty for this new distribution technology. Not the least of these is the need to find revenue-generating export cargoes to fill those just-emptied containers in the Midwest and get them by barge back to Sea Point. At this point, according to Jonathon Red, “the smart money is on specialized, high-value grains” to fill that niche.
Meanwhile, the folks who brainstormed the container-on-barge concept in Memphis 12 years ago may be shaking their heads. Maybe they were just a tad ahead of their time, but there’s little question that good things in this case were well worth waiting for. iBi
This article originally appeared in the October 2009 issue of Midwest Commercial Journal and is also available at midwestceo.com.