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Inside Port of Virginia $450 million plan to win in cargo megaship era

A truck picking up a container at the Norfolk International Terminals at the Port of Virginia. NIT is the largest terminal at the port with more than 90 semi-automated stacking cranes.

Lori Ann LaRocco | CNBC

The Port of Virginia is on track to become the functionally widest and deepest port on the U.S. East Coast by early 2025, as massive ocean containerships upend the economics of port terminals. Norfolk Harbor will be the only waterway channel on the East Coast with Congressional authorization for 55-foot depth from end to end and side to side. While there are channels on the East Coast that are wider than the Port of Virginia, they are not uniformly deep from end to end and side to side, regardless of tide.

A $450 million dredging project at the Port of Virginia, which began in 2019, completed its widening measures in March, allowing two ultra-large container vessels (ULCVs) to pass each other at the same time. An ultra-large containership can carry over 20,000 twenty-foot equivalent (TEU) cargo units. The dredging project is expected to be completed in Fall 2025, making the Port of Virginia the deepest and widest harbor on the East Coast. Once completed, Virginia will have unrestricted vessel size access, with two of these super-sized containerships able to move through the channel at once. 

“Ultra-large container vessels have challenged every port,” said Stephen Edwards, CEO of the Port of Virginia. He explained that these ships reduce ports to a one-way traffic system — when a ship leaves the port it has to go all the way out of the channel before the next one can come in.

“We make our money turning ships on the berth. We don’t make our money as they transit in and out,” Edwards said. The completion of the project “means we can turn that berth quicker. We can gain capacity on and off that berth,” Edwards added.

The expansion will aid the port’s relationship with multiple industries.

“Whether that’s the coal trade, whether that’s the cruise market or military, we can start getting those two-way transits to be that much more efficient as a whole,” Edwards said.

The wider shipping channel is reducing the time vessels stay at the port by up to 15%. It’s also cutting emissions from ships idling while waiting for the channel to clear.

The $450 million channel deepening project is part of the $ 1.4 billion the port is spending to modernize operations and add capacity. It is still in the process of adding more ship berths and cranes to handle the ultra-large vessels. New, taller cranes are needed to move more containers off these ships, while the total number of berths, now two (one at each port terminal), will be expanded to five. The port is presently the sixth-largest port in the U.S. It’s also home to the world’s largest naval base, and shipbuilding and repair industrial base.

“About one in 10, one in nine jobs within the Commonwealth, have activity attached to what we do,” Edwards said. “A lot of them are direct employees. Our goal is to grow the gateway which consists of all the road networks and logistics businesses within Virginia.”

the Delaware, a dredger vessel deepening the Port of Virginia shipping channel from 50 to 55 feet.

Lori Ann LaRocco | CNBC

Container volumes are 7% above 2020 levels, and the port has seen significant growth in the first quarter of 2024. Goods are increasingly coming from South and Southeast Asia, instead of Northeast Asia, with their strongest growth coming from India. It has Walmart, Lowe’s and other top retailers as some of its primary customers, with home improvement products such as marble, and garment manufacturing, among top products arriving at the port.

The India to East Coast trade has been impacted by the Houthi attacks on vessels in the Red Sea, with major ocean carriers now avoiding the Suez Canal and are instead going around the Cape of Good Hope, a longer trip. Edwards said while trade has settled into a predictable pattern, the port is keeping a close eye on the cost of fuel.

“We haven’t seen any degradation of volume,” he said. “We expect it will stay that way and as long as fuel prices stay reasonable, when you offset the cost of the Suez Canal transit against that voyage cost, it is not too detrimental.”

But if fuel prices spike, the economics will change. Maersk, the world’s second-largest ocean carrier, said in its recent earnings report that the Red Sea disruptions could last until the end of 2024.

Baltimore port reopening plans

Virginia has received an increase in recent trade as a result of the closure of the Port of Baltimore — up to four to six weeks of freight in the Baltimore pipeline that needed to be coordinated. Edwards said the port was able to quickly absorb Baltimore freight because of the ocean carrier service overlap in calling on the Port of Virginia, Baltimore and Port of New York/New Jersey.

“There are about nine or 10 services that go to the Port of Baltimore on a weekly basis and we have about 34 on a weekly basis. When the tragedy happened, it was a Tuesday morning, and that evening we were discharging Baltimore freight because there was a ship here alongside discharging Virginia, due to go to Baltimore,” he said.

The fact that overall U.S. container volumes were down, and the port-owned and operated truck scheduling system, aided in the pick up and drop off of additional Baltimore freight. Unlike some landlord ports where each terminal has its own scheduling system, which cuts down on the efficiency of truck turns because the schedule systems do not communicate with each other, the Port of Virginia terminals allow truckers to use one system and plan multiple moves.

Site of the expansion of the Port of Virginia’s Central Rail Yard (CRY) at Norfolk International Terminals (NIT). Project includes two new rail track bundles and three new cantilever rail-mounted gantry cranes (CRMG). These cranes will replace the diesel powered machine loaders called “reach stackers.”

Lori Ann LaRocco | CNBC

On the rail side, the port has also been expanding with its central rail yard expansion expected to be completed by the end of this year. D’Andrae Larry, head of intermodal at Uber Freight, said the strategic development of rail capacity at the Port of Virginia has driven a steadily increasing amount of volume off of ships and into port facilities.

“Throughput is the holy grail for ports,” Larry said. “Over the years, the Port of Virginia has expanded and upgraded the technology and operating model for its central railyard. By building an efficient and flexible model early on, the port was able to be a go-to option for demand that moved away from Baltimore.”  

At the same time, port states need to invest in roads and bridges to keep the flow of trade moving. The Commonwealth of Virginia has invested more than $5 billion in its tunnels, highways, and bridges to receive more freight and commuters. Edwards said these improvements, which include three project partnerships with the Virginia Department of Transportation, will add efficiency and facilitate the movement of the increased cargo capacity.

Planning for net-zero carbon port operations

As the Port of Virginia’s size and cargo volume grows, it is committed to a 2021 pledge to be net-zero carbon by 2040, a goal Edwards said the port is continuing to make significant progress on.

The port reached a 70% reduction in total carbon emissions from its 2017 baseline in 2023, after replacing half of the aging equipment with electric or hybrid equipment. In January, the port became the first East Coast port to power all its terminals with 100% clean energy, eight years ahead of the 2032 target it set for that goal.

The port has power purchase agreements with Virginia-headquartered Dominion Energy, and a rider with Rappahannock Electric Cooperative.

“We’re only buying clean energy, we’re only buying clean electric,” Edwards said. “In our case … that is nuclear, wind or solar. These are long-term and expandable agreements.”

Dominion Energy’s Orion heavy-lift vessel is parked at the Port of Virginia in Norfolk, Virginia. The Jones Act vessel has a crane that Dominion Energy uses to move monopiles, a key component for offshore wind energy turbines.

Lori Ann LaRocco | CNBC

The port currently operates 116 electric container yard semi-automated stacking cranes, four rail yard cranes, called cantilever rail-mounted gantry, 27 electric ship-to-shore cranes, a fleet of more than 100 hybrid shuttle carriers, and the first zero-emission utility tractor rig on the East Coast.

“This fleet of all-electric equipment will grow as the port moves forward with optimizing the North Berth at Norfolk International Terminals,” Edwards said. The expansion will increase the fleet at NIT to 152 electric stacking cranes, seven electric rail cranes, and 31 electric ship-to-shore cranes.

Moving ahead on massive offshore wind project

The domestic offshore wind industry has been in crisis mode, but last October, the Port of Virginia was given the green light for a $9.8 billion project to put up to 176 wind turbines about 27 miles off the Virginia Beach coast. The plan will create the largest offshore wind farm to date in the U.S., and the announcement came on the same day that offshore wind projects Ocean Wind 1 and 2 in New Jersey were shuttered by Danish wind giant Ørsted, which cited supply chain issues and rising interest rates impacting project finance economics.

A series of legal challenges remain. In a note to clients, research firm ClearView Energy Partners highlighted eight separate lawsuits challenging the Bureau of Ocean Energy Management’s approval of four offshore wind projects to delay the Virginia Offshore Wind Commercial Project. The BOEM filed its opposition to that motion and, along with Dominion Energy, submitted a joint status report, including five mitigation plans that the U.S. District Court for the District of Columbia, requested clarification on last week.

One of Dominion Energy’s offshore wind turbine monopiles unloaded at the Port of Virginia.

Lori Ann LaRocco | CNBC

“With this status report, the court may now turn its attention to a motion for preliminary injunction,” said Timothy Fox, who leads ClearView’s power sector coverage. He thinks the court will likely reject the motion to halt construction. “The judge may find that petitioners did not meet the burden of demonstrating that they meet the difficult criteria to warrant a preliminary injunction. We expect a ruling as soon as next week.”

Edwards said he isn’t concerned about the project, or a possible Trump presidency that could potentially thwart future wind farm investments. In fundraisers and rallies, the former president has railed against alternative energy.

“We’re going forward with building 176 wind turbines,” Edwards said. Loading of monopiles —  a structural element for offshore turbines — began on Thursday. “This project is firm. What comes after that project, that’s where we’ll bring back flexibility,” he said. “If it’s more offshore wind, we will work with Dominion.”

Dominion, which says it would be the first electric utility in the U.S. to own an offshore project, said Virginia’s offshore wind plan remains on schedule and the costs and timelines are still consistent with the budget.

Port of Virginia CEO on plans to become the No. 1 destination for ultra-large vessels

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