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October 2012
Game Changers
By Gene Stowe

     Roughly 100 years after the completion of the Panama Canal, the Panama Canal Expansion allowing for post-Panamax ships to transit, is nearing completion in late 2014/early 2015.

     Some say that this will be a global trade route game changer, and that inland ports such as Charlotte with connections to a deep water harbor and truck, rail and air freight services stand to benefit from the expansion and ensuing trade. Others speculate that any boost in trade will at best be temporary with no real long-term benefit or change to trade, transportation or distribution.

     Undoubtedly, the synergy with Charlotte’s new intermodal facility will magnify any such gains, elevating Charlotte onto the global stage.

 

The Power of Place

     Chase Saunders, a former Superior Court judge, community activist and noted historian of Charlotte, introduces the vision for Charlotte in a recent piece he put together for a creative summit:

     “Charlotte owes its existence to its location at the intersection of two local, ancient trading paths. Through time, the intersection gained prominence in the region, then the nation, and now the world. That location is going to leverage Charlotte into one of only a handful of global intersections of commerce.

     “Charlotte is located at one of those pivotal global intersections. Here, you can create, import, manufacture, assemble, ship, handle, and deliver just-in-time any thing. And you can do it more economically and with a better margin of profit than anywhere else. Charlotte offers fertile soil in which business can grow and prosper.

     “The economic vision for Charlotte’s future is one of a global commercial hub, a great inland port city leveraging its manufacturing and logistical resources to world prominence. Charlotte is a place where your business must be located if you want to be relevant in the 21st century.”

     In Create It Make It Move It; Charlotte 2030; a Global Intersection of Commerce, Saunders describes an economic vision and essence of Charlotte: “The world is connected by commercial trade lines on land, sea and air. Where those lines intersect, commerce thrives. Those commercial lines intersect in Charlotte and allow it to move anything with mass to half the United States within 24 hours or less. That is the power of place.

     Saunders was the scribe for a joint endeavor including Dr. Tony Zeiss, president of CPCC and champion of workforce training and education for economic development, and Michael Gallis, a regional and global planner with a truly visionary understanding and appreciation of how things change and the effects of change on populations and on regions, in preparing the Create It Make It Move It manifesto.

     Saunders touts his case for Charlotte:

     “Charlotte will be the significant beneficiary of unprecedented commercial events taking place thousands of miles away. In 2014, a huge number of Chinese trading ships will stop visiting ports in Southern California. Instead, they will are arrive at newly furbished ports along the Gulf Coast and Atlantic Coast as a result of the opening of wider Panama Canal locks. It will be a ‘gone tomorrow, here today’ economic scenario. Some estimates place the number of additional passages through the Panama Canal to reach 15,000 carriers!

     “In 2014, huge amounts of cargo will be taken off Chinese Panamax freighters hauling 16 train loads of goods into ports including Mobile, Jacksonville, Savannah, Charleston, and Norfolk for distribution and assembly or manufacture. And Charlotte will be ready to take that cargo and insert it into the streams of commerce in a freight handling terminal capable of handling tens of thousands of containers.

     “Huge amounts of cargo will move by rail and truck throughout the Southeast. Charlotte will be in the center of much of it, an inland port.

     “And Charlotte is the best placed city to do things with that cargo because we will have the only fully functional and operational intermodal center on the Eastern Seaboard. And it is located at the airport. The airport is already the least expensive location to move people in the world. Add to that the relocation of the Norfolk Southern Rail Yard between two runways with adjacent bays to ensure adequate truck access, and you will have the most efficient place to move freight by air, land, or sea, on the Eastern Seaboard.”

 

Intersection of the Rivers of Commerce

     The opening of a major intermodal facility at Charlotte-Douglas International Airport in late 2013, coinciding with the expansion of the Panama Canal, promises a sea change in greater Charlotte’s global status.

     Charlotte will be ready. The new facility, under the decades-long leadership of Jerry Orr, is the result of more than 15 years’ planning, the assembling of acreage at the airport about as large as Hartsfield-Jackson Atlanta International Airport, and a novel strategy that provided both dirt for an elevated runway and space for a Norfolk Southern rail yard.

     Orr recalls the beginnings of the project about 1990, then working with Gallis and devising a plan by the mid-1990s.

     “We started looking at strategic planning and what some regions were doing—particularly in Asia where there were massive projects based on communities integrated and growing up as part of an airport complex,” Orr says.

     “We needed to understand the global issues so we could focus our limited resources on strengthening our strengths and disguising our weaknesses. The basic concept of that strategic plan was pulling together all four major modes of transportation on one coordinated site under the assumption that doing that would be the pinnacle of efficiency and therefore cost-effectiveness for all four. If we were able to do that, it would place us as one of those intersections of the rivers of commerce that would distinguish us in the future and build the opportunities for business here.”

     They began to look for ways to boost air freight business at the nation’s seventh busiest airport when they recognized an opening to broaden the freight sector. They figured the city could attract traffic by drastically reducing the cost, called the dray charge, of transporting goods from a rail center on the north side of the city to the airport on the west. The co-locating of the activities also brings significant reductions in energy use, traffic crowding, and environmental damage.

     “We begin to realize that freight centers attracted enormous amounts of business,” Gallis says. “With the way the world was going with e-commerce, companies were looking for efficiencies. The world trade lanes were shifting and we wanted them to come through Charlotte.

     “If the world recognized Charlotte as a freight center, then businesses connected with the movement of goods would all be attracted to the airport area,” says Orr.

     “We took that up as our assignment and figured out how to co-locate a freight rail intermodal yard on the airport and began talking to Norfolk Southern about that. About 15 years later, we did the deed.”

 

Charlotte’s New Intermodal Facility / Inland Port

     The new intermodal facility being built and managed by Norfolk Southern will be capable of 200,000 lifts per year, transferring containers between trucks and trains, more than doubling the 115,000-container capacity of the current rail yard. Ultimately, it is designed to handle 600,000 containers, equal to the two largest U.S. centers in Dallas-Fort Worth and Chicago.

     “This facility will be state of the art here. The containers can move by either truck or rail, but they could move from the dock at the port by rail to this yard, be re-sorted and picked up by Norfolk Southern. We happen to be lucky to sit on their main line,” comments Orr.

     “Charlotte is a key hub on the Norfolk Southern intermodal system and on our Crescent Corridor, a new rail intermodal network under development stretching from New Jersey to Memphis and New Orleans,” according to Norfolk Southern CEO Wick Moorman, describing how the facility will greatly expand their ability to handle intermodal traffic.

     Increasingly, inbound cargo is transferred directly from an ocean vessel to railcars and then transported to an inland location, away from the more congested port itself, for further processing and distribution. These inland locations, or intermodal centers, serve as “inland ports,” with some handling as much cargo volumes as their coastal counterparts. Charlotte is already on the relatively short list of current areas widely recognized as full-fledged inland ports.

     Though the inland port concept is not new, these locations are becoming increasingly critical to the global supply chain, affecting logistics decisions ranging from shipping routes to warehouse locations.

     In building the intermodal facility, Gallis says, “What we had was a great opportunity to do something that the other metropolitan areas could not do. Atlanta, nor New York, had the opportunity to build a connection point for rail, for trucking and air at a single location.”

     The benefits of concentrating the connected modes of transportation in one place, so obvious in hindsight, were not under consideration in the haphazard development of cities in the United States. Ties among the different kinds of infrastructure are so little recognized that they are not even all overseen by the same congressional committees.

     But in Charlotte, the collaboration of public and private civic leaders seized the opportunity years before the Panama Canal expansion was planned and maintained the effort as part of a broader economic strategy ready to remake the city after the recession.

     “There is an intermodal yard being built at the airport, but it’s not about an intermodal yard at the airport,” says Gallis, whose remembers the airport’s dreary resemblance to a bus station when he first arrived in the early 1970s. “There has been an incredible transformation.

     “Now we see it not as an airport any more, but we call it a multimodal hub. It’s going to become something different, something we’re not used to seeing.”

     The intermodal facility offers new opportunities for export as well as import and distribution. Emptied containers need to be returned for refill, and local goods, including farm, forest and factory products, could fill them.

     “The backhaul business will provide an opportunity,” Saunders says. “The ship’s here. It’s got to go back. Things you could not otherwise send cost effectively become cost-efficient because you’ve got the containers. There’s a new big market to open up.”

     Gallis points out that the intermodal center also will make Charlotte attractive to the international supply chain.

     “It will become a huge magnet,” he says. “Nothing is made in any one place any more. Things are made everywhere today. The pieces and parts move through the world transportation grid, and as they move they get assembled in what’s called subassemblies, shipped on to other subassemblies, finally getting to the point of the final factory and the final product.”

     Orr says the facility will reduce costs for companies that use it.

     “It’s obviously cheaper to move containers across the ocean on container ships than it is to fly them on an airplane, by a huge spread,” Orr continues. “It is cheaper to move containers by rail than it is by tractor-trailer, and it consumes about 10 percent of the energy.”

     “People ask what an intermodal center is,” Saunders says. “It is the equivalent of a gigantic commercial circulatory pump. It allows all of the business sectors to then plug in, and in particular the business sectors associated with manufacturing.

     “Once you have one of these gigantic circulatory pumps, you immediately have a profit margin that works to the benefit of anybody that’s plugged into it.”

 

Impact of the Panama Canal Expansion

     The Panama Canal Expansion will bring ships three times the size to the Caribbean Sea and the Gulf of Mexico—ships filled with containers of goods bound for ports on the Atlantic Ocean and potentially through Charlotte. The expansion involves the building of two new sets of locks and the widening and dredging of the canal lanes at various locations.

     For the first time in history, inland ports—such as Charlotte’s intermodal facility—rather than seaports will be the hubs of trade and commerce, eliminating the advantage enjoyed by water-accessed cities since ancient civilizations.

     Asian goods once unloaded in California for the cross-continent trip to population centers in the East now will move by water to Norfolk, Wilmington, Charleston, Savannah and Miami. Crowded docks will require quick relief, so the thousands of containers per ship will be lifted onto trains and sped inland for breakdown and further distribution.

     “We’re a distribution center. We always have been,” says Saunders. “Now we’ll be able to tap into what the Panama Canal is going to do when it opens up. There are going to be at least 7,500 passages of post-Panamax ships.

     “The logistics companies are putting out reports on what the impact is going to be, and there’s no doubt the Southeast will benefit as some of those ships no longer dock in California. They will come into the Southeast and the East Coast ports.”

     Norfolk already has the 50-foot depth required to receive such ships, and this year the federal government approved funding to provide such depth at Charleston, Savannah and Mobile.

     When the canal expansion is complete, ships that can carry the equivalent of more than 12,000 20-foot-equivalent units (TEUs), the measure of typical containers, can pass through, far more than the present 4,400 TEU limit.

     “We’re getting ready to have a trade route shift,” Saunders says. “Certain cities will be able to take advantage of it.”

 

Fueling the Economy; Becoming a Global City

     However, it’s not just that Charlotte’s concentration of air, rail and land resources ready to receive and distribute shipments of goods from around the world will be the largest on the East Coast.

     “It’s about anchoring Charlotte in the new pattern of global trade and determining how Charlotte can best compete with centers like Miami, Atlanta and New York,” says Gallis. “The big economic centers of the world are the centers that are trade network hubs. The fact that they’re trade flow centers and passenger flow centers fuels a huge part of their economy.”

     Leaders say the intermodal project is part of an even larger strategy to reposition the city economically in ways that will impact every area of life, from education to employment and infrastructure to culture.

     “Around the world, there are certain locations that are emerging as places where you’ve got to be,” asserts Saunders. Saunders predicts “intermodal Charlotte” will be the region’s next boom.

     “You’ve got to have a vision to get there—whether you’re an individual, a community, a state or a nation,” affirms Zeiss.

     The launch of a global trade hub in Charlotte offers an opportunity to elevate the city’s international stature in fields far beyond transportation and logistics, leaders say.

     “We’re the new global city on the East Coast. Let’s build relationships with every major trading bloc and say to ourselves ‘How can we then capitalize on those trading relationships and bring other companies to Charlotte?’” says Gallis.

     The change will also require a new mindset for city leaders, who typically have looked to Europe for international relations, to leverage and enhance existing elements of global-city life, Gallis says.

     Gallis says the city must continue to address three categories required for top-tier status: “The first is, ‘How are you connected to the global network?’ The intermodal facility provides a giant step forward.

     “The second is, ‘What size and type of economy do you operate?’ That’s really a question of the degree to which you’re part of the innovation economy or you’re part of the traditional economy.

     “The third is, ‘What competitive resources such as medical centers, universities, cultural attractions and other amenities are available for quality of life?”

     While the region has abundant water, relatively economical energy, high-quality health care and a rapidly-growing research university, UNC Charlotte, some sectors require significant improvement.

 

Conclusion

     Asked about the future, Saunders enthusiastically responds.

     “In Charlotte, you can create, manufacture, assemble, or make and then move anything with mass to half of the United States within 24 hours by truck. This production can be done faster and cheaper than in any other location on the East Coast adding a competitive profit margin.

     “The huge airport intermodal complex is comparable to that of Houston in its ability to handle the large TEU containers and rail cars developed for use in the regional seaports of Mobile, Savannah, Jacksonville, Charleston, and Norfolk. Raw materials, parts, and finished goods can move in and out efficiently and economically via air, rail, truck, or ship.

     “The region surrounding the intermodal center is the East Coast hub for manufacturing, warehousing, and assembly complex extending into adjacent counties in both North and South Carolina.

     “This integration of logistics and manufacturing gives the region the same edge which the Chinese in the Pearl River Basin recognize and are using to provide additional profit margins and gain international market share. Charlotte has a similar advantage because of her location at the junction and pivot point of two high-skilled and creative manufacturing regions in North and South Carolina.

     “The best manufacturing companies in the United States, Europe, and Asia will locate branches here.

     “By 2030, Charlotte will realize its destiny as the center of the most economically diversified manufacturing and distribution economy on the East Coast with strong manufacturing, distribution, energy, health care, biotech, and financial services,” Saunders concludes.

     Others in our community are not so confident. According to UNC Charlotte Belk Professor Doug Cooper, “While the expansion will offer the opportunity for improved global flow of goods, it comes just about as the global flow is about to undergo a rather profound and significant change. The coming rebalance of flow between the U.S. and China may actually imply less movement of canal flow rather than more.

     “While much of the Walmart/China flow will be retained,” Cooper continues, “much of that relationship will be moved back to the North American region with less need for the canal. Also various other things are happening …transportation rates are going up; there are growing shortages in container port capacities.

     “In the short run with the transportation hub and the relationship with Charleston, Charlotte will likely feel a small positive. In the long run, in my opinion, it’s not going to have much impact.”

     Boost or boom, Charlotte will take it—as it lifts itself up on to the global stage.

Gene Stowe is a Greater Charlotte Biz freelance writer.
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