Frontier’s $35mn investment outside of Texas signals expanded export demand
U.S. plastics are largely exported through Texas, but as export capacity is rapidly growing; exporters, processors, warehouse and distribution companies are looking for ways to diversify the supply chain and mitigate risk.
Frontier Logistics will construct an initial 400,000-square-foot rail-served warehousing facility in South Carolina to support the transloading of plastic pellets for export through the Port of Charleston. Rail service will be provided by Palmetto Railways, providing connections to both Norfolk Southern and CSX.
The $35.5 million investment announcement will be built on 26 acres at the former Navy base in North Charleston, South Carolina.
“Charleston has significant logistical advantages that reach the entire world market, enough so that it compels us to make Charleston a comprehensive launching pad for future export/import and domestic logistics needs,” Frontier Logistics Chief Executive George Cook said.
Frontier Logistics is now operating 10 facilities nationwide. Six of the 10 facilities are located in the greater Houston area.
US plastics sellers optimize export channels through southeast ports
Bottlenecks and logistical concerns are mounting as the US quickly becomes a top petrochemical exporter, and supply chain professionals are looking for creative ways to mitigate risk.
“When I learned of the tsunami of exports that are going to be coming from the U.S. Gulf, there is no question there will be tremendous bottlenecks,” said Paul McClintock, chief commercial officer and senior vice president of sales and marketing for the South Carolina Ports Authority (SCPA).
“This is unprecedented. This will create a lot of issues not just on container availability and vessel size, but also on rail, truck, capacity of ports and their ability to handle business going in and out of the Gulf,” McClintock added.
While plans are being laid at U.S. Gulf ports and railroads to make room for the incoming flux of exports, exporters and the companies who service them are looking for additional ways to diversify the supply chain.
Some of the viable U.S. export options so far include Charleston, Savannah, Long Beach/Los Angeles, going through Dallas/Ft Worth, and through Mexico.
Long Beach/Los Angeles currently handles 18% of plastic resins business mostly coming through Houston and moving on to Asia, according to the Port of LA/LB.
“Exporters are going to come to Charleston, they are going to go to Dallas, they are going to seek equipment out in LA/LB, because they have to, because the Gulf cannot supply all the equipment they need,” McClintock said.
Port of Charleston
The Port of Charleston got a head start on the game servicing its first railcar from the US Gulf in 2011 and then began making tremendous efforts to grow and support this business.
“People are beginning to discuss what needs to be done and how, but we have been handling resins since 2011 and business is steadily growing,” McClintock said.
The Port of Charleston is now servicing 17 import and export plastic resin companies and has seven bagging and transloading facilities. The facilities are operated by four companies which include Frontier Logistics, Midstates, A&R Bulk-Pac and Wyse Logistics.
“We are spending a lot of time to try to expand our plastics volume,” McClintock said. “The best way to expand it is to attract companies to invest in infrastructure in Charleston.”
“Exporters can’t just decide they want to do business somewhere. There must be a company there to handle it. And these receiving companies must believe that the business is coming and that their investment is going to pay off,” he added.
Availability of empty containers is a top concern for petrochemical producers that plan to grow their exports.
“We (U.S. Ports) are all a potential solution. Manufacturers are going to have to look at anyone who has the potential to handle their product,” McClintock said.
“I think the challenge will be finding places like Charleston that have surplus equipment and have the capability of handling the biggest ships,” McClintock said.
Surplus equipment is available in Charleston because the carriers are coming out of this port as last port of call.
Because it has the deepest harbor in the Southeast, ocean carriers will bring their ships into Charleston to top them off and hence, end up repositioning a lot of empty containers there that may have started in other ports.
“Since we handle ships at 48 feet of water, we have capability of processing and handling fully loaded vessels, mega ships, large container ships here today,” McClintock said.
“If you look at the ports from Houston to Charleston, on a 14,000 TEU ship, we can handle 1,000 more loaded containers than any other port along the way because of our water depth.”
Investment and vessel size
SCPA and the State of South Carolina are investing more than $2 billion in port and port-related facilities by 2021 to fulfill the requirements of a modern port in today’s big-ship environment.
“The ocean carriers are competing for efficiency. The way they become the most efficient is through economies of scale and they are all investing tens of billions of dollars in these new mega vessels,” McClintock said.
There has been a steady increase in vessel size over time. In the 1980s, a big ship was 3,000 or 4,000 TEUs. In the 1990s, it got up to about 6,000 or 7,000 TEUs. Now most of the ships under construction right now are 18,000 -21,000 TEUs, McClintock added.
A recent Allianz infographic shows containership growth starting from 1968 forecasting the next generation of super-sized container shipping giants yet to come in 2018.
As is shown in the image, from 1530 TEU to 19.000+ TEU, container-carrying capacity has increased by approximately 1.200% from 1968.
“If you want to participate in this new environment as a port, you must handle big ships,” McClintock said. “We are definitely in a position to handle them, but it costs a lot of money to get there.”
The largest investment by the State is the harbor deepening project to 52 feet, which will make Charleston the deepest harbor on the entire East Coast.
“We have the only permitted under construction major container terminal in the US. Phase 1 is 1 billion dollars. Construction on our deepening project will begin in February, a $530 million project and that will make us the deepest port in the US East or Gulf Coast,” McClintock said.
South Carolina also has a new intermodal facility that is under construction that will be close to 300 million dollars and is dual served, with close proximity to the Port’s new container terminal.
By Heather Doyle