Delaware River ports fight for market share as dredging project nears completion
Bigger ships and more cargo flowing through the ports of Philadelphia and South Jersey should mean more jobs and greater economic activity when the Delaware River deepening project is completed next year, but the benefits may not be a slam-dunk for the region as expected.
Fierce competition from other East Coast ports for an expected trade bonanza resulting from the widening of the Panama Canal means that the $392 million project to dredge another five feet of mud and rock from the bottom of the river near Philadelphia does not automatically mean that more ships will call at the local ports, experts said.
What’s more, environmentalists warn that the dredging project will harm the health of the river and will likely bring saltwater closer to Philadelphia’s drinking water intakes.
Even to reap the expected benefits of the long-delayed project – now six years into the dredging project and 24 years since its first funding was appropriated by Congress – ports on both sides of the river will have to play to their strengths.
A veritable arms race
The Delaware project comes at a time that nearby competitors such as the ports of New York and New Jersey, Baltimore and Norfolk have also deepened their shipping channels to allow access by new mega-ships that will soon be passing through the Panama Canal, laden with goods from Asia.
“There is a veritable arms race going on,” said Adie Tomer, a fellow in the Metropolitan Policy Program at the Brookings Institution. “Not just the northeast and the mid-Atlantic but the entire Atlantic coast from Miami to Boston. They are effectively competing faster than the pie is growing.”
In the short term, the scramble for new business will mean that some ports will fail in their bid to take a bigger share of the same pie, but in the long run, all should benefit as overall trade volume increases with the advent of bigger ships, Tomer argued.
“It will take a generation to see the full effects of it,” he said. “Just because you open a new major investment, it does not fundamentally change supply and demand for the goods. What’s going to change the amount of goods on those ships is not the width of the Panama Canal or the depth of the ports, it’s the demand by American consumers for American-sourced goods, or the demand from Asian consumers for American goods.”
Even leading boosters of the dredging project concede that Philadelphia will have to fight hard to retain its existing port business and win a bigger share of new trade flows.
“It’s a dog-eat-dog world in the port industry but we had to do this to be competitive,” said Joe Menta, a spokesman for the Philadelphia Regional Port Authority, which is footing a third of the bill for the deepening project.
Don Brennan, the authority’s director of government and public affairs, acknowledged that the dredging was slower than that of competing ports because of the difficulties of getting three states – Pennsylvania, New Jersey, and Delaware – to agree on the plan, and because of protracted court battles over environmental safeguards.
“If we had our druthers, we would have begun the deepening the channel a long time ago,” Brennan said in an interview.
In 2015, the port complex of Philadelphia, Camden, and Wilmington handled some 100 million tons of cargo from 2,243 ship arrivals, and supported 135,000 direct or indirect jobs, according to the Maritime Commission for the Delaware River and Bay.
The local cargo volume compares with 2015 totals of 73.6 million tons for the Port of New York and New Jersey – where containers account for most of the volume — and 32.4 million tons for the Port of Baltimore, according to published data.
The biggest category of imports to the Delaware River ports was fruit, carried by 490 ships, followed by petroleum, and containers, with 410 and 381 ships, respectively. On the export side, by far the biggest category of shipping was containers, with 470 ships, the commission said.
The port contributes $53 billion to the local economy; $7.8 billion in wages and salaries, and $781 million in state and local taxes, the commission said.
Dredging could worsen effects of climate change
Although the dredging is nearly complete, environmentalists continue to warn that the project will damage the river and its surroundings.
From December to March of this year, the U.S. Army Corps of Engineers, which is leading the project, blasted giant rock formations at the bottom of the river near Marcus Hook, Pa. Environmentalists worried that could hurt Atlantic sturgeon, an endangered species of fish that provided a precious source of caviar back in the late 1800s. Army Corps spokesman Ed Voigt said the agency has spent nearly $3 million to protect Atlantic and short-nosed sturgeon during the dredging project and that only one sturgeon has been killed as a result of the rock blasting.
Environmentalists who opposed the project also worried it would dredge up toxins such as PCBs, which could end up in drinking water or the fish people eat. However, the Army Corps said monitoring has shown water quality still meets state and federal standards.
While the project has not been found to have an immediate impact on water quality and aquatic life, concerns are emerging about the impact of deepening the river at the same time sea levels are rising due to climate change.
Desmond Kahn, a biologist who formerly worked with Delaware’s Department of Natural Resources and Environmental Control, said the combined effects of dredging and sea-level rise could result in saltier water from the Atlantic Ocean moving further up the river, threatening to reach drinking water intakes used by Philadelphia and New Jersey.
“When we deepen the channel, we’re going to bring more water upriver with the high tides and that will be saltier water,” Kahn said. “There’s been an estimate the salinity line will move up a mile or two due to the channel deepening.”
Releasing more fresh water from reservoirs in upstate New York could ameliorate that problem.
Maya van Rossum, who heads the Pennsylvania-based Delaware Riverkeeper Network, said the project could also accelerate erosion of wetlands that are an increasingly important coastal defense at a time of sea-level rise.
“The deepening … has resulted in a literal eating away of the wetland habitat along the river’s edge because the job of a river is to move sediment and if we start carving the sediment out of the bottom of the river, the river finds ways to restore that sediment balance,” she said. “One of the ways that it has done it is by literally carving away at the wetlands that are so fundamentally important to our river.”
A much better niche
While environmentalists worry about the effects of the dredging, port officials are figuring out how to turn the deeper channel to their advantage.
Philadelphia, for one, will have to compete for business on the basis of its flexible labor force which uses more frequent work-force shifts to load and unload ships more quickly than at some other ports, Brennan said.
He also highlighted the potential of the proposed Southport development at the Philadelphia Navy Yard which offers 194 acres of waterfront land, an unusually large parcel for a port that would have access to road and rail links, and is close to Center City Philadelphia. Southport, which now has a shortlist of six potential developers, is dependent on its access to the deeper, 45-foot, river channel, Brennan said.
New Jersey’s Delaware River ports will also benefit from the deepening project, said Kevin Castagnola, chief executive of the South Jersey Port Corp., a state agency that manages the ports of Camden, Salem, and, when it is completed, Paulsboro.
The deeper channel will allow existing customers to carry more cargo, saving the operators money, and encouraging them to use the ports, Castagnola said. For example, a shipper that currently brings slag – the residue from steel mills that is used in the manufacture of cement – from Italy has to limit its cargos because of the 40-foot channel but will be able to carry more of the material when the channel deepening is complete, he said.
“If you don’t stay up with the times, it’s going to pass you by,” he said. “The more you narrow your potential, as years go by, you could put yourself out of the market altogether.”
The South Jersey ports, which specialize in imports of plywood, steel, and cocoa beans and exports of recyclable metals, can compete with other East Coast locations because of their location at the heart of the densely populated Northeast market, Castagnola said.
In Philadelphia, Mayor Jim Kenney argued that road links to the Port of Philadelphia are less congested than those of its competitors, allowing quicker turnaround times for trucks; that Philadelphia has lower costs than some nearby ports; and that its position, 90 miles from the mouth of the Delaware Bay, means that land-based shippers of goods to U.S. markets don’t have as far to carry them.
“We are 90 miles closer to Ohio and Indiana where the box is going,” Kenney said, after a recent ceremony at the Packer Avenue Marine Terminal to mark the appropriation of the final $55 million in federal funding needed to complete the dredging project. The federal government is paying two-thirds of the cost.
Kenney said the Port of Philadelphia can “easily” increase its flow of containers from the current 500,000 a year to as many as 1 million, and could create more jobs also by attracting more ships that carry bulk cargoes, as opposed to containers.
Philadelphia is never going to rival New York or Baltimore in terms of the volume of cargo or the size of its ships, Kenney said, but can boost the local economy by taking advantage of the deeper channel.
“We’re a niche port, we’ve always been a niche port but we can be a much better niche than we’ve been,” Kenney said.
The dredging project is now about 85 percent complete, said the PRPA’s Brennan. What remains to be done is an 11-mile stretch of the river from Chester to a point north of Wilmington, and the remainder of the Delaware Bay, according to Jacklin Rhoads, a spokeswoman for Pennsylvania U.S. Senator Bob Casey, a leading backer of the project.
A deeper Delaware: Windfall or boondoggle?
Advocates for the dredging project say increased trade flows will create thousands of direct and indirect jobs. The Maritime Exchange for the Delaware River and Bay, a nonprofit that promotes commerce in the region, projects that the project will generate more than $1 billion of investment in port infrastructure projects, boost cargo volume by 2.5 million tons a year, and add 75,000 direct and indirect jobs to the 135,000 that the port complex already supports.
Beverly Ford, a spokeswoman for the exchange, said the project is already leading to more interest from shippers.
“The enthusiasm this project is creating around the globe is evidenced in the increased number of inquiries from all manner of shipping interests being fielded by public and private port terminals along the Delaware River,” Ford said in a statement.
But Philadelphia won’t be able to take full advantage of the new cargo flows until it invests in new and bigger cranes to lift the goods off the new ships, argued Leo Holt, president of Holt Logistics, which operates the Packer Avenue Marine Terminal, and provides stevedoring services.
“The challenge for us is that we have to finish the deepening, and then we’ve got to re-equip the terminal with [new] cranes,” he said.
Philadelphia can also compete by emphasizing its productivity, which Holt said is higher than other East Coast ports because of its good road and rail links. He said that truck drivers taking goods to or from the port have an average turnaround time of 30 minutes, contrasting with as much as half a day at some other ports.
But even with such new investment and promotion of the port’s advantages, there’s no guarantee that the dredging project will deliver its promised economic benefits, argued Tomer of the Brookings Institution.
“In the long run, this will position Philadelphia to maintain the economic benefits that it gets from the port,” he said. “In the medium term, it’s incredibly difficult. That pie isn’t growing. Who knows exactly where the shippers are going to want to call?”
This story was published through a collaboration with NJ Spotlight.