As published in the October 1, 2008 Toledo Business Journal
Alex Johnson
Midwest Terminals of Toledo International
Water shipping offers to lower freight costs
Toledo Business Journal recently interviewed Alex Johnson, president, and Fred Deichert, chief financial officer, of Midwest Terminals of Toledo International. Midwest Terminals is a full-service US port, Foreign Trade Zone, and NYMEX-approved warehouse facility located at the mouth of the Maumee River at the west end of Lake Erie. Johnson and Deichert shared the following thoughts.
Toledo Business Journal: Officials from Melford International Terminal, Inc. in Nova Scotia recently traveled to Toledo to sign a joint strategic collaboration agreement aimed at increasing water and rail shipments between the two locations. Can you explain the transportation opportunity that Melford offers to our region?
Alex Johnson: The transportation opportunities – from a world perspective – include the reverse Suez backflow. Right now, a lot of the products that come from China come around the world, and back into Los Angeles, Long Beach, Portland, and Vancouver. What Melford is looking at is China, India, Vietnam, and Indonesia, coming back in through the Suez Canal and the Mediterranean and then coming into Halifax and down the St. Lawrence Seaway. They're estimating the sailing time savings to be about 36 hours.
What we're looking at is being able to bring products – not only from China, but more newer developing nations like Vietnam, Indonesia, and India – and then backflowing the materials through the Suez Canal.
With Europe, it's going to depend on the dollar. The dollar is a very critical item for us. Now that we're seeing the dollar soften, already our business at the dock is starting to soften a little bit.
TBJ: Can you discuss the economics of short sea shipping versus rail or truck options?
AJ: There's a lot of congestion around the Great Lakes – on the roads, in ports, and the bridges coming across from Canada. So, each one of those is very problematic, and you have to kind of identify your local customer and what the problem is for them.
About 10 to 15 years ago it was nothing for people to put materials on a truck in Baltimore and take them to Gary, Indiana, or Chicago. As the traffic has increased and it costs more money now for fuel and the time on the road because of congestion, they started to push products to rail. So, as the products came off the trucks and onto rail, then there became congestion in rail.
If you look at Melford to Toledo, there are two things that are going to happen. One is that the short sea shipping opportunity is there, but it's only there nine months of the year. So, we've got to resolve the other three months of the year, and the other three months are going to be rail.
It's all about the timing.
Fred Deichert: The best way to understand the significance of Melford is to think of it like New Orleans. You can't take a full-sized container ship from New Orleans up to Mississippi. So, this type of commerce into the US has already been well established.
What we don't have up in Nova Scotia is the large port to receive the large ships and begin to break them down and feed them in. If Melford is like the port of New Orleans, Toledo is like a St. Louis or Cincinnati or Memphis – a large inland port ready to receive material and distribute it throughout the heart of the Midwest.
We don't need to have 100% of the business. What we have to do though is give them the confidence that we can start to unload containers now. We have the crain capacity to do that at the International dock.
Also, what the high energy cost does for us, advantage-wise, is to make a customer look right now and say, "my trucking cost for a container is out of sight, is there a cheaper alternative?" No problem.
But, I would argue that, in the event that there is a weakening of energy prices, that won't preclude us from getting this concept into fruition. If prices are lower, then the existing corridors – rail and vehicle – are going to continue to grow just at GDP.
And people don't understand how massive the GDP of the United States is, so a series of 2-3% increases in GDP releases a massive increase of containers into the US.
So, the congestion – first on the rail and then on the roads – will continue to grow, and inevitably, the time from dock to dock is going to be more beneficial and more efficient than dock to rail. I'm convinced that the growth of the economy in general will ultimately make the St. Lawrence Seaway a very logical alternative. And it's going to happen, I'm convinced.
Representatives from Melford said that it's four times more cost effective to move by rail than it is by truck. It's seven times more cost effective to move by ship than it is by truck. That's based on numbers earlier this year, and with fuel prices being where they are now, my guess is that moving by ship is eight to nine times that number now.
TBJ: What materials and products do you see coming into our area through the Melford Terminal?
AJ: Basically, it's going to be consumable goods: pharmaceuticals to consumer electronics – you know, the Best Buys of the world and the Walmarts, and others.
These are finished goods that they are looking at.
FD: Before Melford, we did a little market research into container traffic, and the biggest company that had interest in us was Ford. We'd have to do our homework on the import side. We don't know what the full potential is.
There's this huge Walgreens warehouse in Perrysburg Township. The Best Buy warehouse is in Findlay. There are all kinds of distribution activity. One of the specialties of northwest Ohio is logistics and distribution. This is a natural.
AJ: That is why we are working with the University of Toledo right now, and Rich Martinko at the Intermodal Transportation Institute (ITI) is taking the lead for this for us. We're in the middle of it with the Melford people, but the PIERS information tells you where every container is going and what's in it. The data is constantly collected and updated.
Rich Martinko has just started to, in the last several months, accumulate the information that we've asked for. So, I think we're actually three months out.
Toledo needs to remake itself into a logistics and manufacturing hub that specializes in a water perspective. The water gives easy access to the Great Lakes. And if you have a short sea shipping company that can move products from here to Duluth or Green Bay or Montreal, that gives us the opportunity to emphasize why the water is here for us.
Midwest Terminals is trying to develop manufacturing centers and utilize all modes of transportation. Trucking, rail, shipping, and also pipelines. Toledo has something a lot of towns don't have – we have all components. We can ship to anywhere in the world from here.
TBJ: Can you discuss the opportunity for exports from our area through Melford and for what materials and products you see opportunities?
AJ: We think that is why Toledo will become a major facility for Melford. Right now, the problem that many of the container facilities have is that they deliver a container to somewhere like Greenville, Ohio. When that container is empty, they have to do something with it. Right now it either sits there until a truck can come and pick it up and take it to either Rickenbacker International Airport or to Detroit. So, you're carrying that empty container a long way.
By bringing the containers into Toledo, what we can do is fill those containers with grain, distiller dry grains (DDG) from the ethanol plants, wheat, soybeans, corn, and scrap steel to go back to India, Vietnam, etc.
FD: Over Labor Day weekend, we loaded the first vessel of steel coils to come out of Toledo since 1982. When we acquired the International dock in 2004, we had no idea exporting would be on our radar screen. There was no historical basis for it. We were an import-oriented dock. I guess that's part of our education. There's a lot of opportunity.
AJ: All these containers are leaving, and if you don't put something in them, you're never going to sell it. I see wheat as being a big export.
FD: As developing countries develop a middle class, they consume higher end food and their society consumes steel at a rate greater than the overall GDP. Both of those commodities can come out of this area.
TBJ: What is required for the Port of Toledo to provide container handling, and what is the approximate investment that will be needed?
AJ: We don't focus on any one product. We can do a lot of container traffic at this point.
FD: That's the beauty of the gantry cranes that we acquired with the International dock. The pipe business is a great example. Those cranes are very versatile, and you don't realize that. We just purchase or manufacture specialized spreader bars to handle a number of containers. That's easy to do. That investment is typically under $100,000 per crane and pays for itself within the first couple ships that come in.
AJ: We'll need container handlers on the ground to move the containers away and stack them. That's $1 million, but we have equipment to handle containers now.
We're looking at the Ironville Intermodal dock. Ironville was a town down there in the 1800s.
On the waterfront, we're not allowed to build. You can, but it's very expensive. It's an open area for us to put container cranes and handle containers on the facility. We'll have Norfolk Southern providing rail.
FD: This is a blank slate. We're interested in both logistical opportunities and we're interested in attracting manufacturers to come and locate their facilities here.
Including equipment, we're looking at a $6.5 to $7 million investment in total. I recently went with Commissioner Pete Gerken, Representative Matt Szollosi, and Matt Sapara from the Toledo-Lucas County Port Authority to make a presentation for the Ohio Jobs Ready Sites (JRS) Grant. We applied for a $5 million grant. If the grant is awarded in that amount, it will be awarded over a 3-year period between now and 2011.
The competition for those grants is very stiff. There are, I believe, three to four projects in this area that have applied. But, this specific project here was rated the #1 project by the District 12 Integrated Committee. We received a tremendous amount of support from a number of government entities. We were the only project to receive unanimous support from the County, the City, the local communities, and the community improvement corporations. We even got a letter of support from Dr. Lloyd Jacobs at the University of Toledo.
In that grant application, Midwest Terminals also committed to match $1.2 million of capital improvements on top of the rent that we're paying to the Port Authority for the underlying land.
AJ: What needs to happen is container crane and container equipment for handling on that site. The container crane will be about $3 to $4 million, and we're going to need multiple container handling equipment pieces. Equipment will be another $2 million. The project for the site readiness, container, and crane operations will be about $13 million total.
TBJ: Can you discuss the opportunity for our area for an intermodal hub that supports water and rail shipments?
AJ: A lot of people and committees have talked about the need to be an intermodal area. But, Toledo has been doing intermodal for about 80 years. It's nothing new for this town or for us.
There's a lot of really good activity going on that people need to build on. So, build on what's working now, not reinvent the wheel. That's really what it comes down to.
FD: I would say that the intermodal opportunity is there at the Ironville site. It's all of the elements of what is deemed a good intermodal site. Two railroads, ocean-going vessels, and this heavy truck route two miles from the interstate system. It's all here.
For some reason, people are fixated on the concept of an intermodal being a place where a train comes in fast and can stop and unload containers. That is one way to look at it, but the key is for us to have the capacity to add in the vessel traffic.
There are petroleum and food grade pipelines and storage facilities adjacent to these properties.
Biodiesel plants can rent tank space for soybean oil or biodiesel. Just because you don't see goods moving underground in a pipeline doesn't mean it's not transportation. It's transportation; this is a quad-modal site.
AJ: Toledo needs to remake itself, and we have the basis to remake it. Toledo can be an alternative energy center. We have biodiesel, and we're working with a gentleman that's talking about making windmill towers here. I'm committed to alternative energy and multimodal.