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MPA deal is aimed at keeping Maersk at Baltimore port

THE BALTIMORE SUN

With less than two months left before the expiration of Maersk Line's lease in the port of Baltimore, the Maryland Port Administration is trying to persuade Maersk to stay by offering the line something it probably can't get in Virginia -- its own custom-built terminal from which it could offer terminal services to other steamship lines.

MPA Executive Director Brendan W. O'Malley said in an interview last week that the state is offering Maersk, the port's most important customer, a deal that would allow Maersk to take advantage of the fact that it operates a stevedoring company as well as a steamship line.

In October, Maersk's stevedoring subsidiary, Universal Maritime Service Corp., began competing for business in the port of Baltimore. The company has several other steamship-line clients in Baltimore in addition to Maersk Line. "We think Baltimore is the place for both Maersk and Universal to be. We believe the range of stevedoring opportunities is greater in Baltimore," Mr. O'Malley said.

Maersk now leases space from the MPA at the state's Dundalk Marine Terminal. Mr. O'Malley said the state is "laying out a number of options at Dundalk" for Maersk.

One state source familiar with the negotiations said Maersk wants the MPA to spend about $15 million developing a terminal for Maersk's use at Dundalk.

Such a terminal would include a highly automated gate, similar to the one at Seagirt Marine Terminal, that would permit Universal to process large volumes of cargo efficiently.

The cost of the terminal improvements would be paid back to the state under a long-term contract, according to the source, who compared the arrangement to the one the state worked out with Toyota for development of its importing and processing facility for cars in Fairfield.

The source, who asked not to be identified because of the sensitivity of the discussions, said there seemed to be a split in the Maersk organization, with the operations people favoring the Virginia ports of Hampton Roads because of their proximity to the Atlantic and the marketing people favoring Baltimore because of its proximity to a much bigger consuming market.

"We've got to make Baltimore as attractive as possible operationally," the source said. "We're going to do everything we can to keep them."

Delegate Timothy F. Maloney, D-Prince George's County, said he thought the legislature would be receptive to financing a package to keep Maersk in Baltimore, despite the state's difficult financial circumstances.

"This is precisely the kind of investment we should be looking at, even in tough times," he said Friday. "It would be a mistake to do otherwise."

Mr. Maloney, chairman of the House subcommittee with oversight responsibility for the port, has been sharply critical of the MPA in the past and has warned port officials that the legislature would not keep funding projects if the port continued to lose business.

Much of the state's recent investment in port facilities has been speculative. The state spent more than $250 million building Seagirt Marine Terminal without any guarantee steamship lines would use it. By contrast, under the proposal being worked out, the state would receive a long-term commitment from Maersk in return for the public investment, Mr. Maloney said. Consequently, the state would be assured of receiving sufficient economic benefits to justify the investment.

If the legislature did agree to fund the new terminal for Maersk, less money might be available for other port projects, Mr. Maloney said.

In the ports of Hampton Roads, private companies are allowed to compete for stevedoring business -- loading and unloading ships. But private companies are not allowed to provide terminal services -- managing the storage areas and processing the trucks that bring cargo to and from the docks. That part of the business is controlled by a state-owned entity, Virginia International Terminals.

The deal proposed by the MPA would allow Universal to provide both stevedoring and terminal-management services to Maersk Line and to any other steamship line in the port. Universal is already offering both stevedoring and terminal services to several steamship-line customers in Baltimore. The development of a modern terminal by the state for Maersk would give Universal much better facilities to help it expand that business in Baltimore.

David L. Bindler, the regional director for Maersk Line based in Baltimore, declined to discuss details of the offer by the state. He did confirm, however, that Maersk is reviewing its entire operation in the mid-Atlantic area, a review given greater urgency by the fact that the lease in Baltimore is about to expire.

Since last winter, Maersk has been dividing its ship calls between Baltimore and Hampton Roads. Until then, Baltimore handled an average of three Maersk ships a week. But the line was unable to keep its ships on schedule and decided to divert one of the three to Hampton Roads. Skipping Baltimore allows that ship to save a day on its schedule by eliminating the trip up the Chesapeake Bay to Baltimore.

Operating out of two ports on the bay has increased Maersk's costs, putting pressure on the line to consolidate operations either in Baltimore or Hampton Roads.

"Cost-wise we could do things a lot different," Mr. Bindler said, because of the added expense of splitting the operation between two ports.

Mr. Bindler explained that keeping ships on schedule is the prime issue for Maersk, since schedules are the foundation of reliable customer service. "Maintaining schedule is what we've built our reputation on all these many years," he said.

Baltimore has made some progress on the scheduling issue recently because of the new contract with the International Longshoremen's Association. The contract establishes more flexible rules governing the unloading of ships at night. As a result, ships that are running behind schedule can be worked at night rather than waiting until the next morning.

Last winter, a number of Maersk ships bound for Baltimore were diverted to Hampton Roads when they fell behind schedule. This year, because of the new contract, that has not happened, Mr. Bindler said.

Baltimore officials are hopeful Maersk will agree to bring all its ships back to Baltimore. Mr. Bindler suggested that was possible if Maersk's ships could be kept on schedule and Baltimore could offer lower costs and more efficient terminal operations.

"That's what's being discussed right now," said Mr. Bindler, who praised the MPA's efforts to find a way to satisfy Maersk's requirements. "The MPA's been very proactive," he said.

Maurice C. Byan, president of the Steamship Trade Association of Baltimore Inc., said he thinks Baltimore has a good chance of keeping Maersk and perhaps even of luring back the service that was diverted to Hampton Roads. "If we can offer the efficiencies and economies they're looking for, I think the chances are excellent," he said.

Mr. Maloney agreed that the offer being worked on gives the state a solid shot at cementing Maersk's presence in Baltimore. "It's definitely not pie in the sky," he said.

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