Rail terminal opens opportunities for port


For the past 18 months, Tom Howe, general manager of the Maryland Port Administration's Midwest sales offices, has had one of the toughest jobs in the shipping industry.

His task: Persuade Detroit-area auto parts suppliers, manufacturers and major retailers to ship their goods in and out of the port of Baltimore - even though getting it there on a cost-effective train is difficult, if not impossible.

For the first time since it took over 58 percent of Conrail last year, Norfolk Southern Corp. is in a position to deliver on its promise to make Howe's job easier.

Late last month, the railroad opened a $31 million intermodal terminal near Harrisburg, Pa. The terminal creates a new transportation route between Baltimore and Detroit, while at the same time improving transit times in key lanes.

Called the Rutherford Intermodal Terminal, the hub employs 200 and will move an estimated 250,000 containers per year. Though Norfolk Southern still lacks the ability to send trains with double stacks of containers from the terminal - a key factor in cutting transportation costs - some analysts say the new hub will help Baltimore level the playing field among East Coast ports with respect to rail access.

It also is a major step forward in Norfolk Southern's efforts to resolve any lingering service problems that arose after it took control of Conrail's tracks in Maryland and began serving the Baltimore port. So far, most of the cargo Norfolk Southern brings into Baltimore via Harrisburg is destined for the local market. The low volumes of other types of cargo don't always justify a trip by train.

But the railroad and Maryland port officials are optimistic that could change as new lanes are opened.

"Everybody is a target," said Howe, who was tapped by the port to open a new Detroit sales office last year in anticipation of Norfolk Southern's plans. CSX, Norfolk Southern's chief competitor on the East Coast and the dominant carrier in the port of Baltimore, has considered expanding intermodal service to Detroit, but currently has no plans to do so.

Other opportunities

In addition to major auto manufacturers, Michigan is headquarters for Kmart Corp., Dow Chemical Co., Amway and a number of other major corporations. Up for grabs, one port official said, is more than 100,000 cargo containers per year, an amount equal to about one fifth of the container units the port handled in 1999.

Under the most optimistic scenario, the improved access through the Rutherford yard could lower transportation costs and help the port of Baltimore regain some of the container business it has lost over the years to Norfolk, Va., and New York.

How quickly and inexpensively containers move to and from ships is vital when shippers are deciding where and how to move such cargo. Until now, cargo from Detroit could get to Baltimore only by truck, which is why port officials say the new hub is so important to their marketing efforts.

Service invites business

"Detroit was only serviced by Norfolk Southern into Norfolk," said Roy Schleicher, director of marketing for the Maryland Port Administration. "That gave them a huge advantage over the port of Baltimore because we didn't have the same service."

Schleicher said the port will mostly use the new Detroit connection to pursue auto manufacturers, which increasingly rely on ocean vessels to move parts to and from assembly plants scattered across the globe. A significant portion of that business now goes through Norfolk.

Bringing that business to Baltimore will still mean persuading steamship lines to make the 10-hour trip up the Chesapeake Bay.

The extra time, labor and fuel costs associated with the trip have been a major factor in the steady decline in container business at the port.

Maryland port officials have tried to counter that by arguing that Baltimore's proximity to major Midwest markets makes the trip worth the extra fuel costs and pilot fees. In addition to the Detroit link, Norfolk Southern provides intermodal rail service from the port to Chicago, Kansas City, Mo., and St. Louis.

"All things being equal, we should have better rates and better transit times," Schleicher said, referring to the new opportunities presented by the Rutherford terminal.

Selling the shippers

Persuading shippers of the advantages of a Baltimore bill of lading will be key to drawing steamship lines back, says M. Sigmund Shapiro, chief executive officer of Baltimore freight forwarder Samuel Shapiro & Co.

"If it becomes cheaper to come into Baltimore from Harrisburg, then maybe we can solve this problem," he said.

Capt. Lorenzo Di Casagrande, vice president of Mediterranean Shipping Co., said the steamship line is already marketing the Detroit connection to customers. The company is pursuing new business from auto and tractor manufacturers, parts suppliers and others served by the route.

"They still have to prove themselves," he said of Norfolk Southern. "But I personally am confident that they may make it work."

The new hub also partially satisfies its promise to improve intermodal access to Baltimore in exchange for the state's backing in the merger.

State officials blessed the merger in October 1997 after the railroad agreed to a laundry list of infrastructure improvements. Among other things, the railroad pledged to develop a new automobile distribution facility in the Baltimore area, improve its intermodal facilities in Maryland, maintain or increase employment in the region and raise clearances on the former Conrail line so that double-stacked containers can move in and out of the port for the first time.

The railroad, which employs about 125 in the Baltimore area, has been too busy trying to adjust to its Conrail acquisition to make much progress on its key promises to the state. But state transportation officials say the railroad has three years to honor its agreement. Opening the Rutherford terminal is seen as an important milestone in those efforts.

'Missing link'

When the hub reaches its full potential, Baltimore will have the same access to inland markets as other Atlantic ports, said Jeff Heller, director of international marketing and sales for Norfolk Southern. "This hub was a key missing link for all of our port services."

Long term, analysts say, the intermodal hub also will give Norfolk Southern the capacity to aggressively develop its north-south route - historically the exclusive domain of truckers moving mostly domestic cargo. Though it means little, if anything, for the port of Baltimore, the railroad says it will launch new north-south services later this summer.

"The greater importance of Harrisburg over time is what it does to their growth opportunities," said James Higgins, a railroad analyst with Donaldson, Lufkin & Jenrette.

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