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March 2011

Miami port upgrade drives FEC growth: Fla. East Coast Railway cashes in on intermodal

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JACKSONVILLE — Florida East Coast Railway LLC expects annual double-digit intermodal handling increases and a similar pace of revenue growth over the next several years, largely due to the deepening of the Port of Miami and the growth of intermodal business.

The Jacksonville-based railroad will also benefit from a $47 million project that will restore ondock rail service to the port in early 2012, making it easier to transfer containers to and from the company’s yard in nearby Hialeah, said James Hertwig, the company’s CEO and president. The 351-mile railway will also benefit from a new intermodal rail facility in Fort Lauderdale, which is expected to open in 2013.

“Miami will become the best place in South Florida [for cargo ships] to stop because of the huge surrounding population,” Hertwig said. Shipping company customers “might as well use our line to get their cargo to the Southeast.”

The opening of the Panama Canal in late 2014 will allow larger container ships to call on the East Coast, and Miami is expected to be ready after Gov. Rick Scott earlier this month promised to give the port the $77 million it needs to deepen its harbor. FEC expects to gain more business from Miami’s growth, along with transportation customers’ increased willingness to use its intermodal service, the process of hauling goods by train and truck that are normally transported solely by truck.

It’s unknown, however, how much cargo railroad companies will send north via FEC’s line to connect to CSX Corp. and Norfolk Southern Corp.’s lines to Southeast markets. The conventional industry wisdom is that shipping customers would rather transport their goods as far as they can via the cheaper water transport, but Hertwig said transport on the FEC rail line will not only be faster, but also cost-competitive.

“We can have [the cargo] in Atlanta and Charlotte [N.C.] in two days and in Nashville and Memphis [Tenn.] within three days,” Hertwig said. Shipping the cargo through the ports of Savannah or Jacksonville would take several days longer.

FEC, which has an annual revenue of more than $200 million, has increased its intermodal handling in recent years as the trend ramped up and handling of raw material slumped due to the construction industry bust. The U.S. rail industry’s intermodal handling increased nearly 15 percent in 2010 compared with 2009, according to the Association of American Railroads.

FEC handled about 325,000 intermodal units last year — an 11 percent increase from 2009 — and that only accounted for about 10 percent of the available market between Jacksonville and Miami, Hertwig said. The former president of CSX’s intermodal company said FEC expects to gain about 40 percent of the market within the next several years.

FEC, which employs about 540, charges on average $925 for overnight transport of an intermodal unit from Jacksonville to Miami, and that doesn’t include fuel charges or the extra cost of trucking cargo more than 10 miles from the rail. Hertwig said he can offer customers a 40 percent to 50 percent cheaper fare for railing goods the opposite way, making it more attractive for customers to offload their cargo in Miami instead of northern ports, such as Savannah, Ga., and Charleston, S.C.

Whether customers would see the benefit in saving a few days at sea for an extra cost is unknown, but Miami would become a stronger gateway for northern-bound goods if U.S. trade with Cuba was restored, said Jeffrey Kauffman, a Sterne Agee transportation analyst.

He doubts that the deepening of Miami’s port will hurt the Port of Jacksonville because the two are serviced by different shipping lines with cargo for different destinations. Kauffman said ondock rail connections are important for both ports because unloading and offloading of containers is generally faster and customers don’t have to pay trucks to haul containers between the docks and rail.

CSX spokesman Gary Sease said the railroad could also benefit from the deepening of the Port of Miami since it could handle additional freight headed to or from South Florida. In terms of capturing more of the state’s intermodal market, CSX has yet to set a timeline for the construction of a state rail hub in Winter Haven.

Sease said the timeline for Evansville Western Railway, a CSX subsidiary, building the more than $100 million, 318-acre terminal is dependent on increased intermodal handling through the state.

The facility will likely be built later if the state balks at buying access to 61 miles of track for $432 million from CSX for a Central Florida commuter rail project.

SunRail’s $1.2 billion commuter rail project was on track until Gov. Scott froze $235 million in contracts related to the project and said he will take until July to review the project, according to The Associated Press. There is concern that SunRail will meet a fate similar to the planned $2.7 billion high-speed rail line from Orlando to Tampa, which Scott axed in late February.

From the Jacksonville Business Journal: http://www.bizjournals.com/jacksonville/print-edition/2011/03/25/miami-p...


Port Everglades accelerates growth plan

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While the Port of Miami was in the news spotlight on Friday, Port Everglades gained approval from the Broward County Commission earlier in the week to accelerate its growth under an updated master plan.

The moves come as East Coast ports expect a surge in container traffic after an expansion of the Panama Canal is completed in 2014. The arrival of megaships in Miami increases the likelihood of other ships getting displaced into the Fort Lauderdale port under scenarios previously outlined by trade experts.

"The Port Everglades Master/Vision Plan is a living document that we update regularly to take into account any changes in the global marketplace, market changes in South Florida and the southeastern United States, and trends in ocean shipping and cruising," Port Everglades Director Phil Allen said in a news release.

Port Everglades will accelerate its intermodal container transfer facility into the five-year master plan, instead of stringing it out over 10 years. (A crushed rock facility is deferred into the 10-year plan.)

The port will change its turning notch expansion in the Southport area into a single-phase program from a two-step program.

The update also reflects the U.S. Army Corps of Engineers' deepening and widening program, which will allow the port to deepen its channels to 50 feet from the current 42 feet. While the Port of Miami has funding, Port Everglades is still seeking to pull its plan together.

That depth is critical to accommodate the deeper draft vessels that will be able to go through the Panama Canal after the widening is done.

In a recent interview, Allen said an upcoming overpass on Eller Drive will also allow rail service directly to Southport and the creation of a ship-to-rail transfer facility for cargo containers. Currently, trucks have to haul containers to the FEC Railway yard on Andrews Avenue in Fort Lauderdale.

The Port of Miami is also restoring its railway connection to the FEC's Hialeah rail yard with money provided under a federal stimulus program.

With the canal's widening project under way, South Florida's ports want the big ships to stop here first and unload containers onto the FEC Railway for fast delivery all the way into the nation's heartland. (The FEC connects with some of the nation's biggest railways systems, such as Norfolk Southern and CSX.)

Currently, the biggest ships, called post-Panamax for their size, coming from Asia stop on the West Coast, and goods are shipped by rail across the country.

Port Everglades is also making some environmental changes in a 16.5-acre upland area to offset 8 acres of wetlands that will be part of the new turning notch. The notch will provide four new cargo berths.

One challenge for the port is nearby Fort Lauderdale-Hollywood International Airport, which is expanding its south runway to handle larger jets.

Because the flight path goes over the Southport complex, the port has to deal with Federal Aviation Administration height restrictions on things like cranes.

One other interesting project in the master plan is a potential passenger ferry operation to Cuba.

Port Everglades, which already ranks behind the Port of Miami as the world's second-busiest cruise port, is home to the world's two

largest cruise ships, Royal Caribbean International's twin Oasis of the Seas and the Allure of the Seas.

The port's expansion has economic implications for all of South Florida.

Its statistics show it generates an economic value of about $14 billion and impacts 143,000 jobs, including 10,000 people who work for companies that provide direct services to the port.

To see more information about the port's master plan, click here.

From the South Florida Business Journal: http://www.bizjournals.com/southflorida/news/2011/03/02/port-everglades-...