Inland ports increasingly have taken on a more important role as companies further look to efficiently transport products to consumers at the lowest possible cost.
The Kingsbury Industrial Park in La Porte, Ind., for instance, recently broke ground on the new INland Logistics Port – Kingsbury. The port is a 625-acre dual rail served logistics park providing rail and truck access to the Upper Midwest. The $6 million project will reconnect the Kingsbury Industrial Park to the CSX Railroad main line that runs between New York and Chicago, according to J.D. Salazar, managing principal at Champion Realty Advisors LLC.
“Right now as it sits, the Kingsbury Industrial Park and the INland Logistics Port – Kingsbury have rail access through the South Bend/South Shore Railroad, which doesn’t provide access to the East Coast and West Coast. The CSX connection does,” Salazar said. “For Northwest Indiana in particular, it’s going to be great. However, this is not just a Northwest Indiana project. This project is meant to serve the Upper Midwest Consumption Zone, which is roughly 41 million people.”
Salazar added that the rail project in Northwest Indiana also will connect to a similar project at the Port of Tampa in Tampa, Florida, which will enable companies to reach growers and food producers in markets such as Mexico, Central America and South America.
“These port developments are all strategically placed to provide the lowest cost, quickest delivery of products to the major consumption zones,” Salazar said. “Companies with a lot of foresight understand that the quicker they can get their product to the mass consumption zones, the better off everyone is going to be.”
The growth of U.S. exports, especially to countries such as China, also has put a spotlight on the need for strategic inland ports across the United States, according to Jones Lang LaSalle in a new white paper exploring supply chain dynamics. Inland ports, which traditionally focus on moving and handling imports, are also facilitating the effective movement of goods outside the U.S.
The three factors driving inland port demand include:
- Exports riding high – Shipments to emerging markets continue to rise; U.S. agricultural products are in high demand from China;
- Rising fuel costs driving rail and intermodal – Inland ports offer cost-effective intermodal access and are critical components in the rapid movement of goods to and from seaports;
- Growth in global containerized shipping – Savvy shippers make use of import containers arriving at inland ports to export goods back overseas
“Inland ports are becoming a critical part of the nation’s import/export cycle and the country’s competitive position on the world stage,” said John Carver, head of Jones Lang LaSalle Ports Airports and Global Infrastructure (PAGI) group. Inland ports are hubs designed to move international shipments more effectively between maritime ports and locations throughout the U.S. interior. They are connected by dedicated rail lines to one or more seaports.
“Shippers are using inland ports to move their goods to market as efficiently as possible, and with fuel costs rising, they provide intermodal and rail options to bypass expensive and costly trucking methods,” Carver said. “Given the rise in containerized shipping methods, inland port shippers are also re-using overseas containers after they are emptied, as another method of supply chain optimization.”
This trend is being seen in one of the country’s fastest growing export industries, agriculture. The last two years have been the strongest for U.S. agricultural exports in history. China has a growing appetite for raw agricultural products such as wheat, soybeans, corn and hay.
“The current challenge for U.S. producers and suppliers is to have an effective supply chain infrastructure in place to manage the growth in export volume, both in the near future and for the long run,” said Rohan àBeckett, vice president, PAGI. “Shippers are beginning to take advantage of this glut of empty containers in the U.S. as a low-cost solution for shipping exports to China. Not only does this contribute to economic growth by helping close the trade gap with China, but it will boost industrial real estate prospects as demand for storage and distribution space will rise.”
The agriculture industry will continue to be a major contributor to overall export volume from the U.S., thereby providing a long-term user base for inland ports and their outbound containers.
Critical to the success of new inland ports is their connectivity to rail and seaports and being able to provide manufacturers with smooth and quick intermodal trans-loading. Their location is vital. Many of the country’s inland ports are located in the Midwest, including Chicago, Memphis, St. Louis and Kansas City.
“There are multiple real estate prospects as the logistics industry and exporters focus on hubs with immediate proximity to empty import containers, and to distribution hubs for shipment by rail to deep-water ports,” said àBeckett. “The trend toward establishing and expanding inland ports will continue, and there are major opportunities for private-sector development and investment to support the country’s growing export trade.”
“Everyone realizes that using the waterways more is going to be a more effective way to move goods,” said John Morris, senior managing director, Cushman & Wakefield industrial. “The leveraging of inland ports and inland waterways is going to be increasing over time.”
The rising cost of fuel and a shortage of available truck drivers also have made companies more reliant on inland ports as a means of transporting goods.
“Transportation is an industry under as much pressure as any in this country,” Morris said. “Between 2000 and 2010, the inflation rate on over-the-road shipping in this country was 0 percent. Imagine finding yourself in an industry where prices have not gone up a penny, but the price of your equipment and the price of your labor has. You’ll see that it’s an industry under significant price and capacity pressure, and I don’t think it can last.”
Morris added that when demand stabilizes, the transportation industry’s pricing is going to rise rapidly.
“The transportation industry lost about 20 percent of its capacity during the recession,” he said. “The need for those drivers and trucks is going to come back pretty quickly, and it’s not something someone can just flip a switch on. I think in the next six to 18 months there’s going to be significant inflation in the price of trucking in this country and it’s going to trickle down to the price of goods.”
Morris said the biggest challenge facing the transportation industry is a lack of truck drivers, adding that some forecast that in the next few years there is going to be a shortage of almost half a million truck drivers in the country.
“The average age of a truck driver in this country is climbing,” he said. “Once the economy returns aggressively to a more normal state of GDP growth, we’re going to be faced with a significant challenge in finding drivers in this country.”
Salazar said another challenge facing the industry is energy and fuel costs, which is causing companies to increase efficiency.
“The railroads are investing heavily in their infrastructure. The trucking companies are continuing to invest. Now that we’re coming out of this recession, I think you’re going to see a lot of new, more efficient equipment on the road,” he said. “Everyone in the supply chain has increased their efficiency, and that’s a trend that’s going to continue because the consumer wants a high-quality, low-cost product.”