Maersk Line announced yesterday that they continue operations in Charleston, South Carolina through 2014.  This is a reversal of a previous decision by the line to leave the east coast port.  This is obviously great news for Charleston and demonstrates their commitment to serving their shipping line clients in the best possible manner.

The Associated Press reported that Union and State officials have reopened the negotiations to keep Maersk at the Port of Charleston.  Last week Maersk, who represents +/- 25% of the Port of Charleston’s business, announced they would be leaving the port at the end of 2010.  The state port authority had submitted a proposal to Maersk to retain them, and Maersk agreed to those terms.  However, there was a requirement that the ILA union renegotiate the terms of their contract with Maersk.  The ILA refused, and Maersk announced they were leaving.

Now, after realizing what they lost, the ILA is joining forces with the state to attempt to retain the shipping line.  With volumes down and the economy in a major slump, I suspect Maersk has the upper hand in these negotiations.  To lose 25% of their business would be a major blow to the Port of Charleston.  Plus, there would be a huge blemish on their reputation within the shipping community.  Just look what happened when the West Coast ports couldn’t deliver good union relations.  If Charleston is seen as unfriendly to shippers, their place as a major port of call is in serious jeopardy.

The next few weeks will be very interesting.

Last week, Maersk shipping lines announced that they will be leaving the Port of Charleston by the end of 2010.  It’s not that Maersk didn’t want to be in Charleston.  On the contrary, they worked to find solutions where they could stay.  However, in the end, it was a matter of operating costs.  Maersk, operating its own dedicated terminal, must use union labor.  The company has asked for permission to relocate its operations to the common yard.  Unfortunately, the ILA did not provide the necessary consent.  Maybe they thought Maersk was bluffing.  Maybe they just didn’t think it through.  However, now Maersk is leaving and come 2010, those ILA jobs will be lost.

On the plus side, Maersk will relocate the services that previously called upon Charleston.  It’s a good bet that a fair amount of that traffic will go to Virginia, where Maersk recently built a $500 million automated terminal.

A recent Shpping Digest article outlined some of the difficulties Charleston is having designing in a rail yard to their new North Charleston Terminal.  The issue revolves around the need to realign an access road on the terminal to allow electric lift equipment to shuttle containers to a new private intermodal yard.  By redesigning the road, they reopen the permitting and planning process.  The potential for delays could be very costly to the state.  In addition, CSX is a partner in the venture that would be building the intermodal yard and would be the only operator using it – no Norfolk Southern.  Any move to go above and beyond to accommodate the new rail yard would be frowned upon by NS and could be politically costly.

However, Charleston needs to address their rail issues.  Norfolk has on dock rail and is expanding the number of tracks available.  Savannah has near dock rail and is also expanding to accommodate both CSX and NS.  Charleston could be putting itself at a significant competitive disadvantage if it doesn’t figure this out quickly.  Shippers are making decisions today that will effect where they will locate in 2013 when the North Charleston terminal is completed.

GlobeSt.Com today had an interested article on China’s role in the demand for industrial space in the US.  The gist of the article is that China’s economy and production is slowing to the point where it might have an effect on the US industrial market.  The author points out that many of the industrial REITs have made big bets in port markets and those bets may not do as well as previously expected.  One of the important things to note is that we are talking about a shift from 35% growth to 23% growth.  By any measure, that is still tremendous growth and a trend worth paying attention to.

However, the growth is projected to slow and the author is correct that this slow down may have an effect on demand.  However, it just goes to further emphasize the importance of picking the right locations.  When the demand does decrease, it will certainly not decrease proportionally across all port markets.  Some will be much harder hit than others.  As an example, just look at Maersk’s recent decision to leave Charleston in 2010.  Bad news for Charleston, but great news for other markets which will benefit from Maersk redirecting that traffic.  Norfolk and Savannah should both profit from the decision.

Again, making wise investment decisions is the key here.  Any box in any port industrial market won’t get the job done anymore.