A BACK DOOR TO CHINA: Philly Pursues A Shrewd Deal With Young Lithuanian Port

NEW OVERLAND route from China leads straight to Lithuanian port of KlaipÄ—da, a gateway to Europe and N. America. That rail line saves China thousands of miles, linking Chinese exports to Eastern US ports like Phila.

BY TONY WEST/ Something is going on in Lithuania which is a lot bigger than that small Eastern European nation. A handful of far-sighted trade experts are exploring if Philadelphia can become part of it too.

It’s a long way from Philadelphia to Lithuania by sea – 3,700 miles. From there, it’s another 3,000 miles by rail to the Chinese border.

But that border is bursting with the explosive growth of the world’s second-biggest economy. And that total mileage is only around one-third the distance from China to the Northeastern United States, as opposed to 18,000 if you take the eastward route by sea through the Panama Canal.

Why Lithuania? Because its Port of Klaipėda is far east up the Baltic Sea as a ship can get, and still find an ice-free harbor. To serve this young port, massive European and Chinese investments have been pouring in for 20 years – with much more to come.

Can Philadelphia tap into some of that westbound business? The Philadelphia Regional Port Authority is working to make that happen.

Last week, the Republic of Lithuania and the Philadelphia Regional Port Authority signed an historic Memorandum of Understanding that promises to open Philadelphia ports to the European and Asian shipping trade via KlaipÄ—da.

Lithuania’s Transport & Communications Minister Eligijus Masiulis led a delegation of that country’s leaders to meet with PRPA Chairman Charles G. Kopp and Executive Director James T. McDermott, Jr.; various Pennsylvania state and city officials; Leo A. Holt, president of Holt Logistics Corp., the organization that operates the PRPA’s Packer Avenue Marine Terminal the Port of Philadelphia’s largest facility; and Robert Palaima, president of Delaware River Stevedores, Inc. and a Lithuanian American.

Together, they signed an MOU which pledges increased support for expanded trade between Philadelphia and Klaipėda. The delegation also included Lithuanian Ambassador to the United States Žygimantas Pavilionis and Eugenijus Gentvilas, the director general of the Klaipėda Seaport.

The agreement came after extensive discussions between Lithuanian officials and the Port of Philadelphia, led by Krista Bard, US Consul of Lithuania; PRPA officials; and representatives of Holt Logistics.

“Today’s agreement is another step forward for the Port of Philadelphia,” said PRPA Kopp. “Under Gov. Corbett’s leadership, the PRPA is committed to revitalizing the Port, both through continued support of the River deepening project and through partnerships that expand trade opportunities with important port cities like Klaipėda.”

“We live in an increasingly interconnected world, and this agreement significantly improves the Port of Philadelphia’s ability to compete for the cargoes that mean jobs and opportunity for our region,” said Holt. “The Port of Klaipėda is a gateway to greater shipping and trade opportunities throughout Western Europe and Asia.”

Klaipėda is the third-largest city in Lithuania. As a major-league port, it’s scarcely 20 years old. During this period, it was deepened from 25 feet to 45 feet. The port’s annual cargo-handling capacity is now up to 45 million tons.

With more to come…. A trial container train arrived in Lithuania from China just last fall. Rail shipping across Eurasia is still tricky because the gauges of the rails in China, Europe and the Commonwealth of Independent States (former Soviet Union countries like Kazakhstan, Russia and Belarus) are different. Lithuania is an eastern junction where the European rail network links to CIS rails. So Lithuanians have become expert transshippers.

China is a now a world leader in rail technology and Chinese investors have dramatic plans to upgrade their rail links to Europe. Even on the existing rail lines, the trial shipment from China to Lithuania took only 12 days; it would have taken 30 days to ship the same containers by sea.

In East Coast shipping, all eyes are currently on the widening of the Panama Canal, which will double its capacity in 2014, unleashing a tide of large new freighters on our shores. But Lithuania will open a back door to China as well. Holt wants to beat a path from that back door to Philadelphia.

An MOU is largely a symbolic gesture that does not, in itself, deliver any containers. “But it is a powerful symbol,” Holt insisted. “It starts a sales conversation. We have identified a common thread between our two ports. If these ties are nurtured, an MOU can lead to great opportunities.”

All indicators predict Chinese trade with Europe and the USA will continue to boom in coming decades. Part of Klaipėda’s appeal as a port (like Philadelphia’s) is it has ample room for growth. A short distance up the coast, space has been reserved for a second port equal to Klaipėda in size. So international investors are building for tomorrow as well as today.

There already is a federally mandated partnership between the Commonwealth of Pennsylvania and the Republic of Lithuania, and this event marks another historic step in strengthening these ties. Philadelphia was a major port of entry for Lithuanian immigrants 100 years ago and there is a strong Lithuanian American community in the Keystone State.

“We are honored to partner with the Commonwealth and the private sector to create new opportunities for expanded trade between these two vital port cities,” said Bard. “The Commonwealth, the PRPA, and the Holt family have worked hard to make this agreement possible, and we thank them for their outstanding support.”

The Port of Philadelphia’s marketers have been hustling in other places besides Lithuania during the recession and their work has paid off. With many national ports showing no gains and, some showing decreases in shipping, the Port has shown a solid 10% increase in cargo for 2011.

When 2011 year-end totals came in, McDermott reported the 3,993,616 metric tons of cargo handled at its waterfront facilities “marked a solid gain” when compared with the 3,628,312 tons of cargo handled in 2010.

Gains in both containerized cargoes and several non-containerized cargoes contributed to this gain. Cargo showed a 17% increase in 2010 over 2009, surpassing pre-recession levels.

Container cargo, moving through the Port of Philadelphia at the Packer Avenue Marine Terminal and the Tioga Marine Terminal, recorded 2,028,011 metric tons handled in 2011 compared to the 1,860,097 tons handled in 2010.

Many of the Port’s regularly-handled breakbulk cargoes (all non-containerized cargoes except automobiles and liquid-bulk cargoes) also saw big gains in 2011. These included forest products (432,270 metric tons, an 11% gain); cocoa beans (111,773 tons handled, a 15% gain); and project cargo (41,996 tons, an almost 4% gain). Steel (167,353 tons) and fruit (290,146 tons) performed at about 2010 levels last year.

The Port’s cocoa-handling center at Pier 84 handled a record cargo of cocoa beans (19,328 metric tons) in early January, and forest-products carrier Spliethoff Line will return to the Port later this month, regularly delivering high-quality paper and other goods to the Port’s Forest Products Distribution Center at Piers 78/80 and 74.

The biggest highlight among the Port of Philadelphia’s 2011 non-containerized cargoes was undoubtedly automobiles, due to continuous growth in the Port’s Hyundai and Kia automobile business.

Ports compete fiercely with each other. For Philadelphia to build trade with Klaipėda or any other new port, says Holt, it must provide “high productivity at a reasonable cost and with a high ‘touch’ factor – the ability to adapt to individual shippers’ needs.”

All these prospects for growth depend on completing the Delaware River channel-deepening project on schedule. If the ships that sail from Klaipėda have a 45-foot draft, they’ll need to berth the same 45 feet when they get to the Northeast. This work can be completed by 2014, but it must get continued federal funding in a timely manner. If new traffic from China is allowed to settle in at Baltimore or New York instead, it will be much harder for Philadelphia to bid for its fair share in the decades to come.