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U.S. ports take notice as Freeport begins 2nd expansion
Journal of Commerce / June 18, 1998

By Larry Luxner

FREEPORT, Bahamas -- Since its inauguration in July 1997, business has been so good at Freeport Container Port Ltd. (FCP) in the Bahamas that the port's owners now want to double the size of their operation.

Phase I of the container transshipment terminal -- which boasts 1,800 feet of berth, four gantry ship-to-shore cranes and 10 straddle carriers -- represented an investment of $78.3 million. Phase II, to cost another $71.3 million, envisions the addition of 1,200 feet of quay, another 12 straddle carriers and another three cranes.

"We started operations last April, and very quickly reached near-capacity with our 1,800 feet of berthing space for super post-Panamax ships," says S. Gregory Rodgers, operations controller at FCP. The company is a 50-50 venture between Hutchison Port Holdings (HPH) Group and the Grand Bahama Development Co. "Our cranes are designed to handle the largest ships, though they don't call here at the moment yet."

The straddle carriers zipping around the impeccably clean Freeport terminal are made by Sisu, a Finnish manufacturer, and cost $750,000 each. The bright blue cranes, made by Italy's OMG, are worth $5 million apiece. Among those bidding to supply the three additional cranes are Great Britain's Morris, China's ZPNC and Korea's Hyundai. By the time Phase II is completed in September 1999, more than $150 million will have been spent on the project, says Rodgers. According to an internal company magazine, annual throughput at Freeport is expected to jump from the present 560,000 twenty-foot equivalent units to around 930,000 TEUs.

HPH is no stranger to the Bahamas. The Hong Kong-based company has already taken a 50% controlling stake in Grand Bahama Airport Co. as well as management control of nearby Freeport International Airport. Discussions are now underway to establish an air-cargo hub at the airport for relay operations alongside the nearby container port, as well as an ambitious Grand Bahama Sea/Air Business Center on 780 acres of land between the sea port and the airport.

"This will help speed air and sea intermodal transhipment for the region, with maximum security and minimum bureaucracy in a tax-free trade zone," says an HPH press release. "The center, providing a variety of warehouses and factory units tailor-built to meet specific requirements of potential users, will offer extremely cost-effective alternatives for companies selling in the U.S. and Central American markets."

In positioning itself as a transshipment hub, Freeport is clearly taking the lead over rival San Juan, Puerto Rico, which also wants to become a transshipment center for cargo moving between North and South America.

"Our biggest competitors are Rio Haina (Dominican Republic), Kingston (Jamaica) and the Bahamas, all of which are very aggressively seeking transshipment cargo," said Herman Sulsona, executive director of the Puerto Rico Ports Authority.

"We feel we have a much better infrastructure than any of the above, not only as it relates to shipping but also better telephone, electricity and water service," Sulsona said in a recent interview. "We are under the U.S. flag, so in terms of security, we feel we have the edge. Where we are behind is in actual new space, which we are working on now. On the other hand, we're a much busier port. So we'll be increasing movement of cargo through San Juan in order to capture a greater percentage of that market."

Yet San Juan has a long way to go before it can compare itself to Freeport. At the moment, transshipment accounts for only 4% to 5% of San Juan's cargo traffic -- compared to 99.9% for Freeport.

Part of the latter's attraction for U.S. companies is Freeport's abundance of land, tax incentives, lower labor costs, English-speaking workers and its proximity to major Florida ports including Port Canaveral, Palm Beach, Port Everglades and Miami.

"Our overall objective is to provide a hub port for the Caribbean," says Rodgers. "Geography is everything. We're ideally situated on the main routes between Europe, the Gulf of Mexico, Panama and the east coasts of North and South America, as well as the Caribbean. So any service running between these places could call here and feed other cargo to other parts of the world. Companies can scale their operations to meet their needs. Because they can give a better service, they actually generate more cargo."

Freeport's growing success in luring transshipment business away from other ports in Florida and the Caribbean has attracted the interest of Ceres Terminals Inc. The global port operator plans to build a container terminal at Port Canaveral that'll link up with Freeport to handle not only imported goods coming into Central Florida but also citrus, vegetable, seafood and other exports to Europe and Japan.

Asked what advantages Freeport has over Miami as a transshipment center, Rodgers doesn't hesitate. "No interference from statutory and regulatory bodies such as Customs, and no paperwork," he says. "And our labor costs are much cheaper, about 50% less than in Miami."

FCP already employs 105 people directly. When completed, the expanded container terminal will create 150 full-time positions, and almost 1,000 indirect jobs in warehousing and storage, component assembly, transportation, distribution and security services. Other developments within the Freeport Harbor area under consideration include ship and yacht repair facilities and a $10.6 million upgrading of Freeport's cruise-ship facilities, which welcome over 600,000 cruise passengers a year.

"Considering that the facility is still quite new and the staff relatively inexperienced, I'd say they're doing a first-class job," says Rodgers. "Productivity is slowly improving, and by year's end, it'll be up to 30 moves per hour per crane. Now, it's around 23."

Rodgers declined to give out information on projected sales and profits, saying only that "we don't work with standard tariffs, but with individual shipping lines." FCP's biggest customer at the moment is Mediterranean Shipping Co., though other important clients include Sea-Land, Maersk, Tropical Shipping, CMA, TNX and Cagema.

For all the activity at FCP, it's hard to get an answer as to what's being transshipped in and out of the sprawling terminal. "All we're interested in is the business," says Rodgers. "The contents of the containers do not interest me."

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