The Delaware River, already a major route for cargo, is poised to become even more competitive
| October 31, 2023
The Delaware River, long a key commercial artery and a vital route for shipping goods in and out of the region, is on the cusp of a transformation.
With the completion in December 2022 of a $480 million dredging project to deepen the river’s main channel, it can now handle bigger vessels and more cargo, and is set to compete with ports along the East Coast for global shipping business.
The investment, made mainly by the federal government and the Port of Philadelphia, caps a more than three-decade push by state and local officials.
Their goal: to prepare the river for the era of increasingly large vessels expected to serve global shipping routes, especially those traveling from important Asian markets through the Panama Canal
Without a channel deep enough to handle those ships, state, port and shipping representatives feared that the river, with its 90-odd-mile sail from the sea to the Port of Philadelphia, known as PhilaPort, would become for the largest, most efficient vessels a hard-to-traverse backwater.
Whether that gambit pays off, and leads to an economic surge on the Delaware River, is a question that only time can answer, as shipping companies and their customers evaluate the efficiency and effectiveness of moving goods by river into the New York-Philadelphia region.
But any transformation would add to what is already a diverse, distinct and thriving commercial engine that centers on the river and the more than half-dozen ports dotting its banks.
Whether it is fruit from Chile, Kias or Hyundais from Korea or Mexico, construction materials, crude oil imported and refined on the river banks, or scrap metal headed abroad for recycling, the Delaware River delivers goods that feed and clothe consumers, supports businesses, helps manufacturers get their products transported abroad and drives the region’s economy.
PhilaPort estimates the economic impact of the port alone at $1.6 billion, and the impact of the river’s combined maritime industry at $18.2 billion, with 67,000 jobs in the region tied to the industry.
And traffic on the river continues to grow.
Last year, the number of ships that sailed on the river — 2,398 — increased by 4 percent from the year before, according to data from the Maritime Exchange for the Delaware River and Bay.
Ships carrying goods in metal containers, one of the fastest-growing sectors and perhaps the one with the most to gain from the dredging, accounted for about a quarter of those vessels.
This year, from January to September, the number of vessels carrying containerized imports grew by nearly 10 percent over the year before, and container exports increased by 14 percent, the Maritime Exchange said.
Yet even as the global shipping sector reshapes the river’s container market, the energy sector’s use of the river also is changing, as new energy forms rise and older ones decline.
“Historically, the Delaware River has always been known as an oil port in the mid-Atlantic,” mainly imports, which have been a major commodity on the river for 40 years, said Lisa B. Himber, president of the Maritime Exchange for the Delaware River and Bay, which compiles data on vessels movements on the river.
But the number of petroleum vessels on the river has dropped as area refineries have closed, cutting the number from eight in the past to three now.
“Oil imports and crude oil imports have certainly gone down,” Himber said, noting that the number of vessels carrying petroleum in or out of river ports fell by 6 percent over last year, to 220.
“Gas exports, on the other hand, have really exploded,” mainly driven by gas extracted from Marcellus shale and the completion of the Mariner East pipeline system, which brings gas into the Marcus Hook Terminal on the west side of the river, she said.
The 240 ships on the river carrying gas through the end of September this year represents a 15 percent increase over the same period last year, and the terminal expects another 10 percent increase in 2024, she said.
LNG exports eyed
Other new energy producers are also looking to harness the efficiencies of river transportation.
Two ports that would handle liquified natural gas are in the works.
The LNG terminal in Gibbstown, N.J., is still planned, despite significant opposition. And the Philadelphia Liquefied Natural Gas Export Task Force is expected to release a report in November with plans for an LNG terminal on the Pennsylvania side of the river.
New Jersey is also looking to make the Delaware River a big player in its ambitious plans to generate vast amounts of the state’s electricity from wind turbines off the Jersey Shore.
The state is spending more than $500 million to build the New Jersey Wind Port in the Lower Alloways Creek in Salem County, in the shadow of the three nuclear electricity generating plants operated by PSEG.
Calling it the “the nation’s first purpose-built offshore wind marshaling port,” the state says it will provide marshalling, manufacturing and logistics services to offshore wind developers working on the state’s own wind projects and those of neighboring states.
The location is attractive, not just because the river channel now is amply deep, but because turbine towers — which are hundreds of feet long — are best transported to the offshore site in an upright position, and there are no bridges on the 50-mile sail to the open sea that would impede the movement.
About 40 miles north of the wind port, also on the Jersey side of the river, is the Port of Paulsboro, which underwent a $225 million upgrade in 2017. It has emerged as a key part of the region’s offshore wind supply chain.
With state assistance, the German manufacturer EEW American Offshore Structures is building a manufacturing hub to build monopiles — the massive cylinders that form the wind-turbine’s foundation.
Even the Philly Shipyard, a short distance along the river from the port of Philadelphia, has benefited from the offshore wind sector.
In August, President Biden paid a visit to celebrate the building there of a $246 million vessel designed to work on the installation of undersea wind turbine foundations, commissioned by the Great Lakes Dredge and Dock Corporation.
The company, and shipyard, are “stepping up to help meet the clean energy goals,” Biden said.
“Just a few years ago, this shipyard was down to a handful of workers,” he said. “It’s coming alive again.”
Biden made news again in Philadelphia when he announced ambitious federal funding for seven new hydrogen hubs nationally.
The Mid-Atlantic Clean Hydrogen Hub, which will primarily be located in Delaware and stretch into Southeastern Pennsylvania, is set to receive up to $925 million from the feds. A hydrogen hub doesn’t refer to a single production facility; rather it encompasses all of the infrastructure needed to consume, produce, store, and transport hydrogen and any byproducts, all of which is likely to have impacts on the river.
The full diversity of the river’s cargo load can be seen in the work of the half-dozen or so smaller ports along the river’s banks.
The Salem Terminal, which specializes in handling sand and gravel, also handles dry bulk goods — unprocessed materials used in manufacturing that are shipped loose, rather than in containers.
Thirty-five miles north, the Balzano Marine Terminal at the Port of Camden handles cocoa beans, wood products, steel products and furnace slag, iron ore and scrap metal.
The two terminals are among five operated by the South Jersey Port Corp, which in 2022 imported 1.8 million tons of cargo, about two-thirds of which was steel and the bulk of the remainder was cement.
The largest category of exports, scrap metal and other recyclable materials, accounted for about 60 percent of the 1.37 million goods exported through corporation ports, with sand and cement the next largest exports.
The $225 million that the Port Corp invested in the Paulsboro terminal in 2017 created the first new port to open on the Delaware River in 50 years.
Since its opening, according to the Port Corp, the port has handled more than four million tons of imported steel slabs and operator Holt Logistics Corp. says it now handles two million tons a year.
The big dog on the river, however, is PhilaPort, which handles the biggest ships and has the most to gain from the river’s main channel.
The port handled 7.4 million tons of cargo in 2022, a 4 percent increase over the year before.
About two-thirds of that came or left in containers, the port’s largest sector of business and one that has enjoyed an average annual increase of 8 percent over the last decade, according to the port.
Growth slipped slightly in 2022, in the turbulent post-pandemic logistics market, but port officials are bullish about the future.
“We’ve had growth in all our categories, it’s just you’re not getting the big number of growth,” port spokesman Dominic O’Brien said. “It’s not huge growth as it was.”
The port promotes its services by touting a unique selling point of “velocity, proximity and flexibility.”
The pitch argues that the port provides a gateway with rail and road links that can easily get goods into a vast consumer market, stretching from Norfolk to Boston and beyond, including the New York markets.
More than 50 percent of the U.S. and Canadian population is within a two-day drive, the port says. And it argues that the port’s location and efficiency enable shippers to get goods off the ship, out of the port gates and on to their destination faster and more smoothly than bigger ports along the East Coast, especially the Port of New York and New Jersey.
“We’re very competitive,” said Michael K. Pearson, PhilaPort chairman, in a recent promotional video that highlighted the port’s container traffic growth.
While the port currently handles about 750,000 containers a year, an increase to 1.5 million containers a year is “not out of the question,” he said, noting that the port is about to invest in a new berth.
In August 2022, the federal Infrastructure for Rebuilding America program awarded the port $49 million to help build a new $130 million multi-use berth in the port’s auto handling terminal — the first new berth in the port in 50 years.
“When given the opportunity, we can go toe to toe with just about any industry,” Pearson said.
Panama Canal expansion
The need to deepen the River Delaware’s channel — adding five feet to the depth and taking it to 45 feet — stemmed from the steady rise in the size of container ships circling the globe, as companies moving manufactured goods sought to reap economies of scale from larger vessels carrying more containers.
While the newest vessels in 1980 could carry 4,000 to 5,000 TEUS (twenty-foot equivalent unit, the shipping metric used to measure for vessel size), new vessels today can typically carry 15,000 TEUS, and some up to 18,000 TEUs, according to Marine Insight.
The increase led to the expansion of the Panama Canal, which opened in 2016 with a new depth of about 50 feet and was expected to — and did — send far larger container ships from the Far East through the canal to the East Coast.
The Delaware River dredge project largely concluded in 2020, but the corps noticed several stretches with rock outcrops that had still to be removed, delaying completion until last December.
In preparation, PhilaPort has spent more than $550 million to transform its container operation into a modern, smooth-running container port.
The port added three Super Post-Panamax cranes — so called because they can handle ships too large to pass through the old Panama Canal.
The port also strengthened the dock, developed a $70 million refrigerated warehouse on the container terminal and in 2021 opened a $42 million, 200,000-square-foot building a mile from the terminal — a “food-grade warehouse” — that could provide it with support space.
The investments mean the port can now handle ships up to the size of 14,000 TEUs, providing the port with plenty of room to grow.
The largest vessel handled by the port, a 12,200 TEU vessel operated by the MSC container shipping company, came through in August 2018, O’Brien said.
Four years later, those improvements seemed to have done the trick in attracting new business: The port in August 2022 received the first ship in a service bringing containers directly from Asia — the holy grail sought by the port.
“The port is a huge asset for Pennsylvania, as well as our local and national supply chains,” then-Gov. Tom Wolfe said at the time. “Today’s maiden call marks a new chapter for PhilaPort and our commonwealth, which will bring a big boost to the port and our economy here in Pennsylvania.”
But the shipping line, Wan Hai Lines, could not sustain the service, which brought goods from China, Vietnam and Taiwan, and has since terminated it.
Port officials say the investments have in turn sparked a series of non-port private investments that could provide a distinctive element for port clients.
These include a 10 million-square-foot warehouse project by Hilco Redevelopment Partners on the old Sunoco site in Philadelphia, and a 2,400-acre warehouse development by North Point Development on the old Fairless Hills steel plant in Lower Bucks County, O’Brien said.
“I would challenge you to find any other port in the country that has 25 million square feet of new Class A warehousing within 30 miles of the port,” he said, adding that the port is hoping that “a lot of the big international shippers will step in with big million square foot buildings.”
Strength in diversity
Much of the river’s commercial strength comes from the wide variety of goods it handles, from the coated paper, pulp and other forest predicts handled by the Philadelphia Forest Products Center to the cocoa beans that pass through Pier 84 — the only product it handles.
The port in 2019 opened the Philadelphia Automobile Processing Facility, a $110 million, 155-acre vehicle processing center that brings in Hyundais, Kias and other vehicles from countries, including Korea and Mexico. In 2020 it handled 221,000 vehicles.
The port is also distinct in part for its large share of cold-temperature business.
While “dry” containers, which carry non-liquid goods, accounted for 29 percent of the port’s containerized goods in 2022, another 36 percent of the cargo came in refrigerated containers, carrying goods that require a temperature-controlled environment, such as frozen meat, and fruits and vegetables, according to the port.
Much of that is driven by Latin American imports.
The largest share of imported goods through the port — 41 percent — came from South America, and the second largest — 23 percent — came from Central America, according to port data. Both are key providers of fruit and vegetables.
A new port
Thirty-five miles closer to the sea than PhilaPort, the Port of Wilmington — the second-largest container port on the river — also has a strong focus on refrigerated goods, and fruit and vegetable imports.
As the mid-Atlantic distribution hub for Dole Fresh Fruit Company and Chiquita Fresh North America, the port is the “#1 banana port in North America,” according to the port website.
It also handles an extensive array of grapes, apricots and other fruits from Chile, along with apples and pears from Argentina, grapes from Peru and kiwi fruit from New Zealand.
Yet the port’s turbulent recent history shows the difficulties of trying to tap into the expected benefits of the dredged river channel.
After years of the port losing money, the state of Delaware, through the Diamond State Port Corporation, privatized the port in 2018, signing a 50-year-lease with a company, Gulftainer, which pledged to transform the port.
Part of its plan was the development of a new $400 million port two miles up the river at the Edgemoor site — a long-time ambition of Delaware — that would offer more container handling space and greater berth depth than at the Port of Wilmington.
A new port at Edgemoor would be easily accessible for big ships with the newly dredged channel and could compete with the Port of Philadelphia and other East Coast ports, the state believed.
But on July 31, Gulftainer suddenly abandoned the Port of Wilmington, with the Edgemoor project untouched.
The company said in a release put out by the port that the “evolved economic conditions and future financial viability did not meet our threshold for continued investment.”
A new company, Enstructure, a Wellesley, Mass.-based logistics and infrastructure company took over operation of the port, saying it will “maximize economic development” of the existing port.
The new operator said it would also work to work to bring the “bring the potential Edgemoor development project to life.”