The S.C. State Ports Authority hopes to attract more retail distribution centers, like the one Walmart opened in 2022 in Ridgeville, to drive more cargo to the Port of Charleston. (Illustration courtesy of Walmart)
COLUMBIA — The State Ports Authority wants to cut labor costs at its Leatherman Terminal so more container ships will be willing to use the $1.5 billion facility that’s operated by an all-union workforce.
The initiative is part of the authority’s larger effort to rein in costs and boost cargo as the Port of Charleston and other U.S. seaports “are going through a reset,” Micah Mallace, the authority’s president and CEO, told the Senate Transportation Committee on Wednesday.
The authority is more than 5% under its budgeted outlook for containerized cargo through the first eight months of this fiscal year. Charleston’s port has also lost ground to the rest of the port industry, with market share dropping about 2% since 2019 compared to other Southeast ports.
“The industry is challenged right now,” Mallace said, adding the authority is looking to rebuild momentum at a time when its costs and rates are higher than its competitors.
SC Ports shifting focus to growth with immediate benefits, new CEO says
“In order to respond to the place in the cycle where we are necessitates a far more aggressive commercial approach, necessitates cost savings and doing the hard work to set us up for a much brighter future” he said.
The Leatherman Terminal in North Charleston is among the biggest concerns.
It is the only terminal at the Port of Charleston where all jobs are filled by members of the International Longshoremen’s Association.
Those union workers are paid more than their counterparts at other terminals, most notably the Wando Welch Terminal in Mount Pleasant.
Container lines have balked at paying higher fees, leaving Leatherman woefully underutilized.
The first phase of the terminal opened in 2021 with an annual capacity for 700,000 cargo containers. Through the first eight months of this fiscal year, Leatherman has handled just 51,807 containers measured in 20-foot increments. That is less than 6% of all cargo that has moved through the port.
“The Leatherman Terminal has a cost structure that is different than other terminals in the South Atlantic,” Mallace said. “We’re working with our partners to address that now.”
The authority declined to say how much more expensive Leatherman is for shipping lines, citing competitive reasons.
Ken Riley, local president of the dockworkers’ union, said he is negotiating Leatherman’s labor costs with the authority but declined to give details.
SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
“We are looking at ways to right the ship, so to speak,” Riley said.
Leatherman is not the only concern as the authority looks to regain its footing.
Mallace said the port needs to increase its cargo base to get back to outperforming the national average — something Charleston regularly did until the pandemic. Mallace said it will take two years to regain above-market volumes on an annual basis.
A key strategy for growing cargo, he said, is attracting more retail distribution centers like the Walmart operation in Ridgeville that moves products from the port to about 850 Walmart and Sam’s Club stores.
“We need to keep the ships coming, and to keep the ships coming, we need distribution centers,” said Sen. Larry Grooms, a Berkeley County Republican and chairman of the transportation committee. “We need the retail. That wasn’t always a focus, but it is now.”
Mallace said he is bulking up his sales staff to find new prospects, adding “the more people we put in front of our customers, the more opportunities we will unearth.”
The authority also is willing to move dollars from long-term infrastructure projects to customer deals that can more immediately boost cargo.
“We have to deploy capital in new ways with a core focus on growth,” Mallace said.
One capital project that’s drawn scrutiny from state lawmakers — the Navy Base Intermodal Facility — is still making progress, Mallace said, but an opening date has not been scheduled.
“The actual terminal itself is largely delivered,” he said of the rail yard adjacent to Leatherman, where cargo containers will be moved between trucks and trains operated by CSX Corp. and Norfolk-Southern. “The infrastructure to get both railroads into the terminal is really what still needs to be delivered. That infrastructure is very complicated.”
It involves realignment of roads in the neighborhood near the terminal as well as water and power lines that have had to be moved and rebuilt.
“What we are committed to doing is delivering this facility when the infrastructure is right, and when our customers need it,” Mallace said, adding the authority is still negotiating operating terms with railroads that will use the project, which received $550 million in taxpayer funds.
“We will be coming back quickly with operating agreements in place and with a final timeline for the infrastructure delivery,” he said. “That is something that we’re committed to, and we’re making great progress on.”
While Leatherman’s cost structure is the biggest labor issue, Mallace said the authority is looking to trim other employment costs too. For example, the authority has rolled out an early retirement program that aims to reduce expenses over the long term.
Leatherman, which opened in 2021, was almost immediately hit with labor problems when the dockworkers’ union said it had the right to all jobs there because of a contract agreement with shipping lines. A court battle ensued and, in 2024, the U.S. Supreme Court sided with the union by declining to hear the case.
SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Courtesy of South Carolina Daily Gazette
