A SUPERIOR FACILITY
Setting records at Pier 6 is nothing new. The pier began operating in 1963 as the largest coal transload facility in the Northern Hemisphere and the most technologically advanced in the world. It remains so today. In 1999, the pier became the first facility to load 1 billion tons of coal. Since then, it has handled 200 million more.
At Norfolk Southern’s celebration of the pier’s 50th anniversary in September, CEO Wick Moorman credited the ingenuity and boldness of those who constructed it. NS predecessor Norfolk and Western Railway committed $25 million, the equivalent of $193 million in 2013 dollars, to take advantage of a growing overseas demand for U.S. metallurgical, or met coal.
“The people who built this pier didn’t make small plans,” Moorman said. “They had vision. They had foresight.”
Over the last five years, he noted, NS has invested around $43 million to upgrade the facility, including a major overhaul of its massive tandem coal dumpers and twin shiploaders. “It’s an indication that we believe in the future of this pier as well,” Moorman said. “We’re on our way to making sure it dumps 2 billion tons.”
That does not mean the railroad won’t face challenges. In the universe of export coal – affected by everything from weather, economic conditions, and global coal competitors – business historically has moved in feast and famine cycles. For example, a primary reason behind building Pier 6 was to supply Japan’s booming steel industry with coking coal. By the early 1980s, however, Japanese steel producers had shifted to Australian and Canadian coal. In a show of resiliency - and a reflection of Pier 6’s unique value in the global marketplace – NS shifted its marketing efforts to European and South American steel markets.
“To completely lose your customer base like that could have been devastating, but instead of folding the tent, NS redirected the pier to these other markets,” said Mark Bower, NS group vice president, export, metallurgical, and industrial coal marketing. “That’s something that ought to be in a Harvard Business Review case study. To me, that’s the huge success story of Pier 6.”
TAPPING NEW MARKETS
Since 1990, total annual coal tonnage moved through Pier 6 has ranged from an all-time high of 39.5 million tons to a low of 9.9 million. Presently, the market for U.S. export met coal is weathering economic doldrums in Europe and a drop in demand attributed to an abundant supply of low-cost Australian coal. In response, NS has moved aggressively to find new business opportunities for Pier 6, both for met coal and for thermal coal burned by utilities to generate electricity.
“At the end of the day, we’re working hand-in-hand with producers to find a home for U.S. coal,” said Kristopher Sandlin, NS system manager coal transportation. Sandlin works with coal producers and receivers to coordinate the flow of coal moving on NS trains from the mines to Pier 6.
During the past couple of years, Asia has emerged as a new market for met coal, while Europe has become an outlet for thermal coal. Through the first half of 2013, China has been the largest receiver of met coal from Pier 6, while Turkey and Morocco are top receivers of thermal coal.
To help secure business, David Lawson, vice president coal, said NS pitches Pier 6’s unique competitive advantage – its ability to precisely blend coal to meet steelmakers’ demanding specifications. Steelmakers have special blends to create their brand of products, and the pier handles more than 700 distinct classes of high-quality met coal from Central and Northern Appalachia, including more than 80 from one producer.
Pier 6 is the only coal transload facility capable of blending coal in units as small as a single railcar load. Lawson describes it as blending by the teaspoon.
“Our blending capability is one of the things that differentiates Lamberts Point from competitors and increases its value in the world market,” Lawson said.
The combination of the pier’s blending ability, its access to high-quality coals, and its location on the East Coast’s deepest shipping harbor are all reasons to be optimistic about its future, he added.
“Pier 6 is fundamental to our core business, it’s part of our heritage, and it’s part of our outlook,” Lawson said. “This asset is going to be around for a long time.”