The Port of Virginia is more of an economic force than ever but it faces significant hurdles from trade disputes and a slowing global economy, according to one Hampton Roads economist.
“We can always debate the size of the impacts, but I think there is a significant amount of consensus to say that Virginia would be worse off if it did not have the port,” said Bob McNab, Old Dominion University economist and director of the Dragas Center for Economic Analysis and Policy.
The Port of Virginia’s economic footprint has grown significantly over the past five years, according to a new study from the College of William & Mary. The study, which is based on the port’s operations from July 2017 to June 2018, quantifies how the port not only moves cargo but transports Virginia products and delivers materials to many Virginia businesses.
The port made gains in several economic indicators compared with the 2013 fiscal year, when the previous study was completed. It moved 22.1 million tons of cargo during the 2018 fiscal year, an increase of about 23% from five years prior.
The port contributed $39.3 billion to Virginia’s gross state product or 7.5% of its total economic output, marking a 28.7% increase from 2013. It supported close to 400,000 jobs or 9.5% of Virginia’s resident employment, which was a 6% jump from the previous study.
The port is more than the visible movement of cargo, McNab said. It also encourages businesses to relocate to Virginia and allows for their products to be exported to the rest of the world. The state has invested in expensive port infrastructure projects, like a $350 million plan to deepen the shipping channels to 55 feet by 2024.
“The Port of Virginia is growing and the investments we are making are yielding world-class results,” Virginia Port Authority CEO and Executive Director John Reinhart said in a news release. “We are having positive effects on the Virginia economy and the goal is to be able to drive economic growth for decades to come.”
But, competition is much stiffer than it was in 2013, McNab said. Ports in New York, Savannah, Georgia and Charleston, South Carolina, have also invested in high-dollar infrastructure projects.
“Other states have recognized that ports are economic engines,” he said.
The Port of New York and New Jersey still has the largest East Coast market share by far, measured by loaded 20-foot equivalent container units, according to the American Association of Port Authorities. However, that share has dipped in recent years, from 40.7% in 2006 to 36.8% in May.
The Port of Savannah has grown the most over the same time period, jumping 8.7% to a 26.3% share. Virginia’s market share has remained all but flat during that time span, hovering around 17%.
Still, McNab said that stagnation doesn’t take away from the port’s growth in operations and container traffic. Whether Virginia and the rest of the shipping industry can continue that growth is another question entirely.
“My concern is not about port operations but the slowing global growth in trade,” he said.
The global economy grew by just 3% in 2019, according to October projections from the International Monetary Fund. Much of the slowdown is fueled by trade disputes involving President Donald Trump, McNab said. In addition to a continuing trade war with China, the Trump administration threatened tariffs against Brazil, Argentina and France on Dec. 2.
As trade activity slows, ports might soon be taking business away from one another, McNab said.
“It’s a shared challenge for everybody,” he added.
The tariffs and a strong American dollar were negatively affecting agricultural exports, Reinhart said in a report on October cargo traffic.
“The increased cost overseas of American-made goods creates a challenge for exporters,” he continued.
However, Reinhart said port leaders see the problems as short-term issues.
The study was commissioned by the port authority and authored by William & Mary faculty members Roy Pearson and K. Scott Swan.
Trevor Metcalfe, 757-222-5345, trevor.metcalfe@insidebiz.com