NEW HAVEN — “Fifteen years ago, the largest steel coil that was being brought off a ship was probably 15 tons. Today, you’re bringing in 30- to 35-ton coils of steel. The same thing with the heavy lifts, the cranes on the ships have gotten larger and larger, so port facilities have had to change to be able to handle those,” explained Gateway Terminal President James Dillman, an industry veteran and new hire by the New-Haven-based terminal operator. “It’s the same way with the container industry. Today the ships that are calling at container ports are almost three times as large as the largest ship was 15 years ago.”
A highly publicized agreement for Connecticut Port Authority, Ørsted and Eversource to jointly invest $93 million in New London’s State Pier is still pending, but Gateway and its parent company Enstructure LLC took over operations at State Pier on May 1.
Founded in 2015, Enstructure, a “terminals and logistics infrastructure” company based in Wellesley, Massachusetts, operates terminals in Memphis, Tennessee, Winona and Red Wing, Minnesota, as well as New Haven, and now New London.
I was sitting in the employee kitchen of Gateway’s New Haven office speaking with Dillman. It was the only room available since the conference rooms were all full. Joining us were Matthew Satnick co-CEO and chairman of Enstructure, and Philippe De Montigny, co-CEO and founder.
As Satnick explained it, adding New London to Enstructure’s portfolio was a strategic move to increase the company’s geographical capacity to deliver cargo.
“It’s all about your geo-market reach,” said Satnick. “When you look at New Haven, sort of simplistically, you say you’re 40 or 50 miles from New London, but from a geo-market reach perspective that’s pretty meaningful if you see that Rhode Island and Massachusetts would not be serviced from New Haven.”
Enstructure’s broader vision of clustering terminals in a region made New London a logical choice that had the added benefit of increasing knowledge of the market and giving customers more holistic options for landing cargo closer to the “last mile” of delivery, said Satnick.
A deal with offshore wind developer Ørsted to use State Pier also dovetails with the business backgrounds of Satnick and De Montigny.
“I have a background in renewable energy and Matthew did a lot of work on the investment side in the energy sector and I was in renewables in the biofuels business,” said De Montigny. “The opportunity in offshore wind given our backgrounds in renewables and energy sort of coming full circle — tying logistics with the renewables — it’s a great opportunity.”
According to Satnick and De Montigny, after talking with Ørsted and Eversource, they realized the potential for “through-put,” or volume of cargo going through a terminal, would be far greater than the conventional cargo model and simply an extension of their cargo business.
“When you look out for the next 10, 20, 30, 40 years, it’s hard to find a market that’s uncorrelated with sort of the bigger macroeconomic sort of picture that has growth, regardless of what’s happening and sort of the overall economy. When you find those opportunities, from our perspective, that’s very exciting,” Satnick said.
“There’s a completely different growth trajectory in offshore wind than there is in any other conventional cargo market that we touch,” he said.
According to De Montigny, accommodating the wind turbines — each the height of the Chrysler Building City — as well as the outer casings of the towers, called nacelles, State Pier needs to be renovated and reconfigured from its two “finger” wharfs to one long quay that can accommodate much larger ships.
But even without assembling turbines, the pier needs to be fortified to accommodate much heavier loads, Dillman said.
But finding the capital to upgrade the port “is very, very difficult to do to be able to get the return that you need,” he said, and the financial support offered by the offshore wind industry to upgrade State Pier presented a unique opportunity.
“When New London has the opportunity to go into a niche business, like the offshore wind, and to be able to get the influx of this capital into a port facility, to be able to create an extremely dynamic facility to be able to be used long term — that capital would never be able to be found anywhere else to be able to support the industry, it just it just wouldn’t happen,” said Dillman.
Satnick agreed, ““I think Jim hit the nail on the head — when you when you have 100 million dollar upgrade to an asset. The beauty of that is New London keeps that in perpetuity — that is an unbelievable asset, whether the offshore wind industry is active in 20 or 30 years or you have a completely different opportunity for that structure that doesn’t exist today — whether that’s containers, whatever that is.”
New Haven and New London
Regarding the port authority’s choice of Gateway to operate State Pier, Satnick said Enstructure and Gateway put together a strong proposal that included conventional cargo and offshore wind options, “recognizing that if the offshore wind industry or the opportunity did not materialize for whatever reason, we were still committing to a meaningful step up in monetary commitments to the port authority.”
It’s a misperception, he said, that New Haven was going to cannibalize New London’s shipping business. It makes no sense, said Satnick “when you think about the financial commitment that we stepped up to, as well as the reality of the customer, that dictates which port they’re going to call and where that product is going to land — and that’s based on a marginal cost curve of logistics and where it’s going,” he said.
Satnick acknowledged that one customer, previously shipping cargo through New London, had moved its business to New Haven since Gateway began operating State Pier, but he explained that the cargo was destined for Bridgeport. “They did this because they wanted to move product and advantage themselves, which by the way, we were still paying the same amount to lose money in New London. It doesn’t benefit us.”
The takeaway, according to Satnick, is that they cannot control what customers do or where they want to go.
“It’s unfortunate, because we work hard, we eat what we kill, in terms of activity. There are no handouts for us. We have to invest, we have to take risks and sometimes those risks turn into great opportunities and other times, we aren’t able to monetize. New London is still an area where we’ve taken a ton of risk and put a lot of capital out.”
He also said one vessel carrying steel coil recently chose to offload in New London.
Timing and exclusivity
Ørsted and Eversource have said they will need exclusive use of the pier during turbine assembly campaigns, but it’s possible there will be extended gaps in activity.
Satnick said Gateway could fill in with conventional cargo activity but “flipping the switch” will be difficult because arranging for the transition to shipping customers requires extensive lead time.
“I think giving us a year of visibility on the longer term shutdown is important,” he said. “You think about just your customer supply chain management to go out and market and to get people to commit — it depends on the chart of that inventory and what type of equipment is required to handle it.”
With the growth of the offshore wind industry and the number of projects, it is possible that other vendors besides Ørsted will fill in the gaps, should there be any, he said. “And whether that’s with our partners, or if they decided they want to sublease that to another offshore wind developer, that’s something that obviously, we would entertain.”
De Montigny said there was a misperception that offshore wind would shut down any other cargo for the next 20 years.
“That is not the case. We are incentivized that if there’s a lull in activity, we are incentivized to go and get other business and bring it to the port. And also, we have the infrastructure upgrades that will enable us to do other things potentially — whether it be containers, or other types of activity that you can’t currently do, because you’re just dealing with two narrow finger piers,” he said.
Satnick also said there was a misperception that New London had been handling all kinds of cargo for years and the through-put had been massive.
‘Nobody really understands what is happening right there today, which, unfortunately, is not a lot,” he said.
Dillman said it was difficult for smaller ports to compete for the imports, like steel, copper and lumber — commodities based on world market fluctuations.
“Whether it has to do with terrorists, whether it has to do with mine shutdowns that are taking place down in South America, whether it’s floods or forest fires, all of these things really drive what takes place with the important export of these of these various commodities. So on one day, it may be more economically sound to go ahead and import, say steel from Turkey, or, or copper from Chile. But then the next year, it may be more economical to bring things in from say, Australia or Indonesia or someplace like that, where New Haven or New London will have a very difficult time competing in that type of market,” he said.
One of Gateway’s objectives is to bring commodities through its ports to keep business steady despite fluctuations, he said.
“These are things that we have to look at all the time. I think the biggest thing is we’re Connecticut-based, so if at the end of the day, we do have some of these fluctuations that are taking place with New London, it’s our objective to make sure that they continue to come in through a Connecticut port, and that we continue to try to keep Connecticut’s citizens employed and working as much as we can,” he said.
Economic factors, big construction
“When you think about the health of a port, it’s really a function of how much economic activity takes place within a certain radius of that port, whether it’s manufacturing, construction, you know, industrial activity,” said De Montigny. “I’m not talking about the big container ports that have containers that go out across the country, but just ports like New Haven, New London and Providence to some extent.”
Offshore wind represented an “ongoing construction campaign on a massive scale,” that will bring economic activity, he said. “And so if you have 200 of those going, you know, 100 miles from where you are, that’s a building boom — that’s a major building boom. That’s a great thing for a port that happens to have what the offshore industry looks for, which is this infrastructure, no overhead construction, and the deep water channel, because of sub base up in Groton.”
Cargo on the docks is usually charged by the metric ton, but for offshore wind, fees will be calculated on an hourly basis, Satnick said. There will be footage and dockage fees, but “in terms of our core compensation, it comes from the hours we churn and the work we do in physically.”
The vanes, nacelles and other pieces could take a lot of time to handle because of their monumental sizes and shapes, said De Montigny.
Satnick said New London’s proximity to the offshore wind leases represented a huge opportunity to “be captain to a market that didn’t exist or hasn’t existed.”
“Offshore wind has the potential to be a massive sort of ‘knock-on’ effect as a new industry coming into a state where the economic impact of that is not just the pier, but the infrastructure that can get built that then triggers supply chain, given the proximity to that port, is massive.”