The Duluth-Superior port’s new line of business has nothing to do with ships. The Duluth Seaway Port Authority introduced an intermodal service this year that transfers shipping containers between trucks and trains. The service, which operates under the Duluth Cargo Connect brand name, is being run by Lake Superior Warehousing Co. Inc. It manages and markets the port’s physical operations for the Port Authority.
This new service offers the port a business that it can operate all year long. Shipping, after all, shuts down during the winter months.
But is there enough regional business to make this new service profitable?
The Port Authority is betting that there is. Duluth Cargo Connect’s intermodal service brings “a whole new customer to us,” says Vanta Coda II, executive director of the Duluth Seaway Port Authority. These customers are shippers that would normally use trucks to get their goods to major rail hubs in Minneapolis or Chicago.
Unlike most other intermodal “ramps,” Duluth offers warehousing and other ancillary services. “We’re in a position to not just handle the box itself, but also to handle the contents in and out of that box,” says Jonathan Lamb, president of Lake Superior Warehousing.
The Duluth Seaway Port Authority is taking advantage of the Montreal-based Canadian National Railway Co. (CN) expansion between the British Columbia port of Prince Rupert and Chicago, the nation’s busiest rail hub. That main line comes down from International Falls to Steelton Hill in the far southern reaches of Duluth.
The Port Authority tried to create an intermodal ramp with another railroad in the 1990s. But the market shifted, and the opportunity evaporated, Coda says, adding that the market needed to mature.
Canadian railroad benefit
Much of that maturity is linked to CN’s added capacity. Prince Rupert became a major international port during the first decade of the new millennium. At the same time, CN added more capacity between International Falls and Duluth, including double-tracking the line in Duluth. In 2009, CN acquired the Elgin, Joliet & Eastern Railway, whose line encircles the city of Chicago. This development allowed CN to provide a seamless move from the West Coast around the crowded Chicago hub to destinations south and east—including to ports on the Atlantic and Gulf of Mexico.
“They’re the only railroad in our network that has the capability to go from West Coast to East Coast and the Gulf as one single move,” Coda says of CN. The line from International Falls through Duluth is a key part of that transport superhighway.
Intermodal industry expert Larry Gross notes that CN has been adding smaller, secondary ramps across its network for the past few years. “Railroading is a network business. It likes volume,” says Gross, president of Colorado-based Gross Transportation Consulting and a partner in Indiana-based FTR Transportation Intelligence. “The more volume you can add, the more density,” Gross says. “You can run more trains and longer trains.” He argues that the only way railroads can grow is to take market share off of the highways. Shipping by rail from Duluth to Chicago and beyond can be cheaper than trucking.
Because railroads can’t create overall demand, Gross adds, “they have to be continually improving the reach of their intermodal network as one of the ways they can grow.” That’s what CN and other railroads want to do by adding secondary ramps. It’s a strategy that allows the railroad to add more regionally originated freight to its network. Not only is Duluth closer for regional shippers, there’s much less congestion than in Chicago or Minneapolis. “We can turn that truck much faster” than in those major hubs, says Kate Ferguson, Port Authority director of business development.
The Port Authority and Lake Superior Warehousing are betting that the region’s commodity suppliers and manufacturers will choose its intermodal service. The region’s logging companies and paper mills have faced challenges for years. “This gives them a new mode of transport, if you will, to get their products to market,” Lamb says.
A Duluth intermodal ramp also could open up new markets for regional agriculture. As customers increasingly specify non-GMO grains from a single source (called “identity-preserved grains”), shippers don’t want to ship 10,000 or 20,000 tons at a time in a boat, Lamb says. “They want to ship smaller lots where they can control quality much better and control the documentation on all of those shipments,” he says. “This gives us an opportunity to serve the Asian market.”
Following the March 28 commencement of its intermodal service, Duluth Cargo Connect has been handling imports and exports. Though Lamb won’t name specific clients, he says that Cargo Connect has been handling containers originating from or destined for North Dakota, Minnesota, Wisconsin and Michigan’s Upper Peninsula.
Among the contents those containers have carried are forest products, machine parts and subassemblies, components for door manufacturers, agricultural commodities and a variety of steel products. Ancillary services have been used by customers attached to about 80 percent of the container volume, Lamb says. Most of the containers it handled since late March were destined for or originated overseas.
With trucks and trains coming in, who needs boats? Coda maintains that the Duluth-Superior port could handle an average of 10,000 containers annually. “We have a couple of opportunities that are in the trial phase that could put us there,” he says.
Gene Rebeck is a Duluth-based freelance journalist who writes monthly for Twin Cities Business.