N.O. awaits boost in economy from Chaquita’s relocating
28th May 2014 · 0 Comments
By Susan Buchanan
Chiquita International Brands plans to move import and export activities back to New Orleans after leaving the city 40 years ago for Gulfport. Last week, Louisiana Economic Development Secretary Stephen Moret called that move the biggest, container-shipping win yet for the Port of New Orleans. Mississippi authorities feel blindsided, however, saying they never had a chance to renegotiate Chiquita’s Gulfport lease, expiring in July. The Crescent City is one of a handful of U.S. ports used by Charlotte, N.C.-based Chiquita.
“We’re looking to transition our operations during the fourth quarter of this year to New Orleans, replacing our existing Port of Gulfport,” Chiquita spokesman Ed Loyd said last week. The move represents a change in the company’s shipping configuration. “All our other U.S. ports will remain the same,” however, Loyd said. In addition to Gulfport, Chiquita has operations in Wilmington, Del.; Port Everglades, Fla.; Freeport, Texas and Port Hueneme, Calif.
The company expects to bring 30,000 to 39,000 TEUs, or 20-foot-equivalent units, of mostly fruit annually into the Crescent City, and will ship out 30,000 to 39,000 TEUs of packaging materials and other products.
“Chiquita is preparing for future expansion and growth,” said Gary LaGrange, president and CEO of the Port of New Orleans. “The company will use bigger ships that need larger, deeper channels.” Asked which facilities Chiquita was using before it left 40 years ago, LaGrange said the docks at Thalia St., Erato St. and Poydras St. “They’re now the sites of the downtown Hilton, the Convention Center and the cruise ship terminal,” he said.
In addition to importing fruit, Chiquita will ship resin for cellophane, liner board and cardboard—some of which will be Louisiana made—to Central and South America, LaGrange said. Those products are used for banana cartons and wrapping.
The state of Louisiana will give Chiquita a performance-based incentive of $18.55 per TEU, valued at $1.11 million to $1.45 million annually, to offset higher shipping and handling at the Port of New Orleans. Expected higher costs are related in part to the Crescent City’s location 90 miles upriver from the Gulf, LaGrange said. They’re also related to differences in ways that New Orleans and Gulfport handle containerized cargo, Port of New Orleans spokesman Matt Gresham said.
The state will invest $2.2 million in a port-owned distribution and ripening facility to be leased to Chiquita, Secretary Moret said. The port will invest $2 million for refrigerated-container electrical infrastructure and rehabilitation of a container freight warehouse. “Technically, the state will fund the entire $4.2 million in capital expenditures for public infrastructure up front, and then the port will reimburse the state $200,000 annually for its portion,” Moret said. “After deducting the port’s annual $200,000 capital outlay reimbursement, the state’s net cost for incentives will be $910,000 to $1.25 million annually, or $9.1 million to $12.5 million over the ten-year contract term—which will be less than the state tax revenue generated by the project.” Over ten years, the Chiquita project will also provide several million dollars in local tax revenue.
Chiquita plans to use the Napoleon Ave. container terminal for its berths, loading and unloading. Berths there are 1,000 feet long, LaGrange said. Sites for the refrigerated-container electrical infrastructure, the distribution and ripening facility, and the container freight warehouse have yet to be determined. “But we should know more in six weeks,” he said, adding “they have to be on port property.”
Berths at the Napoleon Container Terminal are 45 feet deep. The facility has six Gantry cranes, an on-dock rail, along with access to six Class 1 railroads and I-10. Meanwhile, Gulfport is authorized at 36 feet, which is too small for fully loaded Panamax and Post Panamax vessels. Because of silt, Gulfport is currently 32 feet deep. Containerized cargo at Gulfport is handled now with mobile cranes and ship’s gear or roll-off ramps. Much of Gulfport’s storage was destroyed by Katrina in 2005 and has been rebuilt. But the port needs more storage as its throughput grows. In addition to Chiquita, California-based Dole Foods Co. is a major Gulfport tenant.
As for the ripening facility in New Orleans, it will require the use of ethylene, a colorless, flammable gas. In a typical ripening operation, cartons of green bananas are loaded into a temperature-controlled room. Ethylene is released into the sealed room, generally in a concentration of 0.1%, to stimulate hormonal ripening. After being shut for about 24 hours, the room is ventilated to remove the gas. Then the room is closed again, and the temperature is controlled for several days before the bananas are ready for retailers. Fires can start in ripening rooms, but with improved technology, they’re much less common today than decades ago.
A state-commissioned study, released this month by Louisiana State University’s Ourso College of Business, predicts Chiquita’s move will create 270 to 350 jobs in New Orleans. That’s well above the jobs Chiquita’s presence has generated in Gulfport, however. Chiquita has 20 employees in Gulfport now, and its operation there requires 38 full-time-equivalent International Longshoremen’s Association jobs, or 79,000 hours annually of unionized ILA labor, according to the Mississippi State Port Authority.
In New Orleans, Chiquita will have about 40 people on the company payroll, Loyd said. “We have offered our Gulfport employees the opportunity to relocate but won’t know for several months how many will be able to make the move,” he said.
Kenneth Crier, the New Orleans-based president of ILA local 3000–which includes Gonzales to the mouth of the Mississippi River — said Chiquita’s operations in the Crescent City will require between 40 and 60 full-time-equivalent longshoremen. “Twenty to thirty of them will be part-time ILA people moving up into full-time jobs,” he said. “And 20 to 30 new longshoremen jobs will be created.” Those positions will include operators of Gantry cranes needed to unload Chiquita’s cargo, he said.
LSU economics professor Dek Terrell, who co-authored the Chiquita study with LSU’s Stephen Barnes, said new activity in New Orleans from the company’s expected 60,000 to 78,000 TEUs of imports and exports annually should generate 60 to 90 new direct jobs at the port, 50 to 80 new direct trucking jobs and a small number of positions in other shipping-related industries. The direct jobs won’t necessarily be those held by Chiquita employees, Terrell said. “This level of sustained activity supports another 135 to 180 indirect and induced jobs, yielding a total of 270 to 350 new Louisiana jobs,” he said.
Louisiana officials have been talking with Chiquita for awhile but the Mississippi State Port Authority was left in the dark about the firm’s intentions. On May 14, the MSPA learned that Chiquita wouldn’t renew its Gulfport lease expiring on July 15. “Over the last 90 days, the Port of Gulfport has gone to great lengths to determine whether Chiquita planned to accept the option to extend its lease,” MSPA CEO Jonathan Daniels said in a May 14 release. Mississippi’s port authority was told that Chiquita was assessing future business strategies. “We were never given the opportunity to negotiate a new lease,” Daniels said. “At the same time, we were preparing to spend $29 million on a new Chiquita terminal that they helped design.”
Meanwhile, Gulfport will get a new tenant that could spawn up to 100 new jobs. Houston-based McDermott International will build a 50-acre spool base facility, serving customers laying pipes in the Gulf’s offshore oil and gas sector, company spokeswoman Andrea Burnley said last week. Construction of that facility should start in Gulfport in third quarter 2015, with operations likely to begin in early 2016, the company said this month. Workers at a dedicated dock in Gulfport will reel pipe onto McDermott’s vessels for installation offshore.
In a blow to Louisiana, McDermott last summer announced it was shutting its Morgan City fabrication facility, along with a marine base in nearby Amelia, which together employed 350 workers. McDermott said it would move those operations to Mexico.
As for Chiquita, its global headquarters will shift from Charlotte to Dublin, Ireland after its $1 billion merger with fruit distributor Fyffes, which is expected to close by year-end, Loyd said. That union will create the world’s largest banana company, surpassing Dole Foods. Chiquita’s predecessor, United Brands, owned Fyffes until 1986. In May, Chiquita reported a $25 million loss for first quarter 2014, citing dry growing conditions in Central America.
This article originally published in the May 26, 2014 print edition of The Louisiana Weekly newspaper.