Resins are the unchallenged king of the Houston container market, but there are millions of reasons that could change in the years ahead.
The population of Houston’s metropolitan area grew to some 6 million in the last census, placing it fifth nationally, just behind Dallas-Fort Worth. Between 2000 and 2010, the 10-county area added 1.2 million people, more than the total metropolitan populations of Buffalo, N.Y., or New Orleans.
More people mean more consumer purchases. Houston’s retail sales surged 13.2 percent last year, fueling a trend that is starting to change the mix of cargo through the Gulf of Mexico’s largest container port. Houston handles about two-thirds of all container traffic moving through the Gulf region.
Industrial resins shipped overseas for processing into plastic goods and other products dominate containerized exports through the Port of Houston. Its position in the nation’s largest petrochemical center provides a ready supply of this commodity.
As the nation’s population center shifts southwest, the Port of Houston hopes to balance its strength in exports with increased imports of retail goods for the local market, as well as Dallas, Kansas City, St. Louis, Chicago and other cities via intermodal rail or truck.
“In 2002, only 9 percent of our import volumes were from Asia. Last year, more than 32 percent were from Asia,” said John Moseley, the Port of Houston’s general manager of trade development. “The largest driver of that is the population growth in Houston and other major cities in Texas and the South in general.”
The port is working with Union Pacific and BNSF railroads to market north-south intermodal services between Houston and the region between the Mississippi River and the Rockies. Houston has 96 intermodal trains in and out each week. Sixteen are to or from Chicago, and four of those are nonstop express trains.
Kansas City Southern Railway is working with CenterPoint Properties to develop CenterPoint Intermodal Center, an 800-acre logistics park 35 miles southwest of Houston. The facility will serve as an inland port for a north-south corridor extending from the Port of Lazaro Cardenas, Mexico, through deep into the Midwest for international and domestic freight.
Houston’s port facilities and large local market will mesh nicely with CenterPoint, said John Talhelm, senior vice president at Jones Lang LaSalle, the industrial real estate firm marketing the project. He said the new inland port would be a hub for imports moving through the port as well as for rail shipments from Mexico for shipment north or to local customers such as an equipment plant Caterpillar is building in Victoria, Texas.
Growth in Houston’s growing retail imports has paralleled development of import distribution centers by retailers such as Wal-Mart, which has a 4 million-square-foot facility in nearby Baytown, and Home Depot, Ashley Furniture and Rooms To Go. Home Depot chose Houston for the first of the rapid replenishment centers it has built across the nation.
Grubb & Ellis said in a report at the end of 2010 that industrial real estate in Houston “weathered the recent recession better than most of the major metropolitan areas around the country,” and that the port’s growth “will spur demand for warehouse space going forward.”
Although population growth is on Houston’s side, the port’s bid to increase its penetration of the inland intermodal cargo market puts the port in head-to-head competition with West Coast ports that have leveraged their geographic advantage as the shortest route for intermodal shipments from Asian factories.
A price elasticity study that Leachman and Associates conducted last year for the Southern California Association of Governments found Los Angeles and Long Beach enjoyed a pricing advantage over Houston for transloaded shipments from China to Chicago, St. Louis and Kansas City.
The study, however, said its results “provide a cautionary lesson that elasticity of imports can change markedly in the span of only several years, suggesting the need for continuing analysis to keep up with the dynamics of industry and global economics.”
Moseley said Houston stacks up well in measurements of transit time and cost and warehouse, labor and logistics costs in and around the port. “When you start looking at port fees and clean-trucks fees and dwell times and things like that, we really are very competitive,” he said.
Containerized imports are a smaller part of the cargo mix at Gulf ports than on the East and West coasts. Through the first five months of this year, imports accounted for 40.6 percent of Gulf ports’ container traffic, compared with 54.3 percent on the East Coast and 73.1 percent on the West Coast, according to Journal of Commerce sister company PIERS.
The composition of commodities in Gulf Coast imports also differs from the East and West coasts.
On the West and East coasts, furniture is the top containerized import. Furniture and toys rank Nos. 1 and 2 in imports at Houston. But for Gulf ports as a whole, furniture ranks No. 2 behind bananas, which account for nearly 14 percent of Gulf imports. Most of these shipments move through Gulfport, Miss., which ranks second to Wilmington, Del., in banana imports, and Freeport, Texas.
Apparel and footwear also are less prominent in the Gulf than on other coasts. Nearly three-fourths of U.S. footwear imports come from China, and nearly all move through West Coast ports. Footwear was the No. 3 commodity through West Coast ports last year, with 360,044 20-foot equivalent units.
Gulf ports also are underrepresented in imports of automotive parts, a commodity in which West Coast ports seized leadership two decades ago when Japanese automakers pioneered just-in-time intermodal delivery of parts from home-country suppliers to U.S. factories.
PIERS statistics show Gulf ports last year handled less than 0.5 percent of the market for containerized imports of automotive parts — 18,908 TEUs compared with the West Coast’s 324,825 TEUs and the East Coast’s 167,888 TEUs.
Automotive parts are the top containerized import commodity moving through Mobile, which opened its container terminal in 2008 and has targeted the fast-growing automobile manufacturing industry in Alabama and neighboring states. Through May, Mobile handled 3,720 TEUs of auto parts imports.
Coffee is the No. 1 containerized import commodity at New Orleans, accounting for 5,876 TEUs through the first five months of this year.
Besides resins, Gulf exports include such commodities as wastepaper, cotton and wood pulp. Resins of various kinds represented three of the top five export commodities through Gulf ports last year. Paper and paperboard, including wastepaper, and cotton ranked third and fourth.
When international containerization was a fledgling industry 40 years ago, port interests in Houston and New Orleans fought a losing regulatory battle against minibridge rates that combined sea and land shipments into a single tariff.
As intermodal traffic increased, Gulf ports lost much of their Asian cargo to Los Angeles and Long Beach. The trend was reinforced by the railroads’ investment in intermodal service after their emergence from decades of stifling rate regulation.
Today, West Coast ports handle about 70 percent of containerized imports from Asia. That percentage leveled off at that range after peaking at nearly 80 percent before the 2002 port lockout of longshoremen that idled West Coast ports for 11 days and jolted shippers into seeking alternatives.