Steel shipments through Gulf of Mexico ports have long been a two-way race between Houston and New Orleans. Now a third port has elbowed into the picture.
The Port of Mobile, Ala., handled 3.27 million tons of steel during its fiscal year ending last September. During the first nine months of the current fiscal year, the port had nearly matched that total with 3.22 million tons.
“We budgeted a little over 4 million tons this year, and we’ll exceed that,” said James K. Lyons, CEO of the Alabama State Port Authority. “From what our customers are telling us, we should stay at that level or go higher. We think we can pass Houston and New Orleans in steel within the next few years. In good market conditions, we think we eventually can get to 5 million tons.”
Houston handled 4.3 million tons of steel last year, the most of any U.S. port. Through June of this year, the port had handled nearly 3.1 million tons, a 62.6 percent year-over-year increase.
More than 2.8 million of the volume during the first half of this year was imports, primarily pipe and other materials for oil and gas production and exploration. Steel imported through Houston is shipped inland for shale oil fields as far north as North Dakota and Canada.
The port’s steel traffic slumped during the recession to 2.653 million tons in 2009 and 2.721 million tons in 2010. Current volume still isn’t on pace to match the 6.3 million tons of 2008, but it’s enough to make a healthy contribution to waterfront activity.
Charles Montgomery, president of International Longshoremen’s Association Local 1351 in Houston, said increased steel volume was a key reason his local added 22 new clerks and checkers in March, the first increase since 2007. “Steel was a big part of it, along with containers,” he said. “We try not to add people unless there are jobs for them.”
Related: Gulfport's Evolving Expectations.
Len Waterworth, executive director of the Port of Houston Authority, expects steel volume to hold relatively steady during the rest of the year. “This results primarily from softening in drilling pipe imports, given a ‘flattening’ of rig counts and the likelihood of decreases in natural gas pricing,” he said in a statement accompanying the port’s half-year results.
New Orleans also is enjoying strong steel traffic. During the first quarter, steel imports totaled 570,000 tons, nearly double the 289,000 tons of a year earlier. Steel accounted for more than 80 percent of the port’s breakbulk traffic in the first quarter. Steel volume at New Orleans peaked at more than 6 million tons in the late 1990s, and has topped out at 3 million to 4 million tons since then.
While Houston’s steel traffic is dominated by oil field goods, New Orleans volume is divided among coils and strips, pipes and tubes, and bars, flanges, angles and beams. Coils and strips accounted for about a third of first quarter volume. Much of the steel import volume through New Orleans is transferred to barges for shipment up the Mississippi River system.
Mobile’s steel market has long handled modest amounts of shipments to and from plants in Alabama and Mississippi. The port’s steel business got a big leg up with the opening of a cluster of mills by ThyssenKrupp at Calvert, Ala., 48 miles up the Tombigbee River from the port.
The port built a terminal to handle Brazilian-made steel slabs that are transported by barge to Calvert for heating and rolling into various thicknesses for use in the U.S. or overseas. ThyssenKrupp sold its stainless steel division, including the Calvert facilities, to Finnish company Outokumpu in February for approximately $3.5 billion.
Having the ThyssenKrupp and other plants in its backyard provides Mobile with a nucleus of cargo that other ports are unlikely to poach. “Those cargoes aren’t contestable,” Lyons said. “When you run the numbers, they just don’t work using another port.”
Because steel is an economically sensitive commodity, its volumes are always volatile. A cloudy economic outlook has made it difficult to forecast the near-term outlook for steel shipments.
Steel users are closely watching inventories and prices, and taking a conservative approach to building stockpiles, said David Phelps, president of the American Institute for International Steel.
After a strong start in the first quarter, shipments slowed at midyear. Whether this continues or turns out to be only a temporary lull will depend on the interplay between prices and inventory levels, and on the strength of the economy’s recovery.
Steel demand remains strong in the automotive and oil and gas industries, Phelps noted, but construction “is about 50 percent of what it needs to be. What we have is a three-legged stool,” he said, “with two legs on and one off. “