Locking In Growth

Locking In Growth

The prospects of renewed southbound services, direct links with Asia and new intermodal connections excite the U.S. Gulf’s major container ports.

Carriers are restoring services and/or launching new ones to Latin America and the Far East as trade demand grows.

The major Gulf container ports, which emerged from the 2008-09 recession relatively unscathed, also are laying the foundation to expand into new inland markets for intermodal import cargoes from Asia that will move through new rail terminals either under construction or close to development.

Houston is already a gateway port for imports of consumer goods bound for the Midwest and the Southwest. Port directors at Mobile and Tampa are looking beyond their regional markets in the hope that new rail terminals being built or planned will give them a leg up into inland markets where they don’t compete with each other or with Houston.

New Orleans, which competes with Houston for some inland markets, is building a new intermodal rail hub.

All four ports are angling to nail down new direct all-water services from Asia. The four Gulf ports are anticipating growth in the services from Asia after the Panama Canal’s third set of locks are completed in 2014.

“Without a question, it’s going to increase the competitiveness of the Gulf as an entry point as an alternate to the West Coast and also the East Coast,” said Jimmy Lyons, executive director of the Alabama State Port Authority.

Three studies commissioned by the Port of New Orleans, the city of New Orleans and the state of Louisiana came to the same conclusion: Gulf ports will gain 18 to 20 percent of the incremental volumes generated by the canal’s expansion.

Container volumes at Gulf ports are rebounding this year as the recovery progresses, after staying flat or actually increasing last year, in stark contrast to the steep declines experienced by most East and West Coast ports. The giant oil spill at BP’s offshore oil well has had no impact on port volumes, the Gulf port directors say.

“Occasionally, a vessel complains it has to go out of its way, but there haven’t been any delays,” said Richard Wainio, CEO of the Tampa Port Authority.

Gulf container volumes are growing more strongly on the export side, where outbound vessel capacity is extremely tight. The growth in imports, although slower, is expected to pick up over the next year as carriers restore some of the direct all-water services from Asia that were suspended when ship lines cut back capacity during the recession.

CMA CGM, for example, which suspended direct calls at Mobile by its PEX-3 all-water service from China and South Korea during the recession, has restored those calls. But Zim Integrated Shipping Services, which cut back its direct AGX service from Asia to Tampa, Mobile and Houston to a transshipment operation via Kingston, Jamaica, has yet to restore direct calls to the Gulf ports.

Wainio said Tampa didn’t experience a downturn as a result of the recession, but did experience a slowdown “related to action that Zim took to curtail exports out of the Gulf.”

Fortunately for the three ports, the feeder connection to Kingston provided new links to markets in the Caribbean and Latin America that partially offset the loss of volume from direct all-water calls from Asia. “Zim’s hub in Kingston opens up the South American market, which helps offset the loss of the direct service,” Wainio said.

Houston, which kept its direct all-water CMA CGM APEX-3 service throughout the recession, has seen volume from China remain relatively flat, while trade with Southeast Asia has increased.

“Our overall volume last year did not experience a drop as was the case at ports on the West Coast, so coming off last year, you won’t see the large swing back up from depressed numbers,” said Alec Dreyer, CEO of the Port of Houston Authority. Houston is expecting container volume growth of about 5 percent this year after growth of 1 percent last year.

Trade with ports in Southeast Asia has been especially strong at Houston, driven by imports of plastic resin and chemicals, paperboard, dairy products and by exports of prepared meat and fish products.

Dreyer would like to see more robust growth in exports to the rest of Asia. The port authority is projecting exports to Asia will increase during the second half of the year. Like other ports in the region, Houston is in talks with carriers that have expressed an interest in adding an Asia-Gulf service.

Houston is prepared to act as an intermodal gateway for the 15 percent growth in container volume it expects to result from the expansion of the Panama Canal, Dreyer said. As recently as two years ago, Houston had no regular rail service to Chicago. Now, UP and BNSF operate 16 intermodal trains a week to the Midwest, including four express trains.

Despite the depressed housing market, one of Houston’s biggest imports from developing markets is furniture. Two major furniture retailers, Rooms To Go and Ashley Furniture, opened distribution centers in the area, adding nearly 1.8 million additional square feet to the local market.

New Orleans is seeing strong growth in exports to Asia in both its containerized and breakbulk trade. “Our containerized exports to Asia are up this year, while imports are still sagging,” said Gary LaGrange, president and CEO of the Port of New Orleans. “A lot of that is due to the fact that we don’t have a direct all-water service from New Orleans to Asia.”

Mediterranean Shipping Co. provides New Orleans’ only connection with Asia. But it’s a round-the-world service that comes through the Suez Canal and transships cargo bound for the Gulf at its Gioia Tauro, Italy, hub, adding 21 days to the trip compared to a direct service.

LaGrange sees signs that may change. He is in talks with Target, which plans to start transloading at the port and delivering directly to its retail stores in the middle South, eliminating the time and cost of distribution centers. In addition, Canadian National Railway has told LaGrange it plans to develop a rail terminal in New Orleans, where it hopes to pick up MSC’s intermodal business, he said.

LaGrange was heading for Geneva at the end of July, hoping to persuade MSC to start direct all-water calls at the port. “We’re going to try to play Cupid and get MSC and Target on the same page,” he said.

Tampa may get intermodal rail service in the next few years as well, which would give it the ability to serve markets outside of Central Florida by rail for the first time.

“I always downplayed intermodal, but over the last several months, we’ve been in discussion with carriers and CSX. I’ve started to feel there are some possibilities for Tampa to partner with CSX and the right carrier — Zim being one of them — to serve some of the Southeast,” Wainio said.

Tampa plans to submit a request for federal stimulus money to build an on-dock rail terminal and a spur to the CSX mainline rail network. “If we get it, the project will go forward, but we’re likely to go forward with it even without,” Wainio said. “It could handle intermodal unit trains and various liquid and dry bulk cargoes. We would be the only major port in Florida with an on-dock rail facility.”

The Port of Mobile is in the midst of building a near-dock rail terminal right behind the 2-year old Mobile Container Terminal owned and operated by APM Terminals. “We’ve got the land-filled portion of that done now and are working on the funding for the rail and other portions,” Lyons said. Once completed, the rail spur would connect with the mainline Class I railroads to the Eastern Seaboard and the Great Lakes, most likely with NS and CN.

Lyons said Mobile would be competitive as a gateway for Asia cargoes heading inland up to Pittsburgh, but probably not to Chicago, where there are too many intermodal alternatives from the West Coast. He said Mobile could compete in the Chicago market for intermodal cargoes from the Caribbean, Central America and the north coast of South America, especially for refrigerated cargo.

“Reefers are going to be big here, given our outbound poultry,” Lyons said. “When APM Terminals opened up, they had to double the number of reefer plugs at the terminal because the business is so strong, especially seafood imports.” He said 85 percent of the seafood consumed in the U.S. is imported.

Lyons said APM Terminals’ recent swap of its minority stake in a terminal in Dunkirk, France, for CMA CGM’s minority ownership in the Mobile terminal has no impact on its operation. “It was strictly a business decision that made sense for both parties,” he said.

As it expands its rail links to its inland markets, Mobile won’t be tripping over competition from Tampa or Houston. “We’re not going to tap into Tampa’s market, or Houston’s, and they are not going to tap into ours,” Lyons said. “Mobile does compete with New Orleans, but we’re not going to reach into their back door to pick up cargo, and they’re not going to reach into ours.”

For Mobile, the Asian container trade is one of the most promising markets, with strong demand both inbound and outbound. “I think we’ll have a second direct Asia service within a year, and there’s no question in my mind that we’ve got the cargo for it,” Lyons said.

Any new direct Asian service into Mobile is likely to cover South Korea, as well as China, because of the new Hyundai plant in Alabama, which is fueling trade in auto parts, both inbound and outbound.

Lyons admits he was initially skeptical about Mobile’s prospects for gaining a share of the Asian trade. “When Moffatt & Nichol did a study for us in 2000 predicting that Asia cargo would account for 14 to 15 percent of our business, I said: ‘Oh, you’ve lost your mind. All Asian products go to the West Coast.’ I had to eat my words,” he said.

Contact Peter T. Leach at pleach@joc.com.