It may be new information for some reading this column that Houston is the largest port in the U.S., and has been for the past 14 years.
With its vast petrochemical complex and robust tanker trade along the Houston Ship Channel, no port is larger than Houston in terms of gross tonnage of U.S. foreign commerce. When it comes to breakbulk and project cargo, figures are hard to come by, but it seems highly probable that Houston is No. 1 in this sector as well.
More than 3,800 people showed up to our company’s Breakbulk Americas event in Houston last fall, a tour de force that showcased the port’s dominance in project cargo, heavy-lift and breakbulk.
When it comes to containers, however, the picture changes. Although Houston is a regional juggernaut with a commanding share of Gulf region trade, it has yet to break through and establish itself as a national gateway to rival the access to Chicago and interior points that other gateways such as Los Angeles-Long Beach can boast.
Houston sees itself as a potential gateway, and so the port’s challenge will be to leverage its strengths into a density of freight traffic that can be projected into interior markets. That was my message in a speech last week to the Third Annual Harris County International Trade & Transportation Conference organized by County Judge Ed Emmett, the former chief of the National Industrial Transportation League. Emmett, one of the forces behind the 1998 Ocean Shipping Reform Act, has made transportation an anchor of business development in the sprawling Texas county, and he understands the draw a port exerts on economic activity.
In spite of strong growth from India and elsewhere in Southeast Asia, the region’s share of Houston’s container volume is small compared to that from China, where the biggest volumes will continue to originate. Houston’s Southeast Asia imports, for example, grew at a compound annual growth rate of more than 36 percent from 2005 to 2010. But the region accounts for only 8,000 TEUs, or roughly 2 percent of Houston’s overall container volume, compared with more than 100,000 TEUs or 21 percent of imports from North Asia, including China.
Houston could bet against China, in effect, throwing its resources into developing the South Asia market, which most likely would transit to the U.S. through the Suez Canal route, in hopes it someday can become a major growth driver on par with China.
There’s no doubt Houston will continue to pursue India. One panel at the Harris County event last week focused on potential of the India market. But for India and South Asia to emerge as a game-changing U.S. container market, the region would have to supplant China and the huge trans-Pacific trade — and that sounds like a long shot.
China remains the heavyweight in U.S. imports, and although it holds a significant share of Houston’s volumes, the port itself still remains a small player in the China market. Houston’s U.S. market share in the bellwether eastbound trans-Pacific has remained at about 1 percent for several years. The port and the broader Gulf Coast were largely on the sidelines as the East Coast took market share from the West Coast in the decade prior to the recession, and they remain on the sidelines today as market share has started to return to the West Coast.
The West Coast market share grew 2 percentage points in 2010 as transloading, lower fuel surcharges and faster transit times made Los Angeles-Long Beach and Seattle-Tacoma more attractive alternatives for shippers. Gulf Coast market share remained at 5 percent of U.S. container volumes between 2005 and 2010, according to data from PIERS, a sister company of The Journal of Commerce.
In a sense, the challenge may boil down to this: Container growth reflecting broader economic growth will be centered in Asia, both in imports and exports. Europe and Latin America can be expected to provide steady but not fast growing volumes. Houston’s fasting growing region is Southeast Asia, but that still represents a tiny portion of Houston’s revenue.
There may be no particular reason why there shouldn’t be a Gulf gateway to compete with the East Coast, and Houston is the natural location with more than 17 million people within 300 miles of the city and around approximately 60 million within 700 miles. Houston is the eighth-largest container port in the U.S. and by far the largest in the Gulf, with 63 percent of imports and 69 percent of exports year-to-date November.
That gives it a strong foundation to build on, if shippers and carriers go along for the ride.