Oil & gas, steel, and over-ambitious plans put the future direction of the Gulf Coast ports in flux. Crucial to development plans is the skill in deciding between the 'build it and they will come' approach, regardless of traffic trends, and staying just far enough in front to cater for an increase in demand.
Houston, Tampa and New Orleans will stay as the anchor points of all traffic, with Houston the leader of the three. “Planners have to accept that for most of the time the pattern of traffic will be calls at Houston and then another port,” is how a port executive puts it.
The Port of Gulfport is probably the best example of being over-ambitious and hoping that new facilities will automatically attract new business. Severely damaged by the Katrina hurricane in 2005 (which devastated New Orleans), the port got an unexpected $560m boost from money originally earmarked for housing reconstruction. Grandiose plans were drawn up for what was to be the biggest development project in Mississippi’s history, with some officials envisioning a 'Shanghai of the South'.
Central to the plans was deepening the main channel to 45 ft from the existing 36 ft and raising the main pier by more than 20 ft. All talk of channel deepening has evaporated, although discussions on the pier continue. Seven hundred acres were to be developed, but this has been scaled back to 300 acres.
“No anchor tenants have been found to provide the cash flow needed to pay for the infrastructure development," says Bruce Lambert, head of the Institute for Trade and Transportation Studies, an agency funded by the Southeastern State Departments of Transportation. “It’s like a shopping mall – you have to get the main tenants to make it worthwhile.” Leases for existing tenants suffer from two drawbacks – they are too short to cover long-term projects and the businesses are too small to provide a decent income stream to the port.
There is also no regional market and success depended on poaching container traffic from other ports for no discernible reason.
Scale back
“It’s clear they have had to scale back their ambitions,” says Paul Bingham, economics practice leader at CDM Smith. “Gulfport is a niche port and is still the biggest on the Gulf Coast for citrus and bananas. Containers are not really a big future.”
He cautions planners and politicians in general about getting too excited about “wanna-be ports” – those whose dreams extend beyond their abilities. “Florida is talking about a port in Citrus County, near Tampa, which has a 2.8 metre channel. There is no metropolitan area to serve – a study 25 years ago said it should be for recreational boating.”
The buzz of expectations over the post-2014 Panama Canal has begun to take on more of a realistic notion and less of a dreamland fantasy. Houston will certainly benefit but there is uncertainty over its neighbours and rivals.
At least one port is banking on a dividend from the canal. Manatee County Port Authority in Florida is extending a berth by 178 metres to 483 metres, with a 12.1 metre draft, and building a 10-acre container yard. The project is expected to be completed in June 2013.
Mr Bingham emphasises a demographic point about the Gulf that is often overlooked in analyses of prospects. “There is a steady, continual switch of population and manufacturing to the states served by the Gulf. There is a lot of foreign direct investment springing up in the south - a whole band of automobile manufacturing is located there, such as Hyundai and Kia."
Beyond the box
Projects and development plans throughout the Gulf marginally favour container over breakbulk/liquids. New Orleans has finished its Napoleon Avenue terminal additions consisting of two new 30 metre gauge gantry cranes and a 5-acre marshalling yard. Handling capacity has risen by 45,000 teu to 640,000 teu a year. A new 12,000 square metre cold storage terminal, costing $40m, is in operation.
The port has had to concentrate more on flood and hurricane protection following the devastation from Katrina, which has probably slowed down the pace of capital development. The new measures got their first test and proved their worth during Hurricane Isaac in August.
The Seabrook floodgate structure and the Lake Borgne surge barrier were both brought into operation for the first time. Officials reported minimal damage. In the Inner Harbour the water level rose just over 1.2 metres (compared with four metres during Katrina).
At the Port of Pascagoula, a $1bn LNG facility is fully operational and has a capacity of 1.3bn cubic feet. The port’s main entrance channel is being widened to 167 metres from 137 metres.
Mobile is stacking its future on the Pinto Steel Terminal, primarily for ThyssenKrupp and its carbon steel plant with a capacity of 3.8m tonnes. Volumes through the port are expected to reach almost 4m tonnes this year. Although container volumes have shown a remarkable increase, they are only hovering around the 200,000 teu mark.
Cruise competitor
Tampa continues to bank on a combination of petroleum, containers, breakbulk and a facility that other Gulf ports can’t match, cruise ships. Chief executive Richard Wainio (who left at the beginning of September) has described cruise shipping as “a cash register” that now accounts for 20% of total revenue.
Phosphate rock, the former mainstay of the port, is declining in volume every year. In 1980 the volume was close to 30m tonnes but was only 12m in 2011. Companies are now processing the rock into fertiliser.
The port has taken advantage of a logistical quirk unique to Florida among the 48 states of the continental US – the only state that depends on shipping for its oil supplies – and handles almost 20m tonnes of fuel a year. All the other states rely on pipelines for a significant proportion of supply. Port Dolphin Energy LLC, the US subsidiary of Höegh LNG, is building an offshore-LNG terminal.
Of a total of $202m in capital investment at the port between 2007 and 2012, dredging has taken up the biggest share at $49m followed by container facilities at $48m.
The future appeal of Tampa also relies on its 5,000 acres (3,000 operated by the port and 2,000 by tenants), probably the largest facility in the country. By comparison, Long Beach and Los Angeles are half the area and Miami, serving a population three times as large, is a tenth of the size.
Long-term forecasts to 2020 put the tonnage volumes through the port in a range of 46m tonnes (20m through port authority facilities and the rest through private facilities) to 51m tonnes (with the same proportional split).
Tampa is facing an increasingly expensive item that is now part of the budgets of all major ports in the US, security. The costs involved are not only personnel such as police but also computer and automated surveillance systems that can cost almost as much. For Tampa, security has risen to almost 30% of the operating budget. This is particularly high because of the cruise terminals and other ports say that their costs are somewhat lower.