(Article originally published in Mar/Apr 2016 edition.)
Surging petrochemical production is benefiting Gulf Coast ports.
By Tim Sheahan
As southern California is the nation’s top magnet for containerized cargo, so is the Gulf Coast the most attractive hub for movements of petrochemicals. Led by ports such as Houston and New Orleans, petrochemical activity is thriving due in no small part to growth in refining activity and an abundance of cheap natural gas.
Ports such as Corpus Christi are growing by leaps and bounds. M&G Chemicals confirmed recently that it plans to increase the capacity of its Corpus Christi facility by over 100,000 metric tons per year of integrated PET, no small feat. PET is a key building block for fibers and plastics. Similarly, the company will boost annual PTA capacity, another petrochemical building block, by a corresponding amount.
Major rail infrastructure improvements are taking place to support the M&G facility in addition to direct service by three Class I railroads. John LaRue, the port’s Executive Director, explains: “M&G is constructing the largest and most advanced facility of its kind. This project sets the benchmark for efficiency and innovation. It is exciting to see the construction and we look forward to the opening of the M&G Corpus Christi facility.”
Adds Marco Ghisolfi, CEO of M&G Chemicals: “We strongly believe in our Corpus Christi project, which is the most advanced ever in this industry. We decided to increase our investment in order to make it even more efficient. Most of the increased capacity has already been committed in the market while a portion will be used to displace our current imports from Mexico.”
The facility is currently under construction along the Corpus Christi ship channel with opening scheduled for the second half of this year.
Gulf Coast Rising
Like Corpus Christi, the port of Brownsville is seeing growth in petrochemicals while last year was a record-breaker in total cargo movements. Handling more than 10.1 million tons, up from the 2014 record of 8.4 million, the port claims such activity added $926.7 million to the regional economy and more than $2 billion to the state’s economy. As a mainly bulk and breakbulk port, Brownsville has developed a versatile marine terminal operation for both liquid and dry bulk cargoes while petroleum products and gasoline have further catalyzed growth.
The port of South Louisiana has experienced similar success as it welcomed the ground-breaking for a major new petrochemical project for Yuhuang Chemical Inc, a $1.85 billion methanol complex. “The Port of South Louisiana, the largest tonnage port in the U.S., welcomes Yuhuang Chemical to the port and the river parishes,” exclaimed Port of South Louisiana Executive Director Paul Aucoin. “The port is pleased to have played a role in having Yuhuang choose St. James Parish. We look forward to working with Chairman Jinshu Wang and CEO Charlie Yao and assisting in any way we can. We are fortunate to have a company that will bring to our area 400 new direct jobs with an average salary of $85,000.”
The first phase is scheduled to begin operations by 2018.
The Port of New Orleans has declared itself ready for surges in petrochemical-related cargo and is aggressively working to secure more ocean carriers and services to meet the increase, explains Matt Gresham, the port’s Director of External Affairs: “Chemical exports are playing a major role in growth for us here at the Port of New Orleans. It’s a key part of our business, and the low price of natural gas is helping drive this.”
Gresham is enthused that the boon is not a flash in the pan but one expected to drive double-digit growth for the port. Chemical makers are forecast to double and even triple shipping volume in the future. With 88 refineries located within a hundred-mile radius of New Orleans and more than $6.4 billion in improvements planned over the next two years, there is every reason to be upbeat.
The ongoing boom led SEACOR AMH to introduce an innovative container-on-barge shuttle service from Baton Rouge to export such products through the port of New Orleans. “When we learned of the increasing volume coming out of Baton Rouge from the chemical sector we decided a shuttle service would be complementary to our ongoing services on the Mississippi River,” states Vice President Richard Teubner. “We developed the terminal operations and contractual agreements with port operators in New Orleans and Baton Rouge to get customers interested.”
Port Arthur, Texas is known as Energy City and is home to a cluster of chemical and petrochemical facilities operated by such industry giants as Motiva, Valero, Total and Chevron.
While the port is benefiting from the surge in petrochemical production and exports, it is also making efforts to diversify away from its heavy reliance on a single industry.
Thus 2016 is likely to be a significant year for Port Arthur as it will see the construction of a textile recycling plant called Pure Renewables. The facility is expected to create 500 direct jobs and pump $260 million into the local economy. It should also bring new economic opportunities from “spin out” businesses related to the manufacture and distribution of textiles. Joy Nunn of Pure Renewables says that “In addition to creating hundreds of manufacturing jobs for the Port Arthur workforce, this site will inspire students, expand the supplier base and attract tourists to the Port Arthur area.”
Impact of FTZs
As ports diversify their service offerings in a never-ending effort to grow, the popularity of Foreign Trade Zones continues to escalate. There are now more than 230 of these federally designated areas in the U.S., and their impact is significant.
It is nearly a year to the day since the BMW Group broke ground at the site of a new Vehicle Distribution Center at the Port of Galveston. The purpose of the project was clear: to enable BMW to expand its vehicle distribution network to southeastern Texas and better serve the 45 BMW and MINI dealers within the four states of Texas, Oklahoma, Louisiana and Arkansas.
The facility, owned and operated by WWL Vehicle Services Americas under BMW Group on-site management, will be a boon for both BMW and the port of Galveston. BMW says it plans to import and process approximately 32,500 vehicles a year, employing 40 employees in over 44,000 square feet of processing space in two buildings on 20 acres of land.
Captain John Peterlin III, the port’s Senior Director of Marketing & Administration, says that the ability to offer the benefits of a Foreign Trade Zone to BMW was crucial in attracting the business: “The ability of clients to defer duty is positive for cash flow. Companies can delay payments on duties until the inventory leaves the zone, while other benefits include duty reduction where clients can pay lower duty rate on assembled or manufactured finished products. In addition, you have the benefits of duty elimination and direct delivery whereby businesses can ask for the authority to receive products and clear customs within the zone, which bypasses congested ports as a result.”
He adds that “The whole process is now in operation, and we have the formal ribbon-cutting on the facility this month. Vehicles are arriving and employees are already up to speed, so it’s an exciting time for us and for BMW.”
The Port of Galveston is FTZ No. 36, which was approved by the FTZ Board in 1978. According to Peterlin, the port became the Grantee in 2000, which effectively expanded the zone: “We now operate in the scheme where the FTZ Board has expanded our authority outside of the port confines, so we can provide this authority into the county, which is a big positive for us. This transition was to give the FTZ more flexibility. It can be a big draw for business and obviously offers importers the opportunity to have products reside in the zone before they go to the final receiver. It allows these businesses to spread the cost of duty over several payments rather than on the whole shipment.”
Elsewhere in the U.S., Florida East Coast Railway (FECR) and South Florida’s PortMiami and Port Everglades have invested, and are continuing to invest, in infrastructure and strengthening multi-modal transportation solutions.
A major investment by FECR was returning the on-dock intermodal rail service at PortMiami, featuring 9,000 feet of linear track. It runs multiple daily trains to and from the port, providing truck-like service to both import and export shippers.
“The port and FECR move a variety of goods ranging from grain and food products to electronics, furniture and waste products,” explains Jim Hertwig, Florida East Coast Railway President & CEO. “We are well-positioned to support vessels capable of hauling more than 10,000 TEUs and will continue to promote multimodal shipping and support global trade into and out of South Florida alongside our partners at PortMiami.”
The FECR’s connection to the national rail network via efficient interchange with two Class 1 railroads in Jacksonville means it can offer delivery within the southeastern U.S. in two days, and can reach 70 percent of the U.S. population within four days.
Port Everglades has created what it calls “a faster track to market” with FECR’s new 43-acre Intermodal Container Transfer Facility (ICTF) located adjacent to the port. By moving domestic and international freight through the ICTF, containers no longer need to be trucked via Interstate highways to and from an off-site rail facility. Port Director Steve Cernak says, “The ICTF ensures that Port Everglades is competitive with other U.S. East Coast gateways and, most importantly, gives South Florida a cost and time-to-market advantage over many of these gateways.”
For the Port of Davisville in Quonset, Rhode Island, 2016 is set to be a landmark year, coming on the back of a sixth consecutive year of record growth in automobile imports. Last year it brought in more than 227,000 vehicles, marking a 20-year growth of 547 percent. Capitalizing on this success, Governor Gina Raimondo is set to include a $70 million bond proposal in her state budget to modernize and reconstruct an older pier at the port, thereby adding 50 years to its life and preserving hundreds of jobs in the maritime sector.
Meanwhile, on the opposite end of the country, the port of Coos Bay in Oregon is benefiting from its Coos Bay Rail Link and the efforts of newly appointed CEO John Burns. Burns advocates the diversification of maritime commerce and is charged with moving the port forward with multipurpose cargo berth development and completion of the deep-draft channel modification project. As this edition went to press, it was reported that Business Oregon’s Infrastructure Finance Authority had given the green light to a $600,000 loan to the port for the purchase of a new gantry crane. – MarEx
Tim Sheahan is based in London.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.