Tuesday, September 6, 2011

Gulf Coast Ports Target Expanding Trade

Like their East Coast brethren, Gulf Coast ports have been expanding facilities in expectation of more business once construction of larger locks at the Panama Canal is completed in 2014. Increasing trade with South American countries, especially Brazil, is also spurring development. This is seeing infrastructure investment take place from the Port of Brownsville, Texas in the west to Port Manatee, Florida in the east. It is also generating potential construction of several completely new ports and cargo handling facilities on the Gulf, such as the Louisiana International Gulf Transfer Terminal being eyed for development near the mouth of the Mississippi River, and the La Quinta Trade Gateway Multipurpose Facility, already under first-stage development in southwestern Texas.

Reconstruction from the devastation caused by Hurricane Katrina in 2005 is also continuing, with the Port of Gulfport, Mississippi, the hardest hit of all Gulf ports, in the middle of a major project that will see its marine facilities elevated by 25 feet while cargo handling capacity will be quadrupled. Such expansion, along with new rail infrastructure, will attract the interest of shippers and steamship lines, some of which now utilize West Coast gateways for most of their Midwest-bound traffic.

One of the Gulf ports working most strongly to capture new trade from the enlarged Panama Canal is Florida’s Port Manatee, located across Tampa Bay from the larger Port of Tampa. Although a small port engaged mainly in produce handling, Manatee is also the closest US port to the Panama Canal and has just renewed a marketing and information-sharing agreement with the Panama Canal Authority (ACP) for five more years. This makes it the second US port – and Florida’s only port – to have a five-year alliance with Panama. “Through our relationship with the ACP, we have gained a unique appreciation for Panama’s role in Port Manatee’s future,” said Port Manatee’s Executive Director David L. McDonald.

McDonald pointed out that a new 1,584 foot-long container berth is nearing completion at the port and that a dredging project to deepen the container berth to 41 feet at mean-low-water is currently underway. This project is targeted for completion before the end of the year, with the terminal considered the final piece in Manatee’s $200 million expansion into the containerized trades. In addition, the Manatee County government has “incentivized” nearly 5,000 acres of largely undeveloped land located adjacent to the port to attract more shippers to Florida’s west coast. “This sends a message to the industry and opens the door to advance Port Manatee’s future in containerized shipping,” said McDonald. “To attract class-A carriers, we have to offer a class-A facility.”

Another Gulf port recently signing a partnership agreement with the Panama Canal is Mississippi’s Port of Gulfport, currently engaged in a major reconstruction program after the devastation of hurricane Katrina in 2005. “Maritime commerce is vital to Mississippi’s economy, and the expansion of the Panama Canal provides the state with considerable opportunities for increased trade and worldwide shipping,” said Mississippi Gov. Haley Barbour of the marketing agreement. “Through the partnership with the Panama Canal Authority, the Port of Gulfport will be able to offer even more businesses quick, affordable access to nearly three-quarters of American consumers.”

In June, Gulfport received additional federal funding for a six-year project to elevate port property to 25 feet while quadrupling cargo capacity. Community Development Block Grant money from the US Housing and Urban Development Department, earmarked for Katrina recovery, is paying for the restoration and elevation, with the port having received a total of $570 million to date. Part of these funds have been used to rebuild three berths with a total investment of over $51 million while additional funds are being used to add 84 acres to the port’s West Pier, work which was underway when Katrina struck. The Mississippi gateway is currently handling about as much cargo as it did before Katrina, with 105,000 TEUS moved last year, ranking it as the nation’s 18th busiest container port.

New Orleans
At the Port of New Orleans container volumes have recently exceeded pre-Katrina numbers, largely because of terminal expansion and new equipment that has been brought on line over the past five years. Earlier this year two new container cranes, purchased for $26.5 million from South Korea’s Doosan Heavy Industries & Construction Co. Ltd, were landed at the port’s Napoleon Avenue Container Terminal. Both were delivered by the Chinese semi-submersible heavylift ship Tai An Kou (see Pacific Maritime Magazine, June 2011). The cranes have a 110-foot lift height, a 167-foot outreach, and a 65-long-ton lift capacity, making them among the Gulf Coast’s largest.

“This vital investment in our container operations will position the Port of New Orleans as one of the most productive and efficient container ports in the Gulf of Mexico and South Atlantic region,” said Port President and CEO Gary LaGrange. “They will be faster and more efficient and allow the port to work larger ships and produce quicker turnaround times for our customers.”

The expanded lifting capacity comes after the port moved 427,518 TEUs last year and crane usage jumped by more than 18 percent in the first quarter of this year. “The Port of New Orleans is seeing upward trends in all of its container operations,” said LaGrange. “We are working together with all of our carriers and terminal operators to ensure long-term growth of container operations.”

Louisiana International Gulf Transfer Terminal
While New Orleans continues to add container capacity there are still plans by the State of Louisiana to move ahead with the creation of the Louisiana International Gulf Transfer Terminal (LIGTF) near the mouth of the Mississippi River. Mississippi state Senator A.G. Crowe, (R-Slidell), who sponsored legislation to create the LIGTF as a state agency in 2008, said that investors for the project are expected to be lined up within the next three months. “The way it’s set up and the way it’s staged right now, is that everything is in place,” said Crowe. “Everything is in place, there’s no negotiating the lease, and it’s in the legislation.”

Pointing to a recent ten-year lease agreement between the Port of New Orleans and the Mediterranean Shipping Company, Crowe said he believes the transfer terminal will fill what he sees as a “need for additional capacity” to handle container cargo on the Gulf Coast.

According to Crowe, the new facility would be built on a 260-acre tract of land along the east bank of the Mississippi’s Southwest Pass, in Plaquemines Parish, and would allow ships that are too big for existing ports on the river, such as New Orleans and Baton Rouge, to have their cargo transshipped to smaller vessels for onward carriage upstream. Crowe said project officials plan to travel to China shortly to meet with potential investors in the hopes that the project could be completed in time to take advantage of the widening of the Panama Canal.

In Texas, the Port of Galveston has been eyeing a similar plan to handle ships too large to navigate inland to the Port of Houston but the project’s biggest potential investor, Hong-Kong-based Hutchison Port Holdings, withdrew from negotiations earlier this year, leading its US-based partner, investment group Carlyle, to also withdraw. Roland Bassett, chairman of the Galveston Wharves Board, said Hutchison offered no explanation for the move. “I can’t even speculate what the reason was,” he said, adding that only the Bank of Montreal, which had been handling negotiations for the deal, informed the Wharves Board of the withdrawal.

Bassett said the Hutchison-Carlyle partnership had proposed a 75-year lease, far longer than most port leases, and had agreed to pay off the port’s estimated $60 million debt. In addition, the group would have paid an unspecified amount of cash up front plus committed to 10 years of capital expenditures. The two parties would have shared revenues from Galveston’s container and cruise terminal while Hutchison-Carlyle would have provided annual expense payments to the port.

Undaunted by the collapse of negotiations, Bassett remains optimistic about Galveston’s future, particularly in the cruising sphere where it has already taken most business from Houston because of its closer location to the Gulf. The port is currently expanding its three-berth Texas Cruise Ship Terminal in a project that may eventually amount to an investment of over $12 million.

While the Port of Houston admits that it has lost cruise ship traffic to Galveston, despite the opening of its own terminal, it doesn’t fear loss of container traffic, which has been up by 11 percent tonnage-wise since the start of the year. In April, ships as large as 8,100 TEUs began arriving at the port’s Bayport Container Terminal, where the previous record had only been around 6,500 TEUs. “We had three 8,000-TEU ship arrivals,” noted port CEO Alec G. Dreyer, “the largest container ships that have ever come into the Gulf of Mexico.”

To prepare for the even bigger box boats expected after the Panama Canal widening, Houston plans to continue expanding Bayport while refurbishing its Barbours Cut terminal in La Porte. According to Dreyer, this will include the installation of longer reach and higher lift capacity container cranes plus more equipment. There are also plans to deepen navigation and berthing channels at both container terminals from 40 feet to 45 feet.

While making these capacity enhancements Houston officials have been quick to remind major retailers, such as Home Depot and Wal-Mart, both of which have set up major distribution centers in the Houston area, of the 2002 labor shutdown on the West Coast. To make sure this message is heard in the Far East, the port has hired Ben Line Agencies of Singapore to seek additional business from the Southeast Asia region, particularly China.

Corpus Christi
In southwestern Texas the Port of Corpus Christi is continuing with development of the La Quinta Trade Gateway Multipurpose Facility (LQTGMF). This complex, to eventually provide a state-of-the-art multipurpose dock and container terminal capable of handling at least one million TEUs annually, is being targeted to post-Panama Canal expansion. More than 1,000 acres of port property have already been fully permitted for construction of both the box terminal and the 3,800-foot multipurpose dock.

In May, the US Army Corps of Engineers announced $58.5 million in funding for dredging of the La Quinta Channel extension while the port will commit approximately $15 million to the same project. “This is an important achievement for the port,” said Corpus Christi Port Commission chairman Mike Carrell. “The extension of the La Quinta Channel is a major step forward towards the development of the La Quinta Trade Gateway Multipurpose Facility.” He noted that the dredging project would also provide support for development of the TPCO American Corporation Steel Pipe mill at Gregory, Texas, as well as a gas processing plant proposed for construction in the same area by Cheniere Energy.

As currently envisioned, the LQTGMF will provide up to three ship berths on a depth of 45 feet of water served by nine ship-to-shore cranes. The berths will be backed by 180 acres of container storage area and served by a high-capacity intermodal rail yard. There will also be another 400 acres available for the construction of onsite truck distribution and warehouse centers.

While Port of Corpus Christi commissioners have approved a Lease Option Agreement (LOA) with Global Terminal Advisors (GTA) covering development of the La Quinta complex, they have also approved a Letter of Intent (LOI) with Canyon Supply & Logistics, LLC for the sale of the port’s Ingleside Facility, formerly known as US Naval Station Ingleside, for $102 million. Canyon is a special service company that supports oil and gas production companies operating in the western Gulf and plans to develop the industrial part of the Ingleside facility for offshore logistics purposes. “The Port looks forward to continuing the negotiations with Canyon” said Carrell. “The acquisition of former NSI by Canyon is going to be an excellent opportunity to support growth in the region.”

Under terms of the LOI, Canyon will have until the end of next month to complete all feasibility studies, surveys and due diligences, after which it will have to present a down payment of $24 million and sign a 10-year promissory note for the balance.

The former base site encompasses 483 acres of land, with more than 70 onsite buildings, plus a multi-berth pier and wharf complex. To this infrastructure, the port plans to include 435 acres of green field property located adjacent to the former base that can be incorporated in the development project.