Waterborne Foreign Trade at Houston – Outlook for 2016

Dave Cooley, GHPB

Introduction
At the end of July, vessel arrivals of deep draft freight ships at the Houston Port are 123 vessels below the number of vessel arrivals at the same time period last year, or a drop of 2.6%. If the existing rate of change continues through the end of the year, 2016 ship arrivals are projected to decline by 207 vessels (see Table 1). Contrary to the drop in ship arrivals, total waterborne foreign tonnage for Houston, the sum of import tonnage and export tonnage extrapolated to year-end 2016 is projected to increase by almost 4 million metric tons when compared to 2015 (see Figure 1). What products are driving this change and is it imports or exports? Read on . . .

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Ship Arrivals
The decline in the arrivals of freight ships portends a decisive change if the events of the first 7 months of 2016 become the paradigm of the future. The ship categories that have declined the most are general cargo ships, which are down by 72 ships (a decline of 122 ships projected for 2016) and break bulk ships that are down by 87 ships (a decline of 137 ships anticipated for 2016). These ships carry materials such as steel: cold rolled steel, steel plates, and tubular goods for oil drilling, as well as pressure vessels, machinery, and other types of processing and manufacturing equipment. In addition, vessel arrivals of containerships declined by 39 ships (a drop of 66 ships is estimated for 2016), the effect of which will be reflected in the pace of local economic activity.

Conversely, the type of freight ships that increased during the first 7 months of 2016 include tank ships moving oil (both crude oil and refined products) and gas carriers exporting LPG’s and ethane, which are the result of the oil shale revolution. During the first 7 months of 2016, tankers increased by 75 ships and gas carriers increased by 52 ships (increases of 124 ships and 93 ships respectively are projected for 2016). Offsetting this increase is a decline in chemical carriers of 69 ships (estimated decline of 120 ships for 2016). How these relationships evolve going forward will be interesting.
Houston Foreign Waterborne Trade
Houston’s foreign waterborne tonnage balance of trade (exports minus imports) shows a positive foreign waterborne tonnage trade balance for the year 2016 of 29 million metric tons, an increase of 6 million metric tons from 2015. Foreign waterborne imports for 2016 are estimated to be slightly lower from that reported for 2015, viz., imports of 62.9 million metric tons projected for 2016 v. actual imports for 2015 of 63.9 million metric tons, which is a positive increase in the tonnage trade balance of 1.0 million metric tons. In addition, exports are projected to rise to 91.8 million metric tons for 2016 v. actual export tonnage of 87.0 million metric tons for 2015, which further increases the positive trade balance by another 4.8 million metric tons. See Figure 2.

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Houston Imports – Tons
Houston’s foreign waterborne imports rose steadily over the years from 79.4 million metric tons in 2003 to 94.6 million metric tons during 2006. Since that time, foreign waterborne imports have declined each year to a level of 63.9 million metric tons at the end of 2015. The projection for 2016 shows Houston imports declining again, albeit slightly, by 1.0 million metric tons to 62.9 million metric tons. Considering the top four foreign waterborne import categories and highlighting the primary commodities within each category includes petroleum (crude oil and residual fuels increasing 3.5 million metric tons), cement and aggregates (decreasing 1.0 million metric tons), organic chemicals (methanol decreasing 0.5 million metric tons), and steel (casing and general tubular goods declining 3.5 million metric tons). Movements in the remaining 94 commodity categories show a slight increase in foreign waterborne import tonnage of 0.5 million metric tons. For 2016, petroleum accounts for 66% of the Houston’s total foreign waterborne imports and the total of the top four import categories account for 81%.
Except for a slight downturn during 2013, Houston’s foreign waterborne container imports have shown steady growth over the last 13 years, rising from just under 7 million metric tons in 2003 to over 10 million metric tons in 2015. However, the current projection for 2016 indicates a slight drop in foreign waterborne container imports of just over 1 million metric tons to 9 million metric tons. One of the major components that is forecast to decline is organic chemicals, with a projected drop of 0.5 million metric tons.
Similarly, Houston’s foreign waterborne non-container imports mirror the characteristics previously described for Houston’s total foreign waterborne import activity.
See Figure 3 for Houston’s foreign waterborne imports with details displaying both containerized and non-containerized foreign waterborne imports.

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Houston Exports – Tons
Houston’s foreign waterborne exports demonstrate a steady increase in over the years rising from 33 million metric tons in 2003 to more than 87.0 million metric tons in 2015. Export activity for 2016 projects another increase to 91.8 million metric tons; an increase of 4.8 million metric tons compared to 2015. The primary export categories and highlighting the primary contributors of this growth are petroleum (crude oil, refined products, and LPG’s increasing 3.0 million metric tons), organic chemicals (styrene, acyclic ethers, acetic acid, and ethylene glycol increasing 1.0 million metric tons), and cereals (sorghum, wheat, and corn increasing 1.0 million metric tons). Offsetting these increases is a decrease in an array of plastics declining 0.5 million metric tons and steel exports also dropping by a like quantity. Petroleum accounts for 90% of Houston’s total foreign waterborne exports and the total of the top four foreign waterborne export categories account for 93%.
Houston’s foreign waterborne container exports have shown steady growth over the last 13 years, rising from over 5 million metric tons in 2003 to just over than 16 million metric tons in 2015. The current projection for 2016 indicates a slight drop of about 2 million metric tons to 14 million metric tons with containerized oil products (propane) declining by about 2.0 million metric tons.
Similarly, Houston’s foreign waterborne non-container exports mirror the characteristics previously described for Houston’s total foreign waterborne export activity.
See Figure 4 for Houston’s foreign waterborne imports with details displaying both containerized and non-containerized foreign waterborne imports.

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Value of Houston Trade
In terms of value, Houston’s foreign waterborne imports peaked in 2012 at $83 billion and foreign waterborne exports peaked a year later in 2013 at over $93 billion. The values of foreign waterborne imports will have declined by $36 billion and foreign waterborne exports will have declined by $30 billion from the year these peak values occurred compared to the values projected for 2016.
Comparing actual values for 2015 with anticipated values for 2016, foreign waterborne imports continue to decline by $12 billion. Major commodity groups contributing to this decline are oil ($4.0 billion); steel ($3.5 billion), and machinery ($1.0 billion). Similarly, comparing actual values for 2015 with projected values for 2016, foreign waterborne exports also decline by $13 billion.

Primary contributors to this decline include oil dropping $4.0 billion, machinery declining $4.0 billion, and steel down by $1.0 billion. Driving these declining values in the oil arena is the impact of oversupply that was manifest in late 2014 when OPEC decided to no longer be the “swing” producer and seek market share instead, which resulted in reducing petroleum prices across the board by 50%. Oil also was a factor in declining values for trade in both steel and machinery as the oil industry significantly reduced capital spending for tubular goods and machinery.
On the container side, a $5 billion decline of container imports between 2015 and the anticipated value for 2016 is dispersed across the containerized commodities spectrum, is a result of a sluggish economy.
The value of Houston’s foreign waterborne non-container imports and exports mirror the characteristics previously described for the value of Houston’s total foreign waterborne import activity. See Figures 5a and b.

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Houston Foreign Waterborne Trade Balance
The Houston Port ran a negative overall foreign waterborne trade balance until 2009, when it turned positive and has remained positive ever since. The foreign waterborne trade balance projected for 2016 is a decline of about $1.5 billion from a positive $17.3 billion in 2015 to a forecast positive trade balance of $15.8 billion for 2016. The foreign waterborne container trade component of that total swung to a positive trade balance two years earlier in 2007 followed by the foreign waterborne non-containerized trade two years later in 2009. The non-containerized trade continues to remain positive; driven by oil, while the container trade has dipped to a slight negative trade balance for 2015 and is estimated to remain slightly negative for 2016 as well (see Figure 6).

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Anaylsis of Houston Foreign Waterborne Trade Market Share
The trend in market share for Houston’s foreign waterborne imports and exports, when compared to similar values for the U.S. are distinctly different. Houston’s market share of foreign waterborne imports is relatively steady fluctuating over time between 9% and 10%. Currently hovering near the low end of that range, Houston’s market share of foreign waterborne imports can be attributed to the decline in bulk/break-bulk and container activity somewhat offset by the increase in foreign waterborne oil imports.
On the other hand, Houston’s market share of foreign waterborne exports generally trend upward from just below 10% in 2003 to almost 16% projected for 2016. This gain in export market share is the continued rise of exports of crude oil, refined petroleum products, and liquefied petroleum gases (see Figures 7a and b ).
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Price Volume Variance
Analyzing Houston’s foreign waterborne trade from a price volume variance offers an interesting perspective. The driver of the variance for both foreign waterborne imports and foreign waterborne exports is the price as opposed to the volume. The price of oil, which was very volatile, rising and falling quite precipitously several times during the years 2003-2016, is the key factor driving the price variance during this time period. (See Figures 8a and b)

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Conclusion
Oil and steel, including steel related products, are the dominant commodities driving change in the number of vessels arriving at the Houston Port. The number of tankships carrying oil and oil products is projected to be higher for 2016, when compared to 2015. Conversely, the number of vessel arrivals for general cargo ships and bulkers carrying steel, machinery, and equipment are projected to be lower for 2016 v 2015. Furthermore, the decline in the number of vessel arrivals for general cargo ships and bulkers is slightly greater than the increase in the number of vessel arrivals for tankships carrying oil. The net overall result is a projected annual decline in vessel arrivals of 2.6% for 2016.
However, the projected combined tonnage of Houston’s foreign waterborne imports plus exports for 2016 is greater than the same value for 2015. The effect of rising tonnage combined with declining vessel arrivals suggests that each ship laden with cargo projected to either arrive or depart would be carrying, on average, an additional 1,012 metric tons of cargo during 2016 (average of 20,008 metric tons) when compared to 2015 (average of 18,995 metric tons) and is driven more by exports as opposed to imports.
Overall the key to growth is the oil industry. How oil prices move and the effect not only on oil imports and exports, but also on oil drilling and the related drilling equipment and machinery will be the bellwether for the future.

  • Date November 17, 2016
  • Tags November 2016