Evolution of the Top Ranked Ports; Now You See Me; Now You Don’t

By Dave Cooley, GHPB

The dynamics of waterborne foreign trade can range from the mundane to the radical, from the ordinary to the exceptional. This fifth installment of the Port Bureau’s analysis of waterborne trade discusses the top ports by import and export values for both cargo value and tonnage. By comparing the recent ranking to the historic rankings and analyzing the reasons for the ranking changes, this article will lend insight into some of the factors that impact a port’s success.

The ports chosen for this analysis were those ports that in 2003 were contained within the list of ports that bounded the limits of the top eight ports for 2014. While perhaps statistically an unscientific sample, these ports offer representative examples of events that can affect not only the growth of a port, but also its very existence. Competition between ports to handle the international trade of the U.S. is quite keen, and shippers, who are ever vigilant of the cost structure, are always seeking new opportunities to capture efficiencies. These competitive pressures have resulted in the decline of the number of ports participating in foreign trade from 195 in 2003 to 187 in 2014.

The drivers of a port’s success can be classified into two basic categories:

  • Controllable events, which are usually endogenous, and,
  • Non-controllable events, which are exogenous happenstances.

2015 HALF Blank RomeThe results for each category can be either a positive outcome (success) or negative outcome (failure). An example of a controllable event would be the execution of a well-considered development plan where the outcome is either positive or negative. A non-controllable event would be reaping the benefit or suffering the consequence of an exogenous happenstance whose outcome can be either a one-time random result or a continuing outcome. Whatever the circumstance, the ranking of the top ports changes over time as the dynamics of the waterborne foreign trade are revealed.

As a reminder from previous installments, data are from a database created by the U.S. Census Bureau that is sourced to international trade information collected by the U.S. Customs and Border Protection.

Evolution of the top ports for 2014
Table 1 lists the top ports for 2014 for imports and exports as well as for value and tonnage. It compares the position of the 2014 top eight ports to their positions held in 2003.

2016-1-26 top 8 ports v2
Value – Imports and Exports:
The top ports in value for both imports and exports for both 2014 and 2003 are generally the container ports handling the flow of a large number of containers filled with high value-added finished or semi-finished goods that are essentially ready for consumer distribution without any further manufacture or processing.

  • Imports: Los Angeles, Newark, Long Beach, Savannah, Charleston, Norfolk-Newport News, and Tacoma. While Norfolk-Newport News and Savannah were not in the top eight in 2003, ranking ninth and twelfth, respectively, their new position suggests an opportunity for rising potential. Ports included in the top eight for 2003, but not in the top eight for 2014 include Baltimore and Seattle, which were ranked number six and seven, respectively.
  • Exports: Los Angeles, New York, Long Beach, Norfolk-Newport News, Savannah, and Charleston. Savannah was the only 2014 port not in the top eight in 2003, replacing the only drop-off for 2014, Oakland.
    Oil ports as interlopers: Houston appears as a top eight import port for both 2014 and 2003, and Houston and New Orleans appear as top eight export ports for both 2014 and 2003.

2014_GWI_cropped-revisedTonnage – Imports and Exports:
The top tonnage ports for both imports and exports are generally the “oil” ports.

  • Imports: – Houston, Port Arthur, New Orleans, Corpus Christi, Morgan City, and Gramercy. Comparing 2014 with 2003 suggests that an oil port in the top tier is not a new phenomenon as the 2003 list includes all of the 2014 tonnage ports except New Orleans, which dropped to number 10, and Gramercy, which is off the list. Ports in the top eight for 2003 but not in 2014 include Philadelphia (an oil port as well as a container terminal) as number two and another oil port – Lake Charles – as number eight.
  • Exports: – Houston, New Orleans, Gramercy, Port Arthur, and Corpus Christi as oil ports. For 2003, Port Arthur drops out and Corpus Christ drops to number 11.
  • Container Ports as interlopers: Philadelphia, which falls into both oil and container port designations, was a top port in the import category for 2003, but not 2014. In the export category for 2014 Norfolk-Newport News, a large coal exporter as well as a container port, and two container ports, Long Beach and Los Angeles, are all included in the top eight. In 2003, two additional interlopers, Portland and Tacoma, are included in the top eight, but are replaced in 2014 by the oil ports Port Arthur and Corpus Christi.

Ports Falling In Rank
Imports – Value
Baltimore ranked sixth in 2003 and ninth in 2014. The value of waterborne foreign imports moving through the port of Baltimore grew essentially across the board during the 11-year analysis period. However, Baltimore’s rate of growth is overshadowed by other faster growing ports, such as Charleston and Norfolk-Newport News, allowing its rank to slip to one slot below the top eight. Charleston’s trade differential with Baltimore expanded from a $5.6 billon advantage in 2003 to a $10.7 billion advantage in 2014. Norfolk-Newport News was at a negative trade differential with Baltimore in 2003, coming in almost $3 billion behind Baltimore’s import value, but increased to a positive advantage of over $7 billion in 2014. This reflects the continual demographic movement of the population to the south and west, an uncontrollable factor for Baltimore.

Seattle fell from its seventh rank in 2003 to sixteenth in 2014. In 2003, Seattle’s waterborne foreign imports were valued at $19.5 billion and averaged $28 billion from 2004 through 2012. Then it dropped by a third to $21 billion in 2013 and another third to $14 billion in 2014 as the effect of competitors offering better rates was realized. For example, the Port of Vancouver in British Columbia combined three smaller local ports into one that offered various efficiencies of scale, enabling it to capture the service to Asia of a key Seattle customer, China Ocean Shipping Company (COSCO). COSCO’s move north to Canada also allowed it to avoid the Harbor Maintenance Tax, which saved $130 on each container. Likewise, the Port of Tacoma was able of offer Mitsui OSK Lines a lower cost structure that resulted in shifting the business south from Seattle to facilities located at Tacoma. In an effort to re-ignite growth, the ports of Seattle and Tacoma have proposed, and the FMC has recently agreed to, a joint management venture that will oversee the operations of selected container, break bulk, and vehicle delivery terminals to achieve the scale necessary to sustain growth. The Seattle story is one of a port that correctly read the “tea leaves” but initially exhibited an inability to overcome internal issues regarding amalgamation.

PrintExports – Value
Oakland ranked eighth in 2003 and ninth in 2014, losing rank to faster growing ports despite its own significant growth. The value of exports at Oakland more than doubled between 2003 and 2014, rising from $8 billion to over $20 billion. The key product export, foodstuffs, grew from $2 billion, or 25% of total exports, in 2003 to $10 billion, or 50% of total exports, in 2014. While managing a reasonably diversified portfolio of exports, the regional reach and scope of the port as opposed to a national reach can be a constraining factor affecting growth. Oakland’s geography and established infrastructure are two obstacles to growth. However, it is a significant regional contributor with good harbor and port facilities that continues to attract customers, and it maintains a satisfactory and sustainable position.

Imports – Tonnage
Philadelphia suffered one of the more pronounced drops, falling from second in 2003 to sixteenth in 2014. The waterborne foreign import tonnage at the Port of Philadelphia dropped from 49 million metric tons in 2003 to 12 million metric tons in 2014, a 75% drop. The primary contributor to this drop is the reduction in energy imports of 33 million metric tons, or a drop of 78% over the 11-year analysis period. This is the result of U.S. shale oil delivered by rail displacing waterborne foreign oil imports. Over the 11 years, however, the Port of Philadelphia attempted to adapt to this evolving change as evidenced by the change in oil’s market share. In 2003, oil’s market share was 86%; in 2014 it was 50%. This suggests that as oil declined, other commodity groups such as foodstuffs; metals; and salt, sulfur, lime, and ores maintained a relatively constant dollar value over time, and as such became a larger percentage of the, albeit smaller, total. With the ban on crude oil exports lifted, refiners now face buying oil at the world market price as opposed to the previously discounted price for stranded indigenous oil production. This may result in an unsustainable financial hardship to the Philadelphia refineries and could result in shutting-down. Should this occur, maintaining the status quo may also be unsustainable, and the remaining port traffic could be at risk to interlopers such as Baltimore or Newark.

Lake Charles fell only a single spot, from eighth in 2003 to ninth in 2014. Lake Charles is an oil port whose refining facilities perhaps did not expand quite as rapidly as those of its neighbors New Orleans, Morgan City, and Gramercy, which is considered a random outcome.

Exports – Tonnage
Portland ranked seventh in 2003 and thirteenth in 2014. The annual waterborne foreign exports emanating from Portland averaged 12 million metric tons, with each year’s value ranging from 3 million metric tons below to 1 million metric tons above the average tonnage during the 11 years. The top tonnage exports include wheat (grains and milling products commodity group) and soda ash (chemicals, fertilizers, plastics, and rubber commodity group). During 2014, these two commodity groups totaled 11 million metric tons, or 92% of the total of 12 million metric tons. Further dampening the outlook, all container traffic has left the port, leaving only these two commodities to support total port activity. Labor issues and waterway congestion were considered factors contributing to the decision of two shipping lines to discontinue service to Portland in early 2015. This is considered a controllable event.

Ports Rising In Rank
Imports – Value
Norfolk-Newport News ranked ninth in 2003 and seventh in 2014. The value of Norfolk-Newport News waterborne foreign imports grew from $17 billion in 2003 to over $41 billion in 2014 or 140%. Since this rate was slightly above the growth rate of imports for all of the eight top ports of 112%, it enabled the port to move up two positions. The $24 billion positive change in the value of waterborne foreign imports was distributed throughout multiple commodity groups with no particular standout. Norfolk (50-foot depth) is the container terminal and Newport News (45-foot-depth) is the break bulk and roll-on roll-off facility. At least some of its success can be attributed to its early dredging to 50 feet and the consolidation of the discrete terminals under a single governance organization, the Virginia Ports Authority.2013 Half Trustmark

Savannah increased in ranking from twelfth in 2003 to fifth in 2014. The value of Savannah waterborne foreign imports grew from $14 billion in 2003 to over $52 billion in 2014, or 270%. Since this rate was significantly above the growth rate of imports for all of the eight top ports of 112%, it enabled the port of Savannah to jump seven positions in the ranking of imports by value The primary commodity contributors to the $39 billion positive change include boilers, machinery, motors, and electronics ($10 billion); textiles and apparel ($7 billion); chemicals, fertilizers, plastics, and rubber ($4 billion); metals ($3 billion); and transportation equipment ($3 billion). Innovative, long-range planning that began over 20 years ago included the foresight to designate land that would satisfy not only current but future warehouse needs, as well as requirements to support the container trade. The land is now occupied by a large number of big box companies. In addition, the location offered a logistical advantage with easy access to two major interstate highways, I-16 going west and I-95 north and south. Channel depth is currently 42 feet with approval for 47 feet. These key elements support the rapid rise of the Port of Savannah’s waterborne foreign imports.

Exports – Value
Savannah’s infrastructure improvements aided its exports, as well, and it increased in rank from ninth to seventh. The value of Savannah waterborne foreign exports grew from $8 billion in 2003 to over $28 billion in 2014. Its 250% growth rate is significantly above the growth rate of exports for all of the 8 top ports of 176%, enabling the port of Savannah to move up two positions in the ranking of exports by value. Increases in boilers, machinery, motors, and electronics ($5 billion); chemicals, fertilizers, plastics, and rubber ($4 billion); wood, cork, paper, books, and paperboard ($3 billion); transportation equipment ($2 billion); and textiles and apparel ($2 billion) account for $16 billion of the $20 billion increase in the waterborne foreign exports from 2003 to 2014.

Imports – Tonnage
New Orleans improved its rank from tenth in 2003 to fifth in 2014. Waterborne foreign tonnage imports at New Orleans averaged 29 million metric tons over the 11-year analysis period and ranged from a low of 24 million metric tons in 2009 (the Great Recession) to a high of 38 million metric tons in 2006. In 2014, waterborne foreign tonnage imports were 32 million metric tons — a rise of 4 million metric tons from 2013, and were near the middle of the 11 year range. From 2003 to 2014, waterborne foreign imports increased by 7 million metric tons, bolstered by a 7 million metric ton rise in energy imports and 2 million metric tons increase across another two commodity groups, viz., chemicals, fertilizers, plastics, and rubber; and metals. This increase is offset by a 4 million metric tons decrease in salt, sulfur, lime, and ores. While the Port of New Orleans did not experience a meteoritic rise, waterborne foreign imports at a number of other ports declined beginning in 2009. New Orleans imports have remained relatively stable, enabling its steady rise in ranking.

Exports – Tonnage
Corpus Christi ranked 11th in 2003 and 7th in 2014. Waterborne foreign tonnage exports from Corpus Christi grew over 10 million metric tons to reach 12 million metric tons in 2014. The rise in oil exports from 1 million metric tons to over 9 million metric tons is a result of increased oil production from shale formations located in the area, an exogenous event, and explains essentially the all of the increase.

The impacts of either controllable or non-controllable events play an important part in a port’s comparative ranking. As the above examples show, maintaining status quo or moderate growth is sometimes not enough to remain a top-ranked port. Table 2 encapsulates the results of this assessment of the evolution of the top ports of 2014.Table 2 Causes of Evolution

Since April 2015, the Port of Portland’s container terminal has spent most of its time as an empty concrete lot bereft of cargo. While some events may be out of a port’s control, ports should remain attuned and responsive to changing circumstances.

Ed. Note: The sixth and final article in the waterborne trade series will appear in the March 2016 Port Bureau News. This article, “A View from the Top,” suggests a process where the maritime community can monitor the pulse of the port.

  • Date February 5, 2016
  • Tags February 2016