Port Watch-A Chill or a Simple Draft?

Tom Marian
Buffalo Marine Service, Inc.

The corrections are inevitable. Be it stocks, trade, grades and even politics, nothing climbs, plummets, rises or falls forever. Consequently, there should not be any surprises when overly-optimistic exuberance gives way to rapid devaluation of commodities and stocks. Perhaps the fall is rational or maybe the rapid pricing descent lacks logic, but these things happen. So, what was behind November’s nearly 8% vessel arrival count drop for the Lone Star State’s ports? A bit of fog; an impressively robust October; a softening of oil prices; a further balkanized electorate; or all of the above? Whatever the explanation, this year is shaping up far better than the last.

The good news is, despite nearly every port registering a negative monthly vessel count, all but one port remains in the black for the year. This year’s laggard is Corpus Christi after registering another 11% monthly vessel arrival decline. Great promises are in store for the “sparkling city by the sea” as it dredges an ever-deeper channel to accommodate larger vessels; but these things take time. Thus, 2018 will go down as a “rebuilding year” as it currently trails 2017’s arrival count by nearly 8%. Meanwhile, its neighboring port to the south – affectionately known as the Chess Capital of Texas – still manages to remain ahead of 2017’s vessel arrival pace by 5.5% even after November’s nearly 14% fall. Like Corpus Christi, Brownsville is positioning itself to benefit from the petrochemical export bonanza with convenient access to Latin American markets.

Freeport may not have a sobriquet, but its slogan of “where fun happens” underlies all that is positive within the port. After achieving a year-high arrival count in October, it still managed to hit the 80 mark in November which translates to a 7% monthly wane. To date, it continues to outpace last year’s arrival number by over 2% – a testament to the port’s determination to attract greater volumes of trade on both the import and export front. Meanwhile, the cruise ship capital of Texas – Galveston – was this month’s envy of all as it racked up a nearly 15% gain. This added nicely to its year-to-date tally which remains over 7% ahead of 2017’s numbers. Hopefully, the recent plunge in oil prices will not derail its overall trade numbers.

The port of Sabine provides the marine transportation needs of several cities including Port Arthur which is known as Texas’s Energy City. Indeed, it has been a dynamo as of late as reflected by a vessel arrival count that exceeds last year’s by over 15% – following the most recent monthly uptick of 1%. In fact, November’s arrival count was the high for 2018 prodded by record LPG and oil export transits. To the west, the City by the Bay – Texas City – posted its 2nd lowest arrival number for the year which translated to a 5.7% dip. Nonetheless, the port remains over 4% ahead of 2017’s arrival numbers as, it too, is a beneficiary of the petrochemical export boom that is currently undergirding the state’s economy along the coast.

Activity along the Houston Ship Channel was down dramatically over the last month, as H-Town’s port experienced its largest monthly decline for the year. Yet, even after factoring in the 11.7% plunge, the port has welcomed 2.4% more vessels in 2018 vis-à-vis 2017. There were far more losers than gainers when the numbers were broken down by vessel type; however, there were a few bright spots for the month. In particular, LPG transits were up over 21% resulting in a year-to-date rise of nearly 12%. The only other monthly gainer was bulker transits. Unfortunately, its 4% climb is nowhere near enough to dig itself out of the year-over-year deficit which remains at 16%. There ends the positives for the month as every other vessel category that called upon the port was down.

Sometimes a double-digit percentage fall merely reflects a pause as inventories are built back up after strong demand or drawn down for end-of-year accounting purposes. In light of that, it may be instructive to focus on the year-over-year results to gain a better idea of where things stand. Hence, while chemical tanker arrivals plunged over 24% for the month, they remain up more than 10% for the year. Container vessel arrivals may have fallen 13% over the last month but they are up by 3%. More importantly, 10% more containers have passed through the terminal in 2018 as compared to 2017 with loaded exports seeing greater percentage gains than loaded imports by 2%. Tankers are also enjoying a banner year fueled by crude exports. To date, 5% more of these vessels have passed through the port over the course of the last year. Unfortunately, the same sanguine news is not true for general cargo and ocean-going barges given that both categories are off 3% and 11% respectively for the year.

How does all of this activity stack up against the greater trade picture? Certainly, there are signs of growing sluggishness in the overseas market but the demand for inexpensive BTUs continues to stoke Texas’ economic engine. There are rumblings that consumer confidence is losing steam and another recession may be looming but, given recent retail numbers, that could simply be a pessimistic freshet in a sea of optimism. After all, the final flurry of activity in the nation’s largest export port points to a very strong final surge. Nevertheless, the final push could be the beginning of a prolonged slump that slowly casts a chill upon one of the country’s most vibrant maritime transportation centers.

All in all, there is no hard evidence that the good times are coming to an end. That said, it may be instructive to focus on the laydown yards that line the shores of the ship channel and beyond. As one sage denizen of the port posited in the summer of 2008, “It’s time to sell when those yards remain empty for more than a few months.”

  • Date January 30, 2019
  • Tags 2019 Jan