REALITY CHECK: Hurricanes Rattle But Do Not Roil Port Volumes

--August Port Volumes Solid

--Some Volume Spillover To Sept Likely

By Vicki Schmelzer

     NEW YORK (MNI) - While hurricanes and other storms had a clear dampening

effect on select port volumes in August, overall trade flows remained strong,

according to MNI's exclusive interviews with port spokesmen for the latest

REALITY CHECK.  

     U.S. Gulf Ports were hard hit by Hurricane Harvey and were closed at times

in late August-early September. 

     However, discussions with port spokesmen suggest that while August cargo

volumes may have been tempered by the hurricanes, they remain solid and still

suggest some widening in the US trade deficit, driven by increased imports.

     The Port of Corpus Christi reopened August 31 after a record six-day

closure in the wake of Hurricane Harvey, with limited restrictions that may soon

be lifted. 

     "Fortunately, it didn't take a direct hit on the ship channel or the

industry there; it went a little bit north to devastate northern parts of our

regions," said John P. LaRue, Executive Director at the Port of Corpus Christi.

     Vessels had to wait for the Coast Guard to give the "all clear" before

entering the Port of Corpus Christi and other Gulf ports. 

     Rather than go to another port, "the vast majority just wait because

they've been contracted with a particular cargo to a particular facility," LaRue

explained.   

     There was a backlog of vessels coming in initially, but port traffic

gradually began to return to normal. 

     Industry in the region for the most part was "back and running within 10

days after the storm hit," LaRue said. 

     Total cargo tonnage (inbound and outbound) at the port was down 13.0% in

August 2017 when compared to August 2016, but this was likely skewed by the

hurricane closure. 

     As per August, year-to-date total cargo tonnage at the Port of Corpus

Christi was 67.2 million tons, up 8.7% over the $61.8 million tons seen as per

August 2016. Total cargo tonnage for 2016 was 94.3 million. 

     "I assume September will still be higher numbers than September of 2016. It

won't be as high as it should have been because we lost in effect probably a

week of cargo," LaRue said. 

     Hurricane Harvey will "affect our revenues and our tonnage for September

and for the year. Some of it is just lost cargo and lost revenue - it just won't

be made up," he said.  

     Port of Houston Executive Director Roger Guenther said the port has worked

through the backlog and is "pretty much back to normal at our container

facilities, with pre-Harvey gate volumes." 

     Unlike other Gulf ports that were hit by high winds, the Port of Houston

was spared the wind, but experienced severe flooding instead, which led to

shoaling, he said. 

     "There's some shoaling in the channel, that the Corp of Engineers is

working diligently on, that is restricting the draft by maybe three feet or so,

but that doesn't affect the majority of the container ships." (The Port of

Houston's normal operating draft is 45 feet), Guenther said. 

     During Hurricane Harvey, there were some ships that opted to unload at

other ports, but ultimately much of this cargo still ended up in Houston,

traveling via barge or other vessels, he said. 

     "We're seeing much, if not most, of that cargo that was destined for

Houston, it still has to come to Houston. We're going to see it; we're going to

see it in September," Guenther said.

     Rebuilding of local areas devastated by the hurricanes could also "drive

some increased imports" in coming months, he said,

     On an annualized basis, the Port saw two million twenty-foot equivalents or

TEUs in 2015, then topped that in 2016, with 2.2 million TEUs. Guenther

anticipated that TEU traffic may hit 2.4 million this year. 

     On the West Coast, the Port of Long Beach terminal processed 692,375 TEUs

in August, which was 8% above August 2016 shipments. This was the second busiest

August ever and the third-highest monthly import total in the Port's 106-year

history. 

     Higher cargo volumes were driven by strong consumer demand for goods, with

August 2017 imports 10.6% above the same month last year. Exports were down

26.3% in August, but this was due to the consolidation of global shipping

alliances from four to three alliances (now 2M Alliance, Ocean Alliance and THE

Alliance).

     Empties, or empty containers returning to Asia, stood at 219,370 TEUs in

August and were up 27% over last year. Empties were up a more modest 6.9% in the

current fiscal year ending Sept. 30. 

     "August didn't reach to the heights in raw numbers that July did, but it

was still a very good month for us," said Lee Peterson, spokesman for the Port

of Long Beach.

     Some ships coming from Asia were delayed reaching the port in August due to

storms in the Pacific, which may bolster September numbers. Looking at Q3 data

as a whole may offer a clearer picture, he said.

     Analysts have suggested that the widening and deepening measures being

taken on the East and Gulf Coasts since the expansion of the Panama Canal will

eventually cause West Coast ports to lose market share,  

     "They'll find, like us, that you make those physical improvements at the

terminal, at the dock and then once you start getting the big ships, then you

start learning how to handle the increase that that brings and that's a learning

curve as well," he said 

     "So, we fully expect that, at some point, they will be able to handle some

of that"- but "that is a few years away, before they are going to be able to

efficiently handle those bigger ships," Peterson said.

     He felt confident that the Port of Long Beach would be able to remain

competitive.  "with the services and the advantages that we offer in terms of

getting quicker to market."

     Despite months of media headlines about trade disputes and pending trade

negotiations between countries, Peterson has seen no spillover into port

traffic. 

     "Global trade is alive and well our numbers are up and a lot of the other

ports in the region are up also. You're not seeing any kind of reduction in

global trade. You are seeing businesses and countries being more and more

willing to actually trade with each other on that business level," he said. 

     Container volumes at sister port, the Port of Los Angeles, stood at 847,857

TEUs in August, a 6.1% increase over August 2016 volumes. Empties were up 9.2%

over August 2016 volumes.  

     "This was the busiest August and the second busiest month in the ports

110-year history. The busiest month on record was November 2016, when 877,564

TEUs flowed through the Port," the Port of LA said in a release earlier in

September. 

     Factoring in August, year-to-date volumes for 2017 at the Port of LA stood

at 6,127,209 TEUs, up 9.02% over the same period in 2016. 

     In early August, 14 of South Korea's container carriers, including Hyundai

Merchant Marine, Korea's larger carrier, signed a "memorandum of understanding"

to create the Korea Shipping Partnership (KSP), according to a Pulse report. 

     The KSP is expected to establish operational guidelines by year end, the

report said. 

     This will be a big deal for U.S. West Coast ports, which see the lion's

share of shipping flows from South Korea. For the Port of Los Angeles and Port

of Long Beach, South Korea trade was up 8.17% and 12.41% year-to-date through

July 2017, according to World City Trade Numbers data.

     On the East Coast, the Port of Virginia reported total TEUs of 240,605 in

August, a 2.2% increase over the same month in 2016 and "the most productive

August" in the port's history. 

     "We're tracking very strong in September and we expect the peak season to

continue; So, through the end of November, we see it to be pretty stable and

strong," said John F. Reinhart, CEO and Executive Director at the Virginia Port

Authority (VPA).

     The Port "has been growing at a 5% compounded annual growth rate for the

last three years and we are sitting slightly above that obviously this year. We

expect it to be a very solid performance for this calendar year," he said. 

     Regarding August/September cargo flows, "other than some disruptions to the

network schedules," the Port of Virginia was largely unaffected by Hurricane's

Harvey and Irma, Reinhart said. 

     On a calendar-year basis, total TEU volumes were up 7.4%, containers up

7.7%, rail up 4.7%, trucks up 9% and barge up 26%, as per the end of August. 

     While East Cost ports have been seeing more a bit more "direct Asia"

service since the expanded Panama Canal opening in June 2016, "there has not

been any major reshuffling" from West to East coast ports, with the flow shift

in the "low single digits," Reinhart said.

     Several port spokespersons voiced optimism about increasing plastic resin

exports given booming global demand. 

     In a special report in August, the Port of Long Beach noted that currently,

45% of plastic resin exports move through the Port of Houston, with 30% handled

through ports in Savannah, Charleston, New Orleans and New York.

     "The ports of Long Beach and Los Angeles handle about 18% of plastic resin

exports, most of that coming from Houston by rail," the report said. 

     Editor's Note: MNI's REALITY CHECK on U.S. ports offers insight into the

U.S. economy, with ramifications for trade and retail sales. The REALITY CHECK

series is intended to complement and anticipate economic data. 

     Advanced trade data for August will be released Thursday Sept. 28 at 8:30

a.m. ET. 

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

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