The US Gulf of Mexico ports are enjoying 11.4 percent import growth as the upsizing of vessels on the three all-water services from Asia since 2016 and the expansion of import distribution facilities throughout the region have resulted in more balanced two-way trade. However, China’s tariffs on US exports are stunting the growth in the shipment of resins and cotton.
The lingering dark clouds from the US-China trade war contributed to the Gulf ports’ modest export growth of 4.4 percent in 2018, with China’s tariffs on certain US commodities causing a 13.8 percent decline in the ports’ total exports to China, according to PIERS, a sister company of JOC.com within IHS Markit. China is the region’s largest single market for exports, with the Gulf ports shipping 143,420 TEU in 2018.
The tariffs on US exports were levied last year in retaliation for the Trump administration’s tariffs on more than $200 billion on imports from China. As a direct result of the tariffs, US exports of some commodities grew more slowly to China than to global markets as a whole. In some cases, the tariffs resulted in a decline in exports to China.
Resins exports from Gulf Coast ports to the world increased 15 percent in 2018 over 2017, but resins exports to China increased only 2 percent, according to PIERS. Resins exports to China from Houston increased 8 percent, compared with Houston’s 26 percent increase to all markets. Resins exports from New Orleans declined 26 percent to China, compared with a 4 percent decline to all markets. Resins exports from Mobile to China dropped 5 percent but rose 4 percent to all markets.
Containerized grain exports through Gulf ports to the world declined 40 percent in 2018 from 2017. Paper products exports through Gulf Coast ports to the world declined 10 percent in 2018 year over year, but Gulf ports’ wastepaper exports increased 216 percent from extremely low volumes in 2017. China several years ago began to severely limit imports of wastepaper under its Green Fence program, which is intended to eliminate imports of adulterated scrap products.
Cotton exports to China were hit especially hard by the tariffs. Total cotton exports to China through the Gulf Coast ports declined 70 percent year over year, with shipments from Houston declining 66 percent, from Mobile 96 percent, and from New Orleans 100 percent. By contrast, cotton exports from the Gulf Coast ports to the world grew 18 percent in 2018 from 2017, increasing 13 percent from Houston and 76 percent through New Orleans but dropping 75 percent through Mobile.
Overall, though, ocean carriers last year were attracted to the potential of the region for long-term growth of both imports and exports. The widening of the Panama Canal in 2016 allowed carriers to upsize vessel capacity on the three all-water services from Asia to the Gulf Coast, and an expansion of import distribution centers has led to a more balanced two-way trade to and from the once export-dominated region.
CMA CGM in 2005 launched the first trans-Pacific service to Houston via the Panama Canal. The weekly trans-Pacific services at Gulf ports are the TP18/Lone Star Express operated by Maersk Line and Mediterranean Shipping Co. to Houston and Mobile; Cosco’s GME service to Houston and Mobile; and the CMA CGM PEX3 service to Houston, New Orleans, and Mobile. Cosco in late January added Tampa Bay to its trans-Pacific string, and CMA CGM in May will begin calls to Tampa Bay on its weekly rotation, adding a fourth gateway on the Gulf Coast.
The back-and-forth Trump administration tariffs on more than $200 billion of mostly merchandise imports from China and Beijing’s retaliatory tariffs on mostly US commodity exports had a direct impact on Gulf port volumes. The impact on imports in 2018 may have been positive, as retailers front-loaded merchandise imports to get ahead of 25 percent tariffs that were scheduled to take effect on Jan. 1, 2019, but there could be a valley on the other side of that peak.
Gulf ports’ imports from China increased 17 percent over 2017 to 497,837 TEU last year. However, the front-loading of spring merchandise imports in late 2018 could reduce the ports’ first-quarter import growth this year. China’s retaliatory tariffs contributed to the drop in exports last year, and the decline is expected to continue in 2019 unless negotiations under way succeed in ending the tariff war.
The 10 Gulf ports that handle containers moved 3.3 million laden import and export TEU last year, with the top three ports — Houston, Mobile, and New Orleans — accounting for 88 percent of the total. Imports in Tampa Bay in 2018 increased 26.3 percent to 48,993 TEU, and they should increase further this year with the two new calls there. However, exports from the Florida port declined 88.5 percent to 4,719 TEU.
The Gulf ports have weekly liner connections to Asia, Latin America, and Europe, but China is the largest single market, accounting for 19.4 percent of total Gulf imports and exports.
Houston dominates the Gulf Coast import trade, with a year-over-year increase of 10.4 percent to just shy of 1.2 million TEU in 2018. Mobile’s imports rose 17.7 percent to 143,563 TEU, while New Orleans saw inbound volume increase 11.3 percent to 124,825 TEU. Houston was the only one of the top three ports last year to grow its exports, which were up 8.3 percent to 1.03 million TEU. New Orleans exports dropped 7.4 percent to 276,877 TEU, and exports from Mobile slid 5.9 percent to 125,707 TEU.
A significant force behind the overall growth of the Gulf Coast’s container trade in recent years has been the establishment of import distribution facilities throughout the region. Gulf ports historically had been export dominant, with agricultural commodities, forest products, and petrochemical products — which today include resins — being the main exports.
In 2005, Walmart located a large import distribution warehouse in Houston; today, the largest US retailer and a number of other retailers and direct importers such as Lowes, IKEA, and Sherwin Williams have import warehouses in the region. As in ports across the country, e-commerce fulfillment, led by Amazon, is also driving import growth.
Last year, trade in the Gulf region was in relative balance, with containerized imports totaling 1.7 million TEU and exports, 1.6 million TEU. The growth in imports led directly to the expansion of the two weekly all-water services from Asia because carriers deploy additional capacity to the trans-Pacific trade lane based on imports, which command freight rates four times or greater per container than exports.
Growing imports can actually contribute to a healthy export trade because the imported containers, when unloaded in the region, can be repositioned efficiently and at a lower cost to exporters’ facilities compared with having to bring them in by truck or rail from container surplus locations. The import distribution facilities are highly utilized, with the vacancy rate for industrial real estate space in Houston and Mobile running at 5 percent or lower, according to CBRE, an industrial real estate firm.
Gulf ports account for 56.8 percent of US resins exports, with Houston handling 41.4 percent, according to PIERS. The region had pinned its hope for booming exports in 2019 and beyond on shipping resins to the huge China market.
Nick Vafiadis, vice president of plastics at IHS Markit, told the Global Plastics Summit Nov. 1 in Chicago that eight polyethylene plants are scheduled for completion in 2018-2020, and four more will be completed on the Gulf Coast after 2021. He told the plastics summit the original projection for resins exports to China in 2019 was 4 million tons, but if the tariffs on US resins continue in effect, “It’ll be half of that.”
If a timely resolution to the US-China trade war is not reached, a projected 50 percent increase in resins exports by the end of 2019 and doubling of exports by 2022 most likely will not occur, Vafiadis said. US producers will have to develop new markets in Asia, Europe, and Latin America, which is nevertheless positive for Gulf ports that have services to those locations.