North American bulk alive even if economies still lag

This article was published in the October 2010 issue of World Port Development. To receive a pdf of the article in its original format including charts and pictures please send an email to archive@worldportdevelopment.com

North American bulk alive even if economies still lag

This article was published in the October  2010 issue of World Port Development. To receive a pdf of the article in its original format including charts and pictures please send an email to archive@worldportdevelopment.com

With North America slipping back into a malaise of economic uncertainty, bulk and break bulk shipments have been feeling the pinch, but at least some sectors are showing increases in 2010 as Ray Dykes reports.

While major ports in the United States and Canada still languish behind 2007 total tonnage levels, they’re trending the right way. And that’s in stark contrast to the North American economy overall as second half figures for 2010 are analysed and financial commentators start to wonder if the recovery was a mirage. In the US, some even say the economy barely has a pulse after 2.6% GDP growth figures recorded in the half year to the end of June. With all the federal economic stimulus money now out there – USD862 million – “the economy should be roaring ahead,” according to one leading economist. Instead, when adjusted for inflation, the economy is still smaller than it was before the recession. Canada appears to be slipping back to join its neighbours to the south with a disappointing 2nd Quarter GDP of only 2%. The weak result is in stark contrast to Port Metro Vancouver, the country’s leading port and the busiest export port in all of North America, as bulk shipments this year so far are driving a resource rich Canada back onto its feet. Ranking North America’s port by bulk shipments turns up different results than if container traffic was considered. The No 1 port by bulk and break bulk movements on the continent is the Port of South Louisiana followed by the Port of Houston, Port Metro Vancouver, New York/ New Jersey, the Port of Long Beach, the Port of Los Angeles, and further back the St. Lawrence Seaway ports. For one major port at least, bulk is the catalyst to finding the good times again. “Bulk products are powering our recovery,” says Port Metro Vancouver Chief Operating Officer, Chris Badger, with more optimism than most. “Coal has had a very strong year so far with record levels of US coal exports through our two major coal facilities.” Total tonnage through the port was up 20% to 58.4 mt at the half and coal was up 32% at almost 15 mt resulting from strong demand in Asian countries and continuing favourable world market pricing.

Fertilizer recovery
Port Metro has a diversity of bulk products and in the first half, all fertilizers through the port were up 52.4% at 4.5 mt. Both potash and sulphur are seen as vital for world agricultural recovery. Badger says it appears farmers the world over haven’t been fertilizing their crops as much in an effort to save money. But, to ensure sustained crop yields in the future, a surge of demand is expected for fertilizers. Wheat shipments were up 19% at the half year at 3.5 mt while canola had dropped 17.6%. Overall, grain and specialty agricultural crops and animal feed were steady with only wheat showing signs that the world wants to eat with more gusto. Badger notes that more and more specialty crops, which need careful handling, and other break bulk products such as forest products are now going by container – up to 90% of all lumber shipments and 80% of pulp and paper in 2010. Vancouver has adopted a “cautiously optimistic” stance when it comes to looking ahead for its vaunted Asia-Pacific Gateway, but will be strengthened by the continuing demand for commodities from resource-rich Canada, at least through 2011. Alberta tar sands crude oil shipments pipelined to Vancouver for export in Afra-max vessels (largely around 80,000 deadweight tonnes, but below 120,000 dwt) increased by 14.7% in the first half of 2010 at 4.6 mt. Shipments largely go to US buyers in California, but also include the US Gulf Coast.

US Gulf
South Louisiana relies heavily on liquid bulk shipments to and from a rich port area on the mighty Mississippi River between New Orleans and Baton Rouge and total shipments were up 6% to the end of June, 2010. Crude oil continued to lead the way this year in the first six months at 26.1 million tonnes (about 24% of total throughput), while petrochemicals were close behind at 22.1 mt (20%) along with a surprisingly strong maize shipment sector of 23.3 mt (21%). Other bulk shipments include soybeans at 14.2 mt (12.8%), chemicals and fertilizers at 8.8 mt, coal at 2.2 mt, followed by ore/phosphate/rock shipments, concrete/ stone products, animal feed, steel products and wheat. It’s a healthy mix of bulk products and most seem to be in recovery, led by imports of crude oil, which were up 14% in the first six months of 2010 compared to the same period of 2009 when the recession was hurting the nation more. Maize exports were steady (down only 1%), while petrochemicals were up 12%. Barge calls in the port increased 11% in the six months at 25,278 to the end of June, while deep-sea vessel calls rose slightly at 3% to 1,838. The river region has one of the largest concentrations of heavy manufacturing in North America and there is abundant development land and a range of Louisiana State incentives available to lure more businesses into the port area. Another nearby US Gulf port, run by the Port of Houston Authority, revolves around North America’s largest petrochemical complex. Much of the future success depends on the continuing modernisation of the Houston shipping channel if the port is to maintain its edge over other US Gulf Coast ports as a major international port. The authority governs eight terminals and bulk movements were up a healthy 17% in the year to date to July 2010 at 5.9 mt and barge traffic rose by a similar 17% with 2,310 movements while container traffic rebounded by 8% and topped 9.8 mt. But, this is only a small part of the total port picture. As it is, the Port of Houston stretches 25 miles and is a diversified mix of 150 public and private facilities, all with easy access to the Gulf Coast. In 2009, the total port shipped over 199 million tonnes of cargo and had 7,700 vessels call. All cargo movements through June 2010 totalled 70.7 million tonnes indicating the port is still in the recession’s grip.

Long Beach
On the US West Coast, container movements dominate trade talk, but both the Port of Long Beach and the Port of Los Angeles still rely on bulk shipments as part of port diversification. At Long Beach, where total tonnage reached 70 million tonnes in 2009 – the lowest in five years – container traffic was recovering, up 22% by the end of July 2010. And while Director of Trade Relations, Don Snyder, says America never really stopped driving during the recession, the liquid bulk total was still half of what it was in 2006 (26.4 mt), with 2008 being the lowest level in more than a decade at 8.1 mt. With containers on a comeback, Long Beach reported total cargoes up 14.3% to the end of July 2010, but both liquid bulk and dry bulk numbers were still down by 2.3% and 5.5% respectively. One surprising resurgence came in coal shipments, which Snyder described as having been “dead for years.” That’s changing and Snyder says there’s been an “uptick in coal exports” through Long Beach. Coal trains are back from the Powder River Basin (Montana and Wyoming), Utah and Colorado. Tonnages are still modest, but from zero in 2007, they hit 280,000 tonnes in 2008, dropped to 67,000 tonnes in 2009 and were back up to 242,000 tonnes in the first seven months of 2010. Direct loading from the rail cars to the ships is done at Metro Ports Pier G, which also handles petroleum coke. Cement imports have all but dried up leaving two terminals idle as local production
is enough to satisfy the domestic demand. And taking advantage of empty containers heading back to Asia, soybean, animal feeds and even scrap metal are increasingly being loaded into the boxes based on supply and demand and other market conditions, says Snyder.

Los Angeles
Not far away at the Port of Los Angeles, where total tonnage was down in 2009 to its lowest level since 2003, about 8% total tonnage growth is forecast in 2010 as container traffic (responsible for 80% of the port’s revenues) bounces back in growing trade with Asia, particularly China. In 2009, liquid bulk reached 11.4 million tonnes, about half what it was in 2006, while dry bulk only reached 2 million tonnes from a high of 7 mt in 2000, but was still seen as “one of the better recent years.” The port hasn’t had a cement import shipment since 2008 because of declining building activity in California. Port of Los Angeles Marketing Manager, Marcel van Dijk, says 2009 was “very weak” for break bulk shipments which have been in decline since 2006. “I feel the recession is over as manufacturing activity is increasing, but the economy is still very weak in my view.” However, there are signs of life with break bulk steel imports up 249% at the end of Q1 in 2010 as buyers replenished depleted inventories of coils, steel slabs pipes and beams. And, van Dijk says he’s encouraged that a lot of previous break bulk export cargoes, such as scrap metal and cotton are now moving in containers. Over 1mt of scrap metal was shipped as break bulk, for example, but another 250,000 tonnes went by container in 2009. In liquid bulk, crude oil imports from Alaska and the Middle East feed nine local area refineries, which in turn satisfy 35% of Arizona’s needs and most of the oil requirement of Nevada.

East Coast
The major port complex of the US East Coast, the Port of New York & New Jersey is largely a container operation where bulk is secondary. The major liquid bulk sector – mineral fuel and oil – was down 15.3% in the year to June 2010 over the same period in 2009 at just over 2mt. The next major bulk mover, iron and steel, also dipped by 14.3% to 1.4 mt to June and the continuing decline comes on top of a 10.2% drop in 2009 over the previous year at 49.6 million tonnes. As a sign of the lingering recession, auto handling dropped a massive 40% to 617,831 units in 2009. However, if massive increases in percentage points mean much, New York & New Jersey have them for smaller bulk commodities such as rubber – up 140% to the end of June; salt, sulphur, earth and stone up 150%; wood pulp up 275%; and food waste and animal feed up over 1,900%, but that was only to just over 75,000 tonnes over June 2009. China continues to be the No 1 trading partner with the region.

Seaway
Celebrating its 50th year in 2010, the St Lawrence Seaway could look back on an economic downturn “like no other in our history,” according to its President Richard Corte. The  corporation posted the first deficit in its history with a shortfall of USD11 million, despite extensive “belt-tightening.” With 596 fewer vessel transits in 2009, the Seaway felt the impact of the recession on the North American steel industry and iron ore shipments to refineries declined sharply – down 57.7% or 5.3 mt on the Montreal/Lake Ontario section alone. Coal shipments were also down by 23% on that section. Canadian grain shipments dropped on slightly on the Seaway, but were boosted by bumper crops on the US side. This added another 650,000 tonnes (up 45%) through the Montreal sector and another 710,000 tonnes was carried through the Welland Canal. To the end of June 2010, the news has improved for most bulk cargoes. Iron ore is back and shipments reached nearly 4 million tonnes compared to only 1.9 mt a year earlier. Coal has gone from 780,000 tonnes to 1.1 mt, while other bulk is also slightly ahead of the slow pace of the first two quarters of 2009. There was even better news on the US side, with US-flagged lake ships total tonnage up 53% in the first half of 2010. The strongest increase has come in iron ore, while grain has also shown an uptick and could go higher as the market responds to Russia’s wheat crop exports being curtailed by severe drought.

Montreal
Meanwhile, bulk movements through Canada’s second largest port, the Port of Montreal, were ahead at the June 2010 half year by nearly 8% overall. Dry bulk was up 13.7% at 2.6 mt, but liquid bulk slipped 2.9% to 3.5 mt compared to 3.6 mt a year earlier. Iron ore handled by Contrecoeur Terminal showed amazing growth, jumping by 376% compared to the same period of 2009. Montreal handled 7.7 mt of liquid bulk, 2.9 mt of dry bulk and 2.4 mt of grain in 2009.