US Gulf Coast growth tests port tank capacity, local transport links

The busy Port of Houston expects at least 270,000 twenty-foot equivalent units (TEUs) of new plastics export business to develop between 2016 and 2019 as new petrochemicals capacity comes online.

Container loading at the Port of Houston Authority. Image credit: Port of Houston Authority

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The development of shale oil and gas has increased the demand for container shipping and is to usher in a new wave of export business in new plastics and chemicals, Stan Swigart, market development manager of the Port of Houston Authority (PHA), said.

New ethylene and derivatives production capacity around the Gulf of Mexico spurred by shale field development in the US has put pressure on local ports and boosted wider demand for port services across the Southeast at hubs such as Charleston, some 1,500 km east of Houston.

Between 2017 and 2020, petrochemical companies are expected to add 12–15 billion pounds per year of ethylene capacity that will need to be matched with similar increases in production capacity for polyethylene and/or ethylene glycol, Daniel Lippe, managing partner of Petral Consulting Company, told Petrochemical Update.

“Since polyethylene is the largest end use market for ethylene and is transportable by container vessels, exports of polyethylene are the key to enabling all new ethylene capacity to operate at full rates. Exports of polyethylene from Gulf Coast ports have to triple or quadruple during 2017–2020,” Lippe said.

According to the new US Ethylene Plant Construction Costs Report from Petrochemical Update, an estimated 75% of the new ethylene capacity will be used for polyethylene.

"Based on 10 million tons of new ethylene capacity, the amount of polyethylene that has to be exported (in addition to current exports), based on the need to export 70% of total production at a 90% operating rate, will be about 5 million tons," the report said.

Houston, we have a challenge
The Port of Houston handled 67% of the containers that moved through the Gulf Coast in 2014, and is the leading break-bulk and project cargo port in North America, according to Swigart.

Last year, the port's terminals handled 872,728 TEUs of containerized commodity exports, some 28% of which were resins and plastics, and about 17% chemicals and minerals, according to the latest PHA Market Development Report.

 Top containerized commodity exports through all Houston Ship Channel terminals in 2014, measured in TEUs. Source: PHA Market Development, Journal of  Commerce/ PIERS data.

The PHA benefits from a 52-mile long Houston Ship Channel, and several ports along the channel.

Port officials have been in constant contact with petrochemical producer clients to ensure it is poised to meet the growth, Swigart said, but the Port already suffers from congestion issues.

The Panama Canal expansion in 2016 is also expected to have significant impact on cargo in the Gulf of Mexico region.

The PHA plans “significant infrastructure and terminal improvements in the next few years” to ensure that the Port of Houston can accommodate the larger vessels and increased cargo following the Canal expansion, Swigart said.

It will be a “major challenge” for the Port of Houston to meet the growing demand for services due to uncertainty over the exact pace of the growth of the petrochemical capacity in the coming years, said Kevin Cain, marketing manager for Mitsubishi International Corporation, which has an office in Houston.

“From a tank standpoint, the port is facing tight limitations,” Cain said.

Land around the port area could be developed to provide additional tank storage facilities, he said.

Much of the tank capacity at the Port of Houston is privately owned, opening up opportunities for further investments in new infrastructure capacity in the area. The PHA owns only eight of the 150 terminals along the Port channel, according to Bill Hensel, the PHA’s manager of corporate communications.

In one of the largest real estate deals in the region in recent years, in December 2014, Beaumont-based Trans-Global Solutions (TGS) purchased the 10,897-acre Cedar Crossing Industrial Park in Baytown.

The complex lies along the north side of Galveston Bay and Trinity Bay and is across the Houston Ship Channel from the Bayport and Barbours Cut container terminals.

TGS is a land developer and also a rail and road construction firm. The Cedar Crossing site also has direct access to Class 1 railroad lines, a chemical feedstock pipeline distribution system, as well as to a barge dock on Cedar Bayou and to the Texas State Highway 99.

TGS is planning a major expansion of the park’s capacity, providing nearly 11,000 acres of development land along the Houston Ship Channel in the wake of multi-billion-dollar investments in manufacturing facilities along the Gulf Coast.

TGS has said it could provide local infrastructure services to several plastics-manufacturing projects underway in the area, including Dow Chemical’s 1.5 million ton/year Freeport ethylene production facility and Chevron Phillips’s two 500,000 ton/year polyethylene units in Brazoria County.

PHA’s Swigart said other Gulf container ports such as Freeport, Texas; New Orleans, Louisiana and Mobile, Alabama, will compete for the expected increases but “do not have the current or future land capacity to threaten the PHA significantly.”

East Coast ports serve the Southeast markets while the Port of Houston primarily services the very large Texas and to a lesser degree the mid-Americas market, he said.

Houston is also faced with a ship channel that is not as wide as in some other ports and has had to close for hours, even days, after collisions.

About 70 ships pass through the Houston Ship Channel on a daily basis.

Meanwhile, plastics manufacturers that are not located in the Gulf Coast area and are exporting to Europe or Asia will typically transport their material by rail or truck to the East Coast or the West Coast.

“Houston is not a port of interest for [our plastics] business due to the inland locations of our plants in the USA and the extra inland costs we would incur by shipping through that port,” Bob Bestercy, senior manager of North America Logistics for SABIC Innovative Plastics, said.

“Even when the Panama Canal expands, East Coast ports Charleston, New York and Savannah will all stay preferred to Houston due to this reason,” he said.

Although plastics producers outside of the Gulf Coast area may send their material east or west, the Gulf Coast, and the Houston area in particular, is still home to many petrochemical companies, creating a need for shipping out of the Port of Houston, as well as other ports along the Gulf Coast and lower Atlantic coast.

East Coast benefits 
One port that has shipped plastics from producers looking for alternatives to Houston area is the Port of Charleston in South Carolina.

“We’ve handled plastics cargo from two major producers as far away as Houston. This is a fast growing cargo market for us, and we are actively recruiting transloading companies and private investment to the region to grow our handling capabilities,” says Erin Dhand, public relations manager for the South Carolina Ports Authority.

“This industry is so rapidly growing for us that as we add capacity, it is immediately filled. Ultimately, Charleston offers strong fundamentals – a deepwater harbor soon to be the deepest on the US East Coast – at 52 feet, that will be ideally suited as a fast port-of-call for ocean services carrying heavy export goods. We expect to see continued growth in plastics exports through Charleston as handling capacity grows,” Dhand added. 

By Wesley Busch