US Southeast port services expand for polyethylene export hike
Southeast ports such as the Port of Charleston and the Port of Savannah are preparing to receive a larger share of the growing market for US polyethylene exports to Europe, spurred by the upcoming expansion of ethylene production in North America, port authorities told Petrochemical Update.
With expected congestion at the Gulf’s busiest ports starting in 2017-2018, some polyethylene producers are looking at the next closest and lowest-cost export options that offer a great deal of available empty containers, fast turnarounds, competitive ocean freight rates, high over-the-road and container weight allowances, as well as deep water levels that can handle bigger, more efficient ships.
“The business that is coming is so unbelievable that there’s no possible way even a decent percentage of it is going to be handled on the Gulf. It has to go places to find equipment, containers and vessel space,” said Paul McClintock, senior vice president of Sales & Marketing at the South Carolina Ports Authority (SCPA), which owns and operates public seaport facilities in Charleston, Georgetown and Greer.
“Everybody is looking North, South, East and West to find containers and find ocean services.”
The Port of Charleston is already luring small amounts of petrochemicals export business from the Gulf. Westlake and Chevron rail a total of about 120 railcars/month of Europe-bound resins to the port, according to the SCPA.
Source: Petrochemical Update.
The Port of Charleston projects its plastics export volume will more than double over the next year to about 300 railcars/month in 2016, hiking to 1,000 railcars/month by 2018 on the back of the growing petrochemical production and improved transport links, Byron Miller, SCPA’s director for Marketing & Sales Administration, said.
Activity at the Port of Charleston will be boosted by the 2016 expansion of the Panama Canal and the raising of the Bayonne Bridge roadway in 2017, which are key to efforts to attract larger container ships on the East Coast, McClintock said.
Synthetic resins, NSPF, other chemicals and plastic products make up about 5% of the port’s commodities exports in 2014.
SCPA is deepening the Charleston harbor from the current 45 feet to 52 feet, full post-Panamax depth in 2020, and building a new, 280-acre container terminal that will add 50% to SCPA’s container capacity when it opens in 2020.
The Port of Savannah also expects to reap benefits from the petrochemical production boom and is already investing in harbor deepening (from 42 feet deep to 47 feet) and land infrastructure improvements to accommodate the expected additional traffic.
“The port of Savannah is the closest major US East Coast port to cargo originating in [the Gulf Coast region]. Plastic resin manufacturers, traders, and 3PL packers are looking at East Coast options, and we have had a number of them express interest in Savannah,” said Greg Van Brunt, regional sales manager, Trade Development, at the Georgia Ports Authority (GPA), which owns and operates the Port of Savannah.
US polyethylene exports in the first eight months of 2015 were up 8.3% year on year. Data source: US International Trade Commission (ITC).
The costs: Gulf vs East Coast
Railing petrochemical products from Gulf Coast plants to the East Coast generally means longer transit times and higher rail freight fees, but Southeast ports say producers could make savings from lower expenses for container repositioning and shorter wait times, and get competitive overall export prices to destinations like Northern Europe.
Ocean freight rates vary by port, but the polyethylene ocean freight rates out of the US East Coast to Northern Europe are currently on average $250-300 per 40-foot container cheaper than from the US Gulf Coast, according to Can Fidan, vice president Business Development at New York-based MTS Logistics. Shipping from the US East Coast to the eastern part of South America is currently on average $100-200 cheaper than out of the US Gulf Coast, Fidan said.
The cost difference has shrunk in the last six-seven months, Fidan added, due to a decline in the wider US export market, growing vessel capacities, and the lower crude oil price, which has cut bunker fuel prices.
According to William Staib, president and CEO of Unitcargo Container Line, one of Houston’s biggest Non Vessel Operating Common Carriers (NVOCCs), ocean freight rates to Northern Europe out of the East Coast are currently “substantially more advantageous” than out of the Gulf Coast based on supply and demand.
“Right now you might find about a $700-800 difference on a 40-foot container between New York and Antwerp versus Houston to Antwerp,” Staib told Petrochemical Update.
In contrast to Fidan’s view, Staib said shipments to South America tend to be cheaper out of US Gulf Coast ports than East Coast ports, but there is currently little difference.
“With respect to petrochemicals, the viability of East Coast ports depends on the situation of the resin supply ability,” he said. “My estimation is that if the Gulf Coast ports have sufficient equipment, you won’t see very much going to the East Coast because the rail costs are substantial.”
It costs on average between $200 and $250 to reposition an empty 40-foot container from import surplus markets such as Central and South America to the US Gulf. At a rate of about 3.3 40-foot containers per rail car, it costs shippers about $825 to reposition a rail car worth of products on top of normal ocean freight rates, according to Christian Jensen, president of the Jensen Companies, which owns the only plastics packaging facility at the Port of New Orleans.
In comparison, it costs at least $2,000 more per rail car to ship the same amount of polyethylene from Texas and Louisiana to the East Coast plus the normal ocean freight rates, Jensen said.
SCPA’s Miller argues current rail pricing from Texas and Louisiana to the East Coast is “based largely on niche volumes and is not representative of the future when much larger volumes are put into play.”
“There’s evidently an economic case considering resin is already moving over Charleston and many are working on future execution points here,” Miller said.
New facilities
The leasing of industrial real estate for transloading facilities is also set to rise near Charleston on the back of the expected growth in export volumes.
Frontier Logistics is currently the only plastics handler at the port, with a 25 kg open-mouth bag packing line that can service 3-4 cars per day, a box line that has capacity for 3-4 cars per day, and a seabulk line that can handle six cars per day, according to the company’s website.
In mid-October, Sea Pac, a company that specializes in transloading, warehousing, packaging, and logistics of plastic resins, announced it is constructing a 1.5-million-square-foot export hub for plastic pellets on 107 acres of undeveloped land near the Port of Charleston.
Sea Pac plans to transload polyethylene from railcars to 25-kilogram bags and seabulk containers, though it is considering servicing PVC suppliers as well. The company said the facility will be able to handle up to 650 railcars, in addition to the warehousing and the loading docks.
The company expects to break ground on the new facility in May 2016 and to complete the first set of rail sidings in Q1/Q2 2017.
Sea Pac President and CEO Jon McClure told Petrochemical Update he expects 15% of the polyethylene business to come from manufacturers in the Midwest, with the rest coming from Gulf Coast producers.
McClure decided to locate his facility in Charleston after consulting with brokers and manufacturers in Houston, which advised him to set up a business in the US Southeast, specifically in Charleston, because the Houston market will become oversaturated.
Meanwhile, New Jersey-based packaging, bulk-transfer and logistics services company A&R Bulk-Pak will begin construction in November on a 240,000-square-foot packaging facility close to the Port of Charleston. The first phase of the project – 80,000 square feet – will become operational in May-June 2016.
The company decided to move a lot of its plastics packaging business to the Southeast to avoid the container truck congestion at the Port of New York and to take advantage of new opportunities for resin and PVC exports out of Charleston, said Jason Blinkoff, A&R Bulk-Pak’s executive vice president.
By Nadya Ivanova