Supply chain capital spending peaks as companies prepare for export tsunami
US supply chain groups are planning at least $155 billion in capital investments and nearly 80% of that spending will take place in the US Gulf, where chemical exports have already begun to soar, according to industry trade associations.
The major oil and gas developments taking place now will cause the United States to become a major exporter of petroleum products and shift the entire trajectory of the global energy system over the next few years, according to the U.S. Downstream Capital Projects, Turnaround and Maintenance Market Outlook 2018 produced by Petrochemical Update.
Increased exports resulted in a $32 billion trade surplus in chemicals in 2017, the American Chemistry Council (ACC) said. Total chemical exports (on a dollar basis) rose 4.9% to $127 billion, while imports rose 2.8% to $96 billion. Two-way trade between the U.S. and its foreign partners reached $223 billion at the end of 2017, a 4.0% expansion over 2016.
Continued gains in manufacturing and exports during 2018 and beyond will drive capital spending and infrastructure investment as the US supply chain prepares for an influx of exports and larger vessels.
In its 2016-2020 Port Planned Infrastructure Investment Survey, the American Association of Port Authorities (AAPA) asked its U.S. member ports how much they and their private-sector partners plan to spend on port-related freight and passenger infrastructure over the next five years. The answer was a whopping $154.8 billion, but the dollar figure did not include every US Port. AAPA said it probably had a little over an 80% participation rate.
U.S. ports are planning investments in terminals, berths, piers, equipment, navigation dredging, expansions, facility rehabs, security, rail and environmental improvements.
Port private-sector partners are planning investments in rails, terminals, equipment, bulk-handling and energy transfer facilities, storage, security, piers and expansions.
With $129 billion in shipments, Texas is the largest chemical producing state and Louisiana (with $51 billion in shipments) is the 4th largest chemical producing state.
Most of the major ethylene crackers coming online will be in the U.S. Gulf.
While some supply chain professionals have been concerned that the US Gulf ports will not have the capacity or equipment to handle the export rush, authorities at Houston and New Orleans say they are well prepared.
Port Houston has invested $1 billion over the last five years to develop infrastructure to handle growth. Another $200 million is earmarked over the next two years to handle future growth.
Houston just took possession of three new Neopanamax ship-to-shore (STS) cranes and will be taking on another three cranes in 2018, bringing its ship-to-shore crane fleet to 26. Port Houston's container terminals currently sit on 662 acres and with buildouts taking place at Bayport Texas, it will grow to nearly 1,250 acres.
“Port Houston is the right place to handle this export of resins that is primarily originated here. Our goals as supply chain professionals is to look at cost and streamlining that supply chain, making it agile and getting that product moving. Houston is well positioned to handle this,” said John Moseley, Senior Director, Trade Development at Port of Houston Authority.
Moseley was speaking at the Petrochemical Supply Chain and Logistics Conference.
A big concern in the industry has been container availability in the U.S. Gulf, which was not traditionally an import destination, but things are changing.
“The big story many may not know is that Houston is one of the fastest growing container ports for imports. We handle more than 1 million TEUs of import business. As of the end of November 2017. container import loaded volume was up 21% year on year,” Moseley said.
Resins account for about 30% of exports out of Houston and the Port is forecasting about a 15-20% uptick in exports beginning in January and stretching out over the next few years.
The Port of New Orleans (Port NOLA) has also been working on finding creative solutions to container availability.
The port initiated a container on barge shuttle service, which brings empty containers from Memphis to Baton Rouge where they are loaded with resins, then shipped by barge along the Mississippi River to Port NOLA for export to overseas markets.
SEACOR AMH, the Port’s marine transportation partner, operates the weekly shuttle service that saw 4,000 TEUs (twenty-foot equivalent units) shipped by barge from Baton Rouge to New Orleans in 2016 and 15,000 TEUs in 2017 as of December 1, 2017.
SEACOR AMH is considering adding a second service to its current weekly schedule with experts predicting 400,000 TEUs of plastic resins exports from the Gulf region between now and 2020, Donnell Jackson, media spokesperson said.
Port NOLA is preparing for export volume growth by growing multimodal capacity, investing in technology, and a new gate system.
“With greater control of the logistics chain with the upcoming acquisition of the New Orleans Public Belt Railroad and its access to six Class 1 railroads, we expect to be able to invest strategically in anticipation of the Port’s growth,” Jackson said.
In 2017, Port NOLA began development of a strategic ‘Gateway Master Plan’ that they expect to roll out in early 2018.
The plan lays out a vision for the next 20 years with strategies for growth, including recommendations for capital investments, operational changes, policies and strategic initiatives.
Currently, Port NOLA container facilities can handle 840,000 TEUs annually.
“Our overall expansion footprint at the Napoleon Avenue Container Terminal allows for a capacity of up to 1.5 million TEUs per year and additional new gantry cranes,” Jackson said.
The nearly $155 billion supply chain spending number does not include an additional $66 billion the AAPA estimates the US government will need to spend on infrastructure to keep up with the growth.
Federal investments through 2020 that could aid freight movement through ports is now around $25 billion, according to Aaron Ellis, Public Affairs Director for AAPA.
“Port, private sector and federal spending on infrastructure must be better aligned for safe, efficient goods movement that will grow U.S. jobs and the nation’s 21st century economy,” Ellis said.
AAPA is pushing for $66 billion as part of the President’s $1 Trillion Infrastructure Package. Port of Cleveland President and CEO William Friedman testified before the U.S. Senate Committee on Environment and Public Works (EPW) on January 10th.
“Seaport cargo activity accounts for 26% of U.S. GDP, over 23 million American jobs, and generates over $320 billion annually in federal, state and local tax revenues,” AAPA President and CEO Kurt Nagle said.
By Heather Doyle