Mississippi Potential

from Port Strategy September 2021

Oz Reform Debate

MISSISSIPPI MARKET MOVES

With larger vessels now centre stage, extended market reach is a prime target for US Gulf ports. The Mississippi is a strong focus in this respect including for the potentially game changing Plaquemines project. Mike Mundy reports

Container demand in the three major ports serving the US Gulf coast has bounced back strongly from the COVID crisis.

The combined volumes of the ports of Houston, New Orleans and Mobile are likely to exceed 4m TEUs once again this year, following a stagnation in 2019. The structure of this demand is fragmented, with Houston – by far the largest port – primarily focusing on booming Texan demand and Mobile seeing demand linked to the immediate industrial cluster as well as rapidly developing Georgian demand. Houston has longer term plans to develop a third container terminal but in order to maintain its regional role will have to significantly improve vessel access via the Houston Ship Channel. Even with such a major (USD1bn+) project it is unclear if the port will be able to handle the largest new-Panamax container tonnage.

The situation in New Orleans is more complex, with the existing container terminal focused on limited local volumes and strong containerised exports from the immediate hinterland. Interesting developments indicate that this is set to change.

MISSISSIPPI – TAPPING THE POTENTIAL

Historically, New Orleans terminals have been dominated by bulk export flows, with barging of goods downriver being the primary driver of demand. Grains have dominated these flows.

It has, however, long been apparent to industry observers that the Mississippi and its tributaries represent an underused opportunity for container distribution – at least as far as Memphis and St. Louis and, potentially, beyond. The river also provides clear containerised export opportunities that are simply not available for the major Californian terminals.

With congestion in San Pedro resulting in high delivered costs and major trade imbalances on the Asian trades the time is right to capitalise on this potential.

Some significant changes will catalyse developments: 5 The improvement of the Panama Canal has already seen rapid increases in the size of container vessels on All-Water services from Asia. With 14,000 TEU+ vessels in these trades the shipping costs for containers have been transformed from the situation ten years ago when 5000

TEU was the norm. East Coast ports are catching up with this development, but only limited investment has so far been noted in the Gulf ports. 5 Container barging remains in its infancy on the Mississippi, but cost structures are favourable and new investment is scheduled for this environmentally friendly means of serving both the import and export sectors.

8 Figure 1: Asian

Containers to the Midwest - the Mississippi alternative is coming alive

The US Gulf is moving from a secondary to front rank container market ‘‘

5 The ports are improving, with dredging authorised to 50ft for New Orleans and to 55ft for a new Gulf Gateway Terminal (GGT) development in Plaquemines Parish downriver from

New Orleans. The latter project will permit the berthing of the largest new-Panamax container vessels. There are also improvements planned for Houston and Mobile.

These developments alone indicate the potential for a transformation of the much of the Midwest market – or at the very least, the availability of a new low-cost alternative.

PROPOSED DEVELOPMENTS

The primary focus of new potential is below New Orleans on the Lower Mississippi.

The Port of New Orleans is seeking to provide capacity for further growth and has started the process for acquiring land for a new container terminal downriver from the older Napoleon Avenue terminal in St. Bernard Parish. This will be an expensive project and it is not clear if the largest vessels will be easily berthed – even with the completion of the 50ft dredging programme.

A cheaper and, perhaps, better alternative will be the proposed Plaquemines development, located downriver and 50 miles from the open sea. The project calls for up to 8000 ft (2400m) of river berthage with a depth of 55ft (16.7m) and development land of at least 1000 acres (400ha+). Here, land is much cheaper and there is clear scope for developing dedicated domestic container on vessel facilities. There is also the potential to significantly upgrade the existing rail link to enable access to the major rail yards and the intermodal network.

The Plaquemines project offers a compelling transport cost rationale, with use of new-Panamax deepsea container vessels (14,000 TEU+) and relatively low-cost stevedoring and inland vessel operations indicating a cost saving of at least US$400 per 40ft container for imports into the Memphis and St. Louis markets versus use of West Coast terminals. In addition, there are greater export opportunities for medium value manufactured goods and speciality dry bulks from this region which further boosts the attraction of the route. Transit times to Plaquemines may be longer than via West Coast ports but given recent experiences with congestion in Los Angeles/Long Beach this may not be quite the issue it has seemed in the past.

MARKET SECTOR POSITIVES

A deepwater terminal on the Lower Mississippi (as proposed by Plaquemines) would have significant potential: 5 The Midwest market drives total US demand with at least 30m TEU generated annually. Of this, at least 12m TEU is generated in the river states downstream of the major lock systems. With a low cost and efficient container on vessel operation, it is reasonable to think that at least 15 per cent could be served via the river – and perhaps much more. 5 The local one-day trucking market of Louisiana, Mississippi and eastern Texas (Houston) could certainly offer the potential of a further 1-1.2m TEU – significantly greater than the current volumes of the New Orleans facilities. 5 Provision of an efficient rail link to/from Dallas will also provide significant additional potential in direct competition with West Coast and Houston routeings. 5 Transloading of seaborne goods into domestic containers and trailers for onward rail movement is a major feature on the West Coast but is largely undeveloped on the Gulf. 5 Transloading operations at Plaquemines would open up a much broader continental potential hinterland.

The combination of these markets offers a real commercial rationale for development.

DEVELOPMENT PARTNERS

Plaquemines has generated considerable interest from key industry players. Discussions are underway with APM Terminals for the operation and management of the terminal, with APM backing the project as a gateway for the Midwest and as a complementary step to their existing (and expanding) presence in Mobile.

In addition, Plaquemines is in close discussions with the inland vessel operator, American Patriot Holdings (APH), who are committed to the development of new modern LNGfuelled ‘Hybrid’ vessels to link a dedicated inland vessel terminal with the major markets of Memphis and St Louis. An ambitious investment programme will call for an initial four vessels to provide a weekly service. These vessels will offer a capacity of 1800 TEU and are designed for rapid handling. Once established, APH plans to increase services to Cairo, Joliet, Kansas City, and western Arkansas. The scope is enormous, here.

Prior to the commissioning of these new vessels there is major potential to offer a more conventional container on vessel system in order to catalyse development.

Union Pacific is also a major potential stakeholder for the project and Plaquemines has plans to rationalise and improve the existing rail link from Plaquemines to the major railyards off-dock southwest of New Orleans.

GAME CHANGER

The potential is clearly there for new capacity to radically alter the container options for the Midwest and the Texas markets.

The presence of a new greenfield project on the Lower Mississippi has the potential to radically change US container distribution. Handling the largest vessels capable of transiting the Panama Canal with an environmentally sensitive imperative together with multimodal connectivity represents an innovative solution. Current problems (and costs) associated with using the Californian ports have already emphasised the renewed viability of the All-Water option.

The ‘planets’ are aligning for these developments and the underlying transport cost position is compelling. Interestingly, it seems that the potential will now be realised.