Louisiana’s ports face tough road to recoup container market | Business News

The operators of Louisiana’s five deepwater ports on the lower Mississippi River have known for years that the region needed investment to stop bleeding container shipping market share to Gulf rivals. A new report underlines what a monumental task is ahead to win that business back.

The five ports — Baton Rouge, South Louisiana, New Orleans, St. Bernard and Plaquemines — last year commissioned Martin Associates, a Lancaster, Pennsylvania-based shipping industry consultant, to assess the regional cargo market and advise on strategy. The report was presented by its author, John Martin, on Tuesday to government and port officials in Baton Rouge.

While Martin’s report pointed to opportunities where ports can grow bulk and break-bulk cargo traffic in energy, forestry products and metals, it also concluded that it would take large infrastructure investments as well as big economic development wins before the region could begin to win back container ship market share that has been lost to Houston, Mobile, Alabama and other regional ports in recent decades.

“It’s difficult because it’s highly emotional,” said Martin after his Baton Rouge presentation, speaking of the investment choices facing the ports.

Laying the groundwork

The ports on the lower Mississippi have a storied past and remain vital to trade in the U.S., handing almost two-thirds of the country’s grain exports. Collectively, the ports also handle about 20% of the nation’s petroleum and other energy commodities. But volume overall has stagnated amid recurring droughts and floods affecting grain production and river levels. Also, a lack of investment in infrastructure, including storage capacity, and disruptions from tariffs have stymied cargo growth, the report said.

A particular concern has been containerized shipping, where New Orleans has lost out as container vessels have grown to account for about half the value of U.S. imports and exports.

Since 2000, Houston has seen its container volume triple to more than 4 million standard 20-foot units a year. Mobile’s volume has gone from a negligible amount to more than 560,000 units, driven mainly by the Hyundai Motor plant that came online in 2005 in Montgomery and a large Walmart distribution center built in 2011 near Mobile.

Over the same period, the Port of New Orleans’ container volume has remained little changed, at about 500,000 units.

The purpose of the Martin report was to lay the groundwork for the Louisiana Waterways Investment Commission, a body set up last year by Gov. Jeff Landry with the aim of stemming years of parochial infighting over scarce resources and to set out a common strategy to make the state’s three dozen ports — especially the big five lower Mississippi River ports — more competitive.

‘Essential to staying competitive’

The report comes as the state and ports are weighing billions of dollars in potential investment on a new downriver container terminal and related transportation infrastructure.

The focus has mainly been on the Port of New Orleans’ proposed terminal at Violet in Saint Bernard Parish. The cost of that project has been estimated at $1.8 billion, though it is currently under review to take account of an agreement in January with the International Longshoreman’s Association. New cost estimates would also have to factor in higher materials and labor costs since the project was first announced four years ago.

Port NOLA’s project —known as the Louisiana International Terminal — also would require a new road link connecting the terminal with the interstate about 10 miles away. Called the St. Bernard Transportation Corridor, it is still being studied by the Regional Planning Commission. The state has earmarked $230 million for the road project, though its final estimated cost hasn’t yet been determined.

The Plaquemines Port and Harbor Terminal, which last week renamed itself the Louisiana Gateway Port, recently revived its own plan to build a container terminal, which would be located about 35 miles downriver from Violet, on the West Bank of the Mississippi River. The port has pitched that project as costing about $500 million, which would be a public-private partnership with APM Terminals. It would also require hundreds of millions of dollars of infrastructure investment on new road and rail links.

Martin didn’t discuss either project directly but said a downriver container terminal is essential for New Orleans to stay competitive. Already, the larger container vessels cannot make it past the Crescent City Connection to dock at Port of New Orleans’ Napoleon Avenue terminal, which handles almost all containers on the lower Mississippi River.

“If you don’t build it you’re basically out of the game,” Martin said. “But you have to be very cautious how you do these investments and not just ‘build it and they will come,’ but look at it from a pure market standpoint, from a rational cost-benefit relationship.”

The Port of New Orleans is hoping to start construction on the Louisiana International Terminal this year and have the first phase open in 2028. The plan is to ramp up capacity to 2 million standard units by 2040.

However, Martin’s report says that even under the “most aggressive scenario” for container growth, it is unlikely on current trends that volume would reach even the Napoleon Avenue’s current capacity of a million units over that period.

Charles Tillotson, head of Louisiana Gateway Port, said their strategy would be to focus on Dallas and capture a share of that market which is currently supplied mainly from the Los Angeles/Long Beach ports.

The Plaquemines strategy “has a distinct focus on connecting to the Dallas Inland Port via a West Bank Union Pacific Railroad container intermodal connection,” he said, adding that they would hope to capture 2 million units annually of the Dallas market’s total 19 million units over the first decade.

Martin is skeptical of a strategy based on capturing market share currently served by West Coast ports.

His report notes that while the lower Mississippi River ports have advantages, particularly links via all six of the Class 1 rail operators, good interstate highway connections and connections by river barge, there are also major disadvantages that are difficult to overcome.

Lots of challenges

Population size is one. Even the combined New Orleans-Baton Rouge area’s 2.4 million population is dwarfed by Houston’s 7.5 million people, which has allowed it to grow ancillary facilities like Cedar Port Industrial Park, the largest master-planned, rail-and-barge-served industrial park in the U.S.

Location is another. Competition to supply the Dallas or Midwest markets is stiff even with New Orleans’ transportation links, Martin said. Sailing from China and other Asian manufacturing centers to West Coast ports takes about 12 days less than to Gulf ports, so it is still quicker to send them by rail from West Coast ports to destinations like Chicago.

Another problem for New Orleans to overcome is a mismatch in its imports and exports, which adds to shippers’ costs. Coffee beans make up a large portion of container imports, for example, while plastic resin dominates exports. Both are relatively low-value commodities and they are carried in different-sized containers.

The region already is well served by distribution centers in Houston, Dallas and Mobile, so Martin cautions against pinning too much hope on attracting big retail distribution centers to New Orleans. Rather, economic development agencies should try to attract higher value manufacturing to the area, especially in sectors like medical devices and battery production, he suggests.

Martin also points out that investment by Louisiana has been low and less focused than in neighboring states like Alabama, Texas, Georgia and Florida. Savannah’s port on the Atlantic coast continues to see large investment from state and private sources and its container volume has surpassed that of Houston’s.

Port officials largely welcomed Martin’s sober assessment.

“We’re encouraged by the findings of the need for additional funding for the state’s public maritime infrastructure,” Baton Rouge port’s chief Jay Hardman said via email. Baton Rouge has a small volume of container shipping, mostly via barge, and will “continue what has been our successful pursuit of liquid and dry bulk commodities,” he said.

The Port of New Orleans “agrees with the challenges and opportunities that were laid out in the report,” said Matthew Gresham, chief governmental affairs officer.

“We know we’re a small population center that will have to collectively work with our economic development folks toward building a strong trade ecosystem,” he added.

The Napoleon Avenue terminal could benefit from that activity by being used for iron and steel storage, precious metals and warehouse development, as well as project cargo, the report said.

It could even continue to service smaller container ship traffic with Central America by growing business in perishable markets, developing its cold storage capacity further, it added.