Steel imports waver, but cargo still solid for port

The surge in steel imports has slowed at the Port of Houston Authority and it’s uncertain whether it will resume in 2013.

But the coming year looks to be another solid one for container cargo and automobile imports, which, like steel, will end the year with a double-digit increase.

The amount of steel shipped into and out of Port of Houston Authority cargo terminals dropped by 10 percent in August and has wavered each month since. Inventories built up as low natural gas prices led to a decline in shale drilling that requires steel.

Still, at the end of November, steel tonnage was up by 29 percent from 2011 and 110 percent since 2010. That means this year will go down as one of the strongest for those shipments.

“The first half of the year, it was real strong and there was only one or two years where it was stronger than we’ve seen,” said Leonard Waterworth, Port Authority executive director. “And then it started tailing off the second half.”

Waterworth said the opposite has been true of containerized cargo, the authority’s bread and butter. These shipments “were soft up front” but are now trending upward after Cosco Container Lines launched direct service between Asia and Houston in July. “You add those together and we still have that overall tonnage increase across the year,” Waterworth said. “So my fear is, what’s going to happen with steel the first quarter (of 2013)? We just don’t know.”

Authority staffers project a modest increase in steel tonnage for 2013, while noting that importers have reported lower-than-anticipated orders.

With domestic steel production ramping up, including new mills in Texas, the staffers are “uncomfortable” with the outlook for 2013 at the Turning Basin Terminal, the authority’s breakbulk facility that handles steel shipments.

Drilling is big factor

David Phelps, president of the American Institute for International Steel trade group, said steel shipments typically decrease at year’s end in Houston because the state taxes inventory then and companies try to reduce stockpiled material.

Phelps described Houston as the nation’s largest steel-importing port most years and one “very heavily focused” on steel used in oil and gas production. The outlook for 2013 will depend largely on the level of drilling activity, which he said is somewhat of an unknown.

“Right now the drill rig count is stable – it seems to be edging up – but it’s kind of hard to know where it’s going to be in the next few months,” Phelps said. “We won’t really have a good idea what to expect for 2013 until the new year dawns and we start to see what early 2013 arrivals look like.

“If it’s a typical year, you’re going to see some improvement in part because people are stripping their inventory to as low a number as they possibly can.”

Phelps also said nonresidential construction, which consumes more steel than the oil fields, has been down in the wake of the recession.

“We’ll see what happens with oil and gas,” he said. “But the key question is: How much more wait time do we have on nonresidential?”

Phelps said steel shipments overall have been healthy in part because of strong demand for cars.

Cars push growth

At the end of November, auto tonnage was up 42 percent from 2011 and up 62 percent from 2010. Units had increased 45 percent from 2011 and 60 percent from 2010.

That’s because Volks-wagen, which has leased lots from the Port Authority for more than four decades, has increased vehicle imports into Houston by 35 percent this year and expects demand to remain strong.

“As a group we have been growing tremendously over the past year and actually over the last several years and that’s really what’s driving our additional imports,” spokesman Darryll Harrison said. “We’re well on track to have another record year in terms of sales volume … so I imagine next year we’ll see an increase in our imports as well.”

About half of the Volks-wagen units imported through Houston come from the company’s manufacturing facility in Puebla, Mexico.

Fueled by coal

About 60 percent of the ships moving through the Houston Ship Channel are liquid barges and other vessels associated with the petrochemical industry, meaning they aren’t carrying containers, autos, breakbulks or other cargo.

Last year, authority-owned cargo terminals handled only about 20 percent of the nearly 170 million short tons of cargo that moved through the port.

On a smaller scale, coal exports through the port have also jumped this year as Houston-based Kinder Morgan expands two coal-handling facilities on the Gulf Coast, including a terminal in Houston it calls Deepwater. At the end of November, coal exports had increased 269 percent from last year to 1.5 million short tons.

“As both sites move to completion, you will see increased throughput,” spokesman Joe Hollier said in an email.