High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Brian K. Sullivan (Bloomberg) — A boom in natural gas exports from the U.S. Gulf Coast is raising the prospect of traffic jams at one of America’s busiest ports.
Weather delays from fog and storms are nothing new at the Houston Ship Channel, which links the prolific oil and gas fields of Texas and Louisiana to the rest of the world. But as more cargoes of liquefied natural gas and petrochemicals head across the globe from newly built plants, the tanker bottlenecks are poised to get worse, according to Poten & Partners.
Sixteen months after the first cargo of gas from U.S. shale fields headed overseas, the nation is on the path to becoming a net exporter of the fuel for the first time in decades. The supply surge has created the need for more and bigger roads, pipelines and waterways, prompting a $5.3 billion expansion of the Panama Canal to accommodate the massive tankers used to haul LNG. And with about 20 export terminals already approved or proposed for the Gulf Coast, even more ships are on the way.
“A lot of waterways in the Gulf aren’t ready for prime time,” Gordon Shearer, a senior adviser at Poten in New York, said by phone. “Everything is going into a very concentrated strip of coastline.”
Between 1900 and 2010, Texas’ Galveston County — located at the mouth of the Houston Ship Channel — has been hit by eight hurricanes of Category 3 or stronger, and neighboring Chambers County has been pummeled by seven, according to the U.S. National Hurricane Center. The area around Galveston, New Orleans and the southern tip of Florida gets hit by more tropical systems than anywhere else in the U.S.
Forecasters are expecting the Atlantic hurricane season, which began June 1, to churn out 11 to 17 named storms, compared with the 30-year average of 12. A storm gets a name when it reaches tropical-storm strength of 39 miles (63 kilometers) per hour.
The Calcasieu Ship Channel, which leads to the Port of Lake Charles in Louisiana, is another potential bottleneck for LNG tankers, Shearer said. But Channing Hayden, Lake Charles’ director of navigation, says the port can handle the traffic.
Poten is being “overly pessimistic,” Hayden said. While wind creates delays at the port about 16 percent of the time in March, and the fog season runs from October to April, the backups aren’t extensive, he said.
“We may have fog, but it is not all the time,” Hayden said. “We do have three or four days in a row, yes, but do we have 30 days in a row? No.”
A spokeswoman for the Houston Ship Channel couldn’t immediately find an official available to comment.
Every gas export project has to undergo a suitability study by the Coast Guard, which takes weather and traffic into consideration, said Zach Allen, president of Pan Eurasian Enterprises Inc., a Raleigh, North Carolina-based tracker of LNG shipments.
Shearer said the U.S. government should make it easier for gas export terminals to open on the East and West coasts, despite state and local resistance, to take pressure off of Gulf Coast facilities. He was the chief executive of Hess LNG, leading a failed effort to site an LNG import terminal in Fall River, Massachusetts.
But local opposition to LNG in other parts of the country is one reason why the Gulf, even with its weather challenges, is where developers want to build these projects, Hayden said.
“The Gulf Coast is the only section of the country that welcomes the petrochemical industry,” he said. “This is where the petrochemical industry is, it is where all the pipelines converge, it is the logical place to put it.”
© 2017 Bloomberg L.P
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