November 2015 Port Bureau News

Port Bureau November 2015

Greater Houston Port Bureau

News

Spotlight on PTRA

U.S. Waterborne Foreign Trade Imports and Exports www.txgulf.org

Port Bureau

News

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Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Christine Schlenker Copy Editors Christine Schlenker Judith Schultz

3 Captain’s Corner

10 U.S. Waterborne

4 Port Watch

22 Windmills

Beer Lessons

It’s the Little Stuff

Foreign Trade Imports and Exports

Updates

Despite Subsidy Uncertainties, Outlook Bright for Port of Houston Wind Power Equipment

8 Beach

24 Spotlight on PTRA

Notable Beach Nourishment Project Using Galveston Channel Dredged Sand Nears Completion

32 Greater Houston

6 Port Bureau Nourishment

Coffee Association Annual Luncheon

Featuring Christi and Ragan Bond, Independence Coffee Company

Art Director Kyle Beam Writers Kyle Beam Dave Cooley Bridget McGee Judith Schultz Photographer Kyle Beam Cover Photograph Mike Rusk, PTRA Port Bureau Staff Jeannie Angeli Al Cusick Megan Essenmacher Cristina Gomez Janette Molina Elizabeth Sandefur Patrick Seeba Printing Company DiPuma Printing and Promotional Products www.dipuma.com

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For information about the Port Bureau: Phone: (713) 678-4300 Email: info@txgulf.org For information about the Port Bureau News stories or advertising: Email: editor@txgulf.org

Captain's Corner Beer Lessons

The ability to creatively diversify a product or service is a major theme in the success of American businesses. I was particularly struck by this while listening to a story about Anheuser-Busch InBev (AB InBev) on NPR recently. The company is pursuing the purchase of SABMiller, which would make the conglomerate something of a “super brewery”, controlling about 30 percent of global beer sales and nine of the best-selling brands like Budweiser, Miller, and Stella.

What really grabbed my attention here, though, was AB InBev’s history of stabilizing its business during tough times, a tribute to the acumen of the original Busch family. According to the report, the family acted “with confidence” that it would triumph through the 18th Amendment’s national ban on alcohol. They diversified into soft drinks and refrigerated railroad cars. They brewed up low-alcohol beer and Budweiser barley malt syrup. In an absolutely genius move of marketing and entrepreneurship, they sold corn malt syrup together with baker’s yeast. It came with a label that warned “do not add the yeast to the other ingredients or risk fermentation.”

Cunning consumers took the warning for what it was: instructions to brew your own.

It sold well, and Anheuser-Busch was still in business 13 years later when prohibition was over.

Anheuser-Busch’s ingenuity is something that we can all appreciate.

Diversifying business – or maybe we can just say adaptability – is crucial to survival.

Our own history in the port region is an encyclopedia of adapting and diversifying.

When we needed a port, we adapted a bayou into a channel. When cotton faded, we diversified into oil. When crude oil looked limited, shale emerged. It’s repeated proof there are always other innovative ideas out there, and Houston is a good place to develop them.

I just got back from my annual meeting with the Maritime Information Services of North America (MISNA), in Portland, Oregon, where I met with 13 other marine exchanges from around the country. We get together annually to drink beer and discuss ideas for improving the timeliness and accuracy of our information. One of the projects I shared with them was our Global AIS (Automatic Identification System) on Space Station (GLASS) grant project. We are scheduled to go live with tracking vessels globally in the spring using the International Space Station as a platform to receive AIS signals. Because the ISS’s low orbit altitude and near-constant communication (as compared to satellites with AIS equipment), we think it is the ideal platform to initiate expansion into global ship tracking. We also think the distillation of the new data

CAPT Bill Diehl, USCG (Ret.), P.E. will yield at least a pint or two of inventive ideas to better serve our members and the maritime community.

Houston is known for energy, medicine and space. The Port of Houston is known for petrochemicals, break bulk, and containers.

What will we be known for next? There is no doubt that many challenges await us, but the potential for greater – and even better – things await, too. They simply haven’t been discovered yet! The Port Bureau, like the Busch brewing family, is confident about steering through the obstacles that might “prohibit” growth in the maritime community with our members. We’re here to be your port information hub and to keep bringing the industry together for planning, progress, and prosperity. We do it through our networking events, like the Commerce Club, Captain’s Cup Golf Tournament, and our Annual Dinner and through our forward-thinking sessions with the port efficiency committee and dredging committee. We also do it through our contributions to maritime education and community outreach to bring wider awareness to the value of the port and your business.

We want to hear from you about what you think is the next great step in diversifying for long-term success. Give me a call – or better yet come in. Maybe we can try combining that corn malt syrup and baker’s yeast, and see if we can ferment our own genius method of innovation.

ò

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© Christine Schlenker

PORT WATCH

It’s the Little Stuff

Tom Marian, Buffalo Marine Service The bulk of the Texan ports remained ensconced in the late summer slumber as reflected in a cumulative vessel count that was 2% below that of the previous month.

Even more disconcerting was the fact that the inland tow movements throughout the Houston region hit bottom for the year with a 6% drop, indicating that commodity movements and related petrochemical activity was softening due to dampened demand on the global economic front. There were a few additional signs of this as the oil-centric ports of Texas City, Sabine, and Corpus Christi all registered vessel arrival declines in September. Overall, the end of the third quarter was lackluster at best.

On the positive front, year-to-date vessel arrival figures for the state remain 2.6% above those of 2014. The port at the terminus of the GIWW, Brownsville, continues to lead the fray with a rather impressive annualized gain of nearly 30% following the most recent monthly jump of 18%. This primarily reflects the fact that crude from the Permian Basin continues to

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flow through the port and its foreign trade zone exports are amongst the highest in the nation. Meanwhile, the Port of Corpus Christi’s 2015 vessel-arrival gains continue to erode as the Eagle Ford shale rig count persistently remains below 100. After the most recent monthly wane of 10%, the yearto-date gain stands at a paltry 2%. The Port

of Sabine is somewhat in the same boat, albeit for different reasons. Specifically, its most recent monthly performance, which was 4.3% below that of the previous month, dragged the year-to-date arrivals down to 5.6% above 2014’s. This was the third consecutive monthly decline for Sabine which was primarily attributable to a

port watch

slackening demand for distillates.

Freeport – Brownsville’s performance antithesis – logged another 10% fewer vessels on a month-to-month basis resulting in a similar decline for the year.

Texas City is also off for both the year and the last month as it welcomed 6% fewer vessels for the month and 4% less for the year. Meanwhile, the Port of Galveston has stubbornly climbed into second place in the year-to-date-arrival arena despite the fact that it essentially broke even for the month.

Granted, it did not hurt that the movement of molten sulphur peaked for the year.

What of Houston? The Bayou City’s gem was the only major port to register a gain for the month. The 2.2% monthly gain bolstered the annual arrival numbers by nearly one additional percentage point to 3.3%. Nearly all of the major vessel categories that routinely call upon the Port of Houston were in the positive column. Tows that ply the high seas racked the largest monthover-month percentage gains at 23.5%.

Unfortunately, this substantial climb could not pull this category into positive territory as it remains 5% in the red for the year. Oil

tanker arrivals were up 14% for the month.

This boosted its running totals for the year by 2% over 2014. Hence, the battle between the bulls and the bears in terms of 2015 logging more tank vessel arrivals vis-à-vis 2014 is currently being won by the bulls.

LPG’s 2015 arrival numbers continue to eclipse those of 2014 by a staggering 25%.

Nonetheless, things were off in this realm for the month by 4%. Chemical tankers also rallied in a robust fashion for the year with a 21% year-to-date climb after three straight months without a percentage drop.

On the non-liquid side of the trade equation, bulk carriers had a solid month with 11% more arrivals than the previous month. Unfortunately, this category has seen 11% fewer vessels this year. General cargo has fared a bit better yielding a loss of only 8% for the year; however, the monthly decline was rather dramatic with 16 fewer vessels (i.e., 25.5%) transiting the ship channel. Car carriers have been consistent over the entire year and have matched 2014’s arrival numbers. For the most part, the same is true on the container vessel front given that both the monthly and annual

percentages are unchanged. Of course, the number of containers is more telling than the number of container ships calls. That said, there were 8% fewer containers over the month on the same number of vessels as the previous month. The silver lining is that the cumulative number of containers that have passed across the wharves is still 12% higher than last year.

With three quarters down and one to go are there any signs that 2015 will top that of 2014 and 2016 will be more of the same? On the surface that appears to be the case, but there are indications that the maritime trade picture is poised to trend down rather than up. It’s comprised of those same murmurs that preceded the downturn of mid-2008.

Anecdotes of cancelled ground breakings, significant and unexpected tapering of project cargoes, fewer containers, less steel, soft barge rates, declining rig counts, energy company layoffs, fewer tank cars on unit trains, 12% fewer piloted vessels on the Houston Ship Channel in October and a host of little things that give one pause.

ò

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port bureau updates

December Commerce Club Saluting Captain Mike Morris, Houston Pilots Captain Mike Morris, Presiding Officer of the Houston Pilots, reflects back on his 41 years in the maritime industry and shares his best sea stories at a special Commerce Club Luncheon on December 10. Captain Morris is stepping down from his position as Presiding Officer as he prepares for retirement in the spring of 2016.

Captain Morris grew up around the water in the Miami, Florida area, knowing he wanted to join the oceangoing business from early days. A graduate of the U.S. Merchant Marine Academy, his career spans 21 years with the Houston Pilots and 20 with Exxon, 13 of which he was a Master. In 2005, Captain Morris was the Port Bureau’s Maritime Person of the Year.

Join our Premier sponsors the Houston Pilots and our table sponsors American Commercial Barge Lines, Blades International, Buffalo Marine Service, Enterprise Products, Houston Fuel Oil Terminal Company, Houston Mooring Co., Intercontinental Terminals Company, Kinder Morgan Terminals, Moran Gulf Shipping Agencies, Port of Houston Authority, Richardson Companies, Schröder Marine Services, Shell Trading (US) Company, Suderman & Young Towing, Targa Resources, Texas Terminals, Vopak NA, and West Gulf Maritime Association at this exceptional holiday event. Register now by calling the Port Bureau at (713) 678-4300 or by visiting www.txgulf.org/commerceclub.php.

Port Bureau Upcoming Events

Port Bureau Membership Renewal

2016 Commerce Club Lunchons

Port Bureau membership renewals are coming soon. Respond early to ensure you receive an uninterrupted flow of all your member benefits. Not a member yet? New member enrollments will receive December and all of 2016 included in their $750 premium!

Take full advantage of your company profile in our printed Member Directory that is included with membership. The directory profile page highlight’s your company with space for the following:

Mark your calendars for the second Thursday of each month for the 2016 Commerce Club luncheon series!

We are lining up an exciting roster of speakers – watch your inbox for announcements!

The Commerce Club provides maritime, transportation, and energy industry professionals direct access to business leaders in the port community. Join 200+ executives and entrepreneurs from the port region to open doors for new business relationships and gain new insights into the logistics of the Houston Ship Channel industry markets.

• Company Logo, website, and primary address and telephone numbers • Two company contacts, with space for title, email addresses, and mobile phones • Company description • Listing of services provided or room for additional descriptive content • Conveniently indexed by company name and company type.

Need more space? Consider purchasing a directory ad that will run adjacent to your member profile page. Ads are full page/full color. Need help refining your profile? Call us at (713) 678-4300. We’ll be happy to lend a hand with suggestions or more information.

Make the most of your membership. Renew today.

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The 7th Annual Captain’s Cup Golf Tournament November 2, 2015 • 4-Person Shamble

Presented By:

Thank you to all of our sponsors for supporting the 7th Annual Captain’s Cup Golf Tournament.

Dinner SponSor:

LongeSt Drive

Lunch SponSor:

Dinner Bar:

practice range Beverage cart:

putting green cLoSeSt to the pin hoLe-in-one

hoLe SponSorS Alliant Alpha Mar IMW Amegy Bank Berard Transportation Blank Rome LLP CLM Towing Coating Systems Danner’s Inc. ExxonMobil

Frost Bank Houston Mooring Co. Houston Pilots Hydra US Laborde Products Manchester Terminal Odfjell Terminals Port of Houston Authority

Port Terminal Railroad Association Rio Marine, Inc. Team Services Texas Mooring Texas Terminals Toucan Transportation Watco Companies

Beach Nourishment

Notable Beach Nourishment Project Using Galveston Channel Dredged Sand Nears Completion Judith Schultz, GHPB A beach expansion, representing the largest sand nourishment project in Galveston’s history, should be completed by the end of October. Project plans call for the use of 725,000 cubic yards of sand dredged from the Galveston Ship Channel to establish 20 blocks of additional beach along the island’s seawall, roughly between 61st and 81st streets.

“This is the single largest volume of sand ever placed on Galveston’s beaches,” said Galveston Park Board Executive Director Kelly de Schaun in a Galveston. com press release. “This project is part of a long-term strategy to build public beaches, protect community assets from storm surges and increase property values on the island.”

The U.S. Army Corps of Engineers Galveston District (USACE) is placing the material on the beach rather than the usual disposal placement area.

Regulation mandates require USACE to select the most cost-efficient method of dredging material placement so additional incremental costs are being shared between the Galveston Park Board of Trustees, the city of Galveston through its Industrial Development Corporation, and the Texas General Land Office.

“The USACE Galveston District is excited to partner with the Galveston Park Board of Trustees and Texas General Land Office in order to carry out a dredging project that will benefit channel users and Galveston residents,” said Tricia Campbell, an operations manager with the USACE

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Galveston District, in their May 2015 press release. “While undertaking its mission of keeping America’s waterways navigable, the Corps is able to turn that into an added benefit for the community by placing dredged material (sand) on the Galveston beach for tourists and residents to enjoy.

This beneficial use project allows the Corps to work with a cost-sharing sponsor to place dredged material along the coastline.”

Crews began working on Galveston’s beaches August 13, 2015, with the sand placement estimated to take place over a 60 day period. According to an article in the Galveston County Daily News on May 22, 2015, the dredged material arrives near shore by barge. The sand is then blown directly onto the beach and spread by heavy machinery.

“This project is a great example of what can happen when city, state and federal governments work together to accomplish a common objective,” said Texas Land Commissioner George P. Bush in the Galveston.com story. “Dredge material is not only a cost-effective way to nourish a beach, it will help boost Galveston’s tourism and protect the seawall.”

“One of the reasons we really committed this year is they dredge every 18 to 24 months,” de Schaun said in a May 26, 2015, interview in the Houston Chronicle.

“We want to be on a regular dredge cycle.”

While public access has been limited during the placement process, progress can be watched live via webcam at www.

galveston.com/sandcam. The camera is installed at The Breakers of Galveston hirise condominium facility at 77th Street and Seawall Blvd. When the new beach is opened, visitors will enjoy a new 100-footwide beach area.

In a Houston Public media interview last December, de Schaun indicated this project was one of three similar projects she was overseeing. Earlier this year, she worked with Seascape Condominiums owners to restore a 0.38 mile of beach from the west end of the seawall to Dellanera RV Park, owned by the city of Galveston.

The private condominiums are situated between the end of the seawall and the RV park. Owners agreed to pay for their share of the new beach and allow public access. The Dellanera Park-End of Seawall beach nourishment project was dubbed “little project that could” and named one of the country’s best restored beaches in 2015 by the American Shore and Beach Preservation Association.

The third replenishment project – a reconstruction of the beach between 16th Street and 61st Street – is set to begin in December. Planners expect it to finish in time for Galveston’s 2016 spring break season. All told, the completed projects will give beachcombers more than seven miles of refurbished beach to explore. The park board hopes to utilize sand from the Corps’ routine dredging to maintain the area in the future.

ò

ELECTRICAL | COMMUNICATIONS | TECHNOLOGY

Serving maritime energy through the

POWER OF EXPERIENCE www.shrader.net

BARGING AHEAD ever so politely.

B

Buffalo Marine Service, Inc.

www.BuffaloMarine.com

U.S. Waterborne Foreign Trade – Imports and Exports By: Dave Cooley, GHPB

us waterborne trade Article Highlights • Break bulk ships carry heavy, unfinished cargo, contributing to a larger portion of the total waterborne tonnage • Container ships carry finished or semi-finished goods, which cost more than unfinished goods, but weigh less • Break bulk tonnage stalling on lower oil imports, but difference is predominately replaced by increased container tonnage • Trade deficit fell 20032014 due to the increase in U.S. exports of oil, refined petroleum, and related products, but far from becoming neutral

Introduction In the October 2015 Port Bureau News, part one of this six-part series introduced the trade balance, i.e., the difference between exports and imports values, of U.S. and Houston waterborne foreign trade. This installment discusses the two components of trade – imports and exports – and total trade – the sum of exports and imports in greater detail, and it describes the top contributing commodities. Unless otherwise stated, the term “trade” in this analysis refers to waterborne foreign trade.

The analysis of U.S. trade starts with an overview of the top commodity groups that comprise the total trade of the U.S. for both value and tonnage. Then, the data set is evaluated from two perspectives: the mode of transportation and the direction of cargo movement. The first perspective organizes the data for total trade based on the mode of transport. This divides trade into the movement of containers shipped aboard containerships versus the movement of either a homogeneous commodity (such as grains and liquids) aboard a bulk vessel or individual odd-size items as break bulk cargo aboard general purpose ships. The second view divides the data for total trade into the two constituent components – imports and exports – and shows the top commodity groups for each. Each

THE HOUSTON PILOTS Silent Servants of Progress

www.houston-pilots.com

evaluation offers individual insight as to the trade dynamics of the U.S. Background As a reminder from the first article, data is from a database created by the U.S. Census Bureau that is sourced to international trade information captured by the U.S. Customs and Border Protection.

Data is presented for both value (U.S. dollars) and weight (tons) for both imports and exports, which are all categorized according to the 99 two-digit codes of the Harmonized Tariff Schedule. To facilitate analysis of like goods and commodities, many of these 99 codes have been combined into 26 distinct yet overarching categories referred to as commodity groups, which is one of the key data sets utilized for this project. Ranking was determined based on the 11-year average of the applicable data set. All analysis will include a historical picture showing the evolution of each commodity group from 2003 through 2014.

U.S. Waterborne Foreign Total Trade (Exports plus Imports) Value The value of the U.S. total trade has grown from $810 billion in 2003 to $1,750 billion in 2014. While growing somewhat significantly during the early years of the decade, growth was interrupted by the Great Recession as the value of total trade dropped by $460 billion or 28% from $1,623 billion in 2008 to $1,162 billion in 2009.

The value of the U.S. total trade recovered during 2010 to $1,434 billion and by 2012 to reach $1,782 billion, which exceeded the pre-recession level. Since that time, the value of total trade has slipped slightly over the last two years to around $1,750 billion for both 2013 and 2014. Figure 1 displays a graph of the evolution of the U.S. total trade over the last 11 years.

The top five components comprise 70% of the average annual U.S. total trade from 2003 to 2014. When comparing values for the top five commodity groups for 2014 to the 11-year average annual values, a decline

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us waterborne trade Right Top: Figure 1

Middle: Table 1 - U.S. Total Waterborne Foreign Trade by Value

Bottom: Figure 2

in the market share of the energy commodity group is generally offset by increases in the market share of the remaining 4 commodity groups reflecting the increasing demand for consumer goods. See Table 1.

Tonnage Comparing the two end points, the tonnage associated with total trade of the U.S. shows 1,210 million metric tons recorded in 2003 and 1,286 million metric tons in 2014, which resulted in a minimal net growth of 76 million metric tons over the period. While tonnage dropped and then recovered during and after the Great Recession, an ensuing decline in tonnage for the energy commodity group since 2011 has been mostly offset by a rise in the container trade and resulted in a generally stable level of total trade tonnage going forward. Figure 2 displays a chart of the evolution of the U.S. total trade tonnage from 2003 to 2014.

From 2003 to 2014, the top five tonnage commodity groups comprised 81% of the average annual U.S. total trade tonnage.

Comparing tonnages for 2014 with the 11 year average annual tonnages suggests the energy commodity group’s 7% loss in market share, reflecting the drop in oil activity, is generally offset by a rise in container tonnage. See Table 2.

U.S. Waterborne Foreign Trade – Mode of Transportation Products and commodities moving in international waterborne trade are shipped aboard one of two basic modes of seaborne transportation – in a container aboard a containership or as a bulk shipment utilizing a tanker for liquid bulk, a bulker for solid bulk (grains, coal, and ores) or break bulk ship to carry finished or semi-finished metals (e.g., steel, iron, or aluminum), metal scrap, or other bulk products. Generally, goods shipped by containers are usually high value-added finished or semi-finished

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Commodity Group U.S. Total Trade

Avg. Annual 2014 Total Trade Avg. Annual Total Trade 2003-2014 % of Total (Billions USD) (Billions USD)

2014 % of Total

$1,400

100%

$1,750

100%

Energy

$333

24%

$376

22%

Boilers, Machinery, Motors, and Electronics

$245

18%

$312

18%

Transportation Equipment

$161

12%

$210

12%

Chemicals, Fertilizers, Plastics, and Rubber

$130

9%

$177

10%

Textiles and Apparel

$107

8%

$127

7%

Total Top 5 Commodity Groups

$985

70%

$1,203

69%

us waterborne trade

Commodity Group

U.S. Total Trade

Avg. Annual Total Trade 2003-2014 (Millions MT)

2014 Avg. Annual Total Trade % of Total (Millions MT)

2014 % of Total

1,307

100%

1,286

100%

Energy

719

55%

621

48%

Salt, Sulfur, Lime, and Ores

103

8%

100

8%

Chemicals, Fertilizers, Plastics, and Rubber

96

7%

111

9%

Grains and Milling Products

76

6%

80

6%

Metals

63

5%

74

6%

1,058

81%

988

77%

Total Top 5 Commodity Groups

Left Top: Table 2 - U.S. Total Waterborne Foreign Trade by Tonnage Bottom: Figure 3

products that require little or no further manufacturing or production processing before being introduced into the consumer distribution system.

Conversely, commodities or products shipped as bulk or break bulk generally require additional manufacturing, processing, or finishing. As a result, imports of bulk and break bulk commodities offer a range of various economic opportunities within the importing country to add value by converting these products into a finished form before being introduced into the final distribution system.

From a value viewpoint, since goods shipped in containers are generally categorized as finished or semi-finished products, the shipping value reflects this higher value-added “shelf-ready� condition.

From 2003 to 2014, containerized total trade has averaged $554 billion, 46%, of the total trade of the U.S., and the value of bulk and break bulk total trade averaged 54% or $650 billion. For 2014, the values are $984 billion for containers and $766 billion for bulk.

From a tonnage viewpoint, from 2003 to 2014, containerized total trade tonnage has averaged 35% or 593 million metric tons of the total trade of the U.S., while the tonnage of bulk and break bulk total trade averaged 1,084 million metric tons, covering the other 65%. For 2014 the values are 723 million metric tons for containers and 1,024 million metric tons for bulk.

U.S. Waterborne Foreign Container Total Trade Value The value of the U.S. container total trade has grown from $471 billion in 2003 to $984 billion in 2014. While growing somewhat significantly during the early years of the decade, this growth was also interrupted during the Great Recession of 2008-2009, but not to the same extent

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us waterborne trade as the bulk trades as the value of the total container trade dropped by only $150 billion or half as much as the drop in the bulk trades. Not only did the container trade recover, but grew at essentially the same rate as before the recession, reaching $984 billion at the end of 2014 reflecting continued consumer demand.

The top five components comprise 69% of the average annual U.S. container total trade during the 11-year analysis period and reflect relatively continuing growth in container values, as evidenced by the slightly rising market shares when comparing values for 2014 with the 11 year average annual values. See Table 3.

Tonnage Except for a 35 million metric ton drop or 14% in 2009 container total trade, tonnage rose from 174 million metric tons in 2003 to 261 million metric tons in 2014. Generally all commodity groups rose proportionally, maintaining a relatively consistent tonnage market share throughout the 11-year period.

From 2003 to 2014, the top five container tonnage commodity groups comprised 63% of the average annual U.S. container total trade tonnage, maintained relatively constant market share, and are shown by Table 4.

U.S. Waterborne Foreign Bulk/Break Bulk Total Trade Value – U.S. Dollars The growth of the U.S. bulk/break bulk total trade is quite stout, rising from $339 billion 2003 to $823 billion in 2008, a total of $484 billion. This growth was essentially lost during the Great Recession as the bulk/ break bulk total trade dropped $312 billion to $511 billion in 2009.The bulk/break bulk trade partially rebounded in 2010 and by 2011 fully restored all lost growth by rising $184 billion to $845 billion. The momentum carried forward into 2012; however, by 2014, the value of the U.S. bulk/break bulk total trade declined to $766 billion, a drop of about $50 billion each year.

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The driving force behind this volatile pattern is energy. While a consistent oil importer, the magnitude and direction of this status changed around the end of 2010 as U.S. oil production was increasing and the volume of oil imports began to decline.

Continued increases in U.S. oil production

reached a point where exports of refined petroleum products began to increase as well. However, since the value of oil imports was falling faster than the rising value of oil exports, total trade (the summation of imports and exports)declined for the energy commodity group. From a numerical stand

Top: Table 3 - U.S. Total Containerized Trade by Value Bottom: Table 4 - U.S. Total Containerized Trade by Tonnage

Commodity Group

Avg. Annual 2014 Container Total Avg. Annual Container Trade % of Total Total Trade 2003-2014 (Billions USD) (Billions USD)

2014 % of Total

U.S. Total Trade

$748

100%

$984

100%

Boilers, Machinery, Motors, and Electronics

$197

26%

$261

29%

Textiles and Apparel

$102

14%

$122

12%

Chemicals, Fertilizers, Plastics, and Rubber

$95

13%

$128

13%

Foodstuffs

$71

9%

$104

11%

Transportation Equipment

$52

7%

$67

7%

Total Top 5 Commodity Groups

$519

69%

$684

72%

Avg. Annual Container Total Trade 2003-2014 (Millions MT)

Avg. Annual % of Total

2014 Container Total Trade (Millions MT)

2014 % of Total

U.S. Total Trade

223

100%

261

100%

Foodstuffs

38

17%

48

18%

Chemicals, Fertilizers, Plastics, and Rubber

34

15%

43

16%

Wood, Cork, Paper, Books, and Paperboard

28

13%

33

13%

Metals

21

9%

23

9%

Boilers, Machinery, Motors, and Electronics

18

8%

21

8%

Total Top 5 Commodity Groups

139

63%

168

64%

Commodity Group

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us waterborne trade point, the total value of oil imports fell by about $145 billion while oil exports only rose by about $65 billion.

The rise in market share of the top five commodity groups of 1% is composed of a decline in the market share for the energy commodity group offset by rises in the market share for the transportation equipment and the metals commodity groups, when comparing values for 2014 with values for the 11 year average annual values. See Table 5.

Tonnage The bulk/break bulk total trade tonnage has varied by about 75 million metric tons or about 6% above and below a mean value of 1,084 million metric tons computed over the entire 11-year analysis period and does not display any serious volatility. The energy commodity group remains the primary mover comprising, on average, 65% of the total bulk/break bulk tonnage. The slight tonnage decline from 2011 through 2014 is attributable to the faster decline in the quantity of crude oil imports compared to the relatively slower rise in the quantity of refined product exports.

The top five tonnage components comprise 91% of the average annual U.S. bulk/break bulk total trade tonnage from 2003 to 2014. Comparing tonnage for 2014 with the 11 year average annual tonnages, the energy commodity group market share dropped by 5%. See Table 6.

U.S. Waterborne Foreign Imports Value U.S. imports grew steadily from $600 billion in 2003 to $1,150 billion in 2008.The onset of the Great Recession drove imports down by over $300 billion to a low in 2009 of $800 billion. Recovering over the next two years to again reach the pre-recession high of $1,150 billion in 2011, the value of U.S. imports has remained relatively constant at or near this level through 2014.

The decline in value for crude oil imports is generally offset by an increase in value for

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Commodity Group

Avg. Annual Bulk/ 2014 Bulk/ Break Bulk Total Avg. Annual Break Bulk Trade % of Total Total Trade 2003-2014 (Billions USD) (Billions USD)

2014 % of Total

U.S. Total Trade

$651

100%

$766

100%

Energy

$328

50%

$368

48%

Transportation Equipment

$108

16%

$143

19%

Boilers, Machinery, Motors, and Electronics

$48

7%

$50

6%

Chemicals, Fertilizers, Plastics, and Rubber

$42

6%

$48

6%

Metals

$35

5%

$44

6%

Total Top 5 Commodity Groups

$563

84%

$628

85%

Commodity Group

U.S. Total Trade

Avg. Annual Bulk/ 2014 Bulk/ Break Bulk Avg. Annual Break Bulk Total Trade % of Total Total Trade 2003-2014 (Millions MT) (Millions MT)

2014 % of Total

1,084

100%

1,024

100%

Energy

711

65%

610

60%

Salt, Sulfur, Lime, and Ores

93

9%

90

9%

Grains and Milling Products

72

7%

75

7%

Chemicals, Fertilizers, Plastics, and Rubber

61

6%

67

7%

Metals

42

4%

51

5%

Total Top 5 Commodity Groups

981

91%

896

88%

Top: Table 5 - U.S. Total Bulk/Break Bulk Trade by Value Bottom: Table 6 - U.S. Total Bulk/Break Bulk Trade by Tonnage various commodity groups comprising the container trade.

During the 11-year analysis period, 2003-2014, the top five import categories averaged $655 billion in imports each year and represented 67% of total U.S. imports.

When comparing the values for 2014 with the 11 year average annual values, the

market share for the energy commodity group dropped 6%. While the three remaining commodity groups experienced some growth, it was insufficient to match this overall decline. See Table 7.

Some of the remaining 22 commodity groups that comprise the $323 billion balance of 2003-2014 U.S. imports include:

us waterborne trade Right Top: Table 7 - U.S. Waterborne Foreign Imports by Value Middle: Table 8 - U.S. Waterborne Foreign Imports by Tonnage Bottom: Table 9 - U.S. Waterborne Foreign Exports by Value chemicals, fertilizers, plastics, and rubber; metals; foodstuffs; furniture and bedding; and ceramics and glass.

Tonnage The tonnage associated with the U.S. trade imports exhibit a downward trend since 2003 as a result of declining energy imports. In 2003, imports of energy were 600 million metric tons or slightly below 70% of all tonnage imports. With the discovery of shale oil, foreign sourced oil imports have declined steadily since 2005 and at the end of 2014 were at 325 million metric tons, a 45% reduction from the 2003 level.

The average annual tonnage for the top four import commodity groups total 719 million metric tons or 86% of the tonnage imports during the 11-year analysis period – 2003 to 2014. The 13% market share drop in the energy commodity group is very evident. See Table 8.

The remaining 22 U.S. tonnage import commodity groups contribute an annual average quantity of 118 million metric tons, or 14%, to U.S. tonnage imports.

U.S. Waterborne Foreign Exports Value From 2003 to 2014, U.S. exports averaged $420 billion each year. Except for a $100 billion dip from $470 billion to $370 billion occuring during 2009 reflecting the impact of the Great Recession, U.S. exports have risen each year since 2003 – from $205 billion to $600 billion in 2014 or 192%.

The driver of this signficant exports increase is energy, increasing from $10 billion in 2003 to just over $130 billion in 2014, a $120 billion change over 11 years.

During this time period the market share for energy increased from 4% to 43% of total annual exports. The main export component of the energy commodity

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Commodity Group

Avg. Annual Imports 2003-2014 (Billions USD)

Avg. Annual 2014 Imports % of Total (Billions USD)

2014 % of Total

Total U.S. Imports

$979

100%

$1,150

100%

Energy

$268

27%

$245

21%

Boilers, Machinery, Motors, and Electronics

$177

18%

$227

20%

Transportation Equipment

$115

11%

$142

12%

Textiles and Apparel

$94

10%

$113

10%

Total Top 4 Commodity Groups

$655

67%

$729

63%

Commodity Group

Avg. Annual Imports 20032014 (Millions MT)

Avg. Annual 2014 Imports % of Total (Millions MT)

2014 % of Total

Total U.S. Imports

836

100%

674

100%

Energy

544

65%

352

52%

Salt, Sulfur, Lime, and Ores

85

10%

82

12%

Chemicals, Fertilizers, Plastics, and Rubber

46

5%

54

8%

Metals

42

5%

54

8%

Total Top 4 Commodity Groups

719

86%

544

81%

Commodity Group

Avg. Annual Exports 2003-2014 (Billions USD)

Avg. Annual 2014 Exports % of Total (Billions USD)

2014 % of Total

Total U.S. Exports

$420

100%

$600

100%

Chemicals, Fertilizers, Plastics, and Rubber

$72

17%

$85

14%

Boilers, Machinery, Motors, and Electronics

$67

16%

$84

14%

Energy

$63

16%

$130

22%

Transportation Equipment

$46

11%

$68

11%

Total Top 4 Commodity Groups

$249

59%

$369

61%

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us waterborne trade group is oil, manifest as refined petroleum products, albeit with a little help from coal and gas liquids. In fact, energy became the top commodity group in 2011 as U.S. energy exports rose by $43 billion to more that $111 billion in that year.The energy commodity group has retained this preeminent position ever since.

The average annual export values for the four top commodity groups total $249 billion or 59% of all exports from 2003 to 2014. The energy commodity group’s market share increased by 4% at the expense of the chemicals, fertilizers, plastics, and rubber and the boilers, machinery, motors, and electronics commodity groups. See Table 9.

Foodstuffs; metals; oil seeds, gums, and vegetable oils; grains; textiles and apparel; and optics, photography, and medical equipment are some of the remaining 22 commodity groups that contribute an annual average of $171 billion or 41% to U.S. exports.

Tonnage The growth of exports by tonnage averaged 470 million metric tons each year during the 11-year analysis period Except for a slight dip in 2009, U.S. tonnage exports grew each year — from 330 million metric tons in 2003 to 613 million metric tons in 2014 — for an increase of 283 million metric tons. The key component of this growth was energy, growing 173 million metric tons or 61% from a level of 95 million metric tons in 2003 to 268 million metric tons in 2014.

The annual average export tonnage of the top four commodity groups totaled 340 million metric tons or 72% of tonnage exports. Details are displayed by Table 10.

Some of the remaining 22 commodity groups include: metals; salt, sulfur, lime, and ores; boilers, machinery, motors, and electronics; textiles and apparel; and transportation equipment. These groups’ tonnage exports were 130 million metric tons a year, on average, from 2003 to 2014.

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Commodity Group

Avg. Annual Exports 20032014 (Millions MT)

Avg. Annual 2014 Exports % of Total (Millions MT)

2014 % of Total

Total U.S. Exports

470

100%

614

100%

Energy

170

36%

268

44%

Grains and Milling Products

75

16%

77

13%

Chemicals, Fertilizers, Plastics, and Rubber

50

11%

57

9%

Oil Seeds, Gums, and Vegetable Oils

40

9%

55

9%

Total Top 4 Commodity Groups

340

72%

459

75%

Above: Table 10 - U.S. Waterborne Foreign Exports by Tonnage Primary observations gleaned from the analysis of the waterborne foreign trade data are: • The dichotomy between the top ranked imported commodity groups by value and the top ranked exported commodity groups by tonnage is stark. The top ranked imported commodity groups by value include high value-added goods and products such as, boilers, machinery, motors, and electronics; transportation equipment including motor vehicles and

parts; chemicals, fertilizers, plastics, and rubber; and textiles and apparel. These commodity groups are all produced overseas at a cost that is lower than manufacturing the same goods and products in the U.S. Conversely, the commodity groups with the largest aggregate export tonnage are predominantly the low value / high quantity bulk commodities such as energy (oil and coal), various raw materials including grains; oil seeds, gums, and vegetable oils; and wood, cork, paper, books and paperboard. This trade pattern inherently

us waterborne trade results in a trade deficit and the consequent outflow of money.

• While the export of energy (refined petroleum products, coal, and LPGs) has received great attention over the last few years as a result of a somewhat meteoritic rise in oil export tonnage and related value, it masks the fact that the energy trade remains deficit at albeit a reduced level of $84 billion in 2014. While the energy trade level may remain well below the $500 billion registered from 2003 to 2008, the current but lower trade deficit level is poised to change. The effect of the oil price decline that began last July and accelerated in November 2014, has altered the investment landscape in the U.S. by significantly reducing current and future oil drilling. Decreased investment means, over time, U.S. oil production will again change direction and resume its decline and energy imports will increase, exacerbating the trade deficit.

• Beyond energy, various commodity groups that include finished and semifinished goods, such as boilers, machinery, motors, and electronics; textiles and apparel; and transportation equipment continually increased in prominence in terms of both value and tonnage during the 11-year analysis period. While the trade balance temporized over the last few years, predominantly as a result of the change in the flow of energy, container goods continued to be in demand and will be the driving force of the next thrust of the trade balance toward a greater deficit unless key elements of manufacturing return home.

Conclusion A comparison of the U.S. dollar trade imports with the tonnage exports offers a dramatic contrast between the components of the net inflow of high value/low tonnage finished goods – electronics, apparel, vehicles – with the net outflow of predominantly high tonnage/low value resource type bulk

commodities – wood, oil seeds, various grains, and refined petroleum products.

This is also reinforced when comparing the two modes of transport for both value and tonnage. The goods imported in containers have extraordinary high value, yet the high volume commodities being exported have relatively low value, ergo, a structural trade deficit exists.

As the service sector becomes more and more the primary driver of a U.S. economy that is less and less influenced by valueadded manufacturing, the general direction of the trade balance leads one to question what will be the drivers of future economic growth.

Ed. Note: The third installment of this series will appear in the December 2015 Port Bureau News. It will focus specifically on the Port of Houston (public and private terminals), considering the overall trade picture and the commodities driving trade.

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Windmills

Despite Subsidy Uncertainties, Outlook Bright for Port of Houston Wind Power Equipment Imports/Exports Bridget McGee, GHPB Falling oil prices and the president’s recent approval of oil drilling in the arctic have kept the country buzzing about energy, but oil is not the only energy source worthy of discussion. The wind energy industry has also experienced many ups and downs over the past few years. As the top port for windmill equipment trade in the top state for wind power generation, the Port of Houston has reason to consider the future of the industry.

The wind power industry benefits from a number of subsidies in place to help renewable energy sources compete with more traditional power sources. One of the most beneficial subsidies, the Production Tax Credit (PTC), gives dedicated energy crops, such as wind turbines or wind farms, 2.3 cents per kilowatt hour produced. The only problem is that Congress has had a hard time deciding whether to keep it in place. Congress allowed the PTC to expire at the end of 2013. However, shortly thereafter, the subsidy was extended to the end of 2014. That meant any windmill facility, or even an individual turbine, that was under construction by the end of 2014 would qualify for the subsidy. This constant back-and-forth creates major uncertainty in the industry. leading to a reduction of both domestic and foreign investment. This uncertainty is reflected in the amount of wind products imported.

In the past three years, wind product imports have drastically changed. According to the United States Census Bureau, in 2012 the United States was importing about $4.9 billion worth of windmill products. By

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Wind farms have popped up across the country in recent years creating a booming export and import business for the Port of Houston. Photo Courtesy of Wikipedia Commons.

2013, with the knowledge that the subsidy was ending, imports fell by more than 50% to roughly $2.1 billion. The subsequent subsidy extension created a boost of about $1 billion for 2014. So far, imports remain steady for 2015.

As far as Houston is concerned, the Port of Houston saw the largest portion of those imports for the country. Houston’s portion of the wind product imports in 2012, 2013, and 2014 were approximately $986 million, $273 million, and $549 million, respectively, or about 15 to 20% of U.S. wind product imports. From January to July of this year, the Port of Houston imported more than $400 million worth of wind products. The decline in domestic wind farm developments has the potential to create excess imported supply, leading to

the export of imported products. Thus far, that has not seemed to be the case.

According to the United States Census Bureau, windmill exports were on a steady rise, going from approximately $854 million in 2007 to $1.9 billion in 2012. However, exports saw decreases in both 2013 and 2014. Despite the recent export declines, the International Trade Administration (ITA) has positive projections for windmill exports. Right now most of U.S. windmill parts go to Canada, China, Brazil, Mexico, and Egypt. The ITA projects that the U.S. will encapsulate 8% of the world’s wind export market in 2016, including a quarter of Egypt’s wind imports by 2016. Egypt is pursuing an aggressive schedule to nearly double overall power generation by 2020, including measures to enable 12% of total

Windmills power generation to come from wind. With at least 16 wind turbine parts manufacturing plants in Texas, two of which are located in or near Houston, the Port of Houston may be able to take advantage of product exports. If the uncertain subsidy climate in the U.S. remains, imports of wind products to Houston may decline, but the excess capacity could be shifted to exports.

In the current economic environment, imports will continue to be a larger influence than exports on Port of Houston activity, despite the uncertainty. However, as new wind generation farms are developed globally, Houston is poised to take advantage of the export market. As one of the top project cargo ports in the country, Houston has a long history of adapting to change.

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Spotlight on PTRA

By: Kyle Beam, GHPB As the City and Port of Houston have grown, the demand for transportation services around the ship channel has skyrocketed. One of those service providers rising to meet the challenges is the Port Terminal Railroad Associtation

spotlight

PTRA diesel engines at work on the rail lines. Photo by Mike Rusk.

The history of the Port Terminal Railroad Association (PTRA) dates back to 1924, when 18 railroads came together and established the Association to better serve the industries of the Port of Houston.

The Association was an efficient way to allow the industries to have access to all railroads with service provided by a single carrier, the PTRA. Although mergers and acquisitions have consolidated the number of members since 1924, the benefits and efficiencies of the PTRA have remained largely unchanged.

Today the PTRA is a five-member organization comprised of the Port of Houston Authority, the Houston Belt

& Terminal, and three Class I railroads: Union Pacific Railroad, BNSF Railway, and Kansas City Southern Railway Company.

PTRA services 226 customers via 400 plus miles of track located on both sides of the Houston Ship Channel. On average, it handles 58,000 cars a month, with 10,000 cars at industry at any given time. PTRA has the capability to handle any product that comes into the Port of Houston, including autos, chemicals, coal, coke, crude, ethanol, food products, grain, industrial products, intermodal, plastics, steel, and others.

In 2012, Jeff Norwood became the PTRA General Manager. He recognized that the culture within the PTRA needed

to change. Customer satisfaction levels were down, train delays were increasing, and customers were getting frustrated with inconsistent service. According to Norwood, the culture change began when the 300 employees of the PTRA began to see that they were empowered to be a true part of a team driven, service and safety oriented environment.

The transformation also involved implementing measures to increase customer

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spotlight satisfaction by becoming more proactive in communicating with the customers.

According to Norwood, “Communication to let customers know when railcars may not move as expected” has improved customer satisfaction. Additionally, some customers have more specific issues. In those instances, “We want to sit down with them face-to-face and do what we can to make it right.” Because of these measures, PTRA’s customer satisfaction levels have risen by 20 percent to 93 percent customer satisfaction in 2014, and Norwood feels they can continue to raise those satisfaction levels. “We feel like we have the key measurements down to meet our customer service goals,” but he adds, “it is a continual work in progress to make and maintain those levels of satisfaction.”

For PTRA, improved communications with customers is just the first step in improving the organization and the services it provides. An aging rail infrastructure and expected growth along the Houston Ship Channel has forced the PTRA to invest heavily in new technology and rail infrastructure to keep pace with its customer expectations.

Those expectations are coming from the unprecedented levels of expansion along not just the Houston Ship Channel, but the entire Gulf Coast as industry prepares for an expected energy boom. On the PTRA side, preparing for increased business volumes while maintaining quality safety and service levels falls on the shoulders of the PTRA’s board which consists of the Port of Houston Authority and the three Class I railroads. Rollin Bredenberg, Vice President at BNSF Railway and PTRA board representative, says the responsibility of the board “is to make sure the operations of the PTRA support the customers of the PTRA.” In anticipation of the boom, the PTRA board member companies have been proactive in making efforts to maintain the efficiency and infrastructure of their rail lines in support of their

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customers. According to Bruce Mann, Freight Mobility Manager for the Port of Houston Authority, the PTRA has historically spent $5 million a year on track maintenance and new equipment.

But according to Norwood, the PTRA

has increased its investments, spending $42 million dollars over the last five years on new rail lines alone, and Bredenberg adds an additional $10 million will come in 2016. The increased investments are allowing the PTRA to update the track

spotlight infrastructure across existing lines as well as add more lines, including a second main line scheduled for completion at the end of this year on the North Shore. The new rail lines are necessary, Mann says, because he expects rail and truck traffic to increase 100

percent by 2040. Mann adds, “We have to maintain transportation infrastructure to ensure efficiency,” and the efficiency is why the PTRA works.

Norwood says that because of the additional investment there has not been

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one rail equipment issue caused by track infrastructure in two years. He is proud to say this is possible because he has “people who go in and out checking on the track daily, and the support and investment from our board members to keep the track maintained”. Bredenberg continues, “Jeff has a clear message from the board to spend whatever it takes to maintain the tracks.”

The next step in the PTRA’s plan to prepare for the energy boom begins in 2016. On September 23, 2015 the Houston Galveston Area Council (HGAC) approved a $20 million cost sharing project with the Port of Houston Authority for a new rail overpass on Broadway Street at Erath Street.

Currently, the track on the overpass is in a single-track formation, which Mann says “is designed to accommodate 18 trains per day with no delay, but current utilization of the single-track segment, based on data collected by the PTRA, is 21 trains per day and this number is expected to grow.”

Mann adds, “These trains, on average, handle over 1,000 rail cars per day, and the overutilization of the track is creating congestion in the corridor, which increases the cost of transportation by introducing delays… of up to 2.5 hours per day… into the rail and road networks and lowers the local air quality by increasing harmful emissions.”

Mann explains that if the track kept its current configuration, by 2018 the expected growth in freight shipments would cause the train traffic to increase to 24 trains per day with 4.75 hours in delays per day. “Freight moving into and out of the port would need to move by other means, including truck and other modes of transportation, thus, increasing the negative impact to the environment through higher emissions.”

“From an environmental standpoint [the Broadway Street Overpass] is a big deal,” Norwood says. The potential environmental and emissions gains from using rail instead of trucks to meet future freight capacity was a key motivator for the HGAC’s funding of

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PTRA Rail Network

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The PTRA at Work

Photographs by Mike Rusk, PTRA Chief of Police

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spotlight the project. Mann says, “When compared to the status quo, replacing the Broadway Street Bridge and adding a second track will yield significant economic benefits for the railroads, the port, and the greater Houston region. Reductions in railroad delay will lower the cost of transportation and reduce pollutants that harm local air quality. Moreover, by increasing the capacity of the rail alignment, shippers will be able to ship more freight via train, which is a cleaner form of transportation compared with trucks.”

Bredenberg credits projects like this being completed because of the support of the Port of Houston Authority. “The relationship between the Port Authority and the railroads leads the Port Authority to spend money more effectively than any other port with which I have worked.”

The Broadway Street Overpass is expected to be completed in 2016 preparing the PTRA for what Norwood expects to be “a big boom in 2017.” Even without a boom in 2017 Norwood says, “We are prepared for the energy boom when it happens.”

Despite its unprecedented growth the PTRA has not sacrificed its main hallmark - safety. The PTRA was the safest railroad in the Switching & Terminal Group of large terminal rails, which includes railroads in Chicago, Indiana, and New Orleans in 2014, according to the Federal Railroad Administration. “[Being the safest railroad] is what you have to do to run a railroad on the Houston Ship Channel,” Bredenberg said. “If we are going to take on the obligation [of dangerous goods] we have to be safe.”

With the increased investment, Norwood maintains that at its core, the PTRA is a “transportation provider that provides safety and service to our customers.” Bredenberg says the goal of the board continues to be “to make sure the service is effective and we have to make sure [the customers] get service from all three railroads as if they were on a railroad

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specific line.”

The PTRA has long been a part of the Port of Houston and will continue to be for the foreseeable future. “The PTRA is as important to the port as the ship channel,” Mann said, and Norwood adds, “We are one of the cogs in that wheel to make it

happen.” But he stresses none of this would be possible were it not for the people of the PTRA: “It’s the people who make it happen.”

For more information on the PTRA visit www.ptra.com or call (713) 393-6500.

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GHCA Annual Luncheon

Greater Houston Coffee Assocition Annual Luncheon Featuring Christi and Ragan Bond, Independence Coffee Co. Freshness, Hedging, and Tenacity Keep Independence Coffee Co. Roasting and Growing Bridget McGee, GHPB Christi and Ragan Bond, President and Vice President (respectively) of Independence Coffee Co., talked about building a coffee roasting business at the Greater Houston Coffee Association’s annual luncheon on October 7, 2015, held in conjunction with the Port Bureau’s Commerce Club. The couple described their experiences in the founding and growth of Independence Coffee Co. with luncheongoers.

The Bonds’ motivation for starting Independence Coffee was to run a business that would allow them to slow down, move out of the bustle of Houston to small-town Brenham, and raise their children. Like many small business owners, they have yet Christi and Ragan Bond, President and Vice President of Independence Coffee Co., speak to to slow down. The Bonds started their coffee attendees at the Greater Houston Coffee Association’s Annual Luncheon on October 7, 2015. roasting company in 2003. In that first year, recyclable shots, cold brew coffee, and iced quality beans – within the top five percent of they roasted 1,800 pounds of beans alone in and loose leaf teas. a crop – to ensure consistently high quality their garage, most of which they gave away During their talk, Christi emphasized, products. The Bonds believe this dedication as tasting samples to friends, family, and “[It’s] just the plan that has worked for has led to brand loyalty from their coffee neighbors as they developed their roasting us, not necessarily the plan for everybody.” consumers and aided to the company’s techniques and proprietary blends.

However, the outstanding company growth growth.

They have experienced substantial over the past twelve years shows there must Green coffee beans, the unroasted and growth since then, and now employ 25 be merit to their business model. shelf-stable form of coffee beans, are stored people to keep their coffee on the shelves.

First and foremost, Christi and Ragan at Coffee Association member Dupuy They are projecting 300,000 pounds of find freshness and quality to be the most Storage in Houston. Once the beans are product by the end of 2015, and their coffee important aspects of their product line. “We roasted, however, the coffee has a very can be found in some 500 commercial do focus on making our coffee as fresh as limited shelf life. The coffee is packaged still markets, including H.E.B. and Whole possible. We don’t have a lot of coffee that warm and distributed within a day or two to Foods stores. Independence Coffee products is warehoused. We roast six to seven days a ensure the customer buys only fresh coffee. include bulk bags, single serve, 100% week,” Christi explained. They purchase top

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GHCA Annual Luncheon

Clockwise from top left: CAPT Bill Diehl with speakers Christi and Ragan Bond; Attendees to the Greater Houston Coffee Association Annual Luncheon; Leo Vasquez of Atlantic Coffee Solutions speaks with a luncheon attendee; Christian Rotsko of Farmer Brothers speaks with other luncheon attendees before the start of the program; Greater Houston Coffee Association President Maria Echeverry and Art Flanagan of Hub International; Art Flanagan and Bill Banta of Centerpoint Energy.

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GHCA Annual Luncheon Another unique asset for a small roaster is Ragan’s experience in commodity hedging. Before beginning Independence Coffee with his wife, Ragan was an oil trader, and it was natural fit to apply those skills to the new company. Ragan explained that “from my trading background, we do have a very active hedging program. We have everything hedged through to 2016.”

The Bonds discovered how important that was in 2010. Coffee prices were at a 13year high that year, which weighed heavily on small roasters. Nevertheless, Independence Coffee was able to hold it together, and the Bonds learned how to weather the cyclical nature of the commodity. The experience

reinforced to them the importance of advanced preparation in riding out a difficult market downturn.

Along with their emphasis on quality roasting, freshness, and preparing for market fluctuations, Christi and Ragan cite attention to detail as another crucial factor in their business model. Their focus is on seeing their product quickly stocked on retail shelves. Even the Bond kids get into the action. Madalyn Bond, for whom one of their most popular coffees is named, will alert management if she spots “her” coffee in need of restocking while walking through a store.

That tenacity has allowed them to continue to grow as company. Summing up, Ragan said, “We [small coffee roasters] will do anything to get and keep our products on the shelf.”

Ed. Note: Join us at the December Commerce Club to salute the career of Capt.

Mike Morris, Presiding Officer, Houston Pilots, as he steps down from office and prepares for retirement on Thursday, December 10, 2015, at Brady’s Landing. Individual seats and table sponsorships are available. Sign up by visiting www.txgulf.org/commerceclub.php or by calling (713) 678-4300.

Thank You to Our Table Sponsors

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Texas Gulf Coast Gateway to the Midwest, Southwest and the Greater Galveston/Houston Region

Port of Galveston

AN EFFICIENT PART OF YOUR SUPPLY CHAIN • Served by Wallenius Wilhelmsen • Roll-On / Roll-Off, Break Bulk and Project Logistics, ARC, "K" Line Ro-Ro, Höegh Cargo Terminals Autoliners, CSAV Ro-Ro & NYK Ro-Ro • Direct Connection to BNSF Railway and • 30 minutes to Open Sea Union Pacific Railroad • Efficient Labor and Competitive Rates • Immediate Access to the Interstate Highway • Foreign Trade Zone No. 36 System and Gulf Intracoastal Waterway

Roll-On / Roll-Off terminal - New vehicle imports

P.O. Box 328 • Galveston, TX 77553 Phone 409-766-6112 • Fax 409-766-6171 Website: www.portofgalveston.com Contact: Capt. John G. Peterlin III Sr. Director of Marketing & Administration Email: jpeterlin@portofgalveston.com

Imported wind turbine towers departing the port by rail

Greater Houston Port Bureau www.txgulf.org 111 East Loop North Houston, TX 77029 (713) 678-4300 A Publication of the Greater Houston Port Bureau The Port Bureau News magazine is a monthly publication of the Greater Houston Port Bureau, a member-driven non-profit dedicated to promoting the maritime community, providing vessel movement information, and offering members premier networking and advertising opportunities to drive business. The magazine is distributed to over 7,000 professionals in the Houston maritime community via U.S. mail and email. Advertising is available for members.