June 2013 Port Bureau News

Greater Houston 2013 Jun e

Po r t B u r e a u

Port Watch

Cotton

Spotlight On:

Build it Yourself

Wall Street is Hot - Ports are Not Texas Ports Struggle to Keep Building Momentum

A Brief Summary of the Regional, National, and Global Cotton Markets

Donna Rains Chairman/CEO AllTrans Port Services

GHPB Member Richardson Stevedoring & Logistics Develops New Barge Facility

MEMBER DRIVEN - MARITIME BASED - VALUE ADDED

Captain’s Corner

Polyester Leisure Suit? I should say so!

I’m heading to Upstate New York this month for my 15th high school reunion—ok, maybe it is higher.

Will it be awkward? Absolutely, but I am still looking forward to catching up with friends and reliving the glory days. Did I mention that we were treated like rock stars as members of the cross country team?

The school held assemblies, bonfires, pep-rallies, and thousands turned out for our meets. Oops, that was actually the football team; as members of the cross country team the only recognition we received was our names on little pumpkins pinned to the locker room bulletin board.

Even though a friend just texted me that I am listed as “missing in action” on the reunion website, I’m sure they’ll all remember me. I was an integral part of the Latin Club, and surely my Latin classmates will have as much to reminisce about as those who rode on the homecoming floats. Although at the same time, I hope Ms. Byrd, my old Latin teacher, isn’t hanging out by the punch bowl, because other than E pluribus unum, I’ve retained nothing.

I guess when it came to high school, I thought of myself as part of the in-crowd, but maybe others didn’t share my opinion. I’ve started to be more realistic about the opinions others have of our waterways, too. Even if we know the ports rock (like the cross 2|

June 2013

country team and Latin Club), others are paying more attention to the popular kids - runways, roadways and railways. Port Bureau member Ralph D’Onofrio, of D’Onofrio Management Works, reminded me of this last week when he discussed that marketing for our mode of transportation is lacking at best, that maybe as an industry, we are just a name on a pumpkin on the back bulletin board at DOT. Ralph was very direct in explaining that marketing is all about perceptions, ideas, feeling, and relationships. He added that, “It is how we deal with human nature that will determine if we will be successful or not.” In order for our country to realize our importance, we have to make the case of how waterway transportation is critical to them.

With this discussion in mind, I floated to our Board of Directors the idea of producing a “Book of Pain.”

The idea came from member Donna Rains of AllTrans Port Services. She told me it was one of the tools that the steel industry used to educate Washington about how commerce here was suffering due to tariffs introduced in March of 2002. The idea for the Book of Pain is to put together a pamphlet describing dredging issues and their consequences to the nation in terms of jobs, exports, and taxes, and make Washington feel our pain by describing it in terms they care about. It

will take us time to produce, but we plan to ask 15-20 companies to fill out a one-page summary giving data and stories tied to dredging and ways that they’ve had to change their operations due to lack of dredging. Our goal is to show that their pain ripples throughout the region as costs to hundreds of industries and millions of consumers.

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Hopefully we can move our pumpkin name tag from the DOT/Federal Government locker room bulletin board to the homecoming float, and e pluribus unum - out of many, one compelling message is heard: fix the dredging funding problem.

Greater Houston Port Bureau | 3

May 2013 Commerce Club Honoring

CAPT James Whitehead Commander USCG Sector Houston-Galveston

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June 2013

Page Left: Top-Left: Alan Gao and Mike Vance, TASC; Top-Middle: Jürgen Schröder, Schröder Marine Services, Capt Marek Orent, Chipolbrok, and Greg Paschall listen to Buffalo Marine Service’s Pat Studdert before lunch; Upper-Left: Spencer Chambers and Commissioner COL John Kennedy, Port of Houston Authority; Upper-Middle: Honoree CAPT James Whitehead, USCG and Jon Calder, Malin Ship Repair & Drydock, Inc.; Upper-Right: Robert Hawn, Inchcape Shipping and Capt. Rich Russell, AET, Inc.; Lower-Left, Dennis Hansell, Suderman & Young Towing Company, and Bob Lain, Moran Gulf Shipping; Lower-Middle: Capt Rich Russel speaks to the 2013 Houston Certified Port Executive class table and instructor Capt. Jeff Monroe; Lower-Right: Tom Marian, Buffalo Marine Service, talks with Kristofer and Karl Schröder from Schröder Marine Services.

Page Right: Lower-Left: Warner Welch, Houston Vessel Traffic Service, and COL Mark Vincent, Port of Houston Authority; Lower-Middle: CAPT Marcus Woodring, PHA speaks to the crowd about CAPT Whitehead; Lower-Right: Laci Theriot, Chris Ransome & Associates, and LT Randy Scott, USCG. Greater Houston Port Bureau | 5

WALL STREET IS HOT - PORTS ARE NOT Port Watch - Tom Marian, Buffalo Marine Service As May stock market highs piled up despite lackluster fundamentals, Texas ports struggled to maintain previous gains. In fact, every port across the Lone Star State – save Houston - saw waning arrival numbers during the month of April. The final monthly cumulative tally was down over 4%.

Nevertheless, 2013 continues to outperform 2012 on a year-to-date basis by nearly 3%.

The guarded growth trend for the year is certainly region-centric as evidenced by strong double-digit growth in those ports benefiting from the bounty of west Texas shale gas fields. Thus, the southernmost ports of Brownsville and Corpus Christi are both up 22% for the year but both are also off 7.5% for the month. While the chemical and refining terminals held their own, the majority of the monthly declines were attributable to lower vessel counts at the general cargo and bulk docks. At the opposite end of the Texas coast, Sabine experienced a similar vessel arrival pattern – off by over 6% for the month but over 20% above last year’s running totals. The port of Freeport’s monthly arrivals were off by only 3%; however, unlike the majority of her sister ports, Freeport is a mere 1 ship arrival higher this year as compared to 2012.

Maritime transportation activity was underwhelming over the last month throughout the Houston Ship Channel. Tow movements across the Intercoastal Canal and into the Triport area served by this waterway fell by nearly 7%; lowering year-to-date transits by 4% - not a very positive harbinger for the brownwater sector as a whole. Granted, these results were adversely impacted by high water conditions on the lower Mississippi River which have been recently compounded by emergency lock repairs in New Orleans. Galveston – the smallest of the port triad – had a somewhat poor monthly showing with 15.5% fewer arrivals. Fortunately, Galveston is still in positive territory for the year to the tune of 5.5%.

Heading north, Texas City dropped 21% in terms of April arrivals and is one of the few ports in the region to register negative vessel arrival activity vis-à-vis 2012 – down 9.2% to be precise. This may be a bit deceptive since rail and truck movement of domestic crude has supplanted some of the foreign crude cargoes.

Houston is also experiencing decreases in the import of foreign crude as evidenced by a greater volume of shale gas barrels arriving via offshore tank barges and rail. This has contributed to some of the drag

reflected in the 2.5% fewer year-to-date arrivals but thankfully exports undergird April’s 2% climb over March. On the monthly gainer side, chemicals, LPG, Bulk and Ro/Ro vessel arrivals provided the impetus for the port to remain in overall positive territory.

These same categories with the exception of the de minimus Ro/Ro totals are also positive for the year.

Yet another set of indices that corroborate petrochemical exports dominate the regional trade picture. Conversely, imports are not nearly as robust.

Car carrier traffic plummeted nearly 42% in the last month and remains 14% below 2012’s arrival numbers; Container vessels tapered off 6% mirroring its year-to-date performance; General cargo was also down by 6% for the month but remains 3.5% above 2012’s arrivals; tankers remain 18% below 2012’s vessel calls for this category and merely matched the previous month’s totals. Surprisingly, offshore tug and barge movements did not compensate for tanker’s flat performance as it has in previous month’s since this category saw 21% less activity in April.

All told, the marine transportation picture in April was a mixed bag that did not track the paper exuberance permeating Wall Street. Mind you, there was staythe-course activity throughout the various terminals and expansion plans on the waterfront signal a bullish view for the Port of Houston. Whether such activity is founded on long term growth projections

or pent up dollars yearning to be spent on capital improvements remains to be seen. What is certainly known is that the refiners need to refine, the bounty from the shale gas fields will be extracted and consumers are less likely to stash their cash when it earns very little and there are goods that need to be bought. More importantly, as another Memorial Day weekend gives way to summer, many genuine thanks for the sacrifices and hardships endured by the members of our military to protect and preserve that which we take for granted – day in and day out!-T. Marian, Buffalo Marine Service

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King Cotton

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June 2013

Typical Cotton Barge on the Houston Ship Channel, 1913 Original Caption: “[The Houston Ship Channel] cuts the railroad rate from 21 to 6 cents per hundred pounds and annually saves Texas planters $6,000,000.�

Greater Houston Port Bureau | 9

Photo Credit: Reaching for the Sea; The Story of the Port of Houston, 1989, Port of Houston Authority (Courtesy of Mr. Jeff Joachim – World Trade Distribution, Inc)

Cotton is King!

At least for 100 years (1826 to around 1925) this was so, and Houston was a key cog in the delivery system that moved Texas cotton from the farm, either along the coast to domestic textile manufacturers, or overseas into foreign commerce.

Today, waterborne foreign trade in raw cotton, while a valuable contributor to the U.S. trade balance, has neither the scale nor the scope of yore when compared to the magnitude of either the total value or the total tonnage of the country’s current waterborne foreign trade activity. However, in the realm of agriculture commodities, while cotton may not be king, it is indeed a stately prince and the Port of Houston remains a viable link in the worldwide cotton trade.

Cotton Basics Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of a cotton plant. The fiber, which is almost pure cellulose, is most often spun into yarn or thread used to make soft and breathable woven textiles that can be washed and dried.

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by David Cooley, GHPB

The cotton plant is a shrub of the genus Gossypium native to tropical and subtropical regions around the world (generally between 37째N and 32째S) which include parts of the Americas, Africa, and India.

The northern hemisphere accounts for about 90 percent of global cotton production.

Successful cultivation of cotton requires a long frost-free period, plenty of sunshine, and a climate providing moderate rainfall, usually from 24 inches to 48 inches. In addition, the soils of cotton-growing regions usually need to be fairly heavy, although the level of nutrients does not need to be exceptional and the application of active weed and pest control programs are common.

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In the U.S., cotton is planted in the spring, usually late February through June, and harvested about 25 weeks later (roughly 150-220 days), or August through December.

In the U.S., cotton is produced in the 17 states along the southern tier of the country ranging from Virginia to California.

Scott Dobry

U.S. Cotton Supply and Demand

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Major cotton growing Greater Houston Port Bureau | 11

concentrations in the U.S. include areas of the Texas High and Rolling Plains; the Mississippi, Arkansas, and Louisiana Delta; southern Georgia; and California’s San Joaquin Valley.

The predominant type of cotton grown in the United States is Upland Cotton, which is grown throughout the U.S. Cotton Belt, as well as in most major cotton-producing countries. American Upland Cotton has a staple length of 1 to 1.25 inches and accounts for about 97% of the annual U.S. cotton crop. Upland cotton is versatile and its use ranges from shirts and blouses to denim.

The balance of U.S.-grown cotton is American Pima or extra-long staple (ELS) cotton, which has a staple length of 1.5 inches or longer and is produced predominantly in

California, and the arid regions of southwest Texas, New Mexico, and Arizona where it is particularly well adapted to prevailing environmental conditions. The markets for ELS cotton are mainly high-value products, such as sewing thread and expensive apparel, although it is also used in some home goods, such as bath towels and rugs.

Annual U.S. cotton supply (production) has grown from just over 10 million bales annually during the 1960s to peaking near 23-24 million bales annually during the period 2003-2006. This is a result of better seed, more effective fertilizers and pesticides, and more efficient agricultural practices and machinery. In spite of these benefits, since 2007 cotton production has declined somewhat with output ranging between 15 and 17 million bales. This decline is attributed to both drought in the plains that re-

BARGING AHEAD ever so politely.

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Buffalo Marine Service, Inc. 12 | June 2013

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duced production, and prices of competing row crops that offer farmers more robust profit opportunities.

The demand for U.S. cotton is composed of both textile mill use and exports. During the last 45 years the product mix has slowly evolved so that today the composition is diametrically the opposite of what it was during the mid mid-1960’s. Currently, the primary demand for U.S. cotton is the export market, while 45 years ago, the driving force was demand from the textile mills predominantly located in the Carolinas. Historically, consumption of cotton

by U.S. textile mills generally followed the fall and subsequent rise of domestic cotton production, as well as the general level of economic activity, from the mid-1960s through the mid-1990s.

The U.S. textile manufacturing business peaked in 1997 and has declined by more than 50 percent since that time as a result of increasing labor costs coupled with aging machinery. As a result, the U.S. textile industry is less competitive in the world market and domestic mills have closed. In addition, the end of the Multi-Fiber Arrangement’s (MFA) quotas in 2005, which benefited the U.S. textile industry, was also a contributing factor. Near the

end of the 20th century, capital investment by global textile suppliers accelerated a long-standing trend of moving textile production to developing countries. As a result, overseas market concentration and overseas market share both increased. However, American consumer demand for cotton products remains strong and imported clothing now accounts for most cotton purchases by U.S. consumers. With U.S. textile mill use declining and U.S. cotton production increasing, exports of cotton jumped significantly beginning in the early 1990s and continues today.

Concurrent with the latest decline in textile mill output that began in 1997, the gross value of the output of textile mills (GDP impact) has fallen by about 45 percent, from over $90 billion to about $50 billion. During this period, offshore opportunities increased significantly and presented the worldwide textile industry a more robust economic incentive for owners to shift production to various countries in Asia, such as India, Pakistan, Bangladesh, Vietnam, and China.

Cotton Acreage According to the Census of Agriculture, U.S. cotton farms numbered 18,605 in 2007, down from 24,805 in 2002. While the number of farms has fallen, cotton acreage per farm has risen, averaging 564 acres per farm in 2007 compared with 502 acres in 2002. As a result and as with other industries, cotton farming has followed a trend of consolidating into larger farms to capture advantages economies of scale. This has become more prevalent during the last few years as the share of large cotton farms (over 1,000 acres) has continued to increase while the share of small cotton farms (under 100 acres) declines.

Planted cotton acreage in the United States rose slightly during the first 5 years of the 21st century, continuing a multi-decade trend. During the 1970s and 1980s, the area planted to cotton averaged about 12 million acres, which rose to about 14 million acres during the 1990s. During the first 5 years of the new century, planted acreage again rose, albeit slightly, to a level of more than 14.5 million acres. However, since 2006, cotton planted acreage Greater Houston Port Bureau | 13

in technology (seed varieties, fertilizers, pesticides, and machinery) while utilizing advanced production techniques (reduced tillage, irrigation, crop rotations, and pest management systems). The impact of these changes has been particularly evident as yields reach new highs, even though U.S. cotton production decreased following acreage reductions that occurred during the late 2000s. The increased yields limited the effect of these acreage declines.

Cotton In Texas In Texas, cotton has been a major crop for more than a century, and since 1880 Texas has generally led all states in

in the U.S. has been trending lower as relative prices have favored the planting of alternative crops, such as corn and soybeans. All regions of the Cotton Belt have experienced significant declines as compared to 2000-2005.

Cotton Yields While acreage has declined in recent years, improved technology has resulted in an increased yield per acre in the United States that has been manifest over the last 5-6 years. This increased yield has paralleled advances

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cotton production.

Since 1965, annual Texas cotton production has averaged 4.4 million bales as the state holds position as the nation’s number one cotton producer.

From a low of just over 2.4 million bales in both 1975 and 1983 to a high of over 8 million bales in 2005 and 2007, production in Texas represents just over 30 percent of the total cotton production of the United States, which during the same period averaged 14.6 million bales annually.

Total cotton production in Texas dropped to 3.9 mil-

fer. The results showed that the most water was required for the production of alfalfa and corn followed by wheat, soybeans, and grain sorghum. Cotton required the least amount of water of crops measured, and in fact, while an average of 2.25 acre-feet of water was necessary for the growth of alfalfa, and nearly 1.5 acre-feet was necessary for corn, while cotton only required an average amount of 0.75 acre-feet.

The increased expected return on irrigation from cotton is a major reason for the expansion of cotton production into the Texas Panhandle, as reduced water useage leads to reduced irrigation costs and increased economic return. With the increased return, cotton acreage has in-

lion bales in 2011 after nearly 7.9 million bales in 2010 as a statewide drought impacted farmers growing every type of cash crop. Counties leading in production of upland cotton in 2011 included Hale, Lubbock, Gaines, Dawson, Hockley, Crosby, and Floyd; all located in the Texas High Plains.

An integral aspect of water management in the Texas High Plains is crop management. As water becomes more of a scarce resource and the cost of irrigation increases, the benefit of switching to a different crop is rapidly gaining interest. For example, a study was conducted by Almas, Colette, and Warminski in 2000 and 2004 to determine the amount of water required by different crops, peak times for irrigation, the distribution of crops throughout the districts, and the effects of irrigation patterns on the aquiGreater Houston Port Bureau | 15

creased in the 26 Panhandle counties from 450,300 total harvested acres in 2000 to 488,100 total harvested acres in 2004. Furthermore, cotton production in these counties has also increased from 467,500 bales in 2000 to 739,700 bales in 2004 (USDA NASS, 2006). This represents an 8.4 percent increase in total harvested acres and a 58 percent increase in cotton output. As Texans remain adaptive, cotton has the best chance of remaining the key crop, not only for the Texas Panhandle, but also for the State in general.

U.S. COTTON IN THE WORLD In 2012, cotton was the U.S. 4th largest agricultural export commodity after soybeans, corn, and wheat. The export value of U.S. cotton was over $6 billion. This equates to $2,570/ MT, or $560/bale, or $1.16/lbs.

Cotton will remain associated with the raw material while the term “apparel” will refer to manufactured cotton or finished goods. This reference will include items such as, but not limited to thread, yarn, and woven goods. Woven goods include a wide variety of woven items ranging from simple woven cloth to various finished goods made from cotton; clothes, coats, towels, bedding, and cotton fabrics.

The U.S. demand for cotton apparel is comprised of two sources: the input required by U.S. textile mills and imports of apparel from overseas. Apparel demand since 2002 has ranged from a low of 18 million bales during 2009 as a result of the financial crisis to just over 22 million bales during each year from 2005 through 2007 with a range of about 18%.

During the 2011/2012 cotton crop year, August 2011 through July 2012, the U.S. was the world’s largest supplier of raw cotton with 2.6 million metric tons and the world’s third largest cotton producer, 3.4 million metric tons.

Concurrent with the decline in U.S. textile mill activity, as a result of not being cost competitive, demand swung rapidly to more price-competitive markets overseas. This was especially pronounced after the termination of the Multi-Fiber Agreement in 2005, which had benefited the U.S. textile mills industry.

The volumetric balance of trade for cotton (the broad categories of raw cotton and cotton apparel) was relatively balanced through 2005. In 2007, cotton production in the U.S. began a decline as a result of weather (drought conditions in cotton growing country in the Southwest) and more robust profit opportunities were available from competing row crops, such as corn grown for subsidized etha-

COTTON TRADE NOTE: Heretofore, cotton referred to the raw material consisting of cotton bolls that have been ginned and compressed into bales. Henceforth, cotton will be subdivided.

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June 2013

nol manufacture. As a result, the trade balance for cotton, in terms of volume, has slipped into a deficit position between 2006-2010. Since the value of the raw material is less than the value of the finished product, cotton is also at a trade deficit throughout all years in terms of value as well.

WATERBORNE TRADE IN COTTON Historically, cotton was transported in bulk. Cotton bales (roughly 500 pounds/bale – now standardized at 480 pound/bale) were at first hauled onto a ship using a hand truck or dolly. As steamships grew in size, multiple bales of cotton were hauled aboard using the vessel’s crane to hoist cargo over the rail and into the hold.

Today, the vast majority of cotton is shipped via container. Because most waterborne shipped raw cotton are exports and most cotton apparel are imports, comparing the shipping weight of all raw cotton (generally exports), all cotton apparel (generally imports), and the total of all goods shipped and received in U.S. waterborne foreign trade to the total shipping weight of each category that were shipped in containers, over 90 percent of both raw cotton and cotton apparel are shipped in containers. This percentage far exceeds the percentage of all other waterborne trade which, shipped via container, totals only 10% to 15% of tonnage.

Greater Houston Port Bureau | 17

In terms of tonnage, the trade in raw cotton and cotton apparel comprise about 1.5% each of total container shipping weight. In absolute terms, this equates to an average annual container shipping weight of about 3 million MT for each category. (NOTE: 1 MT = 4.5930 480 lb balea).

The U.S. waterborne foreign cotton trade mirrors activity in the domestic cotton market over the last ten years.

That is, U.S. textile mills are closing reducing domestic manufacture of cotton apparel. In addition, reduced domestic mill throughput pushes more U.S. cotton production into the export market.

Furthermore, rising wealth early in the decade increased the demand for finished cotton products – apparel – which, because of declining apparel manufacture in the U.S., were sourced overseas, so imports increased.

This was tempered later in the decade as economic malaise of a slow recovery dampened disposable income and non-essential demand. As a result, cotton apparel demand and imports have declined.

The trade in raw cotton, essentially exports, has generally declined as drought and alternative crops reduces cotton production in the U.S. Cotton apparel, essentially imports, has generally maintained its position, but tonnage still hovers at levels below what the market reached before the financial crisis.

At the same time, the value of raw cotton rose in 2010, spiked further in 2011, and then dropped, but has remained above the 2010 level. This is the result of increased demand from China as drought reduced supply from the United States. As a result of the increased cost of raw material, the value of apparel also rose somewhat, though growth was tempered by the worldwide economic malaise. Like tonnage, the value of all commodities rose reflecting the general increase in worldwide trade.

Looking at the relative change in export tonnage, one realizes that as textile mills close operations, export of apparel declines as a result of competitive pressures from overseas. Consequently, the export of raw cotton increases as it is not being consumed in the domestic market. Total container exports reach new and higher levels and the U.S. emerges early, on a relative basis, from the recession as the export of manufactured goods increases.

At the same time, raw cotton imports, although miniscule by comparison, dramatically declined as domestic cotton mills are shuttered. With supply of domestic manufactured apparel items removed from the market, imports of cotton apparel rose and on a relative basis, some years exceeded change in total U.S. contain18 |

June 2013

er shipments.

In summary, the change in the cotton trade is a microcosm of the displacements occurring throughout the world as the Adam Smith’s invisible hand is quite evident and the economic behavior of individuals drives markets.

COTTON AND HOUSTON Cotton has always played a prominent role at the Port of Houston. In fact, the cotton trade was the impetus for creating the Houston Ship Channel in the first place. Today, Houston is the 4th largest U.S. exporter of raw cotton behind Los Angeles, Long Beach, and Savannah. Cotton exports emanating from Houston averaged slightly over 350,000 metric tons or 1.6 million bales from 2003 through 2012. This quantity is about 26% of the total Texas cotton crop (average Texas cotton crop production is 6.0 million bales - 2003-2012) and is sourced to local cotton growers located in along the coast southwest of Houston and inland up to 200 miles.

While Houston is the only significant waterborne exporter of cotton by far the largest waterborne exporting port in Texas, the title of the largest exporting port switches from time-to-time between Laredo and Houston. In fact, several of the Texas border towns along the Rio Grande, such as Brownsville and Hidalgo in addition to Laredo, handle a significant amount of cross-border trade with Mexico. This trade, part of the January 1994 North American Free Trade Agreement, involves the U.S. sending raw cotton to Mexico where it is spun, woven into cloth, and sewn into clothing. Mexico then exports finished apparel to the U.S. The value of the cotton exported from all ports along the Rio Grande reached $700-800 million each year from 2003-2012. Reciprocally, the value of finished cotton apparel imported from Mexico averaged $2.4 billion during the same period.

Houston is an export center for raw cotton with average annual exports of about 350,000 metric tons a year and a value of around $500 million (2003-2012). (NOTE: The

2012 drought reduced cotton exports by about 125,000 metric tons or 64 percent). Imports into Houston of both raw cotton and finished apparel, while occurring, are not significant in either tonnage or value.

It is interesting to note that exports of cotton from Houston have declined relative to both total container weight and value of all Houston exports. Also, imports of cotton apparel, while not a significant amount, have marginally increased relative to total container weight of all Houston imports.

For Houston’s export cotton, Turkey is by far the region’s largest customer, receiving over 52% or 185,000 metric tons of raw cotton. The next four largest foreign destinations for cotton, Brazil, China, Pakistan, and Peru receive, in the aggregate, 27% of Houston’s cotton exports, or less than 100,000 metric tons in total. These five destinations account for 78% of the roughly 350,000 metric tons exported each year from the Port of Houston.

PRICE Pricing for raw cotton on the open market is a discussion of cents per pound, and during the last 30 years the price has fluctuated from 37¢/lb in August 1986 (harvest time) to 229¢/lb in March 2011 (just before planting the 2012 crop). During this time, cotton prices have averaged 72¢/lb, with 85% of the prices occurring between 48¢/lb

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During 2012, the price for cotton averaged 89¢/lb, on the high end of the historical range.

In May 2013, cotton sold for 81¢/ lb, generally following the seasonal pattern of declining into the harvest season (August-November) then rising into spring and tapering off as new crops sprout and begin to grow.

The basic driver of price is the interaction between supply and demand. The primary market movers in today’s cotton market, both in terms of supply and demand, are the Chinese.

Utilizing a vast pool of relatively inexpensive labor coupled with an investment in modern machinery, China has emerged as the world’s largest importer of raw cotton. This is in addition to being the largest producer of cotton, the largest manufacturer of cotton goods, and the largest exporter of cotton apparel.

Without a doubt, Chinese market drives the price of cotton.

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and 96¢/lb. This suggests that cotton trades in a relatively narrow range and moves beyond those boundaries as a result of stress. Bountiful production will push the cotton price to the lower end of the scale, while catastrophic crop losses will run the price up.

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In a similar vein, cotton stocks also play an influencing role in determining the price of cotton, as with any commodity.

The cotton stocks with the most

influence on price are located in China. The Chinese maintain a “strategic” level of commodity stocks, of which cotton is one. Action taken with regard to “strategic” stocks occurs irrespective of price. As a result, the influence of the level of cotton stocks on the price of cotton is a Chinese political decision as opposed to an economic decision.

As a result and as with most commodities today, the role of the Chinese is extremely influential. However, the ultimate driver of any decision may not always be primarily influenced by market economics.

CONCLUSION Cotton was the reason that Houston came into being; the cash crop provided the rationale to dredge the ship channel to receive coastal steamers, and basis for establishing the Houston Port. For the first hundred years cotton was King! As the city and the port grew, the wonders of the industrial age provided new opportunities to expand trade.

As the 20th century dawned, oil was discovered in East Texas, and a new king was born. Today, oil and petrochemicals reign where cotton once held court. However, the role of cotton is not forgotten. Cotton is the 4th largest agricultural export and Texas is, by far, the largest cotton growing state in the nation. While no longer a major export product in terms of either value or tonnage, Houston is the 4th largest cotton export port in the country. Maybe no longer a king, but surely a prince. - D. Cooley, GHPB Statistics for this report were compiled from databases maintained by the USDA, Department of Commerce, Bureau of Economic Analysis, Census Bureau, and the National Cotton Council.

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Mike Quiray Senior Vice President Trade Services & Maritime Finance 713.827.3707 MQuiray@trustmark.com

Jeff Deutsch Senior Vice President, Corporate Banking Manager 713.827.3717 JDeutsch@trustmark.com

trustmark.com Member Greater Houston Port Bureau | 21 FDIC

Marpol Annex VI Compliance: Is Your Company Prepared?

Whether a ship builder, ship operator, ship owner or ship’s captain, MARPOL Regulations affect you. As an operator on the waterfront, keeping your company’s marine vessels in compliance with the MARPOL Regulations Annex VI, Regulations 13 & 14 is imperative. One mandatory requirement of MARPOL VI includes the obligation to conduct exhaust emissions testing and report on a real time basis emissions from marine vessels. Analytical measurements, along with data acquisition and reporting systems are required to meet MARPOL emissions compliance.

MARPOL compliance regulations require continuous monitoring Systems (CMS) for the measurement of emissions, including Nitrogen Oxides (NOx), Carbon Monoxide (CO), Oxygen (O2) and Sulfur Dioxide (SO2) utilizing EPA approved fixed and/or hand-held portable emissions monitors. Such systems also include the measure and reporting of urea flow, engine temperatures, RPM, fuel flows, GPS coordinates and meteorological readings on board these vessels.

GHPB Member TASC is a provider of turn-key MARPOL marine systems, and installs/maintains CMS and diesel management systems to meet MARPOL Compliance monitoring for a single application or fleet wide needs. All TASC MARPOL staff are safety certified for their appropriate work environment, i.e. HUET/cold water/egress.

TASC recently provided testing services for a major offshore project in the Arctic Circle, supplying data from the drill ships and their supporting fleet vessels. Daily operations to ensure compliance included hand-held portable emissions monitoring on numerous diesel engines, data acquisition & reporting, system maintenance, spare parts and field support. MARPOL Sources included the main propulsion engines, generator engines, and crane engines stack emissions data utilizing EPA Methods for sampling and opacity observations. These diesel engine applications fall into tier I, II or III, based on date of manufacture. - J. Burkland, TASC Established in 1990, TASC boasts with the finest equipment and support staff available. TASC and Vivicom projects can be found around the world with components in every environment imaginable. As a proud member of numerous organizations including the Greater Houston Port Bureau, Instrument Society of America and Anchorage Chamber of Commerce, TASC is well recognized as a leader in the industry. For more information on any of these services, products or projects, visit the TASC website at www.tascorp.com or call our office 713.474.3232 for all MARPOL questions.

Don’t Navigate Your Finances Alone.

With experienced maritime bankers and the capacity to lend, Bank of Texas has the resources you need to help navigate your finances. We offer competitive structures and terms to meet your growing capital needs.

As a trusted name in marine financing and a committed partner to the maritime industry, let us chart you a course for success. Give us a call, or better yet, let us come see you.

Vessel Financing | Lines of Credit | Leasing Real Estate & Terminal Expansion 832.786.5178 | www.bankoftexas.com/marinefinance Greater Houston Port Bureau | 23

Š 2013 Services provided by Bank of Texas, a division of BOKF, NA. Member FDIC. Equal Housing Lender

When All Else Fails: Build it Yourself Richardson Stevedoring & Logistics has a reputation in the Port of Houston for trucking, stevedoring, materials management, and break-bulk yard work. When it comes to getting cargo off a vessel, Richardson has the experience, personnel and equipment to get the job done. With its participation in the development of the Green Transport Barge Terminal along with J. Jennings Investments, L.P., Richardson is displaying a versatility that many may not have expected from this Port of Houston institution. “It’s an exciting project and a great partnership” explains Nolan Richardson, President of RSL. Just north of the Grand Parkway (SH-99) at Cedar Bayou, Richardson trucks and equipment can be found moving earth, laying pipe, and preparing the Green Transport Barge Terminal for break-bulk, project, and containerized cargo. Though originally a single-faced waterfront slip, construction is underway for a multi-slip barge terminal. This terminal will easily accommodate both over the road and water based transportation given its strategic placement to SH-99 and the Cedar Crossing Industrial Park.

The 75 acre facility is being developed to include a fully concreted lay-down area and maintenance yard which will ensure that the facility is able to maintain constant operational status year-round. Mr. Richardson explains that “We’re working hard to get the Green Transport Barge Terminal up and running. This facility will be a great choice for our customers not only because of the time and money they can save, but also because every barge is playing a part in reducing traffic congestion and harmful emissions which adversely affect our ports and cities.” Recent studies by Texas Transportation Institute explain his excitement, because barges produce less than one-third of the CO2 emissions per ton-mile than trucks.

Therefore, barges with 100 containers on board or full loads of steel coil will play a valuable role in reducing our region’s carbon footprint.

With the booming business of Barbours Cut and Bayport Container terminals coupled with the Houston Region’s reputation for handling break bulk cargo, the Green Transport Barge Terminal will provide an enticing new option for those needing to efficiently move cargo between this area’s manufacturing facilities and finishing stations by capitalizing on two reliable means of transportation: regional waterways and highways.

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Greater Houston Port Bureau | 25

Chairman/CEO, ALLTrans Port Services, Inc.

Donna Rains Born in South Carolina and raised near Ashville, North Carolina, Donna Rains is a team-builder the old fashioned way. “Don’t write so much about me, talk about my people.”

Trained in a steel mill, dedicated to her employees and not afraid to get her hands dirty, the Chairman/CEO of AllTrans Port Service, Inc. has spent forty years in the metals business and is able to manage her people while understanding the day-to-day grind that the transloading company is built upon.

After graduating, Donna went to work for a company called Southeastern Coated Products in Columbia, SC. “I was hired just as that coating line was being built, so I ended up knowing every bolt, turn, everything in the place. It was a great experience because I helped put the inventory system together, knew all the lab stuff, and when the plant manager failed to get his wastewater certification three times, they gave me a stack of books and pretty soon, I was running the wastewater plant as a B grade Wastewater Engineer.”

One day, Donna’s boss walked into the lab where she was working and invited her to lunch; “I showed a prospective customer around the plant, and soon after the gentleman left as a customer, my boss came back in and said, “You

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will go sell steel for me in Houston!” “Okay, when would you like me to start?” “Three o’clock in the morning!” We had landed our first customer for the plant.” Meeting her boss at the airport at 3AM, with an overnight bag packed for a couple of days, Donna rode with her boss as he flew his single-engine Cessna to IAH. “So we got to Houston, landed, he got my bag out, and I asked “So, did you make reservations somewhere for us to stay?” And he said “Stay?

No no. You go sell steel now, I go back”, and he turned around, fueled, and went back to South Carolina.” After the initial shock wore off, Donna called the Host Airport Hotel for a ride. After checking in there, she rented a car, got a map, and picked up the yellow pages to find prospective customers and schedule appointments with them. “At the time, there weren’t any women selling steel, so I think the purchasing agents and the business owners were so curious about what I was doing in this business, they were willing to make that initial appointment just to hear my story. After a week, I was allowed to return home, left Houston with a few orders, and flew commercially – thank God! As a salesperson, you have to knowwhat you’re talking about, and I think it surprised them at how well I knew the products.”

Donna worked for Southeastern until 1977 (19701977) when she decided she needed to move forward and applied for a job with Dearborn Chemicals, a division of W.R. Grace & Co. “All the people they’d hired before to work sales were men with chemistry or chemical engineering degrees, and the interviewer asked me “Well, do you have a chemistry degree?” I looked at him and said “I thought you’re looking for a salesperson”, so he tossed me a pencil and told me to sell it to him. By the time we were done, I had the job.” Again, Donna proved herself a capable salesperson – after six weeks of training, she hit the street and was the company’s top seller for her first three years.

After Dearborn, Donna sold for Atlantic Richfield in Deer Park, and did so for nearly a decade – taking a short break to run for Congress in the Virginia 6th Congressional District - before the opportunity came along to purchase a company that became AllTrans Port Services. Together with her husband Benny, Donna built AllTrans up as a rail company moving steel coil in the Port of Houston. “But remember, the great part about the Port of Houston is how diverse all the cargo that comes through is. So one month, you may move a lot of coil, then the next month, you’re moving nothing but pipe, and you’ve got to be ready for it and able to adapt.”

“We started in 1993, and we were initially focused on rail transloading.” After several years, Donna formed AllTrans Port Trucking, Inc, and the family of companies offers a wide range of transportation services, specializing in OCTG, tubing and line pipe, as well as coils, bars, beams, and plate. The company has over 100 acres of indoor/outdoor storage and handles over 10,000 railcars per year to points all over the United States, Canada, and Mexico. “Too often in this business, it’s hard to find a dedicated trucking company – someone who’ll handle your business and show up where you want us, when you want us. It’s a difficult job and made more difficult today with increased regulation, but we’re dedicated to our customers and delivering loads safely, reliably, and on time.”

“I won’t say we’ve seen it all, but we’ve seen a lot in 20 years. I find that the Port is a fascinating place to work, I think we have our finger on the pulse of the city and the overall community. We try to be good environmental stewards, we’ve kicked off some programs that work pretty well, like applying SS-1 on our yards to control dust, and ensuring that each of our guys wear out uniform shirts with safety stripes. Safety is extremely important to us –

we are probably one of the first independent yards that went to the policy of having our safety stripes on our worker’s shirts.”

Emphasizing safety, Donna explains many of the regulations that AllTrans has in place: when truckers work the AllTrans yard, they have to wear hard hats, gloves, steel toed boots, and if a driver leaves his truck, he can’t get paperwork from the company unless he comes to the window with safety equipment on. “We’re a safe operator in a dangerous business, so when you’re on our yard, you have to listen to the checker, or the head of the yard crew, and you have to stay 10-15 feet in front or behind your truck – never on the side. We don’t want to see any of our people in a situation where accidents can happen.” With daily safety briefs and a leadership meeting every afternoon, Donna emphasizes that “Communication in a company is just about the most important thing there is – you don’t have to like everybody that you work with, but you’d sure better be able to talk to them. “ Donna and her husband Benny have an extended family of four children and ten grandchildren.

It’s a difficult job and made more difficult today with increased regulation, but we’re dedicated to our customers and delivering loads safely, reliably, and on time.

Greater Houston Port Bureau | 27

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