WINTER
2015
THE PORT OF HOUSTON
2 MILLION TEUs... AND COUNTING!
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The National Shipping Company of Saudi Arabia
General Cargo
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Port of Houston Authority | Winter 2015
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Our Journey Continues
CONTENTS WINTER 2015
12 FEATURE 2 MILLION TEUS‌ AND COUNTING!
IN EVERY ISSUE 6 A Message from Executive Director Roger Guenther 8 The Manifest Port of Houston Authority News Highlights
26 Spotlight on Small Business Concrete Results from Epoxy Design Systems
18 State of the Port 22
Big New Cranes Hoisting Cargo at BCT
84: Facilitating and 24 FTZ Expediting International Trade N4 Terminal Operating 28 New System Live at Barbours Cut
Port of Houston Authority The Port Delivers
EXECUTIVE OFFICE
Port of Houston Authority JANIECE LONGORIA Chairman
JOHN D. KENNEDY Commissioner
DEAN E. CORGEY Commissioner
111 East Loop North, P.O. Box 2562, Houston, TX 77252-2562 Phone: 713-670-2400 Fax: 713-670-2429 Executive Director Roger D. Guenther
Chief Legal Officer Erik A. Eriksson
Chief Operating Officer Thomas J. Heidt
Chief People Officer Phyllis Saathoff
Chief Commercial Officer Ricky W. Kunz
Chief Port Operations Officer Jeff Davis
Chief Financial Officer Tim Finley
Harris County Auditor Barbara J. Schott
Chief HSSE Officer Marcus Woodring
Harris County Treasurer Orlando Sanchez
Chief Information Officer Charles Thompson
FIELD OFFICES
Central & South America (excluding Brazil)
CLYDE FITZGERALD Commissioner
Arturo Gamez Central & South America Representative Port of Houston Authority Avenida Aquilino De La Guardia y Calle 47 Ocean Business Plaza Building, Mezzanine Panama, Republic of Panama Tel.: +(507) 340-0205 Fax: +(281) 754-4647 Houston Access (713) 491-4607 Email: agamez@poha.com
Brazil John C. Cuttino Brazil Representative Port of Houston Authority Av. Paulista, 2300-Andar Pilotis Sao Paulo, SP Brazil, CEP: 01310-300 Tel.: +55 (11) 2847-4931 Fax: +55 (11) 2847-4550 Houston Access (832) 239-5076 Email: jcuttino@poha.com
THELDON R. BRANCH, III Commissioner
Asia Garth Harrison Port of Houston Authority c/o Ben Line Agencies Email: gharrison@poha.com Tel: +84 838 256 148 x 147 Mobile: +84 903 943 886
Head Office 200 Cantonment Road, #13-05 Southpoint, 089763 Singapore Tel.: +65 6420 9013 Fax: +65 6224 0163
STEPHEN H. DONCARLOS Commissioner
Port of Houston Magazine’s editorial staff: Stan Swigart, director, marketing and external communications | Bill Hensel, manager, external communications | Laura Blewitt, communications content specialist | David Bray, photographer Chris Kuhlman, photographer | Gilbreath Communications, Inc., design and layout This publication is not copyrighted and permission is given for the reproduction or use of any original materials, provided credit is given to the Port of Houston Authority. Additional information, address changes, extra copies, or advertising specifications may be obtained by writing to the Port of Houston Magazine.
ROY D. MEASE Commissioner
The Port of Houston Magazine is published by the Port of Houston Authority, P.O. Box 2562, Houston, Texas 77252-2562, and is distributed free to maritime, industrial and transportation interests in the United States and foreign countries.
Visit the Port of Houston Authority online www.portofhouston.com
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Port of Houston Authority | Winter 2015
THE INVESTMENT CONTINUES
Bigger. Faster. Ready. THE PORT OF HOUSTON AUTHORITY recently welcomed four super post-Panamax cranes that are just one portion of the $700 million modernization project taking place at our Barbours Cut Container Terminal. These new ship-to-shore cranes will accommodate today’s generation of large container vessels that will be calling on our terminals following the expansion of the Panama Canal.
Port of Houston Authority America’s Distribution Hub for the Next Generation
www.portof houston.com
| 713.670.2400
ROGER THAT!
A MESSAGE FROM EXECUTIVE DIRECTOR
ROGER GUENTHER
The New Year promises to give us more
OPPORTUNITIES TO ENHANCE AND EXPAND our
public
terminals
to
meet
the
tremendous demands ahead. I am happy to report that with the approval of the 2016 capital plan, we are ready to take on new projects to improve our facilities and continue to deliver the most efficient service for our customers. The proposed 2016 operating budget and capital plan was unanimously approved by the Port Commission on Nov. 17, 2015.
18.5%
increase between 2014 and 2015
TEU VOLUME 6
Port of Houston Authority | Winter 2015
An exciting growth area for the Port of Houston Authority is our containerized segment. This magazine issue’s cover story takes an in-depth look at our status as the busiest container port in the Gulf Coast as we surpassed moving 2 million TEUs for the first time. One big reason that our budget is expanding next year can be traced back to projected growth in our container TEU volumes. Our market development analysts foresee an increase of 2.7 percent in container TEU throughput next year. This comes on the back of an incredible 18.5 percent increase between 2014 and 2015. In order to keep the growth going in our container segment, ongoing infrastructure enhancements will continue to take priority in our capital budget. Our strong cash flow generation will help support our $314 million 2016 capital improvement budget.
The Port Authority market development team has reported that steady global economic growth can be expected through 2016–2020. U.S. GDP is estimated at 2.8 percent for 2016, slightly higher than the 2015 GDP growth of 2.3 percent. Although the decline in the price of oil has had impact on related import commodities during recent months, and the strong U.S. dollar brings risk to our exporting power, experts believe that our local and state economy will stay resilient and overall employment levels are firm. This is supported by the tremendous amount of new manufacturing capacity being built along the Gulf Coast that will deliver increased production of petrochemical related commodities for export in the very near future, namely plastic resins.
2016 CAPITAL IMPROVEMENT PROGRAM Recapitalization
$314 MILLION
Strategic Channel development Maintenance/other
The bulk of our improvement budget are moving into major projects that support new growth opportunities. These strategic investments make up $207 million, or about two-thirds, of our total capital improvement budget. Channel development projects were allocated $65 million, or 21 percent of the budget. These funds will go toward continued development at container terminals and DAMP areas. Another integral piece to adding efficiencies at our terminals comes from our recapitalization projects. A total of $33 million will go toward investments that are needed to sustain our high service levels and productivity enhancements. The remaining 3 percent of our capital spend will be directed toward required maintenance projects and equipment replacement.
And on the import side, the U.S. dollar is stronger relative to foreign currencies, and the Port of Houston Authority expects import demand for consumer goods shipped in container boxes to increase even more. Container demand for plastic resins is also poised to skyrocket in 2017 and beyond, bolstering our loaded container volumes. In fact, the budget’s 2017 forecast shows a 14.4 percent rise in projected Port of Houston Authority TEU volumes, meaning after a year of slow-growth in 2016, we are back on track for another boom. This means that 2016 is the perfect time to focus on the strategic projects, channel development, recapitalization projects and requirement maintenance. n
Winter 2015 | Port of Houston Authority
7
THE
MANIFEST
NEWS HIGHLIGHTS
PORT AUTHORITY ENTERS INTO AGREEMENT WITH CORPS OF ENGINEERS The Port Commission of the Port of Houston Authority has approved entering into a Feasibility Cost Share Agreement with the U.S. Army Corps of Engineers for improvements to the Houston Ship Channel and tributaries to accommodate future growth of maritime commerce. The Port Authority was one of three ports in the nation that were selected for involvement in a congressional study for potential improvements to waterways. “We are investing in the future as we prepare for opportunities ahead to strengthen the Port of Houston’s position in the Gulf,” Executive Director Roger Guenther reported at the Port Commission meeting in late October.
SECOND SESSION OF PORT UNIVERSITY COMPLETED The Port of Houston Authority, in partnership with Houston Community College, recently completed the second session of Port University for 2015. Port University is an initiative of the Port Authority’s Small Business Development Division and is aimed at helping small business vendors. A total of 37 small business firms graduated from the second session of the training program, while 42 small businesses graduated from the first session earlier in the year. The addition of those graduates brings the total number of graduates to 578 since the program began in 2002. The Port University course is structured to provide businesses an overview of the Port Authority and give small business vendors information about the procurement processes. It also provides information about procurement packages and a summary of the various departments and their functions within the Port Authority.
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Port of Houston Authority | Winter 2015
PHA SHARES STORY OF GROWTH AT CONTAINER TRADE OUTLOOK CONFERENCE Partnering with the Containerization and Intermodal Institute, the Port of Houston Authority helped host the first annual Container Trade Outlook Conference in Houston Nov. 18, drawing nearly 200 container industry professionals. “We are aggressively preparing our port for the future — a future that is very bright — to meet the demand of a rapidly changing industry,” said Port Authority Executive Director Roger Guenther, who provided the event’s opening remarks. Port Authority Chief Commercial Officer Ricky Kunz — speaking during the Container Trade Outlook panel — focused on reasons why the Port of Houston Authority is one of the fastest-growing container ports in the country. He noted that cargo volume at the Port Authority’s docks has reached historical highs and the growth will continue due to the energy renaissance, population growth and the Panama Canal expansion. “Year-to-date loaded container TEUs are up 15 percent, while container operating revenue has increased 20 percent,” Kunz said. Kunz also reported that Port of Houston Authority import/export balances have moved closer to parity in 2015, with exports making up 53 percent and imports comprising 47 percent of total loaded TEUs. “Since 2011, there has been a steady decline in our loaded container imbalance gap due to increases in imports from East Asia,” he said.
CONTAINER VOLUME INCREASE BUILT INTO 2016 BUDGET APPROVED BY COMMISSION
The 2016 operating budget was approved by the Port Commission during a special meeting Nov. 17, along with a $314 million capital improvement budget. Next year’s budget forecasts a 2 percent increase from 2015. It is anticipated that revenues will continue to grow next year despite the unexpected spike in tonnage handled at the Port Authority’s facilities this year. While the budget forecasts a modest 2.7 percent rise in container units for next year, container units are expected to increase faster between 2016 and 2017, rising another 14.4 percent. The Port Authority continues to invest heavily in infrastructure improvements and expansions. The Port Authority is expected to spend $207 million on strategic projects, which will support new growth opportunities at the Port Authority and make up 66 percent of the 2016 capital improvement budget. Channel projects make up 21 percent. Next year’s expenses are expected to increase due to higher capital investments and container volumes.
Winter 2015 | Port of Houston Authority
9
RATES RAISED FOR HOUSTON PILOTS TO BUY NEW BOATS The Board of Pilot Commissioners for Harris County Ports unanimously approved an increase in pilotage rates to facilitate funding for two new Houston Pilots boats Dec. 15, 2015. Effective Jan. 1, 2017, a $162 fee will be tacked on to existing rates for each inbound and outbound Houston Ship Channel vessel movement that uses a pilot boat. The new charge covers the $28 million debt needed to buy two new pilot vessels. The boats are needed “to ensure the continued high level of uninterrupted service that the customers of the Port of Houston expect and deserve,” said outgoing Presiding Officer of the Houston Pilots, Captain Mike Morris. The new vessels are needed to maintain operations particularly during more severe weather events. Except for the additional $162 fee, current pilotage rates were recommended to stay flat through 2017.
WORK ON WHARF 2 AT BCT ABOUT TO BEGIN Work is about to begin on Wharf 2 at the Port of Houston Authority’s Barbours Cut Container Terminal that will upgrade the existing wharf to support larger wharf cranes. The contract awarded to McCarthy Building Companies will upgrade 1,000 linear feet of wharf, installing new foundations and crane rails. Additionally, the contract calls for construction of a new stevedore support building, high mast poles and the electrical infrastructure required for two new 100-foot gauge electric dock cranes. McCarthy was the contractor on Phase 1 of the Barbours Cut terminal, where Wharf 1 was extended by 1,333 linear feet. About $700 million is being invested by the Port Authority over the next decade modernizing the terminal to increase efficiency, facilitate larger vessels and double the container handling capacity.
THE MANIFEST spotlights news briefs exclusively from Port of Houston Authority, its customers, trading partners, and community stakeholders. Submit information in the form of a letter or press release via e-mail to bhensel@poha.com or via fax 713-670-2564. The Port of Houston Magazine does not guarantee publication and reserves the right to edit submissions for content and style.
Winter 2015 | Port of Houston Authority
11
2MIL TEUs ‌AND COUNTING!
The Port of Houston Authority handled more than 2 million 20-footequivalent units (TEUs) at its container terminals in 2015, setting a record and burnishing its position as the major player in the container trade on the U.S. Gulf Coast.
The milestone was celebrated Dec. 10 during a ceremony at the Bayport Container Terminal. While the Port Authority showed unprecedented growth that was running about 14 percent higher than the prior year’s record of 1.958 million TEUs, the biggest spikes in volumes handled were unexpected. That came from cargo diverted from U.S. West Coast ports.
PHA MAJOR PLAYER in the container trade on the U.S. Gulf Coast
The surge of container volume came on quickly at the start of the second quarter, statistics published by the Port of Houston Authority market development department show. From March to April, volumes jumped sharply higher to 212,673 TEUs, up 25,950 TEUs from the prior month and a new monthly record for the Port Authority. A second monthly record was set in May 2015 when throughput ticked up slightly to reach 212,871 TEUs. The swell of container demand dropped off by the third quarter, but throughput stayed strong, averaging 171,295 TEUs per month. As robust container volumes continued throughout October, the Port Authority hit a new landmark in daily truck processing at the Bayport Container Terminal. A record-high 4,300 trucks were processed in the facility in one day, reflecting the Port Authority’s commitment to efficiency, customer service and freight mobility.
BRINGING BALANCE
The scenario was reminiscent of additional work stoppages in the early 2000s that led to three all-water direct Asian services permanently switching to import containers via the Port of Houston instead of West Coast locations. The rise in imports from East Asia has continued to grow since 2011, which has steadily closed the loaded container imbalance gap at the Port Authority. Loaded container import/export balances now stand closer to parity than they have in nearly 10 years, with exports comprising 53 percent of boxes and imports totaling 47 percent.
ADDING EFFICIENCIES New software and client portals were integral to adding efficiency to the Port of Houston Authority container terminals and for paving the way for continued growth. In September, a new customer service portal called Lynx was brought online to provide trucking dispatchers and cargo owners with detailed information about their containers, vessels and trucks on a desktop computer. The customer service portal is complemented by the Port Authority’s bilingual mobile container app that was launched in the summer of 2014. The app gives on-the-go truck drivers access to basic information such as pick-up and drop-off availability on their smartphones. Another contributor to the Port Authority’s momentum to the 2 million TEU mark was the implementation of optical character recognition at the Bayport and Barbours Cut container terminal truck gates. Through the recognition technology, license plates, container numbers and chassis numbers of trucks entering the terminals are quickly processed to reduce truck time. Average truck turn-around times at the Port Authority’s terminals are between 30 to 35 minutes. Not only is this process faster, but it also reduces emissions from heavy-duty truck idling. Ongoing investment in operating capacity at the Port Authority’s terminals supports continued growth. The Port Authority handles about two-thirds of the containers that move through U.S. Gulf Coast ports.
The rehabilitation of Wharf 1 at Barbours Cut was completed in the fall. Four new ship-to-shore cranes were put in place, enabling larger vessels to call. A contract to upgrade Wharf 2 was awarded by the Port Commission to McCarthy and that work is scheduled to begin in January. That project, which consists of a 1,000foot extension of the existing containership wharf, is slated to be completed in early 2017. The commission also approved the purchase of three additional electric dockside cranes. At Bayport, the build-out of the terminal is continuing, with construction of a new 26-acre container yard, Container Yard 6 South. Construction is scheduled to be completed in 2017. Physical infrastructure expansion, including the installation of new cranes, will bring the logistical throughput capacity in line with projected demand. Once the Port Authority’s 10-year growth plan comes to fruition, Bayport capacity will have more than tripled from 900,000 TEUs per year to 3 million TEUs. Barbours Cut’s current capacity of 1.2 million TEUs annually will rise to 2.5 million TEUs. At final build-out, the Port Authority’s total yearly capacity will rise to 5.5 million TEUs. n
LANDMARK IN DAILY TRUCK PROCESSING A RECORD-HIGH 4,300 TRUCKS WERE PROCESSED IN THE FACILITY IN ONE DAY, REFLECTING THE PORT AUTHORITY’S COMMITMENT TO EFFICIENCY, CUSTOMER SERVICE AND FREIGHT MOBILITY.
ALL CONTAINER MOVES
THERE HAS BEEN A STEADY DECLINE IN OUR LOADED CONTAINER IMBALANCE GAP DUE TO INCREASES IN IMPORTS FROM EAST ASIA; CURRENTLY AT 53 PERCENT EXPORTS AND 47 PERCENT IMPORTS. 100,000
80,000
60,000
40,000
Loaded Exports
Loaded Imports
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
20,000
Empty Total
Units: TEUs; Incl. APM Houston 3 Month Centered Moving Average Source: PHA Market Development based on raw data from PHA Accounting
SINCE
2011,
imports from East Asia have continued to grow, closing the loaded container imbalance gap at the port.
INFRASTRUCTURE EXPANSION BAYPORT Bayport capacity will have more than tripled from 900,000 TEUs per year to 3 million TEUs.
BARBOURS CUT Barbours Cut’s current capacity of 1.2 million TEUs annually will rise to 2.5 million TEUs.
STATE of the PORT
PARTNERSHIP, INNOVATION, SERVICE
Port of Houston Authority Chairman Janiece Longoria addressed a crowd of more than 500 distinguished guests Oct. 30 to highlight the partnership, innovation and service that has driven record-breaking operations and job growth. “Partnership is essential to success in any enterprise, and the bedrock of that success comes from the people involved,” Chairman Longoria said. This year’s event, hosted by the Greater Houston Partnership, garnered more interest than ever before. A mix of local, state and U.S. lawmakers gathered with industry stakeholders and community members to show support for the ongoing successes at the Port Authority. Chairman Longoria opened her address by revealing news of job creation and statewide economic stimulus that was reported in an impact study by Martin Associates, a global research firm and leading provider of economic and strategic studies. An additional 148,000 jobs were created by Port of Houston activity just since 2011, the Chairman reported, bringing total annual statewide job impact from the Houston Ship Channel activities to 1.175 million. “There is no doubt that the Port of Houston is a significant economic driver for our region and our state,” the Chairman said. “The Port of Houston’s public and private marine terminals generated an economic impact
of $265 billion, which is 16 percent of the state’s gross domestic product. This is a remarkable statistic.” The Chairman outlined operations and initiatives while highlighting the Port Authority’s renewed emphasis on strategic planning.
THERE IS NO DOUBT THAT THE PORT OF HOUSTON IS A SIGNIFICANT ECONOMIC DRIVER FOR OUR REGION AND OUR STATE.
MARKED BY MILESTONES The prior year was marked by milestones and record performance. As the Port Authority celebrated the 100th anniversary of the Houston Ship Channel’s christening, cargo tonnage grew 5 percent to 37.6 million tons, while container TEU throughput reached a new high of 1.96 million.
“And by the way, we are on the cusp of achieving a new milestone in our container cargo throughput,” Chairman Longoria said, noting that the Port Authority can expect to reach 2 million TEUs by the end of 2015. That achievement was marked Dec. 10. Operating revenue surged 13 percent to $261 million in 2014 as the Port Authority maintained its rankings as the No. 1 U.S. port in foreign waterborne tonnage and petroleum, steel and project cargo. The biggest surprise to Port Authority operators was the unprecedented uptick to diversion cargo that moved through the Barbours Cut and Bayport Container Terminals in the first half of 2015. “Demonstrating our readiness for growth, we handled a 38 percent increase in cargo that was diverted to our port to avoid potential disruptions on the West Coast,” Chairman Longoria said. The unexpected swell in loaded containers translated into a 20 percent uptick in operating revenue. Year-to-date loaded containers rose by 15 percent. “The bottom line is, we are a cost-efficient and certain supply chain solution,” she said. Chairman Longoria reported that the Port Authority is close to finalizing agreements related to the construction and development of a refrigerated transload facility with ready access to the Bayport Container Terminal.
OPERATING REVENUE SURGED 13 PERCENT TO $261 MILLION IN 2014 AS THE PORT AUTHORITY MAINTAINED ITS RANKINGS AS THE NO. 1 U.S. PORT IN FOREIGN WATERBORNE TONNAGE AND PETROLEUM, STEEL AND PROJECT CARGO.
DEVELOP AND DIVERSIFY “Growing the refrigerated cargo business for our port makes great sense because of our central location on the Gulf Coast, our consumer reach of 144 million consumers within 1,000 miles, and our ready access to South American sources of produce,” she said. She remarked that increased access to refrigerated cargo such as produce and flowers is a win-win for the region. It will bring Houston-area consumers fresher and less expensive produce, while also creating jobs in corollary areas such as warehousing, distribution and logistics. The development of new business lines is not possible without maintaining infrastructure. Chairman Longoria reported that the Port Authority is investing nearly $700 million over the next decade to increase efficiency, facilitate larger vessels and double the container handling capacity at Barbours Cut. The Bayport Container Terminal is also being enhanced as the Port Authority continues to build to meet demand. The state-of-the-art terminal improvements are certainly paying off. “We processed a record 4,300 trucks in one day thanks to the innovations and enhancements that we have made for truck entry and processing,” Chairman Longoria said. “We are best-in-class in customer service.” The Port Authority has also invested heavily in the future of the Houston Ship Channel’s workforce through its work in maritime education. “More than half of our region’s maritime workers are age 50 or older, nearing retirement age,” she said. Through partnerships with local high schools and colleges, students have the opportunity to participate in programs intended to prepare them for maritime careers. The Port of Houston Authority has invested $3.5 million in maritime education in the last five years. The Chairman closed her remarks with an emphasis on freight mobility. “Open and fluid access to road, highway and rail networks are critical to our success and the success of our region,” she said. n
THE PORT OF HOUSTON AUTHORITY’S LATEST ECONOMIC IMPACT STUDY REFLECTS STRONG JOB GROWTH AND FINANCIAL STIMULUS SINCE 2011. The study by Martin Associates examined four types of economic impacts from the Port of Houston: jobs, employee earnings, business revenue and taxes. Martin Associates has provided economic and strategic assessments of the world’s transportation systems for more than 30 years. Job impact extends across four categories: direct, induced, indirect and related. The jobs impact grew by 148,000 since 2011 to bring the port’s total impression to about 1.175 million across the state of Texas. Personal income related to the Port of Houston totaled $66.8 billion. Of that total, nearly 15 percent, or $9.8 billion, is re-invested into the state economy in the form of local personal consumption. The economic output stood at $255.1 billion. Combined with the personal income re-spending, The Port of Houston’s impact reached $265.0 billion in 2015, or 16 percent of the $1.6 trillion statewide gross domestic product. The Port of Houston’s state and local tax stimulus was measured at more than $5 billion. Martin Associates conducted interviews with 1,139 firms that provide services to the cargo and vessels handled at both Port Authority marine terminals and private terminals on the Houston Ship Channel.
Big
New Cranes
Hoisting
Cargo at BCT
«
WITH A 65-LONG TON CAPACITY AND THE ABILITY TO HANDLE TWO 20-FOOT CONTAINERS SIMULTANEOUSLY, THE CRANES’ CAPACITY INCREASES TO 80 LONG TONS WITH THE USE OF A CARGO HOOK.
All four of the new Super Post-Panamax ship-to-shore cranes (STS) delivered to the Port of Houston Authority’s Barbours Cut Container Terminal earlier this year are now operational and have been provisionally accepted from Konecranes. The largest cranes constructed by the Finland-based company, the mammoth electric-powered machines stand 30 stories high and are taller than any other marine cranes currently in North America. The cranes were ordered as part of an ongoing expansion of infrastructure to prepare in part for the larger Post-Panamax container vessels that will call at the Port Authority’s facilities. An ongoing project to expand the Panama Canal by adding a third set of locks is expected to be completed in 2016. “These cranes can move a loaded container twice as fast as their predecessors,” Port Authority Executive Director Roger Guenther said. “They are an important part of our modernization project.” The first operational crane began discharge maneuvers early Nov. 5 with a 4,250 TEU capacity container ship, the M/V New Delhi Express. The second crane became operational at the same time. Endurance testing on the last two cranes—which is a final step in the crane acceptance process, actually working a vessel—was carried out during the first week of December. The cranes were delivered in June after a 73-day journey from South Korea, where they were manufactured. The nearly $50 million contract for the state-of-the-art equipment was approved by the Port Commission in 2013.
»
With a 65-long ton capacity and the ability to handle two 20-foot containers simultaneously, the cranes’ capacity increases to 80 long tons with the use of a cargo hook. They can operate on a vessel that is 22 containers wide, compared to the previous cranes only being able to operate on a vessel 13 containers wide. The cranes were ordered as part of a $1 billion, fiveyear modernization plan, which includes dredging and land-side infrastructure and wharf improvements at Barbours Cut. The older of the Port Authority’s two container terminals, Barbours Cut was built in the 1970s. The first phase of the Bayport terminal opened in 2007 and it already is equipped with STS cranes that can handle larger vessels. Dredging at Barbours Cut already is complete, while dredging at the Bayport terminal is ongoing and is expected to be complete in the first half of 2016. Both channels have been widened and deepened from 40 feet to 45 feet to match the depth of the Houston Ship Channel. n
Winter 2015 | Port of Houston Authority
23
FOREIGN TRADE ZONE 84 FACILITATING AND EXPEDITING
INTERNATIONAL TRADE DISCOVERING NEW TOOLS The U.S. import environment has grown increasingly competitive as a firm dollar gives Americans higher purchasing power than the rest of the world. Additionally, a stronger housing market has brought on additional demand to import construction equipment and household goods.
MITSUBISHI CATERPILLAR
HAS SAVED NEARLY $1 MILLION ANNUALLY AS A BENEFIT OF ITS USE OF FTZ 84 International importers cannot afford to leave any tools unused as the global freight market becomes more competitive and efficient. Nearly four years ago, Houston-based Mitsubishi Caterpillar Forklift America Inc., a manufacturer of material-handling products distributed across North, Central and South America under three brands, Cat Lift Trucks, Mitsubishi Forklift Trucks and Jungheinrich, implemented a tool to reduce costs for imported components used to manufacture forklift trucks in the U.S. This application brought on tax benefits for the company and Mitsubishi Caterpillar has since enjoyed improved cash flow, duty reduction and tariff inversion. WHAT’S THE CATCH? There’s no catch. This program has been endorsed by the federal government for more than 80 years. In 1934, the U.S. Foreign-Trade Zone (FTZ) Act was enacted to “expedite and encourage foreign commerce.” Today, there are 294 zones in the country, including FTZ Zone No. 84 (FTZ 84), which is managed by the Port of Houston Authority. An FTZ is a land area within the U.S. that is legally considered to be outside of national customs territory. The zones operate as public utilities and increase industrial capital investment while also providing jobs for Americans. While the zones lead to some losses in tax revenues, the federal government is willing to take that pinch in order to provide high-paying jobs to Americans.
“When you consider the surge in outsourcing by American companies, it’s important to do what we can to keep various manufacturing and factory jobs here on our soil,” Port of Houston Authority FTZ Administrator Shane Williams said. Of the 294 zones in the country, FTZ 84 is ranked first in total merchandise receipts, while it ranks eighth in the nation for merchandise exports. More than 700 acres of land are “zone-authorized” by FTZ 84. The zone offers facilities for general purpose warehousing, liquid bulk storage and blending, steel and pipe storage and pipe-end finishing and heat treating. DETERMINING FEASIBILITY In January 2012, Mitsubishi Caterpillar began evaluating the feasibility of utilizing FTZ 84 for its own benefits. Diana Urelius, assistant corporate secretary & senior compliance manager responsible for the Mitsubishi Caterpillar FTZ Program, spearheaded the project that would result in savings for Mitsubishi Caterpillar. The road to activation required strong executive support and a dedicated cross-divisional Mitsubishi Caterpillar FTZ Core Team. Mitsubishi Caterpillar also hired a full-time employee to administer the FTZ process. The FTZ application and implementation process involved obtaining letters of support from state legislators, selecting a software vendor and undergoing a security review with the U.S. Bureau of Customs and Border Protection (CBP). With CBP’s validation, Mitsubishi Caterpillar was able to go live with its FTZ in July 2013.
THROUGH ITS 10 NEW
AUTHORIZATIONS, the Port of Houston Authority helped to create 1,000 new jobs in 2015, underscoring the Port Authority’s mission to move the world and drive regional prosperity.
SAVINGS AND GROWTH Mitsubishi Caterpillar has saved nearly $1 million annually as a benefit of its use of FTZ 84. The company discovered an inverted savings opportunity through the FTZ feasibility study. While imports of components to build forklifts were still subject to varying rates of duty, the finished product, assembled within FTZ 84, could be moved into the U.S. market duty-free. “Mitsubishi Caterpillar recouped its investment within four months of activating its FTZ,” Urelius said at the Second Annual FTZ Conference hosted by the Port of Houston Authority. The Port of Houston Authority’s FTZ 84 hit a record in 2014 with five new authorizations in its zone. That figure was doubled in 2015.
Growth in FTZ 84 has developed in tandem with the Port of Houston Authority’s record-high container import levels. Additionally, FTZ 84’s strategic location along the maritime portal through the Houston Ship Channel has given authorized users access to multimodal distribution, a robust rail freight and highway network in the greater Houston region. “We have every type of authorization available at FTZ 84, and our customer base continues to grow,” Williams said. The total value of shipments, both domestic and foreign, increased 150 percent this year to total $25 billion, while exports out of the zone doubled to reach $500 million, according to Williams. Through its 10 new authorizations, the Port of Houston Authority helped to create 1,000 new jobs in 2015, underscoring the Port Authority’s mission to move the world and drive regional prosperity. n
“When you consider the surge in outsourcing by American companies, it’s important to do what we can to keep various manufacturing and factory jobs here on our soil.” – Port of Houston Authority FTZ Administrator Shane Williams
Liquid Bulk Pipe and Steel
FTZ 84
STORAGE FACILITIES
Automobiles Public Warehouses Refining Non-Petrochemical Production Business Parks/Land Production Winter 2015 | Port of Houston Authority
27
NEW TERMINAL OPERATING SYSTEM LIVE AT BARBOURS CUT
MODERN HARDWARE AND SOFTWARE TECHNOLOGY PLATFORMS
As part of a planned strategic move to continue to increase vessel productivity and minimize truck turnaround time at the Barbours Cut Container Terminal, the Port of Houston Authority has completed installation of the Navis N4 terminal operating system (TOS) there. The updating of terminal operations to more modern hardware and software technology platforms is part of a larger master-planned redevelopment. The Port Authority has redeveloped more than 20 acres at Barbours Cut for container stacking and has installed four new Super Post-Panamax cranes from Konecranes on a newly renovated 1,300 foot segment of dock. The Bayport Container Terminal was the first of the Port Authority’s two container terminals to undergo the modernization of its terminal software, transitioning to N4 in 2013, noted Jeff Davis, chief port operations officer for the Port Authority. “We’ve been operating N4 at our Bayport Terminal since 2013 and have been extremely pleased with its performance,” Davis said. “The upgrade at Barbours Cut will allow our organization and stakeholders to enjoy the benefits of N4 as well as allow the use of one common platform at both facilities.”
The Port Authority is focused on maximizing terminal productivity for all stakeholders, as well as minimizing truck turn times, with an emphasis on continuing to operate in a safe and environmentally responsible manner. By improving truck turn times, it cuts down on trucks idling and therefore also cuts down on the amount of emissions. Navis, a part of Cargotec Corp., said in a news release that it was pleased to have been able to work with the Port Authority to install the new operating system. “We are happy to have been given the opportunity to help the Port of Houston Authority improve terminal productivity and efficiency without TOS and we are certain that with Navis’ support, BCT will continue to grow and improve its ROI,” said Chuck Schneider, vice president and general manager Americas for Navis. The improvements at Barbours Cut are in anticipation of larger vessels calling its terminals, including larger ships that will be traversing the expanded Panama Canal. That project is expected to be completed in 2016. The dredging of the Barbours Cut channel to deepen it from 40 feet to a 45-foot operating draft was completed in September. n
SPOTLIGHT ON SMALL BUSINESS Concrete Results from Epoxy Design Systems The anodes bear the corrosive Concrete may be one of the activity as a sacrificial metal.” most durable and useful substances The company also can repair, used in construction, but it needs preserve, maintain, and protect maintenance to preserve its strength steel and wooden structures in and enhance its life span. That’s marine, industrial and commerwhere Epoxy Design Systems, Inc. cial environments, both domesticomes in. cally and internationally. Established in 1977, this speWhile most of its projects are cialty trade contractor has successlocal, the company has staffed fully completed structural concrete Dany Merritt, Danny Thomason, Hank Taylor and completed three projects repair projects throughout the Port for the U.S. Navy on the Island of Houston. Currently, Epoxy Design of Diego Garcia in the Indian Ocean and done loading is a prime subcontractor to McCarthy Building Companies, dock repairs for the Hovensa Refinery in St. Croix, Taylor Inc. on the $35.6 million rehabilitation of Barbours Cut said. Additionally, it has worked on finger piers at the Terminal’s Wharf One, and McCarthy was recently San Nicholas Refinery in Aruba, and performed earthawarded the $38.7 million contract for wharf 2 with Epoxy quake damage consulting on loading docks for Chiquita Design Systems again providing its expertise to the project. in Guatemala. The upgrading of these two wharves at Barbours Cut is “The most challenging aspect of working on docks, necessary to accommodate the new post-Panamax gantry wharves and marine structures is worker safety. Epoxy cranes and the increased cargo anticipated from the larger Design Systems has not had one lost time recordable on ships that will be transiting the enlarged Panama Canal. any of our marine projects,” said Taylor. “This results in Epoxy Design has been repairing existing piling, placing lower rates on our General Marine Liability, USL&H and fiberglass pier pile jackets around them and filling in the Jones Act insurance policies that we maintain in force.” gaps in between with epoxy grout. Epoxy Design has done considerable work for the “We apply metalizing for cathodic protection to prePort Authority, noted Brock Lewis, chief construction vent corrosion of the rebar inside the pilings,” explained manager for the Port Authority. Epoxy Design President Hank Taylor. “We place zinc “They always do their job, sometimes as the prime anodes between the existing reinforcement of the dock contractor and other times as a prime sub,” Lewis said. n and the new reinforcements built during the rehabilitation.
Winter 2015 | Port of Houston Authority
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