Port helps keep Houston economy afloat, experts say

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Port helps keep Houston economy afloat, experts say

The abundance of natural gas in the region and the impending Panama Canal expansion have spurred the growth of chemical companies in the Greater Houston area, including Spring, which is home to ExxonMobil’s Springwoods Village campus and other plastic
manufacturers.

There will be large growth in the chemical and refining industries, said Patrick Jankowski in 2016, senior vice president of research for the Greater Houston Partnership.

“One of the most important things is we have a great deal of construction on the east side of town—between $50 billion [and]$60 billion dollars of chemical, plastic plants and refineries being built,” he said. “They’re being built to take advantage of the cheap natural gas. Most of what’s being built is for the export market. It’s going to be exported to Asia, and it’s going to get there quick and cheaper because of the Panama Canal.”

The Port of Houston’s exports are providing economic relief during the oil and gas slump, Harris County Judge Ed Emmett said at a Jan. 20 governmental affairs meeting hosted by Houston Northwest Chamber of Commerce.

Thriving port

The Port on its own—with its growing container business and two major docks—may not be a remedy to the drilling bust. However, a large construction boom in east Houston, which is built on natural gas, helps offset the drilling bust, said Bill Gilmer, director of the University of Houston’s Institute for Regional Forecasting.

“[With] over $50 billion in refining and petrochemical projects underway, it opens the strong likelihood that Houston will be the major production point for plastics in the Western Hemisphere for decades to come,” Gilmer said.

Scott Davis, regional director of Metrostudy, which studies demographics, said Houston lost 17,000 energy jobs last year. Davis spoke at the Economic Outlook Forum on April 1 at Southwestern Energy’s Spring headquarters.

However, Houston Ship Channel-related business rose by more than 1 million jobs throughout Texas since 2012, according to the Port of Houston Authority.

Exports going out of the Port are a positive trend, and the Houston area has the most active port in the U.S., said Bill Diehl, president of the Greater Houston Port Bureau, at the
April economic forum in Spring.

“I think of [the Port]as oceans and superhighways already built,” Diehl said. “We do not have to do anything with these routes. They’re already there for us. We can build the biggest ships we want for these routes. The only infrastructure we have to invest in is the on- and off-ramps, which is our ports.”

Houston-Galveston Customs District ranked as the seventh-busiest in the U.S. by dollar value in 2015, according to the Greater Houston Partnership. The Port reported more than $110 billion in exports in 2015.

The Port might seem like the salvager in the face of an oil glut. However, Gilmer said he does not expect it to replace the oil and gas industry and believes it will act more like an economic salve.

“[The Port] is primarily an arm of the local oil industry,” he said.

Port helps keep Houston economy afloat, experts sayDemand for plastics

Polyethylene, which is a plastic used for items such as cell phone covers, bags and food containers, exceeded petroleum in waterborne export trade in 2015, said Christine Schlenker, manager of special projects for the Greater Houston Port Bureau.

“Polyethylene was Houston’s top export by containerized waterborne foreign trade value for 2015, just over double of next-closest commodity group, petroleum gases,” Schlenker said.

The high global demand for exported plastics is a large driver of the Greater Houston-area economy, Diehl said.

ExxonMobil, which is headquartered in Springwoods Village in Spring, makes polyethylene plastic, said Margaret Ross, ExxonMobil communications and media spokesperson. The company, which is one of the largest chemical companies in the world, manufactures polyethylene at sites globally, including in Baytown in Harris County.

“We have the capacity to produce 8.6 million [metric tons]per year of polyethylene and 2.7 million [metric tons]per year of polypropylene,” Ross said. “These are both widely used plastics.”

In a 2015 financial and operating-review document, ExxonMobil attests to the growing demand for polyethylene.

“In 2015, we advanced construction of facilities in Baytown and Mont Belvieu, Texas, that will capitalize on advantaged North American feedstocks to supply growing polyethylene demand in emerging markets,” according to the document.

Throughout the next decade, ExxonMobil expects global chemical demand to grow nearly 45 percent, or about 4 percent per year. That projection is a faster pace than energy demand and economic growth,Ross said.

“Nearly two-thirds of the increased demand is expected to be in Asia-Pacific, with rising prosperity and a growing middle class,” she said.

Steve Saltzman, owner of Freedom Polymers Inc. said his plastics-manufacturing business in Spring has had an uptick in recent months. Freedom Polymers products include polyethylene, but he said his products are related not so much to the gas industry but to the byproducts in producing oil and gas.

Saltzman said business activity has had its ups and downs in the 12 years since he started the company.

“It fluctuates,” he said. “Right now things are very good. Tomorrow people will have more than enough, and things will slow down.”

Robert Bauman, owner of Spring-based Polymer Consulting International Inc., said there will soon be an oversupply of plastics such as polyethylene. Although the drop in oil prices has benefited the petrochemical industry, there is now a higher level of new plastic products coming online. 

“Global demand will not be able to absorb the glut that is going on,” he said. “From my point of view, it’s going to be very difficult for the plastic industry to make a bunch of money with all of this capacity.”

Port helps keep Houston economy afloat, experts sayPanama Canal expansion

The $525 billion expansion—or widening—of the Panama Canal will allow larger container ships to go in and out of the canal, Jankowski said.

The expansion, which is 97 percent complete, includes the construction of a third lane and a deepening and widening of navigational panels to allow larger vessels, which can then carry more cargo, according to Mi Canal de Panama, a website that publishes information regarding the canal.

“[The expansion is] going to going to make it a lot easier for us to export to the Asian markets,” Jankowski said. “It allows bigger ships to get through on their way to Asia from Houston.” 

The Panama Canal expansion could lead to positive benefits to the Houston economy,  local economists said. 

“Most people associate expansion of the Panama Canal with imports, but they’re not aware of the potential for exports and larger commodities,” Jankowski said.

However, Gilmer said the talk about the trade boom with the Panama Canal is excessive.

“Much of the narrative about the coming boom with the Panama Canal opening is completely overblown,” Gilmer said. “The Port of Houston has been very careful in its narrative. The local real estate community and other ‘boomers’ for the local economy have taken the narrative to unrealistic levels. [The expansion] opens marginal new opportunities.”

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Julie began freelancing with Community Impact in the summer of 2014. She became a full time reporter for The Woodlands in Oct. 2014. In April 2015 she was promoted to Senior Reporter for The Woodlands. Her coverage area, in additional to The Woodlands, is Shenandoah and Conroe ISD.

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