Houston port could play bigger role as number of ships increase

The long awaited completion of the Panama Canal expansion will undoubtedly bring more international trade to Houston's port, but it will also impact communities such as The Woodlands through an overall economic boost.

The Woodlands is positioned particularly well for business growth brought on by the expansion, says one local expert, not just because it has been carefully developed and then billed as an attractive potential home for companies, but also as a professional melting pot.

Local advantages

"You have a lot of people who come from different parts of the country and different parts of the world," said Nathaniel Karp, Woodlands-based executive vice president and chief U.S. economist with Birmingham, Ala.-based bank BBVA Compass. "That generates very positive effects when you are dealing with foreign trade, because you have the advantage of knowing people from different places and networking is much bigger than it would otherwise be. It's a community already shaped by multiculturalism—and that's advantageous."

Because Houston's established infrastructure and labor pool is already slanted strongly toward the energy industry, Karp believes the area has a clear advantage in growth for energy-related industries, as well as boosts to transportation and manufacturing. But it will not end there. Karp predicts everything from health care to food and beverage industries will see growth.

Big business

Woodlands resident Jonathan Homeyer vividly recalls having lunch at a restaurant overlooking the Panama Canal last summer.

"Just while we were there, three big ships passed through the locks behind us. It costs one of those ships up to $300,000 in tolls, and there were three just in that hour," said Homeyer.

That big business is about to become much bigger, as evidenced by construction seen up close by Homeyer and his traveling companions on a recent Panama Canal tour sponsored by the Greater Houston Partnership, an economic development organization serving the greater Houston area. The Woodlands Economic Development Partnership is also keeping close tabs on the project.

"It's a subject that everyone is concerned about," said Gil Staley, CEO of The Woodlands Economic Development Partnership. "The feedback I'm hearing is we are going to have to continue to keep our port maintained and able to accommodate bigger ships."

While other ports are planning expansions in pursuit of more and bigger Panama Canal generated business, the Port of Houston Authority is keenly aware of the competition. In his State of the Port address in October, Port Commission Chairman James T. Edmonds emphasized the need to accommodate larger vessels with both landside infrastructure investments and adequate maintenance of the Houston Ship Channel.

Free trade agreements with Canada and Mexico created the building blocks of an economy that can tackle global trade, Karp said, and the Panama expansion, he added, simply will add more fuel to that fire.

Economic projections

But exactly how much of an economic boost should the area expect?

The bottom line, said Port of Houston spokesman Bill Hensel, is that nobody knows at this point what the actual impact of the expansion will be.

"We have used a figure of seeing a 15 percent increase in containerized cargo once the canal expansion is complete," he said. "Some have used lesser figures, some considerably higher."

A difference in projections is due at least in part to moving targets such as an increase—and perhaps prohibitive—costs associated to traversing the expanded canal versus the savings from shorter shipping routes. West Coast ports may lower fees to remain more competitive.

The answer will also depend on economic factors, according to Timothy Simpson, spokesman for Maersk Line, a global containerized shipping carrier with 325 worldwide locations, including a customer resource center in The Woodlands. Its parent company, Denmark-based A.P. Moller – Maersk Group, is billed as the largest shipping container company in the world.

While upgrades to East Coast and Gulf Coast ports are a proactive business decision, Simpson said that it is still early in the game to predict how much cargo may be routed to these ports.

"Ultimately, it's too early to tell, especially given the current market dynamics we are faced with," he said. "A lot of companies investing in trade made investments in growth, and then you had the downturn that started in '08, and then continued in '09.

For us, as an ocean carrier, it's 'boom,' there's really great years, and all the carriers are ordering new vessels. Then you had the downturn. But you can't not prepare for the future."

Traffic concerns

With more trade comes more demand and growth, experts say, but with that comes increased truck traffic on major arteries such as the I-45 North corridor—already one of the busiest in the Houston area.

A Regional Goods Movement Study by the H-GAC cites traffic congestion on Houston's major freeways among challenges for the area to remain competitive after the expansion. Although TxDOT is working on projects that will enhance mobility, especially in the east Houston and port areas, the relatively updated lanes of I-45 are not among those designated for improvements in handling the uptick in trucks.

The benefits, however, that will come from the Panama project should outweigh the negative effects in the long run, Karp said.

"When there's greater trade, there is more demand. This is an evolving process," he said. "We just need to keep that in mind."