For all the hype surrounding the forthcoming Panama Canal expansion and its effect on U.S. Gulf and East coast ports, the lack of current direct connections from Asia to the Port of Houston is quite stark.
As of mid-March, only one service directly connected Houston with the Far East: CMA CGM’s PEX3 all-water transpacific loop. But in late March, COSCO Container Lines and Hanjin Shipping said they were starting a new service that would provide a second direct link from China to Houston.
The lines’ GME service will have a rotation of Busan, Shanghai (Waigaoqiao), Ningbo, Xiamen, Yantian, Colon, Houston, and Busan. It will be operated with eight vessels in the 4,000-TEU range, with COSCO providing six and Hanjin two. Those ships are slightly smaller than those found on CMA CGM’s service.
But the service is unique in that it isn’t merely calling Houston on the way to other U.S. Gulf or East coast ports. Houston is the only U.S. call on the service. The PEX3, for example, calls at Mobile, Miami, Savannah, and Charleston in addition to Houston, though Houston is the first U.S. call.
Houston landing a second direct call from Asia could be significant. For all of Houston’s qualities – a huge population, shorter access to the U.S. Midwest, port capacity – a basic geographic reality doesn’t work in its favor.
Calling at Houston requires a noticeable diversion from the trunk line route from Asia to the U.S. South Atlantic and Northeast coasts via Panama. The port is several clicks west of the canal, so any service from Asia that calls direct at Houston sacrifices faster transit times to U.S. East Coast ports.
For instance, CMA CGM’s PEX3 calls at Miami after Houston – the transit time from Busan (the last port of call out of Asia) to Miami is 27 days. But on Maersk Line’s TP7 service, transit time from Busan to Miami is 22 days. The five days largely come because Miami is the first U.S. port of call on the service, with the TP7 requiring no northwestern deviation from Panama.
COSCO and Hanjin’s new service, due to start April 28, avoids that issue by concentrating on U.S. cargo destined only for Houston. Or, from the reverse perspective, gives a conduit for U.S. exports to Asia through Houston alone.
Going back to the PEX3, it takes exports via Houston 47 days to return to Xiamen, the first port in Asia on that loop. COSCO and Hanjin didn’t release details on westbound transit times for the new GME service, but it seems hard to imagine it would be anything close to 47 days, given the loop goes Houston to Busan direct.
The new call is likely no accident. The Port of Houston Authority in late 2010 hired Ben Line Agency Ltd. in Singapore to promote the port in 15 Asian countries. Port officials clearly expect to glean some benefits from the expanded canal, though they are realistic about the immediate impacts.
“I think that we will see an increase, but we are very, very conservative in what we forecast, about a 15 percent increase of the traffic we get on the trade lane from Asia to Houston,” Ricky Kunz, the port authority’s vice president for origination told the New York Times in February. “What we do know is that this third set of locks that’s being built is going to create a redistribution of cargo. It’s not going to make the cargo grow.”
Of all the U.S. port cities that a widened Panama Canal would provide better access to, Houston is the largest outside of New York. The greater metropolitan area around Houston is the nation’s fifth biggest, while the Dallas-Fort Worth area is the fourth biggest. Including the San Antonio area, that puts nearly 15 million people in urban agglomerations within reach of the port, compared to around 12 million in the region between Philadelphia and Washington and 8 million in Greater Miami.
There’s also the fact that since 2005, Walmart has operated a massive regional distribution center in the Houston area. Home Depot operates several facilities in the area.
Then there are the rail connections Houston provides. Both the Union Pacific and BNSF railroads service the port intermodally, potentially connecting huge swathes of the U.S. Midwest to Houston instead of via the U.S. West Coast, especially if ocean rates are more favorable to shippers than rail rates. Though infrastructure concerns remain if cargo volume increases significantly, Houston is well-connected.
“There will be no more railroads built in America if you can imagine how prohibitive the cost would be, but Houston is blessed with this very strategic network rail — a fabulous grid that literally connects Houston between the Rocky Mountains and the Ohio Valley,” Jeff Moseley, president and chief executive of the Greater Houston Partnership, told the New York Times.
Houston is already the second biggest port in the United States by tonnage, but it has lagged behind other ports when it comes to container volume. The vast majority (around two-thirds) of container services presently calling at Houston link the port to Mexico, Central America, the Caribbean, and South America, which makes sense.
The Caribbean connections aid Houston in that larger vessels transiting the expanded Panama Canal might inevitably hub in ports like Kingston. So the widened canal could have indirect benefits even if the number of direct services doesn’t exponentially increase.
And South America is one of the only markets to experience consistent container volume growth in the turbulent last couple of years. Brazil, for instance, handled more container volume last year than India, marking its promise as a growth star for box trades.
But for Houston to maximize its potential more services to and from Asia are needed. And for that to happen, the region will have to lure shippers to want to use the port in place of their current container gateways, inducing lines to bring more direct Asia-Houston links.
Hanjin said its new direct service with COSCO “will fulfill customers’ needs in the trade.”
The question then: is the new service sufficient to meet those needs, or is it the leading edge of a trend as a canal widens to greater possibilities?
Houston, we have a new service
