June 29, 2016 10:00 AM, EDT

Low Oil Prices Slow Cargo Flow, But Houston Port Prepares for Growth

Louis Vest/Flickr

Low oil prices slowed the volume of general cargo the Port of Houston Authority handled in the first five months of the year, commissioners said June 28. Yet, signaling long-term confidence, the Port Commission also awarded a contract for up to $34.4 million to buy three cranes for its Bayport Container Terminal.

"We're planning for the future," Port Authority Executive Director Roger Guenther said after the Port Commission meeting. "You've got to stay ahead of the demand curve."

The Port Authority reported that its general cargo, measured in tons, was down 19% for the first five months of 2016. Steel saw the most significant drop, to 1 million tons from 3.1 million tons (67% ) through May 2015.

"We expected our volumes to return to a more normal level," Guenther said.

The soft energy market has resulted in less drilling, which he said caused a drop in steel imports for pipes related to drilling.

"Until you see drilling pick up or any major construction, we're going to see more of the same," said Bill Diehl, president of the Greater Houston Port Bureau.

Container TEUs, an industry term that measures a cargo vessel's capacity in 20-foot equivalent units, dropped 6% through May. However, the first five months of 2015 saw a significant spike in business as labor issues along the West Coast diverted cargo to Houston. The Port Authority was able to retain much of that cargo, Guenther said.

The container business also is expected to get a boost from a new weekly container service that began earlier this month from Asia. The area's petrochemical boom will help, too.

"We're doing a lot of this expansion to get ready for this tremendous increase of plastic resins that we're going to be shipping starting out next year," Guenther said.

The construction contract for three new cranes at Bayport Container Terminal was awarded to Shanghai Zhenua Heavy Industry Co.

The cranes will be able to unload ships with 22 rows of containers, said Jeff Davis, chief operations officer for the Port Authority.

With the addition of these cranes, the Bayport will have 12 cranes. Ships generally require three to six cranes to load or unload containers.

"As our container volumes grow, either the size of the vessel is going to grow or we're going to get more ships," Davis said. "We're expecting larger vessels. But with those larger vessels, we'll have to put more cranes on each vessel."

The Port Authority reported a 9% drop in operating revenues to $119.2 million through May, 6% less than its budget, and a 27% drop in net income to $31.4 million.