The 230 miles of the meandering Mississippi River on either side of New Orleans are home to the world’s largest port system. But those who make their living on the river say they are experiencing the worst period for commerce in 40 years.
Several severe weather events across the Mississippi River Basin, combined with a lack of funding to maintain a consistent depth in Southwest Pass, the channel that connects the mouth of the Mississippi River to the Gulf of Mexico, sent maritime transportation costs skyrocketing, reducing the region’s ability to compete globally and pushing business away from Southeast Louisiana. Millions of dollars have been, and continue to be, lost on its banks nearly every day, and the state is in an economic boondoggle, continuing to cut funding and causing the forecast for the future on the Mississippi to be as murky as the “Mighty Muddy” itself.
Economic Engine
Collectively, the five deep-water ports on the lower Mississippi River — New Orleans, South Louisiana, Baton Rouge, St. Bernard and Plaquemines — handle more tonnage than any other port in the world, providing billions of dollars in annual economic impact and supporting hundreds of thousands of jobs. Nearly 12,000 ships, including 6,000 oceangoing vessels, travel the lower river corridor annually, carrying 500 million tons of cargo and 700,000 cruise passengers.
“The cargo carried on the Mississippi River has an estimated $135 billion annual impact on the nation’s economy,” said Sean Duffy, executive director of the Big River Coalition, a collection of more than 110 maritime businesses, trade associations and port authorities in 10 states along the Mississippi River and its tributaries. “We are talking about a river system that connects 31 states and two Canadian provinces through the third-largest river basin in the world. It is a true maritime superhighway.”
In a 2012 paper prepared for The Ports Association of Louisiana, The Economic Impact of the Ports of Louisiana, LSU economist James A. Richardson said the combined economic impact of the state’s ports, providers of port and vessel services, businesses operating within the ports, and cruise ship operations, most of it centered in the lower Mississippi River corridor, includes almost 73,000 jobs created and supported, personal earnings of $3.96 billion, and state and local tax collections of $517 million per year with approximately $289 million going to the state government and $228 million going to local governments.
Factor in connected industries — agriculture, oil and gas, petrochemical and coal products, chemicals and related products, food and related products, paper, wood, and fabricated metals — which rely on the ports to assist in moving their goods, and the figures jump to almost 400,000 jobs and personal earnings of close to $20 billion, Richardson said.
But since December, traffic on the waterway has been limited, and there is worry that a lack of maintenance on the shipping channel will impede the flow of the region’s economic lifeline.The restrictions are already affecting commerce and could have long-term consequences for the region as well.
“It’s killing business,” Duffy said. “The message heard around the world as soon as there is a draft restriction is that the Mississippi River is unreliable.”
Stormy conditions
“The message heard around the world as soon as there is a draft restriction is that the Mississippi River is unreliable.” – Sean Duffy, executive director of the Big River Coalition
In order for Louisiana’s ports to stay competitive in the global economy, Southwest Pass needs to be constantly dredged by four vessels to maintain a depth of 47 feet. But two broke down this winter, just as unseasonable floods in the upper Mississippi River Basin pushed record amounts of water and silt south.
When the U.S. Army Corps of Engineers, which oversees work on the lower Mississippi, put out bids for additional dredgers to help keep the channel open, those in the region were already contracted out to other ports for wintertime work. With just two dredgers working, the channel began to shoal, or close in from the banks and the bottom. Soon ship traffic was restricted to 43 feet, then to 41.
“We need approximately $131 million a year under normal river conditions to keep the channel open (at 47 feet),” said Michael R. Lorino Jr., president of the Associated Branch Pilots, mariners who guide commercial ships through Southwest Pass between the gulf and river. “We receive around $85 million a year. We’re always looking for additional funds. So when you have an extraordinary river experiencing conditions that never happen, that throws you even further behind.
“The high river that we experienced at the end of 2015 was the first time that we’ve had water like that in the month of December. It caused major problems, and we’re still trying to recover from those problems today.”
The timing of the increased flow couldn’t have been worse. Just as the state was suffering the effects of physical storms, it was hit with an economic one. In January, newly inaugurated Louisiana Gov. John Bel Edwards revealed the state was facing a $900 million deficit in the current budget cycle and a $2 billion gap in the next fiscal year that also has to be closed.
The Corps had seven dredgers working though March to bring the channel back to 43 feet, and five vessels have worked to maintain it since. But as budgeted funding dwindles, the number of dredgers will again be reduced to four this month.
Docked Pay
Any time draft restrictions are put in place on the river, money is lost, said Finn Host, executive vice president at T. Parker Host, a full-service ship agency that handles dry bulk, breakbulk, chemicals, livestock, cruise, and container vessels.
Often a company makes a deal for commodities, like grain, soybeans, or coal, up to a year in advance of its shipment and plans to be able to move a set amount of goods at a set cost. Now, operations are in flux, causing costs to increase as other vessels are needed to ship products. In some cases orders have been partially filled, with cargo that has been paid for left on the dock in New Orleans.
“Say a company has scheduled a vessel with a 47-foot draft to move 70,000 tons of material. But when the draft is reduced to 43 or 41, the same ship can only load around 55,000 tons,” Host said. “If that ship is moving from here to Europe with its cargo of coal it may cost $1.5 million. Divided by 70,000 tons that’s about $21.43 a ton. When the ship’s capacity is reduced to 55,000 tons, all the sudden the costs are going up to more than $27.27 a ton.”
Additionally, these ships, to move in and out of port, have to pay the pilots, tugboats, line handlers, and so on around $200,000. Because of the high river, currents and all the issues they’re having to pay $300,000 to $400,000 for the same service, he said.
The USACE Dredge Hurley in action, showing the pipeline that carries and deposits dredged sediment out of the navigation channel. Photo by Jim Pogue
“There are tight margins with these commodities around the world. All of a sudden we’re adding on all these extra costs that they had not planned on, and it’s substantial,” he said. “They’re only making a few dollars on some of these cargoes, and then with additional costs for these goods that have already been booked and paid for, they’re now losing money.”
TURNIng to other markets/ports
With the prospect of shipping through New Orleans resulting in reduced margins or possibly a loss, the future of local maritime commerce, indeed the local economy, could be affected if it is perceived that shipping through Louisiana is not as reliable or cost effective as it once was. There is palpable worry that the longer the channel is restricted the more business will be pushed away from not only Southeast Louisiana but most of the interior United States as well.
“We’re being priced out of potential cargoes and opportunities on the river because of this,” Host said. “April and May are usually about the time of year that we start to deal with high river issues, and we’ve already been through three months of the worst of the worst of it.”
Lorino said the ports in south Louisiana combine to ship roughly 75 to 80 percent of the nation’s grain harvest overseas. He worries that shippers will look to other ports – Houston, Mobile – or other markets in South America, like Brazil and Argentina, to buy grain and soybeans.
“We have no extra dredging, more high water coming and shoaling compounding,” Lorino said. “It’s a recipe for disaster.”
Foggy outlook
Unfortunately, none of the stakeholders seems to know when the situation will improve.
Duffy says a 100-year El Nino event will continue to inundate the Mississippi River Basin with precipitation, continuing the runoff that feeds shoaling. “A lot of people are asking when we’ll return to normal, which is 45 to 47 feet in Southwest Pass,” he said. “There’s no guarantee that that will happen this fiscal year and maybe not this calendar year.”
Others are adopting a more optimistic view.
“At the end of March the river was falling,” said Chris Kitsos, T. Parker Host’s Louisiana branch vice president. “We’re hoping for a normal water level by the beginning of May. (If dredging can increase) it may be the end of June before 47 feet (of depth in Southwest Pass) is reached again.”
Still others aren’t anticipating positive change soon.
“We have no idea when we will get to 47 feet again,” Lorino said. “We’re trying to maintain 43 feet. We’re not going to go higher for a while. Truth is, we hope we don’t have to lower it again.”
