In the wake of Katrina, many observers worried that the blows suffered by the Gulf port infrastructure might prove lethal. Although the hurricane’s ultimate impact on trade remained to be seen, early indications were pessimistic. A comprehensive economic study that Congress commissioned from the Congressional Budget predicted that GDP growth in the U.S. in 2005 would slow by half a percentage point.

The good news was that transportation networks appeared resilient (“… redundancies in the transportation system will enable most shipments to reach their destinations, albeit at somewhat higher costs and times in transit”). The bad news was that the Port of New Orleans (and to a lesser extent other Louisiana ports) had sustained severe damage.

The mid-sized port of Gulfport, Mississippi had been banking heavily on an uptick, thanks to CAFTA (fruits and vegetables from South America is its principal trade). Before Katrina, some 350 ships a year called on the port. But in the aftermath of the wreckage (the port sustained damage to seven of nine berths and lost 700,000 square feet of covered shed space required by forest products), speculation abounded that trade would be directed elsewhere (at last count the Gulfport was now running at a rate of 210 ships per annum, “we are alive and kicking and coming back strong” says Executive Director Don Allee).

The role of Gulf facilities in global supply chains is critical, particularly in non-containerized cargo where they are worldwide leaders in the shipment of such things as crude and refined petroleum products, steel, aluminum ores, chemicals, rubber, machinery, plywood, coffee, cotton, foodstuffs, forest products, corn, oil seeds, and wheat. Ranked by tonnage, the Port of South Louisiana was first in the U.S. in 2003 (the most recent year with complete data), New Orleans was fifth, and Baton Rouge was 10th.

So the vital question to world traders today, post-Katrina, is ‘how usable is the Gulf port infrastructure?’

Recovery

Two weeks after Hurricane Katrina, CP Ships’ Lykes Flyer was the first commercial cargo vessel worked by the Port of New Orleans.

As the gateway port to the Mississippi and the Inland River System, New Orleans is one of a few critical cornerstones to U.S. world trade. So when it was estimated in September that it would require $1.7 billion to rehabilitate port facilities and infrastructure back to the 2004 level, when the port supported some $37 billion of U.S. economic output, the figure sounded doubly daunting.

“The day after the storm,” recalled the port’s Director Gary LaGrange, “somebody said they didn’t think we’d have a ship in the port for six months. I took it as a challenge and said that by March 1, we’d be at 70 percent capacity.” During the week we spoke, as the New Year fast approached, 19 ships were calling at the port for the third week in a row. That figure represented 60 percent capacity and LaGrange was encouraged that he’d make good on his promise by March.

Affirmation that progress was moving ahead faster than few had thought possible came from a top executive from one of Japan’s leading steel shipping lines (Toko Lines) who inspected the port in December and announced he was impressed by the “great strides in recovery efforts.”

“The fact that we’re at 65 percent is miraculous,” exclaims LaGrange.

How did the port come back so quickly? “There were three things we needed,” said LaGrange. “Manpower. Homes for them. And FEMA trailers.” It was a Catch 22. Labor was needed to restore operations, but there was no place for workers to live as their residences had been devastated with the city; without one, you couldn’t have the other. Within a matter of days, the U.S. Department of Transportation dispatched five merchant marine training ships to serve as floating dormitories in the harbor for hundreds of port industry workers (when LaGrange and I spoke, they were down to one ship).

The next big thing that had to happen was the restoration of electricity; and then, intermodal connectivity. Power was brought back relatively quickly but getting trucks moving turned out to be tough. The problem was there were no drivers (since they, like everybody else, had fled the city and were barred from returning even had they wanted to).

“Local drayage, regional companies, large terminals and major hubs in New Orleans were all shut down because there were no drivers,” recalled Cathy Gautreaux, Executive Director of the Louisiana Motor Transport Association. Randy Guillot, President of New Orleans-based Southeastern Motor Freight (the oldest trucking company in town), remembers the driver shortage all too well. “For first 30 to 45 days, you couldn’t get anybody. Nobody was in town. If you had a person domiciled in New Orleans, they weren’t here. The whole city was shut down for a month.” Three weeks after Katrina, Guillot got his first FEMA trailer, “I was ahead of the curve on that one” (there are now 18 on his lot, which he shares with a plumbing company).

Getting short-haul drivers back to town was a top priority. “We partnered with the port to do a full court media press,” says Ms. Gautreaux. “We fielded phone calls for two months and assembled a data base of 400 drivers ready to work in New Orleans. The public-private partnership was phenomenal.”

But that’s still not enough. These days, Randy Guillot is running some 35 trucks out of New Orleans (pre-Katrina the total was as many as 60). His customer base is back, demand is high, but the problem is still lack of drivers. “If I had another 25 drivers I could use every one.”

Ironically, one of the biggest obstacles in recapturing drivers is FEMA itself. “If FEMA helps us anymore, they’re going to destroy our economy,” complains Ms. Gautreaux with only slight irony. “We’ve been competing with FEMA for drivers. They’re paying owner-operators $1000 a day and drivers $1000 a week. There’s no way the general market could compete with those kinds of rates. They’ve sucked up our labor force.”

As Ms. Gautreaux points out, the net result was a Catch 22 vicious cycle. “Shippers heard that New Orleans was under water; they thought the port was shut down so they were diverting freight to other ports. Then there wasn’t enough freight to haul to justify truckers coming back to work. I couldn’t get the truckers back before I got the freight back.”

The turnaround is underway, thinks Ms. Gautreaux, but it’s slow. “Every day that goes by we’re somewhat closer to getting freight back,” she observes, noting that there hasn’t been an appreciable backlog of freight waiting to be picked up. But, New Orleans could be handling more if outbound land transportation were moving faster.

The arrival of FEMA trailers like Randy Guillot’s fills the ‘first responder’ trucker void. But normal operations are unlikely until there is considerably more housing. “You can’t blame them, drivers want to be with their families.”

Even for those currently hauling, turnarounds take much longer than before, which cut into their income. “The big problem is highway congestion.” With much of New Orleans’ labor force living elsewhere, there is a mass exodus of commuter traffic every day in and out of the city. “To do one truck turnaround can take 4-5 hours,” notes Ms. Gautreaux. “Before, you could do three or four turnarounds in the port, best case scenario.”

Randy Guillot is more guardedly optimistic. “It depends on the day,” he says about congestion. “From our parish (several miles from the port), traffic is about 50 percent worse than before.”

Problems remain

An even bigger problem beyond truckers and congestion looms on the horizon for the Port of New Orleans—the future of the ship canal, which is now silted over.

Although the main portion of the port, from the central business district to the Uptown neighborhood, incurred only minor to moderate wind damage, “We lost pretty much everything on the canal side,” explains LaGrange. “We’ve got to relocate the nine businesses there that require deep-water access to the Gulf.” Among those operations are U.S. Gypsum (with roughly 9,000 jobs located in the area), Lone Star Cement and New Orleans Cold Storage, the nation’s largest poultry exporter. “It’ll cost $350 million to relocate those companies.”

But there’s more at stake than just money. A bigger concern is whether the New Orleans Industrial Canal will ever be restored to its 36-foot depth by the Corps of Engineers. “There’s no dredging going on now because of political outpouring,” explains LaGrange. “Many people falsely believe the Channel is the reason for the tidal surge. So they won’t dredge for the time being.”

According to LaGrange, ever since Hurricane Betsy in 1965, “The outlet has been a whipping boy and scapegoat for all things bad. It’s not popular for anybody in politics to support a channel that has been identified as a bad boy regardless if that’s right or wrong.”

Nobody knows when—or whether—they will start again. “Everybody’s waiting for the Corps to decide what it’s going to do. If the Corps does not dredge, which is looking more likely, I’ll need federal assistance to relocate the companies that don’t have deep-draft access to the Gulf to some other part of the port.”

Sidebar: Port of Southern Louisiana

Upriver, the 54-mile long Port of Southern Louisiana—stretching from Milepost 114 to Milepost 168 along the Mississippi, the largest tonnage port district in the western hemisphere, shipping, among other things, 60 percent of the world’s grain—escaped Katrina largely unscathed. “The amount of damage wasn’t worth mentioning,” says Executive Director Joel Chaisson. “There was some roof damage from winds but we were up and operational within five days.”

Speculation that grain trade would be badly obstructed was, in Chaisson’s opinion, highly over-blown. “There were rumors that there was a back up in grain and that much of the grain was damaged, but we didn’t see it.”

With their ship channel undisturbed (in striking contrast to New Orleans), the Port of Southern Louisiana began doing what Chaisson calls “double duty.” The result has been a boom in business. “If I had one million square feet available today, I could rent it.” The port operates a 330-acre industrial park with bulk and cargo docks, and recently bought a 200,000 square-foot building currently being used by the Red Cross to provide support services to Katrina recovery. It also expects its energy storage facilities to significantly grow (“three companies are looking to expand”).