Chemical shippers drawn to Texas

A recent trend has seen the Port of Houston luring some firms from Connecticut to be close to their petrochemical client base. (Port of Houston Authority)

HOUSTON (ICIS)–Another chemical shipper has left Connecticut for Texas: Navig8 has been setting up offices here recently.

Navig8’s transfer from the leafy confines of Westport, Connecticut, to an office in the busy Galleria area of Houston is the latest in a trend that began only about a year ago.

That’s when chemical shipping giant Stolt Tankers announced a similar pullout.

Chairman Niels G. Stolt-Nielsen said at the time that their move to the Texas port city was hard to argue against.

“Our customers are in Houston, the chemical industry is in Houston, and our ships call in Houston,” Nielsen said.

Unofficially, Stolt brokers and other sources said the move had been talked about for at least a decade but had been delayed because the company’s top performers and management did not want to leave Connecticut.

That reluctance may explain why four other chemical shippers – BLT Chembulk, Fairfield Chemical Carriers, MTMM and Team Tankers – remain in Connecticut and are unlikely to transfer to Texas.

“They’re close to New York. Connecticut is wonderful in the fall,” a Houston ship broker explained. “But when you look at the hard commercial aspect of it, your entire client base is here. There are so many companies in Houston that are central to petrochemical shipping. If you need to be near your client base, you need to be here.”

The southwest corner of Connecticut – which includes Norwalk, Wilton, Westport and Southport, where the remaining chemical shippers are located – is within a 30- to 45-minute drive to New York City.

While New York is a major chemical port in the Americas, the largest share of US chemical traffic now is in Houston, one of the largest petrochemical hubs in the world. For chemical shippers based in Connecticut, much of their business comes and goes from Houston.

Navig8, which is headquartered in London, did not respond to questions about its US operations move in time for publication.

However, employees in the Houston office confirmed that the transfer from Connecticut was ongoing and should be completed soon. Navig8 had 17 vessels operating during the three months ended 30 September, according to an earnings release, and the company has contracted to buy 19 more by September 2017.

Navig8 joins Stolt and Odfjell already in Houston.

Yet the four firms that continue to operate out of Connecticut show that the hard commercial aspect of Houston has been slow in luring chemical shippers away from their proximity to the Big Apple.

Brokers and other chemical shipping sources say the most important reason is all about people, about the personal preferences of top management and high-dollar performers for staying in Connecticut.

Asked if one of the remaining Connecticut chemical shippers would consider a move to Houston, a broker said, “I highly doubt that will happen. The reason is that the CEO is from Connecticut and wants to stay in Connecticut. That’s part of the reason he took that job.”

Another broker, a longtime veteran of chemical shipping, ticked off the top management of the remaining shippers and said none would likely leave. The broker knew people at one of the shippers and said he had “never heard a whisper about them ever considering a move to Houston.”

The Texas port, of course, has negatives, the most obvious being generally sweaty weather for much of the year, crowded freeways and no comfy train rides from cushy suburbs.

However, Texas does have a clear cost-of-living advantage. Unlike Connecticut, which has the third-highest state tax in the nation, Texas is among only seven states that have no personal income tax. Connecticut’s state-local tax burden is 12.3%, behind New Jersey at 12.4% and New York at 12.8%, according to TurboTax.

A Houston shipbroker said he knows shipping people who have reluctantly moved to Houston and a few who have been hard-sells on its advantages. “But a lot of the people, once they came here, they loved it,” the broker said.

One more obstacle to leaving Connecticut has been the size of the shipping industry there – not just for chemicals, but for oil and container shipping.

Jim Lawrence, chairman of Stamford-based Marine Money International, which publishes the global Marine Money magazine, says there are nearly 5,000 people working in Connecticut for myriad maritime shipping companies and support businesses.

Lawrence compared Connecticut to London, Oslo, Athens, Singapore and Hong Kong as a maritime center. He did not know of the Navig8 move, but said he doubted that it signified a trend for the larger shipping industry based in Connecticut.

“I look at Houston as the operating center for US shipping, with its big port, and New York as the mind and management of the business,” Lawrence said.

Focus article by Lane Kelley