From today's CI:
The Big Not So Easy...Amid all the chatter over the Fed possibly going on hold and the consternation regarding energy prices in the wake of Katrina, we need to keep a few other thoughts in mind. Although this may sound a bit melodramatic, we need to remember that New Orleans is absolutely one of the most important port facilities (at least it was) in the US. Maybe THE most important. It's not just about natural gas and petroleum products. It's also about corn, soybeans, iron ore, wheat, cotton, etc. It's about everything shipped down the Mississippi river. Looking back on American economic history, the Mississippi river has been simply the heartbeat of the agrarian and industrial growth of this nation. And despite all the thinking and blabber about the "new service and tech oriented economy", the port facilities at New Orleans remained an absolutely vital piece of the American economic puzzle until a few weeks ago. There simply is no question about rebuilding NO port facilities. It's a must do for the total American economy. There is really no way to minimize it. On a combined basis, the ports of New Orleans and South Louisiana account for the largest cargo shipped as measured by tonnage of any port facilities in the US. In dollar terms of cargo shipped, NO and South Louisiana combined rank number six in the country. As you know, what flows down the Mississippi are usually products characterized by heavy dry weight. It's easy to understand in that water is one of the cheapest forms of transportation when dealing with items of massive weight such as steel, corn, iron ore, etc. So although the ports of NO and South Louisiana may not be the top dollar volume ports stateside, they provide a mechanism by which bulk can be shipped in the cheapest manner possible from the heartland of the country.
As we mentioned, many agricultural harvests and subsequent shipping is normally scheduled for September. Just how will corn, wheat, soybeans, etc. find their way to both domestic and foreign markets if the Mississippi is constrained? By truck? Far too expensive. By rail? If the capacity is available. Near term, alternative transport routes may be the only choice, again, if available. And that means that earnings for the truckers and rails should hold up well in 3Q and 4Q. But does that also tax significant additional energy related fuel resources? Sure it does. Whether New Orleans as a residential city is rebuilt in its entirety is an open question at this point. But rebuilding the port facilities is not. It's mandatory. As we look ahead and anticipate just who will benefit in terms of construction, we suggest that the Toll Bros., KBH's, Centex's, etc. of the world are well far down on the list. It's the marine engineering and construction firms who stand at the front of the line. We'll have more to say about this thematically ahead.
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