Chicago Economic & Finance News

[OrdoSeclorum]

^^^

I don't think a Panamax can get through the St. Lawrence seaway. I also think that ships larger than Panamax already operate solely within the Great Lakes.

[Ch.G, Ch.G]

Originally Posted by emathias

Read the rest at Crains

Seems like a good idea to me.

Thanks for the excerpt, emathias.

I'm always a fan of infrastructure development. I'm curious, though, about the source of the increased economic activity: Would Chicago be luring existing (or potential?) business away from other port cities? And, if so, which ones?

FWIW, here's how Chicago ranked alongside other inland port cities by total (i.e., both foreign and domestic) cargo volume in 2009:

8 Huntington, WV 59,171,545
20 Pittsburgh, PA 32,891,355
23 St. Louis, MO and IL 31,336,831
25 Duluth/Superior, MN/WI 30,226,449
36 Chicago, IL 19,228,125
40 Memphis, TN 13,980,433
41 Cincinnati, OH 11,767,981
47 Toledo, OH 9,682,178
50 Detroit, MI 9,014,002
51 Indiana Harbor, IN 8,197,993
52 St. Clair, MI 8,073,962
55 Two Harbors, MN 7,095,686
56 Presque Isle, MI 6,989,563
62 Gary, IN 6,388,914
63 Cleveland, OH 6,075,920
65 Mount Vernon, IN 5,554,763
66 Louisville, KY 5,352,587
68 Escanaba, MI 4,854,640

source

[BorisMolotov]

^ I was shocked at Huntington, but a Google Earth search revealed a huge coal shifter to tons of barges that were floating in the Ohio River. Obviously Gary and Indiana Harbor have reason to be concerned but I think that most of the cities have transfer stations already in place to rail or truck lines or vice versa and so may already have locked up potential business in the area. I assume most inland shipping involving boats has to be either ore or coal and those areas are pretty well covered by Duluth and Pittsburgh. But at the very least, Chicago's port will look pretty after the investment into it.

[Attrill]

Originally Posted by OrdoSeclorum

^^^

I don't think a Panamax can get through the St. Lawrence seaway. I also think that ships larger than Panamax already operate solely within the Great Lakes.

Panamax ships obviously can't get through the St. Lawrence, but the CSX and Norfolk Southern work will create a huge increase in the freight capacity going to/from the Atlantic Coast harbors that can handle the New Panamax Ships. Basically they're lowering rail lines or raising bridges so containers can be double-stacked straight through on the shortest routes to Chicago. The New Panamax is going to increase the volume of freight coming and going to the East Coast, and the Port of Chicago needs to be able to handle the increase of rail traffic to/from Hampton Roads and Baltimore, as well as transfers to/from the larger Great Lakes ships you mentioned.

[ardecila]

I don't see how that helps Chicago. The changes will reduce traffic at the West Coast ports as goods bound for the East Coast goes directly there via cheaper ocean freight. The railroads that currently carry these goods will also see diminished traffic.

I guess I just don't see any changes for Great Lakes shipping, which is primarily concerned with the export of commodities. Are you suggesting that Asia-bound commodity shipments leaving the Midwest will eventually be sent to Gulf/Eastern ports instead of West Coast ones?

[ardecila]

While we're on the subject of Calumet - is there any reason at all why the Leucadia gasification plant is a good idea? Natural gas prices are at an all time low and not projected to increase, so there's no need for an artificial substitute. The process will add significant pollution to an already hazardous area. Illinois consumers will pay more for the artificial gas than they currently do for real natural gas.

Is there something I'm not getting? There's no way a few hundred jobs is the only benefit to Illinois. Is it? Or is this a prop for the Illinois coal industry, which can't accept that nobody will buy their dirty bituminous coal unless the gubmint mandates it?

[Vlajos]

Originally Posted by ardecila

While we're on the subject of Calumet - is there any reason at all why the Leucadia gasification plant is a good idea? Natural gas prices are at an all time low and not projected to increase, so there's no need for an artificial substitute. The process will add significant pollution to an already hazardous area. Illinois consumers will pay more for the artificial gas than they currently do for real natural gas.

Is there something I'm not getting? There's no way a few hundred jobs is the only benefit to Illinois. Is it? Or is this a prop for the Illinois coal industry, which can't accept that nobody will buy their dirty bituminous coal unless the gubmint mandates it?

I don't think you're missing anything. It's a bad idea and it looks like it won't be happening.

[Nowhereman1280]

Originally Posted by Attrill

It makes a lot of sense to upgrade the Port of Chicago - the new Panamax ships are coming soon, as well as CSX and Norfolk Southern upgrading their rail lines to Chicago. Freight shipping from/to the East Coast is going to be undergoing some major changes in the near future, and Chicago needs to be ready to deal with the changes.

Chicago should really push for the Seaway to be expanded to handle New Panamax. Such a move would essentially put all the East Coast ports out of business as Chicago is a far superior distribution point as compared to Newark or similar locations. Instead of taking goods from Europe to Newark, sorting them, loading them onto trains, unloading them in Chicago, sorting them again, and then loading them onto trucks. They could just take them right up the St. Lawrence Seaway and unload them once in Chicago and sort them once in Chicago and distribute to the 75% of the country that is a short, flat, ride via rail from Chicago.

A big disadvantage of the current situation is that there are huge bottlenecks getting through the Appalachians and the Rockies via rail that often add days to shipping times. Taking goods directly to Chicago via ship would allow the mountain ranges to be bypassed.

I hope Rahm is planning to push all of the Port's standards to handle Panamax in anticipation of the Seaway being expanded to these dimensions. The Seaway isn't all that far off as it is with Max length being 740 ft (New Panamax is 1200', regular Panamax is 965') and max Beam being 78' (NP: 160, P: 106'). I believe the draft for the canal is already sufficient throughout the system. Most of the places along the Seaway that restrict these numbers are only isolated locations where the canal/locks are this skinny/short. I can't imagine it costing more than $1 or $2 billion to upgrade it to New Panamax which would quickly pay for itself.

Frankly we should also be talking about widening and rebuilding the Sanitary and Ship Canal to New Panamax as well as I believe the Mississippi would also be navigable by New Panamax as well. That would be far more aggressive of a move though and extremely difficult and expensive. But its not like Chicago's never done anything that crazy before.

I would love to see Chicago push for an ambitious project like this as it would really be a home run for the city if it ever happened and would spark a renaissance on the south side. The real way to fix the south side? Restore it to it's rightful place as the center of the American logistics system.



EDIT: Ironically I'm wrong. The Sanitary and Ship Canal is actually plenty wide enough for a New Panamax ship to access it. It is 202 feet wide which is 40 wider than new Panamax requires. The depth is the problem as it's almost 30' too shallow. I imagine they'd run into similar draft problems on the Mississippi as the river has constantly changing sand bar patterns that could mess up any New Panamax ship the strays outside of the channels.

[emathias]

Originally Posted by Nowhereman1280

Chicago should really push for the Seaway to be expanded to handle New Panamax.
...

It does take quite a long time to get from the Atlantic to Chicago via waterways. I think it's about a week. So even if a train was delayed several days on the East coast, it wouldn't necessarily save any time to come directly to Chicago.

The other problem is environmental. There is reluctance to have too many ocean ships in the Great Lakes due to "ride-along" creatures disrupting the ecosystem. I also can't imagine it's particularly fuel-efficient to push a panamax-sized ship against the current of the Mississippi. Going downstream would be one thing - pushing up would be another.

That said, who knows what engineering might be able to resolve. Cost, as always, is likely the biggest limiting factor.

[Attrill]

Originally Posted by ardecila

I don't see how that helps Chicago. The changes will reduce traffic at the West Coast ports as goods bound for the East Coast goes directly there via cheaper ocean freight. The railroads that currently carry these goods will also see diminished traffic.

I guess I just don't see any changes for Great Lakes shipping, which is primarily concerned with the export of commodities. Are you suggesting that Asia-bound commodity shipments leaving the Midwest will eventually be sent to Gulf/Eastern ports instead of West Coast ones?

The main things is that both shipping and rail have been undergoing consolidation for a few decades now, and Panamax is going to accelerate that trend. The trend is resulting in a continued move to a hub and spoke system, with Chicago being one of the main hubs. That's the main reason CSX and Norfolk Southern are investing in upgrades to their Midwestern lines. Both companies have completion dates for their upgrades scheduled for 2015 - when the New Panamax comes into play. That isn't a coincidence.

I think most of the improvements that should be made at the Port of Chicago are related to transshipment, not just for Great Lakes ships themselves. That said, I think there will be an increase in Great Lakes shipping since the improvements in rail service combined with the New Panamax ships will cut the costs of Midwestern commodities for Asian and South American buyers.

Originally Posted by emathias

It does take quite a long time to get from the Atlantic to Chicago via waterways. I think it's about a week. So even if a train was delayed several days on the East coast, it wouldn't necessarily save any time to come directly to Chicago.

Definitely. Norfolk Southern claims their upgrades to date have reduced transit times from Hampton Roads to Chicago from 3 days to 2, which is significantly shorter than any water routes direct to Chicago. The cost of rail upgrades is also significantly less than would be needed to rework the St. Lawrence Seaway, on the scale of hundreds of millions vs. tens (or even hundreds) of billions.

[Rail Claimore]

All this talk of upgrading Chicago ports to handle Panamax ships is a bit wildly optimistic. Most of the commodities and containers that are shipped to the US or traverse the US are to and from Asia (meaning it will arrive in Los Angeles), and if it's oil, it's from the Middle East, Africa, or South America (meaning it will go through Houston). Those two ports aren't going anywhere and are pretty much induplicable. And goods that would normally go to the crowded East Coast ports that handle transatlantic trade are now going to Savannah. Panamax is primarily going to help with oil shipments from South America to China. Any change in relative freight transportation patterns in the US that are a direct result of Panamax will be small.

[HowardL]

Ouch ...

Man Utd sponsor Aon moves headquarters to London

Aon was unveiled as the sponsor of Manchester United in July 2010
US insurance group Aon has said it plans to move its corporate headquarters from Chicago to London

http://www.bbc.co.uk/news/business-16548595

[Via Chicago]

Originally Posted by HowardL

Ouch ...

Man Utd sponsor Aon moves headquarters to London

Aon was unveiled as the sponsor of Manchester United in July 2010
US insurance group Aon has said it plans to move its corporate headquarters from Chicago to London

http://www.bbc.co.uk/news/business-16548595

"ouch" what exactly? aside from the symbolic HQ presence and boosterism, Im not seeing the big deal. its only 20 people relocating and the Trib says they're actually adding close to 1000 more chicago jobs and have a long term lease. its not like they're moving the entire staff to Dallas or something.

[chicubs111]

http://www.chicagobusiness.com/artic...cago-to-london

(AP) — Insurance brokerage Aon Corp. plans to move its corporate headquarters from Chicago to London to improve its access to emerging markets and increase its financial flexibility.

But Aon will add 750 jobs to its offices at the Aon Center in the East Loop, a spokesman says. Those jobs will be a combination of new positions and transfers from elsewhere in the U.S., he said

[OrdoSeclorum]

Originally Posted by Via Chicago

"ouch" what exactly? aside from the symbolic HQ presence and boosterism, Im not seeing the big deal. its only 20 people relocating and the Trib says they're actually adding close to 1000 more chicago jobs and have a long term lease. its not like they're moving the entire staff to Dallas or something.

It's not good news, though the increased presence takes the sting off. Chicago is a "global city" and large headquarters give cache and status and there are ancillary benefits related to business services and the like.

Obviously, London is the Most Globalist of global cities, perhaps behind Hong Kong, but certainly in the west, so Aon has good reasons to move there. Still, as Chicagoans, we've become used to thinking that we are not just a sufficient but an excellent location for a global business, so news like this stings. It may not have any real impact, but it makes me wonder where the currents of globalization will take us. Chicago is a Top 10 global city, but how many cities per continent will retain that status? Is it going to get spikier and spikier? Is there only going to be one global insurance city, London?

[Via Chicago]

Originally Posted by OrdoSeclorum

It's not good news, though the increased presence takes the sting off. Chicago is a "global city" and large headquarters give cache and status and there are ancillary benefits related to business services and the like.

Obviously, London is the Most Globalist of global cities, perhaps behind Hong Kong, but certainly in the west, so Aon has good reasons to move there. Still, as Chicagoans, we've become used to thinking that we are not just a sufficient but an excellent location for a global business, so news like this stings. It may not have any real impact, but it makes me wonder where the currents of globalization will take us. Chicago is a Top 10 global city, but how many cities per continent will retain that status? Is it going to get spikier and spikier? Is there only going to be one global insurance city, London?

The move seems to have more to do with US tax structure and opportunities to emerging markets than anything to do with Chicago or Illinois specifically (although ironic seeing as they paid their CEO more than they did in US taxes).

Anyway, I find it really hard to get worked up about this kind of thing. A handful of 1%'ers moved from here to there...and this affects my Friday how exactly.

[wrab]

While it isn't at all unusual for American companies to incorporate off-shore - Bermuda, Virgin Islands, etc. - I'm drawing a blank in thinking of another recent example of a publicly-traded American company delisting itself from the American exchanges and then reincorporating in Europe?

[the urban politician]

Originally Posted by wrab

While it isn't at all unusual for American companies to incorporate off-shore - Bermuda, Virgin Islands, etc. - I'm drawing a blank in thinking of another recent example of a publicly-traded American company delisting itself from the American exchanges and then reincorporating in Europe?

^ Which makes me think that this move is less of a swipe at Chicago's "inadequate-ness" and more of a swipe at the US tax/regulatory structure. If you read the comments in the Crains article today, and sweep aside all the tea-party hogwash, there are a few commentators in the know who have some interesting things to say about this.

Aon would not have remained a Chicago company for over 3 decades, conducting its global business as it has, if it found Chicago to be inadequate. If it were a Chicago problem, why not move to New York? This sounds to me like more of an "American" problem. My 2 cents.

[Ch.G, Ch.G]

Originally Posted by Via Chicago

Anyway, I find it really hard to get worked up about this kind of thing. A handful of 1%'ers moved from here to there...and this affects my Friday how exactly.

Yeah, I mean, it's not like the uber-wealthy have historically played a role in Chicago's cultural institutions or anything...

Originally Posted by the urban politician

^ Which makes me think that this move is less of a swipe at Chicago's "inadequate-ness" and more of a swipe at the US tax/regulatory structure. If you read the comments in the Crains article today, and sweep aside all the tea-party hogwash, there are a few commentators in the know who have some interesting things to say about this.

Aon would not have remained a Chicago company for over 3 decades, conducting its global business as it has, if it found Chicago to be inadequate. If it were a Chicago problem, why not move to New York? This sounds to me like more of an "American" problem. My 2 cents.

London is also especially well-poised (especially vis-a-vis American cities) to engage emerging markets because of the UK's colonial legacy. At least, that's become the conventional wisdom that outfits like The Economist (and surely the British government) have been promoting.

Honestly, after reading the article and the comments (you're right about the nuggets of wisdom there), I also get the impression that the move is chiefly about exploiting the UK's lower effective corporate tax rate. I mean, the bulk of the American workforce will stay here (where taxes borne by the individual are significantly lower than they are in London).

A couple people also mentioned some problems with the Hewitt merger? And this:

Aon can also free itself somewhat from some of the anti-foreign corruption/bribery strictures in the U.S. They recently settled a big inquiry against it in the U.S. for that.

[RobertWalpole]

Originally Posted by OrdoSeclorum

Is there only going to be one global insurance city, London?

NY too. The biggest insurer, AIG, and the biggest broker, Marsh, both have their global HQ in NY, and NY, as the gateway to the overseas markets, is the US HQ to many international insurers' US subsidiaries.

Anyway, London is the top, global insurance market, and therefore, it makes sense to be based there.