2013
THE PORT OF CINCINNATI
CARGO MARKET
ASSESSMENT
EXECUTIVE SUMMARY
MARTIN ASSOCIATES
941 WHEATLAND AVENUE, SUITE 203, LANCASTER, PA 17603
SEPTEMBER, 2013
TABLE OF CONTENTS
1. OVERVIEW .......................................................................................................................................................... 1
2. WATERBORNE CARGO ASSESSMENT ............................................................................................................... 1
2.1 Base Waterborne Cargoes ........................................................................................................................ 2
2.2 Waterborne Discretionary Cargo Markets and Potential Opportunities ............................ 3
3. NON-WATERBORNE MARKET ASSESSMENT .................................................................................................. 8
4. ROLE OF THE PORT AUTHORITY MOVING FORWARD ................................................................................. 10
THE PORT OF CINCINNATI CARGO MARKET ASSESSMENT
EXECUTIVE SUMMARY
1. Overview
Martin Associates was retained by the Port of Greater Cincinnati Development Authority (Port)
to assess the market potential for 1) non-containerized waterborne cargoes that would be
loaded and/or discharged at river terminals within the Port’s jurisdiction; and 2) nonwaterborne cargoes that utilize the greater Cincinnati transportation assets such as rail and
highway infrastructure. The following summarizes the market conditions, potential
opportunities and recommendations for the Port.
2. Waterborne Cargo Assessment
According to the latest U. S. Army Corps of Engineers (USACE) tonnage statistics available at
the time if this report, in 2011, the Port of Cincinnati District handled 11.7 million tons of
cargo. The vast majority of this cargo is attributed to liquid and dry bulk commodity groups
such as coal and coke products, petroleum products, fertilizers, grains and oilseeds,
sand/gravel, rock and stone. Also the Port of Cincinnati handles modest amounts of break bulk
iron and steel products.
At the outset it is necessary to define the types of waterborne cargo markets in which the Port
of Cincinnati currently competes, and those potentially that the Port can compete for market
share. First captive cargo markets are those in which the commodity is tied to a single
user/producer, primarily due to the fact of proximity to manufacturing plant, mine or farm.
These commodities are typically dry and liquid bulks and have been a staple of Inland River
System and Great Lakes markets. These commodities are typically not dynamic, and therefore
do not lend themselves open to competition. For example, it is extremely difficult for one port
to compete for and penetrate another port’s captive cargoes due to the economies of scale and
favorable logistics already in place. On the other hand, discretionary cargo markets such as
containerized cargo and break bulk cargo such as steel are open to competition between ports
and terminals. In this case, the end user or producer is located somewhere in the competitive
hinterland of two or more port facilities and competitive vessel, port and inland transportation
services will influence the port used. These cargoes are more dynamic in terms of growth. The
Midwest “Battleground” is an example of a discretionary market for containers since the
Midwest can be served via rail from the West Coast and Rail/truck from the Gulf and East
Coasts. The Port of Cincinnati’s competitive reach for discretionary cargoes is impacted by
both Louisville and Huntington. In addition, the Great Lakes Ports of Cleveland, Toledo and
Burns Harbor/Chicago encroach from the north.
As previously mentioned, the Cincinnati District tonnage has been driven by coal, petroleum
and grain, however tonnages have declined over the past five years. This decline has been
experienced in other port regions around the United States due to the effects of the recession
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that took hold in 2008-2010. Overall, commodities in the Cincinnati District do not exhibit
growth patterns. Again this is attributed to the fact that most of the commodities handled are
captive and are therefore non-dynamic and are not expected to see high growth patterns over
time. By comparison, the Huntington and Louisville Districts, those neighboring the Cincinnati
District along the Ohio River, have exhibited similar declines in tonnage through 2009. The
Huntington District total tonnage is dominated by coal, nearly 75%. The Louisville District is
more diverse, but with a concentration on petroleum and crude materials (dry bulk materials).
However, Cincinnati demonstrates the greatest diversity of current waterborne cargo base.
Cincinnati also competes for discretionary cargoes such as steel with Great Lakes ports –
primarily Cleveland, Toledo, Burns Harbor (IN) and Chicago (IL). International cargo moving
via the St. Lawrence Seaway Transits has declined 17% since 2006 reflecting more competition
from coastal ports. International general cargo share of total Seaway traffic has declined from
10% to about 5% over the same period.
A macro-level summary assessment of non-containerized waterborne cargo into/out of
OH/KY/IN was conducted to focus on identifying cargo flows and key competitors. US Bureau
of Census data analyzed includes commodities originating in/destined for OH/KY/IN region.
The data does not include trans-border trade. The data suggests that the primary inbound
commodities include: iron and steel, ores and miscellaneous dry bulks – such as salt, cement,
sand, limestone. Primary outbound commodities include: mineral fuels and oil, oilseeds and
grains and miscellaneous dry bulks – such as salt, cement, sand, and limestone.
On a more micro-level, PIERS data was used to focus on identifying cargo flows into/out of
Ohio and key competitors handling the cargo. Iron and steel imports are primarily sourced
from South America and move through coastal ports of New Orleans, Philadelphia and
Cleveland. Natural rubber from Southeast Asia predominantly comes into New Orleans and
Savannah. In terms of grain exports (corn and soybean), Southeast Asia is the key destination
with the majority of the cargo railed from Ohio to West Coast ports for export with some
shipped through Mobile. The export petroleum additives market to Asia is service via the Port
of Houston.
2.1 Base Waterborne Cargoes
The base cargo assessment focuses on the current waterborne markets in which the Port of
Cincinnati competes. Included is an assessment of each major commodity group that identifies
each commodity’s competitive position and future outlook.

Coal: Cincinnati market has not grown in recent years, in fact experienced an 11%
decline from 2010 to 2011. Coal handled is example of a typical bulk commodity
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(captive cargo) of a river port, characterized by: 1) non-dynamic market; and 2) tied to
a local producer or end user (e.g. Duke Energy). Competition from low-cost natural gas,
which is a trend, is expected to continue. Current trend in coal waterborne movements
is export (primarily to Asian destinations), not inbound receipts. Overall, it is
anticipated that tonnage will continue to exhibit a flat or slight negative growth through
the medium-term.

Fertilizer Products: Fertilizer receipts are a function of local/regional agriculture
market. The Port of Cincinnati market has been flat in recent years, with competition
from neighboring Districts Huntington and Louisville. With this competition, the Port
of Cincinnati experiences a limited hinterland reach. Forecast is expected to remain
stable as crop production and planted acres remain constant.

Cement, Aggregates and Other Dry Bulk: These commodities are typically consumed
in local 50-100 mile radius. Cement and aggregates are used to support local
construction activity. Limestone is also consumed by Duke Energy, while outbound
gypsum is a by-product of utility process. These bulk commodities are again classified
as a captive market. Thus, it is difficult to penetrate into competing markets, and
likewise difficult for competitors to make inroads into Cincinnati’s hinterland. Key local
end users include construction companies and redi-mix plants. As construction
projects resume with economic recovery, aggregates, stone and cement are expected to
increase.

Petroleum Products: Typically handled by proprietary liquid bulk terminals along
Ohio River for blending operations incorporating base oils from Gulf Coast region.
Tonnage in the Cincinnati District declined from 2.7 to 1.8 million tons over 2008-2009
period, but has remained steady at approximately 1.8 million tons over past 3 years.
Again, these are classified as a captive market serving local end users. Outlook is
assumed to remain flat in near-term.
2.2 Waterborne Discretionary Cargo Markets and Potential Opportunities
Discretionary waterborne cargo markets in which the Port of Cincinnati competes (steel), as
well as potential waterborne cargo opportunities in markets in which the Port does not
compete is discussed as follows. A data analysis (2011 Transearch data base) is presented
identifying cargo flows into/out of Cincinnati region/ Business Economic Area (BEA). The
Cincinnati BEA is comprised of 21 counties located in Ohio, Kentucky and Indiana. Then,
Landed Cost Analyses demonstrate Cincinnati’s competitive position and advantages to
penetrate these markets. Finally, key findings for each commodity/opportunity are discussed.
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Purpose of the data analysis is to identify key commodities, key origin/destination (O/D) BEAs
in the U.S. and long-haul markets. Focus on rail and truck-served markets over 500-700 miles.
These markets represent a greater potential to diversion to barge for ultimate O/D in
Cincinnati BEA. It is unlikely the shorter-haul markets would realize the economies of scale of
barge transportation. In addition, the data analysis will assess potential types and volumes for
cargo diversion to barge from Gulf Coast BEAs. The Ports of Houston, New Orleans and Mobile
are of particular interest due to the access to the Inland Waterway System and large, diverse
commodity base at these specific ports.
A summary of Cincinnati O/D rail flows indicates that approximately 5.9 million tons of rail
carload tonnage originating in Cincinnati BEA, of which nearly 60% is classified as iron and
steel which is primarily railed to Midwest markets. Also, nearly 7.7 million tons of cargo is
railed into the Cincinnati BEA. Again, iron/steel and coal are key commodities and key origins
are regional Midwest markets. Only 1.1% (63k tons) of originating rail and 3.6% (277k tons)
of destined rail moves are with key Gulf Coast BEAs, which offer the most likely potential for
diversion to barge. These commodities would include steel, plastics and chemicals. However,
smaller shippers/consignees most likely not poised to switch to barge due to supply chain
considerations such as shipment sizes, transit time and inventory capacity.
In terms of truck flows, approximately 37 million tons of truck tonnage originating in
Cincinnati BEA, 38% is classified as intra-BEA – moving from one county to another within the
BEA. Tonnage is dominated by bulk commodities which are primarily originating or destined
for regional and Midwest markets. Similarly, 44 million tons are trucked into the Cincinnati
BEA, where 32% are intra-BEA movements. Again, bulk stone and gravel are key commodities
dominating the inbound truck market. About 1.2% (410k tons) of originating truck and 3.6%
(700k tons) of destined truck moves are with key Gulf Coast BEAs, which offer the most likely
potential for diversion to barge. Shippers/consignees are most likely using truck due to lot
size capacities, transit time needs and inventory control measures, and it may be difficult to
divert to barge despite the large volumes from Gulf region. However, petroleum, soybean and
chemical products appear to offer volumes that should be investigated as potential for
diversion to barge.
Given the data analysis presented in the section, a Landed Cost Analysis was conducted to
identify Cincinnati’s competitive position to compete for these cargoes. Also, in addition to
quantifiable costs (hard costs) such as transportation, other factors (soft costs) such as
reliability of transportation services and product availability may influence logistics routing
and sourcing decisions.
Steel Products: Tonnage in the Cincinnati District has declined since 2007, bottoming in 2009,
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however has somewhat rebounded in 2010 and 2011. The activity is directly linked to
economic recession and demand for consumer goods. Steel is a more dynamic market which is
influenced by domestic competition, foreign competition, landed cost, transit time and tariffs
and duties. On a more macro scale, the total U.S. and Great Lakes steel import market is
extremely volatile and tied to economic conditions. Similar to the Cincinnati District, there has
been some rebound in recent years.
In order to grow existing break bulk steel business the Port must capture market share from
East Coast/Great Lakes ports or capture/create new sources/routings, such as new
automotive assembly plants locating in the U.S. Both of these scenarios require competitive
cost and transit time considerations.
To assess the Port of Cincinnati’s competitive advantage in competing for these cargoes, a
Landed Cost Analysis was conducted. Total Landed Costs consist of all waterborne
transportation, port/terminal inland transportation costs for the overseas source to the
Cincinnati end user.
The methodology of the Landed Cost Analysis utilizes Martin Associates’ proprietary vessel
cost model to develop ocean and voyage from overseas ports in Antwerp, Belgium; Santos,
Brazil; Algiers, Algeria and Hong Kong, China to U.S. Ports of Cleveland, New York, Baltimore,
Jacksonville, New Orleans and Houston. Barge transportation costs were calculated to
Cincinnati from Houston and New Orleans based on interviews and tariff rates. Inland
transportation costs – truck and rail - were developed for the U.S. ports of entry identified
above to key consumption areas such as Cincinnati, Columbus, Indianapolis and Louisville. For
rail, rates were developed from Class I published rates as well as the NTSB 1% Waybill Sample.
Truck rates were developed from distance between origins and destinations as defined by PC
Miler and rate structures in Martin Associates’ proprietary data base.
The results of the analysis demonstrate that in terms of total landed transportation costs,
barge operations to serve local Cincinnati appear to be competitive with coastal routings.
However, when factoring in Inventory Carrying Costs (ICC) due to the longer transit time, the
barge option loses appeal. Since the ICC is calculated based on a percentage of the value of the
product being shipped, the impact of ICC is exponentially felt by logistics chains where the
value of the good being shipped is higher.
Also, it appears that the most advantageous potential for barge transloading/mid-streaming is
through New Orleans rather than Houston due to the availability of barges and reduced transit
time over Houston. As the end user market moves away from local Cincinnati to other areas
such as Columbus (and Louisville and Indianapolis), coastal routings still maintain the
advantage and are therefore more attractive than barge.
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While this analysis demonstrates a barge transloading service into Cincinnati can compete for
localized market share based on cost, it must be emphasized that, as shown through shipper
interviews, that factors such as reliability of service, frequency and needs of individual logistics
chains of Beneficial Cargo Owners (BCOs) must be considered, i.e. one size does not fit all.
Ultimately, in order to attract additional steel business, the Port will need to be cost
competitive and overcome issues pertaining to reliability and frequency of service. Coastal
ports offer an advantage due to the large number of weekly service offerings as well as the vast
array and selection of overseas destinations. One avenue that is recommended is that the Port
market to a freight forwarder or 3PL that will guarantee volumes.
Grain and Oilseeds: Grain exports can vary from year to year depending on weather
conditions and prices and demand in world markets. The Port of Cincinnati has shipped about
2 million tons of bulk grain annually in recent years. Corn exports are competing with
increasing domestic ethanol production, therefore affecting export shipments.
Another factor competing with bulk export shipments is the fact that containerization of
exports has been increasing. Currently, coastal ports are primarily used for containerized
export movements. In terms of the Tristate, Ohio leads in exports with the vast majority of
those exports moving in bulk. Conversely, about 40% of Indiana’s exports are containerized,
albeit a smaller volume. Also, two distinct concentrations of soybean production occur in NW
Indiana and along the Mississippi River Valley, specifically in Eastern Arkansas and Missouri.
In the Tristate, Ohio is the dominant player in terms of exports, and the ratio of containerized
shipments is about 12% in Ohio and 30% in Indiana.
Bulk grain exports handled at the Pot of Cincinnati have exhibited stable levels since 2007 and
are expected to continue. However, containerized transshipment/transload is an increasing
trend, with Asia being the primary overseas destination. Access to Class I rail is critical since
the majority of the containerized exports are destined for West Coast or East Coast ports. Two
Class I service providers, dual access, is an advantageous option for exporters. Single line
access may be less competitive due to limited destinations and cost inefficiencies that may be
experienced due to increased switching fees. In addition, Cincinnati will need to contend with
competing facilities located in Louisville/Jeffersonville (IN). There are essentially two
potential plays for Cincinnati to compete for this market: 1) Load containerized grain on barge
for export through Gulf; and 2) Stuff containers and rail to coastal port for export.
Containerized transshipment/transload to barge considerations include cost, transit time and
storage capacity: In order to penetrate into the current truck or rail routing to a coastal port,
drayage to the Cincinnati terminal, terminal lift/stevedoring charge and barge rate must be
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competitive. Also with respect to time considerations, the additional 14-16 transit days by
using barge must be factored into delivery time as well as ICC costs. Finally, the potential
Cincinnati terminal needs to have adequate space to store enough containers in order to take
advantage of economies of scale of barge transportation.
Inland transload for export is growing – new facilities are being built in Omaha, Savannah,
Kansas City and Newark. This scenario assumes that there is a transloading facility at the Port;
however rail to a coastal port, not barge transportation is used. East coast ports are actively
pursuing containerized exports. For a service of this nature to be successful, availability of
empty containers in Cincinnati is critical.
Polymers: Polymers manufacturing is a leading industry in Ohio. Polymer manufacturers in
Ohio source raw materials from both domestic sources (e.g. Texas) as well as imports from
overseas producers, primarily in Europe. A large number of companies are located in
Northeast Ohio as well as the western half of the state. It is necessary to identify feasibility for
Cincinnati to compete for domestic Gulf and foreign sources of dry and liquid polymers
destined for Ohio polymer-producing regions of Cleveland/Akron, Columbus and Dayton.
Data analysis suggests that a significant amount of chemicals from Houston and New Orleans
BEAs are destined for Cincinnati: 138,000 rail tons of chemicals/plastics into the Cincinnati
BEA; 402,000 truck tons of chemicals into the Cincinnati BEA. Similar to the previous Landed
Cost Analysis for steel, barge transportation can be competitive to truck and rail routings.
However, inventory and sourcing needs to vary for each individual manufacturer. The key
issue is that smaller and mid-size manufacturers cannot handle barge load quantities (1,500
tons). Also, increasing bunker prices and unfavorable exchange rates have driven up landed
cost of import materials. In fact, some manufacturers have moved to domestically-sourced
material. It is recommended that the Port continue to engage players in the polymers market
to keep abreast of logistics patterns and potential opportunities, such as plant expansions, etc.
Liquid Natural Gas from Regional Shale: Marcellus Shale is a key shale play in the Eastern
U.S. stretching into eastern Ohio. Drilling has only been underway for a few years, and
therefore its industry location and production is still in infancy stages. As more gas is
extracted, the potential to serve domestic users and export markets will increase.
Feasibility of any waterborne export operation would be dependent upon domestic extraction
costs and export market prices. Natural gas is a highly fragmented market given high
transportation costs. While the recent U.S. shale boom has lowered North American prices,
they remain elevated in both Europe and Asia. However, in the long-term, foreign countries
are expected to look to their own shale reserves, potentially equalizing the current price
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difference.
Potential obstacles and barriers of entry for Cincinnati to compete for this market include its
geographic location, which is on the fringe of the Marcellus Shale movement. It is likely there
will be competition from Huntington and/or Pittsburgh which are both located closer to the
source. Ideally, a liquefaction plant would be located adjacent to a maritime terminal. In
addition to the cost of building such a plant, new pipeline would also be required to link the
facility to existing pipeline infrastructure. However, without an on-terminal or local
liquefaction plant, LNG could possibly be trucked from a “peak-shaving plant”. A peak shaving
plant stores gas, for example, removal of natural gas from pipeline infrastructure in the
summer, cool the gas down into liquid state and then release it during demand spikes
(typically during the winter). According to the U.S. Energy Information Administration,
applications and designs are pending for potential export-oriented natural gas liquefaction
facilities in the states of Oregon, Texas, Louisiana and Maryland.
In addition to serve the export market, Cincinnati may also serve as a liquefaction and barge
facility for domestic users – that has plants along the Mississippi River Valley and Inland River
System that are converting to LNG or new/expanding facilities that will be LNG-powered.
Furthermore, ocean vessels and tugs are moving toward LNG power. Many coastal ports are
planning LNG bunkering facilities as part of their long-term plan. River ports will also need to
supply ample LNG bunkering services to accommodate tugs.
3. Non-Waterborne Market Assessment
Aside from the waterborne cargo markets discussed in the previous section, Cincinnati’s other
transportation assets, particularly rail access (Queensgate) and interstate highway access offer
the region other potential non-waterborne transportation-related opportunities. The balance
of this section will assess uses of these assets.
In terms of tonnage, U.S. containerized cargo reached a record year in 2011. Imported
containerized cargo dominates, but share of exports has been increasing since 2006.
Historically the majority of imports came over West Coast ports, specifically Los Angeles/Long
Beach. However, shocks have occurred in the logistics patterns of importers/BCOs. These
changes primarily occurred between 2002 and 2007. These include consolidation of imports
via San Pedro Bay (Los Angeles and Long Beach) ports in the mid 1990’s, growth of
Distribution Center (DC) and cross-dock operations as well as rail investments in LA/LB to
Midwest routings. However, key shocks such as the events of 9/11 and resulting security
measures at U.S. ports, the West Coast Shutdown (2002), West Coast land and labor shortages,
rail and truck shortages and high intermodal rates to Midwest destinations, shifting Asian
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production centers away from China, the global economic crisis have all led to growth in allwater services to the East Coast.
Subsequently, there has been growth of imported Asian container tonnage in the North
Atlantic, South Atlantic and Gulf port ranges since 2000. DC activity has also grown in the
Midwest and East Coast markets. Significant growth in DC activity has occurred east of the
Mississippi River and along Eastern Seaboard. Cincinnati is strategically located and the access
to Class I rail at Queensgate is critically important. However there are numerous competing
regions including Indianapolis, Louisville, Nashville and Memphis vying for similar DC and
manufacturing facilities.
East and Gulf Coast ports will need to compete for local market share as well as the highly
discretionary Midwest “battleground”, which encompasses the key metropolitan and
consumer areas from Chicago to Atlanta, and subsequently rail access to these markets is of
key importance.
Furthermore, growth of near-sourcing in Latin America will continue to compete for Asiansourced goods. Proximity to Gulf and Southeast ports will further enhance the attractiveness
of DC and manufacturing activity east of the Mississippi River. In the future, Latin America,
Caribbean and Mexico will again become key players in the manufacturing arena. This will be
exacerbated by trade policy such as Free Trade Agreements (FTA) with Colombia and Panama
and the pending Trans-Pacific Partnership (TPP) which involves 11 countries including Chile,
Mexico, Peru and Canada.
Over 50% of the 1.34 million intermodal tons originating in the Cincinnati BEA is destined for
coastal port cities of Jacksonville, Norfolk and Los Angeles. Similarly, about 950,000 tons of
intermodal tonnage is destined for the Cincinnati BEA demonstrating a fairly balanced
origin/destination market. Nearly 80% of the intermodal tons destined for Cincinnati
originate in Los Angeles, Norfolk, Seattle and Jacksonville.
While Cincinnati offers strategic location in the Midwestern market, other regions specifically
Columbus and Indianapolis also offer amenities that allure DC operators. The Cincinnati
region offers competitive leasing metrics ($/square foot), an educated labor force, proximity to
major population/consumption centers and Northern Kentucky is a growing DC market.
Competition from other areas include cheaper lease rates and lower vacancy in Louisville,
millions of industrial square footage under construction in Indianapolis, Louisville and
Nashville markets and Nashville is a hot southeast market getting attention.
A Landed Cost Analysis examining Asian cargo imported trough both New York and Savannah
destined for a DC location in Cincinnati, Indianapolis, Columbus, Nashville or Louisville to
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serve the Midwest Region was conducted. The results indicate for containers through New
York, Columbus is lowest cost area to place a DC to serve the Midwest Regional Market;
Similarly for Savannah, Nashville offers the most competitive cost for a DC locale. While
Cincinnati is not the lowest cost option in either scenario, the rates are extremely competitive
and reflect favorably on Cincinnati’s participation in the market.
In order to be successful in attracting logistics-related users, i.e. DC operators and light
manufacturing, access to rail is critical, in fact dual Class I access is preferred. Ideally,
Queensgate has access to both CSX and NS. All key inland logistics center in the U.S. have been
developed around rail, for example, Kansas City, Alliance (TX), Joliet, Louisville, Front Royal
(VA) and Columbus. Also key is North-South and East-West highway corridors linking the DC
to retail consumption markets.
The Queensgate Yard is a critical asset. CSX plans must incorporate the use of that yard to feed
into North Baltimore, OH facility, which will offer a direct link to coastal ports, specifically New
York and Baltimore. Again it needs to be emphasized that all successful inland logistics centers
are direct-rail served. Regional manufacturing clusters are key to attract complementary
businesses for value added manufacturing and assembly for export. Therefore, future Port
Authority real estate plans should incorporate rail and highway elements.
4. Role of the Port Authority Moving Forward
It is recommended that the Port Authority’s role moving forward consists of the following:
Implementation of Infrastructure and Economic Development: This entails driving logistics
efficiencies within the region, particularly with respect to critical asset infrastructure. Also,
leading the industrial re-development effort in Queensgate, as well as engaging in regional
planning processes that may affect regional independent users.
Provide Advocacy: Partnering with other business and transportation agencies to advocate for
maritime and non-maritime logistics-related development. Also, ensuring that the maritime
and logistics community is represented in federal/regional/state governmental venues.
Promote Marketing and Branding of Regional Transportation Assets: This includes all
modes - river, rail, highway, pipeline and air. Educate regional public and private sector
industries on the benefits of maritime and multi-modal operations within the jurisdiction.
Provide Funding Options: Use tools to develop low-cost bonding for maritime and logisticsrelated projects as well as pursue grant opportunities at the Federal (TIGER funds), State
(ODOT grants) and local levels.
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