Competition has NWSA ports eyeing $300 million expansion

Competition has NWSA ports eyeing $300 million expansion

The ports of Seattle and Tacoma are in fierce competition for Asian imports with their neighbors to the north, Vancouver and Prince Rupert, Canada. Photo credit: Shutterstock.com.

Responding aggressively to competition from the ports of Vancouver and Prince Rupert that has cost it a nearly 5 percent loss of market share of Pacific Northwest import volume since 2014, Seattle is moving forward with a redevelopment program that will consolidate container operations in its outer harbor.

The proposed redevelopment plan for the 185-acre Terminal 5 will move container operations from two terminals in the congested downtown core and increase supply chain efficiency at two larger terminals in the harbor’s West Waterway with $300 million in infrastructure improvements. Port commissioners from Seattle and Tacoma, operating under the Northwest Seaport Alliance (NWSA), moved the plan forward on Tuesday, with a final vote scheduled for Feb. 26.

NWSA officials on Tuesday considered staff recommendations to lease the vacant Terminal 5 to SSA Marine and Terminal Investment Limited for 32 years as they move container operations from Terminals 30 and 46 to the larger, less-congested Terminal 18, which is also operated by SSA Marine, or to Terminal 5, which was formerly occupied by APL.

The Pacific Northwest ports are engaged in an intensive battle with Vancouver and Prince Rupert, Canada, and to a degree with California’s container ports, and even East Coast ports, in the US import and export trade with Asia. Vancouver and Prince Rupert, which have direct intermodal service to Chicago and the Midwest, have increased their share of Asian imports through the Pacific Northwest region to 63 percent last year from 58.2 percent in 2014, while the NWSA’s share of regional trade dropped to 37 percent, according to PIERS, a sister product of JOC.com.

The NWSA’s total international container volume, including loaded imports and exports and empty containers, stood at 3.1 million TEU in calendar year 2018, an increase of 3.9 percent over 2017. Laden imports increased 6.1 percent and laden exports were up 1.6 percent, according to statistics from the NWSA.

Port leaders are pushing a program of infrastructure enhancements, process improvements, and terminal consolidation to reduce supply chain transportation costs and better position the NWSA to compete for market share in the largest North American trade lane. “Competition for Asia-Pacific trade among North American West Coast ports has become particularly fierce over the last few years, as marine cargo carriers have consolidated operations into larger vessels with fewer port calls,” the port stated in a release outlining the planned improvements.

This spring, Matson Navigation will move its Hawaii service from T-30 to the south berth of T-5. Container cargo handled by Total Terminals International at T-46 will move to T-18, and $300 million in infrastructure improvements will be launched. New opportunities will be developed for T-30 and T-46, possibly handling breakbulk and project cargo and a cruise terminal serving Seattle’s downtown.

With its 50-foot water depth and on-dock rail yard, T-5 will be redeveloped to handle the largest mega-ships currently able to call US ports — up to 18,000 TEU of capacity — and intermodal rail cargo to the Midwest and East Coast. The NWSA is attempting to improve its competitive position, especially in relation to Vancouver and Prince Rupert, for intermodal traffic to the eastern half of the US, where two-thirds of the US population resides.

The strategy is to reduce cargo-handling costs and intermodal rail hand-offs from vessel to train, so the Seattle-Tacoma gateway can better compete with Vancouver and Prince Rupert. Those ports have the advantage of intermodal rates charged by the Canadian National and Canadian Pacific railroads that are $400-600 lower per container to the US Midwest than rates charged by the Union Pacific and BNSF railroads, according to a study by Ocean Shipping Consultants. In addition, the Canadian ports benefit from a joint federal and provincial effort to support the seaports. “The British Columbia ports of Vancouver and Prince Rupert have grown substantially over the last decade, as the Canadian government directly invests in port infrastructure, while the US government does not,” the NWSA stated.

A 2018 NWSA study that detailed the costs of shipping through Seattle-Tacoma to Chicago versus Vancouver and Prince Rupert concluded that due to lower intermodal and infrastructure-related costs, shippers save about $400 per container through the Canadian gateway to Chicago. “Our port charge per container is less than $100. We could offer our facilities free of charge and still not come close to that number,” John Wolfe, CEO of the NWSA, told JOC.com last July.

The formerly competing ports of Seattle and Tacoma, separated by 30 miles, formed the NWSA in 2015, establishing a single gateway in the US Pacific Northwest. At the time, Wolfe said the four container terminals in North Harbor (Seattle) and five in South Harbor (Tacoma) were too many, and the NWSA would gradually combine facilities where possible and shift vessel calls to fewer but larger terminals that are served by rail.

Wolfe told JOC.com in 2017 the NWSA could eventually have just four large container terminals, two in Seattle and two in Tacoma. Just as carriers are consolidating through mergers and restructuring of their cooperation agreements, going from four vessel-sharing alliances to three larger alliances in 2017, Seattle and Tacoma are reengineering their harbor into a more efficient gateway, Wolfe said.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.