Seattle-Tacoma ports claw back share from Canadian rivals

Seattle-Tacoma ports claw back share from Canadian rivals

The creation of an operational alliance between the Port of Seattle and Port of Tacoma appears to be paying off.

A solid performance by the Northwest Seaport Alliance in September and year to date indicates that Seattle and Tacoma may have regained regional market share from the Canadian ports of Vancouver and Prince Rupert, helping rescue US West Coast ports from what was shaping up to be a lackluster year.

John Wolfe, CEO of the Northwest Seaport Alliance, attributes the turnaround to a concerted effort by the entire port community to optimize service levels in one of the most competitive port regions in North America. “We are really focused each and every day on providing reliable service, on staying in touch with our customers,” Wolfe said.

West Coast ports have struggled all year with soft imports, and the loss of cargo from Hanjin Shipping, which declared bankruptcy on Aug. 31, hit all of the gateways hard. As a result, total laden container volume in September increased only 1.3 percent compared with September 2015. Year to date, total laden container volume at US West Coast ports is up 2.2 percent compared to the first nine months of 2015, according to statistics published on the website of the Pacific Maritime Association.

Containerized imports declined 2 percent in September year-over-year, due most likely to delays in docking and unloading Hanjin vessels. Hanjin had accounted for about 7 percent of total container volume in the trans-Pacific. As Hanjin worked out legal issues with creditors, some of its vessels were unable for weeks to call at West Coast ports. However, it is expected that those containers will be reflected in the October numbers. Total imports in the first nine months of 2016 increased only 1 percent compared with the same period last year.

The Northwest Seaport Alliance bucked the downard import trend, however, with total laden container volume in September up 12.1 percent year-over-year. Imports increased 11.6 percent over September 2015. September continued a year-long trend at the Northwest Seaport Alliance, with total laden container volume year to date up 5.4 percent, according to the PMA website.

Seattle and Tacoma have recovered from the loss of cargo in late 2014 to mid-2015, when work slowdowns by the International Longshore and Warehouse Union and the abrupt cessation of night and weekend gates by employers shifted market share to Vancouver and Prince Rupert.

The Canadian ports last year recorded strong growth month after month, but growth has slowed this year. Total laden container volume in Vancouver is down 2.1 percent year to date, while total laden container volume in Prince Rupert is down from the strong growth experienced in 2015, but still up 4 percent year to date.

Wolfe said the Northwest Seaport Alliance had to earn the cargo that otherwise could have remained in Canada. “The Canadian ports are doing some great things. We’re also aware of Prince Rupert’s expansion plans that are coming online next year,” he said.

The Northwest Seaport Alliance responded quickly as cargo volumes mounted. In order to prevent truck congestion at the terminals, the port authority and terminal operators agreed to offer extended gate hours, with the port providing the funding to compensate terminals for their added labor and equipment costs. Los Angeles-Long Beach and Oakland also run extended gates, but those are supported by fees.

West Coast ports operate with a complex supply chain that includes a heavy reliance on intermodal rail as well as trucking. The only way this supply chain can function smoothly is if terminal operators, railroads, truckers, and longshore labor maintain constant communication on the arrival and delivery of freight, Wolfe said. The real-time communication is handled through the port’s operations center and website portal for all port users, fostering a “collective effort” for freight movement, he said.

The Northwest Seaport Alliance has also experienced strong growth this past year in warehouse and distribution development in the region, both in the immediate harbor area and in the outlying regions where much of the new industrial real estate development is taking place. A Jones Lang LaSalle third-quarter industrial report showed demand tightening up throughout the region, with the vacancy rate in metropolitan Seattle at 1.8 percent, and a vacancy rate of 2.2 percent in Kent Valley and Pierce County.

All of the West Coast gateways are benefitting from what looks like sustained growth in exports after two years of declines. The export trend has been strong since summer, and appears to be accelerating. Laden export container volume on the West Coast increased 8.8 percent in September and exports are up 4.3 percent year to date. Reports of another large harvest this fall, especially soybeans, bode well for exports in the coming months. The peak season for exports in the trans-Pacific is usually November through March.

On a regional basis, September was a mixed bag for the other West Coast gateways, and the Hanjin bankruptcy definitely had an impact. Hanjin is one of the largest ocean carriers to call in Southern California, and its absence in September was obvious. Total laden container volume in Los Angeles-Long Beach was down 1.3 percent from September 2015. Imports declined 4.1 percent, but exports increased 6.9 percent in September. Total laden container volume in Oakland increased 3.5 percent in September, as imports declined 3.6 percent and exports surged 11.6 percent.

Imports should improve coastwide when the October numbers are released, and November could also be a good month for imports. Meanwhile, spot freight rates in the eastbound Pacific are starting to reflect the growth in imports.

Spot rates to the West Coast, as listed on the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index increased 6.1 percent last week, which could be an indication that the peak shipping season in the eastbound Pacific will be later than in previous years. If imports of holiday merchandise remain strong well into November, and if exports continue to increase, 2016 could end up being a year of normal growth for West Coast ports.

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