Could terminal partnerships answer the challenge of larger container shipping alliances?
Investment dilemmas and challenges for port and terminal operators have been magnified by the arrival ...
The enemy of my enemy is my friend – an increasingly popular mantra in today’s multi-polar world, proven by the revelation that the US west coast ports of Tacoma and Seattle have applied to the Federal Maritime Commission to begin co-operation talks.
For so long bitter rivals, separated by just 30 miles across the Puget Sound, the two ports have come to conclusion that, after a particularly fierce year of competition in 2013, their interests would be better served if they collaborated on a range of issues, including terminal investments and terminal handling charges.
The proposal, signed jointly by Tacoma chief executive John Wolfe and Seattle deputy chief executive Kurt Beckett on behalf of chief executive Tay Yoshitani, warns that “recent developments in the shipping industry threaten the future of the US Pacific north-west trade”.
The US Midwest hinterland of both ports is identical and the statement adds: “This discretionary cargo is critical for the financial stability of the ports and the private marine terminal operators who run them.”
The co-operation proposal is based on three key trends:
increasing competition from ports across North America, although the attention of Seattle and Tacoma focuses principally on the Canadian ports of Vancouver and the newer port of Prince Rupert, which was the subject of an Federal Maritime Commission (FMC) study between 2012 and 2013;
the staggering losses incurred by transpacific carriers, which has led to consolidation into mega-alliances such as the G6 and P3, and “could lead to fewer port calls, unless ports can craft cooperative responses”;
and the trend towards larger vessel sizes, which is also likely to lead to fewer port calls – although those ports which can service bigger ships through deeper berths and larger cranes will ultimately prosper.
The proposal adds: “It is imperative in this environment that Seattle and Tacoma have the ability to discuss how they can both succeed and flourish in the changing environment. The agreement thus allows the parties to discuss and share information on the operation of their container terminals – including planning, development and utilisation of facilities, and rates of return.”
In a joint statement, the ports, however, ruled out an outright merger of port authorities.
“Both port commissions agree that a change in governance, such as a merger, will not be part of this discussion and no subsequent outcomes are presupposed.”
Both ports are, ultimately, owned by Washington State, but have been run independently. In recent years, the competition between the two has seen cargo volumes ebb and flow, depending on the particular deals carriers have been able to secure with terminal operators.
Of the two, Tacoma appears to have been in the ascendency since the mid-2012 consolidation of the Grand Alliance’s US pacific north-west port calls there. The then three partners of the GA – Hapag-Lloyd, OOCL and NYK – were soon joined by Zim on a couple of services, which saw Tacoma handle its first 10,000teu vessel, the Zim Djibouti, in the middle of 2013.
Global Port Tracker‘s latest forecast has Tacoma seeing a 12.6% increase in laden import volumes – not including empty handling and laden exports – last year, taking its total to 690,000teu for the year. In 2012, its overall volume was 1.7m teu.
Seattle’s volume movement in the opposite direction. Year-to-date laden imports had contracted 24.6% by November last year, and Global Port Tracker is forecasting year-end imports to decline by 24.1% to 553,000teu. Its total volume for 2012 was 1.8m teu.
Although there had been fears in the US about Canada’s Prince Rupert port taking US-bound cargo from US ports, the results of an FMC study largely proved inconclusive, according to its commissioner, Richard Lidinsky.
The study found that in 2011, Prince Rupert handled 140,845teu of US cargo, which rose to 190,000teu in 2012. However, in a mid-2013 update, the FMC discovered this growth had largely plateaued and predicted US bound-cargo would total 197,400teu in 2013.
It said: “This lower growth could be attributed to several factors, including a slowdown of the global economy; the port of Prince Rupert nearing its maximum design capacity and operational decisions by ocean carriers to utilise US west coast ports.”