The Port Community
Bumpy Ride: Rebuilding PNW containerized exports

By Bill DiBenedetto

In an era of declining Asia-Pacific trade volumes, tight carrier capacity and rising rates, container shortages, looming environmental regulations and expenses, all coupled with a recession and dried-up credit markets, prospects for ports across the country remain extremely difficult.

This is especially true in the highly trade-dependent Pacific Northwest. Out of the gloom that has been the last two years, one often-faint glimmer of hope for PNW ports has been the relative strength of exports out of the region compared to imports. This is not to say that exports are exploding or about to explode; 2008 seems like a long time ago and one or two decent export months may not indicate very much for 2010.

Recent carrier actions, including the rate hikes, capacity cuts and now “super” slow steaming seem aligned to squelch even a potential U.S. export boom, especially in the PNW.

Exports alone will not lead a port to prosperity and profits anyway, because in most cases they occur at a substantially lower level than the high-value containerized imports coming from Asia. This is in large part due to factors beyond port control, including the value of the dollar, the rise of multinational corporations, outsourcing of manufacturing to Asia and extended supply chain networks. Virtually the entire Asia-Pacific container shipping system is geared to a steady flow of imports out of Asia. Carrier decisions regarding vessel capacity and route configuration are also mostly about imports.

Taken as a whole, the numbers for containerized exports out of PNW ports during the January-November period pretty much prove the case. Over that span, PNW port exports to the region’s top five markets in Japan, China, South Korea, Taiwan and Hong Kong declined in value by 24.5 percent, 13.3 percent, 16.8 percent, 32.3 percent and 5.8 percent, respectively.

The picture was mixed when looking at some specific commodities: Exports of apples, frozen French fries and silicon increased, but exports of frozen pork, wheat, aluminum waste and scrap and salmon declined sharply.

Recent reports and indicators say that the Great Recession has ended and that West Coast ports are rebounding, or at least clawing up from the bottom. Even if recovery is afoot, most experts don’t expect a major bounce that would return the PNW to the halcyon days of 2005 and 2006.

Get set for a slow and bumpy ride.

Port of Seattle
Looking at year-end numbers from the major PNW container ports, the Port of Seattle has the most cause for optimism. Perhaps.

Last year was a Dr. Jekyll and Mr. Hyde experience, with the Hyde part coming during the first seven months when volumes plunged dramatically compared to the same period in 2008. The port’s worst month occurred in February, with total box traffic down nearly 37 percent to a paltry 94,595 TEUs. That was the port’s only month below the 100,000-TEU threshold. It was also Seattle’s worst month for exports, with just 26,572 TEUs of fully loaded outbound boxes.

Things began to improve dramatically for the port starting in August, with gains each month (compared to 2008) for the rest of the year. The mid-year comeback coincided with the start of services by Maersk and CMA CGM in June and the resumption of Hanjin’s PSX service in August, which connected the port to Yantian, Kaohsiung, Shanghai, Gwangyang and Busan.

October was Seattle’s best month in 2009, with 160,846 TEUs moved. The 50,984 fully loaded export containers that month also were the highest monthly export total of the year.

The port’s finishing kick included similar full export box numbers in November and December; the latter month seeing box volume jump more than 29 percent compared to December 2008.

When the book finally closed on 2009, Seattle’s total TEUs were down by “only” 7 percent to 1.58 million TEUs. That 7 percent decline was a PNW best of sorts; the other ports in the region posted double-digit TEU losses.

Tucked in the numbers was this almost astonishing positive: The port’s fully-laden export boxes increased 5.8 percent for all of last year to 459,557 TEUs and even more surprisingly, full outbound TEUs in December catapulted by nearly 104 percent.

One month does not a trend make, but it is a hopeful sign for a region eager for something, anything, hopeful to cling to.

Charlie Sheldon, seaport managing director, said, “Since the middle of last summer we’ve seen something of a (upward) trend here. It’s gone on for six months in a row and we’re encouraged by it and we hope it continues.

It’s still a struggle for all West Coast ports. It was a tough year for everyone; our year was less tough.”

Sheldon said he was “fairly optimistic” about 2010. The port is estimating a flat year, or about even with its 2009 totals. “We might see a slight increase but a lot depends on the world economy.”

Port of Tacoma
For the Port of Tacoma – and unlike what happened in Seattle – all of 2009 was a major setback. Container volume declined nearly 17 percent to 1.54 million TEUs, its lowest total in many years. It stopped development and construction of a $300 million container terminal for NYK, TEUs declined every month of the year compared 2008 and Executive Director Tim Farrell resigned.

Port officials blame the global recession for the big declines.

Full outbound container volume declined 13 percent from 2008, but that was the port’s best international performance. Full inbound containers, for example, were off more than 27 percent for the year. Export boxes were a bright spot for Tacoma in 2008, increasing 8.5 percent from 2007.

The total value of Tacoma’s international exports in 2008 was $8.26 billion, led by commodities such as grains and cereals, meat and vehicles/auto parts. The port will be hard-pressed to come close to that total for 2009. It posted declines in all of its major cargo categories, including breakbulk (22 percent), grain (4 percent) and auto units (26.2 percent).

Tacoma’s intermodal decline has been especially harsh. It is a major business line, with as much as 70 percent of its container volume moving by intermodal rail to Midwest and East Coast destinations. The port’s intermodal lifts in 2005 reached a peak of 632,526; but since then the decline has been dizzying. By 2009, intermodal lifts had plunged to 283,820, which represented a 30.4 percent decline from 2008.

In an effort to staunch the bleeding, the Tacoma Port Commission in December approved a “customer commitment program” designed to give financial relief to major international container operators that have lease and operating agreements containing intermodal rail lift volume guarantees. The one-time program provided a $17.50 rebate to terminal operators for each international container that moved through the port’s intermodal rail facilities in 2009. In exchange, the terminal operators would agree to a one-year extension of their lease agreement terms and support the port’s Truck Emissions Improvement Program. There’s no word yet on the extent of terminal operators’ interest in the initiative, but if it helps to improve the port’s intermodal volumes, a natural by-product would be a boost for exports.

Port of Portland
Oregon is the ninth most trade-dependent state in the nation, and its businesses export more than $19.3 billion in goods each year. Portland, the state’s major exporting port, was, as Executive Director Bill Wyatt put it, “hit hard in the past year.”

In every cargo category except for grain tonnage, big double-digit declines were the order of the day, and even grain was down 3 percent from 2008.

Total container volume at the Columbia River port declined 29 percent to 174,203 TEUs. The port generally exports more containers than it imports, mainly because its location and small population base do not make it an attractive import market.

Last year was no exception, but the 97,337 TEUs heading for outbound destination was a 29.4 percent decrease from 2008. The import box decline was equally sharp, down 28.6 percent to 76,866 TEUs. Declines in the port’s other general cargo lines were even more dramatic: auto units (mostly imports) declined 41 percent, breakbulk shrank nearly 60 percent and mineral bulk tonnage was down nearly 43 percent.

The situation for Portland might not improve very dramatically or very quickly because the impact of carrier rate and capacity actions are magnified at a small container port located on a river. It has a difficult mission to attract and keep carriers in the best of economic times. Operators have idled many of the smaller-to-mid-sized container ships that are ideal for Portland, plus they are downsizing the vessels they do send there. Hanjin has announced it will use vessels that can carry 2,000 40-foot containers instead of ones with capacities of 2,750 FEUs and above.

Port officials are optimistic that a brighter future is on the way as exports increasingly move up-market to more valuable cargoes such as frozen fruits and vegetables and away from low-value scrap paper. That and completion of the Columbia River channel-deepening project could provide the tonic the port needs for a comeback.

In his January 27 State of the Union address, President Obama spoke briefly about the “need to export more of our own goods.” His call for a “national export initiative” that will boost U.S. manufacturing and jobs while doubling U.S. exports over the next five years cannot come soon enough for the Pacific Northwest.

In This Issue

Up Front

News, Trends & Analysis
News

Trade Tools: Missing money

Capitol Watch: Focus on job creation

Supply Chain
Chris Steele: Why you might be buying industrial real estate soon

Compliance Corner: Use the Web for denied party lists

Tech Trends: From open source to terminal visibility

Product Review: Trucking drayage and chassis management software

Gateway Glance
New England

Southern California

Cover Story
Spaced Out: Shippers face shortages of vessel space and containers –
along with rising rates

The Port Community
Bumpy Ride: Rebuilding PNW containerized exports

Southwest Intermodal: Can intermodal incentives show the way?

The Shipping Environment
Engaging in the community, slow steaming, and new green products

Oceans are making waves

Commentary
David Bennett: Real signs of trouble

Casualties
The Big Texas spill leads off this month’s rundown

Final Say
Top 25 TIGER projects