Low container terminal utilization’s hurting Puget Sound’s maritime competitiveness

Puget Sound’s two busiest ports, Seattle and Tacoma, could lose a third of their business if they don’t modernize to handle larger ships, a trade consultant told the two ports’ commissions Wednesday.

Steve Rothberg, a principal with Mercator International LLC, said shipping lines are raising the size of their standard containerships to cut the cost per container for transporting goods from Asia to North America. But Seattle and Tacoma have only two berths that can handle those megaships and no terminals that can service two of those giant vessels at once.

The two ports hired Mercator to study their competitive position versus increasingly competitive ports in Canada, in Southern California and on the East Coast.

The two ports recently agreed to form a marketing and operating alliance to compete for new business for their terminals. The commissions met jointly Wednesday in Tacoma to discuss the progress toward putting that alliance in operation. Before their public session, the two commissions met privately to discuss the alliance. The confidential meetings are being challenged in state court.

In addition to the ports’ lack of new facilities designed to handle ships with capacities of greater than 10,000 containers, the two ports also suffer from cost issues versus the competition, he said. Rail charges from Northwest ports, he said, typically are higher than from Canadian and Southern California ports for containers destined for the upper Midwest.

Tacoma and Seattle also are plagued with terminal over-capacity, he said. The two ports are using just 45 percent of their container handling capacity to service ships. That compares with 84 percent in Savannah, Georgia, 77 percent in Vancouver, British Columbia, 73 percent in Los Angeles and Long Beach, and 68 percent in New York and New Jersey. All those ports compete with the Puget Sound area for container business.

With plentiful excess capacity, ports and terminal operators in Puget Sound compete vigorously with each other for business. The result, he said, is low rates that don’t allow terminal operators enough revenue to reinvest in their operations and to modernize those terminals.

John Wolfe, Port of Tacoma chief executive and the designated CEO of the new alliance, said that while some rival ports may enjoy a small cost advantage because of the size of their local markets, the Pacific Northwest should focus on reliability of service as a lure for more shipping business. In a recent visit with BNSF Railway, Wolfe said, the railroad said its service to the upper Midwest is more consistent than service through the Canadian ports of Prince Rupert and Vancouver.

Rothberg’s study recommended that the two ports repurpose some of their excess capacity for new uses and begin earnest efforts to create new terminals that can handle the large ships that are becoming more common on trans-Pacific trade routes. Some of those ships are more than 1,300 feet long and have a capacity in excess of 18,000 20-foot container units.

Accommodating those monster ships will require deeper waterways, larger container cranes and bigger rail yards to handle the surge of containers arriving with those ships. Both the Port of Tacoma and the Port of Seattle have preliminary plans to equip two of their terminals for the larger sized vessels.