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Right now our maritime and transportation industries are experiencing a wave of tremendous change. This change will affect not only the Port of Seattle, but all of the major West Coast container ports. Container cargo supports jobs, and jobs support the vibrant economy we all want for our local communities. Whether we survive or thrive will depend upon how we respond in these intensely competitive times.
West Coast ports benefit from being geographically closest to Asian ports while offering fast, direct rail services to our nation’s lucrative inland markets. Traditionally these ports have competed against each other for container cargo. But dramatic changes underway in three areas—physical, economic and environmental—may require a different strategy.
PHYSICAL
By physical changes, I refer specifically to the new and expanded Canadian and Mexican ports, the Panama Canal expansion, and new and expanded ports on the East and Gulf coasts.
In Canada, the Port of Prince Rupert offers a geographic location that reduces sailing time from Asia, plus high productivity and no U.S. Harbor Maintenance Tax. However, the port also faces the disadvantages of having a lower frequency of service and the potential for double inspection of U.S.–bound cargo (by Canadian Customs at the port, and then by U.S. customs when it crosses the border).
The Ports of Vancouver, Fraser River and Surrey, B.C. merged more than a year ago and now compete against Seattle and Tacoma instead of one another. This demonstrates the new trend toward regional port authorities to offer greater political clout, financial capacity, operational capability and economic benefit. From Canadian ports, Canadian railroads transport cargo via services directly accessing the U.S. heartland.
In Mexico, the port of Lazaro Cardenas offers good connections to Dallas and Kansas City aboard the Kansas City Southern Railroad. For now, this port poses the greatest threat to Oakland and Southern California ports. Plans for a major container port at Punta Colonet are on hold due to poor economic conditions, but when it is built out, these two ports will offer new access to fast-growing U.S. markets from Arizona to Florida.
The Panama Canal expansion, to be completed in 2014, will allow the canal to handle some of the largest container ships afloat, carrying up to 12,000 TEUs. This new capacity could draw ships away from West Coast ports to deliver cargo directly to Gulf and East Coast markets.
Anticipating these greater cargo volumes, East and Gulf coast ports have been on a building binge, adding new cargo capacity that also will have the potential to draw more Asian cargo moving through the Suez Canal. If all the plans are implemented they will add more than 26 million TEUs of capacity to East and Gulf coast ports. To put that in perspective, the six West Coast container ports of Seattle, Tacoma, Portland, Oakland, LA and Long Beach handled 20 million TEUs in 2008.
In the Southeast region, ports and railroads are improving their intermodal rail infrastructure—something that has traditionally been one of the West Coast’s strengths. The Norfolk Southern Railroad is creating a double-stack container rail corridor from Norfolk, Va. to Columbus, Ohio, expected to be operable this year. The CSX Railroad is involved in a public/private venture that will provide double-stack container rail capacity from New York to Norfolk, Ohio and Chicago.
ECONOMIC
The global recession unfolded on a level that is unprecedented in our lifetimes. Most economic analysts are predicting a slow, uneven recovery. All ports have experienced reduced cargo volumes, vessels at anchor, and fewer service offerings on all trade lanes.
But the recession also has created a reduced consumer spending pattern that is expected to be long-term, so that it is now considered the “new normal.” We are seeing a continued shortage of available credit, and unpredictable bond markets. The level of support for publicly-funded infrastructure investments is hard to gauge. All of these factors mean we have to find partners who can help us through the lean times and move ahead with us as the economy improves.
In recent years we’ve seen examples of marine cargo terminal operators helping make capital investments in cranes and fixed infrastructure in Seattle and other places. It’s a positive development, but not surprisingly this has slowed with the economy. To help our terminal operators survive, last year we offered a Customer Support Program including short-term rent concessions, a few minor capital improvements, and relief from minimum volume requirements. In return, the Port got lease amendments for long-term environmental improvements, and an agreement to implement our Clean Truck Program, which brings me to our third change factor: the environment.
ENVIRONMENTAL
For ports, the focus is on reducing harmful air emissions from our operations and, as is often the case, this challenge presents a great opportunity.
Diesel and bunker fuels are significant contributors to harmful air emissions—presenting real human health risks. Transportation emissions are quickly targeted for regulation and citizen action because it is easier to point the finger at black exhaust coming from a ship than at the nearly invisible emissions from cars.
You may already be aware of the battle that’s been raging—most notably in California—over maritime-related air emissions. I see this as an opportunity for the West Coast, because we’ve already done more to reduce emissions from ships, trucks, trains and cargo handling equipment than any other region of the country—perhaps more than any other region in the world—and we’re continuing to make headway.
In Seattle we’ve retrofitted cargo handling equipment with emissions reduction devices and switched them to low-sulfur fuels and biodiesel. Our At-Berth Clean Fuels program helps vessel operators switch to low-sulfur fuels while their ships are at our docks. And in December 2009 we scrapped the first dozen or so trucks to be replaced under our Clean Truck Program.
But there’s an even more important reason why I think environmental issues—and how we’re handling them—create more of an opportunity than a challenge. Back in May 2009 we released a study conducted for the Port by the Herbert Group that analyzed carbon footprints of trade routes between Singapore, Hong Kong and Shanghai, and the U.S. distribution hubs of Chicago, Columbus and Memphis. It found that routing cargo between those origins and destinations through the Port of Seattle produced lower carbon emissions.
As a result, we are promoting our port as the Green Gateway, but the fact is that all of the West Coast ports analyzed in the study performed significantly better in the area of carbon emissions than East and Gulf Coast ports on routes through the Panama and Suez Canals. And that fact is a centerpiece of a relatively new collaborative effort between the six major West Coast container ports and the two largest Western railroads.
COLLABORATION
The Port of Seattle is addressing each of these three areas of change—physical, economic and environmental-- and an important part of our strategy is to become more competitive by becoming more collaborative.
The six West Coast ports—Seattle, Tacoma, Portland, Oakland, Los Angeles and Long Beach—as well as the BNSF Railway and Union Pacific Railroad, are collaborating on a wide range of issues designed to keep us competitive in the rapidly changing world of global trade and transportation. We’ve already made joint calls on key members of Congress. And last fall at the World Shipping Summit in Qingdao, China, we unveiled a joint marketing effort focusing on the advantages the West Coast ports and Western Railroads for shippers and carriers.
The Port of Seattle also is working on joint marketing efforts that focus on the Puget Sound Gateway, including the Port of Tacoma. Together our two ports support more than 300,000 jobs in this region.
The changes this industry is undergoing are dramatic and permanent. If we want not only to survive, but to thrive as we move into the future, we have to change our thinking and our approach.
Tay Yoshitani, chief executive officer of the Port of Seattle, has spent his career in international trade and transportation.
Tay Yoshitani is the Port of Seattle CEO