By Steve Wilhelm, December 10, 2012, Puget Sound Business Journal
It’s looking like the Port of Seattle will retain Hanjin Shipping at Terminal 46 for another decade, but at a steep price.
Under terms of a contract to come before the port commission Dec. 11, the port will pay Hanjin a one-time $4 million fee upon execution of the contract, add capital improvements of up to $35 million, accept a less-favorable rate structure, and hand over five cranes to Hanjin for $1 each.
The good news is that Hanjin isn’t leaving the port, an outcome that had been widely feared as the Korean ocean carrier has suffered delays during reconstruction of the south viaduct, with more congestion expected if an NBA arena is built nearby.
The contract is also good news for BNSF Railroad, and for the people who work at the Seattle International Gateway container handling yard, because BNSF CEO Matt Rose suggested in an interview earlier this year that yard wouldn’t have remained viable without Hanjin.
“It is considered critical to retain TTI (the Hanjin-owned terminal operator) as a tenant of Terminal 46 so that it remains an active cargo terminal,” said the commission agenda action item for Tuesday.
That document described the economic trials of ocean carriers since the recession, and the relative weakness of the Northwest’s competitive position relative to other ports. At that, it pointed out that SSA Marine and the Puyallup Tribe are yet to find a tenant for their joint-operated terminal-to-be at the Port of Tacoma.
“Given the above, it is not likely that the port would find a replacement tenant in the 5-10 year horizon,” the agenda documents said.
Port Commissioner Rob Holland said he expects the five-member commission will approve the contact, despite the stiff terms.
“We’re trying to do the best to preserve (Terminal) 46,” he said, pointing out that activity there accounts for 20 percent of the cargo moving through the port, and 3,200 direct and indirect jobs. “Close to 20 percent of business got hit with Grand Alliance moving to Tacoma; it’s very critical that we don’t have another terminal lose a customer.”
Holland added the ports of Seattle and Tacoma are now bracketed by growing ports in Southern California and British Columbia, both of which are competing fiercely for cargo.
“We are in a very tough situation; I’m kind of likening it to Baltimore, “ he said, alluding to the East Coast port which also is experiencing pressure to the north and south. “We’re going to have to do the best we can, and keeping this terminal active is one of those examples of helping us move forward.”
Also calling at Terminal 46 is China Ocean Shipping Co., also known as Cosco.
A key part of the contract is the port shifting down from what’s called the “Eagle Rate,” a per-acre rate, to a lower a “minimum annual guarantee” system that combines revenue per acres and a container lift fee.
“TTI has made it clear to the port that it would not extend its lease at the ‘Eagle Rate,’ in part because lease rates in Tacoma increase at a slower rate than the Eagle Rate,” the agenda document said. “This proposed rate will be less than the Eagle Rate over the long term, but will keep the port competitive with the market rates in the PNW.”