North American West Coast ports raise incentives but industry appeal unclear

June 24, 2014, Platts

 

Ports on the Pacific Coast of the US and Canada are lining up incentives to encourage more cargo loadings — with the Port of Long Beach in California on Monday becoming the latest to approve a program — but sources say it is unclear how much these incentives will impact vessel traffic.

 

Port of Long Beach board members late Monday approved a package of financial incentives tied to so-called green practices: waiving the parking fee for a vessel that slows down when entering the port and uses onshore power to cut its emissions, and encouraging cargo to be loaded onto rail instead of trucks, which is also aimed at reducing pollution.

 

The port expects the incentives to cost it some money up front but increase business over the long run.

 

It is one of a number of ports offering incentives.

 

Port of Vancouver separates vessels into three emissions ratings categories — bronze, silver and gold — that offer reduced harbor dues fees corresponding to the level for which they qualify. The port also has a wharfage discount tied to vessel punctuality.

 

Like Long Beach, Port of San Francisco provides incentives for increased loadings.

 

“If a shipping line brings in a certain amount of commodities per year then we’ll reduce the wharfage rate we charge them,” said Jim Maloney, Port of San Francisco’s maritime marketing manager.

 

Competition and collaboration are not mutually exclusive. Although ports are looking at ways to differentiate themselves from competing areas, there are also regional collaborative efforts, according to the American Association of Port Authorities.

 

“Actually, I’ve seen an increasing trend toward cooperation, not competition,” AAPA public affairs director Aaron Ellis said, citing collaborations between Long Beach and Los Angeles, Portland and Vancouver, and Tacoma and Seattle. “Ports are looking for ways to coordinate and collaborate.”

 

EFFECTIVENESS OF INCENTIVES UNCLEAR: TRADE

 

The Long Beach incentives may have limited sway in driving more ships to the Southern California port — at least in the short term, sources say.

 

Shippers consider a host of factors when deciding where to dock, and while reducing dockage fees may pull some traffic from other regional ports, a survey of industry sources found that traders and brokers do not expect the incentives to significantly affect current West Coast shipping patterns.

 

“On a trip-by-trip basis, I don’t see it having much of an impact,” one shipping broker said of the Long Beach plan. “Most ships don’t have a choice in where they dock.”

 

For container ships, transportation infrastructure, including the proximity of rail lines and trucking hubs, as well as other logistical factors weigh more heavily than the price of docking fees in determining which ports shippers choose.

 

“Obviously, you don’t go to a port and that’s the final destination — you want the most economical way to get it from the port to the final market,” a West Coast bunker trader said. “Car sellers, for example, are going to go where the big car-distribution centers are.”

 

Oil tankers are even less likely to be swayed by the incentives, sources said.

 

“As a percentage of the cargo, [the waived docking fee,] at the end of the day isn’t going to be a deciding factor,” one shipping broker said. “It’s much more important to make sure you have a place to put the oil once you get it there.”

 

Incentives like those being implemented in Long Beach are more likely to have an impact on the long-term economy of a particular port by persuading shipping companies to move operations into the port, sources said.

 

“Those things are going to trigger development over time,” a trader said.

 

Other sources said the Long Beach deal was unlikely to draw ships away from more northerly ports on the West Coast.

 

“Something like what it sounds like what Long Beach is doing may help bring ships from San Francisco, but it wouldn’t have much effect on Seattle and Vancouver,” one bunker trader said. “The savings from barge rates are not going to offset the cost of shipping your cargo from Los Angeles.”

 

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