Washington Ports Must Collaborate or Wither, Says Port of Seattle CEO

Steve Wilhelm, March 20, 2014, Puget Sound Business Journal

Regional consolidation and cooperation is essential if the Port of Seattle is to compete against other ports hungering for its cargo.

That was a key message from out-going Port of Seattle CEO Tay Yoshitani during his final annual breakfast address Thursday.

Cooperation and consolidation negotiations are taking place between the ports of Seattle and Tacoma and among the three terminal operators serving the Port of Seattle, he said.

“We are having discussions with how we re-align ourselves as partners, to protect, defend and grow business,” he said. “They are pretty tough discussions. I’m optimistic that something positive will come out of it.”

In his remarks, Yoshitani said that pricing pressure from consumers is rippling up through the transportation chain, so that ocean carriers, terminal operators and ports are all feeling enormous financial pressure.

“We have a very difficult set of alliances that are emerging, bringing forth the most difficult and challenging times that this industry has ever faced,” Yoshitani said. “Ocean carriers are losing a lot of money, putting pressure on maritime terminal operators, which also are not doing well.”

In a short history lesson, he said that while the U.S. once was served by 42 major railroads, mergers have brought that number down to five. And while many ocean carriers used to operate independently, most of the world’s container carriers are now part of three large alliances.

“I think, with all the stuff going on up and down the chain, more ports will have to think about how to regionalize,” he said, pointing out the mergers of the ports of New York and New Jersey, and three ports within Virginia, as examples.

Yoshitani said consolidation is pressuring the Port of Seattle’s ocean container operations in particular, which are being squeezed by much-larger operations.

He pointed to Port Metro Vancouver, which was formed by the consolidation of three British Columbia ports. This was done, Yoshitani said, “specifically for the purpose of competing against the Port of Seattle and the Port of Tacoma.”

Competition matters, because while Port of Seattle container operations only provide 12 percent of the port’s revenue, maritime’s economic impact to the Puget Sound region is disproportionately large. Container operations generate many ancillary jobs, and strong imports provide capacity for state exports, in what is known as the “back-haul.”

When viewed together, the ports of Seattle and Tacoma are stalled. Together, they handled 3.46 million TEUs during 2013 — slightly fewer than the 3.56 million they handled in 2008, just before the recession, and down from the 3.60 million they handled in 2012.

The discussions between the ports and among the three terminal operators—SSA Marine, Total Terminals and Eagle Terminals—were approved through an agreement with the Federal Maritime Commission.

While the idea of cooperation between Seattle and Tacoma is difficult for some to swallow after decades of spirited competition, Yoshitani said initial negotiations are going well.

“We’ve had some very constructive meetings,” he said. “I’m hopeful we will come up with something to rationalize the Pacific Northwest, reduce or eliminate this dysfunctional competition between two ports 30 miles apart, and work together in the interests of the entire region.”

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