With Port Just at Half Capacity, Terminal Operators Want Talks

By Emily Heffter, October 22, 2013, Seattle Times

Faced with continuing decline at its seaport, the Port of Seattle has agreed to discuss restructuring business agreements with the companies that operate its terminals.

It’s the Port’s latest attempt to respond to competition from other West Coast ports and changes in the shipping industry. The Port’s 25-year plan calls for a doubling of its shipping business, but the past five years have placed the seaport in jeopardy as competition and a soft market have driven down business on Seattle’s waterfront.

The three companies that operate Seattle’s seaport proposed the meetings, which require approval by the U.S. Federal Maritime Commission because of antitrust laws.

If they are approved, the Port and terminal operators will sit down and work together on a strategy they hope will keep ships calling on the Port of Seattle. The three operators have long-term leases with the Port of five to 15 years, but if the discussions are approved, almost every aspect of the Port’s business with shippers and terminal operators would be back on the table, including pricing, hours, infrastructure improvement, and which terminals remain in use.

“The agreement will allow us to discuss operations, facilities, services and other matters in order to improve service, reduce costs, increase efficiency and otherwise optimize conditions at the port,” the Port said in a statement. “Our goal is to improve the Pacific Northwest container gateway and continue to support thousands of trade-related jobs.”

Seattle’s seaport is operating at about 50 percent capacity. Meanwhile, shipping companies are consolidating their loads onto bigger boats, so there are fewer ships coming in.

“The bad news is we don’t have enough ships coming in. We know that. The Pacific Northwest — Seattle and Tacoma — has been losing market share,” said Jordan Royer, vice president for external affairs at the Pacific Merchant Shipping Association, an industry group that is not involved in the proposed talks.

In June, Moody’s Investors Service changed its outlook on the Port’s bonds from stable to negative. Last summer, one of the Port’s largest shipping companies moved its business to Tacoma. A contract with Hanjin, another major customer, did not bring in as much money as expected.

Port Commission President Tom Albro said an open discussion with terminal operators should lead to a more competitive port. He said, the terminal operators were going to have the talks with each other anyway, so the Port had to decide whether to be in on them or not.

“We had a choice of signing on or not signing on,” he said. “I’d rather be in the room.”

Bob Watters, of SSA Terminals, downplayed the agreement, saying it’s nothing more than “a brainstorming platform.”

But Port Commissioner John Creighton said he worries the Port and taxpayers will lose money in the long run.

“Talking is well and good, but I’m concerned that terminal operators are trying to lead us down a certain path” toward restructuring leases in their favor, he said.

“I am concerned because I think any restructuring acceptable to the terminal operators will likely let them off the hook for tens of millions of future lease payment obligations … and only paper over their problems in the short term,” Creighton said.

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