The shipping world is undergoing massive change, and both of Puget Sound's big ports — Seattle and Tacoma — have more to worry about than each other.
I cover the waterfront, and it’s in flux.
In March, the Grand Alliance shipping lines decided to move from Seattle to Tacoma. When that happens in July, it will take about 20 percent of the container business from the Port of Seattle, more if lines associated with the alliance, Zim and Hamburg Sud, decide to go, too.
The good news is that the Grand Alliance will still call in Washington. The bad: The state’s two biggest ports are largely fighting each other for existing business rather than adding much. For example, in 2009, Maersk Lines moved from Tacoma to Seattle.
Seattle is North America’s seventh-biggest container port; Tacoma ranks No. 11 and is soon to rise. Both are critical elements for one of America’s most trade-dependent states. The ports generally earn revenues from tenants that operate terminals and lease space, as well as from tax-levy dollars usually used for general obligation debt or infrastructure and transportation.
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Beneath this rivalry is one harsh reality: Puget Sound ports have been slowly losing market share against most of their West Coast rivals since the mid-2000s.
Tacoma’s ambitions have been sharpened by the victory. Last month, the port released its new strategic plan with very specific initiatives to build business, make investments and retain its existing customers.
While talk in parts of the industry was that Tacoma put in such an extremely low bid to win the Grand Alliance that its terminal operator, Washington United Terminals, and ultimately the port, might not make money on the deal, port Chief Executive John Wolfe scoffs at the scuttlebutt.
“Our terminal operators have constructed terminals that have much higher capability of volumes than we see today,” he said. “We intend to ensure there’s profits in this new business. They will create jobs and economic wealth through terminal activity and remain profitable.”
Excess capacity is not Tacoma’s only advantage. Another is that much of the port has dockside rail service, eliminating the nonunion, short-haul trucking of Seattle — which became a source of loud protests by organized labor when the Grand Alliance was making its decision.
“We believe (dockside rail) is an advantage,” Wolfe said. “It’s a less expensive, more efficient move. It’s more environmentally friendly. Reducing the carbon footprint is paramount to success of the business. Shipping lines are focused on that.”
Tacoma is primarily a seaport, focused on that business, unlike Seattle with diverse operations including Seattle-Tacoma International Airport and cruise facilities. Tacoma’s port is separated from the urban core and faces no pushback from waterfront gentrification, for now. One trucker told me it’s a much faster and easier port to serve than congested Seattle.
Tacoma embraces its industrial identity. People wear T-shirts that say, “Gritty Tacoman.” As opposed to, say, a latte-quaffing, effete Seattleite. This translates into strong backing for the seaport.
Even so, a peculiar tension grips the Gritty Tacoman, the Tac in Sea-Tac airport. He or she is caught between “Hell, no, we’re not Seattle and we’re glad of it” and “Why don’t people give us the respect they give Seattle?”
The roles were once reversed, when the Northern Pacific Railroad announced in 1873 that Tacoma would be its western terminus, outraging Seattle. But so rich were the possibilities in the Puget Sound region that eventually four transcontinentals would reach here, now consolidated and pared down to two.
Seattle, beneath its ambivalence about it, is a world-class city that also has a seaport. The city’s glitter and advanced technology reputation obscures the fact that the Port of Seattle is the backbone of the blue-collar middle class. Seattle hasn’t thrown away its working port, as happened in San Francisco and San Diego.
Advantages: It’s built out with advanced infrastructure to handle the biggest ships. Major rail yards, such as the Burlington Northern Santa Fe’s Seattle International Gateway, are close to the docks and have state-of-the-art gantry cranes to transfer containers, or “cans,” as they are called in the business. Port officials say the congestion in places such as Harbor Island will be short-lived.
Also, Seattle is working to be the “green gateway,” North America’s most environmentally well-managed port.
Disadvantages: The short-haul or drayage truckers. One can argue about the short distance to the rails, and drayage is commonplace at other ports, but the Teamsters have made the dismal working conditions of these largely immigrant drivers a cause. Also, the port is in the city center, a beautiful work of industrial art until you’re stuck in traffic because of an eighteen-wheeler or slow-moving 100-car train.
Seattle’s private terminal operators likely don’t have the ability to match the low costs of their counterparts in Tacoma, at least for now. Jobs will be lost with the Grand Alliance move.
Tay Yoshitani, chief executive of the Port of Seattle, said of the Grand Alliance move, “Obviously, it has an impact. The Century Agenda goal is 3.5 million TEUs in 25 years and this sets us back. It’s not the end of the world but it puts us in the wrong direction. It’s just another iteration of a race to the bottom. The service may be cheaper. But the region will be the loser. This further eroded our pricing power.”
Without pricing power, the ports ultimately can’t continue making infrastructure investments to be competitive.
The Century Agenda is the Port’s own strategic plan. In 2011, the Seattle port handled more than 2 million TEUs, or twenty-foot-equivalent units, the standard measure for intermodal containers meant to go from ship to train to truck. Tacoma saw 1.5 million TEUs.
Seattle and Tacoma collaborate on some issues. Yoshitani argues that “the most powerful solution would be a port authority that includes Tacoma and Seattle.”
Wolfe is cool to the idea, to say the least. “It might seem fairly simple, but it would be much more complicated,” he said. “We’re very fortunate to have local governance associated with the port.”
Tacoma doesn’t see a consolidation in its best interests.
Said Wolfe, “King County values its Port. We do (ours) as well.”
Yoshitani concedes, “It would be extremely difficult if not impossible politically.”
Washington has some 75 port authorities, although most are not seaports.
Indeed, not even Los Angeles and Long Beach are consolidated even though they adjoin each other. Each has its own governance. Rare examples of rivals being joined are found in New York/New Jersey and Vancouver, B.C.
Yet another reality is that the shipping world is undergoing massive change, and both of Puget Sound’s big ports have more to worry about than each other.
In early 2015, a wider Panama Canal will allow Asian shippers, which account for more than 90 percent of Washington’s container traffic, to send more goods directly to the East Coast.
Canada’s two big railroads have bought and consolidated American rail lines to make it easier to send goods from Canadian ports to the U.S. Midwest, the bread-and-butter market of Puget Sound imports. Of special concern is Prince Rupert, closest to Asia, heavily subsidized by the Canadian government and with a rail straight shot to Chicago and beyond.
The Port of Los Angeles, which already has a coveted home market of 13 million consumers, recently committed to spending $3 billion for terminal, rail and other infrastructure.
The ports of Seattle and Tacoma are run by smart people who understand the threat and the stakes.
The question is whether they can move beyond a natural rivalry to effectively take on the real competition.
You may reach Jon Talton at email@example.com. On Twitter @jontalton.
|The top 15 container ports in North America|
|3.||New York / New Jersey|
|8.||Hampton Roads/Norfolk, Va.|
|12.||San Juan, Puerto Rico|
|15.||Lázaro Cárdenas, Mexico|
Source: American Association
of Port Authorities