48 DC VELOCITY APRIL 2014 www.dcvelocity.com
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Liners, shippers, and beneficial cargo owners have adjusted their business models to cope with all these changes.
U.S. ports, static creatures that they are, don’t have that
luxury. Recognizing this, the rival Washington state ports
of Seattle and Tacoma in mid-January took the extraordinary step of asking the Federal Maritime Commission
(FMC) to approve a plan for the ports to gather and share
information about each other’s operations, facilities, and
rates. In early March, the FMC blessed it.
The ports told the agency that the discussions would
be designed to “identify potential options for responding
to unprecedented industry pressures.” The ports’ joint
strengths—namely a deep harbor and channel that requires
no dredging, strong rail and road connections, and the
West Coast’s second-largest cluster of warehouses and distribution
centers—must be leveraged “in the
face of continued soft demand and
increased competition,” they said.
The ultimate goal is to increase
volumes through the jointly
shared Puget Sound, the nation’s
third-largest container gateway,
according to the ports.
In a February report, Drewry
called the Seattle-Tacoma request
a “ground-breaking move which
could be copied by other ports”
hoping to counter the threats from
bigger ships and liner alliances. As
alliances expand their reach, they will force ports and terminal operators to handle more single-customer volumes,
Drewry said. This could give those alliances significant
pricing power, the firm reckons. However, ports capable
of accommodating megaships may hold a bargaining chip
because there will be a limited number of locations where
such a vessel can call, Drewry says. How the tug o’ war plays
out may determine who gets the upper hand, the firm says.
WAVE OF THE FUTURE
Ship alliances, born from the financial and operating
mess of the past few years, could be the industry’s story
of the future. The P3 alliance, composed of Denmark’s
Maersk Line, France’s CMA CGM, and the Swiss line
Mediterranean Shipping Co., the world’s three largest liner
companies, wants authority from U.S., European Union,
and Chinese regulators to share vessel capacity on major
routes. Based on current operating structures, the alliance
would control 41 percent of trans-Atlantic capacity and 24
percent of trans-Pacific.
On Feb. 20, the G6 alliance, formed in 2011 and com-
posed of APL, Hapag-Lloyd, Hyundai Merchant Marine,
Mitsui O.S.K. Lines, Nippon Yusen Kaisha (NYK), and
Orient Overseas Container Line, said it would expand its
joint services to the trans-Pacific and trans-Atlantic trade
lanes during the second quarter.
The key question facing ports is how vessel rotations will
be influenced by the combination of alliances and larger
ships, according to Curtis Spencer, president and CEO
of IMS Worldwide Inc., a Texas-based consultancy. That
uncertainty is “the much bigger story for 2014 and 2015”
than the hoopla surrounding the Panama Canal expansion
and its potential impact on trade patterns, Spencer said.
The ports that succeed in this new environment will
have strong supporting infrastructure for road and rail
access, Spencer said. The supposed holy grail of channel
and harbor depth will be a secondary consideration in port
selection, he said.
In Seattle and Tacoma, the first big order of business is
likely to be streamlining the abundance of terminals at both sites.
There are nine combined terminals, more than enough to handle
the combined 4 million TEUs of
annual throughput, Drewry said.
The current structure dates back to
the days when each carrier operated its own terminal through affiliate relationships. While this made
sense when carriers were smaller
and operated more independently, it has become a liability when
addressing the outsized needs of
large alliances with their cargo on
massive vessels, the firm said.
The process of consolidating terminal capacity would
require approval by the FMC. Or the winnowing could be
accomplished through mergers. Either way, it would take
time. A more immediate step would be for the ports to
coordinate ship berthing windows or integrate rail intermodal services, Drewry said. However, both steps would
require prior consent of the terminal operators and the
railroads, the firm noted.
IS IT REALLY NECESSARY?
Aaron Ellis, an AAPA spokesman, said the group has no
formal position on the Seattle-Tacoma request. However,
Ellis said AAPA encourages information-sharing among
ports that compete with each other but also have common
interests.
It is possible the trend toward deeper collaboration will
be limited to ports like Seattle and Tacoma. The facilities
are only 30 miles apart, making it an easy logistical task
to coordinate efforts. Unlike other U.S. ports, Seattle and
Tacoma face a unique geographic challenge from Prince
Rupert, which is the closest North American West Coast
port to Asia and touts the shortest land-sea route to the
Midwest through connections with Canadian National
Railway. Prince Rupert has been pursuing the U.S. and
Canadian intermodal traffic that represents about 70 per-
