Seattle's port losing big customer to Tacoma
A consortium of three shipping lines that accounts for about 20 percent of the Port of Seattle's container traffic is moving to Tacoma.
Seattle Times business reporters
A consortium of three shipping lines that accounts for about 20 percent of the Port of Seattle's container traffic is moving to Tacoma — the latest shift in the long-running rivalry between the two seaports.
The "Grand Alliance" consortium of Germany's Hapag-Lloyd, Japan's NYK Line and OOCL of Hong Kong, which now operates at Terminal 18 on Harbor Island, will relocate in July to Tacoma's Washington United Terminal, the Port of Tacoma said in a statement.
The three lines primarily import containerized cargo from Asia, Port of Seattle spokeswoman Charla Skaggs said.
The News Tribune of Tacoma estimated that the Grand Alliance shippers could increase that port's container business by as much as 400,000 units. Should that happen, Tacoma would become the region's largest seaport by cargo volume, a position it last held in 2008.
Two Seattle terminal operators and two in Tacoma were competing for the Grand Alliance contract, Seattle Port Commissioner John Creighton said in an interview.
The Port of Seattle said in a statement the relocation could mean job losses in Seattle, and called for greater cooperation between the two ports.
"By trading customers, we encourage a downward competitive cycle that endangers our ability to invest in the infrastructure we need to support the import and export trade our state depends on," the statement said.
The Port owns Terminal 18 and leases it to operator SSA Marine. SSA then charges the shipping lines for use of the facilities — meaning the company, rather than the Port, likely would feel most of the immediate impact if it can't find new customers or negotiate a new deal with the port.
"As stewards of public infrastructure, ports are compelled to ensure that the investments made in our harbor are used to the fullest benefit for the taxpayers of the state," the Port said. "The short-term local gains for an individual port announced today could very well work to the detriment of the state's economy in the long run."
The Seattle and Tacoma ports have jousted for years for business and bragging rights, even as they face stiffer competition from other ports up and down the West Coast.
In May 2009, for instance, Tacoma lost Danish shipper Maersk to Seattle as part of that line's consolidation with another company, French carrier CMA-CGM. Maersk was the successor to Sea-Land Service, which had moved from Seattle to Tacoma in 1985.
According to the Port of Seattle's 2011 financial report, container operations generate nearly three-quarters of the Seattle seaport's net operating income of $60.7 million. (The seaport accounts for about 28 percent of the Port's total operating income; Seattle-Tacoma International Airport generates most of the rest.)
Creighton said Port staff have previously estimated that annual revenue from oceangoing cargo, amounting to $130,000 per acre for 500 acres, is reduced by roughly $70,000 per acre, or $35 million, because of rate competition with Tacoma.
That estimate was based on comparisons with the Port of Oakland, which has no neighboring cargo port and generates about $200,000 per acre, he said.
The seaport's cargo volume last year was just over 2 million container units, down about 5 percent from the record year of 2010.
Tacoma's cargo volume of nearly 1.5 million container units was up 2.3 percent from 2010.
Overall West Coast shipping volume was virtually flat last year, and competition is only growing stiffer.
"We're facing greater competition from British Columbia ports and the Panama Canal, so it's increasingly hard to find new business to bring to our ports," said Eric Schinfeld, president of the Washington Council on International Trade. (Both ports are council members.)
Creighton said another major port customer, Hanjin, will begin lease renewal negotiations soon. The loss of Grand Alliance "just creates that much more pressure" on the Port's terminal operators, he said.
Seattle has added two cargo lines as new customers in recent years — Geneva-based Mediterranean Shipping and France's CMA CGM, Creighton said.
But losing such major customers as the Grand Alliance will make it harder to fund needed infrastructure at the Port and nearby transportation corridors, he said.
"With this latest round of 'race to the bottom,' that will just put more downward pressure on our rates, and we'll be less able to reinvest back in our terminals and keep them maintained and competitive."
SeattleTimes deputy business editor Rami Grunbaum and business columnist Jon Talton contributed to this story.