Port of Portland, Ore. Executive Director Bill Wyatt told the Portland Business Journal low crude oil prices have caused trucking rates to drop well below expected levels, making direct container service to the Puget Sound region less economically viable.
Port of Portland, Ore. Executive Director Bill Wyatt doesn’t expect container service to return to the port “for a while,” according to a report from the Portland Business Journal.
Wyatt told the local newspaper in an interview low crude oil prices have caused trucking rates to drop well below expected levels, making direct container service to the Puget Sound region less economically viable.
Korean ocean carrier Hanjin Shipping in February 2015 stopped calling the Port of Portland on the its PNH service between China and the Pacific Northwest, opting instead for calls at Prince Rupert, British Columbia; Seattle, Wash.; and Vancouver, British Columbia.
A few months later, Hapag-Lloyd of Germany also pulled out of Portland on its Med Pacific Service (MPS), which connects the region with the Mediterranean, stopping in Central America and the North Coast South America along the way.
International Container Terminal Services Inc. (ICTSI), the operator of Terminal 6, Portland’s only container terminal, at the time blamed work stoppages and slowdowns by the International Longshore and Warehouse Union (ILWU) for the departure of Hanjin and Hapag-Lloyd. The ILWU in late 2014 and early 2015 was still in the midst of contentious dockworker contract negotiations with employers represented by the Pacific Maritime Association, which caused major congestion issues at ports up and down the U.S. West Coast.
ICTSI Oregon said it would remain committed to Portland and the Pacific Northwest region, and that it would seek new container carriers to serve the port, but so far has been unable to do so.
According to ocean carrier schedule and capacity database BlueWater Reporting, Westwood Shipping is the only line still offering direct container service to the Port of Portland. Westwood’s transpacific Service 1 Loop 2, which operates with two vessels with an average capacity of 2,048 TEUs, has a full port rotation of Vancouver (BC), Longview, Portland, Sendai, Hitachinaka, Shimizu, Yokohama, Tokyo, Busan, Osaka, Nagoya, Shimizu, Tokyo, Everett, Tacoma and Vancouver (BC).
The container shipping industry is “really on its head,” Wyatt told the Portland Business Journal, with rampant overcapacity causing freight rates to drop to near record lows on major trade lanes like the transpacific.
“I don’t expect to see any new carriers here for a while,” he said. “With the cost of oil where it is, trucking up to Puget Sound is a lot less expensive than people thought it was going to be a year and a half ago. Freight rates are very cheap right now.”
Wyatt noted that the ever-increasing size of modern containerships was “all predicated on very expensive fuel, the single largest operating cost, which then was $120 or $130 a barrel.”
“Now, that fuel costs $42 or $43 a barrel. Most of the long-term forecasts say it’ll be maybe $50 or $60. There’s way more capacity out there than market demand. The industry is now really in turmoil, so recruiting new carriers is really challenging.”
“ICTSI and the port have made joint presentations to a variety of carriers,” he added. “But in the Trans-Pacific there are about 23 carriers and there probably ought to be about five.
“Beginning 10 years ago or so, carriers who had really been struggling financially for a long time said, ‘OK, the way we can win is we’ll be more efficient than the next guy.’ And the way to do that, so they thought, was to build bigger and bigger and bigger ships to offset fixed operating costs with a larger cargo base.”
Report: Portland’s Wyatt doesn’t expect container service to return ‘for a while’
