Aim of the Northwest Seaport Alliance is to protect and attract more cargo to Puget Sound region.
Commissioners from the ports of Tacoma and Seattle voted Friday to submit a final agreement to form an alliance to unify their port operations to the Federal Maritime Commission for approval.
The partnership, dubbed the Northwest Seaport Alliance, will unify the two Pacific Northwest ports’ marine cargo terminal investments, operations, planning and marketing.
The alliance aims to strengthen the Puget Sound gateway and attract more marine cargo to the region.
In a letter to the FMC and in the draft agreement the ports are asking it to approve, Seattle and Tacoma lay out the various reasons for combining port operations.
They note that more than half their cargo is bound for destinations outside of the Puget Sound region, primarily the Midwest. “Such cargo is discretionary, insofar as the shippers and carriers have choices about which ports and routes they use to offload their cargoes. If the Ports cannot retain this discretionary cargo, the Ports, their terminal operators, and the communities that have invested heavily in these terminal facilities will suffer,” the ports said.
“Increasing competition for cargo from ports all over North America has continued unabated,” they added. “Competing ports on the West Coast of North America have historically competed with Seattle and Tacoma. Ports in the Gulf and East Coast, however, are emerging as new competitors because of the Panama Canal widening and they are seeking to pry away Seattle and Tacoma’s market share of Midwest-bound discretionary cargo.”
Another “factor affecting the Ports’ competitiveness against these competing ports is the railroad pricing in and out of the Puget Sound region. Rail rates continue to hinder the Ports’ ability to maintain market share,” said Seattle and Tacoma.
Combined, the two ports handled 3,456,161 TEUs of containerized cargo in 2014. According to the American Association of Port Autorities, this makes the combined ports the third largest container gateway in the U.S. after the twin ports of Los Angeles and Long Beach and the Port of New York and New Jersey.
The two ports said losses by shipping lines in the Pacific trade over the past three years have led carriers to consolidate into alliances and that “such consolidation also leads to fewer port calls” as carriers seek to rationalize resources.
“Such alliances require ports to craft cooperative responses, where appropriate, to meet shipping lines’ needs,” according to the ports.
The ports also noted that shipping lines are deploying larger container ships. The size of these ships could lead to fewer port calls, but also signals an opportunity for ports that have the capability to handle these vessels through deeper drafts, stronger aprons and berths, and adequate cranes.
“The larger container ships entering the shipping trades require significant capital investment by ports and marine terminal operators in infrastructure. Ports must make targeted and strategic infrastructure investments to remain competitive,” they said.
The plan seems likely receive a sympathetic reception at the Federal Maritime Commission.
Mario Cordero, chairman of the FMC, delivered a keynote address at the Ocean Shipping & Trade Summit in Seattle last month and, according to an account on his web page, “commended the ports for taking the bold step towards working together for the greater good of the region.”
Cordero “noted that the Alliance has the potential to address the rapidly increasing competitiveness of the Ports of Vancouver and Prince Rupert in British Columbia, Canada.”
The Ports of Long Beach and Los Angeles recently moved forward with their own collaborative efforts, filing a discussion agreement to address operational related questions and maximize their joint efforts in the management of the Southern California port complex.
“This agreement is the culmination of months of work to set aside decades of competition in creating a new business model for the greater good,” said Don Johnson, Port of Tacoma commission president. “We recognize how vital the maritime industry is to our state’s economy, and we are proud and excited to strengthen it even more.”
The agreement outlines the Northwest Seaport Alliance’s governance charter, management and financial structures, a transition plan and a business development strategy.
“With today’s vote our two ports take another step toward becoming a united cargo gateway that will compete globally for more trade,” said Stephanie Bowman, Port of Seattle commission co-president. “Our work continues as we help provide our region with the solid economic base it needs for the coming decades.”
While the ports will remain separate organizations and retain ownership of their respective assets, they will form a joint port development authority (PDA) to manage the container, breakbulk, auto and some bulk terminals in Seattle and Tacoma. The airport; cruise business; marinas, such as Fisherman’s Terminal; grain terminals and industrial real estate, such as the Northwest Innovation Works and Puget Sound Energy facilities and Terminal 91 uplands, will remain outside the alliance.
The commissioners expect to hire John Wolfe, current Port of Tacoma chief executive officer, as the CEO of the Northwest Seaport Alliance following the FMC’s approval of the agreement.
Wolfe would lead both organizations through a transition period of up to five years.
Seattle, Tacoma seek FMC approval for seaport alliance
