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Drayage trucking in the U.S. Pacific Northwest is seeing healthy demand thanks to the region’s strong economy drawing in more container imports. But Seattle-Tacoma’s export containers are taking a hit from the U.S. trade war with China.
The split mirrors the competing headwinds facing the U.S. economy as consumer demand holds up in the wake of changing tariff rules. But export-dependent shippers face headwinds as their markets dim.
The Pacific Northwest saw container imports of 692,318 twenty-foot equivalent units (TEUs) in the first six months of 2019, a 4% rise over the same period in 2018.
Not surprisingly, strong regional economic and demographic growth fuel much of the rise in inbound container demand. Personal incomes in Washington rose 4.3% annually in the first quarter of 2019, the U.S. Bureau of Economic Analysis (BEA) said. Nationwide, the growth was 3.4%.
Oregon and Idaho, both within the catchment area for containerized goods coming into the Seattle-Tacoma ports, are seeing even stronger growth at 4.7% and 4.9%, respectively, BEA said.
A vice president of Pacific Northwest operations for a national drayage carrier who spoke on condition of anonymity said the regional market has been strong this year, but the growth will be lower overall due to inflated activity from the container surge of last year. The carrier does mostly inbound consumer goods.
“Our operation is busy in both domestic and international intermodal,” the vice president said. “We’re not expecting as robust a cycle as we did last year, but last year was the front-loading.”
As for the outlook for the remainder of the year, “it’s anybody’s guess this year.
“It’s really good news that Trump is pushing for a later start on some tariffs because so many orders have already been placed,” the vice president said.
Sue Coffey, director of business development at the Northwest Seaport Alliance, said strong local demand is one reason for the import growth. Thanks to the large number of warehouses and distribution centers close to the port, drivers are able to make two to four turns per day, depending on destination and terminal traffic.
“There’s definitely been more trucking supply in the past year” as container volumes slowed, Coffey said. “But new drayage carriers are setting up operations because they see long-term demand.”
She credits the port’s reach to other fast-growing western states and to other inland markets.
About 75% of inbound containers are transloaded, either intact as marine containers or stuffed into domestic intermodal containers. She says the availability of transloading options in the region, with over 100 transload warehouses, is a major source of the port’s growth.
Along with on-dock rail, BNSF and Union Pacific have combined domestic and international container intermodal yards near the port.
“We position ourselves as the alternative gateway to southern California for companies looking at transloading,” Coffey said. “Consumer goods shippers are looking to shift away from southern California or at least mitigate their risk.”
Export container demand, though, has been falling through 2019. From January through June, Seattle-Tacoma ports handled 453,730 TEUs in export containers, a 10% drop from a year earlier.
The Pacific Northwest is the main North American hub for refrigerated container exports, according to the Northwest Seaport Alliance. But trade tensions are hitting those exports, especially to China, which accounted for 28% of agriculture exports from the Northwest.
In response to U.S. tariffs on China’s exports, China imposed duties of 10% to 50% on a host of U.S. fresh fruit imports.
U.S. Census data suggest the tariffs are affecting volumes going through the Seattle-Tacoma ports. The first half of 2019 saw the value of fruit exports to China drop 22% to $8.59 billion, according to U.S Census trade data. Tonnage-wise, fruit exports dropped 7% in the first half.
Whether those volumes fall even more depends on how much farmers will accept to clear their crops. Mark Powers, the president of the Northwest Horticultural Council, told FreightWaves that an expected 20% rise in the apple crop will mean the region’s farmers need export markets more than ever.
“We anticipate a larger crop than last year and need to move more volume overseas,” Powers said.
Al Muehlenbruch, business unit manager of transloading specialist PCC Logistics, said business has slowed down due to tariffs, but the overall level of container activity in the region remains healthy.
Despite the slowdown, truckers still face challenges in the port. The relocation of MSC’s steamship services from Seattle’s Terminal 46 to Terminal 18 has meant that drivers are “looking at long lines to get into that terminal,” Muehlenbruch said.
But the night gate program failed to draw sufficient numbers to justify its continued operation. SSA Marine, Terminal 18’s owner, shuttered night gates as of July 22. Muehlenbruch estimates the night gates have drawn 200 to 250 turns, about half what was expected.
“They did not get good participation” in the night gate program, Muehlenbruch said. But he does expect night gate demand to ramp up by mid-September.
Night gates would mostly be of use to shippers from the eastern Washington region who are still available to assist with issues at the terminal gate, Muehlenbruch said. But day gates are preferred for shippers going to other markets.
“We are always communicating with our shippers and they are on the East Coast,” he said. “We try to get it into the terminal at least before they get to bed.”
Terminal 18’s pre-Gate system through eModal for export container deliveries also could help better smooth out truck flow, Muehlenbruch said. The system gives drivers a “five-day window to drop off export boxes. Ideally though, he would like to see the night gate program extended to import containers as well.
“In a perfect world an appointment system would help the direct trucks to use the night gate,” Muelenbruch said. “But this would require the night gate to also release import containers. The current plan is that the night gate would be for exports only.”
At least one shipper is said to be opting for Saturday container moves at one of the Tacoma terminals to handle import boxes. Opening Saturday gates has been a recurring peak season feature at the Pacific Northwest seaports. But opening a terminal for exclusive use of Saturday gate hours is thought to cost the shipper $25,000.