PNW COMPETITION BUILDS

Figure 1
Figure 1: Total Container Volumes for Seattle-Tacoma, Pacific Gateway and other PNW Ports, 2000-2019, in ‘000 TEU. Source: WSP
Terminal 5
Terminal 5 is due to be operational by the end of 2020, allowing bigger ships to call – but Seattle’s competitive future hinges on appetite from US railroads too

Seattle’s new Terminal 5 modernisation project has a lot riding on it, as the port continues to see strong competition from Canada’s Pacific Gateway ports. AJ Keyes investigates.

“Today we begin the modernisation of Terminal 5, the best container handling terminal in the Pacific Northwest. When complete, it will be a cornerstone of our region’s economic activity for decades to come,” stated Stephanie Bowman, Port of Seattle, Commission President and Co-Chair of The Northwest Seaport Alliance, as ground was broken in July 2019.

Terminal 5 is a US$500 million project to modernise a facility unused since 2014. The project is providing a 1.0 million TEU per annum terminal that will be able to receive 2 x 18,000TEU ships when it opens at the end of 2020. Before construction, Terminal 5 could not handle vessels larger than 6,000TEU.

NEED TO SERVICE BIGGER SHIPS

So, why is it required? Quite simply, for bigger ships. For a port in the Pacific North West to be competitive, it must be able to efficiently handle ships of 18,000TEU, with good ondock intermodal rail accessible.

Container terminal volume growth over the past 10 years has grown by an average of 2.4 per cent through the SeattleTacoma port complex that comprises the Northwest Seaport Alliance.

As a stand-alone figure in a very mature and established market such as North America, this total may actually seem quite reasonable. However, if Vancouver at 4.8 per cent and Prince Rupert with 16.3 per cent over the same comparable period are added to the equation, then all of a sudden the increase for Seattle-Tacoma seems more worrying.

The Northwest Seaport Alliance is a marine cargo operating partnership of the Port of Seattle and Port of Tacoma. The ports joined forces in August 2015 to unify management of marine cargo facilities and business to strengthen the Puget Sound gateway and attract more marine cargo and jobs for the region. Collectively the two ports are the fourth-largest container gateway in North America - Seattle is the “North Harbor” with the Tacoma terminals designated the “South Harbour.”

VANCOUVER BUILDS MARKET SHARE

In terms of historic volumes, Figure 1 confirms that while SeaTac (combined) has the highest volumes, Vancouver has continued to close the gap. In 2000, the Sea-Tac complex (the port’s operated separately at the time, so the individual total container volumes have been combined) handled almost 2.86 million TEU and Vancouver saw 1.16 million TEU.

At the end of 2019, Sea-Tac recorded just under 3.78 million TEU and Vancouver experienced 3.40 million TEU, a considerably smaller gap. In addition, the emergence of Prince Rupert and its continued very strong growth taking the new port to 1.2 million TEU, has added another competitive dimension in the competitive region.

INLAND CONNECTIVITY IS THE KEY FACTOR

The completion of Terminal 5 in Seattle will certainly improve the port’s ability to receive ships up to 18,000TEU. However, that is only part of the process. Prince Rupert, for example, has excellent intermodal rail capabilities to ensure containers are onto the rails quickly.

While Canadian Pacific Railway and Maersk Line have just confirmed that a new transload and distribution facility is to be built in Vancouver, to further boost the competitiveness of this Canadian port.

The CP transload facility will be an expansion of CP’s existing Vancouver Intermodal Facility and thereby be able to benefit from excellent rail infrastructure, when it opens in 2021.

Omar Shamsie, president of Maersk Canada explained the value of the facility. “This agreement installs more agile supply chain options and capacity to and from Vancouver for our North American customers. Marketplace fluctuations, e-commerce demands and omnichannel fulfilment are testing every company – so this integrated logistics solution with CP will clearly elevate supply chain performance.”

The competitiveness of the Canadian Pacific gateway ports means that the pressure is on Seattle-Tacoma for inland activities. The FAST (Freight Action Strategy for Seattle-Tacoma) represents up to 25 projects aimed at improving cargo flow (faster trains and raising intermodal train capacity) and linking the ports with rail networks, to aid container flows from the Seattle-Tacoma region.

Terminal 5 is a needed, largescale investment project that will allow bigger ships to call to Seattle, while FAST initiatives will smooth container flows on the rail network. Ultimately, though, the desire of the US railroads to help win intermodal traffic for discretionary markets will be the key driver of the future success of Terminal 5.

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