The inevitable end of container traffic at the Port of Portland

In recent months, the Port of Portland’s probable loss of the Hanjin shipping company has been in the news. Local media reported on the event, largely painting it as a minor tragedy. Chris, here at Portland Transport, provided his own take, noting how that those businesses using Terminal 6 would now have to truck their goods to Puget Sound, an increase not only in cost but also in carbon emissions.

I have a slightly different take from Chris: container traffic at the Port of Portland is doomed. It is only a question of when.

Hanjin’s departure has sparked a lot of silly analysis. An Oregonian editorial, for example, blamed most of the matter on increased costs from labor disputes, an issue that the Port of Portland claims was a factor in Hanjin’s decision. (The official press release does not mention this factor, nor does the Hanjin letter to shipping customers [PDF] obtained by the Oregonian.)

Meanwhile, the Portland Business Journal sloppily threw a bunch of statistics at the matter, attempting to make the case that Hanjin in specific, and container import-export at the Port of Portland in general, were crucial to the metropolitan economy.

Hanjin’s decision comes as the region executes on a plan to increase exports, which are a significant contributor to the Portland metro economy. A recent Brookings Institution study found that exports accounted for $33.9 billion in regional economic activity in 2012, driving in large part by technology exports. (See the region’s top-five exported goods.)

In addition, a recent Portland Business Alliance study found that Oregon companies made and exported $16.5 billion worth of goods to countries worldwide in 2012, creating 490,000 jobs.

Not all of those good were moved by Hanjin, but as the largest carrier calling on Portland, Hanjin certainly accounted for a good deal of that traffic.

Reading this take from the Portland Business Journal, one might conclude that Hanjin was doing massive amounts of business out of T6, and the the Port of Portland was some kind of big time player in container shipping. Yet this is not at all the case. Terminal volume at T6 for the year 2012 (the most recent year for which data was available) stands at 183,203 TEU. (TEU means “twenty-foot equivalent units,” representing a standard twenty-foot shipping container.) Moreover, T6 has never handled more than 340,000 TEU in a year, and that was ten years ago, in 2003. While this may seem like a lot, let’s put it into perspective, by comparing the Port of Portland’s container traffic to the other major west coast terminals at Los Angeles, Long Beach, Seattle, Oakland, and Tacoma. The following graphic, based on 2010 volumes, gives you some sense of proportion:

teu_graphic_600

Portland is the smallest “major” U.S. container port. Tacoma, the next larger, is more than eight times bigger. As a player in the global container shipping market, Portland doesn’t even exist.

To understand why we need to understand the special nature of containerized cargo. This is the type of stuff that is not so time sensitive or small that it can economically fly, but is of sufficient value and lightness that it can be shipped relatively cheaply and still be competitively sold at its destination. Inbound containerized cargo to the United States is often consumer goods manufactured in Asia. Outbound cargo is typically specialty products or niche materials. In Oregon, examples might be specialty cedar boards for Japanese sauna construction, pallets of Christmas trees headed to Hawaii, or a couple truckloads of Hazelnuts going to China.

Containerized cargo, because it is relatively light and of higher value, is very mobile. Outbound loads will go to the port where shipping companies can offer the fastest transit time to the final destination for the least cost, and that recipe usually means that containers end up shipping in and out where other containers already are, since competition breeds lower costs. It also means that containers tend to go to those ports that are closest to their final destinations, thus reducing transit times. This is why goods heading to Europe typically are trucked or carried by railways to Eastern ports, while goods heading to Asia typically go west to Pacific ports.

So far, you’d think, so good for Portland. Since we are a Pacific port, we’re closer to Asia. But so are all the other ports of the U.S. West Coast. This is were port competitiveness begins. Note that when Hanjin announced its pull out from Portland, the Puget Sound Business Journal treated it as good news: container traffic lost in Portland would likely relocate to Puget Sound ports. In the American shipping world, what is bad for one port is good for all the others.

To compete, each port has its unique characteristics. Portland, along with there ports of the lower Columbia River, has a geographic advantage by being at the mouth of the Columbia River Gorge, the only water-level route through the Cascade-Sierra divide. This makes these ports naturally strong for handling bulk materials, where mobility is heavily restricted by weight and a high shipping cost. According to statistics published by the Port of Portland, Portland Harbor — which includes both the Port of Portland and several private terminals along the Willamette River — is “the largest wheat export port in the United States, the largest mineral export port on the U.S. West Coast, and the 4th largest export tonnage port on the U.S. West Coast.”

Container traffic is, however, highly mobile. Portland is located 100 miles away from the ocean, up a river with a relatively shallow depth (43 feet) and that must be dredged, and on the other side of one of the most treacherous river bars in the world. Put another way, to serve Portland, you have to have a reason to spend the extra time, money, and risk to reach it. All that grain can’t easily or cheaply move elsewhere, but containers — especially if they trucking in anyway and are not being filled directly from Portland producers — can fairly easily and cheaply end up at other ports.

And over the last half-century, that’s exactly what has happened. Railroads, truckers, and shipping lines have all contributed to the development of major container traffic at every major port of the U.S. Pacific Coast–except for Portland. No labor agreement or policy change is going to alter this historic trend.

 

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