Port Competition in the Greater Pacific Northwest

By Jock O’Connell

A recent phone call from a Canadian newspaper reporter up in Vancouver prompted me to revisit the question of just how much the longshore labor dispute that jammed up U.S. West Coast (USWC) ports during the winter of 2014-15 has had a lingering impact on container trade in the Pacific Northwest. The only nugget my caller’s internet search had yielded was a June 2015 Journal of Commerce article which reported that U.S. importers were “rapidly moving more containers through Port Metro Vancouver and to Chicago and the upper Midwest, dealing another blow to the ports of Seattle and Tacoma.”

Had the USWC ports’ sullied reputation for labor relations continued to influence routing decisions or had an ante bellum balance of trade been restored? Let’s see.

Waterfront lore has it that frustration over an evident lack of progress in negotiating a new contract between the ILWU and Pacific Maritime Association began to spill over onto the docks in October 2014, three months after the former contract had expired. From then, until after a tentative settlement was reached late the following February, the flow of containerized trade through ports in California, Oregon, and Washington was anything but smooth.

Data published by the respective ports reveal an interesting dichotomy between the handling of imports versus exports. While containerized exports slumped almost immediately, the impact on import volumes was not as immediate or dramatic as many seem to recall. In fact, during the final quarter of 2014, not one of the five major USWC container ports reported a year-over-year decline in inbound loaded TEUs. In the Pacific Northwest, the Ports of Seattle and Tacoma (since August 2015 rechristened as the Northwest Seaport Alliance or NWSA) actually handled 8.3% more inbound loaded TEUs than they had a year earlier.

But export traffic was an entirely different matter. The number of outbound loaded TEUs at the two ports plummeted by 26.0% from the same quarter the year before. The financial losses to exporters soared, and their plight drew national and international attention, further muddying the reputation of USWC ports. (A study later commissioned by the Washington Council on International Trade found that “Washington state lost $769.5 million in economic activity during that approximately six month period.”)

Any pity that importers may have felt for the plight of exporters soon dissipated, however, as the fate that had already befallen exports caught up with the import trade with the start of the new year. In January-February 2015, import traffic at the NWSA ports plunged by 13.7% as 25,163 fewer inbound loaded TEUs were discharged than in the same two months a year earlier. Meanwhile, exports remained disastrously low, down by 27.7% or 41,556 TEUs year-over-year.

Certainly, by that January, shippers throughout North America were scrambling to redirect their inbound cargos away from USWC ports by routing Asian imports to seaports along the East and Gulf Coasts. At USWC ports, fears grew that these emergency measures might prove permanent.

For shippers accustomed to using the Ports of Seattle and Tacoma, relief was seemingly close at hand at the Ports of Vancouver and Prince (“Cut your cargo’s transit time by days”) Rupert. Surprisingly, though, Vancouver doesn’t appear to have been the recipient of much diverted cargo. While Canada’s largest Pacific Coast port did handle 7,188 more inbound loaded TEUs in January-February 2015 than a year earlier, that represented only a 2.9% increase in traffic – a gain that, even in less peculiar circumstances, an ambitious port might regard as disappointing. Instead, it was relatively tiny Prince Rupert that saw its inbound trade swell those two months by 14,417 TEUs, a 27.3% year-over-year jump. (Neither Vancouver nor Prince Rupert saw any increase at all in exported TEUs during those calamitous first two months of 2015.)

So, what happened next? Well, next came the heroic dock-clearing exercises at USWC ports in March. At the NWSA ports, 149,910 inbound loaded TEUs were discharged, 61.2% more than in March 2015. But exports stuck outside port terminals fared much less well. Indeed, it would not be until August that export volumes began to exceed the levels reported a year earlier.

And then? Here’s what the TEU scorecard reveals. In the six-month period a year prior to the Winter of Discontent (i.e., from October 2013 through March 2014), the NWSA ports handled 569,124 loaded imported TEUs, while Vancouver and Prince Rupert combined to handle 870,954. That gave the two Washington State ports a 39.5% share of the combined Greater Pacific Northwest import trade.

During the six months of the USWC port disruptions, the NWSA ports handled 624,607 loaded import TEUs, while the British Columbia ports processed 947,439. Surprisingly, the NWSA share in fact edged up slightly from a year earlier to 39.7%.

A full year after the labor impasse had gummed up USWC port operations, the NWSA ports were moving 630,630 inbound loaded TEUs from October 2015 through March 2016, while the BC ports handled 917,480 TEUs. The NWSA share again rose, this time to 40.7%.

Exhibit 4 provides a month-by-month look at inbound loaded container traffic through the four Pacific Northwest ports from January 2013 through February 2017. Exhibit 5 shows how the competitors stack up against each other. To be sure, the fact that the NWSA ports predominantly serve U.S. import markets while Vancouver and Prince Rupert send containers to destinations in both Canada and the United States vitiates head-to-head comparisons. It is also difficult to measure growth opportunities that were lost at the NWSA ports as a result of any lasting ill-will the prolonged USWC port slowdown spawned among importers, exporters, and steamship lines. Still, neither graphic points to a sustained diversion of Asian imports away from the NWSA ports. Indeed, while the declared weight of the merchandise contained in TEUs imported from the Far East rose just 1.1% between 2015 and 2016 at all U.S. ports, the NWSA ports saw their inbound trade with Asia increase 3.6%.

The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.