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Container-Terminal Loss at Port of Portland Felt Deeply Upriver by Molly Harbarger Oregonian, April 12, 2015

"And now you have one mode of transportation that is no longer helping provide price competition between rail and truck."

The Port of Portland faced another round of trouble last week: Shipping line Hapag-Lloyd officially announced that no more ships would be visiting the city's container terminal. That might've surprised some in Portland, but it the lentil farmers more than 400 miles up the Columbia River already knew.

Farmers who ship out of the Port of Lewiston in Idaho had already been scrambling to book trucks for their cargo containers. Many of their shipments were already late because labor struggles at West Coast ports have caused a backlog of work.

The Hapag-Lloyd announcement came about a month after Hanjin Shipping Co. made the same decision. Together, the shipping lines had accounted for virtually all of the Port of Portland's cargo-container business in recent years.

While Hapag-Lloyd carried only about 20 percent of the Port of Portland's containers, it accounted for 90 percent of the Port of Lewiston's.

Before the announcement, Hapag-Lloyd had stopped giving containers to anyone who wanted to send them back through the Port of Lewiston to be put on a barge, which would navigate the Columbia Snake River channel, get lifted onto a ship in Portland and then shipped to customers in Europe, the Middle East or South America.

Instead, farmers could only load their dry peas, lentils and garbanzo beans into containers that would be sent by truck to ports in Seattle or Tacoma.

The Port of Lewiston is the country's most inland port -- 365 miles farther from the Pacific Ocean than Portland, beyond the reach of major shipping lines. Port customers relied on barges to transport 40 percent of the country's wheat exports and thousands of containers a year of "pulses" - legume crops including chick peas, lima beans, lentils, peanuts, dry peas and soybeans.

The wheat barges will continue to the Portland, which remains a top-ranking port for exporting grain.

The Port of Portland accounted for about 1 percent of the West Coast's container shipping. It was dwarfed by ports in Southern California and the Puget Sound.

Even within the Port of Portland, the container terminal only accounted for 15 percent of the marine port's revenue on average. The marine arm of the Port of Portland also moves grain, potash, soda ash and automobiles. And that is all just 20 percent of the port's overall business -- the airports and industrial space leasing makes up the rest.

In the big picture, losing the container terminal isn't a catastrophe for the Oregon economy or the region's businesses.

But it could be devastating for some farmers and manufacturers farther down the transportation supply chain. Or, in this case, up the Columbia River.

"The Port of Lewiston is only as competitive as the Port of Portland is competitive," said Lewiston manager David Doeringsfeld. "It'll end container shipment on the Snake."

Is container service worth saving?

Idaho, western Washington and even Montana relied on the Port of Lewiston to put their food in the hands of customers around the world. More than 75 percent of the region's pulses are exported.

Exporting is the lifeblood of the industry, and losing Hapag-Lloyd -- even more than Hanjin, whose February announcement that it was leaving Portland shook many in Oregon -- could make the growers along the Columbia Snake River channel a ground zero of Terminal 6's collapse.

"We're a pretty small player in terms of the West Coast ports, but the Port of Lewiston is at the end of the Columbia Snake River system and it's very important to the agriculture and timber industry in the area," Doeringsfeld said. "And now you have one mode of transportation that is no longer helping provide price competition between rail and truck."

Some economists wonder if container shipping is worth saving, though.

Tim Duy, economics professor at the University of Oregon, removed container exports from his latest monthly report on the Oregon economy. The report lists indicators of how the economy is doing, and the container terminal's traffic was no longer relevant.

"I think it says less about the strength of the Oregon economy than the economic challenges faced by the Port of Portland," Duy said.

In the 1980s and '90s, container traffic increased when businesses were doing well, and decreased during economic slumps. But, lately, the container terminal's numbers showed mostly whether the International Longshore and Warehouse Union members were at odds with port operator ICTSI Oregon or not.

Elvis Ganda, chief executive of ICTSI Oregon, which manages Terminal 6 for the Port of Portland, recently pledged that he would continue courting shipping lines. Port of Portland Director Bill Wyatt plans to help that effort, and the state is gearing up for a trip to Asia to court importers.

Millions of dollars were spent incentivizing exporters and shipping lines to continue calling in Portland as work slowed on the dock amid the labor troubles in recent years. As the problems intensified, many high-value products like semiconductors began being flown, instead of shipped.

Oregon's business development agency announced last week that Gov. Kate Brown approved $50,000 to bring back a direct air cargo flight between Oregon and Asia that had been discontinued in 2013. Business Oregon also will spend $250,000 traveling the state, talking to companies who trade globally to create a list of proposed policy changes for the 2016 Oregon Legislature to consider.

But Duy wonders if container service is worth saving in Portland.

"In order to sustain the service, it seems likely that it would require ongoing significant subsidies, and policymakers should consider the alternative use of those subsidies," Duy said.

They will adapt

No one doubts that trade is important to the Northwest.

Oregon exports hit a record-high in 2014, just under $21 billion in electronics, machinery, food and more.

In Idaho, agricultural exports -- the bulk of Lewiston's containers -- are about $2.6 billion per year. Wheat is a non-containerized powerhouse in that total.

"To be honest, I don't think that the overall impact on Idaho agriculture is going to be significant," said Laura Johnson, a trade specialist the Idaho Department of Agriculture. "The biggest impact will probably be on our pea and lentil folks."

Lentils sell well. The appetite for chickpeas, lentils and dry peas is growing in the United States and Europe, as healthier eating becomes trendier. But most farmers and shippers base their business models on the barge service to Portland. Now, they will have to truck containers to the Puget Sound ports, which can cost up to four times more.

It also puts shippers at odds with each other as they jockey to secure enough trucks -- one per container -- to fulfill their promises to customers.

Some farmers and shippers in the pulse business might not know there was a way to move their products before barges, but Marty Anderson remembers.

"We developed a system -- a major transportation system -- and it is gone," Marty Anderson said. "It's just off the face of the earth."

Anderson has been exporting pulses for about 40 years out of Lewiston, during which time the barge service began, replacing trucks and trains.

He is facing unprecedented trouble collecting return on last year's crops, though. Peas and lentils usually ship out after harvest in early fall. Farmers also time their containers around a month-long break around March, when the Columbia Snake River channel shuts down for maintenance. Before and after it opened, another flush of containers would head down river to Portland.

The usual cycle was interrupted this year when contract negotiations between longshore workers and all West Coast-wide ports brought dock work to a near standstill. That mess is still being cleared up as the ILWU officials and the port operators coalition, the Pacific Maritime Association, finalize a new contract.

On top of that, Portland struggled with productivity for years as the union pushed against port operator ICTSI Oregon.

Lewiston shipped a historic low amount of containers in 2013 -- 3,240. The last time so few left Idaho was in 2011 with 3,653, when the locks closed for three months for major maintenance work.

February's container traffic in Lewiston was down 31 percent over February 2014.

Hanjin Shipping Co. left Portland that month, forcing Oregon companies that trade with Asia to recalibrate their shipping plans at the last minute. Some resorted to flying their cargo, even though the cost can be budget-busting.

When Hapag-Lloyd told customers of its intentions to leave Portland, Anderson joined growers, shippers and industry leaders who gathered in Spokane to discuss how they were going to adapt.

Tim McGreevy, head of the USA Dry Pea & Lentil Council, estimates the 2,400 containers, about 55 metric tons, of product goes through the Port of Portland. Now, that heavy cargo will go by road, which is expensive for growers, but also hard on the environment.

"The economic cost to not having an efficient streamlined transportation system is costly to all of us," McGreevy said. "Whether you're trying to drive on the roads with another 55 to 65 metric tons that have to get to West Coast ports, or you're trying to get down to the Gulf ports, there's a cost to that."

The Gulf of Mexico ports have, indeed, started working with farmers throughout the West Coast. During the fall and winter West Coast slowdowns, that was the best option for some farmers, despite being thousands of miles farther away than Portland or Seattle. That trend is expected to continue when a widening of the Panama Canal ends in 2016.

All those changes filter back to the grower, McGreevy said. But the industry will adapt.

"The product will still be grown."

Related Pages:
Port Extends Ocean Carrier Subsidies by Mateusz Perkowski, Capital Press, 12/10/14
Idaho Needs and Can Maintain Both Its Dams and Fish by David Doeringsfeld, Lewiston Tribune, 3/15/15
Lewiston Container Shipping Fact Sheet, 1997, by Port of Lewiston
Portland Container Shipping Fact Sheet, 2002, by Port of Portland