Here's Why Portland Won't Get New
by James Cronin
With the cost of oil where it is, trucking up to Puget Sound is a lot less expensive than people
thought it was going to be a year and a half ago. Freight rates are very cheap right now.
It's no secret container shipping has slowed to barely a crawl at the Port of Portland.
Westwood Shipping is the sole company delivering and collecting container cargo at the port. Ongoing labor disputes at the port's single container terminal, Terminal 6, caused South Korean-based Hanjin Shipping and Germany-based Hapag-Lloyd to cease sending ships to call at T6 last year.
That sent officials from the port and ICTSI Oregon Inc., the company that manages the container terminal, scrambling to find another carrier to serve the city and upstream Columbia River ports.
In December, Elvis Ganda, CEO of ICTSI Oregon Inc., told me he had a meeting with one interested company, and was in talks with others. I asked for an update a couple months ago, but the company wouldn't offer anything further.
However, on Monday, Bill Wyatt, the Port of Portland's executive director, said landing additional container service won't happen anytime soon. On the international scene, the cargo shipping industry "is really on its head" with an oversupply of carriers for not nearly enough shipping demand, according to Wyatt.
I met Monday with Wyatt and his staff to chat about the state of the container service here and what to expect in the near future. Here's what he had to say.
What has been preventing you and ICTSI from finding new carriers for Portland? ICTSI and the port have made joint presentations to a variety of carriers. But in the Trans-Pacific there are about 23 carriers and there probably ought to be about five. Beginning 10 years ago or so, carriers who had really been struggling financially for a long time said, "OK, the way we can win is we'll be more efficient than the next guy." And the way to do that, so they thought, was to build bigger and bigger and bigger ships to offset fixed operating costs with a larger cargo base.
Now that oil is cheaper, how is that impacting that strategy? This was all predicated on very expensive fuel, the single largest operating cost, which then was $120 or $130 a barrel. Now, that fuel costs $42 or $43 a barrel. Most of the long-term forecasts say it'll be maybe $50 or $60. There's way more capacity out there than market demand. The industry is now really in turmoil, so recruiting new carriers is really challenging.
So when can we expect new container service at the Port? I don't expect to see any new carriers here for a while. With the cost of oil where it is, trucking up to Puget Sound is a lot less expensive than people thought it was going to be a year and a half ago. Freight rates are very cheap right now.
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