Late-year surge at Ta­coma, Seat­tle ports re­veals tar­iff fears

Tri-City Herald (Sunday) - - News - BY BILL VIR­GIN Con­tribut­ing writer Bill Vir­gin is ed­i­tor and pub­lisher of Wash­ing­ton Man­u­fac­tur­ing Alert and Pa­cific North­west Rail News. He can be reached at bill.vir­[email protected]­hoo.com.

Here is some stuff I know, the “let’s clear out the left­overs to make room for our next hol­i­day binge” edi­tion:

The ports of Ta­coma and Seat­tle are hav­ing a late-year surge. For the first 10 months of the year, com­bined statis­tics show, to­tal con­tainer vol­umes are up just 1.3 per­cent. But for Oc­to­ber alone, con­tainer traf­fic was up 9.9 per­cent from the same month a year ago.

That could be a pos­i­tive in­di­ca­tor about the health of the world econ­omy, which would be re­as­sur­ing news given some of the re­cent cau­tions and warn­ings about a slow­down.

It’s more likely, though, that the surge is driven by im­porters rac­ing to beat the next round of tar­iffs and re­tal­ia­tory du­ties to be im­posed by the United States.

A telling statis­tic is that im­port con­tainer vol­umes at the ports were up 20.7 per­cent in Oc­to­ber com­pared to a year ago (us­ing same-month com­par­isons gets around sea­sonal swings caused by build­ing hol­i­day-sales in­ven­tory).

The ports them­selves ac­knowl­edge what’s go­ing on.

“As we ap­proach Jan­uary, the uncer­tainty of the tar­iffs is driv­ing our im­port cus­tomers to re­ex­am­ine their sup­ply chains and ex­plore new strate­gies,” said Tong Zhu, chief com­mer­cial of­fi­cer and chief strat­egy of­fi­cer for the North­west Sea­port Al­liance.

Port vol­umes are al­ways at the mercy of trade poli­cies, so the height­ened volatil­ity and uncer­tainty in trade re­la­tions (are we mak­ing nice with the Chi­nese to­day or are we back to be­ing mad at them?) means prospects for the re­gional ports in 2019 are likely to be both volatile and un­cer­tain. Trade peace could break out to­mor­row, and the tar­iffs could be scrapped; that can be good, bad and both. And if the in­ter­na­tional squab­bles con­tinue? The same.

For all of that uncer­tainty, the ports are mov­ing ahead with projects. Com­mis­sion­ers from the two ports have ap­proved a mea­sure au­tho­riz­ing the chief ex­ec­u­tive to pre­pare a lease, bid­ding doc­u­ments and a re­quest for con­struc­tion funds for im­prove­ments to Seat­tle’s Ter­mi­nal 5 to al­low it to han­dle the big­gest ships.

That’s not much of a sur­prise. The ports have long been lean­ing to­ward the T-5 pro­ject. Mean­while, fa­cil­i­ties in Ta­coma are get­ting up­grades to han­dle much larger con­tainer ships.

Here, though, are the “re­mains to be seen” ques­tions. First, where’s the traf­fic for these fa­cil­i­ties go­ing to come from? The ship­ping in­dus­try is go­ing through a pro­longed shake-out pe­riod.

As noted by the al­liance’s draft bud­get, “The global con­tainer ship­ping in­dus­try con­tin­ues to strug­gle with im­bal­ance in the sup­ply and de­mand of ves­sel ca­pac­ity,” with merg­ers, con­sol­i­da­tion and even a few fail­ures re­sult­ing from weak freight rates. “Car­rier fi­nan­cials re­main dis­mal.”

The al­liance also says it’s in fi­nal ne­go­ti­a­tions with a po­ten­tial ten­ant for T-5. That could mean a car­rier al­ready call­ing here or a new ship­ping line call­ing here ei­ther by adding a stop to ex­ist­ing routes, es­tab­lish­ing new routes or re­lo­cat­ing op­er­a­tions from an­other port. If the ship­ping in­dus­try’s con­di­tion is re­ally that dire, that’s go­ing to make com­pe­ti­tion be­tween the ports here and else­where and ne­go­ti­a­tions be­tween ports and the car­ri­ers even more con­tentious.

Those dis­mal fi­nan­cials won’t be helped if China’s con­trac­tion proves to be real, if the trade fights per­sist or if com­pa­nies reshore or near-shore pro­duc­tion to get out of the way of those dis­putes.

Mean­while, one of the prom­ises made when the al­liance was set up was to make more ef­fi­cient use of the port as­sets that are here, thus avoid­ing pour­ing money into du­plica­tive, un­der­used fa­cil­i­ties. The ports have in­di­cated which ter­mi­nals they’re in­vest­ing in. For 2019 it will be in­ter­est­ing to watch whether any are deemed sur­plus and re­moved from ser­vice, sold or re­de­ployed for other uses.

For all the belly­ach­ing Seat­tle does about the hor­ri­ble bur­dens of hav­ing too many rich peo­ple and big com­pa­nies around, it should count it­self for­tu­nate to have them. Look no fur­ther than the an­nounce­ment that Ta­coma’s First Night cel­e­bra­tion will be scrubbed for 2019 be­cause of money short­age.

Seat­tle is a larger city than Ta­coma in pop­u­la­tion; it’s a much larger city in terms of the pool of com­pa­nies that can be tapped to fund events and fa­cil­i­ties as well as the de­ci­sion-mak­ers who can write checks to fi­nance them. For Ta­coma, the re­quests tend to fall on the same few com­pa­nies and peo­ple.

Seat­tle doesn’t get ev­ery­thing it wants. Spon­sors come and go and events do the same (in­clud­ing one of the city’s two big Fourth of July fire­works shows). There have even been in­stances in which the city de­cided there was a bright shiny bauble even it couldn’t af­ford as hap­pened when it stopped a bid for the Olympics.

Ta­coma is not bereft of any­thing fun to see or do. But un­til it beefs up its port­fo­lio of com­pa­nies large and suc­cess­ful enough to pro­vide mean­ing­ful fi­nan­cial sup­port to mul­ti­ple ac­tiv­i­ties, find­ing the cash to sus­tain what the city has, never mind adding more, will al­ways be a strug­gle.

TONY OVERMAN tover­[email protected]­olympian.com

The 1,200-foot Tha­lassa Axia, be­lieved to be the largest ship ever to dock at the Port of Ta­coma, ar­rives in Com­mence­ment Bay on Nov. 1, 2018. The ship is more than twice the length of the Ta­co­maDome.

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