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