In Port News 01/02/2016
Adds Ms Mattina:” The reaction from customers has been positive. Many said, ‘What took you so long?’—especially since the shipping lines have been forming alliances themselves in the past few years.”
Martin Rushmere explains why the alliance of Tacoma and Seattle is working out so well
Six months after the semi-merger of the ports of Tacoma and Seattle, the Northwest Seaport Alliance has reported a moderate growth in cargo volume, with container exports being particularly strong.
Viewed as being fraught with uncertainty when first mooted, particularly regarding community and ILWU attitudes, the alliance has so far worked well. The emphasis has always been on the long term and the supporters right from the start warned against expecting dramatic results.
So unusual was the arrangement that the alliance could only go ahead with Federal Maritime Commission approval, because of worries over the usual suspects: collusion and anti-trust. Overall authority comes from the joint boards of harbour commissioners, working through a chief executive and 55 officials.
Forecast container volume for 2016 is 3.6m teu, rising to 3.9m teu in 2020.
Probably the most crucial element is finance. “The general way the finances work is that each home port licenses properties with marine cargo facilities to the alliance as close to a 50-50 valuation as possible,” says spokesperson Tara Mattina. “Future investments on those properties will be on a 50-50 basis, as will the revenue received.”
Hopes are that the CMA CGM Benjamin Franklin will call at Terminal 18 in February or March. “The revenue generated from that facility is through a lease,” explains Ms Mattina, “which would be split between the two ports as part of the overall revenue generated by the facilities licensed to the alliance. SSA Marine operates the terminal, so it would hire tugs and labour.”
The finances are based on what is officially termed a “balanced budget”. This is defined as “total revenues…sufficient to cover operating expenses for the budget year and to offset the cost of capital investments (depreciation) and anticipated debt costs for any planned future capital investment.”
Each port continues to be responsible for its own debt and the alliance will not borrow funds.
Total operating revenue for 2016 is forecast to be $193m, with $134m coming from container services, while operating expenses are set at $89m.
Potential roadbumps
There could be potential for disagreement over what are termed “allocations and home port charges”. These refer to services and work done by the alliance for the individual ports and vice-versa.
According to the formal arrangement: “An allocation is an indirect cost for common services or services that are not directly attributed to a given project. For example, support staff do not complete timecards so their time cannot be directly assigned to work. Examples of allocations include the finance team providing analysis work for an investment, Information technology services providing network connectivity and laptop equipment, and the executive team providing leadership and direction. “
In 2016, Tacoma will be owed $1.5m from the alliance compared with $200,000 for Seattle. However, Tacoma will owe the alliance $30m and Seattle will owe $10m.
Capital spending this year will be $39m out of a total of $170m to the end of 2020.
The main projects at Seattle (North Harbour) are wharf redevelopment and paving terminal 46, dredging at terminal 18 and removal of obsolete cranes. At Tacoma (South Harbour) most money will go on new straddle carriers, two post-panamax cranes for the Husky terminal and redevelopment of the APM terminal.
“How much of a market impact that change has made so far is open to question, since no dramatic vessel service or port volume change has followed yet from the creation of the Alliance, “says Paul Bingham of EDR Group. “However the alliance is a long-term strategic move, not a short-term deal-oriented tactical arrangement. It has the potential over the long-term through coordination of terminal development, joint marketing and negotiations with container lines and terminal operators to improve the relative position of Puget Sound container ports.”
Source: Port Strategy
