Mercator
Strategies for Enhancing the Puget Sound Container Trade Gateway Summary Slides December 2014 1 Introduction Mercator International LLC was engaged by the two port authorities to assess: Competitive Threats to Puget Sound Gateway Infrastructure Capabilities & Challenges Dynamics of Intermodal Volume Loss Strategies to Strengthen Puget Sound Gateway Financial Dimensions of Enhancement Strategies 2 Framework of Threat: Routing Alternatives for Asia Intermodal Import Traffic A significant portion of container volume moving through Seattle/Tacoma could be diverted through alternative gateway ports From Asia From Asia via Suez Canal 3 Competitive Threats to the Gateway: Puget Sound Ports' Limited Capabilities for Ultra Large Container Ships (ULCS) 9 international container terminals 2 of which can effectively handle one ULCS at a time Husky WA United None can effectively handle 2 ULCS Pierce simultaneously Olympic Source: Google Earth West Sitcum T-46 Source: Google Earth ULCS will be the "norm" for T-30 Transpacific services by 2020 T-5 Other gateways for Asian trade T-18 have superior infrastructure for handling multiple ULCS 4 Dynamics of Intermodal Volume Losses: Considerations of and Impacts on Excess Terminal Capacity Puget Sound ports have proportionally more excess capacity than all of the other large port complexes in the US and Canada: 2013 Capacity Utilization US / CAN Ports with Volume Greater Than 1.8m TEUs 100% 90% 84% 77% 80% 73% 69% 68% 70% 65% 63% 62% 60% 50% 45% 40% 30% 20% 10% 0% Source: AAPA 34 Dynamics of Intermodal Volume Shifts: Impacts of Near-Term Problem for Puget Sound Container Ports The relatively high level of excess container terminal capacity in the Puget Sound results in an array of inter-related challenges for the Gateway's two ports: 6 Dynamics of Intermodal Volume Losses: Head-Haul Route Cost Analysis Summary Comparisons Competing gateways enjoy cost advantages vis--vis the Puget Sound gateway and are likely to experience continued intermodal volume growth at the expense of the Puget Sound, unless ULCS vessels are able to be effectively handled in the ports of Seattle and Tacoma ROUTE COSTS SHIP CLASS TRADE Origin- Gateway Asia Ocean N Amr Rail Inland Rail Var to (TEU) Total Destination Ports Terminal Transport Terminal Transport Terminal PNW Shanghai- Puget $325- $2,850- 8000 PNW $225 $550 $1,700 $50 Chicago Sound $375 $2,900 Shanghai- San Pedro $450- $2,665- 16000 PSW $225 $390 $1,550 $50 -185 Chicago Bay $500 $2,715 Shanghai- Vancouver, $300- $2,625- 8000 PNW $225 $550 $1,500 $50 -225 Chicago BC $350 $2,675 Shanghai- Puget $325- $2,900- 8000 PNW $225 $550 $1,750 $50 Columbus Sound $375 $2,950 Shanghai- $300- $2,090- 13000 All-Water NY/NJ $225 $865 $650 $50 -50 Columbus $350 $2,140 27 Strategies to Defend/Strengthen the Puget Sound Gateway: Outline of Recommended Approach Mitigate excess capacity through facility re-purposing Enhance ULCS-handling capabilities of selected terminals Adopt collaborative program for terminal asset management to facilitate: o Successful implementation of an excess capacity mitigation strategy o Successful implementation of an asset enhancement strategy o Better financial returns and regional economic development 40 Conclusions The Puget Sound container ports have two key strategic problems: o Significant excess terminal capacity o Inadequate terminal infrastructure for efficiently handling multiple ultra-large containerships Non-mitigation of these two strategic problems will likely have major negative consequences for the Gateway's ports: o Loss of rental income o Loss of discretionary intermodal volumes o Reduced trans-load volumes Toresolve these problems, the two ports need to pursue the following strategies: o Repurpose terminals that are not presently capable of handling ULCS nor can economically be enhanced o Improve one or two existing terminals over next 5-7 years to handle multiple ULCS simultaneously Thestrategies outlined above can be pursued most effectively through the Seaport Alliance 54
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