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
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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