Container Carrier Hapag Lloyd Quits the Port of Portland
Hapag Lloyd, the German-flag ocean carrier, is terminating all container service through the Port of Portland with the company no longer scheduling direct ship calls at Terminal 6, the port’s only deep-water container facility.
The steamship line not only provided the only direct container service linking international shippers in the Portland area with markets and suppliers in Europe, it also served as the primary carrier of the agricultural exports such as lentils, peas and potatoes barged to Portland from the Port of Lewiston, Idaho, via the Columbia-Snake River Channel.
The only option now for the international shippers and logistics managers impacted by the decision will be to move both export and import containers from Seattle or Tacoma by truck or rail. The only container carrier now serving the port is Westwood Shipping, which offers a monthly westbound service linking Portland with Japan and Korea.
The move is the second major blow to the Columbia River port in less than a month. In February, Korea’s Hanjin Shipping Company announced that it would no longer offer direct service to the port. Hanjin had served the port with direct calls since 1993.
The two carriers generated virtually all of the containerized freight moving through the three-berth, 419-acre Terminal 6 container facility, Portland’s only deep-water container facility.
TERMINAL OPERATOR BLAMES LONGSHORE UNION FOR CONTAINER SHIPPING LINES’ DEPARTURE
“We’re reviewing all options and taking prompt action to generate new business,” says Elvis Ganda, CEO of ICTSI North America, which operates the Terminal 6 facility. “There is substantial market demand for exporting and importing goods to and from Asia and Europe through Terminal 6.”
As a result, he adds, “We’re taking calculated steps, in conjunction with the Port of Portland, toward seeking new carriers that can capitalize on the opportunities to serve this valuable market created by Hanjin’s and Hapag-Lloyd’s departure.”
Speaking with the media, Ganda says that the withdrawal of Hanjin and Hapag-Lloyd was a direct result of the “work slowdowns at the terminal caused by the International Longshore and Warehouse Union (ILWU).”
“While ICTSI Oregon will continue efforts to attract new customers, no carrier will want to make a long-term commitment to the terminal so long as ILWU workers delay cargo and vessels as a strong-arm tactic to get what they want,” says Ganda.
”We hold the ILWU fully accountable for its actions; therefore, it is imperative that the ILWU leadership in San Francisco publicly commit that its efforts to interfere with productivity in Portland are over,” he says.
In response to Ganda’s charge, ILWU spokesman Jennifer Sergant says, “Portland is a small market and is overpriced given ICTSI’s propensity to practice monopolistic behavior and set its rates accordingly. Terminal 6 is just one of 11 export terminals in Portland. Longshoremen work at the other 10 terminals and enjoy positive relations with the terminal operators.”
1. The ILA represents long shore labor on the east and gulf coasts. The union representing long shore labor on the west coast is the ILWU.
2. Certainly the ILWU, in my view, is “militant” in terms of the strategy they employ in pursuing their goals. However, in the case of “labor problems” in Portland, they have involved Terminal 6, the container terminal. In addition, ICTSI management, operator of T 6, has equally contributed to the labor issues.
3. The ILWU is probably the strongest union very few people know, unlike the UAW, Teamsters, etc. Though there are various stats, the average ILWU worker earns between $85K and $90K plus a very nice benefits package. We can argue all day as to whether the wages and benefits paid to ILWU labor are; fair, obscene, to low, etc.; for “blue collar” labor . . . No different than we can argue if CEO’s compensation is; fair, obscene, to low, etc. The issue is, that those wages and benefits were negotiated and agreed to management and the ILWU. The focus by the media on the wages and benefits as that is “sexy”, however, the real issue driving management’s objective is productivity and using technology to reduce the labor force thus, labor costs. Of course, like any union, the ILWU is about protective jobs and increasing them.
4. Though the issues between labor and ICTSI management at T 6 have contributed to Hanjin and now Hapag Lloyd leaving Portland, there are other, bigger operating issues behind those decisions, namely, the operating costs of serving Portland given that it 40/50 miles up river from the Pacific, combined with, those carriers were also calling Seattle/Tacoma.
A. Compared to L.A./Long Beach and Oakland which have close/easy access to the Pacific, compared to the long/slow transit up and then back down the Columbia . . . Time is money when you are looking at operating costs of these container vessels in the $20K to $25K range per day. The same can be said about Seattle/Tacoma but there are other factors that come into play that I will address below. I use to work for Hyundai which called at Portland in the 90’s and river transit in both directions amounted to almost a day plus the time in port. Compared to L.A./Long Beach and Oakland were transit from/to open water is around 90 minutes, that is a hugh cost disadvantage for Portland.
B. The other issue was that the services Hanjin and Hapag Lloyd were operating to Portland also called at Seattle/Tacoma . . . To ports in close proximity to each other. On the east coast, as the distance between Jacksonville and Charleston is around 200 nautical miles, carriers will generally call just one of the three ports; i.e., Jacksonville, Savannah or Charleston; as they general serve the same markets, especially rail intermodal connections. The difference is Savannah as this has become the southeast distribution point for many large retailers and consumer product manufacturers, thus some carriers will call Savannah and Charleston or Jacksonville.
C. Seattle/Tacoma has two advantages over Portland; 1. it is a larger local market vs Portland; 3.7 – million pop vs 2.2 – million pop and 2. it is the major intermodal rail gateway in the PNW, 70% of the containers moving through Seattle/Tacoma move intermodal via rail to/from the Midwest and Northeast.
D. Therefore, for Hanjin and Hapag Lloyd, though they would never say it publicly, why call at two ports that are 175 highway miles apart and where one; Portland; has higher operating costs, a smaller local market and is not a major intermodal rail gateway. As rate levels remain flat at best, carriers are looking to cut operating costs and one major option is reducing the number of ports called as port calls are significant costs.
E. Though costs for shippers will increase having to move their container cargo through Seattle/Tacoma, from a overall transit from origin to destination, it will be the same or maybe, actually a day or two shorter.
While the ILWU is an easy target, my career has been in carrier management so I am no fan of the ILWU, for why Hapag Lloyd and Hanjin made their decisions to stop calling at Portland, there are other, bigger financial factors that went into their decision making.