For the last year, ever since the container ship “Ever Given” ran aground in the Suez Canal, global supply chain woes have been a fixture in the world economy. A semiconductor shortage has made it difficult for Americans to buy new cars. Recent closures of factories and ports in China due to COVID-19 variants have made consumers increasingly frustrated by the complexities and interdependencies of the trade-based global economy.
Now those bottleneck problems are coming home to roost in Seattle’s once-thriving Port. Whether such problems will also be a wake-up call for local leaders remains an open and urgent question.
Seattle plays a key role in this world of trade and commerce by virtue of geography, but it is a waning role. With the bipartisan infrastructure bill that President Biden signed into law in November—which includes $17 billion for ports and waterways—Washington has a tremendous opportunity to bolster the state’s commercial shipping industry. This could, in turn, create good, union jobs and boost the regional economy–but only if the federal funds are invested strategically and wisely.
Today, the ports of Seattle and Tacoma (on a combined basis) account for the 7th largest volume of inbound containers by volume. Washington’s ports are vital destinations for marine cargo, thanks largely to the state’s proximity to Asia. The Port of Seattle has served as a vital commercial gateway to Asia for more than a century. The rise of trade with China, and with Japan before that, created tremendous business opportunities, and Washington’s ports enjoyed robust growth in terms of inbound freight in the second half of the 20th century. Annualized growth in cargo volume for the ports of Seattle and Tacoma, now partnered under the auspices of the Northwest Seaport Alliance, remained well above the national average in the 1970s and 1980s.
However, it is increasingly apparent that more must be done to ensure the success and growth of Washington’s shipping industry in the coming decades.
According to The McCown Report, a newsletter published by longtime shipping executive John McCown, the ports of Seattle and Tacoma saw an annualized rate of growth for inbound cargo that has lagged well behind their peers for the last quarter century. From 1995 to 2021, the total combined incoming container volume at the Ports of Seattle and Tacoma grew at an annualized rate of just 2.2%. The figure for other major west coast ports, like Los Angeles and Long Beach, were substantially higher – 5.9% and 4.8% respectively. For ports on the East Coast, the growth rate was typically even higher, at 6.8%. The Port of Savannah—thought to be the best managed port in the country—went from managing 184,270 inbound containers in 1995 to 2,801,201 containers in 2021, an astounding annualized growth rate of 11%.
Seattle’s relative loss in market share can partly be attributed to the recent Panama Canal expansion. In 2016, the Panama Canal essentially doubled its capacity. Deeper, wider locks allowed the larger vessels to traverse the canal and head directly to their final destination, skipping west coast ports and rail connections. Container ships coming from Japan or China and headed to the big Midwest and East Coast markets that would have docked in Seattle and placed their cargo on rail lines and in trucks can now pass through Panama and dock on the east coast. Because those Atlantic ports are closer to America’s major markets, this route is cheaper for Pacific Rim shippers. Going the long way around via Panama is certainly a cost effective way of moving goods from Asia to, say, Chicago and New York, but it is also very slow.
More than any other port in the country, Seattle is a way-station for goods moving to other markets. In a typical year, over half of the cargo that arrives in Seattle is destined to leave the Pacific Northwest for another region.
This reality creates Seattle’s challenge and opportunity for growth. Commercial shippers moving freight to Seattle are typically sending most of it onto another market via intermodal shipping—transferring cargo from ships to trains. The primary competitive advantage for Seattle and Tacoma’s ports is speed. If goods are moved efficiently, Seattle and Tacoma can move cargo to major markets faster than U.S. competitors like Long Beach and Los Angeles, and nearly as fast as the Port of Prince Rupert in Canada.
On that score, Seattle’s newly revamped Terminal 5 near West Seattle is a very positive development. The upgraded Terminal opened for business last month, with improvements necessary to host new, larger classes of freighters. Now with shore-power, heavy duty cranes, a reinforced wharf, deeper berth, and on-dock rail, Terminal 5 is well placed to maintain its position as a top-of-the-line destination for commercial freight and container ships.
The deeper berth, reinforced wharf, and heavy duty cranes are all required to dock and unload the newest classes of large freighters. Shore-power helps to limit how much exhaust and air pollution the docked ships produce, and has also become increasingly standard for major commercial ports.
The main feature that makes Terminal 5 much more competitive is on-dock rail. Moving containers directly from a ship to a train is the fastest way to move them to their final destination. Terminal 5 is currently the only dock within the Ports of Seattle and Tacoma to feature on-dock rail. Because on-dock rail is a fast, efficient way to move freight at scale, Terminal 5 showcases Seattle’s best selling point from a commercial shipping point of view: speed.
I asked former Port Commissioner Stephanie Bowman about the possibility of adding on-dock rail to other port terminals at the Port of Seattle, such as Terminal 46 (just south of the downtown ferry terminal), which could be a good candidate for on-dock rail. (Plans to develop a cruise ship terminal on Terminal 46 are currently in limbo due to the economic effects of the pandemic.) Bowman explained that, while more on-dock rail could generally be beneficial for increasing the volume of shipments to the port, Terminal 46 is substantially smaller than Terminal 5 and may not be the ideal place for that kind of development.
Instead of focusing on specific infrastructure upgrades that might be useful at various terminals, Bowman argued that the best path forward would entail a change of strategy and tactics at the Port. She noted that the ports of Vancouver and Prince Rupert in Canada are a threat to Seattle’s position because they can move goods to the American Midwest faster than Seattle and Tacoma. The Canadian ports have taken some business away from the ports of Seattle and Tacoma in recent years, a threat underscored in a report published by the Northwest Seaport Alliance late last year.
Canada is already doing exactly what Bowman is suggesting Washington do—taking a comprehensive approach to developing its commercial shipping industry. Since 2016, Canada has invested significantly more resources into its commercial ports than the U.S. And the Canadian government is making investments in a strategic, focused manner—elevating a small number of key ports on both coasts, including the ports of Vancouver and Prince Rupert. With the influx of new federal spending Washington state’s government has an opportunity to shift its strategy in that direction, towards a whole-of-government approach that elevates the commercial shipping industry and drives real growth, as politically challenging as it would be.
Developing a better working relationship with the commercial shipping industry’s primary customers, the IKEAs and Home Depots of the world, would be a good place to start. Two of the world’s biggest shippers, Amazon and Costco, are headquartered in Western Washington, and speed is important to their operations. Infrastructure improvements are also needed, and installing on-dock rail at more terminals is one obvious step. New rail spurs and transit stations would help alleviate congestion and air pollution created by trucks traveling on I-5. Well-placed warehouses would incentivize more businesses to move freight through Washington’s ports.
Simply put, maintaining market share for the ports of Seattle and Tacoma in the decades to come is not something the ports can do on their own. Increasing the ports’ advantage in terms of goods-to-market speed, will involve addressing areas and issues outside of their remit, and will require marshalling all the business and governmental resources Washington has to offer.
One of the things that makes Seattle unique is that the city has held onto its commercial port while transitioning to a service economy. While other cities have watched their ports migrate to smaller cities with more open space for stacking containers and less traffic congestion, Seattle has resisted the tide. Continuing that capture for Seattle and Tacoma ports will not be easy, and it will require serious investment and a new strategy. Maintaining the city’s historically strong working waterfront, and the state’s commercial shipping industry, a vital part of the state’s diverse economy. is well worth the effort. The influx of federal infrastructure funding means the time to act is right now.