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Port of Portland container deal a test of labor relations

The initial deal will have a nominal benefit to agricultural exporters because of the small volume it represents.
Mateusz Perkowski

Capital Press

Published on November 13, 2017 5:50PM

Last changed on November 14, 2017 1:28PM

Container terminal operations at the Port of Portland in 2015. Monthly container shipping will resume at the port as soon as January under a new agreement with Swire Group.

Capital Press File

Container terminal operations at the Port of Portland in 2015. Monthly container shipping will resume at the port as soon as January under a new agreement with Swire Group.

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The small-scale resumption of container shipping from the Port of Portland is expected to be an early test of its reconciliation with the longshoremen’s union.

If their renewed relationship proves workable, the port hopes it will serve as the foundation for larger-scale container exports to East Asia, said Keith Leavitt, the port’s chief commercial officer.

“We’re in a very good spot of cooperation with labor. We look forward to proving that out,” he said.

Ships from the London-based Swire Group are expected to begin calling on the port’s Terminal 6 in January, roughly two years after the facility was abandoned by other ocean carriers due to productivity problems.

The deal with Swire Group, whose Cathay Pacific division already provides air cargo service at the Portland International Airport, was struck during Oregon Gov. Kate Brown’s recent trade mission to Hong Kong.

For years, slow loading and unloading of containers at the terminal was blamed on a dispute between the terminal operator, ICTSI, and the International Longshore and Warehouse Union.

The Port of Portland terminated its lease with ICTSI earlier this year, retaking control of the facility.

Over the past five months, the port has settled its own legal disputes with the longshoremen’s union and entered into a memorandum of understanding about their working relationship, said Leavitt.

The Port of Portland and ILWU will work jointly to bring more business to Terminal 6 and have agreed to regularly meet about operational issues before they become bigger conflicts, he said.

A spokesman for the longshoremen’s union confirmed the new arrangement and legal settlements.

For agricultural exporters, who’ve been hurt by the shutdown of container traffic from Portland, the agreement with Swire Group will provide nominal relief, at least initially.

The main outgoing product will be Western Star trucks headed to Australia, with agricultural goods such as grass seed, straw and forest products supplementing those shipments.

Swire’s ships will carry general cargo as well as containers, so they will only have a capacity of about 100 to 200 container per monthly call.

To compare, Hanjin — the bankrupt ocean carrier that once served Terminal 6 — handled about 1,600 containers per ship, with weekly calls.

“This is a much smaller container volume,” said Leavitt. “It’s a critical first step, but it’s step one of many steps.”

At first, Swire ships will deliver containers to Australia and New Zealand, then travel to East Asia to pick up U.S.-bound imports.

As the company grows more confident, it may begin shipping containers from Portland directly to East Asia — good news for agricultural exporters who must now truck their goods to more distant ports in Seattle and Tacoma.

“What we’re hoping is those volumes will build as they establish their market presence,” Leavitt said. “The hope is we’ll be able to build other services with Swire and other carriers beyond that.”

While the port’s repaired relationship with the longshoremen’s union is an important point, the container terminal still faces other challenges.

Before it contracted with ICTSI, the Port of Portland was losing money on the facility and subsidizing its operations with land sales.

With ICTSI now out of the picture, it must find a way to ensure Terminal 6 remains financially sustainable.

“We need to be able to at least break even,” Leavitt said. “We’re digging deep into that question.”

The container terminal is more than 100 river miles away from the Pacific Ocean and can’t handle the massive new ships built by ocean carriers.

It will need to find its niche, particularly as the shipping industry has undergone its own turmoil and consolidation in recent years, said Leavitt.

However, upon termination of the Terminal 6 lease, ICTSI made a payment to the port of $12 million, which will service as working capital for the facility, he said.

Starting out on a smaller scale with the Swire deal will allow the port to determine if its mechanisms for containing costs and earning revenues are functioning, Leavitt said.

“We will learn pretty quickly whether we’re losing money or making money,” he said.


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