PORTLAND — Business is again on the upswing at the Port of Portland’s container terminal after a turbulent decade.
Agricultural exporters are benefiting from resumed ocean carrier service at the terminal, which recently secured additional weekly and monthly vessel calls from two shipping lines.
The question is whether the port can sustain this upward trajectory and bring Terminal 6 into profitability, so it no longer has to be subsidized by other marine operations.
“We are still operating in the red but we have closed the gap significantly,” said Dan Pippenger, the port’s chief operating officer. “We’re closing the gap but we’re not there yet.”
Ten years ago, Terminal 6’s financial losses convinced the port to lease the facility to a terminal operator, ICTSI.
The longshoremen’s union began butting heads with the company almost immediately, resulting in decreased productivity that drove ocean carriers to abandon the container terminal in 2016.
ICTSI ended its contract to lease the facility for $11 million under a legal settlement, after which the port and the longshoremen’s union buried the hatchet.
Weekly container service returned to Terminal 6 early last year and the facility handled the equivalent of 58,800 20-foot containers in 2020.
With expanded service from the SM Line and MSC ocean carrier companies, the port projects those numbers will grow to 108,000 20-foot equivalent units in 2021 and 180,000 TEUs in 2022.
“It’s not linear, like a set number. It grows with time as they market the service,” Pippenger said.
However, an economic analysis commissioned by the port determined that Terminal 6 would need to handle roughly 350,000 TEUs annually to break even, or 265,000 TEUs if other cargo also passes through the facility.
The port has already exhausted the $11 million it got from the ICTSI settlement, but it remains committed to getting the container terminal to financial self-sufficiency.
The end of the settlement money isn’t “the end of the rope” because the terminal is making progress and the service is important to Northwest agricultural exporters, Pippenger said.
“It’s safe to say we’re patient but we want to see steady progress,” he said.
Until the container terminal can stand on its own financially, it’s being supported by other marine operations. How long that will last will depend on the port’s executive director and board of commissioners.
“We do look at it as a whole portfolio,” Pippenger said.
A key part of the deal with MSC is that its ocean carriers are discharging containers for importers in Portland before calling on other ports, he said. “They want to get rid of their cargo as quick as they can when they hit North America.”
That ultimately means more empty containers will be available at the facility — a crucial consideration for agricultural exporters, he said. “The exports are right here. They don’t have to go far to get filled.”
Increased service from SM Line is also significant, since it’s a relatively small global carrier whose operations align with those of Portland’s, Pippenger said.
“They’re a niche carrier,” he said. “It fits their profile to find a niche port.”
Since it began operating nearly a half-century ago, Terminal 6 has occupied a unique position.
Not only is the facility about 100 river miles inland, but it faces greater demand from exporters than from importers, unlike larger competitors on the West Coast.
“The Port of Portland has always been a quasi-coastal port. It hasn’t really operated as an inland port,” said John Vickerman of Vickerman & Associates, a port and freight logistics consultancy firm.
However, Terminal 6 could learn from inland port operations, such as those along the Mississippi River, which have focused on gearing their rail operations to serve larger coastal partner ports, Vickerman said.
By understanding the origin and destination of cargoes moving through Terminal 6, the port can use rail to help partners in the Puget Sound or elsewhere speed up the turnaround or “dwell” time for containers, he said.
The port should continue offering direct ocean shipping while also boosting the productivity of its intermodal rail operations, which are known to cut dwell time compared to trucks, Vickerman said.
Reducing dwell time for containers increases revenues without having to invest in new cranes or other equipment, he said.
“How can we do more with less? Reduce the dwell time on the containers,” he said. “If Portland’s Terminal 6 could lower its dwell time by half, its productivity would double.”
The global shipping industry is dealing with a backlog of containers that’s making life difficult for agricultural exporters that rely on Terminal 6, said Shelly Boshart-Davis, a state representative whose family business ships straw.
“It’s an international issue,” she said. “The backlog is killing everybody.”
Since ocean carrier service has resumed at Terminal 6, though, the company now ships about 30% of its cargo directly to Asia through that facility.
The rest is sent to Puget Sound ports through Portland’s intermodal rail yard or a competing service.
“Every time we can lessen the opportunity for delays, the better,” she said.
Boshart-Davis said her company would probably increase its reliance on direct ocean shipping from Portland if more ships traveled directly to its Asian customers without requiring re-load.
“That’s going to be across the board with ag exports,” she said. “The more destination ports that Portland can offer, the more business they can get.”