Bulk and Breakbulk Report
October 1, 2018
Northwest Seaport Alliance CEO John Wolfe, who recently stood before the US House Ways and Means Committee, spoke about the effects of US tariff policy on the local and national economy.
He brought up the $2.5 billion worth of industrial and electric machinery imports that move through the Seattle/Tacoma ports into Illinois, while Ohio and Indiana respectively import $1.9 billion and $1.2 billion worth of these products through his ports. Last year, Seattle/Tacoma exported $1.89 billion in soybeans to China even though none are being grown in Washington State.
"We are deeply invested in US trade policy discussions because they directly impact our core business, the success of our customers and the lives of our local residents," he said.
But even in the face of trade uncertainty, west coast ports that handle bulk and breakbulk commodities are striving to diversify their business and invest in expanding facilities and infrastructure to capitalize on the opportunities that may arise.
This Southern California port has created a niche for itself as a port that handles bulk and breakbulk commodities.
During fiscal year 2016-2017, the port moved nearly 2.8 million metric tons, with about 21.5 percent of that auto cargo (601,246 metric tons), 42.3 percent dry bulk (1,181,491 metric tons), 3.1 percent liquid bulk (86,919 metric tons), 30.4 percent containers (848,418 metric tons) and 2.6 percent breakbulk cargo (72,442 metric tons).
And while San Diego saw its highest ever volume for auto cargo in FY 2015-2016 with 670,847 metric tons, the port saw it decrease in FY 2016-2017 because of several factors, including end-of-lease cycles or regulatory requirements limiting additional importation. Also, many manufacturing facilities relocated to Mexico, bringing in more rail auto cargo than typical from years past.
Like other ports, the Port of San Diego is closely monitoring how tariffs will affect its business.
"Currently, the most vulnerable commodities handled by the port that are negatively impacted include steel products such as steel coils and pipes," said Joel Valenzuela, director of maritime at the Port of San Diego. "Additionally, although no immediate impacts have been seen, automobile import volumes could also be at risk, depending on how tariff negotiations evolve."
Commodities least affected include containerized perishable products from Latin America, project cargo, and bulk commodities such as construction aggregates and bauxite, according to the port.
"Any conditions that negatively impact global trade are potentially detrimental to the Port of San Diego Maritime business, as this business is driven by trade volumes," Valenzuela said. "A full-blown trade war would have significant detrimental impact on Port business. Of note, however, is that the port has a diversified portfolio of commodities and trade partners that can potentially guard against supply/demand shifts caused by commodity-specific tariffs."
The Port of San Diego's Maritime Business Development team recently secured a three-year deal with G2 Ocean, one of the world's leading breakbulk and bulk shipping firms.
"Having G2 as our trans-Atlantic shipping liner is just the first step in our long-term break bulk and project cargo strategy," Valenzuela said. "Next, we're looking to secure a trans-Pacific liner service."
G2, which formerly had regular service to Los Angeles, will now call at least monthly to the port's Tenth Avenue Marine Terminal, bringing steel products such as steel coils, steel pipes, steel plates and slabs for shipbuilding, appliances and construction projects, as well as project cargo such as transformers and yachts and bagged and bulk fertilizer.
The deal is "a big win for the port and demonstrates that the port can compete with large container ports like Los Angeles and Long Beach when it comes to specialty cargo," Valenzuela said. "With our Tenth Avenue Marine Terminal Redevelopment project underway, we hope G2 will continue with the port well beyond the initial three-year term."
Speaking of Tenth Avenue Marine Terminal, work on the redevelopment project is underway. For Phase 1, crews have demolished an old, underused transit shed near three of the terminal's primary berths and are excavating, grading and compacting the areas beneath the site of the former shed to support a finished pavement. Other work includes demolishing a second transit shed; improving on-dock rail and creating new modular buildings for office space; utility enclosures and restrooms. Phase 1 is expected to be done in spring 2020.
Future redevelopment plans for the Tenth Avenue Marine Terminal may include adding consolidated dry bulk storage capacity, which may feature a new 100,000-square-foot dry bulk structure or an equivalent vertical storage facility; enhancing the existing conveyor system; creating more storage space; updating on-dock rail facility; and installing up to five gantry cranes.
"The TAMT Redevelopment Plan supports our specialty cargo advantage by providing laydown space and flexibility for each cargo type," Valenzuela said.
The port's plan is to focus on three distinct cargo nodes within the existing footprint of the terminal and focus on current core specialties of project cargo, roll-on/roll-off, and breakbulk cargo such as military equipment, wind energy parts, shipbuilding steel, and vehicles; refrigerated containers for fresh produce such as bananas or other perishable goods; and dry bulk cargo such as soda ash, aggregate and cement, used primarily in construction.
Currently, the port is recruiting for additional liner services. Steel products, project cargos, aggregate; perishables and sugar are some examples of commodities that the port is seeking to service at the Tenth Avenue Marine Terminal.
"The Port of San Diego is committed to expanding its break bulk and bulk business," Valenzuela said. "The recent recruitment of G2 Ocean proves that the Port is on the right track to expand its customer base. As previously stated, the District is undergoing a $24 million transformation at the Tenth Avenue Marine Terminal. The main objective of this project is to recruit additional liner business to create a robust and positive economic impact in the region."
Port of Vancouver USA
A major player in the realm of bulk and breakbulk, this Washington port handled about 7.5 million metric tons last year, a slight uptick from 2016 with 7.49 million metric tons.
Last year, the port saw a rise in bulk commodities such as copper, bentonite clay and wheat. Although it saw a slight dip in corn exports, grain is still the port's biggest export by volume.
"The port's cargo mix remains consistent with prior years," said Alex Strogen, chief commercial officer at the Port of Vancouver USA. "Within our two primary niche segments of bulk and breakbulk, the Port of Vancouver strives to maintain a diversified mix of product types. This diversification is further supplemented by our auto terminal serving as the primary gateway for Subaru vehicles distributed across the northern tier of the USA west of the Mississippi."
Global trade policy uncertainty has created a challenging environment for all ports, including Vancouver USA. But the port's diversified base of products helps offset the impact of any one product being disrupted due to tariffs, Strogen said.
"We have seen our portfolio of products remain relatively stable through the course of 2018," Strogen said. "We have not yet witnessed a significant drop in volumes, as a result of tariffs. However, what we do see is a hesitation by some of the port's customers to make long term capital investment decisions until clarity can be achieved in terms of trade policy."
Meanwhile, the port remains focused on growing its bulk agriculture and bulk mineral business segments through the development of its Terminal 5 facility.
Terminal 5 is designed to handle large volumes of bulk commodities from rail to marine and features an 8,500-foot-long loop track that is able to accommodate multiple unit trains carrying a variety of bulk cargoes within the port's internal rail complex.
In July, the port also celebrated the completion of a $250 million West Vancouver Freight Access project, an effort to improve freight rail movement through the port and along the BNSF Railway and Union Pacific Railroad mainlines linking the Pacific Northwest to major rail hubs in Chicago and Houston, and from Canada to Mexico.
The port also wrapped up work on Centennial Industrial Building in the spring. By June, the entire 125,000-square-foot building was leased to Hawthorne Hydroponics, a subsidiary of ScottsMiracle-Gro, a company that sells lawn and garden products in the consumer market.
Port officials are optimistic about its bulk and breakbulk business, despite ongoing tariff talks.
"We see positive signs within the Renewables energy segment going into 2019 as the wind energy business takes advantage of the remaining Production Tax Credit benefits," Strogen said. "Our outlook on bulk agriculture remains flat with a cautious outlook on foreign tariffs impacting soybeans. We see stable to positive potential for our mineral bulk business as these commodities fluctuate with the global market."
Port of Olympia
The port's 66-acre marine terminal features a complete breakbulk/container yard, a US Customs bonded warehouse, on-dock rail and three modern, deepwater berths, all to handle its bulk and breakbulk needs, said Jennie Foglia-Jones, communications, marketing and outreach manager at Port of Olympia.
"We consider ourselves a bulk/breakbulk niche port," she said. "With a strategic Pacific Northwest location and a productive workforce, you can count on innovative service and competitive pricing. We are ready to meet your unique cargo and performance needs today, next week and next year."
Over the past two years, the Port has handled log and dairy heifer exports and bulk grain and gold ore imports.
But the increase of tariffs has affected log export business at the port, where it expected to handle an estimated 130 million board feet in logs in 2017.
And while the port has seen a slow decline with China exports, its business with Japan continues to be "stable and promising for the future," Foglia-Jones said.
"Opportunities arise at different times and we will be ready as new cargoes become available," she said.
Current trade instability makes projections for bulk and breakbulk business beyond 2018 less reliable, though the port expects to load more than 100 million board feet in logs and are hopeful for continued livestock shipments.
"Tariffs have impacted current trade opportunities and project cargoes entering the Pacific Northwest," Foglia-Jones said. "The port continues to seek viable cargoes for sustainable growth options in the future. For now our concentration remains with our log tenants and livestock customers."
The port will continue to stay on top of trade information and work with trade organizations such as Washington Council for International Trade and liaison with our Senators and Congressmen to ensure continued open trade is available, she said.
Meanwhile, the port is focusing on upgrading storage capabilities for an improved customer experience and working on short- and long-term project.
"(With an) industry established reputation of our flexible and efficient longshore, our loop on-dock rail, our 76,000-square-foot open beam warehouse and 140 MT lifting capacity Gottwald crane, we remain confident that Port of Olympia remains a premier niche Port," Foglia-Jones said. "We will provide personalized services, fair rates, a bulk ready facility and an ideal location to help the customer succeed."