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Tuesday, March 19, 2024
March 19, 2024

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Global shipping woes affect Portland

Consultant says carriers can’t justify calling on the port

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MEDFORD, Ore. — The demise of ocean-going container traffic through Portland is indicative of global shipping woes, but it’s unlikely to spark higher consumer prices.

Edward Zaninelli, president of Griffin Creek Consulting, who deals with international carriers and shippers, said this week the Port of Portland’s loss of container shipping activity is the result of overcapacity in the industry.

“Carriers are losing their shirt,” said Zaninelli, a former North American representative for Hong Kong-based OOCL. “Technically, they’re subsidizing the export market by billions of dollars, even with the rates the lowest I’ve seen in my career, because they’ve overbuilt and oversupplied based on the market.”

Ports such as Portland don’t generate enough traffic for carriers to justify making calls, he said.

Los Angeles and Long Beach combine to handle 75 percent of West Coast shipping, Seattle and Tacoma handle 13 percent and Oakland 9 percent.

“The major ports will continue to dominate,” said Zaninelli..

Carriers, with rare exceptions, are hemorrhaging cash, forcing their owners — often government entities — to shore up their finances or combine competing lines flying under their flag.

“The industry has focused on utilization, not profit,” he said.

Zaninelli said officials who don’t understand the industry hire people ill-equipped to run carriers.

“People who don’t know what they’re doing appoint people who don’t know what they’re doing,” he said.

An industry capable of making billions in profits is losing millions every quarter.

Danish-based Maersk Line, one of the few companies showing profitability, earned $700 million the first quarter of 2015, but saw profits plunge to $57 million during the first quarter this year.

“There are only two or three other carries reporting a profit,” he said. “Everyone else lost money.”

Korea’s container carriers Hanjin and Hyundai are in receivership, owing money to a state-owned bank. Hanjin accounted for 78 percent of the Portland container business, or 1,600 containers weekly, before pulling out 15 months ago.

“They should be forced to merge to eliminate some of the overlapping costs such as management and HR,” he said. “The three Japanese carriers all lost money; there should be just one in Japan.”

“What we have now is financial destruction within the industry,” Zaninelli said. “The result will be common sense as some of the carriers go away or merge.”

When Maersk began building massive 400-meter ships in 2011, other companies followed suit.

“It was monkey see, monkey do,” Zaninelli said. “Everyone thought they needed bigger ships. Money was cheap, and they built beyond the global need. They focused on volume, not revenue.”

Operational costs to call on the likes of Portland no longer penciled out.

“Low transportation rates for goods does not create more shipments,” he said.

The cost of shipping a television set across the Pacific dropped from roughly $3.25 to $2.50 last year.

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