SEATTLE, Dec. 19, 2012 /PRNewswire-iReach/ -- Earlier this week, the Seattle Port Commission approved a ten year lease extension with Total Terminals International, LLC (TTI), a joint venture subsidiary of Hanjin Shipping Co., Ltd and Terminal Investment Limited (TIL). The extension will secure continued volume and revenue at Terminal 46 for the next 13 years, through 2025.
"We worked very hard to keep TTI in the Port of Seattle." said Seattle Port Commission John Creighton. "The cargo handled at T-46 means thousands of jobs and economic benefit for our region, which gets us closer to achieving the goals of the Century Agenda, calling for increasing freight volume at the port to 3.5 million TEUs in the next 25 years."
The Hanjin joint venture has operated in Seattle since 1986, and Commissioner Creighton noted that the effort to secure at Terminal 46 for another 10 years was the product of a lot of hard work on the part of many, including Washington Governor Chris Gregoire, the commission, chief executive Tay Yoshitani and seaport staff.
Hanjin Shipping, headquartered in Seoul, South Korea, is a subsidiary of the Hanjin Group, a large transportation conglomerate that includes Korean Air Lines (which operates daily flights to Seattle-Tacoma International Airport). Hanjin is the largest container line in Korea and the 8th largest worldwide. Hanjin has been operating in Seattle harbor since 1981, and have been at Terminal 46 since 1986.
Terminal 46 is an important component of the Port of Seattle's container terminal operations, generating approximately 20% of the container cargo currently passing through the port. Cargo volumes at Terminal 46 are currently estimated to annually generate 3200 direct, induced and indirect jobs. In addition, current activities at the terminal are estimated to annually generate over $370,000,000 in business revenue and over $24,000,000 in state and local taxes.
Last year, the Port of Seattle harbor handled over two million TEUs (20 foot equivalent units) of containers that contributed over 22,000 family wage jobs and $2.6 billion in revenue for the local economy. Over the next 25 years, the Century Agenda will add 100,000 jobs through economic growth led by the Port of Seattle, for a total of 300,000 Port-related jobs in the region, while reducing our environmental footprint.
At Tuesday's Seattle Port Commission meeting, Commissioner Creighton stated that the lease extension involves a restructuring of lease terms with Hanjin from the current flat rate that escalates every five years (standard across harbor leases), to a rate based on the volume of containers that comes through the terminals. Because all cargo terminal operators at the Port of Seattle have a "Most Favored Nation" clause – requiring that all terminal operators receive substantially the same treatment – the other cargo terminal leases in the harbor will also be restructured. While less revenue is projected in the short-term, the new lease structure aligns the port's lease structure with most other ports around the world and will make the port more competitive over the long- run.
In an interview after the public meeting, Commissioner Creighton also noted that the back-and-forth competition for Hanjin with the Port of Tacoma led to a much lower renewal rate than port officials were hoping for. He stated that Seattle port officials have ongoing talks with Port of Tacoma officials to see how the two ports can cooperate to grow the pie for all Puget Sound ports and stop the destructive "race to the bottom" that they are now engaged in.
"Having separate ports in the same body of water may have made sense 100 years ago," Creighton said. "In today's world of complex, interconnected economies, having localized ports using public tax dollars to undercut one another benefits no one."
Commissioner Creighton mentioned that seaport industry experts believe that if Seattle and Tacoma cooperated, lease rates would be closer to those at the Port of Oakland, over 50% more than current Seattle/Tacoma cargo terminal lease rates. That equates to tens of millions of dollars each year lost by both ports through counterproductive inter-harbor competition.
According to Creighton, the lack of coordinated port operations impedes regional planning of critical freight infrastructure necessary to keep our local economy competitive. In 2008, three ports to the north of us in British Columbia combined to form Port Metro Vancouver. One of their main rationales was to wield greater market power to better compete with other West Coast ports.
Puget Sound public ports have been cooperating more and more over the past several years on issues varying from environmental stewardship to port security. Commissioner Creighton believes that the two ports should be looking at two additional areas of cooperation: infrastructure development and commercial planning and marketing.
There are infrastructure needs that local public ports have in common — such as off-dock intermodal rail-yard capacity — that he thinks the two ports should be developing jointly instead of duplicating efforts. Creighton believes that greater commercial cooperation among local ports would give Puget Sound ports increased market power and a better ability to resist the "race to the bottom" in which ports undercut each other with public dollars.
About Commissioner John Creighton
John Creighton was elected to the Seattle Port Commission in 2005 and re-elected in 2009. He served as Port Commission President from 2007-2008, and for the last two years as co-chair of the Commission's Century Agenda committee. The Century Agenda committee has led the development of the Port's 25-year plan to help grow 100,000 new port-related jobs for the Puget Sound region.
Prior to returning home to Seattle in 2000, John Creighton was a business lawyer who practiced law in Washington, D.C., and overseas in Istanbul, Helsinki and Singapore with the New York law firm White & Case. He grew up in the eastside suburbs of Seattle, where he attended Interlake High School. For more information about Commissioner John Creighton, please visit www.johncreighton.org.
Learn about the Seattle Port Commission's Century Agenda – which sets out a series of goals for the port in the next 25 years, – visit here.
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