Patrick Meagher, Weaverville
Trinity Journal, 7/20/16
Last week in these pages I made the case as to why container cargo ship service at Humboldt Bay Seaport is not competitive and therefore there is no need for rail connect from the port to the central valley main rail service. A key part of my argument was the 2003 Port of Humboldt Bay Harbor Revitalization Plan, and again I quote from page 11, paragraph 2, “The scenarios that include a public general cargo terminal are not recommended because they are not supported by market analysis and they involve an unreasonably high level of risk. Almost all of the markets that would be involved in public general cargo terminal operations were identified as unattractive in the prioritization analysis, and Humboldt Bay was found to be uncompetitive in most of them as well. The ‘build it and they will come’ nature of public general cargo terminals, combined with short contract terms common in the trade, high customer leverage, and intense port competition, would result in excess capacity and level of risk that is not commensurate with the limited market opportunity available.” Has anything changed since 2003? Nope, just look at the Port of Oakland experience this year. Contractor Ports America Outer Harbor Terminal filed for chapter 11 Bankruptcy in February 2016. Just five years ago Ports America and the Port of Oakland signed a 50 year lease agreement making the Port of Oakland the company’s single largest unsecured creditor according to court documents. As reported in the Thursday, July 14, 2016 San Francisco Chronicle, “there was a reason why Ports America went bankrupt. The shipping industry is in the doldrums. That’s thanks partly to the advent of large numbers of megaships, which have sent prices down as they carry more cargo and reduce fuel costs. That’s good for consumers….But it wreaks havoc for port related companies trying to gain market share by cutting costs. Before its bankruptcy, Ports America was losing about $40 million a year.” Port of Oakland executive director Christopher Lytle commented, “signing up someone to replace Ports America as an operator will only repeat the same experience.” Drewry, a British shipping consulting firm predicts a port operation’s shake-out is coming. They noted, “We’re expecting a wave of mergers and acquisitions and also likely to see more terminal operators follow Ports America into bankruptcy.” As a final comment on the Ports America bankruptcy, Mr. Lytle stated, “Our board doesn’t want us to make the same mistakes that were made a few years ago, putting someone in there that couldn’t get business. If a company doesn’t have a good plan that’s going to say where cargo is coming from, why would we do that?” It appears that the 2003 assessment and recommendation against a container cargo port in Humboldt Bay is just as relevant today as 13 years ago given the lessons of Port of Oakland with operator Ports America. Again, without a container cargo port in Humboldt Bay there is no need for a feeder rail line.