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Jan.26, 2015

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 34 THE JOURNAL OF COMMERCE JANUARY 26.2015 By Mark Szakonyi THE PORTS OF Seattle and Tacoma are scrambling to improve their intermodal access to the hinterland to protect the dis- cretionary cargo they have, and, perhaps, even regain business lost to Southern Cali- fornia and Canadian ports. They have their work cut out for them. Shippers already have diverted goods away from Puget Sound to Port Metro Vancou- ver and the Port of Prince Rupert, British Columbia, because of cheaper and often more reliable intermodal services to Chi - cago. The lure of the Los Angeles-Long Beach port complex and better availability of empty containers it provides Midwest exporters also has cost Seattle and Tacoma market share. The two ports had a 10.7 percent com- bined market share of North American west coast container volume in the first three quarters of 2014, down from 11.4 percent in the same period of 2013 and 11.9 percent in the first three quarters of 2012, according to port data collected by The Journal of Commerce. "If we hope to grow, it has to come from intermodal," said Linda Styrk, managing director of the seaport division at the Port of Seattle. "We are a secondary port, and unless our population base morphs, we are going to have to work at least twice as hard to grow our volume." Until now, Seattle and Tacoma could do little but encourage terminal operators to hand off imports to the railroads speedily and hope Union Pacific Railroad and BNSF Railway provide better, more competitive service. A planned alliance between Seattle and Tacoma could change that by giving the two ports a larger voice that could grab the railroads' attention. Under the Seaport Alliance, which is pending U.S. regulatory approval, Seattle and Tacoma will plan, market and manage their marine cargo terminals and related function under a single body. The two ports still won't have commercial leverage with container lines and railroads because they'll be out of the contracting process. But their combined market share will make them the third-largest North American container gateway, said Mike Reilly, the Port of Taco- ma's director of business development. The alliance "allows the global market- place to look at us though a different pair of lens," he said. Ideally, BNSF and UP would offer bet- ter service and more competitive pricing, encouraging container lines to ship more cargo through Seattle and Tacoma. The railroads, hypothetically, would moderate pricing increases in exchange for guarantees that the carriers would ship more volume through the gateway. "Right now, the way BNSF has taken their service is, 'We will give you good service for full trains,' " Styrk said. "If the shipping lines can't produce a full train, then they're getting not-so hot service." Aggressive development of the Canadian Pacific and Canadian National rail networks to grab more of the market stretching from Chicago to Detroit heightens the need for better and cheaper service from Seattle and Tacoma to the Midwest. Getting a grasp on how CN and CP services stack up to those of UP and BNSF is tricky, because the railroads don't publicly report reliability metrics, only service performance goals. BNSF and UP transit times this year have suffered just as much as the CP and CN legs, customers have told the Port of Seattle. BNSF transit times from Seattle to Chicago hit 10 days in the second quarter, but have since improved to between six and 10 days, according to Port of Seattle staff. UP's inter- national intermodal service between Seattle and Chicago is reporting sixth day morning arrival 90 percent of the time. UP's published service on the Pacific Northwest-Chicago leg for international equipment is fifth morning and fourth day at noon for domestic intermodal equipment. BNSF handles approximately 70 percent of the intermodal volume tied to the Port of Seattle, with UP handling the rest. The breakdown of market share between the two railroads is more balanced for Tacoma, Reilly said. He said service from both railroads was improving before congestion hit the ports last fall. Reilly is confident service will get back to mid-2013 levels sometime this year. As part of its $6 billion capital plan for 2015, BNSF will spend $2.9 billion on mainte- nance and $1.5 billion on expansion work. Much of that investment will go toward the Northern Corridor, the railroad's big- gest chokepoint. Congestion — driven by increased oil and frac sand shipments, grain shipments and broader freight growth — forced BNSF in 2014 to lower its service goal by approximately 40 hours for its expedited intermodal services on the line connecting the Pacific Northwest and Chicago. "Our intermodal customers are experi- encing improvements on our railroad and have our continued commitment that we will add the resources necessary to handle all of their business," BNSF spokeswoman Amy Casas said in an e-mail. "Once the new capital program is complete, we expect to further restore the capacity flexibility we have historically enjoyed to manage the periodic demand surges that come from a dynamic economic environment." UP, which also is expected to unveil a robust capital plan, said it's working to improve intermodal service from Puget Sound by reducing truck turn times at its Seat- tle intermodal yard, and expanding capacity on its line in the Columbia River Gorge. But improving intermodal service is only one part of the equation. The railroads won't PNW PORTS ON A MISSION Seattle and Tacoma are focusing on intermodal as part of a joint effort to protect and expand their market share

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