The difficult situation for the North American tug industry today â€” beginning with the financial plunge in 2008 and continuing into 2009 â€” runs parallel to the worldwide decline in container shipping.
“Initially we were seeing a drop in cargo. Now we are seeing shipping lines drop vessels entirely out of their routes, resulting in fewer ships coming overall,” said Scott Hoggarth, Crowley Maritime’s general manager for contract services in Seattle.
“Fewer ships means fewer containers and â€” most troubling â€” less work for those in port related businesses,” said Richard D. Steinke, executive director at the Port of Long Beach in California.
Containership activity is an accurate indicator of global trade, especially at the Pacific Rim port of Long Beach/Los Angeles, which is North America’s leading terminal for the import and export of containers. Long Beach container trade dropped 43.3 percent for inbound and 37 percent for outbound between February 2008 and February 2009. From January to February of this year alone, inbound container traffic dropped 25.6 percent, according to port reports.
Container movements at five major West Coast ports taken together was reported as being down 35 percent in February, compared to the prior year period, according to the Pacific Maritime Association (PMA). For the first two months of the year, container volume at the five ports of Seattle-Tacoma, Portland, Oakland and Los Angeles-Long Beach was down 28 percent according to the PMA.
On the East Coast, the Port of New York and New Jersey reported that “due to the current global economic downturn,” the total container traffic during 2008 in the port was 5,265,053 loaded and empty TEUs compared to 5,299,105 in 2007, representing flat growth for the first time since 1993. Rick Larrabee, port commerce director, said container volume in the first three months of this year was lower than the same period in 2008. “After many years of rising container volumes, our port isn’t accustomed to flat growth,” said Port Authority Chairman Anthony R. Coscia. “Still, we’re pleased that we outperformed other major U.S. ports,” he added.
The situation at these two major East and West Coast ports is representative of conditions at smaller ports on all coasts of the United States and Canada. Name the industry or the tug company and you will find diminished sales and, most likely, diminished profits. Companies with level or increased sales and earnings are the exception.
The economic engine that drives business on our waterways has been reduced to running on a slow bell. Tugs that assist containerships are not the only ones suffering, of course. Those that assist car carriers, banana boats, oil tankers, bulkers, break-bulkers and refrigerated ships â€” all these and more are arriving and departing with diminished frequency. But it’s the containerships, and all their support businesses, that get all the headlines.
By late March of this year, the number of containerships in lay-up â€” literally lying idle at docks in faraway places with absolutely no need for tugboat assistance â€” reached 485 with total capacity of 1.42 million TEUs. That figure represented roughly 11 percent of the world container fleet capacity, according to The Journal of Commerce.
As ships were tied up, mountains of unused containers began to emerge in container ports all over the world. In March, as many as 200,000 empty containers were reported to be piled up at the Port of Shanghai in China, normally one of the busiest container ports of the world. Around the globe millions of containers were being piled up in parking lots and unused fields, it was reported. And in waters near Singapore, a total of 735 cargo ships of many types, including tankers, were anchored in mid May because of the decline in shipping cargoes, according to Lloyds Register-Fairplay Research.
|Work for tugboats has diminished along with the decline of container traffic in and out of U.S. ports. Fewer containers means less work for thousands of shoreside businesses and employees, and for equipment such as that shown here at the Port of Los Angeles.|
In Seattle the port slowdown was as severe as anywhere. Container volume in 2008 was down 13.6 percent compared to the year before, and the situation has been getting worse in 2009. In February, the port asked 850 of its non-union workers to take two-week unpaid furloughs while urging unionized employees to come up with a similar plan.
Hoggarth explained how a decline in containership traffic might effect tugboat operations in his region that includes the Seattle area.
Crowley’s Puget Sound operations using three or four tugs in the South Sound to handle container, bulk and auto carrier vessels were experiencing longer idle times between jobs, he said. However, the North Sound with three or four tugs had remained busy with tanker work. “One factor is we still need to service the customers that remain at their reduced levels. For example, if we have two tugs servicing a container port with normally 20 customer vessels per week and that is reduced to 15 vessels, we still essentially need the same number of tugs. One tug can’t be redeployed without subcontracting a significant amount of work to a competitor,” explained Hoggarth.
At the same time, he said, “due to economic conditions we are receiving appeals for rate reductions from the container service customers who historically have been receiving the lowest rates. Since those customers are feeling the effects of the economic downturn most significantly, they have reached out to all of their vendors to grant reprieves until conditions improve. However, since our costs of doing business have steadily increased over time and continue to do so it is unfeasible for us to give back the modest gains we have recently garnered.” â€¢