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Marine transport: back on an even keel.

MARINE TRANSPORT Back On An Even Keel

JUDGING FROM THE VOLUME of northbound cargo moved by the state's three major ocean carriers last year, it's safe to say the recession is over and Alaska's economy is on the rebound. But what about 1990 and beyond

Like much of Alaska's air cargo and trucking industries, Alaska's water carriers rode high on the wake of the Exxon Valdez oil spill and the millions of dollars the cleanup effort pumped into the state's economy. So matching 1989's performance rate will be difficult this year for Sea-Land Services Inc., Totem Ocean Trailer Express (Tote) and Crowley Maritime's Alaska Hydro-Train.

Cargo statistics provided by the three carriers indicate volumes in 1989 grew by 10 to 15 percent over the previous year, with about half of the increase attributed to the Exxon Valdez oil spill cleanup and about half to natural growth following three years of economic recession.

Removing increases attributed to the spill, carriers are projecting about a 5 percent natural growth rate for 1990. "Somewhere toward the end of 1988, the recession hit bottom," says Ev Trout, vice president of sales and operations for Tote.

Adds Jack Sutherland, vice president and general manager of Sea-Land's Alaska Division, "We had a significant upswing in the size and strength of the marketplace in the fourth quarter of 1988, and it was pretty much across the board, particularly in staple goods. People who had been positioning themselves for major capital purchases came into the marketplace. We saw a strong movement in automobiles as well as some appliance merchandise. Also, the exodus of people from the Anchorage bowl had pretty much stopped, which brought back the market a little bit."

Alaska Hydro-Train, which moves a lot of heavy cargo by barge to Whittier for distribution to Railbelt communities, saw its tonnage grow by about 10 percent last year. "There definitely has been an assortment of materials going to the North Slope," says Michael Evans, the company's regional sales manager for Alaska. "In 1989, we saw more building materials move to Alaska, which indicates more construction."

More freight passed through the Port of Anchorage in 1989 than any other time since construction of the Trans-Alaska Pipeline in the mid-1970s. The an overall 21 percent increase over 1988. Petroleum alone increased by 38 percent and general cargo by 12 percent. Revenues jumped 11 percent to a little more than $4 million.

Sea-Land, with about 42 percent of the Alaska ocean cargo market, posted a 13 percent overall increase in freight last year. The firm attributed 8.5 to 9 percent of the growth to oil-spill-related business. With about 38 percent of the market, Tote registered about a 15 percent increase in tonnage moved to Alaska, about half of which was tied to the spill. Alaska Hydro-Train, with a 16 percent market share, reported a 10 percent increase last year, but no breakout for spill-related business was available.

Though no match for the spending spree Alaskans enjoyed prior to early 1986, just before collapsing oil prices flung the state into a major economic recession, 1989 could be considered the year consumer confidence returned to the marketplace.

The strong performance of cargo in the fourth quarter of 1989 baffles several of the ocean carriers. "We found the fourth quarter surprisingly strong," Sutherland explains. "Freight lifting for the month of January was up 6 percent (over the same period last year). It may be residual money in the market from the oil spill, so we don't know if it is sustainable. Originally, we thought there would be a softening of the market when Exxon demobilized. (Apparently) people who didn't have confidence and postponed investment decisions have come back into the market with money diffused from the oil spill."

While ocean cargo is on the rebound, so are freight rates. In February, Sea-Land, Tote and Alaska Hydro-Train increased northbound rates by 3.5 percent to cover the rising cost of fuel. The fuel surcharge followed a series of rate increases last summer that raised tariffs by as much as 12.9 percent, which included a 2.9 percent fuel surcharge. Carriers said they needed to increase tariffs following several years of rate cutting.

"Most of that, if not all of that, was frittered away with freight reductions in the contract process," Trout says. "I suspect...there will be (more) increases and those increases will be dissipated in the competitive arena as the major carriers compete for cargo tied to contracts."

Sutherland, too, expects more rate increases on the horizon for Sea-Land, which has seen fuel prices escalate by 60 percent over the past two years. "I don't see how carriers won't go for another freight rate increase," he says. "Trade is smaller than it was in 1984 and 1985. We're not doing what is needed for the shareholders for the rate of return. I don't see much choice barring some tremendous increase in the marketplace."

Evans of Alaska Hydro-Train agrees: "I think everyone has reached the general conclusion that a general rate increase is in the offing. It's possible there will be incremental rate increases in 1990. The market just hasn't grown."

All three carriers are cautiously optimistic about the future, pointing out that it's not easy to forecast the Alaska economy because of its susceptibility to outside forces, such as oil prices and military spending.

"In 1990, we're looking at a market that is less than 1989 but greater than 1988. We're looking for continued modest growth," Sutherland says. He explains Sea-Land management's forecast of 4.5 to 5 percent annual growth through 1993 doesn't include any major economic projects that might be tied to things such as oil exploration and development in the Arctic National Wildlife Refuge or repair work on the Trans-Alaska Pipeline. "These are the kinds of projects that could trigger significantly greater growth rates," Sutherland adds.

Alyeska Pipeline Service Co. has said it will take about $1.5 billion over five years to fix corrosion problems on the aging line that carries North Slope crude 800 miles to Valdez. "Repair of pipeline corrosion is getting a lot of play (in the press)," Sutherland says. "But how much (spending) will go for commodities, labor, etc.? This is something the freight carrier looks at."

Trout notes that in addition to repairs on the pipeline, Exxon's summer cleanup plans for the remaining oiled beaches in the Prince William Sound and Gulf of Alaska could have a dramatic effect on this year's northbound freight levels. "If they mobilize even a third to a half of what they had before, this will have a proportionate impact on traffic flow," Trout adds.

Alaska Hydro-Train's parent company, Crowley Maritime, was heavily involved in the cleanup, providing Exxon with barges, salvage vessels and tugs. Says Evans, "Revenues from the oil spill were very positive. We hope to get another 5 percent (in growth) in 1990. But a lot depends on whether Exxon comes back."

While the $2 billion Exxon spent on the cleanup had a sharp positive impact on northbound cargo statistics for 1989, in some cases it had a detrimental effect on southbound freight, especially for seafood products. For example, Tote reported a 30 to 35 percent drop in seafood volumes after salmon and herring fisheries were closed in the wake of the spill. "It affected us much more than Sea-Land because Tote serves (just) the Railbelt," Trout points out.

Sea-Land's total seafood cargo was up 3 percent in 1989, Sutherland says, but salmon freight decreased. "Salmon was down significantly in the export market, because Japan cold storage warehouses were full and the price was being manipulated because of the spill. We would have had an excellent year (for seafood) if it hadn't been for the spill," he says.

Barring another oil spill, the seafood industry should come on strong in 1990, Sutherland believes. And he adds there's plenty of reason for optimism outside the Railbelt, particularly in Kodiak and communities in the Aleutian Chain. "We're seeing some of the cyclical movement being removed (from the industry) with bottomfishing and surimi, which also helps in establishing and improving services to those communities," he says.

Evans of Alaska Hydro-Train notes his company is always looking for new products to ship south. Having transported tons of oily waste from last summer's oil spill cleanup, Alaska Hydro-Train sees hazardous waste as a strong growth market for southbound cargo. "There is no disposal site in Alaska to take the core of this stuff," Evans says. "There's a growing concern to get this kind of stuff out of the state."
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Title Annotation:Alaskan shipping industry
Author:Tyson, Ray
Publication:Alaska Business Monthly
Date:Apr 1, 1990
Words:1429
Previous Article:Puget Sound ports of call.
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