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Tide still slack for water carriers.

Drawing their sustenance from a modest state economy, Alaska's water carriers posted only modest performance in 1992. Market shares of Sea-Land Service Inc., Totem Ocean Trailer Express (TOTE), the rail barge companies and small carriers comprising the so-called mosquito fleet remained virtually unchanged. Competition was intense but unmarked by dramatic developments. It was the practiced rhythm of well-matched adversaries facing a long contest.

Industry spokesmen forecast more of the same for this year.

But in business, as in athletics, the sort of equilibrium that prevails in Alaska marine shipping is a transitory phenomenon. Just as boxers testing their opponents know that the circling and probing will come to an end, so in shipping it is inevitable that the current calm will come to a clamoring end when someone makes a move.

Company representatives are reticent about when or what the next major initiative in the market might be. But reading between the lines of equivocal statements and the general prayers for more economic prosperity, it appears some things have already begun to shift.

A Repeat of 1991

Last year marked the beginning of Sea-Land's new service to the Orient via Dutch Harbor. This allows fish processors to ship fish and fish by-products, mainly crab and bottomfish, directly from Kodiak and the Aleutians without first going through Seattle-Tacoma, a substantial economic boon.

"That has done real well," says Dan Ramsay, Sea-Land spokesman. Otherwise, he says, 1992 saw performance very similar to the year before.

"It's basically the same. What we have is a two-horse race. It's been real good. There's been pretty tough competition. And it's probably going to stay that way."

Jim McKenna, Sea-Land's general manager for Alaska, is even more effusive about the company's new service.

"We saw tremendous movement in our westward traffic from Dutch," says McKenna. "It was very, very strong."

McKenna says southbound traffic, which also consists primarily of fish products, remained steady. He characterized northbound cargo volumes as "real flat, no surges, no increases" over 1991.

At TOTE, operations vice president Ev Trout notes some gain for his company last year.

"The basic market was up right at 3 percent," he says. However, he adds that market shares among the major carriers remained constant. In terms of cargo brought to the Railbelt, TOTE and Sea-Land remain dead even.

"The predominant aspect of growth was a reflection of population growth," says Trout. Things will probably not change dramatically without a major new economic development and resulting population increase, he adds.

Crowley Makes a Move

Some observers think that if any of the major Alaskan water carriers could be said to have made a significant positioning move in 1992, it would be Crowley Maritime Corp., operator of what used to be known as Alaska Hydro-Train.

The 100-year old company is one of the largest and most diversified marine carriers in the world. Crowley has been shipping cargo to Alaska for 34 years. It has operated Alaska Hydro-Train for most of that time and is also known for its mammoth sealifts of oilfield supplies to the North Slope and deliveries of lesser volume to other remote Alaskan locations.

Crowley competes directly with CN Aquatrain in the rail barge service that calls at the port of Whittier. While the rail barge carriers run a distant second in volume to carriers serving southcentral Alaska through Anchorage, Sea-Land and TOTE are far from uninterested in any changes at Crowley.

This is especially true since Crowley hired ex-Sea-Lander Gerry McAvinew as director of marketing and sales for general cargo services, based in Seattle. Crowley spokesman Dick Simpson says neither the hiring of McAvinew, nor the decision to drop the Alaska Hydro-Train name in favor of Crowley Marine Services, reflects a new or more aggressive strategy for the Alaska market. On one hand, a position was open, and on the other hand, the name change reflects a company-wide restructuring announced last August that had nothing to do with Alaska.

Ramsay says he expects Crowley will increasingly target less time-sensitive cargoes in the local market under McAvinew, and expects there will be "some small shift" in market share as a result.

How will Crowley's efforts affect the market in the long run? "Too early to tell," says Sea-Land's McKenna.

Will Northern Lights Sail?

Nearly three years ago, TOTE suffered a sudden setback when its 791-foot vessel Great Land had its engine room flooded during routine maintenance operations in Tacoma. The ship was knocked out of service for 12 weeks during the height of the summer shipping season, leaving only the Westward Venture in service.

While the company regained its footing, TOTE officials decided not to risk a repeat occurrence, which briefly cost them 20 percent of their business; unlike Sea-Land, Alaska is TOTE's only market. The company bought a third vessel, the Northern Lights, a $50-million investment which includes the cost of refurbishment and a 90-foot extension, which is nearing completion.

A serious question has been, and continues to be, when will the Northern Lights go into Alaskan service?

"That depends a solely on the market and what the situation is," says Trout. He feels the market probably won't justify a third sailing, but stresses that acquisition and adaptation of the Northern Lights to complement its two other vessels is important in the long term because it would allow TOTE to grow. Currently, the company loses freight to Sea-Land during summer months when its in-service vessels reach capacity.

Sea-Land's Ramsay says there's no way TOTE can afford the market disruption that would result from adding excess capacity and falling prices. "There just ain't that much market," he asserts.

TOTE appears well aware of the market's vulnerability to having too many ships on the water.

"We are very sensitive. The last thing in the world we want is to create a situation of overcapacity," says Trout.

There may be other options for the Northern Lights in 1993, including the unlikely possibility of leasing to the federal government, or pulling one of its other Alaska ships out of the schedule for servicing and substituting it with the new vessel. Trout says TOTE remains interested in hauling fish from Dutch Harbor to Seattle-Tacoma, but cannot justify entry into that market right now because of the capacity issue.

Who Will Make the Next Move?

Most maritime transport analysts are projecting little change in performance by carriers this year over last year, although Trout is a little more upbeat.

"We're expecting about a 4 percent increase in 1993," he says.

At Sea-Land, McKenna expects business to be flat or a little better for northbound and southbound cargoes.

Negative factors in the fishing industry will hold down new growth in Sea-Land's service to the Orient, including this year's bottomfish strike, smaller quotas, smaller fish, increased Russian competition and a glut of product still on the market.

"It will be an OK year, not a banner year like last year," says Sea-Land's McKenna.

And with the economy still ho-hum, the major carriers are not even hauling at capacity. One expert estimated last year it would take a 40 percent jump in the market to absorb the available space. With such a modest prognosis, where do analysts foresee future growth?

Echoes of Retail Boom

Alaska's water carriers have benefited from new retail construction in Fairbanks, Anchorage and the Kenai Peninsula. In fact, it is likely that without the retail boom, the marine cargo market might actually have dipped last year. In 1993, building materials will continue to boost carrier revenues as late-entering players like Wal-Mart break ground.

But more interesting, says McKenna, is what happens when retailers stop shipping bricks and mortar and start consigning merchandise for those acres of aisles. He predicts this transition could impact the competition for marine cargo market share substantially.

"It should prove very, very interesting for '93," says McKenna. "Strategies may change in time."

TOTE's Ev Trout says recent efforts to prolong the life of North Slope oilfields and the trans-Alaska pipeline, and Arco Alaska Inc.'s announced strike in upper Cook Inlet, constitute "a very positive development in the petroleum area."

Trout says such developments not only signal continued health and stability in the Alaskan economy generally, but this kind of oilfield work produces demand for everything from pipe to drilling mud, much of which will be shipped by sea.

To Russia, With Love

New developments in domestic politics or the global economy may hold promise or peril for Alaska's maritime carriers in the future, including changes to the maritime laws and exploration of northern shipping routes with Alaska as a transiting point between the Pacific Coast and Europe. At the moment, these are distant developments in the minds of most analysts.

Still, Alaska's maritime industry has not been without its pioneers in forging new markets. And it's not always the big guys with the big ships that make a splash. Last year, Alaska Cargo Transport of Seattle conducted a successful joint venture to deliver oilfield supplies to Russian shores.

Whether this is a mark of things to come or simply one firm's passing fancy remains to be seen. For the most part, no one in the industry is complaining about modest growth, because it is growth, all the same. In the meantime, the major players watch and wait for some positive economic development, some weakness in their competition to signal the time to make a new move and improve their advantage.
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Article Details
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Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Apr 1, 1993
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