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'K' Line Pulls Up Portland Anchor

by Richard Read
The Oregonian, March 5, 2009

Portland will lose crucial container service to Japan in April when a Tokyo steamship company scraps a shipping route that spans the globe.

A local manager for "K" Line, which launched the 14-city pendulum-shaped route when times were better only seven months ago, confirmed Thursday that its vessels would stop calling on Portland. The port will lose one of its two Asian shipping links, retaining a European and South American service provided by another cargo carrier. As many as 90 Portland longshoremen who service a "K" Line vessel each week will lose that work, along with significant numbers of truck drivers, warehouse workers and freight forwarders. Exporters who ship everything from peas to compressed hay could lose sales.

"This is very difficult news at a very difficult time, but it's also not the end of the world," said Bill Wyatt, Port of Portland executive director. "This departure will leave additional cargo available for other carriers when overall market conditions improve."

Conditions are so bad in the global shipping industry that hundreds of idle vessels sit anchored off Singapore. Wyatt returned Wednesday from a conference in Los Angeles where U.S. port officials compared notes on sinking bottom lines.

"The global drop in container volumes has been stunning," Wyatt said.

Globally, Portland is a tail wagging a big dog, given the port's location up a river at the far end of a vast, 13-vessel shipping route looping through the Atlantic and Pacific oceans. As such, Portland apparently could exert little or no influence on "K" Line's decision to cut back.

The decision could mean that Kawasaki Kisen Kaisha Ltd., as "K" Line is officially known, will end service between Japan and Europe. That move would make headlines in Tokyo.

"K" Line returned to Portland with fanfare in July after a hiatus of nearly four years. The carrier restored the port's only direct link at the time to Japan, Oregon's third largest foreign customer after China and Canada.

Agricultural exporters rejoiced. No longer would they have to spend an extra couple of hundred dollars per container trucking goods to Tacoma.

"K" Line, a behemoth with 488 ships, strung together its complex multi-ocean pendulum route to shore up revenues as West Coast business declined and Asian-European trade persisted. Since then, European business has collapsed. Competitors speculate that "K" Line will revert to a streamlined Pacific route.

Ken Koenig, a "K" Line America Inc. manager in Portland, confirmed Thursday that the company would pull out but provided no details. Portland freight forwarders said they heard the last ship would call in late April.

The departure will clobber some Northwest exporters.

"Oh, jeez," said Shaun Harris, export manager for S.L. Follen Co. and its subsidiary, Oregon Hay Products. "It's going to be really tough."

Oregon Hay exports about 2,000 containers of compressed hay a year, about 70 percent of it to Japan for dairy cattle. "K" Line's service helped make the company competitive abroad. "It's such a thin margin," Harris said. "You basically sell at your cost and make a few bucks."

The departure of "K" Line, which will continue to share some space on shipping-alliance members' vessels calling on Portland, won't entirely eliminate service to Japan. Hanjin-Cosco ships that reach Portland began calling on Yokohama, Japan, a couple of months ago, Wyatt said.

The Hanjin-Cosco route will remain, as will service by Hapag-Lloyd, a German steamship giant that links Portland to Europe and South America.

Freight forwarders, the travel agents of the cargo world, say "K" Line's withdrawal from Portland will complicate an already difficult export business.

A shipment that now takes 10 to 14 days to reach Japan will probably take 13 to 19 days, said Brenda Barnes, customer services director for Allports Forwarding Inc., in Portland.

Containers might go to Kwangyang, South Korea, to be trucked to Pusan, South Korea, for shipment to Japan, Barnes said. Even now, exporters face a shortage of vessel space, she said.

"It's still a battle to get people's product to market," Barnes said. "There's still such a lack of equipment even though the volume of exports has been up."

"K" Line's withdrawal comes as workers near completion of a mammoth project to deepen the 40-foot Columbia River shipping channel by 3 feet. The deepening will allow in ships that can hold about 2,000 more containers than existing vessels. Heavily laden ships will also be able to come to Portland first, instead of calling initially on Tacoma and Vancouver, B.C.

Hanjin Shipping, the South Korean steamship line that teams up in Portland with China's Cosco Group, has no plan to boost service as "K" Line leaves.

"Right now, most carriers are reducing capacity because of diminished demand, so additional vessels and deployment are very expensive and take time," said Jeff McEwen, Hanjin Portland manager. "The market's a big place, and Portland's one piece of that."

Richard Read
'K' Line Pulls Up Portland Anchor
The Oregonian, March 5, 2009

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