After strong cargo growth in 2017, the Cleveland-Cuyahoga County Port Authority’s high hopes for 2018 could sink if the Trump administration decides to put a tariff on imported steel.
“There certainly are some scenarios that could be bad for us. There is just no way around it,” said Will Friedman, the port’s president and CEO. “We’re still pretty dependent on steel.”
U.S. steelmakers have complained for years about unfair foreign competition, but only now is the federal government stepping up protectionist trade policies. On Jan. 11, the U.S. Commerce Department sent to the White House a range of options to counter what domestic steel makers believe are foreign suppliers selling of steel and aluminum in the United States below cost.
The options President Donald Trump is considering include steep tariffs or quotas. He has 90 days to decide whether to impose sanctions.
A significant majority of the ships dropping cargo at the lakefront docks are carrying steel, usually low-end, commodity steel in coils or plates.
“It goes into automotive, battery casings, appliances, lots of things (manufactured) around here,” Friedman said. “We’re holding our breath on that.”
In 2017, 464,000 tons of cargo moved across Port of Cleveland docks. That was a 19% increase from 2016, when ships brought in 375,840 tons of cargo. Of the 2017 tonnage, 90% was shipments of steel.
Friedman said he is hoping that if tariffs are imposed, they only will affect steel imported from China, the leading steel exporter, and not from the European steel plants that ship into the Port of Cleveland.
While Friedman is worried about the fate of steel cargos, in an interview in the public agency’s headquarters building on West Ninth Street overlooking the docks, he said he remains optimistic about the Port Authority’s signature Cleveland-Europe Express (CEE). It is the only regularly scheduled cargo service between the Great Lakes and Europe, and it carries containers, the boxes that move from ships to rail cars to truck beds carrying consumer goods such as televisions, clothing and appliances.
The Port Authority struck a three-year deal for regular service with the Spliethoff Group, an Amsterdam-based shipper, that began in March 2014 with once-a-month service between Antwerp, Belgium, and Cleveland that could carry containers between the two cities. That’s now up to two to four calls a month to the Port of Cleveland.
That first year, the Port Authority subsidized the service to the tune of $850,000 for each month of the roughly eight-month shipping season. That cost has come down over the three-year life of the contract. The Port Authority spent $3.1 million to subsidize the service in 2015 and $1.8 million in 2016, according to the agency’s audited financial statements.
Friedman said the Port Authority is in the midst of negotiations with Spliethoff to continue the service. The port is now moving between 2,500 and 3,000 TEU-equivalent containers a shipping season. TEU is short for “20-foot equivalent unit,” the international measure of containers, which now can be as large as 40 feet long. Friedman said he would like to build that to about 15,000 TEUs a year.
Emails to Spliethoff executives were not returned at deadline last week.
Friedman said his goal in the new contract the Port Authority is negotiating with Spliethoff, in addition to reducing the agency’s overall cost, is to give the shipper a greater incentive to build export volume, which lags behind import container volume. He said that some local shippers like using the local direct-to-Europe service but can’t justify its use financially.
Price competition among shippers for international cargo is intense, due to an oversupply of ships, Friedman said. As a result, shipping rates are especially low to the highly competitive coastal ports. That gives shipping through an East Coast port like Newport News, Va., or Baltimore, and moving containers by truck to or from Ohio a price advantage.
So far, no other Great Lakes port has mounted a competitor of the CEE, although other port operators have been impressed with the local operation, according to Great Lakes shipping observers.
“We’ve been impressed with the Port of Cleveland’s innovative Cleveland-Europe Express with its vessel partner Spliethoff Group,” said a spokeswoman for the Marine Chamber of Commerce in an emailed statement. “It could be a model that is emulated in other parts of the Great Lakes-Seaway system.”
The chamber is a U.S.-Canadian association that represents ship owners and operators, port authorities and other marine-related businesses.
Intra-lake cargo on the Great Lakes was up 3%, according to the Lake Carriers Association, which represents American flag vessels that carry raw materials. Except for iron ore shipments to the Port Authority-operated Cleveland Bulk Terminal on Lake Erie, most of that cargo coming into Cleveland harbor, carrying raw materials such as coal, limestone and salt goes into and out of private docks along the Cuyahoga River.
The Lake Carriers Association reported that iron ore shipments into Cleveland were essentially flat in 2017, at 3.004 million net tons, from 3.008 million net tons in 2016.
Friedman is chairman-elect of the American Association of Port Authorities. In testimony Jan. 10 before U.S. Senate Committee on Environment and Public Works to push for waterway improvements to be included in any federal infrastructure plan, he mentioned, almost in passing, that he anticipated that the Port of Cleveland will spend $43 million on waterway improvements between 2016 and 2020.
In the interview, Friedman said he anticipates the Port Authority will spend $11.4 million of that amount in 2018, with much of it going to rehabilitate its Cleveland Bulk Terminal, which is a transshipment point for iron ore headed to the Arcelor Mittal steel mill along the Cuyahoga River and other bulk material.
Voters in 2017 approved a renewal of the Port Authority’s 0.13-mill operating levy that will raise about $3.1 million a year, or about one-third of the authority’s annual budget.
In addition, the authority, the city of Cleveland, the state of Ohio and the Northeast Ohio Regional Sewer District have raised $10 million on their way to matching an $11.5 million federal grant to keep the hillside along the Irishtown Bend in Ohio City to keep a portion of the west bank of the Cuyahoga River in Ohio City from collapsing and blocking river traffic. Though the problem was identified more than a decade ago, only now, with the Port Authority taking responsibility and bringing the sewer district in, is it being tackled.
“We made that our project some years ago,” Friedman said. “We’re pretty happy about that progress.”
Source: Crain’s Cleveland Business