With the new commissioner, Cam Parry, talking about seeking foreign investment to fund a container dock on the North Spit this is a good time to examine whether such an investment will ever pay off.
Two independent studies, “Feasibility Analysis For a Modern Marine Cargo Facility in the Port of Coos Bay, Oregon “, May 2003,
Prepared by PB Ports and Marine, Inc and “Evaluation of Marine Cargo Opportunities for the Port of Coos Bay, Oregon”, Final Report, April 2002, BST Associates, Bothell, WA, each funded by the Port, say no.
According to the first report, “…A positive financial return is dependent on at least 425,000 tons of general cargo, or a combination of 200,000 tons of general cargo and 900,000 tons of bulk cargo.” These volume requirements are “…several times higher than the copper concentrate volumes that previously moved through Coos Bay and equivalent to the nickel ore volumes at their peak in 1996 and 1997.”
Based on this analysis and actual performance at the benchmark terminals, it is evident that very high cargo volumes would be required for the Coos Bay terminal to break even. General cargo volumes of at least 425,000 tons per year would be needed to repay capital cost with no interest and 785,000 tons would be required to achieve a return at the State of Oregon’s 6% tax-exempt cost of money. These volume levels are as much as 2.5 times greater than at the Portland and Vancouver benchmark terminals, which are located in a large metropolitan market. General cargo volumes closer to those at the benchmark terminals or the minimum operator volume of 200,000 tons would generate a negative financial return.
The 2003 report’s pessimistic conclusions are based, in part, upon the market potential analysis provided in the 2002 report and market conditions will have changed in nine years, however “… tonnage potential for a new marine terminal appears to be well below the levels required to break even on the terminal investment and possibly below the level required for an operator to be economically viable”.
Other barriers include no access to a “Class 1” railroad necessary for high volume transport; fierce competition from established ports; lack of experienced management; and high winds on the North Spit. Imagine cargo dangling from cranes swaying in 30MPH wind. (During an SDAT meeting, Jeff Bishop, executive director at the Port, explained that much of the upper bay had been developed, in part, because employees had trouble working in the winds on the lower bay).
One conclusion is clear-under any circumstances, investment in a new public general cargo terminal involves a very high business risk. The factors that contribute to this are many, including the absence of a clearly defined market; the low capacity utilization and declining volume trends at other, better-positioned terminals; the intense rivalry and price competition among competing terminals; the footloose nature of steamship customers and short-term nature of terminal operator contracts in the market; and the Port’s lack of experience in the business.
Not only must the terminal operate at minimum volumes to repay facility development costs, it must also operate at a level that is viable for the terminal operator as well. Indications are that the facility would only operate near or below these thresholds, leaving no margin for either the Port or its operator to withstand declining volume trends business fluctuations, or adverse competitive actions. While the Port may choose as a ‘ matter of policy to assume a loss on the terminal development cost, the terminal operator could cease operations leaving the Port with the choice of running the terminal itself or idling the facility.
So what do the Port commissioners know that the public doesn’t know that makes them continue to pitch a container dock? What would convince anyone after reading these reports a container dock makes sense? The public would appreciate being kept in the loop. Please, inquiring minds want to know.
Hi Ron, that is a good question, many of us are wondering the same thing.
I’m just sitting here trying to figure out what I’m missing.
ORC’s water use license has been denied. Without that water they cannot comply with DEQ regulations. The heavy metals and other elements to be exposed have been proven to be potentially harnful to humans and animals. And now the new County Commissioner is going to find a way to fix all that?
Somewhere here along the line I got lost.
HELP!
I don’t know if Parry is centrist or not but he claims to weigh science into his decisions. One of his references is Wayne Krieger who makes a lot of hay about working across the aisle and holding coffee meetings and lunches with Democrats. Having some personal anecdotal experience with Krieger, I question the sincerity of his bi-partisan ‘cafe cabinets’ and do hope Parry will extend his boundaries to allow a wider sphere of influence.
Mike Cook, another of Parry’s references is not known for his bridge building skills.
The SDAT report encouraged engaging the entire community last June and so far, nothing has changed.
If Parry is a centrist and expected to bring opposing sides together how is it so few people know him? Haven’t met any rank and file dems who have heard of him.
Generally I don’t return this soon. I do my best thinking while mowing the lawn. Namby Pamby? My wife calls me worse. But, if you folks want to read reports, consider the reports done by our not too distant neighbors, the fishermen’s associations of Humboldt Bay. Constant dredging required at the peoples expense, interruption of fishing fleet activities, damage by large vessel props and azipods to the bay. We have a narrow and shallow estuary. The bay in Coos Bay is not like San Francisco bay, nor Seattle sound, nor Tacoma, nor San Pedro, nor Long Beach, nor San Diego, nor British Columbia, nor the contemplated ports along the west coast of Baja California, or even similar to the Columbia River.
Here’s one for thought. There are several of us living in the neighborhood who traveled the planet – including China (both kinds) – satisfying what is known as “industrial offset” obligations. China, Japan, and other countries who have limited developed natural resources have jobs and would like a presence in the US. We have lots of trees. Why not do a study of their jobs placed here with LOCAL employees, for our trees. Barter is done world wide. My father owned a sawmill, wholesale and retail lumber companies; but, I don’t have a clue about trees. At what point does the value of a tree equal the value of a job?
There’ll be Pie in the Sky When We Die!
Hallelujah brothers & Sisters! Are you readiy for another flight into Corporate Welfare land? I’m not. I’m tired of paying their bills. If they want to trade in Coos we welcome them but they need to pay their own way. Yes, I do like the IDEA of a Container Port and all that it implies. It is quite apparent that that is not likely to happen from the study cited above. Lets get real! China is already in deep over her head. In addition we’ve been through several “schemes” by our fearless leaders. There are many workable solutions. The County is even engaging in at least one now with the new program to dig out ferrous medals and make a revenue of 1 million bucks from that alone. What other bright ideas could we employ if given to creative thinking. I vote no on this project and advise the Port to find other creative ways to lure customers here to our wonderful deep water Port. We DO need to use it but this is another Pie In The Sky!
You do have a way with words, fred!
The Port acts like a giant funnel through which dollars flow from the state and federal treasury into corporate hands in parts unknown. None of it seems to stick to the ribs of the average worker.
Oh Fred, you old namby pamby obstructionist you, people like you just make those hanging on their OWN public teat do nothing but grab another one in their left hand. And aghast, it’s hard to read reports when the milk and honey are a drippin down yer chin.
These people draw their salary all the while. They don’t give a rats’ arse whether it makes sense or rather it will “fly”. Just ask those over at one of the two airline terminals. Hell they be spending your $40,000 to study the sound made from Hank Hickocks’ bigger charter jets, which he is lobbying for. They can’t fill three flights a day now, but ol Hank gets what ol Hank wants here in Coos County, and YOU pay for the pleasure.
Grab your ankles Coos Countians, this ain’t gonna stop any time soon.
And, that’s a dedicated to freight transport multi track Class 1 railroad and many hundreds of acres of yard for assembling those trains that is required and will never be here no matter how much of your tax money the port collects. All built on shifting sands. It’s going to be a day long journey to go 80 statute miles on the soon to be Coos County Taxpapyer Limited Railroad. GOD help them if another tunnel collapses. What about required huge amounts of water, power, fuel for vessels and container operations (that’s another pipeline folks – not by truck), and access to the North Spit by hundreds of trucks daily other than over a single narrow road. Is the McCullough Bridge sound enough for hundreds of trucks daily? Also access to nearby large cargo aircraft is required. Is there enough local taxpayer money available and could you extend two runways far enough into the bay to get the 10 or 12,000 foot runways required for one daily flight? Also, easy truck access to the highway 5 corridor is required. Also, the ability to park their cargo vesels alongside LNG vessels that are offloading. Isn’t that prohibited? Also, it is fact that sea going vessels are majoy contributors to smog that will blow across your neighborhood daily. And, if you like smog, you’ll love the noise 24 / 7 – especially when sound travels far on cold damp Oregon winter nights. I would welcome a container terminal and the jobs FOR LOCAL PEOPLE that – this time – our elected professional politicians could demand. So, in response to what does the port know, nothing that we don’t. What does Campbell Parry know that causes him to want to sell more US lands and businesses to the Chinese? Some day the Chinese are going to call in our debt. Perhaps that should be among the first questions asked of him in the next public forum. Assuming that you are stupid, spending the taxpapeyers monies and keeping the container terminal pipe dream alive justifies that accopmplished nothing to date port board of commissioners and the overpaid – and overly impressed with himself – executive director. Other than that, have a great day.
Whoa! Have the commissioners read these reports? What has changed to make ’em chase something with a lousy return?