Proposed ship pilot rate increase gets push back

September 26, 2018

Shipping companies are pushing back against a proposed rate increase for guiding vessels in and out of the Houston Ship Channel, with some companies even threatening to take their business to other ports.

The Houston Pilots have proposed an aggregate increase that would boost fees by about 2.9 percent a year in each of the next three years, although individual shipping companies have said their costs would be higher. Some companies said they could end up paying 13 percent or almost 14 percent more over the next three years for pilot services.

“This most recent request,” the French container shipping company CMA CGM said in a letter stating its opposition to the rate increases, “will place the Port of Houston so far out of line with comparable ports that it stands to jeopardize CMA CGM future relationship with the Port of Houston and the local labor force.”

The Japanese shipping company NYK Line said the proposed increases “forces us to begin the search on a different port of call in and around your good state.”

CMA CGM and NYK Line are among 15 companies that filed letters ahead of Tuesday’s meeting of the Board of Pilot Commissioners for Harris County Ports, which must approve pilot rates. The commissioners scheduled a hearing on the proposed increase for Oct. 30.

“It’s important to have a transparent, fair and open process so that everybody has a chance to be heard and we can make an appropriate decision,” said Janiece Longoria, chairman of the board.

The Houston Pilots guide vessels to and from their docks through the narrow, busy Houston Ship Channel and charge fees for this service. The pilots said they are seeking the rate increase, in part, because of increased ship traffic, longer vessel transits requiring more time on the ships’ bridge, and additional “off channel” time spent reviewing dock proposals or providing input to channel development projects.

“The Houston Ship Channel is a unique and particularly challenging waterway,” the Houston Pilots wrote in a Sept. 11 application to increase rates, “and supporting growth and efficiency in the busiest port in the United States does not come without cost.”

Among the proposed changes to the pilots’ fee structure is the creation of new zones. Currently, shipping companies pay fees based on the size of their vessels — regardless of where that vessel is headed in the Houston Ship Channel. With the new zones, the fee would be based on both the size of the vessel and its destination.

The Houston Pilots have separate charges for other things, too, such as ship’s draft.

Kevin Sterling, managing director of the investment bank Seaport Global Securities, which has headquarters in New York and New Orleans, said the shipping industry is struggling because of the construction of new, larger ships in recent years, which has created a glut of shipping capacity and forced companies to accept lower rates. That’s why shipping companies are complaining about the difficulty to absorb the higher costs.

Rickmers-Line, a German shipping company, estimated that its fees would rise 13 percent between 2019 and 2021 under the pilots’ proposal. That would “far exceed” the expected rate of inflation, the company said.

“The industry is struggling to survive a very difficult market,” Rickmers-Line said in its letter, “not with stagnating, but rather falling revenues.”

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It’s common for shipping companies to push back against rate increases, Sterling said. Capt. Mark Mitchem, presiding officer of the Houston Pilots, said the Houston Pilots continues to talk with shipping companies about the proposed rate increases and “nothing is set in stone.”

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