Proposed Rate Hikes for Houston Ship Pilots Under Fire

No less than 15 shipping companies, many of them top 10 liner companies, have written to Port of Houston Chairman Janice Longoria to reject the latest call for substantial rate hikes on the Houston Ship Channel. Local pilots already earn salaries that approach $500,000 annually.

Like any other major U.S. port, registered foreign flag vessels must use a local state pilot on the Houston Ship Channel. According to local shipping stakeholders, the rates for those mandated services have spiraled more than 50% in the past 14 years alone.

The rate increase proposal, a seemingly regular event at most U.S. ports over time, has on this occasion, struck a raw nerve at precisely the wrong time for industry. As most deep draft operators face the perfect storm of costs to comply with the looming IMO 2020 emissions mandate, a requirement to install costly ballast water treatment systems to combat the scourge of invasive species, and the specter of (continuing) dismal freight rates brought on to a certain extent by overcapacity on the water, shipping companies are not only putting their collective feet down, they are also threatening to take their business to other ports.

Although the local pilots have proposed an aggregate increase that would boost fees by about 2.9 percent annually over the course of the next three years, some shipping companies – especially those operating the larger, post-Panamax boxships – say that their costs could double. The consensus among all seems to be that, if implemented as proposed, the new rate structure will eventually cost them at least 13 percent or more over the next three years for pilot services.

In the letters obtained by Marinelink, more than one firm stated that they would be forced to look for other ports of call because the new Houston rates would be so far out of line with other similar ports that they would have no other choice. For their part, shippers have said that they have made substantial cost cuts to survive and suggest that the pilots do the same. One shipper even called for a rate reduction.

The Board of Pilot Commissioners for Harris County Ports has the authority to approve pilot rates. A scheduled hearing on the proposed increase is set for October 30. Houston’s growth as a regional freight destination and its position as a top five U.S. port and the heart of the nation’s refining capacity, arguably make the threat for shippers to leave a hollow one. It isn't uncommon for stakeholders to push back against pilot rate increases. This dispute, however, has a different feel than all that which has come before.