Terminal expansion shows Prince Rupert is an idea that works

Terminal expansion shows Prince Rupert is an idea that works

Seven years ago the idea that a relatively obscure bulk port in a sparsely populated region of Western Canada would become one of the fastest growing container gateways in North America would have drawn smirks, and did, even though the vision of a gateway for Asia trade at that location went back to the early years of the 20th century.

But the Port of Prince Rupert has done just that, seizing on its prime location on the Great Circle, and the surge in traffic — up 12 percent in 2014 compared to 2013 — has spurred Maher Terminals to pull the trigger on a planned $200 million expansion. The project, set to be completed in mid-2017, will boost the port’s annual capacity by 500,000 TEUs to 1.3 million TEUs with the construction of a second berth, a container yard expansion and four more gantry cranes. Canadian National Railway, the sole rail provider at the port, will also extend on-track rail to serve the expanded terminal. The expansion is a milestone that more than anything else should certify the viability of the newest North American container gateway.

The new berth will hopefully attract more liner services, either from its existing carriers, Cosco and Hanjin Shipping, their fellow CKYHE members, or another liner entirely, Shaun Stevenson, vice president of trade development and public affairs at the Prince Rupert Port Authority, told JOC.com last week at the 13th annual TPM Conference in Long Beach, California. Three weekly services — two from Cosco and one from Hanjin, both of which have slot-sharing capacity for alliance partners — call at the port currently.

The reasons for Prince Rupert’s success are varied but they all speak directly to what shippers want: reliable and competitive service, especially in the aftermath of the extreme congestion experienced at U.S. West Coast ports in recent months. In roughly two days, sometimes less, containers can be moved from the ship to the on-dock intermodal rail terminal, or vice versa. Via its two daily double-stacked intermodal trains and sometimes a third depending on demand, CN can get Asian goods into Chicago in 100 hours, or slightly more than four days. Between 65 to 70 percent of inbound container volume heads to the U.S., Stevenson said. When the expansion is completed, CN plans to increase daily service to and from the port to three trains and will add another daily service as needed.

The Fairview Container Terminal has attracted cargo bound and from the United States since it opened in 2007,  but recent West Coast port congestion appears to have cemented Prince Rupert as a go-to gateway for some U.S. shippers. Of the shipper executives that said they would shift less cargo through the U.S. West Coast this year and next, 14.7 percent said they would reroute the majority of freight through Prince Rupert and Port Metro Vancouver, Canada’s largest container port, according to a JOC.com survey conducted last month. [caption]

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“We have been engaged with (beneficial cargo owners) over the last 24 months that have already been engaged in Prince Rupert,” Stevenson said. “They are looking to ramp up volume. They are maybe running 5 to 7 percent of their trans-Pacific (volume through the port) and now they’re looking at 10 to 15 percent.”

Disney, for example, last year shifted all cargo headed to its Midwest stores from the U.S. West Coast to Prince Rupert, David Croft, senior manager, logistics products, for Walt Disney Co., said at TPM.

“I had deep scars from the 2002 lockout, so when I knew this contract was coming up, I saw the risk and built relations outside the West Coast,” he said, referring the expiration of the International Longshore and Warehouse Union’s prior six-year collective bargaining agreement on July 1. Relations between the ILWU and waterfront employers deteriorated in the following months, resulting in labor slowdowns  that began in late October that exacerbated existing congestion.

Without a delay-free customs process, U.S. shippers wouldn’t find the Prince Rupert option nearly as attractive.  Through the pre-processing of import documentation, the majority of U.S-bound shipments are cleared immediately at the border, a reflection of the very close U.S.-Canada relationship. And, shipments moving in-bond are cleared at the destination.

Pacific Northwest legislators have railed against U.S. shippers’ ability to avoid paying the U.S. Harbor Maintenance Tax by moving goods through Canadian ports such as Prince Rupert, but efforts to curb the practice, which saves shippers roughly $100 per container, haven’t gone far in Congress. While not having the pay the 0.0125 percent levy on the value of imported goods is a factor, competitive intermodal pricing and service consistency is the bigger draw for many U.S. shippers that move goods through Prince Rupert.

To handle the expected volume growth from the port and broader traffic gains, CN is planning to expand its intermodal rail terminals in Chicago and Memphis, Jean-Jacques Ruest, the railroad’s chief marketing officer, told JOC.com on Tuesday. The railroad has already added a siding near Prince Rupert, creating better fluidity at the intermodal ramp, and expanded capacity at its Saskatoon, Saskatchewan, facility, to handle containers stuffed nearby with backhaul grain headed for Prince Rupert. The largest Canadian railroad is also boosting capacity at its Prince George facility, where pulp and lumber products are loaded into containers destined for the port. Container volume tied to Prince Rupert accounted for roughly 30 percent of CN’s intermodal international traffic in the fourth quarter.

The amount of growth Prince Rupert experiences will determine when the second phase of the expansion, bringing the port’s annual capacity to more than 2 million TEUS, begins. For now, the port has plenty of room to grow, both in terms of cargo and land.

Contact Mark Szakonyi at mszakonyi@joc.com and follow him on Twitter: @szakonyi_joc.