The acquisition of two Canadian port terminals — by PSA International in the port of Halifax and DP World in the port of Vancouver — speaks as much to the desire of global operators to leverage their size and relationships as to the opportunity presented by Canada’s rising cargo volumes.
In Halifax’s Halterm Terminal on the east coast, and Vancouver's Fraser Surrey Docks in the Pacific Northwest, PSA International and DP World have acquired solid, reasonable performing terminals that offer a gateway into the Canadian and US markets. Halterm offers more potential for container cargo growth because of draft limitations at the primarily multipurpose Fraser facility. But they both offer their new owners an opportunity to harness relationships via their global terminal networks to a new market, a port consultant and logistics provider said in a JOC.com webinar Thursday on the outlook for United States-Canadian trade
Dean Davison, technical director, maritime, for engineering and design firm WSP, said he expects PSA International and DP World to use their respective new terminal assets to “rationalize” operations and improve profitability.
“To be global, you need operations everywhere,” Davison said, adding that he expects the two global operators to “leverage their shipping line relationships” to secure more business and increase throughput.
“They may consider offering, for example, global contracts or contracts between certain port pairs that they have control over,” he said. “And I think that they would then, by offering a more flexible arrangement like that, they would hope that they can boost volumes.”
Global player positioning
Container volume through Canada’s four busiest ports — Vancouver, Montreal, Prince Rupert, and Halifax — rose 4.8 percent to 5.8 million TEU in 2018, according to figures from their respective port authorities. The calculation includes laden and empty container volume through Halifax. Cargo through Vancouver, Canada’s largest port and the fifth-largest in North America, grew by 3 percent to 2.86 million TEU.
Cargo volumes through Halifax, Canada’s fourth-largest port, fell by 2.1 percent to 547,445 loaded and unloaded TEU, according to the port authority. Volume has jumped 50 percent in five years, and the port’s ability to attract new Asian services suggests throughput could continue to rise in the future. The port added a Zim Integrated Shipping service via the Panama Canal and Hapag-Lloyd and CMA CGM services through the Suez Canal to Asia in recent years.
Patrick Lo, CEO of logistics provider Canaan Group, said PSA International and DP World believe the rising volumes at Halifax and Vancouver will give them “a competitive advantage moving forward, moving goods through Canada and the United States.”
Leveraging global assets
PSA International, which operates more than two dozen terminals worldwide — including seven in China, four in India, and two in South Korea — acquired Halterm in the face of competition from a joint bid by Canadian National Railway and CMA CGM, Montreal-based Logistec, and others for the terminal. PSA International acquired it from Australia’s Macquarie Infrastructure and Real Assets, not long after purchasing Penn Terminals, a multipurpose terminal just south of Philadelphia on the Delaware River, from Macquarie.
Macquarie also sold the multiuse Fraser Surrey Docks terminal to DP World, which has 78 terminals worldwide. Among them are Saint John, New Brunswick, on the east coast of Canada, which the company bought in 2016, and the Fairview Container Terminal in Prince Rupert, which it acquired in 2015. The Dubai-based terminal operator also runs the Centerm facility at Vancouver.
None of the parties have disclosed the financial terms of either acquisition.
DP World has been successful in driving up cargo volume in the Prince Rupert terminal — up 12.5 percent in 2018, to 776,105 TEU — through “the ability to bring [in] their operating expertise and experience, and they can leverage obviously relationships and equipment supplies,” as a result of being a global operator, Davison said. The multiuse Fraser Surrey Docks offers the company an opportunity to apply its leverage in a “multipurpose operation,” which includes some transportation of steel and grain, he said. The terminal also handles about 250,000 TEU a year of containerized cargo.
Ten years ago, CN and Prince Rupert began to position the western Canadian port to attract Asian cargo bound for Canada and the United States. Now, volumes are growing so quickly that the port is undergoing another expansion to bring its capacity up to 1.8 million TEU.
Halifax, through its CN rail connections to Toronto, Montreal, and Chicago and its ability to handle ships with capacities of up to 16,000 TEU, offers US shippers an alternate routing option for sending cargo through its domestic ports. The port is currently undergoing a two-step expansion project aimed at helping it to better service mega-ships. With a 52-foot draft, Halifax has an annual handling capacity of 1.13 million TEU through its two container terminals.
“Canada has given these operators the chance to grow their portfolios in a new area,” Davison said of PSA International and DP World. “And they are not necessarily going to get very high growth rates straight away because of the mature nature of the trade and the economy. But at the end of the day, they are still good assets, they are solid assets; [there is] still a reasonable amount of cargo going through.”