CMA CGM gains slots to Prince Rupert, capping busy year for port

CMA CGM gains slots to Prince Rupert, capping busy year for port

The announcement this week by CMA CGM that it will share slots on China Ocean Shipping Company’s trans-Pacific service from Asia to Prince Rupert, Canada, caps off one of the more eventful years in the short history of the port’s container operations.

In that span, the port in British Columbia, Canada, launched an expansion project, gained a major service and made steps to prepare for another expansion. Attracting more U.S.-bound cargo has driven cargo up up 31 percent year-over-year in the first 10 months of 2015. The growth is due partly to diversion of cargo from U.S. West Coast ports, but also because of the port’s rapid transit times from Asia to the U.S. Midwest via Canadian National Railway services. 

In recent months Prince Rupert broke ground on an expansion project that will add a second berth at the north end of its Fairview container terminal. When completed in mid-2017, the project will increase the port’s throughput capacity to 1.3 million 20-foot container units from its current capacity of 850,000 TEUs.

Last month, a new trans-Pacific service by the 2M alliance of Maersk Line and Mediterranean Shipping Co. was launched. This development was significant because it marked the first service with vessels operated by a line other than Cosco and Hanjin Shipping Co. Those lines also have slot arrangements with their partners in the CKYHE alliance.

Additionally, Prince Rupert this year received the necessary permits for a southern expansion of the port. Don Krusel, president and CEO, said plans for this expansion project have not been finalized, but it could include construction of a third container berth, extension of the on-dock rail yard and additional container storage space. The southern expansion would increase annual throughput capacity to 2.4 million TEUs.

Prince Rupert, located about 500 miles north of Vancouver on Canada’s Pacific coast, has handled a variety of cargoes for more than 100 years, but its Fairview container terminal just turned eight years old. The Maersk service was launched on Oct. 2, providing Prince Rupert with its first service by the world’s largest container line.

CMA CGM is taking slots on Cosco’s existing Northwest Express service from Central and North China, so the French carrier is not bringing in its own ships or starting a new service. Nevertheless, CMA’s presence adds another carrier to the port’s portfolio, which is one more indication that Prince Rupert is solidifying its role as a major gateway on North America’s Pacific coast. “We’re feeling quite excited about this,” Krusel said.

Prince Rupert has four weekly trans-Pacific services -- two with Cosco vessels, a Hanjin service and the 2M service. The port this year is on track to handle about 800,000 TEUs. That will bring it dangerously close to its existing capacity of 850,000, but Krusel said there is no indication of the type of congestion problems that marine terminals often experience as they approach design capacity. The rule of thumb in the port industry is that when a terminal exceeds 80 percent of capacity, service begins to deteriorate.

Prince Rupert has been flying high this past year due to the diversion of cargo from U.S. West Coast ports that accompanied contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association, and the severe port congestion that resulted.

In October, total container volume in Prince Rupert was 45.8 percent higher than in October 2014. In the first 10 months of 2015, container volume is 31 percent higher than during the same period last year.

The entire West Coast experienced a loss of market share to East and Gulf Coast ports earlier in the year, but since summer much of the diverted business has been recovered. Jon Slangerup, chief executive of the Port of Long Beach, told West Coast freight forwarders and customs brokers meeting in Palm Springs last month that shipments destined for the interior U.S. are returning to the West Coast because larger importers were each spending millions of dollars more in transportation costs to divert cargo through East and Gulf Coast ports.

That is not the case with Prince Rupert, however. Krusel said there has been virtually no migration of cargo back to the U.S. ports this fall. The reason, he said, is Prince Rupert’s value proposition, which is that steaming time is a day or two shorter from North Asia than U.S. West Coast ports, and Prince Rupert offers two intermodal unit train arrivals and departures each day to Chicago and beyond.

CN has direct service from Prince Rupert to Chicago, Memphis and on to New Orleans, and interline service to destinations east of Chicago. CN prices its services aggressively. Railroads consider pricing information to be proprietary, but CN reportedly undercuts the Union Pacific and BNSF roads by $300 to $400 per container to Chicago. That is one of the reasons why Prince Rupert has increased its market share of Pacific Northwest cargo at the expense of the Seattle-Tacoma Northwest Seaport Alliance.

The northern expansion project at Prince Rupert should be completed by mid-2017, but the first phase will come on line next year. With the added capacity, Prince Rupert would be able to accommodate another service next year, Krusel said.     

Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo