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Counting On Containers

VANCOUVER, B. C. - Canada's economic future in trade is likely to be compromised without a full understanding of changes in container activities, including sea and inland connections, according to Dr....

VANCOUVER, B. C. –Canada’s economic future in trade is likely to be compromised without a full understanding of changes in container activities, including sea and inland connections, according to Dr. Claude Comtois, a professor at the University of Montreal, who is a senior research fellow with the Asia Pacific Foundation.

“The objective is to try to identify how container trade has evolved,” he said at a recent Vancouver conference that hosted approximately 200 members of the Western Transportation Advisory Council (Westac), a non-profit group of business, labour and government leaders focused on the western Canadian economy and transportation system.

“What are the major trends?

And how can we manage the impacts?” he implored.

When forecasting, the objective is to try to “predict and provide,” he said. Comtois has studied how container trade has evolved over the past 17 years. He says that containerization is an unavoidable part of world economic growth.

The annual growth rate of container trade stands at about 10%, which means in a few months the world will reach the half billion mark in terms of container movement. But 50% of world container trade occurs in east and southeast Asia, while North America accounts for less than 10% of world container trade.

“But if you look at North America’s container traffic, there are marked differences between North America’s east and west coast, which is good news for Vancouver,” he said.

The west coast is growing at a faster pace, and accounts for a larger share of container trade, he added. The Atlantic seaboard is dominated by New York and New Jersey, while Canada’s eastern seaboard is dominated by Montreal, which accounts for 64% of the container market share of Eastern Canada. The Pacific coast is dominated by a cluster of ports in San Pedro Bay, with Los Angeles and Long Beach, but Canada’s west coast trade is firmly anchored in Vancouver with Prince Rupert emerging as a new load centre on the Pacific Rim.

Comtois also offered a comparison of container traffic between the US and Canada. About 15% of Canadian containerized freight passes through US ports, but 20% of container traffic from Canadian ports is US-bound.

Considering that the size of the economies is different, Canada is actually gaining in this area, due to the vastness of the US market, according to the professor.

“But a key factor in containerized freight is hinterland connections. You must be aware that many countries envy Canada’s rail network architecture, especially in Europe and Asia. There are about three million TEUs carried on Canadian rail.”

When considering commodities, Comtois said Canada’s economy is relatively strong in terms of containers, and there are very minor imbalances between import and export containers, at “approximately plus or minus 2%, which is very reasonable.”

Inbound goods are mostly manufactured and consumer items and outbound traffic is resource-based, which means it’s heavier, which restricts stacking containers on a ship. Montreal and Halifax combined display a broad range of containerized freight economies at Canada’s marine gateways. In sharp contrast, at Vancouver ports 45% of container imports are consumer goods, while 52% of container exports are forest products. It’s a situation which compels Comtois to offer a word of caution.

“This means that there’s not exactly in Vancouver, a portfolio of containerized trade that could act as a buffer, and a protection against market fluctuations,” he warned.

Canada’s market share on the globe is marginal he notes, at less than 1% in terms of container trade. Not only that, world container trade is dominated by global carriers, shippers and terminal operators – almost all containers are shipped by non-North American firms, and terminals are increasingly being managed by international market players.Yet, Comtois is not concerned about this, he says it is simply part of the container globalization process.

“What is interesting is that when you’re talking about containers, you’re talking about intermodality, and gateways like Vancouver cannot avoid intermodality. Its function rests on the most important market, those that generate the highest revenues. But success of intermodalism in Vancouver will depend on several factors, such as: the thickening up of infrastructure; increasing load factor capacity; and above all, development of logistics services. The selected Canadian shippers, such as Canadian Tire, the Bay, and Loblaws, are outsourcing overseas, and are serving the gateways, and this is something we have to appreciate and we have to analyze.”

When forecasting, Comtois believes there will be growth in world container trade, including here in Canada.

“By 2020, I would estimate that Canada will handle approximately 12 million TEUs with over two-thirds of the market share on the west coast, underpinning that the burgeoning market of East Asia will likely contribute to increasing trade containerization. But I would like to underline to you, however, that these figures are less than what is currently being handled in the port of Hong Kong.”

Another impact on Canadian shippers is the US economy, which Comtois believes is “extremely resilient.” He predicts the next US government will provide “massive investment” in US infrastructure, mainly because China has just committed $600 billion to upgrade its infrastructure, a situation that Canada and its transportation stakeholders, must consider.

“Canada will be further exposed to competition. If there is something you have to do as members of the industry, (it) is to scrutinize Transport Canada’s infrastructure development policies,” he urged.

Canada should embark on a path where it invests “massively” in infrastructure, recommends the professor. In discussing the capacity of Canada’s three main gateways by the year 2020, he said Halifax is currently only operating at 50% capacity. Montreal will probably reach saturation, but that area has another site of 350 hectares to expand upon, which will increase capacity by one million TEUs. The west coast is another story.

“In Vancouver and Prince Rupert, according to my calculation, you will reach saturation by 2018, which means you have to find other sites, somewhere in order to cater to that demand,” he said.

Two particular impacts that have to be managed, he said, are related to value-added warehousing and corridor capacity.

Comtois said a “staging post” facility is needed a short distance from the port, which has rail connections for delivery inland.

“This would provide some form of flexibility in scheduling, thus reducing impacts of delays at the port. Then you will be able to provide value-added (services) in trading commodities, and of course, have some sort of capacity to transfer goods or commodities from 40 TEU containers to 53-ft. boxes carried by truck.”

Comtois said that railway corridor capacity for Canada is very difficult to assess because there are “operational issues.”

However, he recommended a need to provide “smart yards,” since additional weight capacity is required for selected tracks. Regarding west coast ports in Vancouver and Prince Rupert, he believes there is a need to develop a rail buffer, or “a smart marshaling yard” with approximately 100 km of railway tracks. “(This would be) somewhere a certain distance from the port, managed by the port, which would be able to provide some sort of buffer between the arrival of ships and the scheduling of freight, which are never on time. But if you have that buffer, controlled by the port authority, that will be able to answer both supply and demand – and of course you do that smartly, with value-added warehousing at the same time.”

Comtois also discussed environmental concerns related to infrastructure planning, and emphasized that “a sustainable gateway is not negotiable.”

The international banking system is already considering establishing credit rates according to the environmental performanc
e of terminal operators and shipping lines, and he indicated that the costs savings can be considerable.

“If you have to build a new container terminal, this will cost you half a billion dollars. What’s the difference between a 5% interest rate and 7% interest rate on half a billion dollars? That’s a lot of money.”

On a trip to the United Kingdom, he discussed green certification with Lloyds of London. Representatives at that organization told him that insurance premiums are being set based on green certification, for both environmental and legal reasons. Shareholders are also increasingly investing with those companies that can prove environmental sustainability. Even shippers are requesting proof of sustainable practices. “Ikea and Wal-Mart are asking shipping lines to measure the environmental footprint of product transport,” said Comtois. “They need to know, and shipping lines such as Maersk have developed these kinds of data.”

Even stakeholders involved in mergers and acquisitions are asking about the environmental performance of each other’s companies, because they don’t want to be buying unforeseen problems, warned Comtois of a shift in corporate values. “This is what is emerging.”

Comtois believes there will be growth in containerized freight in Canada and there are different scenarios that have to be considered in terms of intermodal transport.

He said a blueprint for the integration of gateways and corridors into global logistics supply chains has empirically been tested, and best practices in terms of sustainability are emerging.

“One thing that we have to do in Canada, which has already started, we have to develop performance indicators and benchmarking system for our gateways and corridors. It is a very difficult process, but we have to do it,” he concluded.


‘In Vancouver and Prince Rupert…you will reach saturation in 2018.’

Dr. Claude Comtois

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