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By Richard Armstrong

It is a challenging time to make estimates of logistics markets. The U.S. is recovering from a freight recession that dominated 2007 and the first quarter of 2008. Weakness in the U.S. economy impacted Canadian non-petroleum exports to the U.S. At the same time, petroleum cost increases have helped Canada. Automotive production impacts have been negative for all three North American countries. My crystal ball is further clouded by the sub-prime mortgage crisis, green initiatives and logistics regionalization caused by increased diesel prices. But here goes…

Figure 1

China continues to flex its biceps as the world’s (not so) new superpower on the global trade scene, and it has become abundantly clear to Canadian transportation policy analysts that the future of Canadian trade lies in its ability to handle the staggering influx of Chinese manufactured goods into the Canadian and North American markets. It has also become apparent that a big part of this future is dependent on the development of a sophisticated system of gateways, corridors and inland ports. With this in mind, our federal government’s vision of our global trade future revolves around what is known as the Asia Pacific Gateway and Corridor Initiative (APGCI). One of the most integral pieces of this initiative is the Port of Prince Rupert. Because of its prime location, well-developed network of international business relationships and access to existing federally funded infrastructure, the Port of Vancouver will always be the cornerstone of any Canadian plan to strengthen and secure its global supply chains. However, over the past couple of years, the Port of Prince Rupert has taken great strides in establishing itself as a bona fide player on the North American port scene.

Think about it. As a consumer, I buy my groceries at the same store every time, but if that store becomes too busy and I no longer get the service I want due to long line- ups, construction or congestion on the roads leading into the store, I’ll eventually go to a different store for my groceries. Similarly, I won’t wait for more than a few minutes at a restaurant, because waiting is a waste of my valuable time. Plus, I find the idea of waiting on a sticky vinyl bench with a whack of other hungry people irritating when I know there are many other things I still need to get done that day. So, I just take a short drive to the next restaurant I like and eat there. I do this all the time with a litany of services and products I consume. It is precisely this type of thinking that Maher Terminals out of Port Elizabeth, along with New Jersey, the Government of Canada, and Canadian National Railway (to name but a few of the business and corporate entities involved) are banking on as they continue to work together, with a host of other stakeholders, to make the Port of Prince Rupert the port of choice for handling excess Asian trade capacity.

However, it is not just this type of thinking that makes the Port of Prince Rupert a viable option. By now, almost everybody knows that it’s about its natural, economic and strategic advantages. First of all, the port prides itself not only on being the first newly established international trade route in the past 100 years, but on being more than a day’s sailing closer to Vancouver or Seattle, and nearly three days closer to Los Angeles/Long Beach. The port has shown how reduced sea transit times from Asian ports like Hong Kong, Shanghai, Gaoxiong, Kobe, Tokyo, Yokohama or Pusan to Prince Rupert can more than make up for longer rail transit times to major North American markets like Toronto (104 hours), Chicago (105 hours), Detroit (139 hours) and Memphis (133 hours).
Other natural advantages of the port include that it’s home to some of the world’s deepest and safest ice-free waters; it has an inner harbor entrance that ranges between 38 and 44 meters deep; and it has an inner harbor with depths that are twice those of Vancouver, Oakland or Los Angeles. At low tide it has a wharf depth of over 18.5 meters. Its container traffic facilities were carefully designed under the watchful eye of Maher Terminals – one of the best in the business – and can handle the largest of international vessels. When assessed from a risk mitigation and insurance perspective, the port is one of the safest in the world because of its protection from wind and ice, its deep harbor and its channel width. Shippers also like the port because they spend less time being piloted in and out and end up paying less to move their freight.

From a strategic perspective, its partnership with Canadian National Railway (CNR) provides a seamless transition from sea to rail. The CNR railway line out of Prince Rupert is fast and efficient through the Canadian Rocky Mountains because it is the lowest grade rail through the whole mountain chain (the Yellowhead Pass). The low rail grade makes it less susceptible to winter delays, which means lower operational times and reduced costs. Along the way, any shipper who wants to can immediately access 80 percent of CNR’s high capacity, state-of-the-art Northern line and benefit from the highly integrated network of CNR railway lines that can take you from the Pacific coast to the Atlantic coast to the Gulf coast. Known as a prudent investor in its own infrastructure, CNR is committed to investing in the line out of Prince Rupert because it considers any investment in the APGCI to be an excellent long-term strategic investment. It’s also easier for them to sleep at night knowing that the Government of Canada has just dedicated over 400 million dollars to ensure that port, rail and road infrastructure that supports the port is sustainable for decades to come.

The economic advantages of the port are not limited to the fact that it has state-of-the-art facilities designed specifically for the movement of containerized freight. It also has dedicated facilities for grain, coal, forest products, agricultural products and general cargo. Prince Rupert Grain Ltd. is an ultra-modern terminal focused on exporting Canadian Wheat Board grains such as barley and wheat. The Ridley Terminal is a highly efficient bulk terminal that handles export coal and petroleum coke volumes from Western Canada. Recently, beef and pork producers have expressed interest in shipping product through the port. Because of recent developments such as this, the port is confident that there will be a significant backhaul opportunity for commodities-based shippers. In late June of 2008, Canpotex, the world’s largest potash exporter (based out of Saskatchewan) announced that it chose Prince Rupert as the site for a new West Coast potash terminal, and COSCO announced that it would be adding a second weekly port call to Prince Rupert from South China and Yokohama.

Annual port statistics report that 2007 traffic volumes were up 37 percent, and the port has already shown an 11 percent volume increase for the first six months of 2008. Weekly container traffic volumes are increasing at a time when other West Coast ports are struggling to maintain their traffic volumes. The port is aggressively seeking out new Asian trade partners and working diligently with carriers like COSCO to ensure the long-term viability of the port. Not only are freight volumes up significantly from 2007, but cruise ship activity was up 56 percent in 2007, and the future looks bright as the community endeavors to make on-land tourist attractions more available and desirable. Looking further into the future, the area surrounding the port itself is industrially zoned land that is primed for development. Potential investors will find property that is suitable for liquid bulk terminals, shipyard and marine activities, container transfer terminals and barge and heavy lift terminals. The development potential is limitless.

As one looks back at the developments taking place during the past couple of months, we need to remember that as recently as late 2007, industry experts advised us that Asian imports are going to increase by 300 percent over the next decade. Even with the recent struggles that the global economies have faced in the third quarter of 2008, most analysts feel that it is only a matter of time before the Asian and North American economies stabilize and consumers regain confidence in the marketplace. When this happens, it is envisioned that the West Coast ports of Los Angeles/Long Beach, CA, and Vancouver, BC, will continue to experience the same congestion and capacity problems that they have experienced for the past five years. Industry insiders don’t see the port’s business partners, the government of British Columbia, or the Government of Canada significantly altering their operational, strategic or long-term plans for the port.

Interestingly, the Port of Prince Rupert was originally the vision of an American, not a Canadian. Yes, Charles Melvin Hayes was the American entrepreneur who first had a grand vision for Prince Rupert in the early 1900s. If he were alive today, I’m sure he would be delighted, albeit a little surprised, to see that all of Canada is rooting for Prince Rupert to be a success, the Port of Vancouver included. But alas, and somewhat ironically, Mr. Hayes never realized his dream for the port, as he died a frigid, watery death aboard the Titanic, that fateful day in 1912. My gut feeling, however, is that the new president of the PRPA (Prince Rupert Port Authority), Don Krusel, will make Mr. Hayes’ vision a reality, one that his children and grandchildren will be proud of for decades to come.


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