CN Rail looking to increase the throughput on its Northwestern line offered a three percent price advantage back in August to shippers who send their grain products across the northern lines into Prince Rupert, as opposed to the more congested lines leading to Vancouver.
It’s a decision that could send quite a bit of traffic to the Prince Rupert facility in the future, as it helps to make the transportation costs involving the Rupert Grain elevator more competitive for those looking for shipping options for their product.
The Daily News covered the story and counted on Jeff Burghardt to look at the history of freight rates in Northern BC. He also revealed some of the details of the program and how it could impact on the Prince Rupert’s elevators delivery reputation and its economic success.
GRAIN SHIPPERS FLOCKING TO RIDLEY FACILITY
By Leanne Ritchie
The Daily News
Wednesday, October 18, 2006
Pages One and Seven
A new freight rate introduced this summer by CN Rail will strengthen future prospects for Prince Rupert Grain.
“In the grain business, transportation cost so dominates the competitiveness of your product, it’s a huge turn around for us to say we are a low cost transportation provider,” said Jeff Burghardt, president of Prince Rupert Grain.
On Aug. 1, CN Rail announced it would give shippers moving product to Prince Rupert a three per cent price advantage compared to the rate for shipping grain products to Vancouver in order to encourage full use of the northwestern rail transportation corridor.
Burghardt explained the terminal has been at a disadvantage since 1996 when the Western Grain Transportation Act, which provided for parity freight rates for Vancouver and Prince Rupert, was removed.
“When that was lost, our freight rate at that time became about 15 per cent more expensive than the Vancouver option. We have been battling for the last 10 years to get that back to what we believe is a proper competitive position,” said Burghardt.
“This year, beginning Aug. 1, we absolutely have a lower freight by about three per cent than any other West Coast destination and it is definitely helping to drive our business. We are now seeing more people because of the flat out cost advantage.”
In addition, he said customers are becoming more and more frustrated with congestion in the Lower Mainland.
“Customers, when they had a cost that was lower, would always think ‘this time when I move my product I am going to beat the congestion and my product will get through okay,” said Burghardt.
“They now realize, more times than not, Vancouver is not near what Prince Rupert Grain can deliver to its customers. We have had a real turn around on that front.”
Prince Rupert Grain, located on Ridley Island, is owned by Canada’s five largest grain companies. The terminal can handle up to seven million tones a year, and has the highest throughput of any grain-clearing elevator in Canada.
The terminal shipped 4.1 million tonnes of grain products in the fiscal year ending July 31, 2006 – its best year since 1998. The company credited the good year with prior rate adjustments that brought rail shipping rates to Prince Rupert back down to match those to the Port of Vancouver.
In the past year, the company has also expanded its product mix to include canola and more durum wheat and its workforce has grown by nine employees, all local hires, a high point of the past year for Burghardt.
“We have had the ability to hire people – these are skilled jobs, well paying jobs. We really feel we are on a sustained growth path that is going to allow our business to flourish for a long time in this northwest corridor,” he said.
In addition, the high growth rates in the economies of India and Asia also bode well for the terminal’s future, said Burghardt.
“In the emerging economies of China and India – which we supply a lot of grain products to – as those markets mature and as their economies develop, they move away from agriculture based production to industrial production,” he said. “So they actually have higher food needs as their economies achieve a higher level of affluence.
“In the agricultural business in Canada, we want to serve the value-added opportunities here in North America, but we also want to participate in what we believe are expanded export opportunities. That dynamic should allow for the northwest corridor and Prince Rupert Grain to continue to have a healthy market share anywhere the West Coast exports.”