Preparing for phase two disappointments?

The Editorial page of the Friday Daily News broached a subject few in the area seem willing to think about, let alone accept these days, the possibility of a delay in the expansion of the Port of Prince Rupert container Port.

Thursday’s paper provided an economic analysis of the northern BC economy, which doesn’t particularly paint a rosy picture for the short term as the world economic order undergoes a bit of reorganization.

In the article, Paul Bowles an economics professor at UNBC suggested that world trading patterns aren’t likely to deviate much in the grip of a global recession and that luring new customers to Rupert’s gateway may become problematic over the course of the coming recession.

When you think about that expansion project for phase two, you have to wonder if there will be the financial commitment required in an economic downturn to make that expansion happen.

With banks tightening up on the credit front and Governments planning for a recession era economy one wonders if there will be anywhere near the level of financial resources available to expand a port. Especially one which may not see any increase in traffic until the economic skies clear and the smoke settles from whatever shakes out from the oncoming recession.

In his editorial on Friday, Earle Gale seems to set the table for a delay, while at the same time calling for the pressure to be kept on all levels of government to be ready to “hit the ground running”.

As in all things global, events with the market destination of America or from the exporting nations half way around the world will dictate more of our port expansion agenda than any level of government may.

The Friday editorial offers up a tentative warning that the current economic troubles may have a larger impact on our economy than we may think at the moment.

Editorial
Prince Rupert Daily News
Friday, October 31, 2008
Page four

Any delay need not be wasted time
Earle Gale
Blowing Off Steam

Yesterday’s front page Daily News story about the impact that the world economic crisis is likely to have on the North Coast made for some grim reading.

Those of us who were hoping that we might be able to ride this one out with minimal disruption were in for a nasty surprise.
In the story, an economics expert from the University of Northern British Columbia said that he believes the global economic crisis unfolding at the moment is probably going to hit northerners harder than it will impact B. C.’s south.

In George T. Baker’s story, economics professor Paul Bowles said the North will be in for some tough times, thanks to our heavy reliance on raw commodities.

I must admit, I had been hoping that Prince Rupert, being something of an anomaly, might continue to grow courtesy of its recent pursuit of new markets, especially through the port.

Bowles, who is, after all, an expert and not a rose-tinted spectacle wearing optimist such as myself, crunched the numbers and hinted we should be heading for the bunkers.

He said we should not hold our breath if we are hoping to increase trade with Asia, predicting the general slowing of world trade and looming recession ion the U. S. will stifle hoped for growth.

As a non-expert, I would have thought that even less product being shipped between Asia to North America, there is still room for Prince Rupert to attract some of that business away from more expensive, slow moving and less-efficient ports elsewhere on the continent.

Why should we not manage to help ourselves to a larger slice of pie, even if the pie from which it is cut is smaller? It just means someone else, somewhere else, may go hungry.

But Bowles thinks shippers will be reluctant to change their plans and throw their lot in with a new port when there is so much uncertainty out there.

He may be right.

All in all, it does look possible that phase two of the port expansion could take a little longer to become a reality because of these troubling times.

That said, we must not let it slip off the radar of our senior politicians.

What better time to put 100 per cent of our energy into ensuring all the preparatory work is completed so the next phase can roll, just as soon as the world is ready for it.

Now is the perfect time for the federal government to be working flat out on consultations with First Nations.

And this is also the time to have the environmental assessment undertaken and completed.

The looming recession will likely be short-lived and we need to be ready to hit the ground running when it is over.

Ottawa must have all its ducks in a row now. After all, we should plan for the future and start building this thing in advance of when it will be needed so that the very second exporters, importers and shippers are looking to ramp up their volumes, we are ready to take advantage of the new business..

In Hong Kong, Kevin Falcon outlines transportation and Prince Rupert Port plans

According to an Asian shipping industry trade paper, Seatrade Asia Online, there are moves in the works to dramatically expand the Rupert container port.

In an article dated July 3rd, the on line edition claims that the province of BC is set to dedicate 15 billion dollars to expand the Port of Prince Rupert, in a bid to become the preferred gateway to the Pacific between North America and Asia.

The article outlines how a Danish shipping conglomerate AP Moller-Maersk Group has been selected as the preferred bidder for the job to invest 650 million into the expansion plan for the facility. The estimated time of development is 2012 when the throughput will quadruple the ports capacity.

Falcon recently concluded a two week trip to Asia to highlight among many issues, the opportunities available in British Columbia for those wishing to ship their goods through the ports of the Pacific Gateway.
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While his Ministerial website promised much in the way of details of his trip with frequent reports and photos to accompany his visit, little of actual newsworthiness seems to have been posted there in recent weeks.

The story as reported by the Asian trade paper makes for an interesting development, in that the expansion plans seem to be moving ahead quickly, while locally there has been little heard on the subject in the last few months.

What remains to be seen is whether these details as reported from an international trade newspaper turn out to be correct and a blue print of sorts, or if they were just an outline from the Minister, of what could one day come on the horizon for the Rupert port.

There is no mention of the pending project developments on the BC Transportation Ministry website or on the Port of Prince Rupert website.

As always, those of us on the shoreline wait for further details, hopefully not to have the first word of developments come from the trade papers of the world...

Targeting Asian traffic, Prince Rupert expands
Seatrade Asia Online
July 3, 2008

Vancouver: The Canadian province of British Columbia is spending C$15 billion (HK$114.74 billion) to expand its Prince Rupert port facilities in a bid to become the preferred Pacific gateway for ships travelling between Asia and North America, reports the South China Morning Post.

Using Prince Rupert can trim two days off the 12-day trip for a ship sailing from Shanghai to Long Beach. That, together with a fast and efficient rail network across the continent to Chicago, offers quicker delivery than United States ports, the British Columbia government says.

"The all-in transport time is unmatched by ports on the west coast, even the ports in Long Beach and Los Angeles," the province's Transport Minister Kelvin Falcon said. Mr Falcon was in Hong Kong last week to meet shipping companies and the Airport Authority to tell them about the expansion of airport, port, road and railway infrastructure in British Columbia.

Danish shipping conglomerate AP Moller-Maersk Group had been picked as the preferred bidder by the provincial government to invest in a C$650 million expansion plan in Prince Rupert, the minister said.

The new facility will quadruple the port's capacity to two million 20-foot equivalent units when it opens in 2012.

In the next two to three years, British Columbia is also planning a C$1.2 billion new terminal in Prince Rupert, which will double the capacity of the whole port area to more than four million teu by 2020.Currently Cosco is the port's main customer. [3/7/08]

Will Barack Obama throw a wrench into the Fairview Container expansion plans? Yes He can!

While there is no immediate impact on Prince Rupert's new $170-million, 500,000-TEU (20-foot-equivalent units, the measurement for a shipping container) port, it could dampen enthusiasm for a massive $650-million expansion just getting under way that is designed to increase capacity to four times that size.— From a Globe and Mail article on Prince Rupert’s Fairview Port and the effect that local politics in Chicago may have on potential expansion…

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Who knew that the Northwest could be caught up in the vortex of American presidential politics?

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The Globe and Mail has an interesting article on CN’s trials and tribulations in buying up an Illinois based railroad and running trains through suburban Chicago , a purchase that could have major implications for Prince Rupert's Fairview Port.

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The purchase of the E J and E line would allow CN to run trains from Prince Rupert to Memphis in 100 hours, making it competitive with the huge American container port at Long Beach, California. CN is anxious to get the line under its wing and up and operational in order to further the expansion plans of Fairview.

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However, in it's quest to buy E J and E, CN has run into a fair amount of community backlash over their plans, making for a controversy that is attracting some high profile supporters.

One of the key opponents to CN’s plans is none other than Illinois Senator and would be Presidential hopeful Barrack Obama, who sent a letter to Barrington village president Karen Darch expressing his opposition to CN's plan.

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A Chicago Tribune article outlines the Senators concerns and the response of CN President and CEO Hunter Harrison to the high profile intervention.

CN’s inability to push the purchase forward and run its trains through the contentious areas of Chicago, could as the Globe puts it “make the Prince Rupert/CN option less competitive with other ports/railroads over time."..

Overall the article provides another fascinating snippet of inside information on the machinations of the transportation industry and how events thousands of miles away could change the dynamic locally…

SHIPPING
Prince Rupert casts a wary eye on Chicago
Much of port's success hinges on CN's fight to bypass Illinois bottleneck
DON WHITELEY
Special to The Globe and Mail
May 21, 2008

VANCOUVER -- As Canadian National Railway Co.'s Chicago expansion plans draw new high-profile opposition from the likes of U.S. Democratic presidential hopeful Barack Obama, Don Krusel is looking on with more than a little self interest.

For the chief executive officer of the Prince Rupert Port Authority, his success rides at least in part on CN's completing a $300-million Chicago-area railway deal.

CN has run into significant public opposition in its bid for approval of the acquisition of Elgin Joliet & Eastern Railway Co. CN wants the rail line so it can bypass Chicago through the suburb of Barrington and cut nearly 30 hours off the time it takes container trains to reach destinations in the American Southeast - and that means a faster route from Prince Rupert into key U.S. markets.

"It certainly would add tremendous market weight to our gateway," Mr. Krusel said of the EJ&E acquisition. "If they are successful in getting that line, it will be 100 hours [from Prince Rupert] to Memphis. We'll be just as close in time as L.A./Long Beach - maybe closer."

Dexter Muller, senior vice-president with the Memphis Regional Chamber, echoed that assessment: "If they get the acquisition completed, it would take off more than 24 hours from the [current] travel time. So many companies are trying to bypass L.A./Long Beach - Wal-Mart for example now goes through the Panama Canal just to avoid it. Clearly that opens up an opportunity for Prince Rupert."

The latest setback to CN's plans was a letter from presidential hopeful and Illinois Senator Obama to Barrington village president Karen Darch expressing his opposition to CN's plan.

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While there is no immediate impact on Prince Rupert's new $170-million, 500,000-TEU (20-foot-equivalent units, the measurement for a shipping container) port, it could dampen enthusiasm for a massive $650-million expansion just getting under way that is designed to increase capacity to four times that size.

The new port's performance has been mixed since it began receiving container ships in November, 2007. Over a four-month period, the port has handled less than 40,000 TEUs, well below the four-month capacity of 160,000 TEUs.

"They had the bad luck of bringing this port on line at a challenging time," said Edward Jones transportation analyst Dan Ortwerth. "I think with any new service you have to figure in a fudge factor for initial hiccups that weren't expected."

Prince Rupert is no stranger to "hiccups," having suffered serious economic losses from forestry mill closures and declining bulk commodity volumes (now rebounding) at the port. Other projects that may, or may not, sprout up at Prince Rupert include a potash exporting terminal, a pipeline to ship oil to Asia, and a liquid natural gas import terminal.

Asked about the impact on Prince Rupert of CN's success in Chicago, CN spokesman Mark Hallman said in an e-mail response: "We don't expect so in the short run, but failure to get the expected efficiencies could make the Prince Rupert/CN option less competitive with other ports/railroads over time."

Mr. Ortwerth called the EJ&E acquisition "the icing on the cake" for Prince Rupert, but agreed the impact - positive or negative - will be long term.

"The initial capacity of 500,000 TEUs will find more than enough takers without the added reliability and speed," he said. "But as Rupert continues to expand up to two million TEUs, the larger network comes more into play."

Mr. Krusel pointed out that while the performance is well below initial expectations, Prince Rupert is holding its own while other West Coast ports are seeing declines in container shipments now.

"A year ago we would have expected a second carrier here," he said. "That hasn't happened. Carriers are reducing service on the Pacific, everywhere. It's hard for them to reduce it in one area and add it somewhere else."

China Cosco Holding Ltd. is the only carrier bringing containers into Prince Rupert and did not return calls seeking comment. Mr. Krusel added that he expects Cosco to begin ramping up traffic over the next month or two.

Mr. Hallman, despite the lower traffic, said the railway is meeting operational and financial expectations through Prince Rupert, including the time it takes to get a container to a U.S. destination.

"CN is delivering fifth-morning availability of containers in Chicago and sixth-morning availability in Memphis," he said. "CN's operating plan for the EJ&E assumed that we would receive all of the traffic that could move through Phase 1 of the new Prince Rupert Terminal. But we haven't filled that capacity yet, so CN continues talks with various parties about securing increased volumes of container traffic over Prince Rupert."

Countering disappointing inbound container traffic, however, is that 37 per cent of the outbound containers are now carrying a variety of products - grain, logs, waste paper, cotton, and even aluminum ingots from Rio Tinto PLC's aluminum smelter at Kitimat, B.C. - to markets in Asia.

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"We're maxed out on the backhaul," Mr. Krusel said, explaining that the 37-per-cent figure is based on volume, while the ship's capacity is based on weight. "The imported goods are very light, while our exports are very heavy."

Mr. Krusel said Phase 2 of the Prince Rupert container port remains "on schedule" despite an economic slowdown, and is now working its way through the environmental assessment process. Construction of the $650-million expansion will start in 2009 with completion set for 2013.

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Despite some uncertainty about existing and future projects, these are heady days for Prince Rupert. The city appears to have broken up the black cloud that hovered over the local economy for nearly 100 years after ambitious entrepreneur Charles Hays, on a financing mission in England for another big port development scheme, booked passage home on the Titanic.