a container terminal at the port of prince rupert...

CanadianPoliticalScienceReview2(4)December2008

AContainerTerminalatthePortofPrinceRupert(60‐75)

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AContainerTerminalatthePortofPrinceRupert:ConsiderationsfromaTransportationPerspective

AnneGoodchild,SusanAlbrecht,TsitLam,KaseyFaust(UniversityofWashington)1

Abstract

This paper discusses the transport of containers between the Port of PrinceRupert and the hinterland. The result of several data collection and analysisefforts,wepresentasetoffindingsregardingtherolePrinceRupertmightplayinNorthAmericantransportation,andtheparticularstrengthsorweaknessesofthisfacility.Intheshortterm,therewillbenofacilitiesforcontainerrehandlingin Prince Rupert. This activitymay take place in Prince George, ormore likelytheseimportersmaycontinuetousethefacilitiessurroundingVancouver.Giventhecurrentrailnetwork,PrinceGeorgewillberequiredtohandleasmuchcargoasPrinceRupert.ThiswillhavenegativeimpactsonairqualityinPrinceGeorge,yetpotentially positive impactsonemploymentandeconomicactivity throughrehandlingandtransloadingopportunities.DuetosizeableresourcesinWesternCanada,thisPortmayofferabetterratioofexportstoimportsthanotherWestCoastterminalswhichwillattractsteamshiplineslookingforwest‐boundfares.Weconcludethat,becauseofitsuniquefeatures,thisPorthasstrongpotentialtoimpactlogisticspracticesinacontinentaltransportationsystem.

Introduction

InSeptember2007thePortofPrinceRupertopenedamarinecontainerterminal.Theplansarefor this terminal toultimatelyhavea capacityofat least twomillionTEUs,approximately the2007volumesofthePortsofVancouver,Seattle,andTacoma.TherealsoexistplanstoincreasethistofourmillionTEUs. AtthiscapacityPrinceRupertwouldbethelargestcontainerport inCanada (by container volume). In thispaperweconsider someof the issues surrounding thetransportof these containersbetween theport and thehinterland. These includeevaluatingthe capacity of existing transportation infrastructure, considering the dynamics of themarketforfreighttransportation,andtheimpactofCanadianandUScontainerlaw.

ThePortofPrinceRupertisfreefromiceyearround,isanaturallydeepharbor,isclosertoAsiathanotherportsonthewestcoastofNorthAmerica,andisanodeonanextensiverailnetwork.Inaddition,thePortofPrinceRupertisnotlocatedinalargeurbanregion,thereforereducing

1AnneGoodchild,TsitLamandKaseyFaust,DepartmentofCivilandEnvironmentalEngineering, SusanAlbrecht, Jackson School of International Studies, University of Washington, Seattle, WA [email protected]



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theeffectsofairquality,congestion,andthethreatofsecuritybreaches.PrinceRupert’ssmallpopulation,anddistancefromamajorurbancenter,makesitadistinctiveport.AllotherNorthAmericanWestCoastmarine terminals servingat leastonemillionTEUsannually are in largeurbancenterssuchasVancouver,Seattle,Tacoma,Oakland,LosAngeles,andLongBeach.Thispresents a newmodel of theNorthAmericanmarine terminal. Prince Rupert does not havesignificant local services nor is there a significant local demand for goods. Unlike otherwestcoast ports Prince Rupert will not have resources for rehandling goods or transloadingcontainers nor well developed and resilient communication, energy, and transportationinfrastructure. The interplay of these unique features, and current market dynamics incontainertransportation,arediscussedbelow.

ReliableTransportation

Thereisasensethatdisruptionstothetransportationsystemarebecomingmorecommon,andmorecostly.1Thesedisruptionsarecausedbyadiversesetofeventssuchaslabourunrest(forexamplethe2002WestCoastportlockout;2005truckstrikeatthePortofVancouver),extremeweather (Hurricane Katrina; 2007 Skeena river flood), natural disasters (Loma PrietaEarthquake), terrorist events (destruction of the World Trade Center), failing infrastructure(collapse of the I‐95 bridge in Minnesota), and security vulnerabilities (police chase closesCanadian/USborder,2006).Atthesametime,companieshavebeenstreamliningtheirsupplychains by consolidating flow into a small number of channels, and reducing inventory cost.Although these supply chains can operate under normal conditions at lower cost, there aregreater economic costs to disruption. A literature has developed to consider the “resiliententerprise”2, one that can operate efficiently, but is also tolerant to disruption. As a result,morerecently, largeimporterssuchasWalMart,whohadpreviouslyusedaoneportstrategy;importingalloftheirUnitedStatesdestinedAsiangoodsthroughthePortsofLosAngelesandLong Beach, havemoved to a distributed strategy, using five geographically distributed portsaround theUnited States for their Asian imports (Los Angeles, Tacoma,New York, Savannah,andHouston).AnexampleofthiscanbeseenbyconsideringthevolumesofcontainershandledatWestCoastportsinrecentyears(seefigure1below).In2004thePortsofLosAngelesandLong Beach suffered from heavy congestion due in large part to a lack of availablelongshoremen,andvesselsweredelayedbyuptoaweek.3In2005,thePortofSeattlehadthelargest percentage growth of all US ports, in part because many carriers decided to divertvolumenorthinsearchofmorereliabletraveltimes.

An efficient supply chain has become a requirement for success in the retail market.4Contemporary business leaders such as WalMart and Dell have established their success ontheirabilitytokeeplogisticscostsdown.Thiscanbedoneinareliabletransportationsystem,butuncertaintyistheenemyoflogistics;increasingthedifficultyofmanaginginventory.



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Figure1.Volumes(inTEUs)handledatselectedWestCoastPorts(source:AAPA).

EstimatingLandsideTransportationCapacity

Thegoalofthisandthesubsequentsectionisnottoveryaccuratelypredictporttrafficorraillinecapacity,buttoestimate,andcomparebroadly,thetwovalues.

ConsistentwiththePortofPrinceRupert’sexpectations, it isassumedallcontainerswill leavetheporton trains. ThePortaims to reachanannualcapacityof twomillionTEUs. The trackbetween Prince George and Prince Rupert is a single track with one kilometer sidingsapproximately every 30 kilometers, the track is approximately 600 kilometers in length withcentralized trafficcontrol. During2007the tunnelsbetweenSmithersandTerrace,BCwillbeundercut to permit double‐stack clearances along the line. With current sidings, the line canhandletrainsofabout90carsinlength. Attypicalspeeds,itwouldtaketrainsapproximatelyeighthourstotravelthedistancebetweenPrinceRupertandPrinceGeorge.Iftrainstravelingineachdirectionarespacedabouteveryhour,therewouldbeonlyminordelaycausedbytheneedforpassing.Atthisspacing,thetrackcanhandleabout24trainsineachdirectionperdaywhenthesourceanddestinationterminalsandyardsoperate24hoursperday.Iftheoriginanddestinationterminalsoperate for16hoursaday, thenthecapacityof thetrack is16trains ineachdirection.



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Figure2.CanadianNationalRailwayCompanyNetwork(source:CN).

Alternatively,foragiventimeperiod,thetrackcouldbeusedfortravelinonedirection.GiventheeighthourtraveltimebetweenPrinceGeorgeandPrinceRupert,theperiodsoftravelinonedirectionmustbeatleastthislonginordertoavoidthelimitationofpassingsidingsandallowclumpingoftrainsmoretightly.With5minuteheadwaysthecapacityofthelineis48trainsineachdirectioneachday. Thiswouldbeextremelydifficult tomanageat the terminalswithatrain arriving or departing every fiveminutes for four hours. With 10minute headways, thecapacitydropsto24trainsperdayineachdirection.Table1summarizestheseestimationsofthePrinceRuperttoPrinceGeorgelinecapacity.



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Table1.EstimatedPrinceRuperttoPrinceGeorgelinecapacity.

Hours PerDay

Comments Capacity

24 Twodirectionssimultaneously 24trainsperdayeachdirection16 Two directions simultaneously but

terminalsoperatejust16hoursperday16trainsperdayeachdirection

24 Segregate traffic with 5 minuteheadways.

48 trains per day in eachdirection

24 Segregate traffic with 10 minuteheadways.

24 trains per day in eachdirection

PortTrafficGeneration

Very few, if any, containers will be destined for the local market in Prince Rupert, and it isanticipatedthatmanygoodsthatareconsumedinPrinceRupertwillstillbetransportedinitiallytoPrinceGeorge,handled,andtruckedbacktoPrinceRupert.ContainersaretypicallyshippedfromfactoriesinAsiafullofgoodsfromthatfactory,anditisunlikelythatanentirecontainerofgoods will be bound for Prince Rupert, rather, these goods may be transported to aconsolidation center where containers are unpacked, packed with the goods destined for asinglelocation(andperhapsfromseveralfactories)andshippedout.Adoublestackedtraincanholdapproximately350TEUs(assumingeachrailcarcarriestwo40footcontainersor4TEUs).Table 2 shows the number of trains required to service the intermodal traffic if operating 52weeksayear.

Table2.Trainsrequiredgivenportvolume.

TEUsannually Daysofportoperationsperweek Trainsperdayeachdirection

1,000,000 7 41,000,000 5 62,000,000 7 82,000,000 5 114,000,000 7 164,000,000 5 22

Inaddition to intermodal trainscarryingcontainers, thePortofPrinceRupertplans toservicecoal trains from Eastern British Columbia and grain trains from the prairies to Prince Rupert.RidleyterminalinPrinceRuperthandlesboththecoalandgrainexports.CurrentlythePortcanload up to 4,000 tons of wheat or barley per hour.5 Assuming this rate is constant for thedurationofaninehourday,andeachtrainhasapproximately147cars,eachwithabout45,000kilograms,aboutsixtrainswillbetravelingtoPrinceRuperteachday.Thesecarswouldneedto



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returnemptytothesource.Thecoalfacilitycanhandle24milliontonesperyearwhichmeansthatwhenoperatingatcapacitythiswouldgenerateabout13trainsineachdirectioneachday.

ThreedaysaweekapassengertraintravelsfromPrinceRuperttoPrinceGeorgeandthreedaysaweek the trainwill be going the opposite direction. Presumably theremay be demand formoreserviceifsignificanteconomicgrowthgoesalongwiththeportexpansion.

Wedonotexpectsignificantchangesinthevolumesofbulkgrainandcoalhandledasafunctionofthegrowthofthecontainerterminal.ThevolumesofgrainandcoalhandledatPrinceRupertduringthesecondquarterof2007werealmostequivalent,2.5milliontonsofeach.Thiswouldgenerateapproximatelysixtrainseachdayineachdirectionforeachcommodity.

Giventheseassumptions,weconcludethePorthassufficientexistingrailcapacitytohandleallanticipatedcontainervolumewiththeexistinginfrastructureavailable.

TransportationInfrastructureReliability

TheSkeenaRiverexperiencesheavyflowsfromsnowfall,snowmeltandrainfall inthewinterandspring.Thishashistoricallycausedfrequentroadwayandrail‐lineclosuresduetofloodingand landslides. Tounderstandthe impactof these failuresonservice reliability, thehistoricalrecord of rainstorm and flood damage in the area6 provided details of all rainstorms andconsequent damages. From this we extracted events that caused rail line damage orinterrupted service between Prince Rupert and Prince George. For events that indicateinterruption,butlackdataonlength,theaverageofall interruptionlengthsisassumed.Ifthedirectionofthedisruptionisomitted,itisassumedthedisruptionoccurredinbothdirections.

Ifweassumethisweatherdatarepresentsfutureweatherpatternsitispossibletoestimatetheimpactofweatherdisruptions to containers traveling inandoutof thePortofPrinceRupert.For example, on 03 March, 1911 there was service interruption at Swanson Bay due to alandslide.Allserviceonthelinewasceasedforthreedays.Intheexampleabove,itisassumedthePortwould like tobemoving four trainsperday,butcannotmoveany for threedays. Itthenhas thecapacity tomove24 trainsadayuntil thecongestionhasbeencleared. Ondaythreethetrainsareabletodepart,butthequeueisnotcleareduntilabouthalfwaythroughtheday.Thequeuingdelayisshowninfigure3asthetotalgrayshadedareaminustheshadedareaunderthebluecurve.Theinterceptpointbetweenthetwocurvesisthepointwherethequeuehas dissipated. In this example, total train delay is 43.2 train‐days. With 350 containers pertrain,thisis15,120container‐days.ThetablebelowshowstheresultsofcontainerdelaybasedondifferentannualPortTEUvolumes.



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Figure3.Queuinganalysisexample.

Table3.Summaryofresults(totaldelayforbothdirections).

TEUsAnnually

Daysofportoperationsper

week

Trainsperdayeach

direction

Capacity(trains/day)

AverageDelay

(Container‐days/Year)

AverageAnnualDelay

(Container‐Hours)

AverageAnnualDelay(container‐hourspercontainerthroughput)

1,000,000 7dayaweekoperation

4 24 95222 2285335 2.29

1,000,000 5dayaweekoperation

6 24 158704 3808892 3.81

2,000,000 7 8 24 238056 5713339 2.862,000,000 5 11 24 402864 9668727 4.834,000,000 7 16 24 952223 22853355 5.714,000,000 5 22 24 5237227 125693450 31.42

As shown in the figure4below, theaverageannualdelaydrastically increaseswhen thePortincreasesvolumetofourmillionTEUs(22trainsperdayeachdirection,closetothecapacityof24trainsperday).Thisistypicalofaqueuingsystem.WithfourmillionTEUsperyearandfivedaysaweekoperation,thedelaywouldbesignificantlylargerthanoperatingatsevendaysperweek.This isalsobecausetherailroadsystemoperatesataratethat isveryclosetocapacitywithfivedaysaweekoperation.



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Figure4.Averagedelaywithvarioustrainservices.

Figure5isthegraphicrepresentationofaverageinterruptiondurationbetween1891and1991.Most disruptions occurred in the winter months, October through January, while summermonths have low disruption rates. This is due to weather patterns in the area, with mostfloodingandrainfalloccurringinthewinterandspring.

Figure5.Averageserviceinterruptiondurationbymonth.

Table4showstheaverageserviceinterruptiondurationanddelaybymonthforvariouslevelsofPort activity. The average disruption duration is almost 1 day inOctober (no service in eachdirection),whereas it is0 inJune. Theexpectedtotaldelay isshownforeachmonth intrain‐



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daysofdelay,forvariousvolumes. InOctober,weexpectalmost160train‐daysofdelaywiththeportgeneratingeighttrainsperday(twomillionTEU),whereasinJuneweexpectnodelay.

Table4.Traindelaysbymonth.

Delay (train-day)s Month Average

Duration 4 trains/day

6 trains/day

8 trains/day

11 trains/day

16 trains/day

22 trains/day

Jan 0.46 13.2 21.9 32.9 55.7 131.6 723.7 Feb 0.16 2.5 5.3 8.0 13.5 31.9 175.2 Mar 0.20 10.2 7.0 10.5 17.8 42.0 231.2 Apr 0.04 0.1 0.7 1.0 1.7 4.0 22.1 May 0.49 57.5 90.3 135.5 229.3 541.9 2980.6 Jun 0.00 0.0 0.0 0.0 0.0 0.0 0.0 Jul 0.02 0.0 0.1 0.1 0.2 0.4 2.2 Aug 0.00 0.0 0.0 0.0 0.0 0.0 0.0 Sep 0.05 0.1 1.0 1.5 2.5 6.0 32.9 Oct 0.95 1.6 158.4 237.7 402.2 950.6 5228.5 Nov 0.73 67.7 61.4 92.2 156.0 368.7 2027.7 Dec 0.35 14.2 21.1 31.7 53.6 126.6 696.4

Figure6showsthetotalserviceinterruptiondurationanddelaybyyear.Thedurationanddelayhave a similar pattern in the years of high disruptions. This shows it is the long durationdisruptionsthatcausesignificantdelay.

Figure6.Serviceinterruptiondurationanddelaybyyear.

Line closures in and out of Prince Rupert are not uncommon, and would cause significantdisruptiontothetransportationsystem.ArecentstudysuggeststhecostoftheLosAngelesandLong Beach port complex closure at $1 billion per day.7 While this port complex handles an



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orderofmagnitudemorecontainers thanplans forPrinceRupert, shoulddisruptionsoccuratPrinceRupert,suchcostsofdisruptionwouldstillbeverysignificant.

Rehandling

Mostportsonthewestcoastactasbothnodesandterminalsonthetransportationsystem.Apass‐through facility for goods traveling through the location but destined for outside theregion,andaterminalforgoodsdestinedfortheregionitself.Historicallyportsweredesignedasterminals,andarestillreferredtoasmarineterminals,servingtheareaaroundthem.Withthedevelopmentof lowcostoverland transportation, theWestCoastportshavebecome theimport locations of choice, and containers are moved via double stacked trains to locationsinlandviawhatisreferredtoasthelandbridge.

IntheshorttermthePortofPrinceRupertwillnothaveanyregionalhandlingfacilities(facilitiesinPrinceGeorgearenotconsideredregional).Vancouverwillthereforeprobablycontinuetodoall of the consolidation/deconsolidation.8 Importers use regional handling facilities to takeadvantage of inventory management opportunities and pricing structures for long‐haulcontainers.Thisistypicallyadvantageousforimportersoflowcostgoodsforwhomtimeislessvaluable,andimportersoflargequantitieswhocantakeadvantageoftheeconomiesofscaleintransportationcost. Deconsolidationalsoallows importerstodelaydestinationdecisionsuntildemandestimatesaremorecertain,reducinginventoryandmissedsalesopportunities,andtocarry out necessary re‐stuffing to convert from factorybasedpacking to storebasedpacking.PrinceRupertwillthereforebeausefulchannelforsmall importersandfor large importersoflow‐valuegoodsdistributinginCanadaandtheUSmid‐west.

PrinceGeorge

ThereisaspurlinefromPrinceGeorgetoPrinceRupert(seefigure2).Thismeansthattoreachany destination, all containers leaving Prince Rupertmust travel through Prince George, andvice‐versa.Thegrowthincontainertrafficofcontainervesselsandintermodaltrainswillhaveasignificanteffecton regionalairquality. Airquality isnotcurrentlyamajorconcern inPrinceRupert given the small sizeof the community and the abilityof the air basin to absorb thesetoxins.Evenatamicroscalewedonotexpectairqualitytobeaproblemduetotherelianceonrail transport. Trains travelingup the SkeenaRiver valley fully loadedwill certainly introducetoxinsandcontributetoairpollution inPrinceGeorge,wherefederalairqualitystandardsareoften exceeded. Adding 100 trains a day to the rail traffic in Prince George will have asignificant,negativeimpactontheairbasinwhichisalreadyofconcern.9

Muchoftheeconomicactivitygeneratedbyportsisinperipheralactivities,notdirectlythroughhandlingat theport itself. Ina recent reportbyMartinAssociates it isestimated thatof the8,397,301Americansworkingforportsandport‐relatedindustriesin2006,nearlysevenmillionwereemployedbyfirmsinvolvedinhandlingimportsandexports,suchasretailers,wholesalers,manufacturers,distributorsandlogisticscompanies.Giventheexistingbaseofinfrastructureitis anticipated that most of these businesses will actually locate in Prince George. It is notnecessary for them to be located in Prince Rupert itself. Martin estimates that 507,448



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Americans held jobs at the ports themselves as terminal operators, longshoremen, freightforwarders, steamship agents, ship pilots, tug and towboat operators, chandlers,warehousemen,aswellas jobs in thedredging,marineconstruction, ship repair, truckingandrailroad industries. This is sixpercentof theestimatednumberof jobsworking forportsandportrelatedindustries.Thestudyestimatesanother630,913inducedjobssupportedbytheseportjobsduetopurchasesoffood,housing,transportation,apparel,medicalandentertainmentservices. Also included as induced jobs were those with local, state and federal agenciesprovidingsupportfunctionssuchaseducationandmunicipalservices.Thereportalsofindsthatport‐sectorjobstendtopayabove‐averagewages.Port‐sectorworkerstodayearn,onaverage,about$50,000ayear,whichis$13,000moreperyearthantheNationalAverageWageIndex,ascomputedbytheSocialSecurityAdministration.10

USMarket

Prince Rupert plans to rely in large part on carrying traffic for US destinations. ContainerthroughputinNorthAmericain2004was41.1millionTEU,and78percentofAsia‐UStrafficwashandledbytheWestCoastPorts.In2006and2007,aboutfivepercentofthevolumecarriedbythe Port of Vancouver was US traffic.11 Approximately 30 percent of inbound containers atHalifax in 2007were bound for theUS12, a significantly larger percentage than at Vancouver.CostsassociatedwithentryintotheUSmarketaretheextracostofbordersecurityinthepost9‐11eraanddocumentation.Interruptionsorslowdownstoclearcustomscarryacostasitisaloss of time in transporting and delivering goods. A recent study examined this issue anddetermined the costs of increased security also has the potential to impact the level ofinvestmentbetweenthetwocountries,andthatthiscostwillprimarilybebornebyCanadaasitsexportswillbemoreadverselyaffectedbysecurity‐exacerbatedbordercrossingdelays,andthusimpactthewholenetworkofsupplychainsystemsonbothsidesoftheborder.13

CanadiantaxesarenotleviedongoodsdestinedfortheUSthatareimportedthroughCanada;however if the finaldestination isnotknownat the timeof import, thendutiesmustbepaidandreimbursementsoughtforthosegoods.ThetransactioncostsfortheimporterdiscouragesimportersfromusingCanadianportsastheirNorthAmericanportofentry.

Exports

ThePortofPrinceRupertisclosetotheresourcerichareasofBritishColumbiaandAlberta,andhas the potential to capture the related exports. From 2005 to the present North AmericanWest Coast Ports have imported more loaded containers than they have exported, creatingmore demand for eastbound service from Asia than westbound service to Asia, and amuchhighercostforeastboundservice.InSouthernCaliforniatheexport/importratioisabout0.35,inNorthernCalifornia0.95, inOregon0.98andinWashington0.72. AttheportofVancouverthe ratiowas also 0.72.14 Ports that can offer export traffic allow shipping lines to generatemore revenue and are therefore appealing as destinations. This balance of trade also allowsefficiencieslandsideasintermodaltrainsdonotneedtoreturntotheportempty,butcancarryexport loads which are revenue generating loads. This makes serving the destination moreappealingtotherailroadaswell,asrevenuecanbegeneratedontripstoandfromtheport.



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Mostshipping lineschoosetovisitterminalswithsignificantexports last inamulti‐stoproute,anddestinationswith“hot”importsfirstonamulti‐stoproute.Typicalmulti‐stoproutesleaveAsia forSouthernCalifornia,and then travelup thecoast toNorthernCaliforniaor thePacificNorthwestbeforereturningtoAsia.Thisallowsthemtoservicethe“hot”importsinSouthernCalifornia quickly and as much as possible load the vessel with loaded containers beforetraveling across the Pacific, better utilizing the ship’s capacity. Most exported containers areempty,sothereissignificantlymoretimepressurewhenhandlingimports.Thereare,however,asmallernumberofservicesthatdovisitthePacificNorthwestfirst. TodatePrinceRupert isthefirstportofcallforservicesthatcallattheport,allowingtheporttotakeadvantageofitspositionastheclosestNorthAmericanterminaltoAsia. Inaddition,exportvolumesatPrinceRuperthavebeenminimal.

ContainerLaw

The container industry is worldwide, with 90 percent of global cargo (by weight) carried inmarine containers. Marine containers used in international trade upon entering Canada aregranteddutyrelief,subjecttoseverallimitations:1)Thecontainermustbeexportedwithin30daysofthedateofimportation,and2)maybeusedinonedomesticmove,providedthemoveisbetweenthepointofdischargeofimportedcargoandthepointofloadingforexport,orifitisempty,providedthemoveistothepointofexit.ThisisdifferentfromUScabotagelaws,whichallow for 365 days and do not legislate domestic repositioning (or, DRP). Consequently, UScabotageisconsideredmoreliberalthanCanadianlaws.NAFTAclassifiesmarinecontainersas“steelpackaging”astheydonotaltertheformorvalueofaproductandtherefore,areexemptfromtariffs.

Themovement of empty containers onNorth America’s rail networks is an inefficient use ofintermodalcapacity.Theimbalanceoffullandemptycontainersispartlyafactorofgeographicsizeandalsobecausemanyexportersarelocatedoutsidemainconsumingregions.Inresponse,tocontainer law,andexistingpricingstructures,transloadfacilitieshavebeenestablished15sothat importers can send their marine containers to a transload facility, discharging 40 footcontainersintotrailersordomesticcontainersforhaulageeitherdirectlytoastoreoraregionaldistributioncenter.16

However, under the Canadian post audit system, ocean carriers have the status as a “pooloperator.”17 Under this status, which allows for an inventory of equipment, containers canremain in Canada duty free for up to 180 days; as a result, the time restrictions are not theprimarylimitingconcernofCanadiancabotage,butrather,thetypeanddirectionofmovementallowed.ForlargeoceancarrierssuchasMaersk,thedifferencesinUSandCanadiancabotagelaws does not affect the way Maersk does business in Canada. For Maersk, the timerequirementisnotaconcern;rather,greaterfreedomofmovementinadditiontoportsofexitis preferred.18 For other companies, the time restriction and DPR requirement act “as ahindrancetodevelopingsynergisticpartnership.”19

While it may be beneficial for Canadian cabotage regulations to be harmonized with moreliberal US cabotage, it is not clear Canadian cabotage adversely impacts large international



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oceancarriers. It seemsshipping linesmayhaveapreference formanagingcontainers in theUS,overCanada,duetothereducedrestrictions.

NorthAmericanPortCapacity

Container traffic continues to growworldwide and is expected to double in the next decade.Containerizationisadynamictradeforports,involvingsignificantcapital,ishighlycompetitive,andisriskybynature.IncreasingcontainerizationgrowthhashadanimpactonVancouverandothermajorUSwest coastports.Muchof thecontainer tradegrowthcomes fromthe riseofChina as amajormanufacturer, and has led to a booming trans‐Pacific pendulum trade fromAsia to the west coast of North America. The Port of Vancouver experienced congestion asimports from Asia led to double‐digit growth in 2004, leading the Port Authority to plan todevelop a second container terminal. At the Port of Prince Rupert, capacitywill be added asneededinamoreisolatedenvironmenttohandlethegrowingtrans‐Pacificcontainertrade.20

Demand for services atNorthAmericanPorts hasbeen growingdramatically over the last 15years(seefigure7below).Thevastmajorityofthisgrowth,however,hasoccurredattheportsof LosAngeles/LongBeach, andNewYork/New Jersey. Whileotherportson theWestCoasthave experienced strong growth, the growth at LA/LB and NY/NJ has been exponential.Althoughtherehasbeenmuchdiscussionabouttheneedforadditionalcapacity,therearestillportsoperatingbelowtheircapacity.

It is difficult to identify the capacity of a marine terminal. Port capacity is a function of itsphysicalinfrastructureaswellasitsmethodsofoperationandinformationinfrastructure.Thiscanbeobservedby thedistinctly lowerTEU throughput/hectare ratioswhencomparingportsaroundtheglobe(seefigure8below).

ThehistoricportsofHongKongandSingaporehaveexperiencedconstraintson theirphysicalland area for some time and so have optimized their operations tominimize land utilization,whilerelyingmoreheavilyonmoreavailableresourcessuchaslabor.Theargument,therefore,thatWest Coast Portswill soon run out of capacity is dependent on their being amaximumcapacity for these ports to move containers. It is clear that with changes currently beingimplemented such as technology deployments and reductions in free storage time, that theexistingterminalsmaybeabletohandleadditionalgoods.PrinceRupertcannotrelysolelyonthenecessityoftheterminal,butwillalsohavetoofferareliable,efficientservicetocompete.



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Figure7.TEUshandledatNorthAmericanportsoverthelast25years(source:AAPA).

Figure 8. Productivity metrics for selected world ports (source: National Urban FreightConference200621).



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Conclusions

BeingclosertoAsiaisasignificantassetifthevesselcallsatPrinceRupertfirst,butthisworksincontrast todevelopingexportmarkets. Shipping lineswant tovisitportswithexports last, toloadthevesselpriortoreturningtoAsia.Basicportservicessuchasterminaloperationsmustoccur in PrinceRupert butmuchperipheral activity could occur in PrinceGeorge, such as re‐handlingandrailswitchingoperations.ThiscouldmeansignificanteconomicactivityforPrinceGeorgeaswellastheassociatedenvironmentalcost.ItisassumedthatmuchofthetwomillionTEUs handled at Prince Rupert will be destined to the US. Currently only five percent ofVancouver’simportsaredestinedtotheUS.Therearebarrierstocross‐bordertradethatneedtobeunderstoodandaddressedifPrinceRupertistocapturemoreoftheUSmarket.Asasignof things to come, Prince Rupert has had a very successful first year, and is delivering on itspromise to provide reliable transportation for imported goods from Asia to the Americanheartland.

Endnotes

1P.KleindorferandG.Saad,“Managingdisruptionrisksinsupplychains,”ProductionandOperationsManagement,Spring2005.

2Y.Sheffi,TheResilentEnterprise,MITPress,2007.3B.Mongelluzzo,“Apeekatthepeak,”JournalofCommerce,June2005.4Y.SheffiandP.Michelman,“Thenextkillerapp?It’syoursupplychain”HarvardBusinessReview,April

2005.5SeePrinceRupertPortAuthoritywebsite,www.rupertport.com.6“RainstormandFloodDamage:NorthwestBritishColumbia1891‐1991,”TheBritishColumbiaMinistry

ofForestsResearch.7H.RosoffandD.vonWinterfeldt,“AriskandeconomicanalysisofdirtybombattacksontheportsofLos

AngelesandLongBeach,”CREATEFinalReport,2005.8R.Leachman,FinalReport,PortandModalElasticityStudy,SouthernCaliforniaAssociationof

Governments,2005.9ThePrinceGeorgeairshedhasanumberoflocalsourcesofairpollutionanditslocationwithinariver

valleywhichexposesittoseveralindustrialsourcesoffineparticulatematter.PrinceGeorgeAirQualityManagementPlan,Phase1,FinalReport,Available:http://wlapwww.gov.bc.ca/nor/pollution/environmental/air_mgmtplan_final.pdf[Accessed09,April2008],and,2004AnnualAirQualityReportforPrinceGeorge.EnvironmentalProtectionDivisionMinistryofWater,LandandAirProtection,Omincea‐PeaceRegions,BritishColumbia.Available:http://wlapwww.gov.bc.ca/nor/pollution/environmental/air/air_report_04.pdf[Accessed09,April2008].

10MartinAssociatesPortEconomicImpactStudy,2007.11PortofVancouverdata.12PersonalCommunicationwiththePortofHalifax.13P.Gandhi,W.Glass,&N.Duffy,“BordersecuritycostsandtheirimpactonCanada‐UStradeand

investment.”JournalofMidwestInternationalBusinessResearch,vol.XXI,p.7,2007.14DataobtainedfromthePacificMaritimeAssociationandPortofVancouver.15ThereisonenearthePortofVancouver.



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16MarinovaConsultingLtd,&Partners,TheUseofContainersinCanada,TransportCanada,December2006.

17Railways,truckers,andthirdparties(freightforwarders,shippers,etc)couldqualifyiftheyeitherleasecontainersormaintainastorageyardforthepurposeofusingcontainersininternationaltraffic.

18ContainersmustreturnalongtheroutewhereacontainerenteredCanada,theexceptionbeingemptycontainerscanexitbyanyport.

19SupplyChainSolutionsInternationalandUniversityofManitobaTransportInstitute,AReviewofRegulationsGoverningUseofInternationalMarineContainersinCanadianDomesticCargoCarriage,December2005.

20M.Ircha,“Characteristicsoftomorrow’ssuccessfulport.”TheAIMSAtlanticaPapers#4,January2006.AtlanticInstituteforMarketStudies,Halifax,NovaScotia.

21H.D.Le‐GriffinandM.Murphy,“Assessingcontainerterminalproductivity:ExperiencesattheportsofLosAngelesandLongBeach”presentedattheFebruary2006NationalUrbanFreightConference.

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http://www.britishcolumbia.com/regions/towns/?townID=3660PortofLosAngeles.“PortofLosAngelesContainerStatistics”July2007.

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gif&sel=flat&sz=sm&fr=RidleyTerminals.July2007.http://www.rti.comTourismPrinceRupert.June2007.http://www.tourismprincerupert.com/liveworkandplayVIARail.“Jasper‐PrinceGeorge‐PrinceRupert”July2007.http://www.viarail.ca/pdf/2007/timetable/

VI200705_Jasper‐PrinceGeorge‐PrinceRupert.pdf

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