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Multimillion-dollar container terminal investments in B.C. buck global trend

$810 million in upgrades expanding Metro Vancouver’s cargo capacity despite growing transpacific trade war concerns
Left to right, GCT Canada president Eric Waltz, B.C. Premier John Horgan, Global Container Terminals CEO Doron Grosman and GCT Deltaport vice-president of operations Daniel Howell touring GCT Deltaport terminal’s new rail densification project | Submitted

Globally, investors have become wary of sinking big dollars into port and terminal projects, but locally they are being far less cautious.

Global Container Terminals (GCT) recently went live with its $300 million rail densification project at GCT Deltaport.

The investment in the Roberts Bank container cargo terminal is part of what GCT president and CEO Doron Grosman sees as one of his three main objectives after he replaced Stephen Edwards in July 2017: increase GCT’s return on capital.

The company is also set to invest $160 million to expand container cargo handling capacity at its Vanterm terminal in Vancouver.

Current market conditions appear to support the wisdom of GCT’s investments.

Vancouver recently graduated into the list of the world’s top 50 container ports as compiled by the U.S.-based Journal of Commerce. Its 10.9% increase to 3.25 million 20-foot equivalent units (TEUs) handled in 2017 ranked it No. 47. Mid-year cargo numbers released earlier this year showed container cargo through the Port of Vancouver up 5% to a record 1.64 million TEUs and up 16% through the Port of Prince Rupert to 591,335 TEUs compared with 2017’s first six months.

In the wider world, a new United Nations Conference on Trade and Development (UNCTAD) report concludes that prospects for global seaborne trade are good.

Review of Maritime Transport 2018 notes that trade expanded by 4% in 2017 as 752.2 million TEUs were moved through global container ports. It was seaborne trade’s fastest growth in five years, and UNCTAD estimates volume increases this year will match 2017’s 4% growth.UNCTAD is also forecasting 3.8% compound annual growth for seaborne trade between 2018 and 2023, with containerized and dry bulk sectors leading that growth.

But not all analysts share the same optimistic outlook for trade and shipping.

Drewry, a U.K.-based shipping consultancy, recently downgraded its five-year projection for annual container port traffic growth to 4.3% from 5.7% based in part on the China-U.S. trade war and collateral skirmishes on other fronts.

A September Drewry briefing added that the number of greenfield container port projects globally has dropped from 130 in 2009 to around 80 today.

Neil Davidson, senior analyst in Drewry’s ports and terminals practice, pointed out that the capacity of new container terminals is also down.

“This suggests that investors are most cautious about the largest terminal projects, and the focus for greenfield projects [now] is on smaller facilities. This is understandable, but it’s not necessarily what the market wants or needs.”

According to Drewry, annual global container port capacity is projected to expand by only 2%, or 125 million TEUs, by 2022, which it argues is well below projected demand. The trend in a global container cargo shipping sector that continues to struggle with overcapacity, escalating bunker fuel costs, chronically low freight rates and looming environmental challenges has been to deploy larger ships and consolidate shipping lines via acquisitions or alliances.

Those two factors intensify container-handling efficiency pressures for ports and terminals; they also reduce choices for shippers and marginalize smaller ports and terminals that can’t handle mega-container ships. In addition, more liner companies are partnering with container terminals or acquiring operating interests in them to secure customer commitments, increase revenue and diffuse operational risks.  

But those deals create their own complications.

Davidson noted that the politics of liner alliances is complex because the aims of terminal operators and shipping lines often conflict. 

“The independent terminal operator wants to maximize profits,” he said, “but the shipping line wants to pay the lowest possible price for terminal handling.”

Container terminal operators are also investing in extending their operations further along logistics chains.

DP World Ltd., which operates Vancouver’s Centerm and Prince Rupert’s Fairview container terminals, acquired Unifeeder earlier this year in a deal worth an estimated US$765 million. The integrated logistics company is the largest container feeder operator in Europe. DP World also plans to invest $350 million to increase the capacity of its Centerm container terminal in Vancouver to 1.5 million TEUs from the current 900,000. The project would expand Centerm’s footprint by an estimated 15%.

Consolidated container cargo volume through the Dubai-based company’s 78 terminals dipped 0.5% to 9.1 million TEUs in 2018’s third quarter compared with the same quarter a year ago. The slowdown, according to CEO Sultan Ahmed bin Sulayem, was due in part to “general caution in the market given uncertainty in global trade.”

Angela Kirkham, DP World (Canada) Inc.’s manager of marketing and communications, said the Centerm project still needs to complete several approval processes before work on it can begin.

“We are progressing, but there are no shovels in the ground.”

GCT’s $160 million Vanterm upgrade would increase container handling capacity 25% (220,000 TEUs) and allow it to handle larger container ships.

The project, which includes no expansion of Vanterm’s physical footprint, is expected to get underway by year’s end. 

GCT is also looking at further Deltaport expansion as part of what company vice-president of pubic affairs Marko Dekovic said is GCT’s game plan of incremental expansion to service growing container traffic through its terminals.

Meanwhile, the Vancouver Fraser Port Authority’s ambitious Roberts Bank Terminal 2 project is still undergoing environmental assessment. In planning stages since 2012, the $2 billion container terminal would add 2.4 million TEUs to the port’s annual containerized cargo handling capacity.

In an interview with Business in Vancouver, Grosman said container shipping industry consolidation and larger ships concentrated in the hands of fewer shipping lines create challenges for terminal operators.

“The bigger the vessels, the higher the cranes need to reach and the further out the cranes need to reach because the vessels get longer, they get higher and they get broader.”

The investment in Deltaport’s rail densification is aimed at addressing those infrastructure issues. Grosman said it has increased Deltaport’s overall capacity 33% and its ability to move railcar boxes by 50%.

And, a month after the project’s completion, “it is a beautiful purring machine.” 

More purring logistics machinery in the Port of Vancouver would be music to the ears of Asia-Pacific Gateway shippers. Early in October, the Journal of Commerce reported concerns raised by shippers over container dwell times exceeding five days rather than the usual three days at the port. 

A reckoning of terminal cargo-handling efficiency, dwell time is a measure of how long a container sits on a dock after being unloaded from a ship and before it’s loaded onto railcars or trucks. As of September, port statistics pegged the average dwell time at 3.7 days.

Grosman said that another major challenge facing the global shipping sector is “the man down in Washington barking and waving his arms and creating all kinds of waves across the world that don’t exactly help global trade and promote movement of goods.”

Grosman, a U.S. citizen, added that the tariff disputes and the aggressive approach of the current U.S. administration are moving international relations and global trade in the wrong direction.

Previous administrations, he said, were far from perfect, “but we were all trying to move in a direction that was for the improvement of the world at large, with a lot of squabbling but the intention was honourable…. We didn’t poke our best allies in history in the eye; we didn’t say rude things about them; we argued and we figured it out.”

Grosman said the current trade and tariff war “is not hurting our business today; it may hurt our business in the new year [but] that’s still not clear.… There is a lot of barking but not a lot of biting, and the biting that is occurring is not adversely impacting the container business – yet.” • 

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