Damn the torpedoes.
That appears to be the sentiment of West Coast container terminals embarking on expansion projects despite predictions of a significant slowdown in the global container-shipping sector.
Drewry, a U.K.-based shipping consultancy, had projected container traffic worldwide to grow by an average 4.5% annually from 2015 through to 2019 after rising 5.4% each year from 2010 to 2014.
But in late 2015, the company significantly downgraded its global container port throughput projections. In addition to reducing 2015’s growth to 2.2%, Neil Davidson, Drewry’s ports and terminals senior analyst, said Drewry cut 2016’s projected growth to 3.3% from 4.9%.
The main reason for the revised outlook is “the sudden and marked slowdown in the Chinese economy – and the attempts by the Chinese government to change the nature of the economy – and the resultant slump in Chinese exports,” Davidson said. As well, “the European economy remains sluggish, Russia remains problematic and demand in Africa, Latin America and Australia has softened.”
Davidson added that the economic slowdown has hit many trade routes hard, especially Asia-North Europe, where 2015 volume is expected to drop 4% compared with 2014.
While he said the transpacific trade route is holding up relatively well, projections for West Coast North American port volumes are lower than those for their East Coast counterparts. Reasons include the deployment of larger container ships through the expanded Panama and Suez canals and marketplace uncertainty over the long-term competitiveness of West Coast versus East Coast ports, especially in the wake of the protracted longshore union contract negotiations that disrupted traffic through Los Angeles-Long Beach and other major American West Coast ports from mid-2014 through the early part of 2015.
The labour dispute hurt the West Coast’s already compromised competitive edge.
According to an August 26 Jones Lang LaSalle (NYSE:JLL) report, U.S. and Canadian West Coast ports’ market share of North America’s container traffic over the past eight years has dropped to 55.2% from 61.2%, while the market share of Gulf of Mexico and Eastern Seaboard ports like Houston, Savannah and New York-New Jersey has increased to 44.8% from 38.8%.
Drewry research released in late December noted that more large container ships are being deployed on the Asia-West Coast North America trade route.
It said the average size of the ships on the route has risen 14% in two years and that there are now more than 50 ships with capacity to carry 10,000 or more 20-foot containers (TEU) on the route compared with 14 at the start of 2014.
The report added that terminal technology constraints, port operation hours and berth productivity are among the issues preventing West Coast ports from being ready to regularly handle the new fleets of ultra-large 18,000 TEU vessels, which carry enough containers to fill a train 77 kilometres long.
But B.C. port officials say the province’s terminals will be big-ship ready within a few years, and container terminal operators are planning for expansion, not contraction, in their business.
In an interview earlier in 2015, Peter Xotta, Port Metro Vancouver (PMV) vice-president, planning and operations, said Deltaport already handles 10,000 TEU ships, adding, “I’m confident that the terminal can handle vessels [of] up to 12,000 or 14,000.”
He conceded that port container cranes would have to be modified to service 18,000 TEU vessels but added that the proposed three-berth Roberts Bank Terminal 2 at Deltaport, which would add 2.4 million TEU annually to its container-handling capacity, would be designed to service mega-container vessels anticipated to start calling at PMV in three to five years.
In November, GCT Global Container Terminals Inc., whose GCT Canada subsidiary operates PMV’s Vanterm and Deltaport container terminals, announced the start of a $280 million project to expand Deltaport’s intermodal (ship-to-rail) yard to increase its annual capacity to 1.9 million TEU. Vanterm and Deltaport handle more than 75% of the containers shipped through PMV.
While the company declined to comment on its 2016 container business projections, Louanne Wong, GCT’s manager of market initiatives and development, said its investment in intermodal infrastructure shows where the growth is for container terminals.
In a 2014 interview, GCT Global president and CEO Stephen Edwards told Business in Vancouver that the company is increasing its PMV rail capacity because “the fastest-growing part of the Vancouver gateway is the ship-to-rail and rail-to-ship product.”
About 70% of the company’s PMV traffic is handled by rail; 30% goes on trucks.
GCT competitor DP World is also bullish on ship to rail.
The Dubai-based company, which owns Prince Rupert’s Fairview and Vancouver’s Centerm container terminals, has ambitions to reach annual global container handling capacity of 100 million TEU through its 65 marine terminals by 2020. It currently sits at 77 million.
In December, DP World announced plans to study further expansion of Fairview, which is exclusively intermodal, to increase its container handling capacity to more than two million TEU.
Last March, Fairview’s operator committed $200 million to increase the terminal’s capacity by 60%.
According to the U.S.-based Journal of Commerce (JoC), Prince Rupert’s 13.8% year-over-year growth made it North America’s fastest-growing port in 2014. It was also ranked in the top 10 in the Americas category of the JoC’s 2015 survey of global port productivity.
Port of Prince Rupert numbers show a 31% increase in container traffic as of July 2015 compared with the same month in 2014.
Maksim Mihic, general manager of DP World Vancouver, declined to comment on 2016 global container trade projections, but said the company is “positive about Prince Rupert and our ability to deliver. We are up almost 30% up there for this year. We believe that we have the best product, the shortest route to Asia and superior service.”
He said the Phase 2 Fairview expansion project “is good news for our economy, it’s good news for B.C., it’s a massive investment for the community of Prince Rupert.”
PMV’s annual container shipping volumes have increased significantly over the past 15 years: to 2.83 million TEU by the end of 2013 from 1.16 million in 2000.
As of September 2015, its year-to-date container cargo was 2.3 million TEU, up 5.7% from the same period in 2014. According to a 2014 Ocean Shipping Consultants report, the port’s terminals are projected to be handling closer to 5.0 million TEU annually by 2025.
