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Supply chain inefficiencies squeezing agriculture and other business bottom lines

Submissions to federal international trade committee point to rail and data-sharing shortcomings
Railcars assembled in a Canadian Pacific rail yard in Metro Vancouver | Chung Chow

B.C.’s Asia-Pacific Gateway needs more than port infrastructure upgrades to deliver an efficient flow of agricultural goods and other imports and exports.

What happens further along the supply chain line requires attention, according to submissions made to the federal government’s Standing Committee on International Trade (SCIT). Without it, business customers and consumers will continue to face rising cost pressures and delivery dysfunction.

The good news is that B.C. ports are spearheading several major projects aimed at improving cargo-handling capacity.

Earlier this month, the Prince Rupert Port Authority announced that its $250 million Ridley Island Export Logistics Project (RIELP) had passed the federal government’s environmental review process. That clears the way for the development of an export complex on the southern end of Prince Rupert’s Ridley Island.

The complex, which will take an estimated two years to complete, will provide the Port of Prince Rupert with bulk and breakbulk transload facilities, an intermodal rail yard and a container storage yard. The project’s first phase will create an estimated 400,000 20-foot-equivalent units (TEUs) of additional port capacity to move everything from plastic pellets and cereal grains to lumber and pulp in containers directly from railcars to ships.

The announcement follows the recent completion in the Port of Vancouver of a $350 million expansion at DP World’s Centerm container terminal that increases its handling capacity to 1.5 million TEUs from 900,000 TEUs.

The Vancouver Fraser Port Authority (VFPA) is also waiting for a federal cabinet decision on its proposed $3.2 billion Terminal 2 expansion project at Roberts Bank.

That decision is imminent.

If approved, Terminal 2 would add 2.4 million TEUs to the port’s annual container handling capacity and increase overall container terminal capacity by more than 30 per cent on Canada’s West Coast.   

But Asia-Pacific Gateway supply chain efficiency needs more than terminal capacity upgrades. This network, and the grain producers and other freight customers that rely on it, need road and railway improvements.

In its submission to the SCIT, GCT Global Container Terminals Inc. said there was an “urgent” need to increase Canada’s rail transportation capacity “to support restoration of [the country’s] supply chain fluidity” and the movement of rail containers. 

GCT, which operates the Port of Vancouver’s GCT Deltaport and Vanterm container terminals, said the inability of railways to move containers efficiently is increasing rail dwell times and congestion at marine container terminals.

GCT’s submission also emphasized that those terminals are not designed to be “warehouses” for storing rail containers.

Little wonder then that, when asked earlier this year what GCT thinks should be a supply chain infrastructure investment priority for B.C., Marko Dekovic, the company’s vice-president of public affairs, told BIV that, “really, it is about the rail infrastructure.… We’re still idling ships at Deltaport because there’s no rail supply.”

Railcar movement remains an issue for the Port of Vancouver. 

Average rail dwell times, a measurement of how long a ship’s containers take to be offloaded at the dock and loaded onto railcars, were hovering around 7.5 days in January 2022 compared with the Port of Vancouver’s target of 2.5 days to three days. Those times were down to 3.9 days in September, but, as of January 2023, were back up to 8.9 days.

Availability of railcars was highlighted as a top concern in the SCIT’s Transporting Goods in Rail Containers: Some Trade Implications for Canada report.

Regina-based AGT Food and Ingredients Inc. told the committee that the number of containers available for transporting goods from Western Canada depends on the “willingness” of shipping firms to allow these containers to “stop in Western Canada empty to be filled with [agriculture and agri-food goods].”

Edmonton’s Quorum Corp., which monitors the country’s prairie grain handling and transportation system, estimated that, as of October 2022, the Port of Vancouver’s “monthly total of loaded export containers dropped by 33 per cent compared with the average in the same 12 months in 2019 and 2020, while the number of [rail containers] moved out [empty] increased by 96 per cent”. 

Other submissions to the SCIT pointed to outdated infrastructure at some Canadian ports, labour shortages and the length of time it takes to secure approval for intermodal and other major transportation infrastructure projects in Canada.

For example, the Canadian National Railway Co. (TSX:CNR) pointed out that the federal process for the company’s Milton logistics hub project in Ontario took six years to complete, five years of which were invested in the environmental assessment process.

In B.C., the VFPA’s Terminal 2 project has taken more than a decade to reach the federal cabinet for a decision.

CN consequently called on the federal government to streamline the infrastructure investment process to expand Canada’s trade potential.

It also pointed to bottlenecks in supply chain data sharing, claiming, for example, that the Canada Border Services Agency’s “antiquated” information technology systems and processes “prohibit flexibility in the supply chain.” 

Shipping costs from Asia to North America’s West Coast have also been a major concern for grain producers and other rail customers.

Ontario’s N. Tepperman Ltd. estimated that the cost of moving a rail container from Asia to Canada increased to about $30,000 in early 2022 from approximately $3,500 prior to the pandemic. 

Canadian companies also face a significant price penalty compared with their American counterparts.

N. Tepperman told the SCIT that, as of October 2022, the cost to ship a 40-foot rail container from Shanghai to Vancouver was $7,000 compared with $2,015 to ship the same container from Shanghai to Seattle.

The Ontario-based home furnishing company estimated that higher transportation costs were a major contributor to the doubling of prices of some goods in early 2022.

Canadian exporters have also been on the hook for demurrage fees and other financial penalties for storing containers stalled by supply chain bottlenecks.

But transpacific container freight rates have decreased significantly this year with the slowdown in exports from China.

Freight rates for a standard 40-foot container from China to the West Coast have dropped to US$1,825, which is roughly the peak shipping season rate prior to the pandemic. 

That rate during the peak of transpacific congestion and dysfunction in September 2021 had jumped to US$17,500.

Shifl, a New York-based digital freight forwarding company, reported last week that spot container freight rates from China to Los Angeles had plunged 87 per cent compared with March 2022, as transpacific trade volumes continue to drop.

The SCIT’s report recommended the federal government ensure that Canada’s national transportation strategy addresses the need to build resilient supply chains and move goods in rail containers efficiently and cost effectively.

It concluded that the government should consult stakeholders regarding priorities for federal funding and promote the timely collection, reporting and sharing of rail container information and data. 

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