With Prince Rupert’s Fairview Container Terminal expansion set to make it Canada’s second-largest containerized cargo-handling facility by July and severe winter weather temporarily hindering Vancouver’s capacity, more attention has been focused on B.C.’s northern trade corridor as an Asia Pacific gateway.
But experts disagree on what conditions will be needed to increase Prince Rupert’s role in Canada’s vital transpacific trade.
That role spiked dramatically last November, when heavy rainstorms washed out almost all road and rail links between the Lower Mainland and the rest of the country and forced many shippers to divert cargo to the northern port.
“Absolutely, this has put more attention on us,” said Shaun Stevenson, president and CEO of the Prince Rupert Port Authority. “If you look at our key export sectors in Canada, whether it’s the export of energy or agricultural products, we saw cargo immediately diverted to Prince Rupert to ensure that trade would continue when there was a disruption with the systems linking to the Port of Vancouver.
“I think it reminds our federal government and our key export sectors of the importance of having two trade corridors to the West Coast – for both having the capacity to support the growth of Canada and for having the resiliency to make sure we can continue shipping to the Pacific when there are disruptions.”
Earlier this month, Prince Rupert announced the completion of Stage 1 of Fairview’s Phase 2B expansion. The expansion will increase Fairview’s annual container-handling capacity to 1.6 million 20-foot-equivalent units (TEUs) by July and to 1.8 million by the time the expansion is completed in 2024.
Maksim Mihic, CEO and general manager of DP World (Canada) Inc., which operates Fairview, said the company saw the potential of Rupert over the long term, noting that the current round of expansions was planned as far back as 2013.
“Prince Rupert was developed 100 years ago because it offered one of the closest routes to Asia,” Mihic said. “That did not change. And given it does not have a big urban area, [cargo] doesn’t have to go through a lot of switches to go through the city. This allows us to process the trains and containers through to their destinations much faster.”
Experts say Prince Rupert’s success since container traffic operations began at Fairview in 2007 has been evident by any standard. It has quickly capitalized on its geographic advantage, deep port and lower population density to boost growth.
Garland Chow, a University of British Columbia operations and logistics associate professor emeritus and the former director of the Bureau of Intelligent Transportation Systems and Freight Security, is a leading expert in Canada’s rail and trade transport infrastructure. He said CN Rail’s (TSX:CNR) efficient operations of its rail link to Prince Rupert from Edmonton, coupled with the port’s smooth operations, have made the port the quickest way for Asian cargo to get to Chicago and other key American Midwest freight hubs.
“The co-operation between the DP World terminal, CN and the port is basically for setting up a fine-tuned network to move things really fast once it lands in Prince Rupert,” Chow said.
“I’m incredulous. They can get cargo to Chicago and Memphis faster than [from] L.A.-Long Beach or even Vancouver. The point is, once you get that system going and grow its volume, there will be more capacity.”
Maintaining that success, however, may be challenging.
Chow noted that, over the long term, if companies and the federal government continue to put the rail link to Prince Rupert to work, it will help CN dedicate the investment in track infrastructure, trains and people needed to increase the line’s capacity.
However, the key is keeping the route useful and cost-efficient. Chow noted that the Port of Vancouver strike in 2014 benefited Prince Rupert’s traffic somewhat, but the most notable impact on its business was Asian exporters shipping through Atlantic ports like Halifax to access the Canadian market.
So shippers have alternatives to move goods in and out of Canada, and, like a muscle, if the rail link to Prince Rupert isn’t used enough, it will shrivel as rail operators move resources to other routes where shippers favour.
“Here’s the problem with calling Prince Rupert the perfect substitute for Vancouver,” Chow said. “Most ships do not go directly between two ports on either side of the Pacific. A ship from Shanghai, for example, may pick up some goods in Busan, South Korea, and hit another port on the North American West Coast before coming to Vancouver. Prince Rupert is at the far end of this route.”
He added that Prince Rupert’s northern corridor does not have that ecosystem along its routes.
“Rupert’s biggest advantage is if a boat from Asia goes to Prince Rupert first and drops everything off. The worst-case scenario is if a boat goes to Los Angeles and Seattle first, and in most cases with the mega-ships, they will stop at the port with the most containers first. And that’s common sense.”
Peter Hall agreed.
The Simon Fraser University urban studies professor and port planning economics researcher noted that, despite Prince Rupert’s recent successes, cargo movements from 2020 to 2021 fell by 23 per cent, with 25 million tonnes moving through the port in 2021 compared with 31 million in 2020.
The issue, Hall said, is that Vancouver has the web of connections to various markets along its rail routes. CN, Canadian Pacific (TSX:CP) and BNSF Rail (NYSE:BNI) run services through the port to the rest of Canada and into the eastern United States.
Given its historical linkages to other major markets – not to mention being a major international port – has given Vancouver an advantage for shippers that would be impossible for Prince Rupert to duplicate.
“What they’ve achieved in the last decade and a half is very impressive,” Hall said of Prince Rupert. “And as a backup piece to the Canadian trade infrastructure to take pressure off Vancouver, sure, absolutely. But it is important to remember the way in which Vancouver is in itself a much more important market, and there are huge advantages locked in for Vancouver.
“So if you can fill a container in Asia, and you know you are not going to open it until it gets to a warehouse in Toronto, surely, by all means make use of Prince Rupert. But if you want to take a container and fill it with stuff that’s going to a number of markets in Canada, like Calgary, there are all sorts of reasons to go through Vancouver.”
Hall added that Prince Rupert’s port business downturn in 2021 prior to the November storms could have resulted in part from Vancouver’s supply chain corridor having more access to populated markets and its ability to generate more business opportunities.
When the business environment is difficult – as it has been in the shipping industry during COVID – routes like the northern corridor are the most vulnerable to losing business as shippers focus on the most profitable routes.
Stevenson acknowledged that the port authority is not looking for explosive growth but rather an organic uptake. He added that efforts are well underway to not only improve import/export support and capacity by opening new facilities at the port, but also to look beyond just container traffic at Fairview Terminal as a way to diversify and generate sustainable growth.
“We are looking at how Prince Rupert plays a role in energy transition,” he said. “We’ve seen success with the Ridley Island propane export terminal with AltaGas (TSX:ALA). Pembina (Pipeline Corp. TSX:PPL) is now also moving a lot of propane through its terminal here. And we are also seeing Vopak Pacific with a significant scale-up of its facilities to support market access in the energy sector. So it’s not just about containers. We are looking for diversity of capabilities at the port.”
