Amid supply-chain snarls, fight over expansion pits Canada’s biggest port against key tenant

Article content

OTTAWA — Despite a rush to increase Canadian ports’ capacity to handle container freight, the federal government is expecting them to start clogging up with freight by 2030, if not sooner.

Whether that’s actually true is the subject of a battle between the Vancouver Fraser Port Authority, the federal agency that manages Canada’s biggest port, and one of its major container-handling tenants, Global Container Terminals.

Article content

They agree the port needs more capacity, but not on how urgent that need is.

Shortages of raw materials and parts have plagued Canadian industry as the global economy recovers in fits and starts from successive COVID-19 waves. A recent survey by the Canadian Manufacturers and Exporters found that over 90 per cent of respondents were dealing with supply-chain problems; more than 60 per cent said those problems were “major” or “severe,” and the worst-affected goods are those moving by boat.

Article content

Vancouver handles about as much of the country’s seaborne container traffic as the next four ports combined. Despite B.C.’s weather disasters last year, nearly 3.7 million “twenty-foot–equivalent units” (or “TEUs”) moved through the port in 2021, up from nearly 3.5 million in 2020 and 3.4 million in 2019.

Article content

If the port is congested, Canadian supply chains will suffer as they have amid the global post-pandemic economic revival and recent fires, floods and labour disputes, said Duncan Wilson, the port authority’s vice-president for environmental and external affairs. Container ships will bob in English Bay as they have off the coast of California, the goods aboard them undelivered while the cost of transporting them increases.

“Canada will be less self-reliant, with respect to container cargo through the West Coast of our country and will be more dependent on U.S. ports,” Wilson told The Logic in an interview.

Bigger companies can work around port congestion, he said. “It’s brutally difficult for smaller importers—the costs for smaller importers will be extremely high, to have to route cargo through the U.S.”

Article content

Canada’s freight transportation relies heavily on east-west rail, he said, and switching to trucks to move goods through the U.S. would be expensive and difficult for exporters, too.

The port is seeking federal environmental approval to add a new container terminal on a spit of land near Delta, B.C., south of Vancouver, and approval to borrow money to build it.

The “Roberts Bank Terminal 2” project has been in the works for nearly 20 years, counting an earlier attempt aborted by the recession of the late 2000s, Wilson said.

That’s one of the things wrong with it, according to Global Container Terminals, which operates a container terminal, GCT Deltaport, on the same spit of land.

“It’s a project that is outmoded. Not relevant to what’s been happening in the market,” said Marko Dekovic, the vice-president of public affairs at GCT (and a former senior employee at the port authority). “It was conceptualized in the early 2000s. The world has changed significantly in 20 years; the ocean carriers and the way they do business and the way we do business has significantly changed.”

Article content

Port authorities are landlords and overseers, managing seaports on the federal government’s behalf. They can include many kinds of terminals, run by operators that are like tenants in a shopping mall, or airlines at an airport. GCT is one of those at the Vancouver port authority.

“Simply put, we’re not in danger of running out of container capacity anytime soon,” Dekovic said. “If by ‘soon’ you mean the next five years or less, definitely not. If you think of the next 10 years or less, still not. If you think of the next 25 years or so, maybe.”

The port’s been predicting container congestion for years and it just hasn’t happened, he said. Though the total TEUs processed at Vancouver’s terminals was up last year, Dekovic pointed out that an unusual number were empty—according to the port’s statistics, the number of full TEUs was actually down slightly.

Article content

GCT has its own expansion proposal for Deltaport, in keeping with that less urgent timeline. It’s well behind the port authority’s own proposal in environmental approvals, but GCT argues it would be privately financed, built in stages to match the slower growth in traffic GCT anticipates, more automated, capable of handling bigger ships, and less harmful to life in the Strait of Georgia.

If the situation is an emergency, the Roberts Bank Terminal 2 project’s head start is significant. If there’s no great hurry, there’d be time for GCT to catch up.

On the flip side, Wilson argued, a congested port isn’t bad news for the port’s terminal operators, like GCT, who would be able to charge more money for the containers they handle.

Article content

“Them having a dominant market share is a valuable thing for them,” Wilson said. “To me, what they’re doing, from a business point of view, makes some sense.”

The federal government trusts the port authority’s work on this, said Transport Canada spokesperson Sau Sau Liu. Port authorities “have independent boards of directors, who are responsible for setting their strategic direction, including the development and expansion of container handling capacity,” she wrote in an email.

GCT has gone to court to try to force the port to consider its proposal; the parties are awaiting a ruling after a multi-day hearing in October.

The ugly dispute is playing out amid major investments in container capacity at multiple seaports.

Article content

The port in Prince Rupert, north on the B.C. coast, is completing the first phase of a major container-terminal expansion. In the east, the Port of Montreal is adding a new container terminal. The Port de Québec, down the St. Lawrence River, had a major container project in the works until the federal government refused it on environmental grounds last summer. The relatively small port in Saint John, N.B., is doubling its container capacity.

To help speed throughput immediately, the federal government earlier this month promised $7 million toward a new inspection facility for containers at the Port of Halifax, aiming to speed up processing. The Vancouver port authority got $4.1 million for a new yard to store empty sea cans so they don’t get in the way of full ones.

The National Trade Corridors Fund is considering applications for more such projects, after a winter call for proposals closed in February. Transport Canada said it’s evaluating projects whose total value is over $90 million.

This section is powered by The Logic. The Logic is Canada’s preeminent tech and business newsroom. For more news, visit thelogic.co.