What do Prince Rupert, Quebec City, Chicago and New Orleans have in common? All are directly linked to the Canadian National Railway
 Changes in the dynamics of world shipping, its enormous increase in scale in the last 20 years - particularly in the last 10 - have enlarged the role of Canada in North American supply chains.
What was unthinkable in the past is now part of present-day planning as more and more Asian cargo lands on the east coast of North America via Suez as well as Panama.
In Canada, this has resulted in relatively obscure deep sea ports such as east coast Quebec City and west coast Prince Rupert now competing with heavy hitters in Halifax and Montreal in one case, and with Vancouver in the other. More than that, they now threaten cargo diversions from giant ports like New York and Los Angeles because of newly acquired comparative advantages they offer to cost-cutting shippers.
The very insignificance of these once obscure locations like Quebec City and Prince Rupert translate into the advantage of easy uncongested egress to road and rail facilities.
This has not only affected logistics in Canada, itself a substantial G7 market, but also as a conduit into the consumer-rich heartland of the United States. Today, from the east and west coasts of Canada, cargo can reach Chicago as fast or faster than landing it in LA or Long Beach. Paying for this in anemic Canadian (US$1 - C$0.75) dollars is another substantial plus.
The big advantage is the enormous and unified Canadian railways which move goods not only across Canada, but with recent acquisitions of American roads, through much of the United States as well.
Hong Kong's Hutchison's Ports has set up in Quebec City, linked to the Canadian National Railway as is to the Port of Halifax. Of course, the main business of the east coast ports is the rich transatlantic trade, and while increasing, Asian cargo via Suez remains a small part of the whole.
Fifty years ago, when CP Ships was a force in the world, Quebec City was set up as a container port at Wolfe's Cove. But in the age when cellular containerships were no bigger than 500 TEU, there was no economy of scale to make it competitive with Montreal, which today because of its shallow waters can only dock 3,500-TEUers while Quebec can handle 20,000-TEUers or more with its 15-metre (52-foot) draught alongside.
The US$585.5 million Quebec City project aims to establish a container terminal with an annual capacity of 500,000 TEU. On a 43-acre site, it will be able to handle vessels of more than 8,000 TEU, taking advantage of its deep water, which will make it the only container facility on the St Lawrence River capable of accommodating big ships. Under the joint venture agreement, Hutchison Ports will build and operate the facility that will add to the company's network of 52 ports in 27 countries.
The chief focus of the Quebec terminal will be on trade with Asia, said Hutchison. "Quebec City will become Hutchison Ports' gateway to the east coast of North America," said managing director Eric Ip.
"As a fully intermodal deepwater port, its strategic location to reach the Midwest market and the strong support shown by the local authorities, the project has all the attributes to be successful," he said.
But Karl-Heinz Legler, general manager of Rutherford Global Logistics, noted that the Port of Quebec did handle box traffic in the 1970s, but subsequently concentrated on breakbulk cargo, while container carriers went further up the St Lawrence to Montreal, which has been the primary gateway for traffic from Europe heading through Canada to the US Midwest.
The Hutchison deal with the Quebec Port Authority calls for the most technologically advanced cargo-handling facility in North America. According to a study from global accounting firm KPMG, for the construction phase alone, the project will generate US$500 million in economic benefits and an average of 1,267 jobs a year.
DP World's Prince Rupert terminal is a far more advanced development having been operational since 2007. After successfully converting the former Fairview Terminal from a general cargo facility to a container port capable of handling the world's biggest ships with its 15.5 metres alongside.
As Prince Rupert is the closest major North American port to Asia with direct on-dock rail access to the CN network, the terminal has been designed as a high volume intermodal facility, with containers rapidly moving between vessel and rail, reducing transit time.
Situated on the great circle route from Asia, Prince Rupert is also North America’s deepest natural harbour. As such, it can comfortably handle the world’s largest containerships. Sixty-five per cent of cargo through Prince Rupert is US-bound while 65 per cent cargo via Vancouver is Canada bound.
But the lynchpin of the entire system, making the ports so much a part of a unified transportation system is the Canadian National Railway. CN has become much more than it was even 10 years ago. Cobbled together from failed railways 100 years ago, it spent much of its time as a loss-making state-owned giant bent on providing jobs and performing functions better suited to a social welfare agency.
But on November 17, 1995, the Canadian government privatised CN. Over the next decade, the profit-making company expanded into the United States, purchasing Illinois Central Railroad and Wisconsin Central Transportation, among others.
Already the only railway in North America with tracks to the Atlantic and Pacific, CN then expanded south, first to Chicago. With the 1998 purchase of the Illinois Central, which connected the already existing lines from Vancouver to Halifax with a line running from Chicago to New Orleans. This single purchase transformed CN's entire corporate focus from being an east-west uniting presence within Canada into a north-south NAFTA railway. The purchase of the Wisconsin Central allowed CN to encircle Lake Michigan and Lake Superior, forging efficient connections from Chicago to western Canada.
A seemingly minor but in fact major development was the acquisition and securing of sound mitigation agreements of a number of tiny railways around Chicago. In 2015, the then CN chief executive Claude Mongeau said the acquisition of the Chicago's Elgin, Joliet and Eastern Railway (EJ&E) transformed life of CN.
"Almost 30 per cent of CN's revenue ton-miles are in the United States, so the US," he said. "our northbound traffic has grown faster than southbound freight over the past five years. As such, we play an important role in moving US exports to both Canada and offshore destinations." Mr Mongeau said.
With 25 per cent of its freight traffic touching the city, CN's Chicago focus is on network efficiencies, close collaboration with other carriers, he said.
"The EJ&E allows us to seamlessly connect our five rail lines entering Chicago and to avoid congested inner city rail corridors. This is a clear gain for CN, but it also frees up capacity for other carriers on the Belt Railway of Chicago and Indiana Harbour Belt - a benefit for the entire greater Chicago rail network," he said.
By clearing the way around notoriously congested Chicago, transit times were reduced as the sea route is shorter from China, Korea and Japan to Prince Rupert as all these ports are in the north of the northern hemisphere. With smooth intermodal cargo handling at the port itself, combined with a smooth rail journey through thousands of miles of pristine Canadian wilderness before a brief turn south through the wilds of Wisconsin, containers find themselves in Chicago - nearly three days sooner than had they landed in Los Angeles or Long Beach. And to avoid the turmoil of the Windy City, CN has made it a lot less tumultuous by its purchase of the Elgin, Joliet and Eastern Railway which smooths the way for cargo dispersal throughout the Midwest, but also south to the Gulf of Mexico, and into Mexico itself via an alliance with the Kansas City Southern.
If one looks at the map of North America, one can more clearly see the dream of Canadian sourced supply chain by drawing a horizontal line across the country, then adding a vertical line south, thus creating something like a "T", indicating the approximate line of the CN track from Prince Rupert in the west and Quebec City in the east, and then almost midway, plunging south through Chicago to New Orleans, The jury's still out on Quebec City, but there is little doubt about the success of Prince Rupert and the Canadian National Railway. |
