Gateway 2017

2017 | THE B.C. PORT MAGAZINE

GATEWAY B.C. PORT INFRASTRUCTURE IMPERATIVES COMPETITIVE EDGES: ECONOMY SLOWING; COMPETITION RISING

SINK OR SWIM: TECH INNOVATION ACCELERATING NAVIGATING SUPPLY CHAIN ISSUES: CHALLENGES, OPPORTUNITIES

OUTLOOK

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TECHNOLOGY

TERMINALS

LABOUR FORCE

REAL ESTATE

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The heart of the Vancouver Gateway.

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@BigShipReady

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Building BC Ports

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CONTENTS 2017 | THE BC PORT MAGAZINE

GATEWAY

FEATURES Port data Bankruptcy, mergers & low growth Prioritizing port infrastructure improvements Size matters for West Coast ports Port uses driving industrial demand Barnston dilemma: industry or ALR? Weathering the doldrums Port privatization: pros & cons Tech retooling the supply chain App targets freight wait Terminal profit; hard reality Positive altitude: YVR air cargo plan Long-haul trucking with Mr. Roboto A new path for Port Alberni Interior opportunity The new waterfront: women’s work Global shipping centre ambitions Getting the goods to market

TRACKING THE CARGO FROM START TO FINISH

6 8 10 13 16 18 22 26 28 30 34 36 38 42 44 46 48 53

A MODERN WORKFORCE: ADAPTING AND EVOLVING

MITIGATING THE RISKS: THE ENVIRONMENTAL CHALLENGES NAVAGATING BC’S PORTS: EXAMINING THE ISSUES AND ECONOMICS

INTERIOR OPPORTUNITY

44

MULTIMODAL

LABOUR FORCE

TECHNOLOGY

Pia Huynh, Laura Torrance, Chris Wilson

DESIGN: Randy Pearsall PRODUCTION: Rob Benac WRITERS: Patrick Blennerhassett,

Kleo Landucci heads Ashcroft Terminal, a key inland link in B.C.’s Asia-Pacific logistics chain

Evan Duggan, Glen Edwards, Darah Hansen, Peter Mitham, Tyler Nyquvest, Timothy Renshaw, Hayley Woodin PROOFREADER: Meg Yamamoto ADVERTISING SALES: Dean Hargrave, Blair Johnston, Joan McGrogan, Steve Micolino, Corinne Tkachuk ADMINISTRATORS: Katherine Butler, Marie Pearsall SALES OPERATIONS MANAGER:

Michelle Myers RESEARCH: Anna Liczmanska, Carrie Schmidt

Is automation the answer to a big-rig driver shortage?

38 POSITIVE ALTITUDE: YVR AIR CARGO PLAN

36

Airport’s $48 million Sea Island deal has consolidated YVR facilities, providing a platform for improved air freight service

Editor’s note ateways work best when they swing efficiently both ways.

Location is also key, as is size and design.

B.C.’s gateways have many of those attributes.

Container terminals and other links in the global cargo logistics chain in the ports of Vancouver and Prince Rupert are competitive with the best in North America.

Smaller West Coast B.C. ports such as Nanaimo, Squamish and Port Alberni have the potential to be vital support pieces for the province’s two primary Asia-Pacific import-export gateways.

Gateway magazine has been launched to explore and analyze the nuts and bolts of the many pieces crucial to efficient cargo movement and trade cultivation in B.C. It is also aimed at providing insights into avenues of opportunity on both sides of our cargo gateways.

However, there is much more than cargo at play here. B.C.’s ports are gateways for economic growth and development.

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COMMUNITIES

PUBLISHER: Sue Belisle VICE-PRESIDENT, AUDIENCE AND BUSINESS DEVELOPMENT: Kirk LaPointe EDITOR: Timothy Renshaw INTEGRATED SALES MANAGERS:

LONG-HAUL TRUCKING WITH MR. ROBOTO

G

ENVIRONMENT

They open doors to opportunities.

For Metro Vancouver, those opportunities include high-paying local jobs and commerce. For B.C. and the rest of the country, those opportunities revolve around the global trade that is so crucial to Canada’s economy and standard of living.

But B.C.’s gateways are in a fierce competitive battle for transpacific cargo with their counterparts up and down the east and west coasts of North and South America and in the Gulf of Mexico.

T he federal government’s 2017 budget recognized that marketplace reality with the creation of a $10 billion trade and transportation fund to invest in gateways and ports.

This is an unprecedented time in the international goods movement sector. Marketplace volatility, technological disruption and globalization are rapidly changing the way business is done all over the world.

The challenges are huge; but so are the opportunities.

Gateway 2017 is published by BIV Magazines, a division of BIV Media Group, 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6, 604-688-2398, fax 604-688-1963, www.biv.com.

Copyright 2017 Business in Vancouver Magazines. All rights reserved. No part of this book may be reproduced in any form or incorporated into any information retrieval system without permission of BIV Magazines. The publishers are not responsible in whole or in part for any errors or omissions in this publication.

ISSN 1205-5662 Publications Mail Agreement No: 40069240. Registration No: 8876. Return undeliverable Canadian addresses to Circulation Department: 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6 Email: subscribe@biv.com Cover: Clear Seas Centre for Responsible Marine Shipping

PRODUCED BY

– Timothy Renshaw

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Port data

VANCOUVER REVENUE

PERCENTAGE OF CONTAINER CARGO

BULK VERSUS CONTAINER CARGO

PRINCE RUPERT REVENUE

NANAIMO REVENUE

BULK VERSUS CONTAINER CARGO

PERCENTAGE OF CONTAINER CARGO

BULK VERSUS CONTAINER CARGO

PERCENTAGE OF CONTAINER CARGO

SOURCE: BUSINESS IN VANCOUVER

TOP 10 CANADIAN PORTS BY TONNAGE

VANCOUVER

107,575

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SAINT JOHN

31,469

QUEBEC

28,962

MONTREAL

27,856

COME BY CHANCE

27,387

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TOP THREE CANADIAN PORTS BY VESSEL MOVEMENTS METRO VANCOUVER

MONTREAL

17,306

3,898

PERCENTAGE OF CONTAINER CARGO

BULK VERSUS CONTAINER CARGO

LOS ANGELES REVENUE

BULK VERSUS CONTAINER CARGO

SEATTLE/TACOMA REVENUE

PERCENTAGE OF CONTAINER CARGO

BULK VERSUS CONTAINER CARGO

PERCENTAGE OF CONTAINER CARGO

2,657

SOURCE: COUNCIL OF CANADIAN ACADEMIES, APRIL 2016 | CLEARSEAS.ORG VESSEL MOVEMENT DATA WAS ACQUIRED FROM STATISTICS CANADA (STATCAN 2007, 2008, 2009, 2010A, 2010B, 2011, 2012A, 2012B); THE LAST YEAR FOR WHICH STATISTICS CANADA PUBLISHED THESE DATA IS 2011. EACH ARRIVAL AT AND DEPARTURE FROM A CANADIAN PORT IS COUNTED AS A VESSEL MOVEMENT. THE DATA INCLUDES CARGO MOVEMENTS, WHICH INVOLVE LOADING OR UNLOADING OF COMMERCIAL CARGO, AND BALLAST MOVEMENTS, WHICH DO NOT.

LONG BEACH REVENUE

HALIFAX

SOURCE: BUSINESS IN VANCOUVER

SEPT-ILES

25,786

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HAWKESBURY

23,738

PRINCE RUPERT

18,780

PORT-CARTIER

17,603

NEWFOUNDLAND OFFSHORE

13,663

SOURCE: COUNCIL OF CANADIAN ACADEMIES, APRIL 2016 | CLEARSEAS.ORG

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

PORTS OVERVIEW: OUTLOOK

From left, David Bennett, president of Americas for Globe Express Services; Wolfgang Schoch, vice-president of Hapag-Lloyd Canada; and moderator/speaker Paul Bingham, vice-president for trade and global logistics at the Economic Development Research Group. The three spoke at the 2017 Cargo Logistics Canada conference held at the Vancouver Convention Centre | JON BENJAMIN PHOTOGRAPHY

BANKRUPTCY, MERGERS &

LOW GROWTH Uncertainty and small GDP growth remain on the horizon for the global shipping industry, Cargo Logistics Canada conference panellists predict PATRICK BLENNERHASSETT

W

ith global trade at its lowest ebb since 2011, key figures within the shipping industry are looking to make sense of the cloud of unknowns and instability that has descended on the sector.

Speakers at an ocean shipping outlook panel on February 8 – part of the Cargo Logistics Canada Expo and Conference – acknowledge global trade in 2017 could make small gains on last year’s numbers, but say the industry is still reeling from losing one of its key players.

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In late August, Hanjin Shipping Co. filed for court receivership after it failed to regain its footing from the 2008-09 economic recession. It was declared bankrupt on February 17. The Journal of Commerce estimates the container shipping industry lost US$1.5

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billion as a result of the financial crisis, and Hanjin lost US$1.1 billion alone in 2009. The South Korean company was the world’s seventh-largest container shipping line.

Its filing for receivership triggered a scramble by shippers to find alternative containers after the company failed to raise enough liquidity and restructure its debt.

An estimated US$14 billion in cargo on more than 80 ships was initially set adrift in financial uncertainty as terminals refuse to load or unload Hanjin vessels without assurance of payment for services or those ships remain at sea fearing seizure by creditors.

Panellist David Bennett, president of the Americas for Globe Express Services, a supply chain company that owns air and ocean freight services, says the fall of Hanjin looms large over the industry.

“What’s the true long-term and short-term impact of the Hanjin bankruptcy? As a result of that I think we have gone through a very unsustainable and volatile rate environment. … I think this creates a very interesting challenge for the industry and the shippers.”

Paul Bingham, vice-president of trade and global logistics for the Economic Development Research Group, says the consensus forecast for world gross domestic product growth is at 3.4% for 2017. This would push world GDP growth above 2011 figures, but nowhere near pre-recession levels.

“Now if you’re a developing economy, that’s pretty

strong growth, but if you’re not a developing economy, that’s not so great,” Bingham says. “There’s a rule of thumb that if you have world economic growth fall below 2% you’re in a recession.”

World GDP growth ended 2016 at 2.6% according to the World Bank. Bingham says there could be a light at the end of the tunnel.

“We kind of went through this commodity price supercycle where commodity prices dropped for years,” he says. “And we’re past the bottom of that cycle; we’ve seen a number of commodity prices moving up, including oil.”

Bingham adds overcapacity remains in multiple commodity sectors, which has caused a number of emerging nations that rely on exports for growth to bottom out.

Germany-based cargo container shipping line HapagLloyd recently announced it is merging with United Arab Shipping Co., which would create the fifth-largest ocean container carrier company in the world.

Wolfgang Schoch, vice-president of Hapag-Lloyd Canada, says he expected the merger to be official by March. Hapag-Lloyd has 166 ships, and United Arab Shipping has 52. He notes his outlook for the global shipping industry has improved recently despite recent setbacks and low growth projections.

“For me, I see the light at the end of the tunnel, and for me that’s a lot better than the past few years.” É

PAUL BINGHAM VICE-PRESIDENT, TRADE AND GROWTH LOGISTICS, ECONOMIC DEVELOPMENT RESEARCH GROUP

There’s a rule of thumb that if you have world economic growth fall below 2% you’re in a recession

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

PORTS OVERVIEW: INFRASTRUCTURE

PRIORITIZING PORT

INFRASTRUCTURE IMPROVEMENTS Railways key to ensuring supply chain maximizes the efficiency of new terminal technology

TYLER NYQUVEST

KARL GERRAND CEO, G3 CANADA LTD.

The solution isn’t just about the railways; the solution includes government infrastructure money

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L

arge investments in new terminals have spurred major developments in Canada’s transportation sector, but the country’s aging railways and capacity limitations continue to cause concerns.

B.C.’s two major ports, Port of Vancouver and Port of Prince Rupert, handle 33% of Canada’s trade volume and are a vital cog in the country’s international shipping machine. As export terminal technology becomes increasingly sophisticated and the amount of cargo rises, questions over the ability of infrastructure arteries to meet those demands increase.

“The western gateways have more cargo going through now than they ever have,” says Scott Galloway, representative of the Freight Management Association of Canada. “We all suffer the consequences of congestion.”

A Canada Transportation Act (CTA) review released in 2016 indicates that significant investments in rail will be required well before 2030, as will alternatives to moving train traffic through Metro Vancouver.

Railways in major urban centres like Vancouver face

numerous problems, including congestion, capacity constraints, operational stoppages and bottlenecks.

Such congestion has already been seen in East Vancouver as Canadian National Railway (CN) has activated a previously quiet railway line that runs through some of Vancouver’s busier commuter streets.

CN spokeswoman Kate Fenske says in an email to Business in Vancouver that the company will be “increasing train traffic on the Burrard Inlet spur to better serve existing intermodal terminals on Vancouver’s south shore.”

Up to six trains could use the line daily, a frequency that has prompted concern from residents.

Another thorn in the side of B.C. transportation will be limited rail capacity. According to the CTA review, growth in Canada’s top six commodity groups will exceed rail line capacity to Vancouver in the next 10 years.

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Canada’s top bulk commodities (coal, iron ore, grain, oilseeds, potash, crude oil and forestry products) represent 60% of all Canadian railway traffic. The crude oil sector is expected to increase the most, with oil production predicted to rise 43% to 5.3 million barrels per day by 2030.

According to the Port of Vancouver, industrial land inventory in Metro Vancouver will be exhausted by 2020.

Noise and vibration will add fuel to the fire for Vancouver residents opposed to further industrial development in urban areas.

Karl Gerrand, CEO of G3 Canada Ltd. and head of the future $500 million G3 grain terminal in North Vancouver, admits that the system needs improvement from all sides.

“The solution isn’t just about the railways; the solution includes government infrastructure money,” Gerrand says. “The government has committed to investing $10.1 billion in Canada on infrastructure, on goods moving to export position.”

To the north, the Port of Prince Rupert is pushing ahead with high-profile projects and cementing its reputation as one of the leading North American West Coast ports.

Thanks to the alignment of future projects with the objectives of the railway industry, the Port of Prince

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Increased volumes of cargo moving through the Port of Vancouver are raising fears that railroad infrastructure will be unable to keep up with demand | PETE SPIRO/SHUTTERSTOCK

Grain terminals along the Port of Vancouver’s north shore; the port’s grain storage and movement will increase significantly with the addition of the new $500 million G3 grain terminal in North Vancouver | ROB KRUYT

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Prioritizing port infrastructure improvements

Railcars along the Port of Vancouver’s south shore; the efficiency of rail lines and rail service is vital to gateway operations | ROB KRUYT

Rupert has been able to steer clear of many of the issues seen in Vancouver. “The northern main line runs at a significant percentage of low capacity, near 25% utilization at this point,� says Shaun Stevenson, vice-president of trade development and public affairs at the Port of Prince Rupert. “We’ve

been engaged with CN as we look at all prospective expansion scenarios for [the Port of] Prince Rupert.�

According to the Port of Prince Rupert website, the port is preparing for $25 billion in capital investment in the next 10 years. The completion of the Ridley Island industrial site opened 500 hectares of land for development into large future bulk export terminals, and other projects like the Prince Rupert LNG and Fairview terminals promise to be major contributions to B.C.’s future economy.

Last year, the port generated more than $53 million in revenue. Up to 10 trains run through the Port of Prince Rupert every day, and due to the design of the port, train congestion and limited capacity have not been major concerns in the northern town. “That has to do with how we are set up,� Stevenson says. “We have a single container terminal and strong collaboration between the railway, the port authority and our terminal operator, DP World.�

As B.C.’s ports continue to grow, discussion surrounding the possible privatization of all of Canada’s ports has recently been reignited.

But Stevenson says the current governance system is sufficient. “[It] creates commercially self-sustaining entities. Investments and port expansions are driven by business and the private sector developing terminals. Having competing gateways and a choice for shippers serves Canadian trade interest quite well.â€? É

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PORTS OVERVIEW: EXPANSION

SIZE MATTERS FOR WEST COAST PORTS From B.C.’s north coast to Los Angeles, port authorities and companies are expanding terminal operations

EVAN DUGGAN

I

t’s difficult to know how North American trade patterns will be affected by the mixed messages coming from Washington these days. But up and down the Pacific coast, port authorities and their private partners continue with bold expansion projects to keep up with cargo volumes that show no signs of waning.

Port Edward is the chosen location of Petronas’ proposed $11.4 billion Pacific NorthWest LNG plant and marine terminal | SUBMITTED

On B.C.’s north coast, the Port of Prince Rupert is carrying out a series of ambitious expansion projects.

“We have capacity to grow, and we’ve got pretty expansive reach into the Asia-Pacific markets,” says Shaun Stevenson, the port’s vice-president of trade development and public affairs.

Prince Rupert’s port has the deepest natural harbour on the Pacific coast and is located about 800 nautical kilometres closer to Asia than are other ports in the Pacific Northwest. Port authorities and their private partners hope to expand on the port’s existing six terminals, wrapped around the city and Ridley Island.

Several projects are being considered, Stevenson says, highlighting a $500 million break-bulk terminal at the south end of Kaien Island, currently under a feasibility study; a $750 million liquid bulk terminal; and a $500 million propane export facility by AltaGas on a site leased from Ridley Terminals.

“That project has just completed its environmental assessment, and AltaGas just made a final investment decision,” he says. “That project we expect to be moving

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Size matters for West Coast ports

Aerial view of the Port of Los Angeles, one of several major port facilities on North America’s Pacific coast pursuing major expansions and upgrades | SUBMITTED

PETER XOTTA VICE-PRESIDENT OF PLANNING AND OPERATIONS, VANCOUVER FRASER PORT AUTHORITY

Once the land is gone, we may see those businesses move elsewhere, such as Alberta and the U.S., which will mean lost jobs for us in B.C. This could also lead to the inefficient movement of goods throughout our region, which means more trucks on the road, higher consumer pricing and environmental impacts

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forward into construction later this year.”

Already nearing completion is the second phase of Fairview container terminal expansion, which is expected to be operating by the end of the year. That will add capacity for 1.3 million more cargo containers at the terminal.

The major potential game-changer for the port and province, however, is liquefied natural gas (LNG). Once touted by the B.C. government as the next major employer and economic engine for the province, LNG refinery projects along the coast haven’t materialized, due to weak economics, legal battles and halting support from First Nations communities.

Part of the yet-to-materialize LNG industry is the proposed $11.4 billion Pacific NorthWest LNG liquefaction terminal on Lelu Island. That project, if it goes ahead, would be part of $36 billion in spending, including having TransCanada Corp. build two pipelines to the terminal. The consortium, led by Petronas, is expected to make its final decision to invest in the project this summer.

Meanwhile, about 750 kilometres to the south in B.C.’s Lower Mainland, the Port of Vancouver moved about 138 million tonnes of cargo through its terminals in 2015.

In the last five years Port of Vancouver operations have grown by roughly 30 million metric tonnes, says Peter Xotta, Vancouver Fraser Port Authority’s vice-president of planning and operations. “Not only has this gateway grown by the equivalent of the second-largest port, but

we expect this to happen again in the next five years or so,” Xotta says in an email to Business in Vancouver.

To keep up, the port has proposed a new three-ship container terminal at Roberts Bank in Delta. The project would provide capacity for another 2.4 million containers and is needed to meet forecast demand for trade of goods in containers, he says. The port also plans to expand the Centerm containerized cargo terminal on the south shore of Vancouver’s inner harbour.

G3 Global Holdings is also planning to build a new $500 million grain terminal on the port’s north shore.

Xotta says port expansion faces unique obstacles.

“Our operations border 16 communities,” he says. “This is a unique structure, as many ports operate in, and are often owned by, only one municipality.”

He says the port grapples with the land constraints in Metro Vancouver.

“We are doing what we can to make current port operations as efficient as possible,” he says. “This includes encouraging terminals and tenants to maximize their existing footprint when increasing capacity and supporting off-dock and inland development, in places like Ashcroft or Calgary, when it makes sense to our customers.”

He says there is also a shortage of trade-enabling industrial properties in the region such as warehouses and distribution centres.

“Once the land is gone, we may see those businesses move elsewhere, such as Alberta and the U.S., which will

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mean lost jobs for us in B.C.,” Xotta says. “This could also lead to the inefficient movement of goods throughout our region, which means more trucks on the road, higher consumer pricing and environmental impacts.”

Trade-enabling industrial land in the region must be protected to keep up with trade, he adds. “That is going to take a collaborative, regional approach to land management.

Down the coast in Los Angeles, the busiest port in the U.S. is also working on a series of ambitious expansion projects, including the TraPac container terminal expansion. That five-year, US$510 million plan expanded the port’s wharves to 4,600 linear feet, deepened channels and installed new cranes. It also upgraded and electrified backlands, constructed road and gate improvements and terminal buildings and built a new on-dock rail facility, says port spokesman Phillip Sanfield in an email to BIV. “Construction of on-dock rail and the final phase of backland improvements were completed in 2016, making the Port of Los Angeles home to the first automated terminal and rail facility on the West Coast,” he says.

“The terminals’ crane maintenance building is expected to be completed in 2017.”

In 2016, the Port of L.A. moved 8.8 million container units, a record total, according to the port’s posted records, which go back to 1989.

Sanfield says improvements worth US$127 million

are also underway at the Yusen container terminal in Oakland. That project includes upgrading wharves and backland infrastructure within the existing port footprint. He says it aims “to enhance Yusen’s ability to service the biggest ships in the transpacific trade lanes.”

Back in Vancouver, stakeholders outside of the port say the authority is justified in raising the alarm over a shortage of industrial land – especially off-port land that’s needed for distribution, storage and trade-related services.

“We’re in a very tight spot,” says Ryan Kerr, a principal with Avison Young in Vancouver. “Operators are suffering under high lease rates and lack of options, and we have an overwhelming number of tenants and occupiers who are not able to satisfy their growth needs in Metro Vancouver.”

It’s not just the port feeling those effects, he says. “It’s any industrial business trying to operate in Vancouver.

The port is trying to fulfil its mandate, but there is also a ton of other manufacturers and other businesses that need to or want to be here, and they just can’t realize that fact.”

He says the most common complaint from industrial stakeholders is that access to the port is getting worse due to the shrinking availability of land and facilities, while lease rates and land values skyrocket. Kerr says port and trade-related businesses are starting to ask the question: “Do we need to be here?” É

PORT CONTAINER CARGO STATS PRINCE RUPERT Six terminals Containers: 736,663 20-foot equivalent units (TEUs) (2016) Total volume: 18.9 million tonnes (2016) VANCOUVER Twenty-seven marine cargo and passenger terminals Containers: 2.92 million TEUs (2016) Total volume: 136 million tonnes (2016) NORTHWEST SEAPORT ALLIANCE (Seattle and Tacoma) Containers: 3.5 million TEUs (2015) Total volume: 33.4 million tonnes (2015) LOS ANGELES Containers: 8.8 million TEUs (2016) Total volume: 183 million tonnes (2016) LONG BEACH Containers: 6.9 million TEUs (2016) Total volume: 161 million tonnes (2016)

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

CHALLENGES: LAND

PORT USES DRIVING

INDUSTRIAL DEMAND Dwindling supply of well-located land highlights industrial development success in suburbs PETER MITHAM

CHRIS MACCAULEY SENIOR VICEPRESIDENT, CBRE LTD.

This is a game-changer for logistics companies

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M

etro Vancouver is Canada’s gateway for goods from Asia and products moving out across the Pacific. To meet the needs of importers and exporters, vast swaths of the region are in demand to serve the logistics companies that handle goods moving into and out of the country.

The growth of the region has sparked fierce debates about the importance of industrial land, its loss to residential development and its impact on agricultural pursuits. The city’s strategic location on the Pacific Rim in a spectacular natural setting on fertile soils makes the debate less a question of which use should prevail, however, and more one of how uses can best coexist.

With large logistics users occupying more than 40% of Metro Vancouver industrial space, port-related activities set the agenda for discussions of the region’s industrial land. Most logistics space handles incoming goods, just 30% of which land at the Centerm and Vanterm container terminals on Burrard Inlet. Deltaport is the primary container-handling facility, which means most logistics demand – and, in turn, discussions about industrial land – focus on properties south of the Fraser.

This is why the South Fraser Perimeter Road, completed at the end of 2013 to connect Deltaport with the industrial parks along the Fraser from Tilbury to Langley, is key.

Yet even here, supplies are tight.

Metro Vancouver’s 2015 inventory identified 28,000

acres of industrial land in the region, of which just 5,585 acres are undeveloped. A report for commercial real estate association NAIOP pegged the readily developable acreage at less than 3,000 acres.

Zoning is a complicating factor, limiting where large distribution facilities requiring more than 100,000 square feet and cross-docks can locate. Site Economics Ltd. prepared a study for the Port of Vancouver in 2015 that identified just 1,067 acres of logistics-suitable land.

“The primary inventory of suitable logistics lands are located in the ideally located municipalities Richmond, Delta and Tsawwassen First Nation,” the report states.

Meanwhile, other developments have been forced farther north and east, contributing to the success of Golden Ears Business Park in Pitt Meadows and the uptake of space at Campbell Heights in Surrey. These developments are primarily home to lighter industrial uses, from film companies to manufacturers and microbreweries, rather than large-scale logistics companies.

To secure the large tracts of land logistics facilities require, Oxford Properties Group and other developers

2017-04-12 10:07 AM

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Debate over the Lower Mainland’s dwindling supply of viable industrial property has focused the spotlight on facilities such as Delta’s Tilbury Industrial Park | CHUNG CHOW

have focused on infill opportunities such as Queensborough Logistics Park in New Westminster and Riverbend Business Park in Burnaby, which are transforming former mills and brownfield sites into next-generation space.

Queensborough operates on a land lease from the Port of Vancouver, which continues to seek land for port-related uses – a fact that has heightened competition for sites among users across the board.

“How many industrial users out there meet Port [of] Vancouver’s requirement for port-related uses?” asks Beth Berry, director of industrial development for Beedie Development Group. “At what point does Port [of] Vancouver purchasing land restrict other industrial uses that don’t have that amount of port requirement from being able to do business in Vancouver?”

Complicating matters is a 1999 agreement between Canadian National Railway Co. (CN) and Canadian Pacific Railway Ltd. (CP) that facilitates the shared use of tracks between Matsqui and Nepa, just south of Ashcroft. Goods heading east from Vancouver can travel non-stop between the two points on CP tracks while all westbound product travels on CN tracks. This has largely limited the development of major logistics facilities to areas west of Matsqui.

Once again, however, it’s the areas south of the Fraser that enjoy the requisite proximity to water and rail lines, as well as the space needed to accommodate large-scale facilities.

Site Economics principal Richard Wozny says constraints on the land base in Pitt Meadows and Maple Ridge prevent the scaling up of sites to create the large industrial estates seen at the mouth of Fraser River at Annacis Island, Tilbury and, more recently, along Boundary Bay. “The northeast has the CP Rail intermodal yard and is a good location for logistics,” he says, “but there is very little flat, well-located, industrially zoned land in that area, so future logistics development is restricted.”

With the growing importance of Deltaport, areas north

00_Gateway 2017_02 56PAGES.indd 17

of the Fraser are outside the main corridor, now delineated by the South Fraser Perimeter Road (SFPR).

“This is a game-changer for logistics companies,” says Chris MacCauley, a senior vice-president with CBRE Ltd. focused on industrial properties.

The route’s opening has allowed Surrey and Delta to attract 64% of industrial demand, almost exclusively from large users. Vacancies south of the Fraser have dropped to 2.6%, undercutting vacancies north of the Fraser for the first time. Half of all the region’s new industrial space is located in the two municipalities, too. “[SFPR] shifted people’s perception of the distribution wheel,” adds Lee Hester, senior vice-president with Jones Lang LaSalle. “Now you can locate in Tilbury and you’re minutes to Port Kells, you’re minutes to Deltaport, you’re minutes to Burnaby and Richmond. Prior to the South Fraser Perimeter Road, that wasn’t an option.”

Two key facilities serving the demand are Tsawwassen First Nation’s Deltaport Logistics Centre, a 300-acre facility leased to Port of Vancouver, Euro Asia Transload and Delta iPort, and Wesgroup Properties LP’s Pacific Link Industrial Park in Surrey.

“We’ve noticed, particularly in the past year or two, very strong interest from tenants, and it’s all related to the SFPR,” says David Wesik, vice-president of operations and corporate development with Wesgroup.

Demand led to Wesgroup recently acquiring a 40-acre site along River Road in Delta, where it hopes to develop 550,000 square feet of logistics space.

It was a rare opportunity, Wesik says, with developers forced to innovate to provide logistics space on an increasingly constrained land base.

“Centre ice for the true distribution logistics tenants will always be Tilbury, Bridgeview, East Richmond – but those areas are fairly mature and built out,” he says. “So then it becomes not ‘Where should my business be?’ but ‘Where the hell can I find a site that’s big enough?’” É

BIG NUMBERS

28,000 5,585 1,067

64%

40%

Estimated number of acres of industrial land in Metro Vancouver Number of acres that are undeveloped Remaining acres of logisticssuitable land in Metro Vancouver, according to a Site Economics Ltd. study prepared for the Port of Vancouver Percentage of Metro Vancouver industrial land demand that has been driven to Surrey and Delta by the South Fraser Perimeter Road Percentage of Metro Vancouver industrial space that’s occupied by large logistics users

2017-04-12 10:07 AM

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

CHALLENGES: ZONING

BARNSTON DILEMMA:

INDUSTRY OR ALR? Orphan Fraser River island could play a key role in the region’s goods movement chain or food manufacturing and distribution sector

TIMOTHY RENSHAW

ROBIN SILVESTER PRESIDENT AND CEO, VANCOUVER FRASER PORT AUTHORITY

I really worry that we are heading toward an economic brick wall in the Lower Mainland

00_Gateway 2017_02 56PAGES.indd 18

T

he island in this stream could provide Metro Vancouver’s Asia-Pacific gateway with a strategic industrial land option.

It also has potential as a regional manufacturing distribution hub that, unlike areas designated for industrial use elsewhere, is close to prime road and river transportation corridors.

However, Barnston Island is also prized by some as an important Agricultural Land Reserve (ALR) property and tranquil Fraser River hobby farm collective providing a lifestyle reminiscent of a bygone era.

Its industrial potential faces some major roadblocks.

For one, it’s in the ALR; for another, access to Barnston relies on the river’s last inland ferry.

Barnston’s agricultural hurdles are also significant.

The island has a high water table, which, because of the rhythms of the river, rises at crucial times in crop cycles.

That results in poor growing conditions for roughly 85% of the island.

A report in an April 2006 Barnston Island Majority Landowners submission to remove the island from the

ALR notes that Barnston’s agricultural productivity has declined since the 1980s. It estimates that, on the other hand, rezoning 1,100 acres of the 1,400-acre island to industrial from agricultural use would yield a $13.8 billion benefit to the local economy.

But the EvEco Consultants report concludes that soil suitability is not a game-breaker in Barnston’s sustainable agricultural potential. The real issues, it says, were limited access, lack of government support for infrastructure, development pressures and changing market forces.

Those factors weigh against the success of any commercial venture on the island.

Falling within Metro Vancouver’s unincorporated

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DELTAPORT

Electoral Area A, Barnston is also an awkward regional orphan. It’s not part of any municipality; it has no tax base to finance infrastructure improvements.

But Barnston is in the centre of one of Metro Vancouver’s fastest-growing areas – a location that gives it significant economic potential, especially in a region with a rapidly shrinking industrial land base.

The Port of Vancouver is among the regional economic drivers that have raised red flags over industrial land erosion. Representatives of the country’s largest port claim that it needs land to expand containerized freight and other Asia-Pacific gateway cargo infrastructure – not just for the region but for B.C. and the rest of the country.

One piece of that infrastructure is the Vancouver Fraser Port Authority’s proposed $2 billion Terminal 2 expansion project at Roberts Bank.

Competition for transpacific containerized cargo along North America’s west coast and around the continent is accelerating as highly leveraged deep-sea shipping companies grapple with overcapacity and low container shipping rates.

Global freight company alliances with fleets of larger ships mean container carriers are now making fewer stops at fewer ports. Container handling and transshipment efficiency is therefore essential for ports and terminals.

So is land on which to expand cargo-handling capacity.

In a 2016 interview with Business in Vancouver, Robin Silvester, the Vancouver Fraser Port Authority’s president and CEO, says the loss of usable industrial land threatens

00_Gateway 2017_02 56PAGES.indd 19

WHITE ROCK

to stall growth for the port and the region.

“I really worry,” he says, “that we are heading toward an economic brick wall in the Lower Mainland.”

Cliff Stewart, the Port of Vancouver’s vice-president of infrastructure, estimates that the annual tax revenue and economic spinoff from 100 acres of industrial port land is around $1.8 billion. The high-paying jobs generated by the operations on that land and off-terminal activities like trucking, warehousing and railway, Stewart adds, are significant.

“If you don’t have the industrial land available, those jobs will still happen, but they will happen somewhere else.”

Others, however, are less keen about exploiting Barnston’s industrial potential.

Delta South Independent MLA Vicki Huntington sees it as further erosion of the region’s ALR and the regional food security it provides.

“Again, it’s pressure on the ALR, and at some point the ALR has to be off limits,” says Huntington, who announced in early 2017 that she would not seek a third term in May’s provincial election.

While she agrees that the island is well placed to service regional industrial land uses for goods movement and manufacturing, Huntington says that even the idea of removing Barnston Island from the ALR in exchange for other lands being added to the reserve is “such a mug’s game, [especially] with a government that isn’t very much in support of the ALR.”

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Barnston dilemma: industry or ALR?

The Barnston Island ferry provides the only road link between the island and the rest of Metro Vancouver | ROB KRUYT

The City of Surrey at one time was interested in annexing Barnston Island.

But Mayor Linda Hepner says the annexation’s economics would work for her municipality only if Barnston were freed up for industrial or other commercial uses. Hepner says she’s aware of the region’s need for

PASSIONATELY DELIVERING THE BEST MARINE SOLUTIONS

industrial land to support economic activity, but concedes that some of what’s available in Surrey and other municipalities is too far removed to be of practical use to the port. Barnston’s potential uses beyond port logistics, as pointed out in the landowners’ submission, include a hub for value-added manufacturing, processing and distribution of food produced on the island and elsewhere in the region.

Hepner notes that over the past 15 years the region has lost many of its food distribution centres, which are critical to maintaining and expanding the Lower Mainland’s sustainable food industry and improving local food security.

A major Barnston landowner agrees.

David Emri and his Emri Group own roughly 55% of the island. But Emri, a former vice-president of acquisitions and development for the Onni Group of Companies, maintains he’s not a developer.

“I’m an investor,” he says.

Reasons for his Barnston investment are many. Barnston’s industrial potential is one.

But whether it’s in the form of agricultural cultivation, food distribution, industrial warehousing or port container transshipment, that potential will be realized only if the island’s access issues are resolved and all or a portion of its land is freed of ALR restrictions.

Emri concedes that a single business or investor is not going to make that happen.

But he adds that if he were a planner, then “absolutely it should be industrial.”

As he points out, Metro Vancouver has a mandate to protect the region’s remaining industrial land but no similar direction to create more. Because of its proximity to highway and river transportation arteries and its contribution to preserving and cultivating the local food industry, Barnston as a food distribution and manufacturing hub, he says, would be sustainable “green industrial.”

His investment, then, is based on the bet that the island will eventually be in the region’s development conversation.

Emri emphasizes that he is not lobbying to convert Barnston to industrial, but he says the intersection of industrial and ALR needs to be rethought in Metro Vancouver.

Emri says Barnston could service industrial manufacturing businesses that support high-paying jobs without having to extend major arterial transportation links through residential areas.

He adds that while entities like the Port of Vancouver complain that the region is running out of industrial land, government is not taking the initiative to secure more and better-located sites for future industrial development.

ALR flexibility is one solution.

“My definition of green [industrial], from 30,000 feet, is Barnston. We’ve got rail; we’ve got river. It’s sustainable development. [But] no. This is in the ALR, so we just stop our discussion, and that to me is ignorant.” É

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

CHALLENGES: GOVERNANCE

WEATHERING THE DOLDRUMS Canadian and U.S. ports: a tale of two governance models

PATRICK BLENNERHASSETT

PETER HALL ASSOCIATE PROFESSOR, URBAN STUDIES, SIMON FRASER UNIVERSITY

The federal investments in the Vancouver region on the rail side [have] been really impressive in the past few years. And it would be tough to see how that would be possible without a strong federal stake

00_Gateway 2017_02 56PAGES.indd 22

W

ith global trade in its worst slump since 2011, North American port competition for break-bulk and container cargo and cruise ship passenger business has been fierce.

How those ports respond to the tepid trade climate is in large part determined by which side of the 49th parallel they’re on.

While most U.S. ports are run by local authorities whose business priorities are local and regional rather than federal, Canada is a much different beast. Federal marine legislation that came into effect in 1998 effectively requires Canada’s ports to foster trade across the country. So the Port of Vancouver and other Canadian ports must focus on the needs of the nation and their local communities. The question remains as to what style of port governance best suits this new global economy of tepid growth, in which world gross domestic product has fallen starkly since 2014 and projections forecast another year of decreased trade.

Duncan Wilson, vice-president for corporate and social responsibility for the Port of Vancouver, says there are many benefits to being a Canadian port authority under the Canada Marine Act, but one reason stands out in particular.

“One of the big differences is we’re required to be self-sufficient under our mandate,” Wilson says. “So we don’t have access to the tax base – in the U.S. they do. And while they still operate largely on a commercial basis, a lot of money goes into the U.S. port structures through taxes.”

This means all revenue the Port of Vancouver generates is from tenant rent, fees from port users, rent payments from terminal facilities and harbour dues.

Wilson says this also allows the Port of Vancouver, which covers 33 anchorages and 350 kilometres of shoreline including Burrard Inlet, the north and main arms of the Fraser River and the Roberts Bank area in Delta, to reinvest about 85% of its revenue directly into transportation infrastructure.

Peter Hall, an associate professor in Simon Fraser University’s urban studies program and an associate member of the department of geography, says the benefit of this reinvested revenue is tangible in Canada.

“The federal investments in the Vancouver region on the rail side [have] been really impressive in the past few years,” he says. “And it would be tough to see how that would be possible without a strong federal stake.”

Wilson adds that one downside to not having access to the tax base like U.S. ports is the Port of Vancouver has to find revenue to complete necessary tasks like harbour maintenance.

“We have to pay for all of our dredging ourselves. So in the Fraser River we spend $20 million a year dredging the river for navigation; in the U.S. they have a harbour maintenance fund that pays for dredging.”

Hall, who has published multiple papers on the topics of port cities, seaports and logistics, says U.S. ports and the American “decentralized” model can more swiftly respond to the ebb and flow of trade. This is partly due, he explains, to the chain of command stopping at the local authority, without the need for a state or federal mandate.

2017-04-12 10:07 AM

| 23

“The counter-example is the ports of Los Angeles and Long Beach and their work concerning the environment,” adds Hall, noting one area in which a decentralized model might be more efficient. “Because they are so responsive to their local cities, they’ve worked hard to clean up their air pollution.”

Los Angeles residents have made air quality a key campaign issue for years, and the port structure is still the largest source of air pollution in southern California.

Elected officials have spent the last decade trying to cut emissions, with varied levels of success.

In Vancouver, while the port authority does not have direct access to the local tax base, it is the beneficiary of various forms of public largesse. The provincial government recently announced capital investments and financial help for the Port of Vancouver, as noted on the government’s website, “in response to increasing container traffic at B.C. ports,” with 138 million tonnes

00_Gateway 2017_02 56PAGES.indd 23

Duncan Wilson, vice-president for social and corporate responsibility for the Port of Vancouver, says the Port of Vancouver benefits from a federal mandate that promotes trade across Canada | CHUNG CHOW

of cargo coming through the various areas in 2015 alone.

This includes $10 million for the recently completed Philip Avenue overpass, part of the $307 million to complete the Roberts Bank rail corridor, $1.26 billion for the recently completed South Fraser Perimeter Road and $15 million for the road, rail and utility corridor at the Port of Prince Rupert. Most U.S. ports have to apply for state or federal funding for various infrastructure or project monies, often competing with other nearby ports.

Hall says the question of whether the Canadian port model is better than its U.S. counterpart will ultimately be decided by an economy that is now squeezing ports for every last penny.

“If we are entering a period of declining trade and the end of various trade agreements, it’s certainly going to be very interesting to see how ports in each country respond and whether one set of structures is better than the other.” É

2017-04-12 10:07 AM

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Weathering the doldrums

PORT OF VANCOUVER The Vancouver Fraser Port Authority is the federal organization that manages the Port of Vancouver, which reports to Transport Canada.

5

BIGGEST TRADING PARTNERS PORT OF VANCOUVER

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THE PORT OF VANCOUVER SUPPORTS NEARLY

ONE IN FIVE DOLLARS OF TRADE $200 BILLION

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LARGER THAN THE NEXT FIVE CANADIAN PORTS COMBINED,

BETWEEN CANADA AND 170 COUNTRIES, ACCOUNTING FOR ANNUALLY

SUPPORTS 98,800 DIRECT AND INDIRECT JOBS AND GENERATES

THE PORT OF VANCOUVER HANDLES FIVE MAIN TYPES OF CARGO

$9.7 BILLION ANNUALLY

BULK Dry or liquid cargo, including coal, grain, potash, sulphur and petroleum products, which can be poured directly into the ship’s hold.

TOWARD CANADA’S GROSS DOMESTIC PRODUCT

BREAK BULK Cargo such as forest products and steel pipes, accounting for 12% of annual tonnage.

CONTAINER Cargo including imported consumer goods and machine parts and exported resources such as specialty grains and pulp.

CRUISE Canada Place cruise terminal serves as the home port for the Vancouver-Alaska cruise industry, which serves approximately 830,000 passengers every year.

AUTOMOBILES The port’s two automobile terminals are on the Fraser River and import nearly all Asian-made vehicles to Canada. Almost 400,000 vehicles per year move through the port.

One of Western Canada’s leading BREAK BULK terminals for over 40 years LOCATION UÊÊ `i> ÞÊà ÌÕ>Ìi`Ê>ÌÊÌ iÊ ÀÌ Êi `Ê vÊ ÜiÊ - Õ `Ê Ê-µÕ> à ]Ê À Ì Ã Ê Õ L > UÊÊÎÓÊ >ÕÌ V> Ê iÃÊ ÀÌ Ê vÊ* ÀÌÊ iÌÀ Ê 6> V ÕÛiÀÊ> `Ê{nÊ iÌiÀÃÊÛ >Ê ÜÞ°Ê FACILITIES & EQUIPMENT UÊÊ >ÃÌÊ iÀÌ Ê Ê i }Ì \Ê£ÎÇ°äÊ iÌiÀÃÊ« ÕÃÊÎxÊ iÌiÀÃÊv ÀÊ > ` }Ê>Êà «½ÃÊ}> }Ü>Þ]Ê<iÀ Ê / `iÊ À>vÌ\Ê££°xÊ iÌiÀà UÊÊ7iÃÌÊ iÀÌ Ê Ê i }Ì \Ê£xÓ°{Ê iÌiÀÃ]Ê<iÀ Ê / `iÊ À>vÌ\Ê££°nÊ iÌiÀà UÊÊ"ÛiÀÊxäÊ« iViÃÊ vÊëiV > âi`Ê> `Ê `iÀ Ê V>À} Ê > ` }ÊiµÕ « i Ì

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2017-04-12 10:07 AM

Charting a course for the future Providing access to 170 global markets, the Port of Vancouver is a critical gateway for Canadian trade. With real-time monitoring, innovative supply chain strategies and strategic investments in infrastructure, itâ&#x20AC;&#x2122;s also the right choice now and for the future.

But our business is not just to deliver the goods. Itâ&#x20AC;&#x2122;s to do it sustainably.

Weâ&#x20AC;&#x2122;re working to balance efficient port operations, a healthy environment and thriving communities as the port grows. A job we take very seriously to ensure Canada and your business continue to prosper well into the future.

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2017-04-12 10:07 AM

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

CHALLENGES: FINANCING

PORT PRIVATIZATION:

PROS & CONS Fee increases, diverted trade, investment priorities among top concerns raised in Ottawa’s look at feasibility of turning seaports over to private sector

TYLER NYQUVEST

ROBERT LEWISMANNING PRESIDENT, CHAMBER OF SHIPPING OF BC

There have been very polarized opinions on the privatization of the ports, and I believe that is an injustice to the potential because there may be certain instances where privatization could bring capital that federal money couldn’t bring

00_Gateway 2017_02 56PAGES.indd 26

F

irst came the airports, now come the seaports.

The topic of privatizing Canada’s ports has been gathering momentum since the Canada Transportation Act review report was released in 2016.

The report recommends that governments “research the feasibility of adopting a share capital structure for ports including receiving proposals from institutional investors or private equity investors.”

Canada has 18 seaports that stand to be privatized. In November of last year, the Justin Trudeau government hired Morgan Stanley Canada Ltd. to study the potential effects of privatizing.

The seaports and airports have two important things in common: they’re both non-share, non-profit organizations, and their board members are nominated by stakeholders. Shareholders do not elect them.

A recent C.D. Howe Institute study reports that the sale of Canada’s eight largest airports could raise between $7.2 billion and $16.6 billion for infrastructure investments.

While those numbers will likely spur increased consideration of airport privatization, turning ports over to the private sector is a trickier prospect.

At the 2017 Cargo Logistics Canada conference in Vancouver, Western Stevedoring president and presenter Brad Eshleman has far more questions than answers

regarding port privatization.

“Is this in the national interest?” Eshleman asks. “What about the environmental stewardship program? Who is going to pay for that? Will the regulatory role be a new arm of government? And who would champion the Asia-Pacific Gateway and Prince Rupert?”

These and many more questions remained unanswered at the conference as marine operators admit they are not completely confident in their research and are still doing their “homework.”

Eshleman acknowledges the importance of the issue and its possibilities.

“We need dollars to replenish our infrastructure, and this is an area where [the government] can generate some money,” says Eshleman. “[As] opposed to the airports, the ports are an agency of the federal government so they can be sold.”

It would appear that what everyone is most clamouring for is more insight.

In a phone interview, Robert Lewis-Manning, president of the Chamber of Shipping of BC, admits he is hesitant about privatization.

2017-04-12 10:07 AM

| 27

“We really don’t know what the policy options might look like,” Lewis-Manning says. “Overall there is just so little information.”

What seems certain is that privatizing brings higher fees.

“Fees tend to go up with private ports versus public ports,” says David Gillen, director of the Centre for Transportation Studies at the University of British Columbia’s Sauder School of Business. “As a private entity, you may be more exposed to the different sets of rules than a public entity.”

Eshleman also acknowledges the likelihood of higher port fees.

“More costs for the [port] users, more cost on Canada exports – this reduces competitiveness, increases prices to Canadian consumers, and there is potential diversion of traffic.”

Shaun Stevenson, vice-president of trade development and public affairs for the Port of Prince Rupert, which is North America’s fastest-growing container shipping gateway, isn’t convinced the current model needs changing.

“Having competing gateways but also a choice for shippers serves the Canadian economy well, so I am not sure there is an advantage to be had,” Stevenson says.

While many have been quick to predict adverse effects from privatization, Lewis-Manning recommends keeping an open mind.

“There have been very polarized opinions on the privatization of the ports, and I believe that is an injustice

to the potential because there may be certain instances where privatization could bring capital that federal money couldn’t bring.”

If the ports want to have greater access to capital, and to be able to issue equity capital, privatization could hold the answer. Large investments in Canadian infrastructure are limited, so privatization could open the door for more capital to flow in.

There is another wild card in Canada’s transportation deck as the election of Donald Trump as U.S. president has raised questions about North America’s trade future.

“It is very unclear what is going to happen in the United States,” Gillen says. “If Trump does play the protectionist card, then it could be the case that the amount of traffic going through Canadian ports may diminish. In response, West Coast trade may increase with China, and we may deflect a lot of our trade to Southeast Asia rather than the U.S. It is a very uncertain time right now.”

At the logistics conference, Eshleman closes his presentation with a comparison that hits close to home for many Lower Mainland residents.

“The Vancouver housing market has been a growth market,” says Eshleman. “Think about how you would feel if you sold your house five or 10 years ago, compared to what you could get for it now.

“Now think about Canada’s Asia-Pacific Gateway and the ports and their growth potential. The question I have for you is, is now the time to sell? I am not so sure.” É

Western Stevedoring president Brad Eshleman: “we need dollars to replenish our infrastructure, and this is an area where [the government] can generate some money. [As] opposed to the airports, the ports are an agency of the federal government so they can be sold” | SUBMITTED

Southern Railway of British Columbia is a major transporter of freight in British Columbia providing high quality service and safely delivering the best rail based solutions

www.sryraillink.com

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

TECHNOLOGY: DIGITAL

TECH

RETOOLING THE SUPPLY CHAIN Companies cater to retailers, manufacturers seeking more automation, greater efficiency

EVAN DUGGAN

G

o down the list,” says Steve Simmerman, senior director of sales at JDA, a supply chain software company. “Sears, JCPenney, Target in Canada. They weren’t able to adapt fast enough.” Target, awash in technology and inventory troubles from the start, fled Canada after only two years in business. Simmerman suggests other major retailers could also be on the brink for failing to adapt to changes ripping through the digital supply chain.

“

STEVE SIMMERMAN SENIOR DIRECTOR OF SALES, JDA

Ten years ago, a retailer never had to worry about shipping the same day. Now, it’s ‘Give it to me in two hours, and I’ll pick it up in the store’

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JDA is a software company that makes programs that manage every facet of a supply chain. “Ten years ago, a retailer never had to worry about shipping the same day,” says Simmerman, after hosting a panel in Vancouver on tech trends in the supply chain at the Cargo Logistics Canada conference in February. “Now, it’s ‘Give it to me in two hours and I’ll pick it up in the store.’”

Not long ago, product makers chose how many units to make and how to distribute them, and retailers controlled when and how to sell it, Simmerman says.

“I can do all that on my phone right now. If I don’t like your price, I’ll go to the next guy. If I don’t like his delivery, I’ll go to the next guy.”

Now, online shopping and social media have made

consumers more aware than ever about their options, industry insiders say. The supply chain went from being a one-way street to a feedback loop that relies on new technologies as well as consumer-based demand planning, forecasting and promotion.

Based in Scottsdale, Arizona, JDA launched in 1985 and is now used by 4,000 customers around the world, including 20 companies in the Gartner Supply Chain Top 25.

JDA’s programs add intelligence to every aspect of the chain, such as scheduling trucks with an automated assessment of warehouse scheduling. “I’m not going to send five trucks to the warehouse when I know the workload of the warehouse, and I won’t have back doors available,” Simmerman says. “I have to get better at

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planning the pickup or delivery of those goods. If I don’t, I’m losing money.”

He says JDA’s programs also help to optimize labour.

“We plan the labour; we predict how much we need. We monitor it in real time throughout the day,” he says. “I need four people here, two people here, and I can let these people go home. The savings are absolutely tremendous.”

Simmerman says that a typical fulfilment distribution centre is running at about 60% productivity. “You’re taking 40% of that cost and just throwing it out the window. It’s amazing.”

Brian Best, who runs London Drugs’ warehouse and distribution network, agrees.

“You have to make sure that you’re always looking out for what the customers’ needs are,” Best says. “I think that’s what we do well as a retailer – we always have – but now we have to do it even faster. That’s the bigger challenge.”

Meanwhile, a made-in-Canada development is primed to further shake up the global supply chain: robots.

Dematic Canada, based in Mississauga, Ontario, is now producing and testing several automated inventory-picking systems to add to its stable of intelligent conveyor systems, automated guide vehicles and automated storage and retrieval systems.

The company invests more than $70 million per year in research and development, says Nick Klein Schiphorst, Dematic Canada’s director of business development.

“An order that leaves the building with an error is very costly for any company to have to correct that error.”

Klein Schiphorst adds that the robots are now more accurate and efficient than humans.

The company has created a robot arm that sifts through

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Technology is radically changing every link in the global supply chain; companies that fail to embrace those changes will suffer significantly | KIDSANA MAIMEETOOK/SHUTTERSTOCK

and identifies items as small as aspirin in inventory totes.

“We’ve been working on it for many years,” Klein Schiphorst says during the tech panel in Vancouver.

“There are two key components that we’re not ready for us to commercialize as of yet, but they have come far enough that we can now pick orders more accurately than a human can. There could be six or seven SKUs [stock-keeping units] in a tote, and the system can actually recognize which one it needs to pick and it can shuffle around.”

Dematic is looking for a third-party company to start beta testing of the technology.

We live in a golden age of technology and information, but that information must be converted into usable intelligence, says Rick Cleveland, director of education with the Supply Chain Management Association advocacy group.

“There are now more items connected to the Internet than there are people on the planet,” Cleveland says.

“How do we take this unstructured, unfiltered data and turn it into actual information?”

He says Canada has always provided a good testing ground for new tech in the supply chain due to the modest size of most companies here.

“It just becomes the natural thing for Canadians to be better communicators internally. We are early adopters in a lot of ways, but we still don’t have the funding and we are not a big enough market to justify the cost.”

Simmerman says the argument is easy to make for stakeholders throughout the supply chain: change or die.

“These are major paradigm shifts, because organizations weren’t built this way,” he says, adding that most supply chain companies still have closed-off silos of methods and technology. “The whole game is changed.” É

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

TECHNOLOGY: LOGISTICS

APP 00_Gateway 2017_02 56PAGES.indd 30

TARGETS FREIGHT WAIT

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Go99 bypasses brokers to connect smaller truckers and shippers directly as freight companies embrace innovation GLEN EDWARDS

A

There are many surface freight jobs that should be automated for the benefit of shipper and trucker, says Go99 CEO Devlin Fenton | CHUNG CHOW

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North Vancouver company is launching an app that could clear the major roadblock from small truck operators doing business and getting paid.

Go99, created by Surespan Group of Companies, connects truckers directly to shippers and ensures payday is the next day. The app joins a dense cloud of digitization that permeates the logistics supply chain. From GPS tracking, telematics and robotics to e-commerce software, the transport industry has shifted into the passing lane, says a commentator on industry trends.

“Traditionally, you have a truck, trailer and a driver, and it hasn’t been looked at as a very innovative space,” admits Ryan Ernst, a senior manager at Deloitte who speaks on disruptive technologies affecting supply chains.

“But when you actually see the investments being made by the freight companies over the last 10 to 15 years, they’ve been at the forefront.”

Go99’s toehold on tomorrow is small owner-operator trucking companies looking to move simple freight jobs. Historically, freight brokers have overseen the supply-demand relationship for shippers and carriers.

However, many surface freight transactions don’t require a middleman, says Devlin Fenton, CEO of Go99.

“If I’m moving lumber or containers, there are standard dimensions and maximum weight,” Fenton says.

“It’s really simple. You shouldn’t need a third party to get between a shipper and a carrier, versus something much more complicated that’s overweight and over-dimensional.”

The removal of the freight broker from the shipping equation has spurred what the industry has dubbed the “Uberization of freight.” Fenton says a more apt analogy is Airbnb, with automation optimizing underused capacity. He describes the shape of Go99’s business model as a triangle where the vertical axis is complexity and horizontal is volume. Go99 is focused on the wide-body bottom and looking up, he says.

“There are a whole lot of surface freight jobs at the bottom of the triangle that shouldn’t need much help,” Fenton says. “Most of that work should be automated.

That’s where we’re looking at first – starting at the

bottom of the triangle and working our way up until we meet market resistance where either the shipper or the carrier is uncomfortable with the complexity of the load.”

On Go99, shippers post a load to the app’s community, and carriers provide competing quotes in real time. The app will provide shippers with historical data on average pricing, while carriers will have a record of their previous submissions’ success. Ratings for preferred vendors are also offered.

There is other popular industry matchmaking software available, such as Loadlink and uShip, but they allow entry to freight brokers. Not only are these commerce communities a digitization of the status quo, but also freight brokers can profit online without perspiring.

Kelly Ficociello, owner of Mak Transportation Services, says load board sites can attract freight brokers with no skin in the game. Go99 is truly disruptive technology in that it removes the in-between taking a cut of the action. “[With Go99], first and foremost, you’re getting rid of that middleman who isn’t doing anything,” says Ficociello. “There are so many load board sites where you don’t have to have trucks. That freight broker – his costs are a phone and a fax. Not even that anymore, he just needs access to email.”

Louise Yako, president and CEO of the BC Trucking Association, supports the streamlining of simple surface freight transactions.

“To the extent you can take out the middleman and put the driver or the owner of the equipment in direct contact with the customer, I think that really just improves customer service,” Yako says.

Fenton estimates freight brokers can take 15% to 40% of a transaction’s value. Truckers are left having to guess the total take because the freight broker doesn’t disclose the contracted price. Importantly, there is also the risk of the shipper or freight broker defaulting on payment to the trucker. Truckers relying on freight bill factoring – using a financial institution to provide advances on a company’s

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

App targets freight wait

DEVLIN FENTON CEO, GO99

One of the founding values that we built the company on was empowering the underdog and underserved

accounts receivable – are additionally at risk. Go99 guarantees payment to truckers the day after a delivery.

The app takes 20% of a transaction’s contracted value.

“We have almost a factoring agreement with our carriers, that in order to pay them next day we are taking the burden on the collection, and that incurs a fee,” explains Fenton. “There are not many other businesses willing to take the same risks on this community that we are.”

Ficociello says financial certainty is a big selling point.

“I’ve got a couple of guys that have two or three trucks,” Ficociello says, “and they are so pumped about [Go99] because even though they’re going to take 20%, you’re going to get paid the next day. And they’re never able to come back to you and say, ‘Oh, we didn’t collect the money.’”

Go99 might improve margins for both shipper and trucker. Seattle-based Convoy, a digitized brokerage that sets prices for surface freight, reports shippers are paying less and truck drivers are getting the same or more than they had been making previously.

For jobs beyond simple surface shipments, however, both Fenton and Ficociello promote freight brokers. But e-commerce software like Go99 and Convoy will likely push freight brokers to more hands-on, service-oriented work for complex freight that can never be coded.

Mark Linton, president of KML Logistics and chairman of Canada’s National Transportation Brokers Association, acknowledges “there’s definitely a place” for Go99, but warns that all shipments can pose problems that

automation can’t solve.

“I have to embrace technology and innovation or else we could be blindsided and lose our businesses,” Linton says. “But while I don’t like using the term, the broker business is somewhat old school, based on human interaction with the client to solve their problems. Our target client has multiple lanes of traffic, multiple requirements, various off-load environments, and then we provide the solutions. You will not be able to get that from an Ubertype technology.”

Go99, named after citizens-band radio code for “mission accomplished,” soft-launched in January, serving Surespan’s preferred carriers and shippers. In the first three weeks, the app processed approximately $70,000 worth of transactions. Go99 intends to ramp up features and functionality before its official launch mid-year.

Fenton says the app will build out its community locally, focusing first on corridors serving the Lower Mainland.

The app is based on feedback from several months of boots-on-the-ground work interviewing nearly 100 drivers at truck stops.

“One of the founding values that we built the company on was empowering the underdog and underserved,” Fenton says. “We see Go99 as an opportunity to provide the business tools to owner-operator truckers. On the front end, we will provide the sales support and funnel of work for you. And, on the back end, we’ll support your invoicing and accounting.” É

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Go99 taking patient, proof-of-concept approach to market Surespan Digital is not looking to put the pedal to the metal to get Go99 to market, says the companyâ&#x20AC;&#x2122;s CEO. In the mobile app world, there is no programming code for â&#x20AC;&#x153;net earnings.â&#x20AC;? On the big stage, Snapchat reported a $514 million loss for 2016, while Twitter continues to post consecutive quarterly losses over the last three years. On the smaller scene, mobile app startups can quickly run out of cash before drawing a suitable crowd.

Business is truly a binary world, though â&#x20AC;&#x201C; profit or perish.

And, when it comes to outside investors, board members can be bullies. However, Devlin Fenton, CEO of Go99, says his mobile app has the full backing of the leadership of Surespan Group of Companies, which spends up to $3 million on surface freight shipping annually. Full internal ownership and funding gives Go99 the autonomy to move at a pace itâ&#x20AC;&#x2122;s comfortable with, he explains. â&#x20AC;&#x153;There have been many players over the last four years that have tried to do something and then crashed, usually because theyâ&#x20AC;&#x2122;re either releasing too quickly, theyâ&#x20AC;&#x2122;re over-leveraged or the business model hasnâ&#x20AC;&#x2122;t been thought through,â&#x20AC;? says Fenton. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re looking at building this as a startup for ourselves and for the industry. Weâ&#x20AC;&#x2122;re in this for the long haul.â&#x20AC;?

Go99 is emphasizing proof of concept as it carefully steps out into the

marketplace. The appâ&#x20AC;&#x2122;s soft launch targeted 20 shippers and an equal number of truckers from Surespanâ&#x20AC;&#x2122;s network. Fenton admits building the app was the easy part, while â&#x20AC;&#x153;the recruiting of new users will be the hardest challenge.â&#x20AC;?

As a business-to-business app for a specific industry, Go99â&#x20AC;&#x2122;s target audience is more precise. That being said, the financial opportunity is large. Fenton estimates the North American market for surface freight is approaching skyward of $800 billion in revenue annually.

The company is already promoting its app at industry trade shows and spreading the word on social media channels. Go99â&#x20AC;&#x2122;s website allows users to register and download the app before its official June launch. However, the real selling point will be an app thatâ&#x20AC;&#x2122;s easy to use and does what it says it will do. Fenton says the addition of new users has to be seamless and quality must be paramount to avoid attrition. â&#x20AC;&#x153;These are big-fingered, big-thumbed truckers,â&#x20AC;? says Fenton of Go99â&#x20AC;&#x2122;s interface. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s a real persona we have to design for. Weâ&#x20AC;&#x2122;re looking at being complementary to their work, lowest barrier to entry, and easiest to use. At the end of the day, technology must either be beautiful or invisible. Anything in between is not on our radar.â&#x20AC;?

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www.pathbc.ca

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

TECHNOLOGY: INFRASTRUCTURE

TERMINAL PROFIT; HARD REALITY

Sluggish growth, massive mergers are among sector’s challenges

GCT Global Container Terminals

DARAH HANSEN

has ordered 12 state-ofthe-art gantry cranes to increase container-handling efficiency at Deltaport. Bigger companies and bigger ships are changing the global ports and terminals industry | MAX LINDENTHALER/SHUTTERSTOCK

I

n a new report examining the relative health of the global ports and terminal industry, Neil Davidson poses a provocative question.

“Are we entering a new period where the money to be made from ports and terminals is markedly less than it was in the past?” the senior analyst with U.K.-based maritime research firm Drewry posits in the opening of his paper, Diminishing Returns?

The question is critical to more than just the commercial businesses at the centre of the discussion. Entire coastal regions rely on healthy terminal operations to help drive the economy through the import and export of products

00_Gateway 2017_02 56PAGES.indd 34

and manufactured goods such as clothing, food, electronics, car parts, pulp, paper, lumber and grains.

The Pacific Northwest, for instance, which extends roughly from Portland, Oregon, north to Prince Rupert, B.C., handled almost 8.07 million 20-foot equivalent units (TEUs), or 20-foot containers, in 2015, according to the latest Ocean Shipping Consultants traffic forecast.

Of that total, the Port of Vancouver’s (PoV) share accounted for 37.8%, a rise from 31.5% in 2011. Prince

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Rupert’s share is 9.6%, as the Pacific Gateway facilities continue to grow faster than the U.S. Pacific Northwest ports of Seattle-Tacoma and Portland, states the forecast, commissioned by the Vancouver Fraser Port Authority.

Since 2000, the PoV has seen container growth of 6.7% yearly, above the regional average of 3.4%.

But don’t let the numbers fool you. Davidson says the industry at large is facing stormy seas, and no one is immune to the volatility of the market and world economy.

“The challenges faced by B.C. operators are similar to other operators,” he wrote in an email.

The economic crisis of 2008 undoubtedly left its mark on container terminal operations, which, while still profitable, have seen a significant overall slowdown in growth, from double digits annually a decade ago to gloomy global rates of just 1% in 2015 and a forecast 2.5% in 2016 – the lowest since the crash.

Indeed, Davidson identifies demand growth as just one of several “key challenges” facing terminals operators worldwide. Today’s terminals, including those in B.C., must also contend with a number of pressing external realities eating away at the bottom line: a volatile game of musical chairs among struggling shipping lines that has resulted in industry consolidation into a handful of larger, and fewer, mega-alliances; a global trend toward ever-larger shipping vessels (up 18% in capacity between 2010 and 2015, according to Drewry) that result in fewer calls into port and higher volumes of containers handled per call; and, on land, a pressure to consolidate services among operators and bankroll expensive upgrades such as larger cranes, longer and deeper berths, larger, enhanced inland transportation links and more densely stacked yards to keep ahead of the competition.

That said, analysts are banking on a bright future for PoV and Prince Rupert.

Though noting a 5.9% decline in cargo numbers in 2016’s first half compared with the same period a year earlier, the Ocean Shipping Consultants forecast noted opportunities for the Pacific Gateway region, calling it “a highly competitive option for import and export container volumes.”

By 2025, driven by growing demand between the West Coast and Asian markets, the port’s terminals are projected to be handling over 4.8 million TEUs per year, compared with current traffic of three million TEUs. “There is already a pressing need for container terminal investment if further potential demand is not to be missed,” the forecast cautions.

On the ground, terminals operators are working with government authorities to respond to the changing landscape.

GCT Global Container Terminals, which operates the port’s Vanterm and Deltaport container terminals, broke ground on a $280 million project in 2015 in a bid to expand its Deltaport intermodal yard to increase its annual capacity to 1.9 million TEUs. Last year, the company also confirmed it had ordered 12 state-of-the art gantry cranes to increase container-handling efficiency at Deltaport, which was one of three North American terminals with the most improved port productivity from 2014 to 2015, according to the Journal of Commerce’s 2015 global port productivity survey.

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NEIL DAVIDSON SENIOR ANALYST, DREWRY

The global container port and terminal industry is on the cusp of a critical turning point. …

Something has to give

Dubai-based DP World is also nearing completion of a $200 million expansion of its container terminal at Prince Rupert’s Fairview container terminal that is intended to take advantage of growing interest from North American shippers in the region – notably because of its proximity to Shanghai relative to Vancouver and Los Angeles.

The project, which includes a second deepwater berth, three additional gantry cranes capable of loading and unloading the largest vessels in the world and land reclamation to expand the size of the yard, is scheduled to be completed in the fall of 2017 and expand the terminal’s overall capacity by 60%.

DP World also owns Vancouver’s Centerm container terminals.

On the horizon, meanwhile, looms a $2 billion threeberth terminal at Roberts Bank. In the planning stages since 2012, the project, known as Terminal 2, would add another 2.4 million TEUs to the PoV’s annual container capacity by its scheduled completion in 2025.

PoV sees Terminal 2, which is being vetted by government regulatory bodies, as a key element in taking advantage of the container mega-ships deployed on the Asia-West Coast North America trade routes.

The proposal is meeting with fierce opposition from environmentalists who say it will cause too much damage to the region’s unique marine ecosystem.

The terminal is also of concern to the International Longshore and Warehouse Union (ILWU) Canada, which opposes an aggressive drive toward automation at new facilities on the grounds that it poses a threat to its 6,000 members who work at the ports in various trades and cargo-handling operations.

Bob Dhaliwal, secretary-treasurer of ILWU Canada, says the union is not opposed to technological change per se, but is seeking input in the decisions in an effort to protect jobs.

A terminal that offers a high level of automation, which in some parts of Europe has cut port workforces significantly, is “a scary thing,” says Dhaliwal. “It could force other terminals to go the same route and it would be a race to the bottom for us.”

More broadly, Drewry’s Davidson sees several possible scenarios playing out on the global scene in the future.

One is that terminal operators and shipping lines will co-operate much more closely to mitigate the negative impact of larger ships and alliances – a move that is “unlikely to solve the problem entirely,” the analyst admits.

Another is that significant price hikes will be obtained from shipping lines to balance higher costs and maintain margins. Shipping lines, however, are already under severe financial pressure and “will resist strongly,” Davidson says.

Still another possibility is that terminal operators will accept a new era of lower margins and returns, with some operators and investors leaving the market.

“An extreme option,” says Davidson, is that terminal operators will choose to not invest in new capacity because the returns are insufficient, leaving shipping lines with nowhere to berth large ships.

Whatever happens, he concludes, “the global container port and terminal industry is on the cusp of a critical turning point. … Something has to give.” É

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

OTHER GATEWAYS: AIR

POSITIVE ALTITUDE: YVR AIR CARGO PLAN $48 million Sea Island deal consolidated the airport’s facilities, provided platform for improved freight service GLEN EDWARDS

RAYMOND SEGAT DIRECTOR OF CARGO AND BUSINESS DEVELOPMENT, VANCOUVER AIRPORT AUTHORITY

We wanted to have a much closer working relationship with all the tenants in the [cargo] industry. So, we know what they need, where they’re going and how we can help facilitate that growth

00_Gateway 2017_02 56PAGES.indd 36

V

ancouver International Airport (YVR) is about as well situated as a water station at the halfway mark of a marathon.

Located in the closest major North American city to Asia, and within sight of port and border, YVR might be expected to take heady cargo volumes as a given. However, touting geography as your sole competitive advantage has the hubris of claiming credit for plate tectonics and continental drift.

And in the commercial cargo business, location is good, but the killer combination of service, speed, space and synchronicity is what makes cargo hubs great.

In the last two years, Vancouver Airport Authority (VAA) has invested substantial capital and culture in a service-centric approach that has distanced it from its peers in more ways than kilometres can measure.

“I would say, out of all the airports in Canada, Vancouver airport is probably the one that is most receptive, or in tune with, air cargo needs,” says Lise-Marie Turpin, vice-president of cargo for Air Canada. “They’ve been very proactive in looking to work with us and understand what they can do more to help us with our business.”

In mid-2014, the VAA acquired the leasehold interests in 17 neighbouring buildings on Sea Island for $48 million.

The consolidation created Cargo Village, a one-owner hub providing more than a million square feet of cargo buildings and warehouse space that is home to air carriers, freight forwarders, customs brokers, trucking firms and courier companies. VAA launched a subsidiary, Vancouver Airport Property Management (VAPM), to operate Cargo Village with the explicit goal of expanding business.

Raymond Segat, VAA’s director of cargo and business development, says Cargo Village is a unique offering in

North America. Segat, who also oversees VAPM, says their cargo strategy mirrors the thinking behind the creation of the airport authority and its effect on what has become an award-winning passenger terminal: own the infrastructure, create a direct relationship with tenants and have the authority to quickly respond to evolving needs.

“We wanted to have a much closer working relationship with all the tenants in the [cargo] industry. So, we know what they need, where they’re going and how we can help facilitate that growth,” explains Segat. “We’re more tied into the industry than being a landlord collecting a rent cheque.”

Centralizing cargo facilities has also created the platform for faster dialogue and decision-making, a big selling point for a service that promotes time as its value proposition, says Turpin.

“We’re air. We sell speed, so everything has to be quick.

They understand the necessity to bring all the stakeholders in the supply chain closer together so we can interface more quickly.”

VAPM is also looking to improve the velocity of operations in a pilot project. Cargo from an international flight destined for a connection has to be off-loaded and moved to a carrier’s cargo facility, sometimes located

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a considerable distance away from the gate. The issue is important. International represents the bulk of Air Canada’s cargo business, says Turpin. Cargo can often sit for several hours before it needs to be transported back to be loaded onto a connecting flight. The pilot program with Air Canada has created a dedicated area near the terminal to stage freight in transit. The initiative is aimed at improving the efficiency of moving in-transit freight, saving on handling costs and fuel, reducing vehicle wear and tear and improving the airport’s environmental footprint. And, importantly, it could reduce the time needed between connecting flights, trimming shipping times. Lessons from the pilot program will be considered in VAA’s long-term terminal expansion plans.

“It’s [another] way they’re willing to accommodate us and help out,” Turpin says.

By design, all VAPM employees work at Cargo Village.

This factory-floor, front-line approach underlines Segat’s No. 1 priority of “understanding our tenants’ business and moving forward on things they require.”

VAA’s overall cargo approach mirrors the same service attitude of another supply chain company. When Hunter Harrison came aboard Canadian Pacific Railway in 2012, he moved the company’s headquarters from its comfy Calgary downtown digs to its rail operations at Ogden Yard to ensure everyone who looked out the window knew what business they were in. And Harrison, who is now the CEO of international transportation company CSX Corp., made sure everyone knew the first rule for railroading: provide service.

Likewise, Segat wants everyone breathing cargo.

“Overall, [it’s about] being plugged into the business,”

Segat says. “I’m not just talking about a property manager understanding what our tenant needs. I believe the integration of knowledge needs to go all the way through our team.”

YVR’s cargo business, much like its passenger volume, has seen steady growth. Only extraordinary global events like 9/11, the SARS outbreak and the 2008 financial meltdown have put dents in its business. YVR’s 2016 air cargo business increased 3.4% to 281,018 tonnes compared with the year previous, and nearly 6% between 2014 and 2015 – far exceeding VAA’s modest 1% annual growth rate that it uses for planning purposes. However, air cargo tonnage alone is a misleading performance metric that represents just a fraction of YVR’s commercial cargo business. Sea Island is also home, for instance, to a UPS regional hub and major FedEx, DHL and Purolator operations.

According to VAA’s 2015 numbers presented at a recent conference, air cargo accounted for only 21% of the 1.27 million tonnes processed at the airport. Most of the cargo (78%) processed at the airport goes by truck. Total value of airport cargo in 2015 was $30.2 billion, with truck-totruck accounting for $15.5 billion, air cargo representing $12.5 billion and diverted cargo amounting to $2.2 billion.

Ultimately, YVR’s cargo service must also be grounded to trucking.

“The freight that we load [from truck] onto our flights originates from a much broader catchment area,” says Turpin. “There’s a lot of trucking going on. Airports need to build facilities that will facilitate the interface between trucking and air – having the right space to manoeuvre and ease of access to roadways. All of that they understand very well.” É

The airport’s cargo strategy mirrors the thinking behind the creation of the airport authority itself, says Raymond Segat, director of cargo and business development | GLEN EDWARDS

BIG NUMBERS

3.4% $30.2b

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Percentage increase, to 281,018 tonnes, in YVR’s 2016 air cargo business compared with 2015 Value of YVR airport cargo in 2015

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

OTHER GATEWAYS: ROAD

LONG-HAUL TRUCKING WITH

MR. ROBOTO Is automation the answer to a big-rig driver shortage?

GLEN EDWARDS

D Louise Yako, president and CEO of the BC Trucking Association, says red tape will likely stall any autonomous future in the longhaul trucking sector | SUBMITTED

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epending on how brave your new world is, long-haul trucking in the future is either facing an acute driver shortage or in no need of employing any human behind the wheel.

It’s forecast that at least 26% of today’s roughly 11,800 transport truck drivers in B.C. will retire by 2025, according to statistics compiled by the Asia Pacific Gateway Skills Table. The British Columbia Trucking Sector Labour Market Outlook 2016-2025 rates the chances of hiring truck drivers as mostly “difficult” over the foreseeable future. In northern B.C. alone, drivers will represent 40% of the total number of job openings among the 17 occupations making up the trucking industry.

A similarly dire study from the Canadian Trucking Alliance predicts a shortfall of 33,000 to 48,000 drivers by 2020, depending on the rate of economic growth.

The industry is at the precipice of a “demographic cliff,” the study warned.

Louise Yako, president and CEO of the BC Trucking Association (BCTA), says truck drivers in B.C. are aging out of the workforce in large numbers. Long-haul drivers are older than the average Canadian worker, which

underlines challenges bringing in new blood, Yako says.

“T here’s a demog raph ic issue a nd there a re social trends,” says Yako of the age-related exodus. “[Unfortunately] we have a natural growth requirement at the same time the worker population is slowly leaving us.”

In the near term, the BCTA is aiming to increase the uptake of young people to rates rivalling those of other industrial sectors. The trucking industry is a laggard, says Yako, because the minimum age to get a commercial Class 1 driver’s licence is 19.

“By 19, many young people have made an occupational choice that has taken them in a different direction,” she says.

In response, BCTA has partnered with Kamloops/ Thompson School District 73 to launch a “commercial driver training program.” Students take four courses over one semester to gain a basic understanding of truck operation, safety and driving techniques necessary to

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get their Class 1. However, Yako says the provincial government has yet to budge on an exemption to allow students to achieve Class 1 at 18.

BCTA has also been working with the Ministry of Transportation and Infrastructure to improve working conditions on the road. Late last year, after surveying mostly long-haul truck drivers, the ministry committed to improving existing rest areas, building new facilities, seeking out vendors to provide service stations, shower facilities and other amenities and improving connectivity by offering free Wi-Fi at select rest areas.

Daimler’s Freightliner Inspiration, billed as the world’s first self-driving semi truck, is now undergoing testing on real road conditions in Nevada | SUBMITTED

The province is to spend $9 million over three years.

However, these roadside attractions ignore the elephant standing in the middle of the highway. Although the image of long-haul trucking on a lonesome highway has made for many chapters of the country music songbook, it hasn’t filled many fun pages of family albums.

According to Yako, approximately 96% of long-haul drivers are male – and, odds are, that same percentage represents those who don’t want to be away from their loved ones.

“If you are a long-haul truck driver and are away for

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dpworld.ca

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Long-haul trucking with Mr. Roboto

lengthy periods of time, it’s really hard to be an active parent and partner,” admits Yako. “We think that lifestyle plays a part in making it difficult to attract people.”

And if humans are closing the door on long-haul trucking as a career choice, enter automation.

Talk of driverless or semi-autonomous trucks has gained momentum, spurring imaginations both inside and outside the industry. Rubber has hit the road in terms of application, too. Rio Tinto is using fully autonomous trucks at its Pilbara mining operations in Western Australia. Closer to home, Suncor Energy is testing fully automated trucks on an isolated part of the company’s oilsands operations north of Fort McMurray.

Outside of controlled mine-site locations, autonomous trucks are now being piloted on roads. Daimler’s Freightliner Inspiration, billed as the world’s first self-driving semi-trailer truck, is now undergoing testing on roads in Nevada. Last October, Otto, the self-driving-truck subsidiary of Uber, shipped a load of Budweiser from Fort Collins, Colorado, to Colorado Springs in one of its autonomous truck prototypes.

However, both technologies basically rely on a truck autopilot system, with a human driver still present in the cab. The technology is classified as Level 3 by the U.S. National Highway Traffic Safety Administration – with Level 4 being full automation and no driver. Level 3 means vehicle systems can control all driving tasks under limited conditions, but a driver must be able to

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assume operations when prompted. Daimler’s Highway Pilot system uses radar sensors and cameras to detect objects and lane markings around the truck and take over steering, braking and accelerating from the driver. If the software determines that it can’t handle upcoming twists and turns, a 20-second countdown to human driving is flashed.

Daimler says its Inspiration prototype can save both fuel and lives – reducing crashes due to driver error and fatigue.

The near-term future of the sector as seen by proponents of semi-autonomous trucks resembles the commercial air transportation industry. A pilot handles takeoff and landing at city airports; autopilot takes over for the distance in between. Backers of new driverless technology envision autonomous driving on dedicated highway lanes, with human drivers taking over at city limits.

Complementing this future is California-based Peloton Technology, which is testing the feasibility of deploying multiple trucks travelling in close formation, led by a single driver in the front vehicle, to reduce wind resistance and increase fuel efficiency. However, Class 1 railroad companies can claim that one-driver-longtrain technology has existed in Canada since before the Last Spike.

Most proponents echo the opinion of Martin Daum, head of Daimler Trucks North A merica, that the

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technology will make the driver’s job easier. According to a Bloomberg Businessweek article, Daum hoped to show regulators that trucks equipped with autonomous-driving technology put fewer hard miles on a human driver’s day, so those drivers should be allowed to spend more than 11 hours per day behind the wheel.

Lior Ron, Otto co-founder, told Reuters of the potential for a truck to be operated 24 hours a day, every day.

Technology that enslaves rather than emancipates humans? Yako says that would never fly in Canada.

“There are currently hours of service in place that limit the number of hours that drivers can be on duty, even when they are not driving,” says Yako. “Regardless of whether you’re in an autonomous truck or you’re actually doing the driving yourself, it’s tiring to always be alert. I don’t think that anyone would expect anyone to spend more time in the cab.”

Ultimately, new technology is going to have to drive through miles of regulatory red tape before autonomous trucks become commonplace.

“Given the kind of timelines that are currently required to change legislation and policy in this country, it seems to be a really herculean task,” says Yako. “It’s probably going to happen after I retire.”

Ryan Ernst, a senior manager in Deloitte’s strategy and operations practice, speaks on disruptive technologies affecting supply chains. He says Canada is largely taking a wait-and-see approach.

“We’re years away, I think, just as a short answer,” says Ernst of an autonomous trucking future. “2025 or 2030 is almost a given by most consensus now in terms of how people are predicting. [But] I don’t see anyone pushing for it actively in Canada as an investment the same way that you see it south of the border.”

Technology purists promote the vision of a Level 4 future, eliminating both driver and salary. But Level 4 also may shift liability from the driver to the vehicle manufacturer in the case of a crash or death – a contentious legal consideration, say some industry leaders.

Drivers will remain inside the trucks “for the foreseeable future,” Ron told Reuters. Advanced autopilot technology, allowing fewer drivers to do more, is seemingly the more likely future.

Up until talk of autonomous commercial vehicles, truckers had been largely ignored. It’s been an “uphill battle” for truckers to get the profile they deserve, says Yako. The sad irony is that now that long-haul truckers are in the spotlight, the conversation is about removing or reducing their role.

“The trucking industry typically just gets the job done. There are thousands and thousands of trips made daily without really any fanfare. I don’t know if the public really appreciates that,” says Yako. “I just think we need to do a better job to educate the public about what it is the trucking industry contributes to our way of life.” É

BIG NUMBERS

26% 40%

48,000 96%

Estimated percentage of today’s 11,800 transport truck drivers in B.C. who will retire by 2025 Percentage of the total number of job openings in northern B.C. represented by drivers among the 17 occupations making up the trucking industry Canadian Trucking Alliance’s estimate of the shortfall by 2020 in the number of truck drivers needed Percentage of long-haul drivers who are male

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OTHER GATEWAYS: SEA

A NEW PATH FOR

PORT ALBERNI Proponents of proposed deepwater container port claim it would help alleviate Port of Vancouver cargo congestion

PATRICK BLENNERHASSETT

A

s the Port of Vancouver continues to thrive in volatile economic times, other potential marine industry areas in B.C. are hoping to seize opportunities to alleviate congestion created by Canada’s biggest and busiest harbour.

The Port Alberni Transshipment Hub, the Port Alberni Port Authority’s proposed $1.7 billion deepwater port, would handle up to 22,000 TEUs annually | SUBMITTED

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SUBMITTED

Recently named in Deloitte’s EU Shipping Competitiveness Study as one of five benchmark international shipping centres along with Singapore, Hong Kong, Dubai and Shanghai, the Port of Vancouver continues to grapple with the challenge of accommodating a rising tide of container traffic. For the past four years, it has handled more than 135 million tonnes of cargo annually.

While the proposed Roberts Bank Terminal 2 project in Delta would potentially add 2.4 million 20-foot equivalent units (TEUs) to local container capacity, an outlying community is promoting an equally ambitious project.

The Port Alberni Transshipment Hub (PATH), the Port Alberni Port Authority’s (PAPA) proposed $1.7 billion deepwater port, would handle up to 22,000 TEUs annually. PAPA chief executive officer Zoran Knezevic says the idea is to help Lower Mainland container terminals with “pre-sorted cargo.”

“It’s a very viable alternative and solution to a problem that larger ports are facing, such as the Port of Vancouver and Seattle, in terms of congestion issues with a major port so close to a city,” he says. “[PATH] is beneficial because of its location. It’s an accepted concept everywhere throughout the world to essentially create a large hub and spoke model for a major port.”

PATH recently completed a pre-feasibility study, which was partially funded by Transport Canada.

Knezevic says that since then PAPA has been gathering endorsements from the local community, the regional district, the City of Port Alberni, various First Nations and business organizations as well as private investors.

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He says there was initial pushback from the Port of Vancouver given that PATH could be seen as an alternative to Deltaport’s Terminal 2 container expansion project; however, he notes that since then the Port of Vancouver has become more welcoming of the progress on the Deltaport proposal, which is currently undergoing a federal environmental review.

PATH would potentially increase Canada’s gross domestic product by $21.3 billion and reduce commuting time through the George Massey Tunnel by 98,750 hours annually, according to PAPA’s pre-feasibility study.

Knezevic says another benefit centres around pushback against further Port of Vancouver development by groups such as APE (Against Port Expansion), which fear that increasing port capacity across Metro Vancouver would damage the ecological makeup of the Fraser River and adjacent agricultural land.

Bernie Dumas, president and chief executive officer of the Port of Nanaimo, says Nanaimo supports the project and is taking a collaborative approach with the proposed project rather than a competitive one.

The Port of Nanaimo is battling with the Nanaimo Marina Association over an increased lease-rate model, a dispute that has gone on for the past five years.

“It’s an interesting concept,” says Dumas when asked about PATH. “And both ports, Port Alberni and Nanaimo, have underused assets in the sense that both were quite active with the forest products industry for 50-plus years and now that’s gone soft, and now we’re both trying to reinvent ourselves.” É

ZORAN KNEZEVIC CHIEF EXECUTIVE OFFICER, PORT ALBERNI PORT AUTHORITY

It’s a very viable alternative and solution to a problem that larger ports are facing, such as the Port of Vancouver and Seattle, in terms of congestion issues with a major port so close to a city

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

PROFILE

INTERIOR

OPPORTUNITY Kleo Landucci heads a key inland link in Asia-Pacific Gateway logistics chain

Kleo Landucci, managing

TYLER NYQUVEST

director of Ashcroft Terminal, at her Vancouver office | ROB KRUYT

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B

ehind the desk at Ashcroft Terminal’s administrative office in Vancouver is an inspiringly Canadian painting. Created by artist Jan Kasparec, the work depicts a lone, stationary train on a track through an alluring natural environment like that of British Columbia’s Interior.

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T he painting is an eloquent pairing of two interconnected themes: the rugged beauty of the Canadian landscape and the importance of and reliance on movement across that landscape.

Movement and transportation help define Canadians’ way of life, and, says Kleo Landucci, managing director of Ashcroft Terminal, it’s time for movement of goods within our country to rise to a more sophisticated level of efficiency.

Ashcroft Terminal is a 320-acre, privately owned inland trans-load and storage terminal with 350 acres of surrounding buffer land. It is located 340 kilometres east of Vancouver and 90 kilometres west of Kamloops, and it has direct access to major highways and railways.

The terminal operates through a unique agreement between Canadian Pacific Railway Ltd. (CN) and Canadian National Railway Co. (CP).

Landucci says the facility is one of the most ideally placed inland terminals to help alleviate some of the major congestion problems facing goods movement in the Lower Mainland and to drive efficiency in a system riddled with redundancies.

“Ashcroft Terminal has the only property in the country with both CP and CN main lines running through it,” Landucci says. “We are uniquely positioned to be able to service the Lower Mainland and alleviate congestion and encroachment of industrial and agricultural land by moving some of those activities inland.”

The terminal is the creation of the Landucci family, which has a distinctly West Coast history. Kleo Landucci’s father, Robert Landucci, is the owner and CEO, and has been active in many of the sectors at the traditional centre of B.C.’s economy.

“My dad started as a commercial fisherman, then started his own lumber company in 1972,” Kleo Landucci says. “He’s also been involved in mining. Our family owns a small mine in the north, so he really had that background understanding of what it takes to get resource to market.”

“My grandfather immigrated here from Italy and spent 47 years working for what is now CP, so our background is in the Interior,” she adds. “It’s in our blood as to where the wealth is actually created – not in the city centres that support it, [but in] the hinterland, the mines, where the lumber is cut, where the products are produced.”

Landucci, 40, was raised on Vancouver’s North Shore, with the ocean as her backdrop. She attended Capilano University, but when a summer job at Canaccord Genuity Wealth Management turned into a full-time opportunity, she took the position and never looked back.

“I worked on the U.S. trading desk and I started a little web-based television show, before YouTube and smartphones.”

After gaining valuable corporate experience, she left the company to join the family business in 2004.

While many see problems facing the sector, Landucci sees possibilities, and embraces goods movement and strategy as her future.

“Well, I guess I am an optimist; there are terrific opportunities,” she says. “Look at the funding that’s

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KLEO LANDUCCI MANAGING DIRECTOR, ASHCROFT TERMINAL

Ours is a beautiful city; we are lucky to live here, but it’s not sustainable to be moving goods the way we have been moving goods

When you were a kid, what you wanted to be when you grew up: Entrepreneur/business person (I started my first company at eight years old) Profession you would most like to try: I’m doing it. Logistics/ transportation touches all industries globally. I am grateful to be doing exactly what I’m doing Toughest business decision: Realizing a business didn’t work and having to shut it down and eat the loss Advice you would give the younger you: There are no barriers; work smart, be straightforward, and you can do anything What’s left to do: The list is too long for this article

coming from government into trade-enabling infrastructure. Certainly the federal government understands very clearly that there is a need to spend some money to help support trade through our critical gateways.”

Naturally, Landucci sees inland ports as a huge opportunity.

“Ours is a beautiful city; we are lucky to live here, but it’s not sustainable to be moving goods the way we have been moving goods.

“We see a lot of the production in Western Canada being driven or brought down inefficiently into the Lower Mainland and [it] needs to be trans-loaded here and put into containers to go to export – and that is a big cost to the producer.”

By operating as an effective storage facility connected to CP and CN main lines, Ashcroft stands to help producers cut costs and alleviate congestion.

“We look at doing things different,” Landucci says.

“We look at doing things closer to source, and we look at the opportunities to alleviate those long-haul truck drives that are unnecessary.”

She illustrates her point by showing an image of the Lower Mainland criss-crossed by a spiderweb-like pattern of lines that highlight truck movement from various facilities.

“We have an opportunity to look at smart infrastructure investments that convert as much truck traffic to rail traffic as possible.”

At the same time, inland ports struggle with the same challenges facing the entire transportation sector.

“Population growth, density, wanting beautiful residences on land that was once industrial – we can’t keep upzoning these properties, losing industrial land, complaining about it and then not finding solutions,” she says.

Congestion has been a major concern in Metro Vancouver. The Canada Transportation Act review report identified it as one of the main hindrances in the sector over the next 20 years.

“Ashcroft is a really great solution for some [logistics problems],” she says. “We don’t claim to be able to do everything, but we can certainly help prepare goods because every single train, every single product that comes on every single boat has to pass through our terminal, so that gives us an opportunity to help get that product out.”

Asked about the transportation sector’s economic outlook, Landucci stresses the crucial importance of efficiency.

“The need to have efficient transportation supply chains is at an all-time high,” she says. “When we look at where transportation is going, we know exports are generally growing. We know that imports are coming through our western coast ports; they are being fed into Canada and very focused into the midwest.”

The intricate problems that come with managing these movements are what excites Landucci.

“I love being strategic. I love looking at opportunities and then getting into the weeds and figuring it out, going from 30,000 feet down.” É

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

THE NEW WATERFRONT: WOMEN’S WORK From sea to C-suite, more women are finding success in B.C.’s gateways

HAYLEY WOODIN

ANGELA SPLINTER CEO, TRUCKING HR CANADA

We’re having a difficult time in breaking out of that traditional labour pool, so that includes women

00_Gateway 2017_02 56PAGES.indd 46

O

ver the last three decades, docks and their associated industries have seen a lot of change. Technological advances have retooled the nature of work at ports around the world.

Demand for B.C. and Canadian goods has spurred growth, and activity at the waterfront is increasingly busy.

More than $102 billion in goods and services were brought into the province in 2015, a 189% increase over the amount imported in 1987. Exports of B.C. goods to other countries rose 75% over the same period, according to data from BC Stats.

As a result, B.C.’s ports are in demand. With a looming skills shortage and a shift in the types of skills needed in the trade and transportation industries, it has gradually become easier – and more crucial – for women to succeed in work on the waterfront.

“I’d say 15 to 20 years ago, we had very few women on the waterfront, and it was a problem for the industry,” says Rob Ashton, president of the International Longshore and Warehouse Union (ILWU) Canada.

Of the more than 6,000 B.C. workers ILWU Canada represents, 10.5% are women. At his Vancouver local 20 years ago, Ashton says, that number may as well have been zero.

“You have to remember this was – I hate using that term – a male-dominated industry,” he says.

But the industry has changed. Both the physical and

written tests required to enter the union have been adapted to reduce the failure rate of both men and women.

Waterfront work today relies more heavily on equipment and machinery than on physical strength. Facilities – wash-up areas, showers, washrooms – have been added to accommodate ILWU sisters.

“It takes 10 to 12 years to make our union,” Ashton says. “The more women, the more of our sisters that are making it into the membership, the more of them we’re seeing succeeding at the executive level, if they choose to do that part.”

ILWU Local 519 in Stewart, B.C., recently elected its first female president. In New Westminster, a longshore sister now serves as secretary-treasurer. Though ILWU Canada advocates a 50-50 gender hiring policy, there remains a considerable way to go before as many women as men work in roles on vessels, on the docks or in the boardrooms of industries that touch B.C.’s gateways to the Pacific and beyond.

“We have been really taking targeted measures to try and increase the representation of women on our executive

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Sandra Case, vice-president of human resources and labour relations with the Vancouver Fraser Port Authority, says the organization has taken steps to raise the number of women on its executive | VANCOUVER FRASER PORT AUTHORITY

Women make up a growing proportion of the workforce at B.C. ports but have yet to make substantial inroads in

team,” says Sandra Case, vice-president of human resources and labour relations with the Vancouver Fraser Port Authority, which was recognized with an Employment Equity Achievement Award by the federal Ministry of Employment, Workforce Development and Labour last year.

Case is the only female executive on the port authority’s seven-person leadership team. At lower levels, however, the port’s governing body is split fairly evenly between men and women overall, though some types of positions will typically draw more applications from men, while others attract more female applicants, Case says.

For example, roles in construction, engineering and ticketed trades draw more men, says Case, noting that fewer than 1% of ticketed tradespeople in B.C. are women.

Female-dominated roles include positions in communications, human resources and administrative assistance.

Planning, law and accounting see an equal split.

“Particularly with roles when we’re hiring into our organization, we do try to be flexible and look at the competencies people have versus direct experience, because if you just look in this industry, it’s going to be very challenging to find enough women to move up,” says Case, who worked as a lawyer and in labour relations and human resources at organizations including the University of British Columbia before joining the port authority as a director in 2012.

“I think generally the industry is very supportive of recognizing that there is a need to bring more gender equality to the industry,” says Bonnie Gee, vice-president of the Chamber of Shipping of British Columbia. “Certainly on the waterfront itself we’re seeing quite an increase in the number of female workers.”

Gee points to an increase in female longshore workers, more women handling equipment at terminals and more women managing the logistics around container shipments. Where you don’t tend to see women, Gee notes, is aboard marine vessels.

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According to the Asia Pacific Gateway Skills Table, 110,000 jobs will need to be filled in 52 transportation and construction occupations in B.C. between 2016 and 2025.

More than a third of senior managers in transportation, production, utilities and construction will leave the job market over the next eight years.

In trucking, job openings for transport truck drivers are expected to increase 5% by 2025 as more jobs are created and more than 11,800 drivers retire from the workforce.

“We’re having a difficult time in breaking out of that traditional labour pool, so that includes women,” says Angela Splinter, CEO of Trucking HR Canada (THRC).

“We just need to do a better job of just reaching into those new labour pools.”

Just 3% of drivers and 3% of mechanics, transport trailer technicians and cargo workers in Canada are women, according to THRC. Even in the areas with the greatest representation of women – dispatchers (18%) and freight claims, safety, and loss prevention specialists (25%) – female representation falls significantly short of a 50-50 split.

“Even in the senior management roles, we’re starting to see that there’s a need to make sure we’re bringing new talent in,” says Splinter. “We know that women are largely under-represented in the industry.”

Part of it, Splinter believes, is a perception issue about what’s required to do the job, as well as a lack of awareness about what roles in trucking the industry has to offer. In 2014, THRC launched Women with Drive, a national project aimed at supporting women in trucking and attracting more women to the industry.

The initiative works to promote greater gender equity in the workplace, says Splinter, but it’s also a response to the recruitment needs facing trucking, and transportation generally.

“Obviously [we need to] make sure we’re not ignoring one of the largest labour pools.” É

management positions in the industry | BIKERIDERLONDON/ SHUTTERSTOCK

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GLOBAL CENTRE

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Port of Vancouver among group of five that poses a growing threat to EU market share in shipping, according to Deloitte analysis TIMOTHY RENSHAW

U

neven Port of Vancouver cargo numbers for 2016 released in early 2017 reflect a flatlining global economy ahead and a tumultuous year past for major shipping lines.

SHIPPING AMBITIONS

But the port’s resilience in the face of economic volatility and its recognition in a new report as a fast-rising international shipping centre took much of the negative edge off those numbers.

The port’s overall 2016 cargo volume was down 1.8% to 136 million tonnes compared with 2015.

But Robin Silvester, president and chief executive officer of the Vancouver Fraser Port Authority, points out that, despite global economic downturns, the port’s ability to handle a wide range of imports and exports has helped it record its fourth consecutive year of cargo volumes of more than 135 million tonnes.

Other aspects of Vancouver’s port operations and regulatory environment are also highlighted in Deloitte’s EU Shipping Competitiveness Study.

The international benchmark analysis, released in late February, was commissioned by the European Community Shipowners’ Associations to provide data on the looming competitive threats to the European Union’s ports and to provide recommendations on how to retain and expand market share.

Vancouver is one of five “leading international shipping centres” used in the report’s comparative benchmarking analysis. Singapore, Hong Kong, Dubai and Shanghai are the others.

The report notes that, while most of the five still have Overall container cargo handled through Centerm and other Port of Vancouver container terminals in 2016 was down 4.1% compared with 2015.

The port’s 2016 break-bulk lumber and wood pulp volumes were down 22% compared with 2015 | CHUNG CHOW

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Global shipping centre ambitions

Robin Silvester, president and chief executive officer, Vancouver Fraser Port Authority: â&#x20AC;&#x153;clearly there is more protectionist rhetoric around the world than there was a year ago, and that is a bit of a concern for all of us from an economic point of view | SUBMITTED

minor global market share relative to the EU, â&#x20AC;&#x153;they experience high growth rates and are named the main competitors to the EU for location of strategic, commercial and operational shipping activities.â&#x20AC;?

Vancouver scored well in the reportâ&#x20AC;&#x2122;s regulatory, economic and political factors category.

However, it still lags behind other shipping centres in availability of finance and is even further behind when it comes to local access to the legal, finance, logistics, insurance, brokering, chartering and professional services that are critical to success in the complex business of international shipping and cargo handling.

The federally and provincially funded Vancouver International Maritime Centre (VIMC) is focused on helping fill that void by promoting B.C. to the international shipping sector as a maritime centre and selling the advantages of basing shipping industry companies in Metro Vancouver, especially those in the sectorâ&#x20AC;&#x2122;s lucrative and high-paying service arena.

Kaity Arsoniadis-Stein, VIMCâ&#x20AC;&#x2122;s executive director, says the Deloitte report will help the organizationâ&#x20AC;&#x2122;s mandate because it gives Vancouver top scores in critical areas that make it a good place from which to conduct shipping industry business: taxation and other fiscal incentives; regulatory, economic and political factors; and ease of doing business.

But Arsoniadis-Stein says improvements are needed in several areas to increase the attraction of Vancouver and

the rest of B.C. to major shipping industry companies.

For example, immigration complications, especially for top executives, need to be eliminated if the region hopes to attract more head offices.

Arsoniadis-Stein adds that, while â&#x20AC;&#x153;Canada has some of the strongest banks in the world, none of them have international shipping expertise, and therefore there is no availability of ship finance. This is a big weakness. Shipping is a capital-intensive industry sector that requires significant investment.â&#x20AC;?

Some of the global shipping industry companies that have major offices in Metro Vancouver now include Seaspan Corp., Teekay Corp., Pacific Basin Shipping Ltd., Mediterranean Shipping Co. and Methanex Corp.â&#x20AC;&#x2122;s Waterfront Shipping Co. Ltd. Grain, meanwhile, was among the Port of Vancouverâ&#x20AC;&#x2122;s good-news stories from 2016. Exports through the port were up 1.3% from 2015, reflecting strong global demand and a bumper harvest in Canada.

But a 22% drop in break-bulk lumber and wood pulp dragged down break-bulk cargo, which overall was down 1.4%, as was bulk dry cargo (-2.9%).

Containerized cargo was a mixed bag. While exports were up 3.3% to 1.1 million 20-foot equivalent units (TEUs), overall container cargo handled through the port was down 4.1% to 2.9 million TEUs compared with 2015.

The portâ&#x20AC;&#x2122;s year-end 2016 numbers continued the trend set in the yearâ&#x20AC;&#x2122;s first six months when total cargo shipped

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through the port dropped 5.9% to 66 million tonnes compared with the same period in 2015.

Container traffic, which has grown steadily through West Coast B.C. ports over the past five years, especially in 2015, was also down significantly (6.5%) in the year’s first six months.

The drop in container traffic, in part, reflects the cargo boom in 2015 when major deep-sea container shipping companies diverted large numbers of U.S.-bound containers to West Coast Canadian ports because of goods movement interruptions caused by protracted dock worker contract negotiations at West Coast U.S. ports.

The Port of Vancouver’s numbers also mirror a slowdown in global economic growth, which worsened an already difficult year for global shipping lines.

The companies, faced with overcapacity and record-low freight rates on major cargo routes, are in an industry that has lost more than US$50 billion in sales since 2014.

The outlook for 2017 is less dire than the realities of 2016.

However, the global forecast for container traffic remains far more subdued than earlier in the decade.

“Clearly there is more protectionist rhetoric around the world than there was a year ago,” says Silvester, “and that is a bit of a concern for all of us from an economic point of view.”

During a January 24 webinar on global container ports and terminals, Neil Dekker, director of container research at U.K.-based shipping consultancy Drewry, notes that

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the world economy is moving into a new era of “fairly low global growth.” That growth in 2015, he says, was around 1.3%.

“Our latest assessment for 2016 is about the same, so the days of 4%, 5%, 6%, 7% global growth are long gone.”

Dekker says Drewry’s outlook of relatively static container shipping growth extends to 2020.

But he adds that the more immediate horizon for 2017 is somewhat brighter with global growth forecast at around 2.1% and growth on the transpacific trade route of approximately 3.2% in 2016 and the same or slightly less for 2017.

Dekker says 2016, an extremely tumultuous year for container shipping, was notable in a number of ways, including the increase in vessel scrapping aimed at reducing the container shipping sector’s overcapacity.

An estimated 670,000 TEUs of capacity was scrapped during the year.

That, Dekker says, helped bring supply and demand in tune with the overall global level for the “first time in many years.”

Reasons for optimism in the container shipping sector outlined in the webinar include stronger demand, higher fuel prices and what Drewry describes as a “more disciplined commercial approach that carriers are taking.”

But the addition of 82 new and bigger container ships to major container fleets in 2017-18 will largely offset that capacity reduction.

Kaity Arsoniadis-Stein, executive director of the Vancouver International Maritime Centre: “[while] Canada has some of the strongest banks in the world, none of them have international shipping expertise” | SUBMITTED

2017-04-12 10:08 AM

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Global shipping centre ambitions

136m Tonnes of cargo shipped through the Port of Vancouver in 2016, down 1.8% from 2015

21.8m Tonnes of bulk grain shipped through the port in 2016, up 1.3% from 2015 and the third consecutive year of record volumes

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Alphaliner notes in a January 18-24 newsletter that deliveries of new vessels will outpace scrapping by a 2-1 margin in 2017.

The global container shipping data company says that 78% of the 1.69 million TEUs of new capacity will be concentrated in ships of more than 10,000 TEUs. Container carrier shipping lines collectively lost US$1 billion in 2016’s third quarter alone, and Drewry estimates the sector finished the fiscal year with a US$3.5 billion loss.

In its 2016 annual report, Denmark’s Maersk Line, the world’s biggest container shipping company, posted a US$384 million loss compared with a US$1.3 billion profit in 2015. The company blamed poor market conditions that seriously eroded container shipping rates as one of the main reasons for the loss.

Depressed container rates coupled with the 2016 collapse of Hanjin Shipping have also hurt assorted suppliers to the industry, including Seaspan. The world’s largest independent container ship lease company has one of its four main global offices in Vancouver.

Dekker notes that vessels chartered to the now-bankrupt Hanjin were on long-term charter rates of between US$35,000 and US$45,000 per day, “which is fantastic when [Seaspan CEO] Gerry Wang signed those deals, but those ships have been returned and now Seaspan is [looking at] rates of US$8,000 and US$9,000.”

He adds that demand for container ship charters is weak, “and there is a genuine oversupply in most key trades with

plenty of tonnage to charter. … Operators are focusing on deploying their own tonnage and returning unwanted chartered tonnage.”

Drewry has since reported that Seaspan and other ship charter companies have found replacement lessees for 30 of 98 Hanjin ships.

Seaspan also bought four Hanjin ships for an estimated US$20.8 million.

Seaspan’s 2016 financials, released February 28, note that the company absorbed US$19.7 million in expenses from the Hanjin bankruptcy. While Seaspan’s fiscal 2016 revenue rose 7.2% to US$878 million compared with US$819 million in 2015, it reported a US$139 million loss compared with a US$199 million profit in 2015.

Seaspan is not the only shipping industry company facing financial writeoffs in the wake of Hanjin’s collapse.

Alphaliner notes that it has left a lengthy debt trail: Hanjin’s last published financial report (September 30, 2016) lists liabilities of US$6.06 billion against assets of US$3.93 billion.

The rate of recovery for unsecured creditors, Alphaliner says, “is expected to be close to zero,” because most of Hanjin’s unencumbered assets “are being sold at very low prices.”

In another area of global shipping, Teekay reports a net loss of US$123.1 million in 2016 compared with profit of US$82.15 million in 2015.

The marine energy transportation company, which provides ship charters and other services in the global oil and liquefied natural gas sectors, has consolidated assets of approximately US$13 billion.

Teekay’s 2016 revenue, according to its corporate financials, was affected by a number of issues, including lower ship charter rates.

But analysts see sunny breaks on the 2017 horizon. Drewry’s outlook for a somewhat brighter 2017 is shared by the National Retail Federation.

The U.S.-based organization’s latest Global Port Tracker projects a 4.6% increase in imports to U.S. major retail container ports during the year’s first half.

The federation notes that ports covered by the tracker handled 10.2% more cargo in December 2016 compared with the same month in 2015 and 6.6% more in January 2017 than in January 2016.

Maersk Line is also more bullish on the year ahead. Its outlook for 2017, based on a forecast of global container shipping growing between 2% and 4%, is a profit of more than US$1 billion compared with its US$384 million loss in 2016.

Silvester notes that private-sector investment in port infrastructure, like G3 Global Holdings’ new $500 million grain terminal on the port’s north shore and DP World’s planned $350 million expansion of its Centerm container terminal on the south shore of Vancouver’s inner harbour, is creating new capacity in the port.

That shows, he says, “that all those businesses have confidence in the long-term growth potential that we have here, and that is good for Vancouver’s economy.” É

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GETTING THE

GOODS TO MARKET Peter Xotta, the Port of Vancouver’s head of planning and operations, on the future of cargo, shipping and Canada’s trade outlook

PETER XOTTA VICE-PRESIDENT, PLANNING AND OPERATIONS, PORT OF VANCOUVER PATRICK BLENNERHASSETT

P

eter Xotta has a lot on his plate. The Port of Vancouver’s vice-president of planning and operations is in charge of the Vancouver Fraser Port Authority’s long-term planning, operations, security and trade development. Xotta, who came to the Port of Vancouver from the private sector in 1995, spoke with Business in Vancouver about the challenges facing Canada’s largest port.

Q W hat’s the main issue for the Port of Vancou-

ver in the current economic climate of low growth projections?

A The top issue for us is reinforcing the brand that

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Canada has had historically for us. And this is how I kind of boil it down to simple terms: we’ve got a bunch of stuff here that exceeds what we can consume, and if you can buy it from us, we’ll get it to you.

The top issue for us is reinforcing the brand that Canada has had historically for us. And this is how I kind of boil it down to simple terms: we’ve kind of got a bunch of stuff here that exceeds what we can consume, and if you can buy it from us, we’ll get it to you

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GATEWAY 2017 PUBLISHED BY BUSINESS IN VANCOUVER

Getting the goods to market

Peter Xotta, vice-president of planning and operations for the Port of Vancouver, says multiple projects are underway to expand the port’s capacity | PORT OF VANC0UVER

Q What are some of the port’s main infrastructure projects coming down the pipe?

A In December of 2016, a company called G3 announced plans to develop an entirely new [grain] elevator in North Vancouver adjacent to the Neptune Terminals. That facility is reported by G3 to be something in the order of a $700 million investment. So that in itself is the single biggest investment that’s been made in the port in any one project ever.

On the container side of things, what we have unfolding today is about a $300 million investment at the DeltaPort, the Roberts Bank Terminal 2 project [a three-berth container terminal]. The project itself will increase the capacity of that port from 1.8 million TEUs [20-foot equivalent units] to 2.4 million. The project is undergoing a federal environmental assessment by an independent review panel, under the Canadian Environmental Assessment Act. The next project after that, which is currently out in consultation, is the Centerm terminal expansion.

Centerm is the facility closest to Canada Place, and that particular project is about a $350 million expansion.

Q Land is a hot commodity all over Metro Vancouver.

What is the Port of Vancouver doing to ensure it stays

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in the game in terms of acquiring land that will help maintain growth projections?

A There’s no doubt there are challenges with both the supply and the valuation of the land in the Lower Mainland. In the context of ports, land that is industrial either on the water [or] that has good road and rail access will always be a desired acquisition for the port authority.

Increasingly we’re seeing the available parcels being competed for immensely, and so that, I think, is just a reflection of the climate and the current price situation.

Q What are some of the port’s key cargo congestion points? And what is the port doing to address that congestion?

A Our federal transport minister, Marc Garneau, has announced something called Transportation 2030, and part of that plan is just over $10 billion that is available to support enhanced goods movement mobility and trade-enabling infrastructure. So we have been working with a variety of stakeholders including Transport Canada, the provincial Ministry of Transportation, the Greater Vancouver Gateway Council and TransLink to collaborate and identify a series of bottleneck mitigation projects and to begin the process of advocating with the federal government for funding for those projects. É

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