Gateway 2019

2019 | THE B.C. PORT MAGAZINE

GATEWAY GCT’S AMBITIOUS NEW BOX BOSS

WANTED: MORE MARINERS CHINA’S GLOBAL PORT PUSH GREENER GATEWAYS STILL STRUGGLING WITH SMUGGLING

NAVIGATING SUPPLY CHAIN ISSUES: CHALLENGES, OPPORTUNITIES

TRADE

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AIR FREIGHT

ENVIRONMENT

TECHNOLOGY

HUMAN RESOURCES

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CONTENTS

6 PORT DATA 2018

2019 | THE B.C. PORT MAGAZINE

GATEWAY

8 TROUBLING TRADE WINDS 12 AIR-FREIGHT TECH

GCT’S AMBITIOUS NEW BOX BOSS

14 GREENER GATEWAYS 16 BLOCKCHAIN BATTLES 18 STRUGGLING WITH SMUGGLING 21 CARGO THEFT ALERT

8

16

WANTED: MORE MARINERS CHINA’S GLOBAL PORT PUSH GREENER GATEWAYS STILL STRUGGLING WITH SMUGGLING

NAVIGATING SUPPLY CHAIN ISSUES: CHALLENGES, OPPORTUNITIES

24 MARINERS WANTED

TRADE

26 TRUCK STOPS 28 BOXING MATCHES 31 CHINA’S PORT PUSH 33 TERMINAL CAPACITY CRUNCH 34 TOUGH BRIDGE HAND 35 CHANGING LANES 37 REBUILDING SHIPBUILDING

AIR FREIGHT

ENVIRONMENT

TECHNOLOGY

HUMAN RESOURCES

PRESIDENT: Alvin Brouwer EDITOR-IN-CHIEF, BUSINESS IN VANCOUVER; VICE-PRESIDENT, GLACIER MEDIA: Kirk LaPointe EDITOR: Timothy Renshaw DESIGN: Randy Pearsall PRODUCTION: Rob Benac CONTRIBUTORS: Nelson Bennett, Chuck Chiang, Glen Korstrom, Tyler Nyquvest, Tyler Orton, Timothy Renshaw, Albert Van Santvoort, Hayley Woodin PROOFREADER: Meg Yamamoto DIRECTOR, SALES AND MARKETING : Pia Huynh SALES MANAGER: Laura Torrance ADVERTISING SALES: Benita Bajwa, Blair Johnston, Corinne Tkachuk, Chris Wilson ADMINISTRATOR: Katherine Butler RESEARCH: Anna Liczmanska, Carrie Schmidt Gateway 2019 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, biv.com.

Copyright 2019 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.

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Return undeliverable Canadian addresses to Circulation Department: 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6 Email: subscribe@biv.com COVER PHOTO: Doron Grosman, president and CEO, Global Container Terminals Inc. • Chung Chow

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MESSAGE FROM THE EDITOR

FOG BANK LOOMS ON TRADE GATEWAY HORIZONS Analysts contemplating gateway futures will see thick fog on the horizon.

Ports and other key trade gateways, after all, are the doors through which global commerce moves.

T he fog bank on that horizon began building in 2018 when the Donald Trump White House administration ramped up tariff and protectionist rhetoric and followed through with tariff skirmishes on several fronts with major U.S. trading partners, including Canada and China.

In the face of trade war escalation since then, the global economy has stalled and stock markets have gone from bull to bear.

2019’s opening has followed 2018’s close.

We s t C o a s t N o r t h A m e r i c a gateways have counterintuitively benefited in the short term from the Trump trade rhetoric bump as shippers pre-emptively accelerated orders in a rush to avoid the inevitable cost penalties riding on the next wave of tariff increases.

But slowdowns in leading economies have revised growth outlooks down.

For shippers, a host of other factors, including consolidation in the international container carrier fleet, larger ships demanding dockside operational upgrades, shifting manufacturing patterns and regionalization of manufacturing, have eroded bottom-line profit margins and reduced investor appetite for sinking money into needed port

and logistics chain infrastructure improvements.

Thus that fog on the horizon.

Uncertainty is not good for business, but certainty in the need for change is.

Gateway 2019 examines some of the changes in the offing, some of the human resource, technological and environmental challenges ahead for ports and other links in the global transportation logistics chain.

The outlook includes fog, but it also promises opportunity.

The nimble and enlightened will seize the latter.

Timothy Renshaw Editor, Gateway trenshaw@biv.com

Strong and Secure With a history spanning more than 150 years, BLG lawyers have unsurpassed depth of knowledge and experience in maritime law and are committed to delivering insightful, pragmatic legal advice to drive value and advance our clients’ objectives.

Graham Walker | Managing Partner | Vancouver | 604.640.4045 | gwalker@blg.com Dionysios (Dino) Rossi | Partner | Vancouver | 604.640.4110 | drossi@blg.com

blg.com/shipping

Lawyers | Patent & Trademark Agents Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

PORT DATA 2018

VANCOUVER IMPORTS In tonnes

U.S.

SOUTH KOREA

1,517,604

TAIWAN

841,654

MOROCCO

820,206

727,448

JAPAN

THAILAND

356,105

CHILE

329,275

VIETNAM

338,286

HONG KONG

TOGO

MALAYSIA

PHILIPPINES

SINGAPORE

GUATEMALA

1,554,163 CHINA

646,995

8,026,953

155,200

VANCOUVER

149,656

NETHERLANDS

116,326

MEXICO

244,867

69,418

50,537

GERMANY ITALY

U.S.

JAPAN

CHINA

MOROCCO

SOUTH KOREA TAIWAN HONG KONG PHILIPPINES MALAYSIA

INDIA

MEXICO GUATEMALA

THAILAND VIETNAM SINGAPORE INDONESIA

TOGO BRAZIL

AUSTRALIA CHILE

TOP DESTINATIONS FOR EXPORTS TOP FIVE TRADERS

40%

Tonnes

20% 0% -20% -40%

METALLURGICAL COAL IMPORTERS 8,000,000

9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000

7,000,000 6,000,000

Tonnes

60%

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3,000,000

Five-year

Ten-year

China India

15

14

20

20

13

2

Japan South Korea

20

11

20 1

China Taiwan Japan South Korea United States

20

2

4 01

20 20 15 16 20 17

20 0 20 8 0 20 9 10 20 20 11 1 20 2 13

1,000,000

ite Ch d i So St na ut at h es Ko r Ta ea iw a Ja n pa M n ex Th ico ai la nd

One-year

5,000,000 4,000,000

2,000,000

-60%

Un

Percentage change in exports

LARGEST IMPORTERS

Taiwan

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VANCOUVER EXPORTS In tonnes

JAPAN

14,883,491

BRAZIL

1,780,482 PHILIPPINES

401,974

TAIWAN

3,246,401

CHINA

25,073,385

HONG KONG

206,641

INDONESIA

2,776,950

GERMANY

32,460

INDIA

6,343,650

AUSTRALIA

31,306 2,050,243 24,677

SOUTH KOREA

12,939,891

VIETNAM

U.S.

NETHERLANDS

ITALY

4,458,989

CHILE

16,570

1,847,381

THROUGH THE PORT OF VANCOUVER THERMAL COAL IMPORTERS

WOOD PULP IMPORTERS

LUMBER IMPORTERS 3,000,000

6,000,000

2,500,000

2,500,000

5,000,000

2,000,000 1,000,000

2,000,000

4,000,000 3,000,000 2,000,000

Tonnes

3,000,000

Tonnes

500,000

1,000,000

South Korea Japan

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Hong Kong

China Japan

South Korea

China Japan

Taiwan Philippines

16 20 17

15

20

14

20

20

16 20 17

15

20

14

20 Indonesia Thailand

20

20 11 20 12 20 13

16 20 17

15

20

20

13 20 13

20

2

14 20 Taiwan Chile

11 20 12 20 13

500,000

1,000,000

20 1

1,500,000

20

Tonnes

7,000,000

South Korea

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

TROUBLING

TRADE WINDS Uncertainty over continued growth in containerized cargo volumes rising with tariff rhetoric

TIMOTHY RENSHAW

THE KEY QUESTION NOW IS HOW LONG AND HOW DEEP THAT SLOWING [IN CONTAINER CARGO GROWTH] WILL BE j Neil Davidson Senior analyst, ports and terminals practice, Drewry

T

ranspacific shipping forecast 2019: volatile Sino-American trade winds forming dark clouds on the horizon. Other complicating factors for global container carriers include the Brexit effect, overcapacity, depressed freight rates, economic slowdowns, technological disruptions and multibillion-dollar spikes in operating costs from an International Maritime Organization mandate that carriers reduce their sulphur dioxide emissions.

The shipping business weather report rolling into 2019 therefore is not great for container carriers servicing the transpacific and other major trade routes.

The overall seaborne trade forecast, however, is brighter. But it depends in large part on the status of the trade and tariff war between the United States and China.

The United Nations Conference on Trade and Development notes in its 2018 report that global seaborne trade is doing relatively well. It expanded by 4% in 2017 to reach 10.7 billion tonnes and is expected to increase by the same percentage in 2018.

Major container shipping companies are hoping that outlook is more than misplaced optimism.

In its nine-month 2018 financial report, Hapag-Lloyd cites IHS Global Insight projections of global container

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shipments increasing 4.9% to approximately 153 million 20-foot-equivalent units (TEUs) in 2019 in the wake of a 4% increase in 2018.

But Germany’s largest container shipping company also notes that the International Monetary Fund lowered its global economic growth forecast by 0.2 percentage points since its April forecast to 3.7% for 2018 and 2019.

The downgrade is based in part on increased risk of a global economic slowdown.

And any slowdown would have significant consequences for international trade and the companies that service it.

As Hapag-Lloyd financials notes, “The existing global macroeconomic uncertainties and ongoing stiff competition could have a significant negative impact on the development of transport volumes and freight rates.…

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Significant risks for the Group’s revenue and earnings development include a further sharp slowdown in global economic and trade volume growth.”

Maersk, the world’s largest containerized cargo shipping company, notes in its 2018 annual report that its guidance for 2019 is “subject to considerable uncertainties due to the current risk of further restrictions on global trade and other factors impacting container freight rates, bunker prices and foreign rate of exchange.”

It adds that the growth outlook for global container trade is projected to deteriorate to between 1% and 3% in 2019.

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B.C.’s ports have thus far been spared any major collateral damage from the China-U.S. trade and tariff war.

Vancouver recently graduated into the list of the world’s top 50 container ports as compiled by the U.S.based Journal of Commerce. Its 10.9% increase to 3.25 million TEUs handled in 2017 ranked it No. 47. Mid-year 2018 cargo numbers showed container cargo up 5% to a record 1.64 million TEUs through the Port of Vancouver and up 16% through the Port of Prince Rupert to 591,335 TEUs compared with 2017’s first six months. Vancouver’s total for 2018 was 3.4 million TEUs. In December, DP World’s Fairview container terminal celebrated a historic milestone. For the first time in a

Shipping containers stacked in yards along Metro Vancouver’s South Fraser Perimeter Road • ROB KRUYT

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10 | GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

TROUBLING TRADE WINDS

A container ship loading at GCT Deltaport. Last year’s rail densification project increased Deltaport’s capacity 33% and its ability to move railcar boxes by 50% • ROB KRUYT

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calendar year, the Port of Prince Rupert facility handled one million containers. When it opened in 2008, Fairview moved only 182,523 TEUs. The Vancouver Fraser Port Authority is banking on B.C. ports maintaining their recent tally of robust container volume increases.

Its case for investing between $2 billion and $3 billion in the Terminal 2 container terminal project at Roberts Bank includes projected increases of between 2.1% and 3.7% in annual containerized cargo volumes between 2017 and 2040.

The low-end forecast would have 6.7 million TEUs handled annually by B.C. ports; the high end would raise that total to 9.7 million.

But uncertainty continues to cloud trade forecasts, especially for 2019.

U.K.-based shipping consultancy Drewry notes in a late-2018 container shipping outlook that the volatility of tariff standoffs and trade war rhetoric between the United States and China, coupled with uncertainty over Brexit, makes it extremely difficult to provide any accurate projections about trade growth on major shipping routes.

Neil Davidson, senior analyst in Drewry’s ports and terminals practice, notes that without the ongoing China-U.S. tariff war and the Brexit battle, annual container trade would likely be growing at 3.5% over the next five years; however, the worst-case scenario from those uncertainties could cut that figure to 1.5% annually. “This, though, has required some bold assumptions,�

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Davidson says, “in particular that one-third of ChinaU.S. trade will continue to flow, one-third will switch from China to alternative sources such as Southeast Asia and one-third will no longer move by sea, but instead be from Mexico and Canada or produced domestically in the U.S.” The company’s container ports briefing in midDecember notes that average growth rates of cargo handled by global container ports have been slowing since they peaked in 2018’s first quarter.

“The key question now,” says Davidson, “is how long and how deep that slowing will be.”

He notes that the China-U.S. trade war increased the flow of containers to North American ports in 2018’s third quarter “as shippers seek to build up import stocks in the U.S. before the tariffs really bite hard.”

But trade uncertainty caused by the dispute has eroded valuations of major port companies.

Davidson says most of their share prices fell by double digits during 2018’s third quarter as “the performance within our coverage universe suffered one of its worst periods.”

Oxford Economics is more optimistic about 2019.

Its December research briefing notes that while capacity pressures and underlying inflation “have created an air of gloom around economic and financial prospects for 2019 … we think that global growth is likely to nudge up after the recent soft patch.” É

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Containers on railcars at the causeway leading to GCT Deltaport at Roberts Bank in Delta. Global Container Terminals completed its $300 million rail densification project at the terminal last year • ROB KRUYT

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

AIR-FREIGHT

TECH FIGHT

Volumes set to rise but margins likely to be squeezed

GLEN KORSTROM

F

reight forwarders stand to benefit from rising global volumes of air freight, but they also face challenges from heightened competition among players in the supply chain. A 2018 report by McKinsey & Co. suggests that the volume of air freight will continue to increase, by an average of about 3% per year until at least 2025 and most likely until 2030.

The problem for those who move cargo by air is that ocean-freighter operators will pressure prices for air freight by about 3% per year because the ships will be bigger and more efficient, the report predicts. So while there may be more air-freight business, companies operating in the sector may have to charge less for it.

One solution, according to McKinsey & Co., is for airfreight forwarders to invest in enhanced data analytics and automation to provide added value. B.C. companies are taking that advice to heart.

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Richmond-based Flying Fresh Air Freight, for example, has recently made multiple six-figure investments to become more efficient and to add value for customers, says Robert Parker, the company’s vice-president of sales, marketing and strategic planning.

The biggest new investment was to pay WiseTech Global more than $100,000 in early November for use of its cloud-based CargoWise One technology.

That technology converts emails into price quotes, then into bookings, jobs and end invoices. The process

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saves time and allows Flying Fresh to then reinvest that time into business development or other aspects of the business.

“CargoWise One saves us a lot of infrastructure costs,” Parker says. “Instead of spending millions of dollars, we can operate for less than $250,000. It gives us the capability to run everything for our clients – from our billings to bookings to transport.”

He says Flying Fresh is creating portals for its clients and that one day the company will be able to use blockchain technology, which is an end-to-end system that tracks signatures and accountability in every step of complex transactions.

Flying Fresh customers could also soon be able to track their orders online.

The company, which Parker says is the largest airfreight forwarder in Canada, had previously made another six-figure investment late in 2017, when it bought what he describes as a “really, really, really big” X-ray machine for its facility at Vancouver International Airport.

Much like the X-ray machines that Canadian Air Transport Security Authority employees use to screen airline passengers’ bags, the ones at Flying Fresh have rollers. Instead of those rollers carrying light plastic baskets for wallets, keys or carry-on bags, however, the ones at Flying Fresh carry pallets of products – about 90% of which tend to be perishable items such as seafood or fruit.

Because speed is of the essence when handling such supplies, the machines are important in that they allow the company to process cargo without sending it to a third party, Parker says.

Use of such machines, by certified technicians, is required by Transport Canada for cargo destined to be carried on an airplane that has at least one passenger.

Parker says some of Flying Fresh’s 88 Canadian employees are Transport Canada-certified to operate the machine.

He expects that Flying Fresh will continue to invest in technology and that the next step will likely be to get some scanners for bar codes that are affixed to product shipments.

Until late 2018, the company’s employees were largely using the time-consuming method of paper and pen.

A load of fresh farmed salmon, for example, could be destined for nine different consignees in nine different parts of the world, Parker says. “It can take a lot of time to process the receiving of those shipments and labelling them with colour-coded labels, depending on the final destination.”

Other freight forwarders are also investing in technology to get a leg up on competition.

Langley-based Vital Logistics, for example, has four programmers on staff to create proprietary software.

Some of the work that its software engineers produce is plug-ins to popular customer relations management software made by Salesforce.com.

“Our system, on a daily basis, will give you updates and proactive email notifications that are auto-generated,” says owner and Business in Vancouver Forty under 40 winner Matthew Gruben.

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Gruben says the system is similar to the one used when someone buys a pair of socks on Amazon, or a meal from a meal-delivery service.

“They send you a message to tell you that your order has been placed, that your order has been picked, your order has been shipped and that your order is about to arrive.”

While Vital Logistics does not yet have a GPS system with mapping, like some meal-delivery services have, Gruben is unsure that his clients want to pay the extra cost such a system would entail.

Some customers place GPS tracking devices in the shipments as well as temperature reading devices, he says. The problem is the expense of adding those items to every shipment, he adds.

“I don’t particularly think customers need to be tracking the order on every street on the way from China to their door in Toronto. But that might become standard at one point.”

Until that service becomes a standard feature, he plans to compete using the ageless strategies of leveraging relationships and accurately assessing how much space he will need on airplanes.

Much of the trick to turning a profit in the air-freight logistics sector comes down to buying guaranteed allotments for cargo from airlines, he explains.

If all the cargo space on the plane is full, customers needing space then have to deal with logistics companies that have acquired guaranteed space.

“Sometimes it comes down to who’s got the space, who’s got the relationship,” he says. É

Flying Fresh Air Freight has recently made multiple technology investments that were each more than $100,000, according to its vice-president of sales, marketing and strategic planning, Robert Parker • ROB KRUYT

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

GREENER GATEWAYS The Port of Vancouver is sharing with and learning from other major global gateways that have ambitions of running greener marine industry operations

HAYLEY WOODIN

The Port of Vancouver notes that, in 2009, the Canada Place cruise ship terminal became the first in Canada and third in the world to offer shore power for cruise ships. Since then, it estimates that the port’s cruise ship terminal shore power installations have eliminated 20,757 tonnes of greenhouse gases • EB ADVENTURE PHOTOGRAPHY/ SHUTTERSTOCK

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T

hrough initiatives such as Port 2050 and globally recognized environmental programs, the Port of Vancouver has its sights set on becoming the world’s most sustainable port. “Among ports, we had a very early start in terms of environmental initiatives,” says Duncan Wilson, vice-president of corporate social responsibility at the Vancouver Fraser Port Authority.

In the 1980s, for example, Wilson says the port was the first in Canada to require mid-ocean water balance exchange, which today is a national standard.

But sustainability is to a large extent a moving target: climates are changing, standards improving and environmental bars being raised around the world. Canada’s

largest gateway doesn’t operate in isolation.

“In a global context, we are a small player,” says Wilson.

“When we’re trying to advance things under the environmental sustainability pillar, we can move further, faster if we’re working with other ports.”

Last year, the port authority signed on to the World Ports

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Climate Action Program along with six other authorities in Antwerp, Barcelona, Hamburg, Los Angeles, Long Beach and Rotterdam. The program recognizes the role ports and maritime transport play in producing global emissions, and the role they ought to play in reducing them.

The program will prioritize five areas: supply chain efficiency through the use of digital tools, policy approaches to reducing emissions, developing in-port renewable power solutions, developing commercially viable and sustainable low-carbon fuels for ships, and fully decarbonizing cargo handling facilities.

“It’s an opportunity for us to leverage the experience of others in these areas,” says Wilson.

T he in itiative is just one of ma ny port-related multi-stakeholder groups focused on environmental and sustainability goals.

The Port of Vancouver is part of the Northwest Ports Clean Air Strategy along with counterparts in Seattle and Tacoma. Vancouver also leads an international project team trying to bring a patchwork of environmental incentive programs under one roof. When it’s operational, it will function like an Expedia.ca for shipping lines booking ports of call.

“Lots and lots of ports around the world have these incentive programs,” explains Christine Rigby, an air emissions environmental specialist with the Vancouver Fraser Port Authority and the port’s point person for the International Collaboration on Vessel Emission Reduction.

“But the questions always come up: how can we make these programs and these opportunities, this infrastructure, be used more effectively to reduce emissions and other impacts?”

The project – which includes the ports of Los Angeles and Long Beach, Transport Canada, the Environmental Protection Agency, the China Waterborne Transport Research Institute and others – ultimately hopes to attract cleaner vessels to participating ports that offer emissions-reducing programs such as shore power.

“Instead of thinking of our own program as its own system, I started to try and think about it as one part of a larger system,” says Rigby. “Instead of looking at it on a one-port, one-call basis, it’s on a route basis.”

Twenty-one hundred kilometres south, the Port of Los Angeles is setting “really aggressive goals” for some

of its operations. The port expects its cargo handling equipment and its drayage fleet to be emissions-free by 2030 and 2035, respectively.

This is no small endeavour: the Port of Los Angeles is North America’s largest container port. Between Los Angeles and Long Beach, 17 million 20-foot-equivalent units of cargo come in and out annually, making the ports – which are less than seven kilometres apart – among the top 10 containerized cargo handling ports in the world.

Some 17,000 trucks service the ports’ terminals.

“We realize, in our view, that maybe the biggest, most important environmental crisis facing the world today is climate change,” says Christopher Cannon, the Port of Los Angeles’ director of environmental management.

The technology is nascent, he says, but the port wants its diesel fleet to move over to battery, fuel cell or other zero-emission technology.

“If equipment can handle the duty cycle here, it can handle the duty cycle anywhere,” says Cannon. “[We] want to be kind of a test bed for all this type of technology.”

The port is also home to AltaSea: a 35-acre research campus that aims to function like a Silicon Valley for marine innovation, bringing together partners in science, education and business to develop solutions to environmental challenges.

It goes beyond the scope of what one might expect from a port. As does the Port of Vancouver’s award-winning Enhancing Cetacean Habitat and Observation (ECHO) program, says Wilson, which brings together industry and scientists to better understand the impact of shipping activities on whales along B.C.’s southern coast.

Among its achievements is a vessel slowdown participation rate that regularly reaches 90%, a result Wilson says is “fantastic.”

On its path to become the most sustainable port, Vancouver is also looking at and tracking requirements for cleaner trucks, Envision as well as Leadership in Energy and Environmental Design (LEED) building standards, and shore power capability – which is now available for container vessels in two of three terminals.

Greenhouse gas emissions remain a top priority. Wilson says the port has successfully decoupled air emissions from port growth, except when it comes to greenhouse gases. It’s a priority of ports the world over.

“From a n a i r poi nt of v iew, that’s the biggest challenge.” É

WE REALIZE, IN OUR VIEW, THAT MAYBE THE BIGGEST, MOST IMPORTANT ENVIRONMENTAL CRISIS FACING THE WORLD TODAY IS CLIMATE CHANGE j Christopher Cannon Director of environmental management, Port of Los Angeles

Smarter Trade. Better Lives.

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Vancouver

Nanaimo

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@DPWorldCanada

2019-04-03 7:44 AM

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

BLOCKCHAIN

BATTLES

Maersk, IBM and a new consortium of carriers and terminal operators vying to become dominant provider of blockchain services for shipping industry TYLER ORTON

W

hen the automobile industry launched at the beginning of the last century, there were hundreds of automakers trying to carve out their niche in the market. “Now we’re down to a few,” says Scott Collinson. And blockchain service providers targeting the global shipping industry find themselves in the same position as the auto sector 100 years ago, according to PwC Canada’s national transportation and logistics leader.

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“The problem now becomes standardization,” says Collinson.

While some may blanch at the technology’s association with volatile cryptocurrencies, blockchain itself is considered sound.

The technology acts as an expanding list of records – or blocks – that are linked through cryptography, essentially serving as a secure electronic ledger that cannot be manipulated by a third party.

Applied to the container shipping industry, blockchain technology could eliminate millions of pages of paper documents, track containers more efficiently and reduce related costs.

Blockchain in Logistics, a 2018 report from the research arm of global logistics company DHL, estimates the technology could result in “billions of dollars in savings” by reducing delays and fraud through more efficient tracking of tens of millions of shipping containers annually.

In early 2018 IBM Corp. and shipping giant A.P. Moller– Maersk Group (Maersk) unveiled their TradeLens joint venture, which uses blockchain technology to push for more efficient information sharing among industry players.

By August the joint venture’s early-adopter program had attracted 94 organizations including ports, terminal operators and carriers.

And in Canada, the Port of Montreal and the Canada Border Services Agency (CBSA) had joined by the fall.

“Other carriers, they’re reluctant to come on board because they’re worried about trust and proprietary information,” Collinson says.

Last summer Maersk and IBM moved away from describing TradeLens as a joint venture and announced they’d deliver TradeLens through an extension of their pre-existing collaboration agreement.

“Competitors [perceiving] that a system was built by the biggest shipping company [Maersk] … will give Maersk a competitive advantage,” says Glenn Gow, who oversees all blockchain investment opportunities at Silicon Valley technology venture capital firm Clear Ventures.

“Whether or not this is true, the fact that the next three to four largest shipping companies didn’t participate in the build-out of the system means they’re going to do what they can to kill it.”

Maersk did not respond to an interview request from Gateway.

Locally, TradeLens does not appear to be gaining traction.

The Vancouver Fraser Port Authority is launching

what it calls a “test project” in partnership with the CBSA that will use blockchain technology to share data securely and help improve efficiency when moving containers flagged for inspection.

The test project launches in early 2019 at the Tsawwassen Container Examination Facility in Delta, B.C. Robert Coard, PwC Canada’s western technology and consumer markets leader, says that beyond the privacy concerns, many companies are reluctant to start using a specific blockchain tool before a dominant provider emerges.

“Early stages of the technology has really caused them to say, ‘We’re not sure yet,’” he says. “And so [companies are] kind of sitting on the sidelines saying, ‘OK, let’s see what comes.’”

Companies could find themselves making the same mistake as 1980s consumers who invested heavily in Betamax-format video libraries just as VHS was making its ascent.

Meanwhile, Collinson says, a new consortium of nine carriers and terminal operators could persuade more organizations to push forward with a global standard for blockchain within the shipping industry.

The Global Shipping Business Network, which was unveiled in November at the China International Import Expo in Shanghai, is developing a blockchain-enabled platform to track goods digitally.

“That might provide a bit more of an arm’s-length trust factor that allows others to maybe buy into that,” Collinson says.

“The value proposition is there. It’s just to what degree can the industry parties agree on standards that make multiple solutions interoperable?”

But the question about interoperability might be further complicated by differences in the way companies interpret blockchain, according to a 2017 research paper from Copenhagen Business School.

“Our findings suggest that the conceptual understanding of blockchain is low and there is no single agreed upon definition,” write report authors Riccardo Di Gregorio and Stian Skjærset Nustad. “Instead, various organizations have their own understanding of what blockchain is, leading them to develop their own blockchain solution.”

The authors add that this lack of uniformity results in even more non-interoperable systems and contributes to the creation of more data silos.

“This industry is obviously very fragmented still,” Collinson says. “It’s largely dominated by manual, paperbased and disparate processes. And so it is ripe for this standardization … that blockchain could provide.” É

EARLY STAGES OF THE TECHNOLOGY HAS REALLY CAUSED THEM TO SAY, “WE’RE NOT SURE YET,” AND SO [COMPANIES ARE] KIND OF SITTING ON THE SIDELINES SAYING, “OK, LET’S SEE WHAT COMES” j Robert Coard PwC Canada

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

STRUGGLING WITH

SMUGGLING More container traffic through West Coast ports means more opportunities for smugglers

TIMOTHY RENSHAW

C

ontainerized cargo shipped through B.C.’s ports continues to increase. That’s good for the economy; it’s also good for smugglers. In Vancouver, now the world’s 47th-largest container shipping port, the exportation of stolen goods and the importation of illicit drugs and other contraband continue to be a major challenge for port operations and enforcement.

The complexity of the challenge is increasing because opportunities to move stolen goods through major trade hubs like the Port of Vancouver multiply with the number of shipping containers they handle, and the rise in transpacific trade points to a continued expansion in container movement via B.C.’s West Coast.

Smuggling through Canadian ports is not new.

A January 2011 Public Safety Canada report prepared

by Presidia Security Consulting concludes that Canada’s three largest ports – Vancouver, Montreal and Halifax

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– are the most vulnerable to inbound and outbound smuggling.

The report cites container traffic volume as a key reason for the three ports’ appeal to smugglers. Another factor in their value as smuggling conduits, according to the report: “sophisticated criminal groups have become well entrenched in the host cities (in the cases of Montreal and Vancouver) and made the ports essential to their smuggling operations.”

Government and law enforcement officials have

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Canada Border Services Agency’s new marine container examination facility during construction.

It’s located in the Deltaport development adjacent to the Port of Vancouver’s GCT Deltaport container terminal at Roberts Bank • ROB KRUYT

provided little evidence to suggest that much has changed in the eight years since the report was released.

However, a new Canada Border Services Agency (CBSA) marine container examination facility has been built on Tsawwassen First Nation land adjacent to the Port of Vancouver’s GCT Deltaport container terminal at Roberts Bank to improve container inspection efficiency on the West Coast.

It could also increase the odds of intercepting stolen cargo and uncovering smuggling operations.

The facility joins two similar centres on the coast, one in Prince Rupert and the other in Burnaby. It will eventually displace the latter.

Delays in CBSA inspections of cargo containers moving through Canadian ports, especially in Vancouver, spurred complaints from the Canadian International Freight Forwarders Association and other shippers in 2017 about higher costs and stalled goods shipments (“Shippers Irked over Canada Border Services Agency Container Inspection Delays,” Business in Vancouver issue 1448; August 1-7, 2017).

Those concerns included inspection holdups of up to four weeks in the Port of Vancouver compared with three to five days in the Port of Montreal.

The Delta container examination facility has 15 shipping container examination bays. But considering that the Port of Vancouver alone handled approximately 3.4 million containers in 2018 and that the trend in container cargo fleets is for larger ships carrying more containers that need to be unloaded faster, it would be an understatement to say that the new examination centre will have its hands full.

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And while the CBSA maintains that it “risk assessed” 1,177,007 marine containers coming into B.C. during 2016-17, it declined to provide a number for how many outgoing containers leaving the province’s ports were risk assessed, let alone opened and examined during that time.

The CBSA declined Business in Vancouver’s request for an interview. But in an emailed response, Joseph Chayeski, the CBSA’s director of the Pacific region’s Metro Vancouver district, states that the organization conducts “random and risk-based examinations on exports.” His email maintains that disclosing the number of export containers searched could “compromise our investigative techniques.”

The Presidia report estimates that the CBSA’s resource limitations mean that only between 1% and 7% of all shipping containers are ever inspected.

So while it notes that the proportion of high-risk containers inspected is much higher, the report adds “it is widely acknowledged that only a small fraction of drugs and other contraband hidden in containers are discovered at marine ports in Canada due to CBSA interdiction efforts.”

A 2015 federal auditor general’s report agrees.

Controlling Exports at the Border concludes that the CBSA “did not fully have the necessary authorities, information, practices and controls to implement its enforcement priorities and prevent the export of goods that contravene Canada’s export laws.”

The auditor general’s report finds that the CBSA prevented the illegal export of about 700 stolen cars between April 2013 and December 2014.

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

STRUGGLING WITH SMUGGLING

CRUNCHING CONTAINER INSPECTION NUMBERS 3.4 MILLION 1% TO 7% 1.2 MILLION UNKNOWN

Number of 20-foot-equivalent shipping containers handled by the Port of Vancouver in 2018 Estimated percentage of total shipping containers inspected in Canada Number of marine containers coming into B.C. risk assessed during 2016-17 Number of marine containers leaving the province inspected or risk assessed during 2016-17

But it notes that the agency failed to examine around 20% of the “high-risk shipments that had been identified by its centralized targeting units.”

The report also finds that “the number of export shipments that the CBSA placed on hold or detained was very small compared with total exports.”

Shipping containers continue to be the main conduit to international markets for cars stolen in Canada.

According to Insurance Bureau of Canada (IBC) data, the number of cars stolen in Alberta jumped 100% between 2012 and 2016 to around 28,000. Of that number roughly 15% falls within the stolen unrecovered vehicles (SURVs) category.

According to Insurance Corp. of British Columbia data, the number of vehicles reported stolen in B.C. rose to 11,600 in 2017 from 7,000 in 2012, a 65.7% increase.

Organized crime is behind most SURVs. The stolen vehicles are dismantled and resold as parts, retooled and outfitted with new 17-digit vehicle identification numbers (VINs) and resold, or shipped out of the country in cargo containers packed in with mattresses, boxes of disposable diapers or other products to conceal their real contents.

It is a lucrative business.

In an interview with Business in Vancouver prior to his departure from IBC as its national director of the Investigative Services Division (ISD), Dan Service estimated that a stolen vehicle that has been outfitted with a replacement VIN could net thieves between $50,000 and $75,000.

A May 2011 study commissioned by the Canadian Trucking Alliance pegs cargo crime’s annual cost at $5 billion. It also links cargo theft to organized crime, which it says uses the proceeds to fund activities such as gun and drug smuggling.

Car theft is also expensive for insurers.

Service estimates that Alberta’s SURV count in 2016 was just over 3,600. With the average insurance payout for each vehicle at around $20,000, that totals just over $70 million. B.C.’s number of SURVs, he says, has increased from around 1,300 in 2012 to 1,900 in 2016.

Applying the same formula to B.C.’s 2016 SURV count adds up to about $38 million annually in insurance payouts.

IBC estimates that ISD, working with local police forces

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and the CBSA, helped the insurance industry recover $28 million worth of stolen automobiles in 2016. That was up 17% from the $23.6 million recovered in 2015.

According to Steve Kee, IBC’s director of media and digital communications, IBC and ISD recovered approximately $24.6 million worth of stolen vehicles in 2017. Of that total, $12.4 million worth was intercepted at Canadian ports – $2.7 million worth in Halifax and $9.7 million worth in Montreal, but none in Vancouver, where there is no ISD ports program.

Kee says efforts are continuing to establish the ISD program in Vancouver.

Other vehicles and machinery recovered through IBC’s national cargo theft program in 2017 included trucks ($40.3 million), trailers ($11.9 million) and heavy equipment ($3.7 million).

While Chayeski’s email states that his department has been working with IBC and local police since 2014 to intercept stolen vehicles being smuggled out of the country, the CBSA provided no estimate of the value of stolen goods seized at the Port of Vancouver.

It states only that “all seizures are significant for the CBSA, regardless of quantity seized. The CBSA does not publicly assign a monetary value to seizures due to the variables that impact the associated value, including where a good may be sold/purchased.”

Transport Canada spokeswoman Annie Joannette notes in an emailed statement that the review of Canada’s port authorities launched in March 2018 by Minister of Transport Marc Garneau is aimed at improving the federal government’s response to a wide range of threats facing the country’s ports. They include “inbound and outbound smuggling, organized crime, unlawful interference, terrorist and extremist attacks and cyberattacks.”

She says Transport Canada is therefore “keen to hear from stakeholders, communities and the public about safety and security challenges faced at ports.”

Findings from the port authorities review are expected in 2019.

Neither Public Safety Canada nor the RCMP provided information on what progress, if any, is being made in Canada’s fight against smuggling.

However, Public Safety Canada spokesman JeanPhilippe Levert notes that Bill C-21, which targets the unlawful export of stolen property, illegal drugs and other dangerous goods, is now at third reading in the House of Commons. The bill would make it an offence under the Customs Act to smuggle goods out of Canada; the current act prohibits only the smuggling of goods into Canada.

The bill was drafted in response to the 2015 auditor general’s report.

The RCMP declined to comment on whether smuggling through Canadian maritime ports has increased or decreased since the release of the 2011 Presidia report or whether organized crime’s involvement in it has increased or decreased. However, Tania Vaughan, a staff sergeant with the RCMP’s national communication services, notes in an email that it remains a priority for the national police force. É With files from Hayley Woodin

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CARGO

THEFT ALERT

Reports raise red flags over multibillion-dollar container goods hijacking threats

TIMOTHY RENSHAW

T

here’s an enterprising group in Canada other than retailers that annually mark their business calendars with holly and other Christmas cheer in anticipation of bottom-line bounty: the fraternity of cargo thieves and smugglers. And, as it does during any holiday, long weekend or other celebratory time of the year when social distractions abound, that fraternity is looking to cash in big time.

Reports released in late 2018 from major North American insurance companies and supply chain management auditors have underscored the need for better security and awareness all along goods movement networks, especially when it comes to the transportation of containerized cargo via trucks.

Canadian Cargo Theft Trends: What’s New, What’s Now, and What’s on the Horizon notes, for example, that annual cargo theft in Canada now runs into multibillion-dollar losses. That theft, it notes, is often linked to money laundering, terrorist funding and the drug trade.

The shipping sector’s incoming digital disruption revolution is but one factor opening new doors for organized criminal gangs and black marketeers whose logistics chains in some cases rival those of legitimate shippers.

The Northbridge Insurance report notes that much of Canada’s containerized cargo theft is concentrated

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around major trucking hubs in Eastern Canada such as Brampton, Mississauga and Toronto. But while meat is atop the menu of choice for cargo hijackers in the East, a growing percentage of thefts targeting lumber and heavy equipment are now occurring in B.C. and the rest of Western Canada.

The value of B.C. lumber is rising following the province’s record wildfire season and the shrinking basket of wood fibre left in B.C. in the wake of the pine beetle infestation.

One estimate pegs the annual cost of cargo stolen from containers in Canada at $5 billion, but reliable numbers for that cost remain hard to come by.

The good news, according to the Northbridge report, is that more cargo thefts are being reported to the voluntary reporting system launched in 2014 by the Insurance Bureau of Canada (IBC) and the Canadian Trucking Alliance.

IT’S A LOW-MARGIN [THING TO STEAL], BUT IF I HAVE THE DISTRIBUTION SETUP ... I CAN SELL [LAUNDRY DETERGENT] ANYWHERE.…

SO EASILY SOLD, EASILY MOVED, EASILY BLENDING IN [WITH] ALL THE OTHER PRODUCTS THAT ARE BEING SOLD ON STORE SHELVES j Garry Robertson Manager, special investigations unit, Northbridge Insurance

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

CARGO THEFT ALERT

ELECTRONICS AND OTHER PRODUCTS THAT MIGHT HAVE SEXIER ALLURE IN THE MARKETPLACE ALSO COME WITH SERIAL NUMBERS AND OTHER TRACEABLE AND IDENTIFIABLE COMPLICATIONS FOR THIEVES ALL ALONG THE SUPPLY CHAIN

ROB KRUYT

In Western Canada, that’s helping put numbers to the severity of container cargo theft that previously have been unavailable.

Garry Robertson, manager of Northbridge’s special investigations unit, says that creating a common database of property stolen is a critical component in helping solve the cargo theft puzzle. It’s also fundamental to establishing the scope of the cargo theft problem and applying a dollar value to it.

Robertson helped set up the cargo theft reporting system during his 16-year stint as IBC’s national director of investigations. In its first year, Robertson says, it received about 600 reports. Well over 2,000 were filed in 2018.

The Northbridge report notes that mixed-load cargo is a favourite target of thieves because it can be broken down, separated and sold quickly.

Also atop priority lists for Canadian cargo thieves: metals and food products, especially meat.

Their preferences are consistent with those of other thieves in North America.

According to a global cargo theft report compiled by BSI Supply Chain Services and Solutions and the TT Club, the products of choice for thieves in North America in the first half of 2018 were food and beverage shipments. Consumer products, electronics and construction

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materials were also high on their lists.

The report estimates that the median value of cargo theft in North America is US$56,666, compared with US$77,940 in South America and US$14,582 in Asia.

BSI is a global supplier of supply chain intelligence and risk management services; the TT Club provides insurance and other risk management services to the international transportation industry.

The allure of a low-margin product like laundry detergent for the organized criminal gangs behind the majority of container thefts is simple, says Robertson.

“It’s easily sold, and everyone needs it.… It’s a low-margin [thing to steal], but if I have the distribution setup ... I can sell [laundry detergent] anywhere.…

So easily sold, easily moved, easily blending in [with] all the other products that are being sold on store shelves.”

It’s also difficult to track once it has been stolen.

Electronics and other products that might have sexier allure in the marketplace also come with serial numbers and other traceable and identifiable complications for thieves all along the supply chain.

But, says Robertson, “how are you going to identify a load of laundry detergent?”

Knowing what’s inside a specific container is critical for organized criminal groups. It also requires detailed inside information.

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Consider, for example, that the Port of Vancouver handled 3.25 million 20-foot-equivalent units of containerized cargo in 2017.

That is a lot of containers stuffed with a wide array of goods coming from and going to extremely diverse marketplaces.

So how do criminal gangs know which trailers to target when?

“It’s like anything,” Robertson says. “This has become such a lucrative job for them that they really do have sources on the inside in many cases.”

Digitization of supply chain information and the addition of artificial intelligence to the shipping sector in the form of radio-frequency identification sensors and electronic logging devices promise to remove much of the guesswork out of where a container is at any given time during its journey. But until the human factor is removed from vulnerable links in the supply chain, that technology leaves shipping databases vulnerable to hackers.

Robertson also points out that GPS and other technology is not much good when it’s not being monitored, especially over long weekends or during other breaks when a cargo container truck might be parked for several days in an unsecure lot.

But Robertson adds that another weak link in the shipping chain “is just talking – drivers stopping at truck stops and talking along the way.”

“It doesn’t take long before I can find out what you are hauling and where you are going and where you are stopping,” he says.

For that and other reasons, Robertson says, containerized cargo is most vulnerable to theft when it’s in transit on a transport truck.

The Northbridge report recommends a number of security precautions trucking companies and shippers need to institute to reduce cargo theft. They range from increasing trailer yard security and installing closed-circuit television cameras to improving background checks for employees and setting up better online password procedures.

Robertson says it’s hard to know whether containerized cargo theft in Canada is increasing or decreasing because the dollar value of cargo theft is largely unknown. It’s expected that the IBC reporting system will provide some base totals when it reaches its five-year anniversary in March 2019.

In the meantime, Robertson says, it’s critical for truck drivers and other shipping industry personnel to report thefts, suspected thefts or other suspicious activities to police and the IBC. “As much as they know about what is moving, they also hear about what has been stolen, and having been in this industry for that length of time I can tell you that is where a lot of this information should be coming from.” É

Garry Robertson, manager of Northbridge Insurance’s special investigations unit, says identifying the scope of cargo theft is a crucial step in the fight against the problem • SUBMITTED

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2019-04-02 1:51 PM

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

MARINERS

WANTED High-paying jobs available, but marine industry in Canada is facing a serious labour shortage

NELSON BENNETT

A

looming skilled labour shortage is something that gets a lot of discussion in B.C. business circles. But one area of the economy where that shortage appears to have already become chronic, without garnering a lot of attention, is Canada’s marine industry.

The Seafarers’ Training Institute (BCIT Marine Campus) on the North Vancouver waterfront • CHUNG CHOW

The industry is facing serious shortfalls across the board, from deckhands and cooks to captains, which is why the Seafarers’ Training Institute (STI) has been holding open houses in B.C. recently and talking with the local colleges about getting training programs set up here in B.C. “Our union hiring halls that we operate there [in B.C.] have absolutely nobody,” says Jim Given, president of the Seafarers’ International Union of Canada. “This is the first year in our history – and we’ve been around since [1938] – that we’ve had vessels tied up because we couldn’t find enough crew. When you’re tying a vessel up, you’re talking $12,000 a day to have the vessel out of service, plus whatever effect it’s having on carrying the commodities to market.”

Phillip Nelson, president of the Council of Marine Carriers, whose members include Seaspan and a number of local independent barge, tug and towboat owneroperators, tells a similar story.

“We are expecting a shortage,” Nelson says. “I think we’re already in that shortage. It’s something we in the marine industry in general – not just locally but

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2019-04-02 11:04 AM

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Vancouver’s Mission to Seafarers Flying Angel Club. The association assists unemployed seamen • CHUNG CHOW

worldwide – have been talking about. Everyone’s been saying, ‘In the next little while we’re going to see this.’

Well, I think we’re already there now.”

And it may get even worse in a few years with the LNG Canada and Trans Mountain pipeline expansion projects.

The liquefied natural gas carriers and oil tankers that will serve those projects would be internationally flagged vessels, so Canadians are not likely to be employed on those vessels.

But both of those projects will require increased tug, escort and barge operators, all of which will require trained mariners.

“We’re going to be looking at needing more escort tugs,” Nelson says.

Given blames the sector as a whole for failing to promote the benefits of a career as a merchant mariner.

“These are really good-paying middle-class jobs, but unfortunately our industry has just done a terrible job of promoting ourselves, and young people aren’t even aware that the job is there,” he says. “Our guys in Vancouver that work on some of the bunkering vessels out there, the tug vessels, they’re [making] over $100,000, most of them.”

Typical deckhands start off at $60,000 to $80,000, depending on the vessel they are on. Second mates are paid $120,000 and up.

Aside from the pay rate of merchant mariner jobs, the training offered through the STI – valued at $50,000 – is free, offering another selling point.

“It is free room and board, free tuition, free everything,” Given says.

Recruits accepted into the seafarers training program typically spend 36 weeks at a training institute in Piney Point, Maryland, although the STI has been working with Canadian colleges to get training programs in Canada.

Seafarers who complete the program qualify for jobs on Canadian-flagged vessels. While some of the jobs might be on bulk carriers or other international shipping vessels, most of the Canadian-flagged ships operate in Canadian waters – on the Great Lakes, the St. Lawrence Seaway and the east and west coasts.

For the local marine industry that Nelson’s council represents, the training is different, and it’s not free.

On the other hand, job hopefuls don’t have to leave B.C. to get work.

00_Gateway 2019_40p_4.indd 25

“The nice thing about this type of work is that you can live pretty well wherever you want,” Nelson says. “We have seafarers who live in the Okanagan.”

Mariners working on domestic marine vessels like tugs, barges and cargo ferries require Transport Canada-approved certification, like a bridge watchman’s certificate. The training is offered locally through the British Columbia Institute of Technology, Camosun College in Victoria and the Western Maritime Institute in Ladysmith at a cost of about $2,000.

Mariners working on vessels plying international waters would typically work seven days a week for three months, then have a month off, Given says. Mariners working the B.C. coast might have a work rotation that is 28 days on and 28 days off.

While graduates are virtually guaranteed work, they might not get a job in B.C. They could end up in Newfoundland or as far away as Brazil.

“It’s not for everybody, because you are away from home, but those people that get into it and like, love it,” Given says. “We don’t hide the fact that it’s hard work.

You’re going to get your hands dirty. But there’s lots of room for advancement. It’s a solid career.”

One of the challenges to training is that working vessels don’t have berths approved for trainees, Nelson says.

“We need to get some changes in the law to permit training berths on our vessels.”

Globally, according to Drewry, the supply of seafarers grew significantly between 2013 and 2016. The average annual growth rate in the number of seafarers during that time was around 4.6%, according to the U.K.-based shipping consultancy.

But Latifat Igbinosun, a Drewry senior market analyst, said during the company’s annual manning review and 2018-19 forecast that rate slowed to 1.1% during 2017 and to 0.4% at the beginning of 2018.

Igbinosun says growth in the global seafarer population has slowed in part because being a merchant sailor “is becoming a less attractive option as a career path in some of [the countries that provide the majority of crew on freighters] because there are better options offered by shore-based career paths within those nations.”

Drewry estimates that the global seafarer population stood at approximately 1.53 million as of 2018. É

OUR UNION HIRING HALLS THAT WE OPERATE THERE [IN B.C.] HAVE ABSOLUTELY NOBODY. THIS IS THE FIRST YEAR IN OUR HISTORY – AND WE’VE BEEN AROUND SINCE [1938] – THAT WE’VE HAD VESSELS TIED UP BECAUSE WE COULDN’T FIND ENOUGH CREW j Jim Given President, Seafarers’ International Union of Canada

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

TRUCK

STOPS

Trucking industry labour shortage threatens to raise prices all along the logistics chain

ALBERT VAN SANTVOORT

DEFINITIVELY WE’RE INTO A LABOUR SHORTAGE. IT’S AFFECTING OPERATIONS; IT’S AFFECTING GOODS MOVEMENT. IT’S STARTING TO BITE j Dave Earle, President and CEO, BC Trucking Association

B

ritish Columbia’s truck driver shortage is getting serious. “Definitively we’re into a labour shortage. It’s affecting operations; it’s affecting goods movement,” says Dave Earle, president and CEO of the BC Trucking Association. “It’s starting to bite.” Over the past two years, vacancies within the industry have increased nearly 300% to 3,610 in 2018’s second quarter from 930 in 2016’s second quarter. The number of vacancies, according to Statistics Canada data, grew to 13.2% of industry jobs, which was nearly triple the size of the Q2 2018 average vacancy rate of 4.7% across all industries in B.C.

Ken Peacock, chief economist at the Business Council of British Columbia, says that a typical job vacancy rate in a specific industry is around 3%, so while the province is coping with a tight labour market generally, the problem is especially acute in the trucking industry.

Trucking issues affect a host of industries. Most consumer goods at some point in the logistics chain are transported by a truck. So higher wages and other benefits used to attract more drivers will eventually

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raise transportation costs, which will be passed on to shippers and consumers.

Peacock says labour shortages faced by construction, manufacturing and other industries that rely on similar demographic groups for their employee base exacerbate the challenge faced by trucking companies.

But Earle says different demographics can help fill trucking industry talent shortages.

“The workforce that we’re trying to attract and retain

2019-04-02 11:04 AM

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isn’t the same as the workforce even five or 10 years ago.

Like most industries, we need to do a much better job engaging underutilized communities, including joint ventures with Indigenous communities as well as finding more ways to attract more immigrants and women into the industry.”

The driver shortage is being intensified by other factors, including the growth in e-commerce and online shopping, which has increased demand for home delivery of goods.

Earle adds that the industry will also have to adapt to the changing demands of B.C.’s workforce, which is now far less interested in working nights or long shifts that require extended absences from family.

He says the industry also needs to change the way it deals with customers, because industry norms that include midnight to 4 a.m. load deliveries and inflexible full-time working hours are no longer acceptable.

New technologies that more efficiently allocate trucks and equipment are part of the solution.

But the transportation industry needs help.

Earle says government policy could ease temporary foreign worker restrictions. Mandatory entry-level training requirements, he adds, would add a level of

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Sandy Burt, Bison Transport’s sales and operations manager for B.C.; (left) a portion of the company’s truck fleet • CHUNG CHOW

professionalism to the job.

The looming introduction of autonomous vehicles might have created uncertainty about the long-term future of truck driving, but Earle says that their threat to a career in the business has been exaggerated.

For example, major resource extraction projects often require trucks to go where there are no GPS signals, and trucks will likely need to be manned even after automated vehicles become mainstream. É

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GATEWAY 2019 PUBLISHED BY BUSINESS IN VANCOUVER

BOXING MATCHES GCT boss has ambitious plans for Canada’s biggest maritime employer

TIMOTHY RENSHAW

D

oron Grosman knew a fair bit about moving boxes before he took the reins of Canada’s largest maritime employer, but not the kind of boxes GCT Global Container Terminals Inc. (GCT) moves. And not as many. The boxes Grosman moved pre-GCT would have been the household and office boxes any ambitious chief executive officer moves when he or she changes command posts.

The boxes GCT moves come in 20-, 40- and 53-foot lengths, and they contain pretty much everything and anything that makes world consumer markets and major global trade routes tick.

In 2017, Vancouver-headquartered GCT handled approximately 3.9 million 20-foot-equivalent units (TEUs) through its four container terminals – GCT Vanterm in Vancouver, GCT Deltaport at Roberts Bank, GCT New York on Staten Island in New York and GCT Bayonne in Bayonne, New Jersey.

Depending on cargo traffic through its terminals, the company employs about 5,100 people. Roughly 380 are management. The rest are unionized dock and container terminal workers.

GCT Canada accounts for the lion’s share of that employment at around 4,250 management and dockworker personnel.

Canada has a majority equity stake in the company.

The Ontario Teachers’ Pension Plan holds 37.5% and the BC Investment Management Corp. has a 25% equity interest. Australia’s IFM Investors holds the remaining 37.5%.

Grosman took over as GCT’s president and CEO in July 2017. He replaced Stephen Edwards, who had served that dual role for GCT since 2012.

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Business in Vancouver sat down for a chat with Grosman a little over a year after his first anniversary of taking command of GCT. The focus was twofold: to determine whether the Johannesburg-born executive had gotten his sea legs yet and to get his insights on the current state and future prospects of the volatile global container cargo business.

Grosman’s background is not especially nautical.

The announcement from GCT’s board introducing Grosman as the company’s new leader noted that he was a “seasoned, multi-industry executive with a variety of C-suite roles at global Fortune 1000 companies.”

However, that included no marine industry seasoning.

It instead included stints as an operating partner with New York-based Court Square Capital Partners; as president of Hexcel Corp., a company involved in advanced composites technology; and as president of Quebecor World’s magazine printing solutions business.

He’s also a Harvard man with an MBA from that university’s highly regarded business school, and he served 11 years in various executive roles at General Electric.

But, again, no sea stories in his resumé, no stints down at the waterfront, no long sea voyages, no executive adventures in Shanghai, Singapore, Rotterdam or other major global container ports.

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Q: So how and why did the former CEO of American Standard’s global Trane air conditioning business end up at the helm of a top international container terminal business? Is it more a matter of management style and leadership? After all, the container cargo business is basically about moving boxes, right?

A: Right, it’s just moving boxes around. All the businesses

I’ve worked in have been very asset intensive. So return on capital is critical. You place a big bet, it takes a long time for the bet [the capital] to be deployed and you better be right if you are going to get the returns.… Whether you are in plastics, whether you are in air conditioning, whether you are in magazine printing, it’s asset intensive, and you are manically focused on getting a good return on the capital.

Q: What were some key priorities for you when you first joined GCT? A: My mandate was three things that the board and I

agreed to … seek opportunities to grow the business

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Doron Grosman, president and CEO, GCT Global Container Terminals Inc., at the company’s Vanterm container terminal in Vancouver. Grosman took over as the company’s top executive in July 2017 • CHUNG CHOW

profitably, increase the return on capital, and the third was that the way the company had been run and allowed to be run by the board was fragmented. There was the U.S. operation along the East Coast run in U.S. dollars, and there was the Canadian operation on the West Coast in Canadian dollars, and there wasn’t a lot of connection between the two, and so – this is not difficult stuff – I created a concept called One GCT. Q: So you’ve been here about 18 months now, likely got your sea legs. How have those priorities changed?

A: The priorities haven’t changed. There are two external

context areas that have a big influence on the priorities.

External context one relates to the container industry, the shipping industry and the container terminal operating industry. Things are evolving and changing there reasonably rapidly.

Then, more recently, the second external context that has changed is obviously the man down in Washington barking and waving his arms and creating all kinds of waves across the world that don’t exactly help global

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BOXING MATCHES

WHETHER YOU ARE IN PLASTICS, WHETHER YOU ARE IN AIR CONDITIONING, WHETHER YOU ARE IN MAGAZINE PRINTING, IT’S ASSET INTENSIVE, AND YOU ARE MANICALLY FOCUSED ON GETTING A GOOD RETURN ON THE CAPITAL j Doron Grosman President and CEO, Global Container Terminals Inc.

trade and promote movement of goods, and we are a carrier of international goods imported and exported out of our container terminals. So those are two big external factors that are influencing where we are at and where we are going.

Q: What challenges are specific to GCT’s operation?

A: [Consolidation in the shipping company industry] is an ongoing trend, and I think it is going to continue.…

There are only 11 or 12 shipping companies in the world that we would have any interest in doing business with.

So that number is coming down dramatically, and they have significant challenges – not that we don’t – but … cyclical profitability, the price of oil has a dramatic impact on them, and they are increasing the size of their vessels to move more containers per ship, and that carries over as a challenge to us.… The largest ships will be coming in ever-growing excitements and challenges. The shipping companies need to be moving more boxes; it’s more efficient to move them on fewer ships. In the old days, we used to have 5,500 TEUs on a vessel. Then it grew to 9,000, and people said, ‘Nine thousand – how can you even dock a vessel like that?’

Then it went to 14,000, and now it’s at 20,000 to 22,000.

I just came back from Shanghai and Singapore, and you look at these vessels and [laughing] this thing floats?

But the challenge for us as container terminal operators is that the bigger the vessels, the higher the cranes need to reach, and the further out the cranes need to reach because the vessels get longer, they get higher and they get broader, so we continue to invest in that capability.

Q: Is that part of the rationale for the $300 million GCT Deltaport upgrade?

automation and sophistication. I don’t know about the wider world, but here in North America, this is the most advanced rail loading and unloading project anywhere.

Q: The cargo liner industry has traditionally been conservative and very slow to embrace technology, especially the new digital disruptive technology that is revolutionizing pretty much every other industry. Is that a frustration for terminal operators?

A: Yes. They are metal people. They are moving boats;

they are moving boxes. Technology is not at the forefront of their thinking, but, having spent time with CEOs of a number of our customers, they are working hard at it. They want to get there, but it costs money, and it’s new, and it’s different, and they are not necessarily located in parts of the world where they can draw on the capability of young millennials who will just hammer out a bunch of code and all of a sudden you have an app and it’s doing this and it’s connected to that, and you have a chain.

There is not much in [blockchain] for us. As a company blockchain doesn’t help us much, but it is very important in order to move the cargo from A to B, where that three- or four-day window from the time it gets off the vessel onto the train or the truck, and we have got to be able to service it.… To go from here to Chicago [via train] is 96 hours; to come from Asia to Vancouver is 21 days, so our three or four days is a small component of it, but it’s a link, it’s a chain – you break the link, and you don’t have what you need.

Q: Has GCT got ambitions to expand beyond its two central locations?

A: Yes, why not? Anywhere in North America where

A: Not the rail densification project. We just put two new

cranes in there that can deal with 14,000-TEU vessels without a problem; we are going to be doing a similar project in New Jersey-Bayonne. Now we can handle one 14,000 [TEU vessel], but we want to be able to handle two 14,000s, so we have a big investment project that we are working on.

The [GCT Deltaport] rail project is not an outcome of larger ships. The rail project is an outcome of more boxes [containers]. Whether they are coming on 3,000, 5,000 TEUs or coming on one 15,000 TEU [ship], there are more boxes coming in every year, and we have got to get those boxes out. So 80% of containers that come into Deltaport go out on CP or CN railroad, so we have got to get them off the ship, put them in the yard and get them on the train, or when trains are coming in for export we have to take them off.

The rail project went live [September 24], and it is a beautiful purring machine.

Q: In simple terms, what did it do?

A: Two things: it increased the [terminal’s] ability to

move rail boxes out by 50%, and it increased the capacity in the overall terminal by 33%.… There is no project or operation in North America that has this degree of rail

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you can make money.

Q: What are some other issues container terminals are facing that need more airing?

A: I’m not going to tell you for a second that I’m a world expert [on the ongoing trade wars between the United States, China, Canada and other regions].… I am an American citizen; unfortunately for right now, we are moving in the wrong direction. Nobody in the world was perfect before in [U.S. administrations], but we were all trying to move in a direction that was for the improvement of the world at large, with a lot of squabbling, but the intention was honourable. So we had the transpacific trade, we had NAFTA [North American Free Trade Agreement]; we didn’t poke our best allies in history in the eye; we didn’t say rude things about them; we argued, and we figured it out. That will hopefully end in two years’ time, and, if not, it will definitely end in six years’ time … but it’s not helping; it’s not enhancing trade. It’s not hurting our business today; it may hurt our business in [2019], [but] that’s still not clear.

One way or the other, it is short-lived.… There is a lot of barking but not a lot of biting, and the biting that is occurring is not adversely impacting the container business – yet. É

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CHINA’S

PORT PUSH Expanding marine infrastructure portfolio a key trend to watch for international shipping sector

CHUCK CHIANG

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hina is continuing to expand its reach and influence in port facilities beyond its borders. And given the growing divide between China and the United States in their trade relationship, the pace at which Chinese companies look to acquire port terminals in Europe, Asia and even South America could accelerate despite the current lull in activity, analysts say.

Chinese acquisitions in recent years have largely been done by two state-owned corporations: China Ocean Shipping (Group) Co. (COSCO) and China Merchants Port Holdings Co. Ltd. The former not only controls one of the world’s largest fleets of cargo ships, but also now owns a 51% majority stake in Greece’s Piraeus Port Authority after a purchase in 2016. The latter, meanwhile, bought up to 90% of TCP Participacoes SA, Brazil’s most profitable port terminal, in 2017.

China has also bought terminals in the Netherlands, Belgium, Italy, Israel, Sri Lanka and Pakistan. But while

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China’s pace of acquisitions trailed off toward the end of 2018, especially in Europe, Neil Davidson says the slowdown doesn’t reflect any overall cooling in China’s desire to expand further.

“This is not necessarily because they have lost their appetite; rather it is because opportunities to acquire suitable port and terminal assets in Europe are rare,” says the senior ports and terminals analyst with U.K.-based consultancy Drewry.

Davidson adds that Chinese investment remains very attractive to many European countries.

IF YOU ARE A LARGE DOMESTIC ECONOMY, PORTS ARE LESS IMPORTANT IN THE OVERALL PICTURE. BUT FOR WEAKER ECONOMIES, CHINESE INVESTMENT IN UPGRADING THE PORT CAN MAKE YOU MORE ATTRACTIVE FOR FOREIGN INVESTMENT j Frans-Paul van der Putten Senior research fellow, Clingendael

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CHINA’S PORT PUSH

Hambantota, Sri Lanka: China took over Sri Lanka’s Hambantota Port after the Sri Lankan government was unable to pay nearly US$13 billion in debt • MICHELEB/ SHUTTERSTOCK

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“The attraction is generally because the buyers bring investment in enhancing the facilities, and in the case of COSCO, they bring a connection with one of the world’s major container shipping lines.”

Ronald Linden, political science professor at the University of Pittsburgh, says Chinese appetite for European ports is especially strong because it fits Beijing’s One Belt, One Road economic initiative to link the Asian and European markets in a recreation of the ancient Silk Road.

Linden notes that Chinese foreign direct investment has been higher in Europe than in the United States for three of the last five years.

“Now you have some physical roads and trains cutting across Central Asia, but no roads can match what a port can do – with massive supertankers that can take 20,000 TEUs [20-foot-equivalent units] each. One of these ships can bring in six months’ worth of goods at a time … and the Chinese don’t have to deal with one agency that controls everything with port entry as they would face in North America, because Europe hasn’t created a single port agency yet.”

Frans-Paul van der Putten, senior research fellow of Clingendael (the Netherlands Institute of International Relations), says the attraction for some European countries is natural – especially for smaller players beyond the typical European Union (EU) giants in Germany and France.

“If you are a large domestic economy, ports are less important in the overall picture. But for weaker economies, Chinese investment in upgrading the port can make you more attractive for foreign investment, and that may make those economies more open to Chinese influence. Now, it doesn’t mean that, when Chinese investment happens, a country then automatically becomes a puppet of Chinese foreign policy. But it’s something that China can at some point leverage for political purposes, depending on how urgent those purposes are.”

Some observers have expressed concerns over China’s marine port expansion, given that it coincides with the launch of the country’s operations at its first overseas naval base in Djibouti on the Horn of Africa in 2017.

The potential for Beijing to repurpose Chinese-owned

port facilities when geopolitical needs arise has also raised concerns. For example, China took over Sri Lanka’s Hambantota Port after the Sri Lankan government was unable to pay nearly US$13 billion in debt.

But Drewry’s Davidson notes that Europe is different.

“It is important to remember that in most cases, Chinese investors have bought terminals in ports, not entire ports.

The port authorities – or landlords – remain owned by the governments of the countries involved, the only exception to this being COSCO in Piraeus. The majority of container terminal capacity in Europe remains owned by non-Chinese interests, as do virtually all of the port authorities.”

Linden adds that Europe is starting to institute safeguards. The EU recently created a framework agreement that allows other EU members to request “clarification” from an EU member approving foreign investments in port facilities. While not comprehensive, Linden says it is the first step in creating a more rigorous oversight system that’s needed and illustrates that Europeans are aware of the risks.

“In theory, China can decide how to expand its ports and terminals,” Linden says. “They have a plan to build a gigantic tourist facility in Greece. But the local Greek government has opposed that and has just blocked it. At the same time, Greek workers are finding out that – when a Chinese company takes over the port – it doesn’t help the local labour situation as much as they have hoped, because the company brings in a lot of their workers.

“Almost everybody I talked to when I was in Europe doing research on this knew about Sri Lanka. So I think there’s at least potential for pushback, because countries in Europe have alternatives.”

Regardless of more scrutiny, however, Linden and van der Putten both note that China will continue to harbour significant port acquisition aspirations – as much for the country’s own economic survival as for its international ambitions.

“If you look at Chinese growth rates, they have flattened out,” Linden says. “They need to keep selling, they need to keep manufacturing, and they need to get the best technology. And they now have a huge middle class that’s not going to be satisfied with a better chair or a basic car. That middle class now wants Italian and French goods; people want to travel to those countries themselves. The economy has to keep growing for the regime to keep people happy, so I would say the push factor is very strong.”

Van der Putten adds that, with the trade war erecting tariff barriers between North America and China, acquiring ports in countries that still have good access to both markets will be the new name of the game, because Chinese port acquisitions are often accompanied by additional infrastructure and industrial investments clustered around port facilities.

“One thing that has been a constant – and has accelerated because of the trade war – is the relocation of industry,” van der Putten says.

“Previously, there has been a very strong concentration of industry within China, and now there’s relocation from China to other countries … where export to North American markets is still not affected by the trade war.

In this regard, this makes the shipping dimension more important.” É

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TERMINAL

CAPACITY CRUNCH

Limited expansion options force terminal operators to look inward TYLER NYQUVEST

THERE IS NO QUESTION THAT THE EFFICIENCY IN THE TRANSPORTATION INDUSTRY IS BECOMING MORE AND MORE IMPORTANT. THE DEMAND FOR EXPORTS OUT OF VANCOUVER IS GETTING HIGHER ALL THE TIME j David Kushnier CEO, Alliance Grain Terminal

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aced with dwindling expansion options, Port of Vancouver terminals are streamlining equipment and upgrading technology to increase efficiency and maintain competitiveness.

But industry professionals wonder whether those initiatives will be enough to overcome infrastructure limitations.

The $600 million G3 Terminal being built at North Vancouver’s Lynnterm West Gate is among B.C.’s major new port developments. The grain elevator of the G3 Global Holdings and Western Stevedoring Co. Ltd. joint venture is hard-wired to increase the efficiency of Canadian grain exports, which have hit a host of logjams over the past few years.

According to G3, Canadian grain and oilseed crops generate $23 billion in exports each year, but infrastructure challenges are hampering the industry’s ability to meet increased global demand. The elevator is scheduled to be completed in 2020 and grain will start moving through the terminal in 2019, but there are concerns that other links in the transportation chain will undermine the elevator’s increased efficiencies.

Alliance Grain Terminal (AGT), a bulk terminal on Burrard Inlet’s south shore, recently completed a project to improve ship loader equipment to optimize load and unload times.

AGT has an annual capacity of three million tonnes.

The dock conveyor system improvements and other upgrades aimed at reducing grain carrier congestion in

Vancouver harbour began in 2017.

Improvements include: ■increased vessel loading capacity – up to 2,000 tonnes per hour – with the ability to accommodate larger ships, including Panamax vessels; ■safety updates; and ■a new dust suppression system to reduce waste and air pollution.

“There is no question that the efficiency in the transportation industry is becoming more and more important,” says AGT CEO David Kushnier. “The demand for exports out of Vancouver is getting higher all the time.

We have now increased our ship loading capacity from an average of about 600 tonnes an hour to an average of 1,400 tonnes an hour. By doing that, it is really in line with the most efficient terminals in Vancouver. We are about 35% more efficient on unloading railcars per day because of the ship loader.”

Paterson GlobalFoods bought AGT in 2007, and the terminal is owned and operated by Paterson Grain, Parrish and Heimbecker and North West Terminal Ltd. “All these people are facing the same … peak capacity

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TERMINAL CAPACITY CRUNCH

problem,” says Garland Chow, professor at the University of British Columbia Sauder School of Business’ operations and logistics division. “That is, at a certain time, you wish you had more capacity, but at other times, you have more than enough capacity.”

Chow acknowledges that grain terminal technology has improved significantly, but new or upgraded terminals can do only so much in the long run.

The Port of Vancouver also faces a looming shortage

of transportation infrastructure to handle predicted increases in containerized cargo.

“The inner harbour is full,” says Chow. “There is no place to expand. You might replace some of the grain elevators with a bigger one or a more effective one, but that is going to have a marginal impact.”

He adds that inter-terminal co-operation coupled with better technology will be key to improving Port of Vancouver cargo shipping efficiency. É

The newly upgraded Alliance Grain Terminal looks to reduce Port of Vancouver congestion • SUBMITTED

VANCOUVER PORT DEVELOPMENT DEALT TOUGH BRIDGE HAND Developers of North Shore port infrastructure face the same transportation challenge as their residential housing counterparts: bridge congestion.

However, the challenge for the area’s por t developers is shaping up to be far more complex.

They have only one bridge and one lane across Burrard Inlet connecting the North Shore’s rail traffic to Metro Vancouver; housing and other developers have two bridges and nine lanes connecting them and their vehicles to the rest of the region.

Consider also that the Second Narrows rail bridge is out of commission five to six hours per day when it’s lifted to allow marine traffic to move through the narrows.

Add in the significant increase in train trips across the bridge that Fibreco’s new $100 million specialty grains handling facility will generate when it’s operating later this year and when the North Shore’s $600 million G3 grain terminal is completed in early 2020, and the Second Narrows rail bridge bottleneck could become a transportation choke point that will limit the terminals’ abilities to benefit from their design efficiencies.

The G3 project alone is expected to increase the Port of Vancouver’s annual grain handling capacity by eight million tonnes, and Fibreco’s specialty grains business will process approximately two million tonnes of agri-products annually.

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All of that grain has to get to Nor th Shore terminals via railcars that cross the Second Narrows rail bridge.

Both G3 and Fibreco design efficiencies will allow the terminals to unload longer trains faster.

But efficiencies at terminals won’t matter much if bottlenecks delay train arrivals or departures.

Fibreco CEO Kerry Lige agrees.

“The bridge is definitely a limiting factor for us as an industry. The North Shore corridor is one of the issues all of us on the North Shore have to consider in our expansion plans. We could all expand and build more capacity at our facilities, but if the railway can’t support that volume and provide the service, it’s a big problem for us.”

He notes that some funding through the federal government’s $2 billion National Trade Corridors Fund has been allocated to add tracks and improve access to the rail tunnel that feeds into Burrard Inlet’s south shore and onto the bridge.

“Those two things are going to help increase the capacity of how many trains can go across the bridge, but it is fair to say that at some point we are going to run into a capacity issue coming across the bridge.”

Jonathan Abecassis, Canadian National Railway’s director of media relations, says in an email that CN spent $340 million in 2018 alone as part of its ongoing investment to improve its B.C. network. In

March, it announced plans to invest approximately $345 million in its B.C. rail infrastructure.

CN came under fire last year following Canadian Federation of Agriculture complaints focused on railcar bottlenecks that were seriously delaying grain exports.

Abecassis says CN customers have also invested in increasing capacity at their facilities.

“That said, the supply chain requires ongoing investment from all its partners – the port, other railways, customers and the federal government – to meet the growing demands of both import and export traffic.”

While Abeca ssis added that the design of expansion projects like G3 will help improve rail transportation efficiencies, he concedes that the North Shore is approaching rail capacity.

Running more trains to and from the North Shore via Squamish, he says, is not a good option “because it is longer round-trip and the track speed is lower due to the mountain grade and associated restrictions on the number of cars and type of locomotive required for the terrain.”

A b e c a s s i s s ay s i m p rove m e n t s i n Po r t of Vancouver goods movement will require ongoing federal government investment in grade separations and other transportation infrastructure.

– Timothy Renshaw

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CHANGING LANES A new vehicle processing terminal at Port of Nanaimo is part of a drive to make the seaside city a bigger player in B.C.’s import industry

TYLER NYQUVEST

THE CITY’S CURRENT ECONOMIC POSITION IS VERY STRONG AND WE ARE NOW IN OUR FIFTH YEAR OF RECORD BUILDING PERMITS AND GROWTH j Leonard Krog Mayor, Nanaimo

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W

ith plenty of available mixed-use land and a willing city council embodying an open-for-business spirit, Nanaimo is poised to help boost B.C.’s import shipping infrastructure. A keystone of the Port of Nanaimo’s plans is the construction of the BC Vehicle Processing Centre (BCVPC), which will serve as the primary entry point for newly built European vehicles delivered to B.C. by sea.

In partnership with Western Stevedoring and its affiliate organization, the automotive division of SSA Marine, Port of Nanaimo has designed, built and financed the first-of-its-kind operation, which is expected to realign the vehicle supply chain in B.C. “It is a change in trade patterns coming over by water, through the canal, down through B.C. and distributed to B.C.’s Lower Mainland,” says Port of Nanaimo CEO Ian Marr. “Moving further along, the project will feed Alberta and Saskatchewan.”

Vehicle shipments will travel through the Panama Canal to Nanaimo instead of from Eastern Canada by train.

Once arrived in Nanaimo, vehicles will be modified to

conform to Canadian regulations and then shuttled by barge to the Lower Mainland or distributed to dealerships on Vancouver Island.

The project will be built in phases. In Phase 1, a 60,000-square-foot warehouse has been refinished to become a vehicle processing centre. It hosted its first shipment of Mercedes-Benz automobiles on March 8.

T h e w a re h o u s e w i l l b e op e rate d b y We s te r n Stevedoring.

Following the arrival of the first shipment, vehicles will arrive every two weeks for the first year, totalling approximately 10,000 within Year 1.

The second phase will open more space for vehicles,

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CHANGING LANES

which will bring the total footprint of the BCVPC project to nearly 27 acres of port land. The terminal expansion has created 25 jobs within the warehouse and another five on the marine works. About 60 jobs are expected to be created in the short term, then another 110 in the long term.

“We have other properties available for expansion to host that type of business should they be successful in moving in and bringing on other manufacturers,” Marr says. “There would definitely be room to expand.… We are hoping that would be the plan at this point.”

The project is a $19 million investment. The federal government contributed $6.3 million under the National Trade Corridors Fund.

The expansion comes at a time when Nanaimo’s focal downtown marina, infrastructure and key land plots are all being reconsidered as elements in a plan to turn the city into a big player in the B.C. shipping and tourism sectors.

“Our challenge is getting people to realize how close we are to the Lower Mainland and how some short sea shipping combined with where we are can be better for going into Vancouver,” says Marr. “[Nanaimo] is a viable alternative for a lot of things.”

According to BC Stats, Nanaimo’s population has grown by 7.1% since 2011, to 104,936 in 2016 from 98,021.

“The city’s current economic position is very strong and we are now in our fifth year of record building permits and growth in a row, so there is obviously a lot of change in the community,” says Nanaimo Mayor Leonard Krog.

The 60,000-square-foot warehouse that will house the BC Vehicle Processing Centre • SUBMITTED

“That is being driven by a balanced economy and central location.… This particular port facility and the port in general reflects the role of the city in being a hub of the main island and northern B.C.” Nanaimo has traditionally been known as the Hub City due to the wheel-like configuration of inner city streets around its central port as well as its position as the main connector to Vancouver Island from the mainland.

Another recent development expected to help transform port operations in the city is a $15 million capital plan to improve the marina configuration to better serve commercial vessels.

The plan, developed by Saltspring Island-based InterTidal Design, will restructure the marina to make more room for moorage of commercial vessels. The plan will not take more space from the existing structure but instead aims to optimize the area with a more efficient layout.

The extension of the harbourfront walkway has long been considered an attractive option for luring tourism and increased activity to downtown businesses. The plan has been met with enthusiasm but had been shelved previously to prioritize other infrastructure developments.

“There is land available in this community for business and industry development,” Krog says. “I expect to see a significant reinvestment in marketing programming over the next several years, which repositions the municipality and the region as a go-to place.

“We are very positive about the future here – everyone has reason to be, but Nanaimo particularly has so much potential.” É

TTO O BOOK YOUR 2020 GATEWAY AD Call 604-688-2398 or email ads@biv.com Ca Space Close: March 5, 2020

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PROFILE: SEASPAN SHIPYARDS’ NEW CEO, MARK LAMARRE

REBUILDING

SHIPBUILDING Shipbuilding veteran ready to rightsize local shipbuilder and make Seaspan Shipyards globally competitive

HAYLEY WOODIN

I HAVE THE BENEFIT OF HAVING A NETWORK OF PEOPLE WHO, LIKE ME, HAVE FAILED AT RETIREMENT j Mark Lamarre CEO, Seaspan Shipyards

S

hipbuilding is sort of Mark Lamarre’s family business. “It was just in my blood,” says the new chief executive officer of Seaspan Shipyards. “I spent a lot of Saturday mornings with my dad in the shipyard.” Lamarre, who joined the company in July 2018, represents the third generation of his family to have found a calling in building ships. His grandfather did so during the war; his father started in the industry as an apprentice.

The yard Lamarre used to run around on Saturday mornings was the machine shop at Bath Iron Works, now a subsidiary of General Dynamics Corp., one of the world’s largest defence contractors. Lamarre would go on to work as a management development intern at Bath

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Iron Works in the 1980s.

“It seemed like the natural thing to do when I got out of college,” says Lamarre, who attended the Maxwell School of Citizenship and Public Affairs at Syracuse University.

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REBUILDING SHIPBUILDING

That internship role included rotating assignments in all major areas of the company, an opportunity that afforded Lamarre the chance to establish a broad-based understanding of a business in which he would ultimately go on to spend more than two decades. In total, he has spent 25 years and counting in the shipbuilding industry.

“It’s an easy business to be proud to be involved in,” explains Lamarre. “We’re playing a role in national defence and coastal protection, and there’s been a lot of pride in my household related to the business.”

In a career spent almost entirely in the shipbuilding arena, Lamarre has collected a vast amount of experience across a wide range of positions.

At various times at Bath Iron Works, for example, he worked as a production engineer, as director of production trades – where he oversaw the training and

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Seaspan Shipyards CEO, Mark Lamarre: “My first two weeks prior to joining ASC, the minister of defence said in Parliament that he wouldn’t trust [the Australian Shipbuilding Co.] to build a canoe” • SUBMITTED

development of 3,200 members – and as director of operations for the firm’s air warfare destroyer program.

He also took a five-and-a-half-year detour into technology between extended stints at Bath Iron Works, first at KAO Infosystems in Massachusetts, followed by three years at Globalware Solutions, where he oversaw operations at the $175 million multinational.

Lamarre was the director of international programs at Bath Iron Works when he was recruited in 2014 to lead the Australian Shipbuilding Co. (ASC) as its chief executive officer.

“The game plan that I used at ASC is going to be very relevant to what we’re doing here,” says Lamarre.

“There’s a lot of similarities, actually, between what’s going on there and what’s going on in Canada in terms of restarting an industry.”

Both Australia and Canada went for many years without building a new naval or coast guard ship. Both industries had slowed down significantly, and both are seeing “very, very significant” levels of investment now, says Lamarre.

“My first two weeks prior to joining ASC, the minister of defence said in Parliament that he wouldn’t trust ASC to build a canoe. So that’s where we started with our relationship. We had to rebuild from there.

“We’re not starting from where we started in Australia,” adds Lamarre, noting Seaspan Shipyards’ strong relationship with the Government of Canada, which has awarded several billion dollars’ worth of contracts to the company under its National Shipbuilding Strategy.

The program is so large that it will command Seaspan Shipyards’ attention in the short term. But Lamarre has his sights set globally.

“I have full confidence that we can be internationally competitive,” he says.

Getting there won’t be without its challenges.

When Lamarre started in Australia, the industry had a reputation for delays and cost overruns. The industry in Canada has similarly earned a reputation for being expensive.

“We set ourselves about refuting that and actually smashed that notion. We’ll be doing the same thing here,” says Lamarre.

Enter his game plan. Though he is less than a year into his role with Seaspan, Lamarre has already brought in a handful of people who collectively have 350 years of shipbuilding experience among them and who each have 40 to 50 ships under their belt.

“I have the benefit of having a network of people who, like me, have failed at retirement,” says Lamarre.

He is also spearheading a complete evaluation of Seaspan Shipyards’ cost and organizational structures and is aiming to meet international benchmarks for cost and efficiency.

“We will be globally competitive for shipbuilding and ship repair, we will rightsize ourselves … on our cost structure and our organization, and we will be going after international work when the time is right,” says the CEO. “We need to be demonstrating to our stakeholders that we are doing things that internationally competitive shipyards are doing, and they’ll see our journey and know when we arrive.” É

2019-04-02 11:04 AM

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