• Saturday, November 17, 2018

B.C. Marine Terminals: Facing up to competitive challenges

By BCShippingNews 11 July 2018
G3 Terminal rendering (courtesy G3 Canada).
By Captain Stephen Brown, West Pacific Marine

I would doubt that there is a single marine terminal manager in British Columbia who is not plotting his or her next moves to be more efficient, competitive and user-friendly. Here in B.C., we are a microcosm of the international challenges faced by marine terminals as world trade continues to grow, ships get bigger, infrastructure development becomes increasingly expensive and environmental resistance to port expansion projects is unrelenting. So, what are the specific challenges for British Columbia?

Many terminals were designed for ships far smaller than those calling today with container, bulk, breakbulk and cruise terminals all struggling to keep up. At the same time, the demand for the shortest possible turnaround times is ever present as ocean carriers seek to realize the unit cost benefits of their investments in bigger ships. Line-ups of more than 30 ships at anchor, as commonly experienced by the Port of Vancouver, primarily waiting to load grain or coal will not be sustainable once the bulk market, and by default, freight rates recover as they surely will. The already high monthly demurrage costs being borne by cargo will otherwise render Canada seriously unattractive as a reliable business partner. This is not news. It is acknowledged by the federal government, the provincial economies and shippers that rely on West Coast ports, terminals, railways, freight forwarders, ocean carriers and the wealth of logistical support expertise that, in combination, keep the wheels turning.

Photo above: G3 Terminal rendering (courtesy G3 Canada).

On Canada’s West Coast, we are seeing a regional trend towards diversification and in some cases, a complete change of utilization. Arguably, the prime example occurred in 2007 with the launch of the single-berth Fairview Container Terminal in Prince Rupert, once a thriving lumber dock supported by lumber mills across Northern B.C. With initial federal, provincial and CN Rail investment, the skeptics were quickly silenced. Largely thanks to the commitment of COSCO, container handling has increased year over year and, in August 2017, a second deep-sea berth was commissioned, representing a capacity expansion of 60 per cent. Now operated by DP World, the terminal handled 926,540 TEU in 2017, a 26 per cent increase over 2016.

Overall, the port handled 24.1 million tons in 2017 thanks to stronger coal and wood pellet volumes and despite a six per cent decline in grain throughput. We should also mention the emergence of supporting ventures including Ray-Mont Logistics which is purpose-built for transloading grain into containers, and the CT Terminals lumber transload facility on Ridley Island, a limited partnership between Tidal Coast Terminals and Coast Tsimshian Enterprises which complements Tidal Coast Terminals’ main operational site at Prince Rupert’s Butze Bay Industrial Park. The facility sorts logs, handles containers and reloads forest products in addition to handling breakbulk and project cargoes by barge. All this for a port which in the late 1990s was ready to close the doors and throw away the key.

From a regional perspective, the closure of pulp, paper and lumber mills across B.C. in the decade beginning in 1995 was painful for many communities. Gold River, Thasis, Duncan Bay, Woodfibre, Skeena and Eurocan to recall but a few household names in the forestry industry that failed on account of unsustainable cost pressures and/or failure to modernize their mills. In retrospect, this restructuring, including a number of renegotiated labour agreements at surviving mills, was necessary to put the B.C. forestry industry on a sustainable footing. However, thanks in part to the amalgamation of Lower Mainland ports effective January 1, 2008, in combination with a continuous squeeze on the footprint of the Port of Vancouver, the trend towards diversification and even entire changes in utilization has gathered pace.

A prime example of the need for diversification occurred in 2005 when Hapag-Lloyd acquired CP Ships and almost overnight diverted most of its container trades from Fraser Surrey Docks (FSD) to Deltaport. FSD lost around 75 per cent of its 400,000 TEU throughput, a major blow given that the terminal had strategically elected to withdraw from handling forestry to focus on container handling. The road to recovery has been long but thanks in part to the acquisition of FSD by Macquarie Infrastructure Partners in 2007, there has been a steady uptake in the terminal’s fortunes.

The project to introduce coal handling was tough but ultimately successful, even if implementation remains subject to market conditions. On the other hand, the prospect of investment by Parrish & Heimbecker in a new grain-handling facility with capacity to handle up to 3.5 million tons/year represents a major opportunity to build on the successful but limited capacity mobile grain loading system currently handling about one million tonnes/year. In addition to grain, the terminal continues to handle containers along with large volumes of steel imports, raw log exports and project cargoes, making it a genuinely diversified multi-purpose terminal. We should also mention that a proposal by BHP Billiton to develop a new potash export facility with an annual capacity of eight million tonnes is under preliminary review by Vancouver Fraser Port Authority. The project would utilize an existing berth and portion of the container yard.

Staying with the theme of bulk handling diversification, and potash in particular, the decision of Pacific Coast Terminals in Port Moody and Germany’s K+S Potash Group to enter into a long-term contract in April 2014 for the handling, storage and export of potash products from K+S Potash Canada’s Bethune mine in Sasketchewan was another milestone of capacity optimization. Following completion of the $200-million infrastructure in August 2017, including 160,000 tonnes of storage capacity, the first 30,000 tonnes shipment to Asia left the port in late October. K+S Potash determination to get it right was perhaps further underlined by a decision to invest in a dedicated fleet of 531 rail cars to be handled under an exclusive rail service agreement with CP. The project is now well on the way to achieving the initial two million tonnes/year throughput projection.

Faced with declining sulphur exports and the end of a contract to handle ethylene glycol, the decision of PCT to diversify can be judged as inevitable but it didn’t stop with potash. In 2013, PCT had signed an agreement with Bunge Canada to develop facilities for the handling of up to 400,000 tonnes/year of food grade canola oil with the potential to expand this to an eventual 750,000 tonnes/year. With Canada being the world’s largest producer of canola and controlling some 15 per cent of global supply, the $35-million project was a strategic move to maintain specialized liquid cargo handling capacity at the terminal.

Another bulk facility which is currently turning the page on history is North Vancouver’s Fibreco Export Inc. Faced with declining throughput volumes in the company’s traditional wood chip and wood pellet markets, the terminal applied for approval to diversify from its business model of four decades to the handling of agricultural products through what is formally described as a “Terminal Enhancement Project.” In December 2017, the company received a Christmas present in the form of a project permit from VFPA subject to a number of conditions and while the terminal will no longer handle wood chips, it will continue to handle wood pellets in tandem with agricultural products. In February this year, the District of North Vancouver also issued a development permit and all seems set for the new terminal operations to be in business in 2019.

Also placing money on the continued expansion of agricultural exports are the existing grain handling terminals and the major redevelopment at what was previously Lynnterm West, or as many of us remember it “Seaboard International Terminal.” Proponent G3 Global Holdings, with partners Bunge Canada — a vertically integrated food and feed ingredient company, supplying raw and processed agricultural commodities and specialized food ingredients in the animal feed, food, food service and bakery industries — and Saudi Agricultural and Livestock Investment Company (SALIC) — a joint stock company based in Riyadh, Saudi Arabia. Vancouver’s first new grain terminal in more than 50 years will feature a rail loop track with capacity for three 134-car trains, over 180,000 metric tonnes of storage for cereal grains, oilseeds, pulses and special crops; and provide an annual increase in throughput capacity of around eight million tonnes.

To give context to these investments, agricultural commodities (primarily grain) through the Port of Vancouver reached a new record high of 23.6 million tonnes in 2017, an eight per cent increase over 2016, representing the fourth consecutive year of growth. Overall cargo volume through the port reached a record high of 142.1 million tonnes, up five per cent from 2016.

With respect to the Port of Vancouver’s largest bulk export, that of coal, volumes made something of a recovery in 2017 to reach almost 37 million tonnes, 70 per cent of which was metallurgical coal. At Westshore Terminals, throughput for the year was 29 million tonnes (25.8 million tonnes in 2016) assisted by the recovery in coal prices which began in 2016 and was sustained through 2017. The terminal’s $270 million capital upgrade project is on schedule with two of the three new stacker reclaimers now in operation. The third stacker reclaimer is expected to be assembled during the second half of 2018 and will be operational in late 2018 or early 2019.

Another small development which has attracted local attention is the $32-million Vancouver Wharves “North Shore Diesel Handling Facility Expansion Project.” The project calls for construction of two additional fuel storage tanks and a rail track extension to accommodate 12 additional railcar unloading positions along with supporting infrastructure, all within the terminal’s existing footprint.

Turning to containers, the Port of Vancouver’s throughput in 2017 packed a heavy punch with an 11 per cent increase in throughput over 2016 to reach a record 3.3 million TEU, distributed between Global Container Terminals at their Deltaport and Vanterm facilities, along with DP World at Centerm and Fraser Surrey Docks. Deltaport remains Canada’s largest container terminal and in 2017, completed the Intermodal Yard Reconfiguration Project with delivery of 12 state-of-the-art rubber-tired gantry (RTG) cranes from Konecranes of Finland. In addition, the second stage of the multi-phased expansion, described as the Deltaport Terminal Road and Rail Improvement Project (DTRRIP), was completed. This included rearranging the existing two sets of four rail tracks into a single set of seven tracks; replacement of seven existing electric RMGs with eight new, modernized, electric CRMGs; the addition of mobile container handling equipment; and the addition of a new rail maintenance building

In anticipation of the era of Ultra Large Container Vessels (ULCV), in 2017, GCT Deltaport also took delivery of two high-efficiency “Megamax” Ship-to-Shore Cranes from Shanghai Zhenhua Heavy Industries (ZPMC). The impressive new cranes have 60 tonnes SWL and provide for 23+ container outreach.

If all this were not enough, there are two more VFPA strategic initiatives designed to enhance efficiency at the terminal. The first is the establishment of a truck staging facility at the intersection of Highway 17 and Deltaport Way, designed to ease truck queues at the terminal gates through more efficient staging aligned to reservation times. The new facility will have the capacity to accommodate up to 140 trucks, a secure vehicle access gate, a Commercial Vehicle Safety and Enforcement (CVSE) area for truck safety inspections and new access and exit ramps to and from Highway 17. The project is a joint partnership with the Government of Canada, the BC Ministry of Transportation and Infrastructure, and VFPA.

The other important initiative, the new CBSA-approved Tsawwassen Container Examination Facility, has been in the making for some time. The new facility stands on an 11.4-acre site on Tsawwassen First Nation (TFN) industrial lands and will supplement the long-standing “Stream Logistics” facility in Burnaby. The major gain will be a significant reduction in the inefficient flow of traffic across Metro Vancouver, purely for the purpose of container inspections. The project also translates into action the VFPA commitment to partner with TFN in identifying opportunities for cooperation. Funding of construction is provided by VFPA and Transport Canada while an operator will run and maintain the facility on a shared basis with CBSA. The facility is expected to be up and running in late 2019.

Back to the Vancouver inner harbour, on April 20 this year, the Centerm Expansion and the South Shore Access Projects received a project permit from VFPA following a review that began in late 2015. The project includes a series of both on and off terminal improvements to Centerm and to access roads. The permit includes 86 conditions, many of which relate to the avoidance of significant adverse environmental impacts. Centerm Expansion Partners (CXP), an unincorporated joint venture between Dragados Canada, Jacob Bros. Construction, and Fraser River Pile & Dredge, has been identified as the Design Build Contractor and contract negotiations are underway with a view to beginning construction later this year, subject to the issuance of permits. All going well, construction will be completed in early 2022 thereby increasing the terminal footprint by some 15 per cent and raising annual capacity from the current 900,000 TEU to 1.5 million TEU.

Looking further ahead, the VFPA-led Roberts Bank Terminal 2 (T2) project continues to wind its way through the regulatory review process. The Project is undergoing a federal environmental assessment by an independent review panel, under the Canadian Environmental Assessment Act, 2012 and also a review under the BC Environmental Assessment Act. Should the project be approved there will inevitably be conditions, but this will clear the way to seek the required permits and authorizations to allow for construction. The new three-berth container terminal would add 2.4 million TEU of container handling capacity and is predicted to be needed within the next 10 years based on throughput growth forecasts. Funding would be shared by VFPA and private investors.

One final issue related to container terminals is the installation of shore power infrastructure. In 2015, VFPA and the then federal government announced $12 million of funding, $7 million at Centerm and $5 million at Deltaport, for the installation of shore power at Deltaport Berth 3 and Centerm. As with the shore power at Canada Place for cruise ships, key to success was the negotiation of a favourable rate agreement with BC Hydro. We should also recall that the Port of Prince Rupert already offers shore power at Fairview Container Terminal berth 1.

The use of shore power is but one aspect of environmental impact reduction that West Coast ports and terminals are pursuing. Quebec City-based Green Marine has established a West Coast regional office in Seattle and several Canadian West Coast ports and terminals have signed up to the program. In addition to the major ports, the list of members includes, Global Container Terminals, DP World, Squamish Terminals, Fraser Surrey Docks, Pinnacle’s Westview Terminal (Prince Rupert), Neptune Terminals, Westshore Terminals, West Coast Reduction, Ceres Terminals, Kinder Morgan (Westridge) and Tidal Coast Terminals.

Returning briefly to Canada Place, the VFPA estimates that almost 900,000 cruise ship passengers will transit the facility in 2018 — an increase of seven per cent over 2017. Despite the by now well-documented restrictions presented by the air draft under the Lions Gate bridge, on September 30, the recently commissioned Norwegian Bliss, will be the largest ever cruise ship to make a port call and in 2019, both Ovation of the Seas and Celebrity Eclipse will home-port in Vancouver. Notably also in 2019, Cunard’s Queen Elizabeth will undertake a series of Alaska cruises from Vancouver, representing Cunard’s first appearance here for 20 years. Meanwhile, potential options for accepting today’s mega cruise ships at facilities outside of Burrard Inlet continue to be considered.

On a very different theme, and while many projects have lapsed, planning for the expanded export of oil and eventually LNG through B.C.’s ports is far from dead, even if a few are on life support. In addition to the much-in-the-news Kinder Morgan Westridge Terminal expansion project, Woodfibre LNG, WesPac Midstream on the Fraser River, the LNG Canada (Shell) project in Kitimat and Steelhead LNG’s Kwispaa LNG project off Port Alberni are all still in play as is Kitimat LNG and the WCC LNG export project under joint development by Imperial Oil and ExxonMobil in Prince Rupert which is also home to Pembina’s Prince Rupert LPG Export Terminal on City of Prince Rupert owned Watson Island. Building on the port’s pursuit of diversification, the terminal is expected to be in service mid-2020, subject to completing regulatory approvals. Finally, and still on the energy front, I would mention the Eagle Spirit Pipeline project, the context and subject of which I described in some detail in last month’s edition of this magazine.

It would be negligent not to mention another important project in Northern B.C., that of construction of a second berth at the Rio Tinto Alcan dock in Kitimat, formally known as the “Terminal A Extension Project.” Following completion of the $4.8 billion Kitimat Modernization Project in 2015 resulting in a 48 per cent expansion of production to 420,000 tonnes/year, the company has been using the previous Eurocan paper dock for aluminium export loading on account of the main smelter dock being fully occupied in receiving raw materials in the form of alumina, petcoke and liquid pitch shipments. With the formal sale of the Eurocan Dock to Canada LNG, additional berth capacity became a pressing need. In addition to the 250-metre wharf extension, the project includes a barge ramp, tug dock and laydown area in addition to extensive dredging.  

Turning to the breakbulk terminal sector in the form of Lynnterm East and Fraser Surrey Docks, the sector saw a two per cent increase in throughput over 2016 due to improved wood pulp exports and the growing movement of freight between the Lower Mainland and Vancouver Island being handled by Seaspan Ferries. The previously discussed developments at Fraser Surrey Docks along with much reduced capacity at Lynnterm has, as anticipated, translated into significant handling capacity challenges for steel imports but at the same time opened up further diversification opportunities for Squamish, and others, tied to creative trucking and transhipment agreements.

Finally, let’s not forget the never-ending drain on our pockets, that of our cars. Economic confidence provided the auto sector with a nine per cent throughput increase in 2017 over 2016. WWL Vehicle Services on the Fraser River somehow managed a third consecutive year of growth as their land footprint continues to operate at full capacity and at the mercy of rail fluency. Some of this pressure may be relieved by the recently announced plan by Nanaimo Port Authority, Western Stevedoring and their affiliate organization, the Auto Division of SSA Marine (SSA) to design, build, finance and operate a multipurpose breakbulk terminal at Nanaimo Assembly Wharf. The project calls for the development of a full Vehicle Processing Centre and Auto Terminal. First vessel calls are expected in Q1 2019.

In summary, despite several disappointments related to provincial LNG projects, there is clearly a great deal of other terminal development, expansion and modernization activity taking centre stage. The major challenge is to find a home for new projects given the lack of waterfront industrial land suitable for development, but also the competition for finance in support of another round of much needed infrastructure improvements. In the meantime, the trend towards diversification and alternative utilization of existing terminals seems certain to continue if we are to optimize what we have available to work with.

Captain Stephen Brown spent 21 years at sea where he served as Master for the last five years with Gearbulk Shipping. After coming ashore, he worked in various levels of operational management before going on to serve as Chamber of Shipping of BC Director (2000 to 2008) and President (2008 to 2016). Captain Brown is currently the owner of West Pacific Marine Ltd., Marine Consultancy. For more information, visit www.westpacificmarine.ca.