Pacific Coast Container Terminal Competitiveness Study - TP 14837E

 

 

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CHAPTER 2 - TERMINAL CUSTOMERS

 

 

 

 

 

Pacific Coast container terminals have three main categories of customers:  shipping lines, importers, and exporters. Knowing the needs of these customers allows us to assess the competitiveness of terminal services and prices.

2.1 Shipping lines

The marine terminals generally do not deal directly with private exporters or importers; they deal with shipping lines. Most terminals do not have customer service reps, sales offices or price lists for private importers and exporters. They expect shippers and receivers to go through shipping companies. The terminal locations for each of the three major shipping alliances and three independent shipping companies on the Pacific coast are shown in Exhibit 1. In the US, shipping and terminal operations are fully integrated, whereas in Canada the terminals are independently owned by financial institutions.

Exhibit 1 - Shipping Lines and Terminal Locations 2007¹

Shipping lines		Terminal locations
		Canada	United States
Alliances	CKHY	Vanterm, Fairview	LA, L.Beach (3), Oakland (2), Tacoma (2), Seattle
	New World	Centerm	LA (2), L. Beach, Oakland (2), Tacoma, Seattle
	Grand	Vanterm, Deltaport	LA
Independents	Maersk	Vanterm	LA, Oakland, Tacoma
	Evergreen	Deltaport	LA, Oakland, Tacoma
	China Ship	Deltaport	LA, Long Beach (2)

To maintain reliable schedules, shipping companies have organized their services into routes between the various container terminal ports. The routes are interrelated and changed only with input from all alliance partners, freight forwarders and major customers. Route choice is complex and fairly inflexible. On opening of the Fairview Terminal, CKHY Alliance members China Overseas Shipping (Cosco) and Hanjin agreed to make one stop per week in Prince Rupert continuing on to Vancouver and Seattle. Some of the CKHY Alliances’ Chicago customers agreed to be served via CN and Prince Rupert rather than by Hanjin’s Seattle, Oakland or Long Beach terminals and BNSF or UP Rail.

Different ships within the various shipping alliances can meet the trade requirements of particular routes. For example, barley for a brewery in Korea served by Hanjin can be placed on a vessel owned by another shipping alliance member Cosco vessel calling at Prince Rupert. Alliance members are allocated their own space on each ship to market and cooperate to provide joint port-to-port services.

The shipping lines compete with each other to attract customers by offering different service packages and their prices may vary.² For example, the free storage time, delivery time, container delivery and pick-up service, terms of payment and personal sales relationships may be different for Hanjin and Cosco even though the same ship is used.

The shipping alliances organize their routes or services such that the major Asian ports are served on a regular schedule. By coordinating their schedules they can provide more frequent regular service to the five US and two Canadian ports. For example, the Cosco ship Antwerp that first called on Prince Rupert is part of the CKHY Alliance’s Butterfly South Loop that includes nine container ships. The route provides weekly service in Hong Kong, Yantian, Qingdao, Dalian and Xiamin in China, Yokohama, Japan, Prince Rupert, Vancouver and Seattle.³

The shipping company representatives we contacted said their primary concerns with respect to Canadian terminals are relatively little competition between terminals in Canada and delays in environmental permits for terminal expansion. These issues affect their schedule reliability, customer service and costs. Inadequate competition may give rise to market allocations and price discrimination. On the other hand the need for larger ships, better terminal equipment, and state-of-the-art information systems is behind the trend toward consolidation of shipping services.

The number and average size of ships that called on the three Canadian Pacific Coast terminals during the period of August to December 2007 are summarized in Exhibit 2. This data was obtained by tabulating daily postings on Terminal Systems’ Pacific Gateway portal Website. The ranking by overall volume of shipping companies using each terminal is also shown in the exhibit. OOCL, the former owner of Vanterm and Deltaport, carries the greatest volume, about 17 percent of the total. K-Line and Hanjin each carry about 10 percent, Costco 9 percent and Evergreen 8 percent.

Exhibit 2 - Canadian Terminal Customers Aug–Dec 2007⁴

Deltaport

 

		Number of Ships	Average Ship Size (TEUs)
Line & Rank	1 OOCL	20	5,512
	5 Evergreen	20	5,556
	10 Zim	20	3,429
	11 ChinaShip	15
	13 NYK	3
	2 K-Line	2
	Largest		6,208
	Smallest		3,029
	Average		4,806
Total	5 Months	81	389,366
	Annual	194	934,478

Vanterm

 

		Number of Ships	Average Ship Size (TEUs)
Line & Rank	1 OOCL	19	5,568
	3 Hanjin	20	5,374
	4 Cosco	20	5,515
	12 Maersk	15	6,797
	Largest		6,978
	Smallest		4,253
	Average		5,831
Total	5 Months	70	408,187
	Annual	168	979,649

Centerm

 

		Number of Ships	Average Ship Size (TEUs)
Line & Rank	2 K-Line	20	5,512
	6 Hyundai	20	5,556
	7 APL	20	3,429
	8 MOL	15
	9 Yang Ming	3
	Largest		6,208
	Smallest		3,029
	Average		4,806
Total	5 Months	81	389,366
	Annual	194	934,478

 

 

 

Projecting the capacity of ships handled during the five-month period over the full year results in a total of 1.1 million TEUs for Centerm, 1.0 million for Vanterm and 0.9 million for Deltaport a total of 3.0 million TEUs per year. But the actual total handled is less than the capacity and the five months summarized are the busiest period of the year. The actual total for 2007 was 2.3 million TEUs, about the same as in 2006.

 

 

 

In the five-month period, Centerm handled the most ships, 90, compared with 81 for Deltaport and 70 for Vanterm. Ships calling at Vanterm were 21 percent larger than ships at Deltaport, and ships at Centerm were 10 percent larger than ships at Deltaport. Vanterm handled CKHY Alliance, OOCL, and Maersk ships that are bigger. Deltaport handled the small ships of Zim and Centerm handled the smaller ships of Yang Ming, bringing down their average size. The size of ships calling on the three terminals ranged from 3,029 TEUs Zim ship at Deltaport to a 6,978 TEUs Maersk ship at Vanterm.

The average size of ship received during the August to December, 2007 period was 5,280 TEU, about 11 percent larger than the 4,765 TEU average size on Asia Pacific services received at American President Line’s Los Angeles terminal in September 2007.⁵ In Canada, about 11 percent of the vessels, those of Maersk, NYK and Hyundai are larger than 6,000 TEU, whereas in Los Angeles and Long Beach 25 percent of the vessels are now over 6,000 TEUs capacity. Some much larger ships are in service and on order especially for the Asia to Europe service. However, K-Line recently ordered five new vessels each with a capacity of 6,400 TEUs for its Asia-North America service. Canada’s Pacific Coast average vessel size is still quite close to the LA and Long Beach average size of 4,900 TEUs.⁶

The proportion of larger vessels is increasing slowly but not fast enough to affect Canada’s container terminal competitiveness within the next few years. The largest ships, those of Maersk, averaging 6,800 TEUs call at the most compact terminal, Vanterm, indicating that there is room for larger ships of other lines as well. None of the container ships on Asia to North America routes have been scrapped in the past four years.⁷ The largest portion of the container ship fleet, 44 percent, is less than 4 years old; 25 percent is 5 to 9 years old and only 31 percent is more than 10 years old. Therefore, the ships serving the Pacific coast of North America can be expected to stay in service for many years.

Exhibit 2 does not include Fairview Terminals in Prince Rupert. Cosco began weekly service to Fairview Terminals on October 30, 2007, with a 5,400 TEUs capacity ship unloading 1,100 TEUs at the terminal with the balance unloaded at Vancouver and Seattle.⁸ Of the Prince Rupert terminal, and CN initial traffic, 85 percent is planned to be imports to the mid-west US with return traffic of empty containers and US crops such as soy beans. Containers loaded at Prince Rupert take away from the number that can be loaded in Vancouver and Seattle.

2.2 Importers

Container terminal operators consider their customers to be the major shipping companies. However, the actual customers for both the shipping companies and the terminals are major retailers and their freight forwarders, transload, warehouse, and distribution centre operators listed in Exhibit 3. This list includes all the terminals within 40 km of the marine terminals that we found. Terminals in Langley, Abbotsford and farther inland are not included. It would be worthwhile to gather further information about the services these terminals provide but this was beyond the scope of our report.

Exhibit 3 - Canadian Import Distribution Terminals 2007⁹

Container Yard	Owner	Affiliation	Truck Bays	Throughput in 2007 (1,000 TEU)
HBC Logistics	The Bay	Zim, Hyundai, Cosco	100	45
Maersk Distribution, Delta	Maersk	OOCL, K-Line, CN	60	25
Direct, Richmond		K-Line, Hanjin	60	20
Ikea	Ikea	Maersk	40	15
West Can Ex, Richmond			40	12
Schenker Stinnes, Delta		Hyundai, CN, CF	24	10
Lawrence, New West		Hanjin, Cosco	22	8
Van Truck, Richmond		Maersk, Zim, OOCL, PIL	20	8
Canadian Tire	Can Tire		20	8
3P Logix, Richmond		Evergreen, OOCL, CS	20	8
Squamish & Comox Freight			20	6
Interstate, Delta			16	5
PBB, Richmond		PIL, EMP	16	5
Container World, N West		OOCL, Hapag	12	4
TDK Logistics, N West		Cosco, Maersk Evergreen	12	4
Lyndon, Delta			12	4
A Group Cargo, Richmond		Evergreen, NYK	12	4
Leader Cold, Richmond		Hapag	12	4
CRSA Pacific CR, P. Coq	Sear		10	3
Tak Logistics, Delta			10	3
Interactive, Richmond		Hyundai, MOL	10	3
AMJ Campbell		APL	10	3
Nitro, Richmond		YM, Hyunai	10	3
Bunzl, Delta			8	2
PMK Logistics, Delta		Maersk, MOL, Evergreen	8	2
Can Alliance, Richmond		Zim, CN	8	2
McKenna Logistics, NW		Cosco, Hanjin, CN	8	2
CHEP, New West		OOCL	8	2
Interline, Surrey		Mitsui, Hanjin	4	2
JR Hall, Delta		APL	4	2
CP Rail, Pitt Meadows	CP		0	5
CN Rail, Surrey	CN		0	1
CN Rail, Edmonton	CN		0	0
BNSF, Surrey	BNSF		0	0
Other			40	20
Total transloaded				250
Direct shipment by truck				120
Direct shipment rail				730
Total			656	1100

 

 

 

The terminals and the shipping companies work together to keep the major retailers satisfied and maintain their business. These customers could switch to another shipping firm if they get better service and prices from competitors. The total throughput of these import distribution terminal is 1.1 million TEUs per year about half the total import, export and empty container throughput. Key services are provided by import warehouses such as bonding, customs clearance, storage, sorting, transport, and distribution services. Some of these warehouse services are provided by shipping companies or their affiliated companies. Others are provided by the importers or their affiliated companies. Independent companies are also very important in providing these services.

 

 

 

The largest multi-client distribution centre in Western Canada is Maersk Distribution, located in Delta. Maersk has 60 truck bays and serves large retail clients, including Ikea, Home Depot, Walmart, Canadian Tire and Sears. Maersk designs systems to reduce lead times and inventory costs by tracking and speeding up deliveries. For some clients they sort, palletize, and bar code goods to allow them to be shipped directly to specific retail stores.

Another major terminal customer is Schenker Stinnes Logistics with 400 locations around the world. Schenker reduces the time for delivery of parts using automated labeling and order filling. Another major distributor, Sylvan Distribution, related to 3P Logix, brings containers from Deltaport to its warehouse in Richmond, sorts the contents and sends them out to the Brick, the Gap, and other retail stores.

In Canada there are more than 30 transload facilities near the ports, whereas in Los Angeles and Long Beach there were only a few very large transload facilities near the port. In LA/LB more containers are delivered to the customers directly and more transloading is done outside the port area. Four transload warehouses in the Port of LA for the retail clothing industry, called the Port of Los Angeles Distribution Center, were much larger than anything in Canada: FMI 4,000 m2 with 60 truck bays, Advanced Quality Logistics, 4,000m2 with 60 truck bays, MJO Distribution 4,000 m2 60 truck bays and Nippon Express 2,000 m2 with 40 truck bays. These companies provide international cargo management, customs documentation, warehousing and distribution services.

For example, FMI offers garment hangers service, Web-based tracking, transload, deconsolidation, labeling, customized reports, automated billing, and other services to companies such as Jones Apparel, Polo Ralph Lauren, Mamiye Bros., and Federated Merchandising Group. The buildings used by these import distributors are leased to them by the port. Containers from all of the marine terminals in the area arrive at these warehouses and are stored, unloaded, and transferred into trucks for distribution throughout California.

The only other transload facility observed near the Long Beach and Los Angeles marine terminals is California Cartage, Container Freight Station, Wilmington, with approximately 40 bays in and out and is shown in Exhibit 4. Containers from many shipping lines and some major distributors were observed. JB Hunt, Knight Transportation and many other truckers use the terminal and there were no lines observed.

Exhibit 4 - Import Distribution - California Cartage, Port of Long Beach¹⁰

 

In the Seattle Tacoma area one of the largest import distribution centres, 200,000 m3 is operated by the major US retailer Target. Some of the import transload companies are: MacMillan Piper, Mid-Columbia Warehouses, Pacific Coast Container, Puget Sound International, South Sound Transload, Tri-Pak, United Warehouse Company, and Western Cartage.

The breakdown between rail and truck transportation for imports is provided in Exhibit 5. In Canada, 68 percent of the import containers are moved close to their destination by rail, compared with only 50 percent in Los Angeles and Long Beach. In the US, a much greater proportion of the containers is delivered directly by truck partly because of the greater population near the ports. In Los Angeles and Long Beach, 18 percent of the containers are trucked to off-dock rail transload yards, whereas in Canada, Canadian Tire is the main importer using this transport combination.

In transload facilities products are transferred from 40-ft. long by 8-ft. wide by 8-ft. or 8.5-ft. high marine containers into 53-ft. long by 8-ft. wide by 9.5-ft. high domestic containers. Two 53-ft. domestic containers contain the same freight as three 40-ft. containers. Although importers pay more for transloading they save about 30 percent on the rail freight.

Exhibit 5 - Import Transportation Modes % 2006¹¹

Mode		Los Angeles12/Long Beach13	Seattle/Tacoma14	Delta/Vancouver15
Rail	Direct by rail to remote transload yard	25		66
	Via on-dock rail transload yard	4		0
	Via off-dock local rail transload yard	3		0
Truck & Rail	Via off-dock rail intermodal yard	18		2
	Subtotal rail	50	67	68
Truck	Direct by truck	43		11
	Via truck transload depot	7		21
	Subtotal truck	50	33	32
Total		100	100	100

In Vancouver and Delta the transload facilities are all off-dock. CP and CN intermodal yards in Coquitlam and Surrey are far from the marine container terminals and do not transfer contents of international containers into domestic containers or trucks. Their primary function is to load 53-ft. domestic containers on and off rail cars. In Los Angeles and Long Beach 4 percent of the containers are transloaded on the dock. International containers may also be trucked to UP or BNSF consolidation facilities close to downtown LA, San Bernadino or East Los Angeles.

Large retailers such as Walmart, Home Depot, the Bay and Canadian Tire and freight forwarders such as Maersk, Direct, and Schenker transfer most cargo from the 40-ft. international containers to the larger 53-ft. domestic containers. Goods are sometimes stored for a short time in warehouses where labels and hangers may be added and loads made up for orders by specific retail stores. HBC Logistics, a subsidiary of Hudson’s Bay Company, has the largest distribution centre in Vancouver, importing 50,000 TEUs per year that it transfers from international containers into its own fleet of 5,000 domestic containers for shipment to distribution centres in Calgary and Toronto.¹⁶ Almost all these containers are used to carry domestic freight from Toronto back to Calgary or Vancouver.

Similarly Canadian Tire has a distribution terminal in Port Coquitlam operated for it by Canadian Fastfrate. Import containers are sorted into domestic loads for distribution centres in Calgary, Edmonton, and Brampton. Canadian Tire has a fleet of 2,300 domestic containers, a 300,000 m² warehouse in Brampton, ON and a 100,000 m2 warehouse in Calgary. About 80 percent of the 700 international containers arriving each year for Canadian Tire in Vancouver are transferred to 53-ft. containers, trucked to CP’s Intermodal yard in Coquitlam, and shipped to Toronto by rail. The other 20 percent of the international containers are trucked directly to the Calgary warehouse.

In Vancouver and Delta the empty containers are returned to the three marine terminals or to one of ten container storage yards. These yards seem to have specific shipping company customers as discussed in the Marine Terminal Service Quality section of this report.

In October 2007, APL introduced the first 53-ft. long international shipping containers for selected customers such as Toys-R-Us in the US. The company expects the use of 53-ft. containers between Asian suppliers and North American customers will rapidly increase.¹⁷ This change will eliminate a lot of transloading and associated costs.

In Canada, importers try to receive their goods in the day time because their freight rate from the shipping company is based on day time terminal rates. If they were to accept evening or Saturday deliveries they would have to pay extra for terminal services. Therefore, most import receiving warehouses are not open in the evening. Truck drivers prefer not to pick up and deliver containers then because they would need to leave a chassis behind and take unpaid time to pick up their next import container. Some of the Canadian import terminals are smaller than those in the US and may not be able to afford longer operating hours.

In conclusion, US importers receive more shipments directly from their Asian suppliers without intermediate unloading and reloading operations. The marine terminals in Los Angeles and Long Beach are organized to serve trucks quickly and efficiently. In the US there seem to be much larger distribution centres and service suppliers. In Canada, a higher proportion of containers is taken away from the terminal by rail than by truck and rail service is given a higher priority. The import service suppliers seem more diverse and smaller.

2.3 Forest products exporters

Forest products are the leading containerized exports for Vancouver/Delta and Seattle/Tacoma as shown in Exhibit 6. Waste paper is the leading containerized export from Los Angeles and Long Beach but this is loaded into containers close to the source and not near the marine terminals. Many of the 37 pulp and paper mills in British Columbia, Alberta and Saskatchewan ship bales and rolls by box car to warehouses in the Vancouver area and 40 percent of these are transloaded into containers for export. Lumber and panel board exports are brought to Vancouver by truck, boxcars or flatcars and are transferred to containers at transload facilities. At Centerm 40 percent of containerized exports arrive by rail and 60 percent arrive by truck. There appear to be opportunities for increased source loading of forest product containers.

Exhibit 6 - Containerized Exports 2007¹⁸

Product	Value $1,000/TEU	Number of exporters in Canada	Vancouver Fraser TEUs/y	Seattle & Tacoma TEUs/y
Pulp, paper & waste paper	8	20	340,000	200,000
Lumber, panels & wood products	8	20	190,000	50,000
Agri crops-Peas, beans, barley	4	100	90,000	180,000
Animal feed – hay, alfalfa pellets	2		70,000	100,000
Metals – lead, zinc, copper, alum	40	2	30,000	20,000
Metal scrap	5		50,000	20,000
Chemicals	12		20,000	90,000
Machinery & equipment	26		40,000	90,000
Food, drinks, meat & fish	30		50,000	70,000
Electronic & science equipment	48		0	30,000
Other			70,000	100,000
Total			950,000	950,000

 

 

 

In October 2007, CN opened a new Intermodal yard in Prince George with two 730 m tracks and an 8,000 m² warehouse. The new facility is expected to provide lumber, panel, wood pulp, paper, metal concentrate, and chemical backhaul container traffic to Asian markets via the new container terminal in Prince Rupert. CN will provide various freight forwarding services, including product transfer, inspection, consolidation, inventory control and transportation.¹⁹

 

 

 

About 70 percent of the products shipped from BC’s and Alberta’s 80 forest products manufacturers to Asia and Europe use containers. Export transload facilities close to Vanterm, Centerm and Deltaport respond quickly to customers’ orders, pickup the right empty containers, and fill available slots on the scheduled container ships. Products are trucked to Vancouver and stored in open yards or warehouses where customers’ orders are assembled to specifications. The warehouse dispatches a truck, often independently owned, to the on-dock terminal or storage yard to pick up an empty container. It is filled and returned to the on-dock terminal.

Some of the largest forest products transload facilities are listed in Exhibit 7. There are eight large lumber and panel board transloading facilities mostly in Surrey and Richmond. Each of the terminals seems to serve one or two major forest companies as well as other smaller companies. Most receive lumber and panel board by truck. The largest transload terminal, the Surrey-based Westran Intermodal, was established in 1983 to provide BC mills access to BNSF. Its main clients are West Fraser, Weyerhaeuser, Aspen Planers, Abitibi Consolidated and Dunkley Lumber. Westran has 14,000 m2 of warehouse space for pulp, panel board and lumber sheds, a Web-based customer inventory and shipping information system and more than 200 rail cars most with Westran’s own patented design.

Almost equal in size to Westran is the Richmond-based Portside Terminal, an affiliate of Canadian Forest Products (Canfor), BC’s largest forest products company. Container shippers from this terminal include Zim, Hanjin, and APL. Portside terminal is also used for bulk rail shipments to the US. Canaam, South Fraser Container and Apex are three other major lumber transload terminals. Canaam receives lumber and plywood by truck and puts them into its own international containers. Canaam’s customers include Downie Timber, Federated Coop, Wood Ex, Abitibi Consolidated, Canfor, and Dunkley Lumber. South Fraser Container Terminal has a 5 acre site, many BC customers and at least one US customer, Patrick Lumber in Portland, OR.

Catalyst Paper exports pulp and is also the largest paper exporter from Vancouver. They have a 30 bay 80,000 m² warehouse in Surrey for loading trucks bound for the US and international shipping containers for Asia. Catalyst uses its own containers made by ISC, Triton, and GVC rather than ones owned by an international shipping company. Pulp and paper are transloaded by Catalyst Paper, Coast 2000 in Richmond, and Eurasia, in Burnaby. Eurasia receives pulp from mills in BC, Alberta and Saskatchewan and stores it in a 28,000 m² warehouse. A maximum of 25 tonnes is put into a 40-ft. container. Some of the contracts are with the pulp manufacturers, others are with brokers or shipping lines.

Exhibit 7 - Forest Products Export Facilities in 2007²⁰

 

Container Yard		Owner	Customers	Shipping Company	1,000 TEUs/y
Pulp, paper & waste paper	Catalyst Paper, Surrey	Catalyst			50
	Coast 2000, Richmond	SSAM		OOCL	40
	Eurasia, Burnaby				30
	TMS, Surrey				20
	Other –  pulp & paper mills in BC, Alberta & Sask.				200
	Subtotal				340
Lumber	Westran Richmond	Ferraro	W Fraser, Weyerhaeuser	OOCL,K-L	35
	Portside, Richmond		Canfor	MOL, NYK	30
	Apex, Surrey		W Fraser, Tolko, Gorman	Mitsui, NYK	25
	S Fraser Container, Surrey		Dunkley, Tolko, Carrier	OOCL	20
	Canaam Group, Richmond		F Coop, Abitibi, Downie		15
	Annacis Reload, New West		Tolko, Dunkley, Adams L.		10
	Pac Gateway, Richmond		Pope & Talbot, WG, WFP		10
	S&R, Langley		Weyerhaeuser		10
	Lynterm, North Vancouver	SSAM	Canfor, Tolko, Interfor	NYK, K-Line	5
	Downie, Richmond		WFP, Canfor, TW	OOCL	5
	Tower Transload		Canfor		5
	Other				20
	Subtotal				190
Total					530

Some of the other sources of containerized pulp and paper are the inland mills located in Prince George, Quesnel, Kamloops, Castlegar, Crestbrook, Chetwynd, Taylor, and MacKenzie, BC and Grande Prairie, Hinton, Slave Lake, Whitecourt, Peace River, and Athabasca, Alberta, and Prince Albert and Meadow Lake, Saskatchewan. There are several paper recyclers in Metro Vancouver that export in containers.

In conclusion, more than two thirds of forest products exports are now containerized and this trend is likely to increase with the new terminal in Prince George. Containerization has contributed to higher quality of forest products exports and a decline in traditional break bulk handling. Multiple companies compete to provide container loading services.

2.4 Food exporters

The vast crop growing region of the Prairie Provinces includes approximately 20 million hectares extending from Winnipeg in the East to the Alberta foothills in the Southwest and up to Peace River in the Northwest. Some 337 rail delivery points service approximately 75,000 farmers.²¹ Three quarters of the crops are delivered less than 80 km from the farm to a railhead.²² CP has 191 delivery points; CN has 146. There are 23 delivery points with both CP and CN. Total crop exports are about 30 million tonnes per year as shown in Exhibit 8. About half of these exports are to Asia.

Exhibit 8 - Canadian Agricultural Crop Exports - August to August, 2003-2004 and 2006-2007²³

		Weight (Kt)		Price ($/t)		Sales ($million)
		2003	2007	2003	2007	2003	2007	Growth
Grains & Oilseeds	Wheat	5,615	12,853	125	153	700	2,000	1,300
	Canola	2,346	5,015	233	244	550	1,200	650
	Durum wheat	2,923	4,100	148	162	430	660	230
	Oats	549	1,479	124	128	70	190	120
	Barley	317	1,102	125	130	40	140	100
	Soybeans	449	981	202	227	90	220	130
	Flaxseed	532	508	227	214	120	110	-10
	Corn	34	193	91	126	3	20	17
	Subtotal	12,765	26,231	157	170	2,003	4,540	2.537
Agri-foods	Dry peas	1,316	2,300	175	190	230	440	210
	Lentils	367	600	420	375	150	140	-10
	Dry beans	344	290	495	585	170	170	0
	Chick peas	74	150	330	495	20	70	50
	Mustard Seed	121	135	390	465	50	60	10
	Canary seed	165	180	345	350	60	60	0
	Sunflower seed	96	110	405	440	40	50	10
	Buckwheat	5	3	355	370	2	1	-1
	Total	2,488	3,768	289	287	722	991	269

 

 

 

The Canadian Wheat Board has exclusive jurisdiction over the purchase and sale of wheat, durum wheat and barley grown in Western Canada for human consumption, about 60 percent of the overall export crops. Domestic animal feed is not controlled by the Canadian Wheat Board. Grain companies purchase grain on behalf of the Canadian Wheat Board when farmers deliver the grain to their elevators. There are numerous types of grain and within each type, many different grades, protein levels, and other specifications. The board allocates orders to grain companies and accounts for the differing specifications in allocating rail cars, transporting the grain, storing and loading it at the port. A recent survey of 500 industry stakeholders and experts found this cooperative marketing system is vulnerable to foreign competition (64 percent agree or strongly agree).²⁷

 

 

 

The grain companies compete against each other for farmers’ business using service incentives such as paying for the cost of trucking to their elevator or lowering the cost of inputs. The Canadian Wheat Board sets an initial price at the elevator, which is adjusted during the crop year with a final adjustment after the crop year has ended. The grain companies are paid for the grain once it is delivered to the port. The peak shipping period is October through March.

In the 2006-2007 crop year, 2.1 million tonnes of crops were exported in containers from Vancouver and Delta. This is 13 percent of the total crops exported from Vancouver, Delta and Prince Rupert and half of exports outside the control of the Canadian Wheat Board. If half of all crop exports were containerized this would be an increase from 90,000 to 330,000 TEUs per year, about equal to the number of empty containers per year leaving the Port of Vancouver.

The US has a significant lead over Canada in direct marketing of agricultural products by private companies that load containers close to the farm. Containerized agricultural exports from Seattle and Tacoma are about double those from Vancouver. Containerized shipments of grain to Asia from the US have increased to 400,000 TEUs in 2007 and are up 80 percent year on the year.²⁸

There are approximately 21,000 special crop producers in the three prairie provinces – 14,000 in Saskatchewan, 4,500 in Alberta and 2,500 in Manitoba. The major special crops grown in Western Canada include: peas, lentils, beans, mustard seed, canary seed and sunflower seed as shown in Exhibit 8. Peas are the fastest growing segment of the market. Specialty crops exports from Canada are valued at $1.0 billion per year in 2007 and are growing at a rate of 7 percent per year with stable prices Specialty crops are about a fifth of Canada’s grain and oilseeds exports of $4.5 billion.

With the advance of information and communication technologies, crop buyers increasingly want to trace the source of their purchases.²⁹ They want shorter purchase agreements, typically 90 days, smaller 5 to 20 rail car lots, and fast deliveries. With bulk shipments highest quality products are blended with lower quality ones taking away buyer choice. With container shipping, buyers gain a competitive advantage with quality and product attributes such as the origin of the product, organic certification, genetic purity, specific protein content, or baking quality.³⁰ Canadian agri-business provides packaging, seals, single point loading, cleaning, weighing and grading. However, customers complain seeds, peas and lentils crops have often deteriorated during transport.³¹

Pulse Canada, an industry association for food suppliers to customers in Asia, considers improved transportation as critical to meeting customer quality needs.³² Source loading maintains quality by speeding deliveries, avoiding double handling, and reducing the cost of bulk shipping.³³ The shipping time for wheat to off-shore customers is about 21 days in containers, compared with 97 days for bulk shipments, including waiting time at the grain elevators.³⁴ Due to customer demand and decreasing costs containerized exports of traditional bulk agricultural commodities has continued to increase.

In Canada most containers are filled near the port. Exhibit 9 lists the nine terminals in the Vancouver area each with sidings for about 10 hopper cars and a conveying system to transfer peas, lentils and grains into silos or directly into containers. There are also some smaller operators. Twenty-foot containers are tilted upwards and filled from the end. They are then vibrated to ensure they are packed tightly before the door is closed. The containers are then transported with minimum storage time to Deltaport, Vanterm or Centerm for export. Correct transfer timing is critical to profitability because CP and CN allow only two days before charging demurrage and if a car stays an extra day the operation may become unprofitable.

Exhibit 9 - Crop Export Loading 2007³⁵

 

 

 

Wheat

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Westnav	Barber	Canada Wheat	Ever, Hyundai, APL	3
Columbia	Ferraro	Canada Wheat	Hanjin, Cosco, K-Line	3
Subtotal				6

Barley

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Columbia, Vancouver	Ferraro	Rahr, Prairie Malt	Hanjin, Cosco, K-Line	8
Coastal, Vancouver	Castle	Canada Malt	Hanjin, NYK	6
Westnav, Surrey	Barber			5
W Transload, N West				4
Source load – CN-Rail				6
Source load – CP, Rail				4
Subtotal				33

Peas, beans, lentils, seeds

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Westnav, Surrey	Barber	Alliance, Great West	Ever, Hyundai, APL	12
Columbia, Vancouver	Ferraro		Hanjin, Cosco, K-Line	8
EBN, Richmond		Alliance	ChinaShip, Cosco, ZIM	8
Global,Surrey(Agrolink)	Sangha			6
Source load – CN Rail		Western, ProCan, Sun		6
Source load – CP Rail		L&R, Bean, Simpson		6
Subtotal				46

Canola

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Parish & Heimbecker	P&H		Cosco, China Ship	2
Columbia	Ferraro			2
Subtotal				4

Oats

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Coastal				1

Total Container Exports

Container Terminal	Owner	Customers	Shipping Company	100 TEUs/y
Total				90

 

 

 

The top three containerized crop exporters from the Port of Vancouver are Cargill, Canada Malting and Parrish and Heimbecker. Cargill Inc, part owners of Prairie Malting, exports through the Columbia Container terminal. Canada Malting, Calgary, owned by Castle Harlan Investment Group, New York, and CHAMP Private Equity of Australia owns Coastal Containers’ transload terminal. The two transload terminals are located close together on private waterfront land near the marine container terminals and are served by CP.

 

 

 

Parrish and Heimbecker, based in Winnipeg has customers in Vietnam, China, and other parts of Asia. It has a container transload facility in Surrey for canola and canola meal and has begun container loading at its Alliance Terminal in the Port of Vancouver. Parrish and Heimbecker, Paterson Global Foods, also of Winnipeg, and four Saskatchewan grain terminals purchased the Alliance Terminal in July 2007 for $40 million after Viterra (formerly called Saskatchewan Wheat Pool) was forced to sell it by Canada’s Commissioner of Competition.³⁶

About 46,000 TEUs per year of peas, lentils and beans are shipped from Vancouver, making these “pulse” crops Canada’s leading containerized agricultural export. At 22 tonnes per TEU, this is 1,000,000 tonnes per year. There are about 40 processing plants large enough to ship peas and lentils by rail.³⁷ Most are located in Saskatchewan with a few in Manitoba and Alberta. The largest exporting company is Alliance Pulse Processors Inc., Regina, (formerly Saskcan Pulse and Agtech). The company has four processing plants in Saskatchewan and one in North Dakota with a total capacity of 200,000 t/y.³⁸ Viterra Inc., is the next largest with plants in Regina, Lethbridge and Medicine Hat. Parrish and Heimbecker, Winnipeg and Lethbridge, is another major processor. All three companies use both CN and CP.

Other major pea exporters on CN are Western Grain, Saskatoon, Sunrise Foods, Saskatoon, Walker Seeds, Tisdale, SK, and Great Western Grain, Lloydminster. Major peas exporters on CP are Simpson Seeds, Moose Jaw, Weyburn Inland Terminal, Weyburn, Bean & Company and Lily and Rose, Regina. Container shipments are economic from Saskatoon and Regina but the plants in smaller towns are usually served by hopper cars that are transloaded in Vancouver.

Malt barley is the second leading containerized agricultural export from Vancouver. This product must be handled delicately to reduce damage to the kernel that can come from handling the grain. About 33,000 TEUs per year of malt barley is exported mainly from two malt plants in Alberta, one in Saskatchewan and one in Manitoba. Exporters bring 80-tonne hopper cars to transload facilities in Vancouver or Surrey. Malt-grade containers are readily available in Vancouver evenly split between 20- and 40-ft. containers.

Westnav, located in Surrey, is the largest crop transload terminal in Vancouver. It has an 8,000 m2 warehouse and 3 ha of paved yard. Its main throughput is peas but it also handles barley and some wheat for a broker working for the Canadian Wheat Board. Westnav also offers custom bagging of bulk materials.

EBN Grainco, Richmond, loads peas and lentils from CN or CP hopper cars into containers. About two thirds of the containers are human food grade 20-ft. long containers. The peas are exported mainly to China where starch is extracted to make noodles and the lentils are exported mainly to India. In Surrey, Global Agriculture transloads peas, lentils, chick peas, flax seed, and canary seed from hopper cars into containers. It has bagging equipment for part of its product.

Columbia Container, privately owed and located on the waterfront in the Port of Vancouver, is the second largest export crop transload terminal in the Vancouver area. Columbia’s main business is peas, lentils, and barley but they also are starting to handle some wheat for the Canadian Wheat Board. Columbia unloads mainly CN cars into silos and then fills them into 20-ft. containers. It seems part of the success of this business depends on the exporters supplying their own containers purchased or leased from the container manufacturer Triton International. The other containers used by Columbia are from Hanjin, Cosco, China Shipping, and K-Line.

In 2005, Marine Container Services, Montreal, invested $1.5 million in a 16 ha two-loader container terminal in Moose Jaw with support from farm equipment maker John Deere and CN. Marine Container has developed equipment to load containers directly at the farmer’s combine to produce registered identified source loaded products. The group planned to bring containers to Moose Jaw by truck from CN’s Saskatoon intermodal yard and CN and China Shipping agreed to take 50,000 TEUs to China via Deltaport. However, due to extreme cold weather on startup, competition from CP, and limited financing, the loading equipment has been removed.

In conclusion, crop exports have more than doubled in the past four years and containerized exports have contributed to this growth. Most of Canada’s crop exports are controlled by the Canadian Wheat Board, whereas in the US there is more direct marketing of agricultural products by private companies. However, relatively small food companies such as Paterson Global Foods and Parrish and Heimbecker have recently made investments to make crop transportation more competitive for the benefit of farmers. Increasing use of containers has the potential to improve product quality and greatly speed delivery times.

2.5 Other exporters

Metal concentrates, chemicals and scrap metal are three other exports that have changed from bulk shipments to a significant proportion of containers. A partial list of examples of such exporters includes Teck Cominco, IDC Distribution Services, Dow, Nexen, and Pacific Coast Recycling. Teck Cominco ships lead and zinc concentrate from mines in Alaska and BC in 20-ft. shipping containers with a payload of 22 tonnes. It has its own 20-ft. containers and a storage yard in Delta with about 300 containers in storage. Teck Cominco back hauls lime in the containers and glycol in special tanks mounted inside 20-ft. container frames. IDC ships copper concentrate from the Fraser Surrey terminal.

Dow Chemical, Edmonton, ships bulk polyethylene to Vancouver in its own 100-tonne hopper cars and transloads it into containers to meet the required shipping time widows. Bagged polyethylene is source loaded at its Edmonton plant. Nexen Chemicals, near Edmonton, ships sodium chlorate in bags packed into containers.

Pacific Coast Recycling located beside the Hanjin container terminal in the Port of Long Beach loads some scrap metal into containers, although they also have a berth for bulk loading.

Many more small-scale Asian importers are looking for concentrates, chemicals, and scrap metals for their businesses. It seems likely that these products will follow the rapid growth trend of containerized forest product and agricultural crop exports.

 

 

¹ Source: Compiled by Hanam Canada

 

 

² OOCL News Release. http://www.oocl.com/eng/pressandmedia/pressreleases/2007/1aug07.htm

³ Prince Rupert Port Authority Press Release, October 31, 2007. http://www.chamber-of-shipping.com/index/news-app/story.1214

⁴ Source: Compiled from Terminal Systems Inc., Pacific Gateway Portal data
Photos: Hanam Canada

⁵ Eagle Marine Services, Los Angeles, September 26, 2007. http://www.eaglemarineservices.com/html/vesselschedule_ggs.html and http://www.nol.com/

⁶ Mercator Transport Group., Bellevue, WA February 22, 2005. http://www.portoflosangeles.org/DOC/Report_SPB_Vessel_Forecast.pdf

⁷ Clarkson Research, Container Intelligence Monthly, October 2006.

⁸ Chamber of Shipping, October 31, 2007. http://www.chamber-of-shipping.com/index/news-app/story.1214

⁹ Source: Site visits and phone calls by Hanam Canada

¹⁰ Photo: Hanam Canada

¹¹ Source: Compiled by Hanam Canada

¹² Port of Los Angeles Shipping Handbook, 2006/2007

¹³ Wilbur Smith Associates, Multi-County Goods Movement Action Plan, October 6, 2006. http://www.mta.net/images/Final TM3 100606.pdf

¹⁴ Rocky Mountain Institute, Snowmass, CO Port Innovation Workshop Final Report, April 2007. http://wwwcascadesierrasolutions.or/downloads/css_library/RMII_Workshop.pdf

¹⁵ Cliff Stewart, VP Operations, Centerm, DP World, Vancouver, “Proceedings of the Standing Committee on Transport and Communications, Evidence March 14, 2007”. http://www.parl.gc.ca/

¹⁶ Marinova Consulting et al, Use of Containers in Canada, Transport Canada, 2006. http://www.tc.gc.ca/pol/EN/report/acg/containers2006/ExSum.htm

¹⁷ APL-NOL, News Release, October 30, 2007. http://www.apl.com/press_releases/html/press_release_20071030.html

¹⁸ Source: Calculated from Port data

¹⁹ Progressive Railroading, October 16, 2007. http://www.progressiverailroading.com/freightnews/article.asp?id=11554

²⁰ Source: Compiled by Hanam Canada

²¹ Ward Weisensel, Canadian Wheat Board, Letter to the Canadian transportation Agency, March 23, 2007. http://www.cwb.ca/public/en/hot/rail/pdf/cwbintervenerapp.pdf

²² Campbell and Associates, Winnipeg, Push of Pull? Supply Chain Challenges for Prairie Pulse and Special Crop Exports, March 1998.

²³ Source: Agriculture and Agri-Foods Canada²⁴, Grains Canada²⁵ US Department of Agriculture for Grains & oilseeds prices.²⁶

²⁴ Agriculture and Agri-foods Canada, Market Analysis Division, Winnipeg, MB. http://www.agr.gc.ca/mad-dam/index_e.php?page=intro

²⁵ Grains Canada, Winnipeg, MB. http://www.grainscanada.gc.ca/

²⁶ US Department of Agriculture. http://usda/mannlib.cornell.edu/usda/current/AgriPriSu/AgriPricSup-07-20-2007_revision.pdf

²⁷ Compas Inc., Opinion Poll, Report to Agriculture and Agri-Food Canada, August 15, 2006, p. 107. http://www.agr.gc.ca/info/consult/cgc-ccg/pdf/compas_cgc_e.pdf

²⁸ US Department of Agriculture, Transport Service Branch, Grain Transportation Report, December 20, 2007. http://www.ams.usda/tmtsb/grain/2007/12-20-07.pdf

²⁹ Lach Coburn, Cargill Ltd. The Challenge for Grain, Seminar Record, Vancouver, June 20, 2005. http://www.bcmarine.org/~bcmarine/wmc/A - /The Challenge for Grain Seminar Summary.pdf

³⁰ Shon Ferguson and Simon Weseen, Agricultural Economics, University of Saskatchewan, Organic Grain Marketing Guide, December 2005. http://organic.usask.ca/reports/

³¹ Doug Campbell, Agri-business Strategist, Proceedings of the Standing Senate Committee on Transport and Communications, March 13, 2007. http://www.parl.gc.ca/39/1/

³² Pulse Canada, Winnipeg, MB. http://www.pulsecanada.com/transportation

³³ April Taylor, Economist, Transportation Services Branch, US Department of Agriculture, as reported by Dr. Barry Prentice, Transport Institute, University of Manitoba, 9th Annual Fields on Wheels Conference, Winnipeg, November 23, 2004. www.umanitoba.ca/faculties/management/ti/media/9thFOW.pdf

³⁴ Dr. Barry Prentice, University of Manitoba, Transportation Research Forum, Philadelphia, PA, October 1998. http://www.umanitoba.ca/faculties/management/ti/media.Re-engineering_Grain_1998.pdf

³⁵ Source: Compiled by Hanam Canada

³⁶ Viterra Quarterly Report, September 7, 2007. http://www.swp.com/

³⁷ Saskatchewan Pulse Growers. http://www.saskpulse.com/

³⁸ Yahoo Finance, December 10, 2007. http://cf.us.biz.yahoo.com/cnw/071210/agtech_name_change.html?.v=1

 

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