Record Prince Rupert volume shows staying power of US diversions

Bill Mongelluzzo, June 11, 2015, JOC.com

The Port of Prince Rupert hit a monthly record for volume with container volume increasing 45.6 percent over May 2014. This development indicates that cargo interests who diverted shipments from U.S. West Coast ports last year due to congestion and labor problems have remained loyal to the Canadian port, at least for now.

Prince Rupert in May handled a total of 74,881 20-foot container units. Imports, at 39,985 TEUs, were up 35.7 percent and exports, at 34,896 TEUs, were up 59 percent from May 2014. Year-to-date, Prince Rupert’s total container volume is 42.8 percent higher than during the first five months of 2014.

 

The Prince Rupert Port Authority opened its Fairview container terminal in September 2007. Located 500 miles north of Vancouver, Canada’s largest port, the tiny town did not appear to be a likely candidate as a gateway for North America’s trade with Asia.

 

However, Canadian National Railway has direct service from Prince Rupert to Chicago, Memphis and New Orleans. When China Ocean Shipping Co. initiated service from Asia to Prince Rupert, CN priced its intermodal service to the U.S. aggressively, reportedly $300 to $400 per 40-foot container lower than what the BNSF and Union Pacific railroads were charging for trans-Pacific services to Chicago through U.S. West Coast ports.

 

Prince Rupert’s growth in the trans-Pacific container trade was meteoric, as the port registered  year-over-year gains of 20 percent or higher practically each month until 2013. Much of the growth was based upon U.S. cargo, although in recent years Prince Rupert has increased its share of the Canada-Asia trade. Also, the port has been successful in attracting more export cargo than was originally anticipated.

 

It appeared that Prince Rupert hit a brick wall in 2013. Instead of registering double-digit growth numbers each month, Prince Rupert experienced a decline of about 5 percent in container volume that year. CN’s initial intermodal contract with Cosco reportedly had expired, and the rates to the U.S. market went up.

 

The decline in container volume continued into early 2014, but then importers apparently began to divert U.S. cargo to Prince Rupert in anticipation of the expiration of the International Longshore and Warehouse Union contract on July 1, 2014. Prince Rupert’s performance turned positive in 2014 as it ended the year with a total container volume of 618,167 TEUs, a 15.2 percent increase over 2013.

 

The diversion from U.S. West Coast ports continued into 2015, with Prince Rupert posting strong year-over-year gains each month. The ILWU and the Pacific Maritime Association reached a tentative contract agreement on Feb. 20, but West Coast port congestion continued for the next two months. Both parties ratified the agreement in late May.

 

The coming months will demonstrate how much of the cargo diversion will be permanent.  Shipping lines in the trans-Pacific recently completed their service contract negotiations with importers for 2015-16, so the coming months will tell if U.S. importers have returned to the West Coast ports in the new contract year.

 

Prince Rupert opened its Fairview container terminal with a design capacity of slightly more than 500,000 TEUs a year, which the port has already exceeded. Plans are underway to add a second berth.

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