Building the Container Transload Sector in Halifax - Halifax Gateway

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Building the Container Transload Sector in Halifax 3responded by locating distribution centres in close proximity to these ports, in aneffort to keep their supply chains (and stores) full of merchandise. Canadian retailershave begun to develop a similar strategy, with CRSA and Canadian Tire now usingHalifax as an alternative gateway to Vancouver.Several studies by Drewry Shipping Consultants have highlighted the fact that thePanama Canal is operating at about 93% capacity. In the past year, there have beenreports of auctions taking place for vessels and shipowners wanting to bypass theusual line-ups to pass through the Canal. In the meantime, Panama has announcedplans to spend $5.25B to expand the Canal by 2014. This proposal was favourablyvoted on in a plebiscite and the project is moving ahead. Thus, a new Panamaxvessel will be 365.8 m in length, 48.6 m in beam, 27.7 m high and capable ofcarrying at least 12,500 TEUs, compared to the present Panamax capacity of 5,050TEU.As of September 2006, some 287 post-Panamax vessels were on order fromshipyards around the world, with at least 167 not committed to any trade route. It ismost likely that these new vessels will first be deployed on Asia-Europe routesfollowed by Asia-west coast strings. After that, they could find their way onto Asia-North America routes via the Suez Canal. Several analyses have suggested that aSuez routing from Hong Kong would require nine vessels, compared with a typicalPanama routing of just eight vessels, thus requiring an additional capital expenditureof about $125 million. The “Suez Expressway” is viewed as holding much potentialfor Halifax because there is a 436 nautical mile advantage compared with a PanamaCanal routing. More critical than Halifax’s advantage, however, is the differential forNew York, which is 382 miles further away via the Suez Canal.As the 2004 Greater Halifax Distribution Study pointed out, the Indian market is seento hold much promise for Halifax. Indeed, the Halifax Port Authority has recognizedthis and appointed its own agents to promote the port in that country. Halifax shouldbe a natural Canadian gateway for Indian products, as its largest port, JawaharlalNehru (JNP) near Mumbai is 7,673 nautical miles from Halifax compared with 9,513miles from Vancouver. However, India is still an emerging market. In 2004, its 21container ports handled 4.3 million TEUs, of which 2.3 million were handled at JNPand another 250,000 at Mumbai. On the main east-west trade corridors, Indiahandled an estimated 2.8 million TEUs in 2004, of which 513,000 were carried toand from North America. This included 148,000 TEUs of imports from North Americaand 365,000 TEUs of exports to North America. In 2005, the Journal of Commercereported that India exported 338,000 TEUs to the US and imported 173,000. Thewhole Indian sub-continent exported 575,000 TEUs and imported 238,000. Thesetotals pale in comparison to total Asian exports to North America of 12.3 millionTEUs and imports of 4.5 million TEUs. Canada has recently initiated exploratorytalks on a free trade agreement with India, but what this would entail is not yetknown.1.3 The Business CaseBuilding a transload and, eventually a distribution sector in Halifax is of criticalimportance to the future of the Atlantic Gateway. The withdrawal of Maersk Line fromMay 2007
Building the Container Transload Sector in Halifax 4Halifax in April 2007, in favour of Savannah, GA, which has 19 major distributionfacilities within 10 miles of the port, underscores the urgency of this situation.Savannah is 870 nautical miles further away from the entrance to the Mediterranean,and the Atlantic region provided the line with ample local cargoes, including verygood paying refrigerated cargoes, yet it still felt compelled to switch to Savannahbecause of the amount of distribution activity taking place there. From relativeobscurity in the 1980s, when it was actually smaller than Halifax in the number ofcontainers handled, Savannah has made itself a “must call” port, for lines serving theUS east coast via the Panama and Suez canals. Halifax must do the same.The transload sector begins to address the problem of the small size of the Atlanticregion market. It makes the market bigger than it actually is by driving additionalcargo through the port. This is just one of several initiatives underway to increasecargo throughput at Halifax, but it is very key, and has been identified as the numberone priority of the Halifax Port Authority. From 26 interviews undertaken, eight (8)companies indicated a short-medium term interest in transloading cargo at Halifax.These companies represent incremental volume amounting to about 50,000 TEUs,or almost 10% of the port’s existing volume. They also represent some of Canada’slargest retailers and a number of large 3PLs. Some of this cargo could beaccommodated in facilities presently being constructed or planned; some wouldrequire new facilities.The transload sector is important for both inbound cargo to feed national supplychains in central Canada and to provide containers for regional exporters. Thecontents of three (3) 40 ft. ocean containers are destuffed at a transload facility andrestuffed into two (2) 53 ft domestic containers or highway trailers. At present, the 53ft unit would likely return to central Canada empty and the 40 ft unit would likelyreturn to Atlantic Canada empty. Transloading balances out two empty loads withtwo full loads. The retailer pays for two units to move inland instead of three. Thelocal shipper in Atlantic Canada obtains access to much needed containerequipment much sooner than otherwise. The retailer has the option of shipping its 53ft unit to a distribution centre in central Canada or directly to a store, as well aseventually performing some value added services.A distribution cluster is evolving in Phase 12 of Burnside Industrial Park, whereConsolidated Fastfrate is building a new facility and Armour Transportation Grouphas purchased a large lot. In many respects, this location is not ideal, however itdoes have some momentum. Future options for accommodating the sector includebuilding out Phase 12, linking it to Phase 13 across Akerley Boulevard, ordeveloping a new site near the proposed inland terminal at Rocky Lake.The potential volumes identified in the study are equivalent to one major new servicecalling at the port, or 500 inbound lifts per week. According to previous researchconducted for the Halifax Gateway Council, each container ship visit equates to4,621 person hours of work or 3 person years. Thus, 500 lifts (or 50,000 TEUs) perweek would equate to about 3 person years per week, or 156 per years at close to$50,000 per year per person. Direct port-related impacts are therefore about $7.8million per year. Impacts from transloading have yet to be determined.May 2007
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