Prince Rupert of the East?
Two Nova Scotia ports with deep water, intermodal links vie for large containerships.
By Chris Dupin
Two communities in Nova Scotia – about 70 miles apart — are seeking to build large new marine terminals and emulate the success of Prince Rupert, British Columbia, which has attracted growing quantities of container traffic by offering a landfall close to foreign markets and connected by direct rail service to major population centers in Canada and the U.S. Midwest.
The Cape Breton Regional Municipality (CBRM) in July launched a marketing campaign to promote development of Sydport, a new container port in Sydney, on the northeast coast of Nova Scotia. Developers have been promoting the idea for several years.
Many of the advantages highlighted by Sydport are similar to those being touted by Melford International Terminal, which similarly wants to develop a container port on the southwestern side of the Strait of Canso, the waterway which separates Cape Breton Island from the mainland of Nova Scotia.
In July 2010, Maher Terminals, the New Jersey-based stevedoring company that operates both the largest terminal in the Port of New York and New Jersey and the Fairview Container Terminal in Prince Rupert, agreed to become a shareholder in and operate the planned terminal at Melford.
CBRM purchased about 500 acres of waterfront property in Sydney from Laurentian Energy Corp. in May. According to the Canadian Broadcasting Corp., the local government’s offer of $6 million bested two others from private developers.
The purchase followed a project to dredge the channel in Sydney harbor to 17 meters (55.7 feet), which was completed in January. That depth is enough to accommodate the largest containerships, and the port noted it has no bridges that present air draft restrictions. Dredge spoils have been used to create an additional 150 acres of land at the port.
“For the people and the economy of our region, we are launching this effort with the full support of our community to develop the greenfield site as the future location of an international container terminal. The potential for job creation and long-term economic growth is critical to the future of Cape Breton,” said CBRM Mayor John W. Morgan.
Sydney was once a major coal extraction center with mines that extended five miles beneath the ocean and home to Sydney Steel Corp., a major integrated mill — but both of those businesses closed more than a decade ago.
Cape Breton in June had an unemployment rate of 14.1 percent, compared to 9.3 percent for all of Nova Scotia and 7.2 percent Canada-wide.
Gordon Forsyth, a spokesman for Sydport, said the effort is focused on attracting containerized rather than bulk cargo to the port because it would have a greater positive impact on the local community.
The port said labor agreements are “in progress” with the International Longshoremen’s Association. In addition to jobs unloading and loading ships, Forsyth said a container terminal would create box repair and equipment maintenance jobs and perhaps distribution centers and transload operations.
He added the port has already had expressions of interest from an ocean carrier, stevedoring company, investment bank, and even a small railroad company, though one that is different from RailAmerica.
It’s still questionable whether a container terminal in Nova Scotia could have the success experienced by Prince Rupert.
Despite its location in a remote part of northern British Columbia, close to the Alaska panhandle, Prince Rupert has attracted several transpacific carriers moving containerized cargo from China, South Korea and Japan to North America. Prince Rupert is a deep-water, uncongested terminal where cargo can be loaded directly onto Canadian National Railway trains and whisked away to big cities in Eastern Canada and the U.S. Midwest.
Melford and Sydport believe they can offer a similar proposition to carriers moving cargo from Southeast Asia and the Indian Subcontinent. As manufacturing increases in countries such as Vietnam, Bangladesh, and India, they expect routings through the Suez Canal to become more attractive. They both say cargo could be transferred to trains operated by the short line Cape Breton and Central Nova Scotia Railway, which connects with CN in Truro, Nova Scotia.
Sydport also said feeder ships could be used to move containers from Nova Scotia to ports on the U.S. East Coast.
CN has been an important ally to Prince Rupert. Last month it said it would build five additional sidings on the rail line between Prince Rupert and Edmonton, the latest in about $150 million in improvements on the corridor in the past eight years.
But Mark Hallman, a spokesman for CN, gave a cautious assessment of the Sydney and Melford projects, saying the railroad “at this time does not see a market opportunity” for the new ports, noting declining container volumes and plenty of capacity at the two terminals in the Port of Halifax. But he added CN would add capacity should additional demand arise for container transport from the new terminals.
Both ports feel their green field sites offer advantages over the Port of Halifax which handled 410,649 TEUs in 2011, compared to 435,461 TEUs in 2010 and 490,071 TEUs back in 2007. In the first quarter of 2012, Halifax’s container volume was 89,214 TEUs, off 11.8 percent from the first quarter of 2011.
Michele Peveril, a spokeswoman for the Port of Halifax, said existing facilities at the port have plenty of capacity for additional cargo. She explained that existing facilities can handle 1.3 million TEUs, and with additions of property and other improvements the port has identified, those volumes could be boosted to 2.5 million TEUs.
She also said CN has indicated that it could triple the volume of cargo it handles on its line. About two-thirds of the containerized cargo handled by Halifax moves from the port by rail, instead of truck, and about 20 to 22 percent of this rail traffic is destined to the United States.
John Vickerman, a consultant to Maher-Melford, said “we are beginning to see some upticks in the westbound flow of the Suez,” which could be beneficial to Nova Scotia ports. And he noted a forecast from IHS Global Insight that also projects a near doubling of both imports and export container volumes from Europe and the Mediterranean between their recent low in 2009 and 2025.
In addition, he said services using the Suez Canal could put competitive pressure on services using the Panama Canal in years to come, because the Suez Canal will not have the same need to recover costs associated with the expense of adding a third set of locks in Panama to accommodate larger ships.
CBRM said it will “explore the potential of entering a long-term concession agreement with an interested terminal operator.”
Sydport estimates it would cost about $350 million to $400 million to build the first phase of a container terminal to handle about 1 million TEUs annually and be capable of accommodating the largest containerships.
Richie Mann, vice president of marketing at Melford International Terminal, gave a similar cost estimate for creating a port in Melford, saying it would take $350 million to $375 million to get the first phase of Melford operating, including construction of a 20 mile rail spur from the terminal to the Cape Breton and Central Nova Scotia Railroad. That first phase would have a capacity of about 1.5 million TEUs.
In addition to Maher, Mann said a number of companies including the New York-based investment fund Cyrus Capital Partners have said they will be equity investors in the project.
Because Melford is closer to Truro, Mann said there would have to be fewer improvements to the short line to handle cargo from Melford than Sydport.
Mann and Vickerman explained that in past years Sydney Harbor has been affected by sea ice, though a Nova Scotia government report said it is “seldom thick” and “seldom long lived and causes little delays to vessels.” A 2007 study found the expected delay based on the last 10 years of ice data was less than seven days, once in about four years.
Mann said at Melford “the missing link is a cargo commitment and we indicated from the beginning that we would not start construction of the project until such time as we had some cargo committed and we are concentrated on that aspect of the project. I think we are making some considerable progress in dealing with a number of carriers who we are in serious discussions with and also the cargo owners.” Melford and Maher are willing to discuss a joint venture with an ocean carrier, he said.
Mann indicated the process of creating the Melford terminal is taking longer than promoters of the port originally thought, in part because of the global economic slowdown, which he says has made it “difficult for decision makers to look too far ahead.”
“We’re optimistic,” he added. “We think it will happen sooner rather than later.”
“Ultimately the private sector is going to decide which of the ports is developed, based on the economics,” Forsyth said.