CN envisions Halifax as ‘Prince Rupert of the East’

Railway officials discussed plans to grow intermodal cargo and develop the Nova Scotia port during this week’s earnings call.

CN envisions Halifax as ‘Prince Rupert of the East’

Railway officials discussed plans to grow intermodal cargo and develop the Nova Scotia port during this week’s earnings call.

CN envisions Halifax as ‘Prince Rupert of the East’

Railway officials discussed plans to grow intermodal cargo and develop the Nova Scotia port during this week’s earnings call.

 
Officials from Canadian National Railway Co. highlighted their desire to grow intermodal cargo, including plans to develop the Port of Halifax into a “Prince Rupert of the East,” during an analyst call discussing financial results for 2018 and outlook for the coming year.
    Last month, Jean-Jacques Ruest, the chief executive officer of CN, told Canada’s Financial Post that the railroad had put in a preliminary offer to acquire the Halterm terminal in Hailfax.
    Halterm was purchased in 2006 by Macquarie Infrastructure and Real Assets (MIRA). Sources tell American Shipper that MIRA is trying to sell Halterm in a bundle along with Fraser Surrey Docks near Vancouver, British Columbia, and Penn Terminals in Eddystone, Pa., on the Delaware River near Philadelphia. Reportedly MIRA was disappointed with the first round of offers it received and has asked for additional bids.
    Keith Reardon, senior vice president of consumer product supply chain growth at CN, said the investment in Halifax is “a play that we want to make, we feel we will be successful. We are going to market it as Prince Rupert of the East and we feel it has the exact same attributes and we will be successful.”
    Located in Northern British Columbia near the Alaska panhandle, the Port of Prince Rupert has seen container traffic skyrocket in the past decade. The Fairview Container Terminal opened in 2008 and moved 182,523 million TEUs. Cargo volumes last year surpassed 1 million TEUs in 2018, the port reported last month.
   Reardon said the prospects for more Asian cargo moving to North America via the Suez Cana to ports such as Halifax are good.
    “That market is evolving all the time and its only going to increase as the manufacturing capabilities that are in China today are moving out as higher costs are occurring. They are moving into Malaysia, Indonesia, Vietnam. We were there in November. And the number of plants that are being built is significant.
    “So as that trade moves further south, that gets right into the wheelhouse of the Halifax-Suez Canal connection and we feel very, very comfortable that we would be able to play in that market. That's one of the reasons why we are looking at Halifax so extensively.”
    Pressed as to the timing a Halifax deal, Ruest said “We are in due diligence. So we cant really talk too much about the details. But the timing is, we are still a number of weeks, a number of months before this whole thing comes together.”
    Ruest had told the Financial Post “CN is action-oriented on this file. We need to act in 2019.”
   On Tuesday Ruest said CN’s “vision of the Rupert of the East could be played more than one way and we have more than one iron in the fire. But Halifax is definitely one of them.”
    Ruest had told the Financial Post that there are two other ports the railway is looking at as well, one in Nova Scotia and one on the St. Lawrence River. He did not identify those locations, but it has been speculated that he is talking about proposed container terminals in Quebec City or Melford, Nova Scotia.
    Two groups in Nova Scotia have been promoting their locations as being prime locations for new container terminal serving jumbo containerships that many have predicted will eventually ply the trade route between Southeast Asia and Indian subcontinent and North America.
    Melford International Terminal and Melford Atlantic Gateway are working in partnership with Stevedoring Service of America in Seattle to build a new greenfield container terminal in Guysboro County, Nova Scotia, in the vicinity of Port Hawksbury.
    Richie Mann, vice president of marketing and government relations at Melford International Terminal, said CN’s interest in Halterm and attracting Asian cargo is a positive for Melford.
   During Tuesday’s call with investment analysts, Ruest noted that the CN has “no capacity restriction between Halifax and Chicago.”
    If CN is “going to look at better utilization of their line, then the one thing they have to do is add cargo. I think simply taking over Halterm is not going to do that. They can perhaps fix some of the traffic problems that exist in Halifax because of truck traffic downtown, those kind of things. But fixing that may, in fact, add more cost to doing business there, and if that is the case, it is not likely to add cargo. In fact it could jeopardize some cargo.
    “So if you’re going to increase your cargo volume, then in all likelihood you’ve got to look at doing something that can attract incremental cargo and I think that brings you around to Melford. I think it bodes well for Melford going forward,” he said.
    Even farther east in Nova Scotia , NOVAPORTE is seeking to build a mega container terminal in Sydney that it says would be operated by Ports America along with a logistics park.
    Albert Barbusci, the chief executive officer of NOVAPORTE, said he sees no downside in CN acquiring Halifax and still believes that NOVAPORTE is a strategic location “now that larger vessels are being built and they’re here to stay.”
   “We have a greenfield, we have a white canvas. We have deep water, a sheltered arbor that is basically ice free and we have 2,000 acres of land. No matter what they do in Hailifax and Halterm, they just can’t buy any more land.”
    Cargo discharged or loaded in Sydney would have to travel 180 miles over a shortline railroad to connect with Truro in Nova Scotia, but Barbusci believes rehabilitation of that connection is not a major obstacle.
    Barbusci said, however, that there is only room for one new greenfield port serving the container industry. “It’s either NOVAPORTE or Melford, we don’t see two surviving. If one breaks ground on the container side, there may be a bulk play or another opportunity.
    Handling 559,242 TEUs in 2017, Halifax is the second largest port in Eastern Canada, compared with 1,537,669 TEUs in Montreal. Larger ships cannot call Montreal because of draft restrictions on the St. Lawrence River.
    “The markets for Halifax and the markets for Montreal are really two different markets, said Reardon “And it’s because of the physical nature of the ports. Halifax is a deepwater port, ice-free. We are planning on that to be big ship, big train ready.
   “Montreal is more of a niche market for our customers. It’s a higher cost per container, if you have smaller vessels coming in versus being able to come in with large vessels at Halifax. So they are two separate markets. We look at them in two different ways. And I believe our customers do as well.”
    On Tuesday, CN said had a net income of 4.33 billion Canadian dollars (C$) in 2018 compared to C$5.48 billion in 2017. Total revenue for 2018 was C$14.32 billion compared to C$13.04 billion in 2017. In the fourth quarter of 2018, the company earned C$1.14 billion on revenue of $3.81 billion compared with net income of C$2.61 billion on revenue of C$3.29 billion in the fourth quarter of 2017.
    Ruest said “We are focused on operational productivity and services that resonate with customers. In 2019, our record capital program of C$3.9 billion will be focused on investing in the renewal of a more efficient and reliable locomotive fleet, adding network capacity to accommodate our solid pipeline of growth in diverse markets and bringing technology to our Precision Scheduled Railroading.”
    The company said intermodal revenue was C$3.47 billion in 2018, an 8 percent increase over 2017.
    Ruest said intermodal revenue was up in the fourth quarter due to better pricing and good volume growth out of Port of Prince Rupert and the Port of Vancouver.
   “In Vancouver, from November 1 to mid-January, we moved solid 10 percent more volume than last year. CN and a good number of world-class supply chain terminal operators that are committed to the efficiency of running 24 hours a day, seven days a week have kept the big port of Vancouver growing at a time of strong demand and harsh conditions."
    He said the company, along with the Canadian government has plans to invest $300 million in two projects in the Port of Vancouver. He said details would be forthcoming at CN's investor day in June bu said the company is deploying technology "into the next evolution of rail transportation and supply chain productivity."
    Ruest said CN is taking a different approach to growth than it has in the past, and an approach that is different from other Class 1 railroads.
    “Our objective, our appetite is to find ways to make more use of the existing network. So we have mainlines from East to West and North to South which is not fully utilized to the exception of the Edmonton to Winnipeg line. All other aspect of our railroad has capacity to grow in the existing mainline. So what can we do as of tuck-in acquisition or joint ventures that would bring more business to our mainline. That really is the focus.”
    He said this desire was behind CN’s acquisition of TransX, an intermodal service provider.
   That deal was announced in October. Ruest said “we have an agreement with seller but the we don't have an agreement yet with the government to actually take control of the company. But what TransX is, is a company who is in the intermodal business and we believe they can help us to bring more business to the CN railroad using our network. In that case, specifically Halifax to Vancouver, to divert traffic from the road to railroad.”


From our hiring practices, which have resulted in nearly 50% of all new hires being minority candidates, to our support of employee resource groups like PA Pride, we will continue to foster a diverse and inclusive environment among our workforce.

Drewry’s World Container Index, a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, was down 1.4% to $1,351.15 per 40-foot container as of June 13.

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CN envisions Halifax as ‘Prince Rupert of the East’

Railway officials discussed plans to grow intermodal cargo and develop the Nova Scotia port during this week’s earnings call.

Jan 30, 2019 on Dec 27, 2018AmericanShipper.com

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CN envisions Halifax as ‘Prince Rupert of the East’

Railway officials discussed plans to grow intermodal cargo and develop the Nova Scotia port during this week’s earnings call.

Jan 30, 2019 on Dec 27, 2018AmericanShipper.com