Could a Railway Influence a Super Port Location?

CN Rail

By Harry Valentine 2016-09-25 19:26:14

An interesting situation is evolving in Eastern Canada involving competing port companies seeking to establish a transshipment port for mega container ships that sail via the Suez Canal. 

At one time, the tracks of two railway companies crossed Canada. However, deregulation of the competing truck transport industry increased competition and Canadian Pacific Railways (CP Rail) withdrew from Nova Scotia, leaving CN Rail as the sole mainline long-distance railway company to serve that region. CP Rail tracks extend only as far east as the Port of Saint John, where DP Ports is developing a terminal for neo-Panamax ships.

CN Rail tracks extend to the Port of Halifax as well as to Mulgrave, the future site of the proposed Melford transshipment terminal with a short line railway connecting to Port of Sydney where competing plans are underway to develop a transshipment terminal to berth mega container ships. At the present time, the Port of Halifax south terminal actually has a north-south quay of sufficient length (600m) to berth a container ship of over 400m length, with some 55-acres of terminal area to the immediate east of the quay and railway lines that extend to that quay.

Railway Analysts

The main railway marshalling area is located to the north and northwest of the Halifax quay, allowing for the installation of several parallel railway lines near dockside and within reach of cranes. Considerable design and operational ingenuity will be required at Halifax to make effective use of minimal terminal area to undertake ship – railway transfers of containers from ships of up to 22,000 TEU capacity. The competing proposed transshipment terminals located east of Halifax intend to include 315 and 500-acres of terminal space, to include ship – railway container transfers with the options of ship-to-ship and ship –truck transfers.

If the railway operator were asked to invest in the installation of railway tracks at a transshipment terminal for mega-size container ships, they would want to be assured of a viable return on their investment. The railway’s intermodal transportation analysts would have to evaluate future business prospects at the three locations in Nova Scotia to determine the optimal location to develop the railway side of the intermodal terminal. These analysts will need to evaluate projected future container volumes that could sail from Asia to Nova Scotia aboard mega container ships, to determine future viability of the terminals.

Competing Sailing Distances

The sailing distance between Hong Kong (also nearby Shenzhen and Guangzhou) and Nova Scotia is slightly shorter (by five percent) via the Panama Canal than via the Suez Canal. Following the future opening of the Kra Canal, the different in sailing distance will be less than two percent, making the mega container ship and its lower per container transportation cost more competitive sailing via the Suez Canal than neo-Panamax ships sailing via the Panama Canal. 

The major Asian transshipment ports of Singapore, Colombo, Dubai and Salalah (Oman) are closer to Nova Scotia via the Suez Canal than via the Panama Canal.

A future Kra Canal would also reduce sailing distance between Shanghai (also nearby Qingdao and Ningbo) and Nova Scotia, with a mega container ship sailing via the Suez Canal arriving 24 to 48-hours after a neo-Panamax ships sailing via the Panama Canal. 

Precedents indicates customers who would seek to realize savings in transportation costs by sending containers aboard the bigger, slower boat from China. The competitive sailing distances would extend aboard domestic ships that sail to the Ports of Boston, Newark/New York and Norfolk, also along the inland waterway to Montreal and ports upstream of Montreal. 

Railway Versus Maritime Competition

Prior to the opening of the enlarged Panama Canal to transit neo-Panamax container ships, many logistics companies moved containers from Asia to east coast United States via west coast ports and trans-continental railway trains. The containers would typically arrive four to five days ahead of containers carried aboard Panamax ships that sailed from East Asian ports to East Coast American ports and saved some $2,000 per container in transportation costs. 

While some customers seek fast delivery and are willing to pay premium transportation rates, other customers are willing to delay arrival of their containers so as to realize cost savings.

Ships could take three weeks sailing at 17 to 19 knots from Hong Kong to Nova Scotia, with an interconnecting train carrying containers from super port Nova Scotia to major cities such as Montreal or Boston arriving 12 hours to 24 hours ahead of a Panamax size ship that would carry containers at much lower per-container transportation cost than the railways and savings of some $300. 

Precedent along the American east coast indicates that there are customers who may be willing to wait 24 hours to realize the savings, requiring Nova Scotia super port to offer both railway and domestic maritime connections.

Railway Logistics

The railway operator would seek a market niche for their services given the annual closure of the Strait of Canso (located north of Mulgrave) as well as of the St Lawrence Seaway upstream of Montreal, also the build-up of winter ice cover over sections of the Gulf of St Lawrence. 

Given the cyclical nature of the retail trade, the peak of retail related containers arrives at North American ports during the northern summer and tapers off toward December. For super port Nova Scotia, the railway company could seek to negotiate to carry the winter load of containers throughout the year.  

The railway operator would need to evaluate international container transportation to assess the projected volume of containers that could arrive at Nova Scotia aboard mega container ships, as well as the number of ports that could be viable transferring that number of containers. In the interest of future viability, the railway operator may find itself having to decline to develop interlining railway services to one of the Nova Scotia terminal locations for reasons of projected insufficient projected traffic volumes or excess operational complexity. The railway may have to indicate if one or two transshipment terminals could viably operate in Nova Scotia.