Canada Could Boost Arctic Container Shipping

Efficient operations at Canada’s Pacific coast container ports combined with efficient trans-continental railway services have resulted in these ports approaching peak operational capacity. The situation increases the possibility of using Canada’s Arctic channel to transfer some container transfer operations to the east-coast ports. 

Mega-size container ships regularly sail the trans-Pacific service between major East Asian ports and west coast North American ports, where containers are transferred to trans-continental container trains that travel to east coast destinations delivering higher-priority containers at premium transportation rates. The railways have revised their train layouts to include remotely controlled locomotives near the middle of the trains, to increase train length. Some of the long-distance container trains can include 250-wagons carrying double stacked 40-foot containers, for a total of 1,000 TEUs per train. However, the maritime voyage via the Panama Canal involves lower transportation cost per container.

At the present time, while the Canadian trans-Arctic channels can transit ships of much greater draft than the Russian trans-Arctic passage, the Canadian channels are not yet ready to transit a regular procession of container ships. The shallower Russian passage has the advantage that the warm Gulf Stream Ocean Current flows across the North Atlantic and into the Barents Sea, with some of that water eventually flowing from the Arctic via the Bering Strait and a portion of it flowing into the Beaufort Sea and toward Greenland. China is building trans-Arctic container ships to sail the Shanghai – Europe service.

Asia – Europe Market Niches

While mega-ships of up to 22,000 TEUs carry container trade between Asia and Europe at very competitive transportation rates, a market segment has emerged that asks for faster delivery of containers. Trans-Arctic container ships of 3,000 TEUs could sail between Shanghai and Hamburg/Rotterdam is less time. While up to four trains per day are carrying containers between Shanghai and Europe via Russia and via a southern route, these trains typically involves 100 single stacked carriages carrying 200 TEUs. On the southern route, railway carriages have to be boarded on to lake ferries for a voyage across either Lake Van of across the Caspian Sea.

China and Russia plan to operate a fleet of up to 40 icebreakers to assist trans-Arctic container ships. Asia – Europe railway operators and existing shipowners have been silent on the proposed trans-Arctic container ship service, possibly because each mode will occupy a unique market niche. Canada owns four trans-Arctic capable icebreakers, leaving operators of mega-size container ships to arrange with private companies to provide icebreaking services on the passage through Canada’s trans-Arctic navigation channels. The Panama Canal charges $100 per TEU to transit a ship of 10,000 TEUs and North American trans-continental railway transportation can exceed $2,000 per TEU.

Competition Issues

Canada’s railways are well organized and efficient. Per train, they can carry five times the number of containers as Asia – Europe trains. The combination of trans-Pacific ships and North American transcontinental railways will carry high-priority containers from Asia’s trio of nearby mega-ports of Hong Kong, Shenzhen and Guangzhou to east coast North America. Low priority containers that involve much lower per-container transportation costs will sail to North America’s east coast either via the Panama Canal or via the Suez Canal. The Hong Kong - Sydney, Eastern Canada voyage is two days faster via the upgraded Suez Canal than via the Panama Canal.

However, the Shanghai –Sydney voyage via the Suez Canal would involve an additional two days compared to via the Panama Canal. A bigger ship sailing via the Suez Canal would involve lower per-container transportation costs, especially due to the Suez Canal Authority having reduced their per container transit fees. After completion of twin-parallel navigation channels, the authority needs to advise if they would grant passage to larger container ships or up to 28,000 TEUs that use bow-wave reduction technology during the canal transit. A positive response could result in even lower per container transportation costs arriving in Easter Canada.

Canadian Trans-Arctic Cost Issues

The cost of building an Arctic-capable icebreaker ship is estimated at over $1 billion. Some 40 icebreakers could potentially become available to assist Russian-side trans-Arctic shipping and several commercial freight/cargo ships have already sailed between the Bering Strait and the North Sea. There are going to be political issues surrounding icebreaker ships built to assist Canadian trans-Arctic ship transport would remain. If the private sector is required to build the ships, they will remain idle for extended periods of each year. Profit seeking private icebreaker owners could charge premium rates per container, to assist mega-size trans-Arctic container ships.

The fee would reflect the possibility of faster delivery sailing via the Arctic, be higher than the Panama Canal per-container transit fee of $100 per container and be competitive with trans-continental railway transportation of around $4,000 per container. They would need to set the trans-Arctic fee low enough to ensure viable operation of east coast interlining ships and assure lower per container transportation costs of containers moving via the Panama Canal. Canadian railways along with environmental groups would likely raise objections if the Canadian government proposed to build icebreakers intended to assist trans-Arctic shipping.

Trans-Arctic Competition

Without competition from Canada, the Russian Arctic passage could transit freight sailing between Asia and east coast ports such as Montreal, also between Western Europe and Pacific northwestern ports such as Vancouver and Tacoma-Seattle, aboard container ships of 3,000 TEUs capacity. Ships sailing between Shanghai and Montreal could offer a savings in per container transportation costs over the combined trans-Pacific voyage and transcontinental railway transportation, with faster delivery over ships that sail via the Panama Canal. There would likely be a fee charged to trans-Arctic container ships to cover the cost of icebreaker assistance.

North Eastern Coast Transshipment Ports

There are presently several competing north east coast ports that include Newark and Halifax, with possible competition from Saint John, Quebec City, Sydney and Mulgrave (Melford). Newark offers the shortest railway distance to Toronto and to Montreal compared to Halifax, Saint John and Cape Breton proposed ports. Only Quebec City offers competitive railway distance to Montreal and Toronto, from Newark. Competition is inevitable amongst Saint John, Mulgrave and Quebec City for ship-railway container transfers going to inland destinations, with a potential market shake-out occurring. Sydney aims to transfer containers from mega-ships from Asia to local coastal ships.

Container Movement

Ships sailing via the Suez Canal to east coast North America could originate from Hong Kong / Shenzhen / Guangzhou that processes over 61 million TEU annually, with interlining ships arriving from the combination of Taiwan and Fuzhou (14 million). Ports on the westbound voyage would include Singapore (31 million) with interline ships from Jakarta (six million), Vietnam (five million), Klang (12 million), Tajung Pelepas (nine million) with a possible stop at Colombo (six million) for a total of 144 million TEU annually. Ships could sail via the Arctic from ports such as Shanghai (37 million), Ningbo (21 million), Busan (20 million) plus Qingdao (18 million) and Tianjin (15 million) for 110-million TEU annually.

Ships of up to 20,000 TEUs arriving twice weekly at Sydney could deliver two million TEUs annually, with ports such as New York/Newark (5.5 million), Savannah (3.3 million), Virginia (2.4 million), Montreal (2 million) and Charleston (1.8 million) that account for 15 million TEUs annually. There is potential for a mega-ship to sail weekly via the Suez Canal between Asia and eastern Canada with possible weekly mega-ships sailing via the Arctic between Far East Asia and eastern Canada. Ship-to-ship interlining at transshipment ports in both Asia and Eastern Canada would be essential to generate sufficient container traffic to assure viable operation of mega-ships.

Logistics

The Northeastern market along with the logistics sector will determine the number of containers that will regularly arrive at east coast ports. A sufficiently high volume of containers from Asian transshipment ports could justify the operation of mega-ships of up to 28,000 TEUs on the Asia – Sydney link via the Suez Canal, offering lower transportation costs per container than the voyage via the Panama Canal, with smaller interlining vessels sailing to other east coast ports. Newark typically transfers container from ships of up to 10,000 TEUs, Boston around 5,000 TEUs and Montreal up to 3,500-TEUs.
 
Ships of up to 15,000 TEUs could carry containers from Europe destined for both Newark and Boston, stopping at Halifax to offload up to 5,000 TEUs. The big ship would then sail to Newark incurring lower trans-Atlantic transportation cost per container than a ship of 10,000 TEUs having sailed across the North Atlantic. A smaller ship would carry containers from Halifax to Boston. Ships sailing from Europe could carry over 6,000 TEUs destined for the combination of Chicago, Detroit, Cleveland, Toronto and Montreal with ship - ship and ship - railway transshipment occurring at Quebec City.

Conclusions

Canada’s west coast container ports are approaching peak operational capacity, transferring containers arriving aboard mega-ships to extended length railway trains. Capacity is available at several Canadian east coast ports except that a market shakeout might be on the horizon. Segments of Europe – North America container trade could sustain transshipment operations at Halifax and at Quebec City Ships of 3,000 TEUs could occupy a unique market niche sailing via the Russian side of the Arctic between Shanghai and Montreal.

The lack of available icebreakers would impede introduction of trans-Arctic container shipping through Canadian navigation channels. Private and/or foreign owned icebreakers may need to assist container ships that sail through the Canadian Arctic channel. Transshipment operations at Sydney would depend on mega-size ships sailing from Asia via an upgraded Suez Canal, carrying double the load of trans-Panama Canal container ships at lower transportation cost per container.