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Changing Market Conditions and Eastern Canadian Ports

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File image courtesy Port of Halifax

By Harry Valentine 05-22-2020 08:21:06

A combination of factors that includes the COVID pandemic, U.S. – China trade disputes and advancing technology have changed market conditions for Eastern Canadian container ports. Canada being implicated in the U.S. – China Huawei dispute has reduced funding to develop a mega-ship transshipment terminal in Eastern Nova Scotia, while the COVID pandemic and U.S. – China trade dispute might have delayed development of a competing transshipment port.

The development of ultra-large container ships that exceeded the dimensions of the largest neo-Panamax ships offered the potential for container transshipment in Eastern Canada. Such a business plan involved sailing ships of 18,000 TEU from East Asia to Eastern Nova Scotia, then transferring containers to smaller vessels destined for American east coast ports. At the time, the terminal area at Halifax was deemed to be too small to totally offload the largest container ships of the period and transfer containers to smaller ships. The Canadian government then invested to develop Port of Saint John container terminal for larger ships.

Officials at Quebec City then announced that their terminal could berth neo-Panamax size container ships and officials at Montreal suggested that larger container ships could theoretically sail to their port, courtesy of generous navigation width along the Lower Saint Lawrence River. Several American east coast ports were subsequently modified to berth larger container ships (prior to President Trump initiating action to disrupt U.S. – China trade). Combined with reduced trade resulting from the COVID-19 pandemic, the short-term future of Eastern Nova Scotia transshipment ports appears uncertain, as does future container traffic at Port of Saint John.

Halifax Transshipment

The sailing distance between Western Europe and any of Boston, New York City or Newark barely changes if a ship briefly stops at Port of Halifax. Compared to sailing two different sized container ships between the same European port and both Boston and Newark/New York, it is actually cheaper per container to sail a single larger container ship to Newark/New York and partially offload containers at Halifax, then sail a smaller interline ship between Halifax and Boston. Despite limited terminal space, Halifax could expand transshipment to include other small American east coast ports such as Portland and New Haven/Bridgeport.

Saint John

While the railway distance between Saint John and Montreal is shorter than Halifax – Montreal, it is still greater than Boston – Montreal and New York/Newark – Montreal. Political support to develop Port of Saint John to berth neo-Panamax size ships was the result of political strategy to reduce a single railway from operating a virtual monopoly of container transportation between Eastern (Halifax) and Central Canada (Montreal and Toronto). A different railway operates between Saint John and Montreal. Moving containers by rail between Saint John and Boston is much more costly per container than doing so by ship.

Quebec City

Despite initial opposition to a container transshipment terminal for neo-Panamax size ships at Quebec City, there is merit in doing so. It is closer via Suez Canal to the ports of Hong Kong, Guangzhou, Shenzhen and Yantian than via Panama Canal. There is insufficient market demand to warrant sailing a neo-Panamax ship via Panama Canal between an East Asian port and Quebec City. However, there is merit in sailing interline ships between a Western Mediterranean transshipment port and Quebec City, to connect with the largest container ships that sail from China and India to Europe.

When market conditions allow, a modified height-reduced interline ship of 7,000 to 9,000-TEU with a low level forward bridge could carry containers from Asia and Europe to Quebec City for partial offloading. With height and sailing depth reduced, the ship could sail to the port of Montreal. Interline waterway ships may carry containers from Quebec City to Ogdensburg, New York and Cleveland, Ohio, with tug barges sailing to Canadian inland ports located upstream of Montreal.

Mega-Ship Transshipment

The pandemic has reduced international trade and called into question the viability of operating mega-size container ships that offer the lowest per container transportation cost. Transshipment presents a potential market for such ships sailing between Asia and Western Mediterranean transshipment terminals, to interline with smaller ships sailing to both European and northeast North American ports. In the latter case, a westbound neo-Panamax ship would sail across the North Atlantic to Halifax and Newark, with a smaller ship sailing to Quebec City. Transshipment allows the mega-ship to provide more competitive per container transportation costs, including to northeastern North America.

The lower cost per container achieved by the combination of a super-size container ship sailing via Suez Canal and interlining with a smaller trans-Atlantic ship could extend to east coast American ports located south of New York, such as Norfolk/Newport News and Baltimore. If trade volumes decline, a tug-and-barge route could carry containers between Norfolk/Newport News and Baltimore, with possible extension via Chesapeake Canal to Philadelphia. An interline ship could carry combined payload for both Charleston and Savannah, calling at both ports. During a period of reduced trade, transshipment would form the basis of mega-ship business plans.

 

Transshipment port strategies

Transshipment would form the basis for business plans involving the largest container ships capable of carrying massive volumes of containers at the lowest overall cost per container. Container transshipment would occur at western Mediterranean terminals involving ships carrying containers from Asia and being transferred to smaller ships sailing to the combination of multiple European destinations, Canada’s St. Lawrence River and North American Atlantic coast ports. The Canadian ports of Quebec City, Halifax and Montreal would sustain business during and after the economic slowdown. Eastern Canadian mega-ship transshipment terminals are likely many years into the future.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.