POINT OF VIEW
Geography, planning and environment professor at Concordia University in Montreal and an expert on maritime transport and intermodality
Montreal a viable alternative to West Coast ports for handling Asian cargo
The Port of Montreal is handling more and more cargo from Asia. In fact, Asia and the Middle East now account for 15 percent of the port’s total containerized cargo traffic. PortInfo spoke with Brian Slack, a geography, planning and environment professor at Concordia University in Montreal and an expert on maritime transport and intermodality, to discuss why the Port of Montreal is a viable alternative to North American West Coast ports and their current challenges for handling Asian cargo, and what the port needs to do to “build on this momentum.”
What are the current challenges facing North American West Coast ports?
U.S. West Coast ports have encountered a lot of difficulty over the past two years – and even before then – in terms of congestion and the ability to get cargo out of the ports and into the market. In Canada, rail traffic, from Vancouver in particular, has encountered difficulty with regards to the provision of railcars, but also because of the amount of traffic that is being generated by the Canadian resource industry for shipment overseas. U.S. West Coast ports and Vancouver have also experienced labour difficulties and problems with truckers.
There has been a whole series of difficulties that has mushroomed. The result is that shippers are now really skeptical about the ability of West Coast ports to recover completely, and shippers are inevitably searching for alternatives.
Secondly, with the increase in ship size, the big ocean carriers have been sending more and more traffic from Asia via the Suez Canal into the Mediterranean, with some of that traffic then coming across the Atlantic to the East Coast.
These are the two broad issues affecting the whole flow of goods from Asia. It’s been a double whammy.
How has the Port of Montreal been able to benefit?
Montreal has been able to gain some advantage from this and diversify its traditional market, which had always been Europe. Montreal is an efficient port that has built its reputation on labour stability, connections with rail on-dock, and carriers that are able to offer a very efficient, time-sensitive service. So you have this combination of problems on the West Coast and Montreal’s long-term advantages that the port has really been able to exploit.
Why is Montreal a viable alternative to North American West Coast ports and their challenges? What advantages does it offer to shippers who have traditionally moved cargo through West Coast ports?
Montreal has been able to show and is increasingly showing shippers in Asia that if they want to avoid problems on the West Coast, they can ship reliably to Montreal through transshipment in the Mediterranean. The big player that has really made a difference in Montreal is MSC. MSC has built its reputation, in a sense, on having a major transshipment terminal in the Mediterranean from where it is able to serve many markets. One of the markets that it is able to exploit and develop is Montreal. It is combining the increasing movement of traffic from Asia through the Suez Canal with transshipment in the Mediterranean. This has really opened up Montreal to wider markets.
Montreal has been able to show for all of its traffic that it offers a reliable and efficient service. Moving Asian traffic through Montreal has the potential to be a little bit more expensive than moving it through the West Coast because of transshipment costs. And the West Coast has a time advantage of over the combination of the Suez Canal and transshipment through the Mediterranean.
But Montreal has been able to show many customers in Asia that it is a cost-competitive solution because of the economies of scale provided by the huge ships that are now used on the Asia-Europe route and the Mediterranean route; these ships are much bigger than the vessels serving West Coast ports. Montreal is benefiting from these economies of scale. And even though the costs are potentially higher than simply shipping through the West Coast and then railing across on the landbridge, the problems with the landbridge are such that there are delays. People don’t know when their goods are going to arrive. Whereas if it’s shipped through the Mediterranean, they are being shown that the service reliability is in fact quite good.
Major shippers on the Asian trade were burned 10 years ago by congestion on the West Coast, and they are being burned again. They are really seriously looking for long-term solutions. The development of transshipment in the Mediterranean and the fact that the carriers are using much larger vessels on the Asia-Europe leg is giving shippers a cost advantage in a sense. This is playing a big hand for Montreal. It shows that there are alternatives.
How do you see the future on the West Coast?
The West Coast ports are going to face difficulty in recovering the losses they’ve encountered. They have very limited opportunity to expand significantly. Their hands are tied because of environmental restrictions.
They have an issue of recovering their operational efficiency and overcoming their labour problems, their trucking problems and the delays in getting the containers to the railways. The railways have to prove themselves capable of handling the goods.
All of this is going to be a major issue that will put somewhat of a damper on the turnaround that the West Coast ports can achieve.
You also have to factor in what is going to happen with the Panama Canal expansion in 2016. They’re going to have to face that issue as well.
The West Coast ports – on paper, in theory – have an advantage. But in practice, it is being shown that they’ve got congestion, and they’ve got competition from the Suez.
What must the Port of Montreal and its partners do to “keep the momentum going”?
The Port of Montreal has the potential to retain new customers who had been shipping through the West Coast. Fifteen percent of the port’s traffic is now coming from Asia and the Middle East. The port has got to build on that.
The big question is: Can the Montreal service providers – the shipping lines – show that they can get a good quality service to Canadian markets via the Mediterranean? I think they are doing that, but this is something that has got to be stressed and exploited, and the word has to be spread further in Asia. That’s where the selling job has got to be. It’s got to be with the shipping lines to make sure that they are doing the marketing themselves for the product.
MSC is a major player and has a big commitment with a new terminal in Montreal. It is committed to serving the port with traffic directly from Europe but also traffic from the Mediterranean via transshipment. It sees this as an advantage, and Montreal as a viable market.
I would suspect that Maersk, which also handles very major transshipment traffic out of its hubs in the Mediterranean, has the interest potentially to accentuate its traffic from Asia.
So I think there are two major shipping lines that have the interest and potential to utilize that opportunity to exploit Asia trade through Montreal.
Montreal now has a sales representative in Asia who can show first-hand actual case studies on transit time, reliability and the cost of moving a shipment from Shanghai or Singapore into the Montreal market. There are customers who will be able to take advantage of that.
I think the market for this trade will be Eastern Canada – Ontario and Quebec. Montreal has enough evidence to show that in terms of time, and in some respects cost, it offers advantages for serving Ontario and Quebec. That’s not a negligible market. It’s a big market. We tend to forget that.
Until the last few years, it is a market that tentatively has been seen as being served from Asia by Vancouver. Vancouver I’m sure still believes that it serves Ontario and Quebec. But I think the evidence is showing that there is a leakage, and I think that Montreal has the potential for certain kinds of traffic.
Montreal does things pretty well. The port expansion has got to take place. Montreal has to show that it can accommodate new traffic and that it can handle it efficiently because this is something that some of the other ports are not able to do.
Montreal has always had this European traffic orientation; this has been its bread and butter in terms of container traffic. The port now has the option of moving elsewhere, and I think that Asia, the Middle East, South America and even Africa are markets in which it can have action.
Thank You, Professor Slack!