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White Paper: Recession-proof Prince Rupert seems to weather every storm

US AND Canadian ports have had their ups and downs over the last 10 years, but for little Prince Rupert in the wilderness 400 nautical miles north of Vancouver it's been pretty much up all the way.

This is of the many conclusions of a 3,300-word "White Paper" from IHS Media reviewing the history and the prospects of the busy little Canadian port.

"The 2009 recession really helped Prince Rupert," said Walter Kemmsies, managing director, economist and chief strategist for Jones Lang LaSalle's US ports, airports and global infrastructure group.

"When it hit, logistics managers were told to find a way to slash costs. Importers who tried the Prince Rupert soon discovered its strength extended beyond cost savings to a successful conveyer belt model that moved goods quickly and efficiently, reducing total transit times and improving service reliability," he said.

It was this overall value proposition of speed and scheduling accuracy that reduced inventory carrying costs, as an example.

"That enabled Prince Rupert to pick up a lot of cargo and gave it critical momentum just after it had opened," Mr Kemmsies said.

Prince Rupert's Fairview Container Terminal was conceived mainly to handle imports from Asia destined for the Midwest, but the planners always included exports as part of the mix. Western Canada, particularly British Columbia, has the highest concentration of forest products in North America.

"When we first were planning and promoting the concept of Prince Rupert as a container gateway, the scepticism was that we would not be able to fill the containers for backhaul," said Port of Prince Rupert CEO Don Krusel.

"But the reality is that we are getting good backhaul coming from as far away as the US Midwest. As a partner in the terminal's design, CN put strict requirements on shipping lines calling the port to find cargo for their containers when they bring them back for export to Asia.

"The railroad is putting some very tight guidelines around matchback for every carrier. They have an incentive to go out and fill boxes," said DP World vice president Matthew Leech, who runs the terminal.

Another key element is the Canadian National (CN) rail line which runs to Toronto but more importantly to Chicago whence cargo is picked up and delivered throughout the US Midwest.

Even more important says the IHS "White Paper" is the benefit derived from containerising bulk commodity exports, made possible by low freight rates.

"What's really good about the port is ... the predictability and consistency" fuelled the growth of exports such as lumber and pulp from British Columbia and specialty grains from the Canadian prairies and the US Midwest," said Mr Leech.

Three hundred miles east of Prince Rupert, CN operates an intermodal container yard in Prince George, which is a major producer of the forest products that are loaded into containers for export.

"Fifty-nine per cent of our export volumes come from British Columbia," Mr Krusel said. "It's all lumber and wood pulp and panel boards and other forest products that are being stuck in containers both at Prince George and then at Prince Rupert.

Cosco operates its CEN service to Prince Rupert as the first port of call with vessels in the 8,500-TEU range. It will soon deploy 13,000-TEU vessels on the route, Mr Leech said. The service takes 11 days from Shanghai to Prince Rupert and on to Chicago via CN in 17 days.

Ships on the CEN service then steam from Prince Rupert to Long Beach and Oakland, California and back to Tianjin, gateway to Beijing and equidistant between Qingdao and Dalian.

From the beginning, the partners in the new terminal targeted beneficial cargo owners (BCO) as their customers as much as, if not more, than container lines. "We don't necessarily think of our customers as a container line. We're focussed on the shippers, both North American import and export shippers," Mr Krusel said.

One big BCO is represented by Pat Flynn-Cherenzia, global logistics and supply chain director for Microsoft, which imports products from China through Prince Rupert, whence they move elsewhere.

Ms Flynn-Cherenzia has used Prince Rupert since it opened and has watched it grow. "I've been with several different companies using Prince Rupert as a port of entry for about seven years. So I've seen it go from a little infantile, very customised, to now a very mature, very sophisticated, but still very helpful."

She lists the pros and cons of the Prince Rupert gateway: PROS: "We like the fast, reliable, consistent services. There is a financial savings as a result of doing that. We like the good use of the automation. I've been to the port, and there was no problem getting access in and out. The people there have been very good about working with us as opposed to laying out certain rules that I have to abide by. And then of course the cost savings and associated fees as a result."

Of the CONS, she said: "There are limited container movements, so you only have certain vessel sailings. The callings are maybe only once or twice a week, so you have to take them into account when you do your ship scheduling.

"And then periodically, especially last year when everybody else jumped up to Prince Rupert, we did experience congestion. But when you think about one month of disruption in seven years, it wasn't too bad," she said.

The growth of Prince Rupert's container trade has been so strong that DP World and the port authority are considering even more expansion of the port's current annual capacity of 850,000 TEU.

Plans underway will add 500,000 TEU, for a total of 1.35 million-TEU capacity by July 1, 2017. An additional future phase being contemplated would bring total capacity above two million TEU if approved.