ANALYSIS & PERSPECTIVE 2006 - New gateway horizons for Canada’s marine industry

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By Leo Ryan, AJOTAmidst a changing landscape, Canada’s marine industry is poised for major developments in 2007 as foreign and domestic investors are giving a hard look at gateway opportunities on both the East and West Coasts. This has included substantial forays into container terminals and various shortsea projects in the Great Lakes region.
While bulk cargo remains the dominant port activity, the container sector has been the catalyst for major initiatives – thanks notably to sharply rising maritime trade with Asia and to the need in North America for meeting demand with sufficient cargo-handling capacity.
At the same time, a super-port on Canada’s Pacific coast is moving closer to reality.
The Boards of Directors of three Lower Mainland ports in British Columbia recently ratified a consultant report recommending their merger into a single large entity that would compete more effectively against US rivals amidst surging trade between Asia and North America.
Such an ambitious undertaking could take place by the end of 2007, some observers consider, if no bureaucratic hurdles cause delays.
The integration of the ports of Vancouver, Fraser River and North Fraser “is the most effective means of optimizing port planning, development and marketing,” says George Adams, Chairman of the Vancouver Port Authority.
“One of the most important aspects in looking at the case for integration has been to ensure we had the support of our stakeholders,” comments Fraser River Chairman Peter Podovinikoff. “The consultants interviewed many of our key stakeholders and it is apparent the majority support integration.”
Together, the ports concerned represent over 130 million metric tons of cargo and account for more than half of the total containerized cargo passing through Canadian ports.
Box traffic is handled at Vancouver, Canada’s largest port, and Fraser River, while North Fraser is mainly engaged in coastal and domestic shipping of commodities.
Such consolidation was proposed last summer by federal Transport Minister Lawrence Cannon, who must now determine how quickly regulations will be amended to facilitate the merger.
The report was prepared by InterVISTAS Consulting Ltd. and commissioned by the three port authorities.
It is widely believed that the merger initiative was partly driven by last winter’s departure of CP Ships from Fraser Surrey Docks following the carrier’s acquisition by Hapag-Lloyd. The latter has transferred CP Ships box cargo to Vancouver, and, virtually overnight, Fraser Surrey Docks lost 70% of its container business.
The action had already been heating up at Vancouver with the announcement that Canada’s federal government had, following prolonged delays, given its environmental blessing to adding a third berth at Deltaport. The Port of Vancouver, which handled two million teus for the first time this year, is projecting a tripling of box cargo by 2020.
Big terminal acquisitionsMore dramatic, however, was the news of a complete outsider - the Ontario Teachers’ Pension Plan (OTPP) - gobbling up the Canadian and US terminals owned by Hong Kong’s Orient Overseas (International) Ltd. for the princely sum of $2.4 billion in cash in a transaction due to be finalized by the end of the first quarter of 2007.
The price tag stunned analysts who had been expecting a transaction not likely exceeding $1.8 billion and had also been counting on the buyer coming from the ranks of such global financial giants as Goldman Sachs and Australia’s Macquarie Group, or even terminal industry leader Hutchison Ports.
The terminal market has been stirring great interest from financial entities looking closely at infrastructure investments offering steady cash flow and growth potential as world trade continues to increase significantly.
OOIL’s terminals division comprises TSI Terminal Systems, which operates the Vanterm and Deltaport container terminals in Vancouver, plus two terminals in New York and New Jersey.
OOIL, which owns Orient Overse

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American Journal of Transportation