Harbour Link Blog Archive

Is T2 still needed?

Posted 2014-06-26 by Harbour Link in opinion

As a longstanding participant in Vancouver’s container business, including the operations, planning and expansion of the Port’s existing container facilities, the evolving trend by container shipping lines to concentrate their services through the formation of shared alliances with each other, raises the question whether T2 continues to be a valid and necessary expansion for the gateway.

Let’s assume for the moment that the permitting process (presently underway) will permit the development of T2 to proceed.

The cost to build T2 is projected to be in the order of $2.5 billion. If T2 is to be built by the private sector, the build costs appear to exceed the business case for its development, and if T2 is built by Government, the economic merits to justify its development will require a lot of external value to merit the investment beyond that of the port’s supply chain requirements.

For the above reasons, before PMV continue further with T2, we believe the assumptions used to justify the development of T2 should be revisited to take into account the changing market trends and developments that are changing container shipping and its future direction.

We also believe the merits of less costly alternate options to T2 should be evaluated that permit the gateway to accommodate projected higher container volume through better utilization of the existing container terminals.

Based on the actions already in play by shipping lines to form and operate within alliances (P3, made up of Maersk Line, Mediterranean Shipping and CMA CGA is a good example), the number of container ships deployed globally by shipping line carriers will continue to shrink. Indeed, the future growth in container shipping will be accommodated by shipping alliances achieving operational synergies driven by the deployment and better utilization of much larger but fewer ships.

The good news for Vancouver flowing from the trend of fewer but larger ships is the Port’s visionary thinking by building three world class container terminals (Centerm, Vanterm and Deltaport) with large contiguous deep water berths, each capable of handling the progressively larger ships that will call at Pacific Northwest ports for many years to come. Moreover, the existing berths located at Centerm, Vanterm and Deltaport collectively, have the berth space needed to accommodate the fewer but larger container ships that will call.

What the above container terminals do not have are sufficient uplands to accommodate the greater container volumes they will be required to handle unless major operational changes are made in how the landside transit of containers at these terminals is performed to achieve much higher container volumes and greater velocity, whcih is essential to the port’s future.

Achieving greater capacity and velocity requires the port’s terminal operators to focus on reducing container dwell time and to reengineer their operating processes to optimize the capacity of the footprint of the existing terminals.

This is a blog not a detailed report. Withthis in mind, some of the options worthy of evaluation to achieve the missing capacity/velocity factors include the following:

  1. The merits to establish near dock container depots with rail sidings that are strategically situated along the port’s rail corridors to enable westbound double stack trains to be cleared of MT containers and also export containers designated for loading to ships before the earliest receiving date (ERD) set by the terminal for the intended vessel of loading, in advance of the train’s arrival at the port. This simple step of clearing the westbound trains of MT and Export containers in advance of the train’s arrival at the port will free up large areas of the port’s existing container terminals to enable each terminal to handle substantially greater throughput, probably by as much as 30%. It will also substantially reduce the volume of truck traffic visiting the terminals to pick-up MT containers that presently arrive ex rail that are required by exporters to perform trans loading activities.

  2. The merits of establishing strategically located off dock container depots to serve as buffers for the transfer of import containers that are to be moved east by rail, when rail carriers cannot provide matching rolling stock to permit the seamless transfer of import containers onto waiting trains.

    It is fair to say that on-dock rail works well when rail carriers have sufficient rolling stock available to seamlessly accommodate the flow of eastbound containers between ships at berth onto railcars. However, each time a railcar shortage occurs, the shortage rapidly causes the port’s container terminals to become congested with rail traffic and to seriously impede the terminal’s ability to continue to seamlessly handle containers for other modes of transport. Regrettably it is not unusual for the port’s container terminals to become gridlocked with import containers waiting for the arrival of trains. As I write this, the equivalent of 15 or more double stack trains are occupying space urgently needed by the port’s terminals to accommodate other container flows.

    It is also important to bear in mind that as the Port’s container volume continues to grow, the demand for additional rail will also grow. Thus, a factor that must be considered, is at what point does the Port draw a line in the sand to optimize the use of the existing rail infrastructure which forms part of the existing container terminals and start handling all additional rail traffic using barges to relay same directly to the intermodal yards of CP and CN located on the Fraser River.

  3. There are various land opportunities situated along the Fraser River that could be transformed into excellent port buffer zones. These include sites in Richmond (good connectivity to rail, highway and barge connections), sites located in Port Kells, (situated adjacent to CN’s main line to facilitate rail, barge and highway connectivity). The land mass located east of FSD up to the Pattullo Bridge is also ideally positioned with good rail, barge and highway connectivity. The TFN and Kingswood Capital Corporation ALR lands located close to Robert Banks are also perfectly situated to support substantial near dock rail intermodal and related container handling and storage facilities, plus port trade zones with warehouses to facilitate distribution and consolidation centres. And let’s not overlook the strategic merits of FSD being transformed into a support network for both rail carriers and the Port as a major relay centre to handle east and westbound trains and to serve as a container buffer zone to handle eastbound rail containers, MT containers, export containers that arrive prior to the ERD of the vessel and to serve the industrial parks concentrated in Surrey, Langley and the Tilbury area of Delta.

  4. The merits of the terminal operators automating the container yard component of their terminals. Such technology is increasingly being deployed globally, is well proven and readily available. Automation technology will substantially increase container capacity and velocity of the existing container stacking areas at each of the existing terminals. It would also result in a substantial rise in overall throughput capacity and improved operating efficiency levels compared to the present systems being used. A win-win for everyone!

  5. The merits of using barges to relay containers between the container terminals and the buffer zones. Such barges will most probably be purpose built and handle in the order of 500TEU (equivalent to an average size unit train).

    To optimize efficiency, the barges would probably operate using inset barge slips (similar to the Vancouver harbour Sea-bus) and be spanned by rail mounted canter-lever cranes to permit high functioning operating systems to be achieved at the port’s container terminals and also at the buffer zones and rail heads.

    As an intermodal carrier we strongly believe the use of barges provides the solution to achieving traffic dissemination to enable the gateway to seamlessly handle the future container volumes that are projected. The alternative of continuing to following past practice and to do everything directly at the port will create a massive funnel effect on the rail and road corridors that link the Port with the geographic region of its growing market. This funnel effect will result in worsening traffic bottlenecks and community uprisings against port activities, and adversely impact the Gateways competitive advantages.

In a nutshell, in our opinion, the use of port nodes (buffer zones), combined with the deployment of barges, provides a workable solution to add significant throughput capacity to the existing port facilities. Port nodes will also shorten container dwell time and increase throughput velocity.

So to answer the question “Is T2 still needed” our conclusion is that significant market changes are in play that seriously impact the merits of the basic assumptions used to warrant the T2 development. More so, we believe these market changes create the need to review the merits of building T2 and why we think the above options should be evaluated before proceeding further with T2. As stated above, we believe the Port already has sufficient berths to accommodate further shipping growth. We also believe there are substantially cheaper and better options available that will enable the Port to achieve greater container capacity/velocity than to spend $2.5+ billion building T2 as presently envisioned.

Vancouver has always been a smartly operated Gateway, which is why it has achieved World recognition as a leading edge successfully operated port. We believe the time has come to capitalize on the experience of other global ports that have already adopted hub and spoke buffer zones (port nodes) using barging services to expedite the flow, distribution and collection of containers as support links to the port. In the process they have added significant throughput capacity in harmony with and the support of the surrounding community. The German ports linked to the Rhine River are a good example.