Prince Rupert Port Authority: An interview with Shaun Stevenson

One of the interesting new developments in the world of ocean trade has been the opening of the Prince Rupert Port Authority’s Fairview Container Terminal in October 2007 with their intermodal connection to the rest of Canada and the U.S. Midwest, offering an alternative gateway for those destinations vs. LA/Long Beach. With the recent labor disruptions on the West Coast, particularly in LA/Long Beach, during the PMA/ILWU contract negotiations, not to mention the increased cost of doing business there, a lot of people have been looking northward and pondering Prince Rupert. So we here at 3plwire.com decided to reach out to the Prince Rupert Port Authority for their thoughts. They put us in touch with Shaun Stevenson, Vice President Marketing and Business Development, who was kind enough to spend some time talking to us:

3plwire: First off, I wanted to touch base on the Prince Rupert Port Authority’s vision, which you state to be “a leading trade port or gateway between North America and Asian markets”. For our readers who may not know a lot about Prince Rupert, why Prince Rupert and how are you going about becoming a leading Transpacific gateway?

Shaun Stevenson: Well I think it reflects our transition from being, for the most part, a regional export gateway, since the port was originally established, to really transitioning into being an anchor for a new trade corridor into linking Asia into Central Canada and also the U.S., with a rail and highway corridor that’s anchored by a port facility that can facilitate that trade.

3plwire: One of the things that I want to talk about is the declining competitiveness of West Coast Ports, primarily LA/Long Beach, and obviously LA/Long Beach is still a very important gateway for Transpacific cargo. In your opinion, what do you think is wrong with the LA/Long Beach port complex and why customers may be starting to avoid, well actually they have been avoiding LA/Long Beach and there seems to be a lot of interest in All-Water services to the East Coast and other alternative gateways.

Shaun Stevenson: Well, I don’t know that I can speak in detail about what is wrong with LA/Long Beach, but I can certainly reference what I think is great about Prince Rupert…

3plwire: Ok…

Shaun Stevenson: …and that is that we see ourselves as a pure intermodal gateway. The traditional model for a container trade is, uh, that container terminals were built near, or in, large metropolitan areas to serve that local market. And then this notion of intermodal transportation, where containers were destined for points further inland, has really been a more modern manifestation of transportation. And really one of our biggest barriers developing as a container gateway was the lack of a large, local population, or local market. And that, we think, is actually our strength, in that containers, inbound, via the Prince Rupert gateway, aren’t destined for Prince Rupert. So we offer virtually a pure intermodal facility where containers are directly loaded from ships onto trains and expedited to points inland.

3plwire: I’m glad you touched on that point, because I wanted to talk a little about Prince Rupert, as you said, the majority of the cargo is NOT destined for Prince Rupert…

Shaun Stevenson: Absolutely.

3plwire: …Prince Rupert is a small town, correct me if I’m wrong, roughly 14,000 people in population?

Shaun Stevenson: That’s correct.

3plwire: And as you said traditionally ports have been centered around large metropolitan areas, where there’s large populations. In terms of Prince Rupert’s growth, where you are planning a lot of expansion with the container terminals, one of the advantages that I would say some of the larger ports on the West Coast have is that they are in metropolitan areas and they have a very ready and available dynamic workforce, whereas Prince Rupert with a smaller population, I read an article earlier this year, can’t remember where, that talked about the aging of the Prince Rupert workforce. How does that play into Prince Rupert’s expansion plans? Is there a concern with the potential lack of labor or the rising age of the labor force?

Shaun Stevenson: You know, what I think that we’re seeing is, we see a fairly significant economical restructuring across Prince Rupert, but also across Northern British Columbia, where you are seeing some of the traditional industries in forestry and fishing and so forth, have been in decline, and so what that has contributed to is a fairly high unemployment and access to an unemployed or underemployed workforce. In fact, also we went through a period of decline in port operations, and a lot of our longshore labor was working elsewhere, like in Vancouver through some mobility clauses in their collective agreements. So what we’re seeing is a lot of people come back to Prince Rupert that maybe were working in the oil patch or in Vancouver, because of the lack of employment opportunities here. So we think we’ve got a pretty significant workforce going forward to not just support our current operations but our planned expansion that we have on the drawing board for the next decade.

3plwire: I see. So then would I be correct in saying that you forecast that you’ll continue to attract labor from other parts of British Columbia to work in the port?

Shaun Stevenson: Yes, that’s part of it, but what happened with the decline in the key economic drivers here over the last decade is you had a lot of families that were separated, where the husband was working the oil patch in Alberta but they maintained a residence here. What’s happened is bringing those people back to Prince Rupert again.

3plwire: Are you seeing an interest or a rise in newer/younger families moving into Prince Rupert?

Shaun Stevenson: Yeah, as a result of the port expansion there’s economic opportunity here, there’s employment opportunities here, we’re seeing that happen. In fact if you look at the recruitment we’ve done recently, with the anticipation of the container terminal opening up, we brought on an additional 250 longshoremen. You know, the average age of those recruits is quite young.

3plwire: Speaking about labor issues, as you know the ILWU and the PMA recently came to a tentative agreement here on the West Coast. I wanted to get some perspective on the Prince Rupert Port Authority’s relationship with local longshore labor: How’s it governed, do you face similar difficulties that perhaps LA/Long Beach or Oakland might face? How is the relationship with labor?

Shaun Stevenson: Well we have a really, really positive working relationship with our local longshore labor here. You know, in fact, I would kind of reference them as partners in all of the port expansion. Together we’ve been promoting the opportunities in Prince Rupert. The local ILWU is part of the collective agreement that spans Vancouver to Prince Rupert, so they’re all part of the same collective agreement and we’ve enjoyed a very positive working relationship with them and seen as a partnership in developing new opportunities with their membership and in the community overall. You know one of the things that I think distinguishes Prince Rupert is that we’re, in a large city, you go to work and you go home and you’re anonymous. In a community the size of Prince Rupert, you know, we all know each other. And everyone wants to see the success of the port and new projects, and so there’s pressure that goes along with that with everyone involved: pressure for the Port Authority in seeing our visions for expansion realized, but also pressure within, I’m certain, the ILWU membership to making sure everyone’s striving to perform to a standard. Quite a different dynamic in the community as opposed to what you would see in a large city.

3plwire: Yeah, sounds like it. I take it then that you have not seen, or I would say that you guys probably rarely see any labor disruptions with your union members.

Shaun Stevenson: No. No, and I think we can attribute a great deal of the success of the terminal in the first 9 months of operations here to the commitment and, uh, buy-in by the ILWU into making this whole new gateway work.

3plwire: Now obviously you guys are, um, you’re huge with the intermodal service, you’ve got great connections to the Midwest, and that seems to be where a lot of your marketing and expertise go, makes perfect sense, however I wanted to speak a little about Southern California, the ports there seem to be on a campaign to make themselves as uncompetitive as possible: you’ve got the labor issues with the ILWU, environmental groups….

Shaun Stevenson: …port taxes…

3plwire: …yup, port taxes, fees, development/expansion difficulties, the controversial Clean Truck Program, the list goes on and on. And I think there’s a real frustration with shippers in regards to Southern California and a growing desire to avoid it whenever possible for cargo that’s NOT destined for California. That being said, California is still a huge economy and there’s a lot of cargo that does need to terminate there. In terms of the news and developments coming out of California, does any of that play into Prince Rupert’s planning? I mean, and in addition to that, has there been any brainstorming or thoughts about actually servicing the West Coast from Prince Rupert?

Shaun Stevenson: Well certainly the developments down in California are relevant in the competitive arena that we operate within. And we really see Prince Rupert, the Prince Rupert gateway, you know, as a potential alternative to LA/Long Beach, obviously for the intermodal traffic. And we view some of the recent developments as only improving our competitive positioning…

3plwire: (laughs) Of course!

Shaun Stevenson: …cause really our value proposition that we’ve been demonstrating over the last 9 months have, uh, you know the velocity and reliability of using Prince Rupert to access Chicago, Memphis, the Mississippi basin, and I think if more shippers become aware of that and their increasing frustration with what’s happening in California, you know, Prince Rupert is going to become more relevant. I don’t know that we’ll ever get to a point where we’re able to serve the California market better than LA/Long Beach. I think LA/Long Beach can confidently look after the California market. In the near future likely will become more focused on that and maybe less around the intermodal traffic destined for the Midwest.

3plwire: So then no plans for Prince Rupert to even attempt any kind of intermodal connections down to California?

Shaun Stevenson: I don’t think we could deliver a strong value proposition for that.

3plwire: Got it, makes sense. Regarding your intermodal service to the Midwest, the Journal of Commerce a few weeks ago, Peter Tirschwell wrote a column entitled “A Study In Contrasts” in which he compared the stark contrast in competitiveness and development between LA/Long Beach and Prince Rupert, and he obviously gave Prince Rupert a pretty glowing review. However, one of the potential challenges he mentioned is the fact that there is no truck option for Prince Rupert and the rail line to Chicago is single tracked, and that could possibly pose a problem in case of a nasty winter in keeping it open. Is that a valid concern?

Shaun Stevenson: Well I think if you, if you look at the CN network, the CN has gone through a pretty significant capital expansion along the Northern main line that services Prince Rupert. And while it’s not double tracked we’ve got a situation with sidings extended to 14,000 feet where we understand CN’s effectively created a double line operating model with those sidings. You know I think the issues brought forth, or I guess the concerns or curiosities about the impact of weather, that’s a natural concern that comes forward thinking about a northern location. But the reality this past winter, you know, on the coast was hammered with weather challenges through all the gateways and the reality is that Prince Rupert in the Northwest transportation corridor performed exceptionally well with little or no interruptions throughout the entire winter. So I think a lot of those concerns or questions are starting to be answered with having just operated through one of the harshest winters in the past decade. The other thing, the rail line which services Prince Rupert transits the Rocky Mountains through the lowest grades on the West Coast of North America. It’s an open valley and very gentle grades, the grades with this liner are less than half a percent through the entire system.

3plwire: Wow.

Shaun Stevenson: So that means it’s very dependable and not as exposed to potential winter weather interruptions. It also means that trains can travel at higher speeds and use less locomotive power.

3plwire: Speaking of the CN can you speak a little bit about it’s bid for the acquisition of the Elgin Joliet & Eastern Railway Company. I don’t know too much about it, but I believe locally there’s been some opposition to that, I think I read somewhere that Presidential hopeful Barack Obama recently expressed his opposition to the plan, what’s the reason for it and maybe you can touch a little on that.

Shaun Stevenson: Well the acquisition of that line would effectively bypass Chicago and the congestion that the rail system faces in the city of Chicago. You know, the city of Chicago has been working with all of the railways over the past 5-10 years to try to find some solutions and dealing with that chokepoint and trying to move some of that traffic outside of Chicago. So this acquisition that CN’s been working towards it really fits well with the goals and objectives of the city of Chicago and relieving some of those conflicts of freight traffic through the city where they use the same rail lines for public transportation during the daylight hours. From a supply chain management perspective, it would effectively eliminate a 12-24 hour lag in crossing the city of Chicago and get goods faster into the DCs in Memphis and Chicago.

3plwire: So why would some of the locals be against this plan?

Shaun Stevenson: Well the locals that are against it are in the area where the rail line transits through.

3plwire: So it’s more of a “Not-in-my-backyard” kind of a thing.

Shaun Stevenson: Yeah, absolutely. And so, you can certainly understand their concerns surrounding increased rail traffic on a line that for the most part’s been virtually dormant and under utilized. But from a city of Chicago or state of Illinois perspective this makes good transportation policy and permits Chicago to grow as distribution hub for the Midwest. For us it would just improve the efficiency of the network that links us into the Midwest, likely trim 20 hrs off the transit time into Memphis, actually.

3plwire: Absolutely, who wouldn’t want that? Now you’re obviously really good into the Midwest, Chicago, Memphis, and of course you service your own gateways in Canada, you go all the way to Halifax, correct?

Shaun Stevenson: Yes, the CN line is coast-to-coast in Canada.

3plwire: Let’s talk about the East Coast. All-Water service to the East Coast is in high demand right now, the Panama Canal is going through expansion, I think the estimate is that they’ll have it completed sometime around 2014, which is going to allow larger vessels to transit from Asia to the East Coast and a lot of the East Coast ports have major infrastructure projects planned to improve efficiency and handle a little more volume, unlike the West Coast, or I should say LA/Long Beach. Are there any plans with Prince Rupert to further rail connections in the U.S. to service the East Coast?

Shaun Stevenson: Well with CN’s network and their interchange agreements with other lines we have reach…you know I think when we look at Prince Rupert’s role in that there’s no doubt that these East Coast ports are going to continue to grow and I think the decline in the West Coast traffic we’ve seen over the last 6 months or so is somewhat misleading in that you see growth in the East Coast. You’ve got some new terminal developments and some very well integrated operations in Norfolk and Savannah and so forth and we expect that they’re going to continue to grow and serve the East Coast very well. And particularly when the Panama Canal opens up, we, you know, we’re sort of counting on maybe a 12-15% shift in traffic from the West to East Coast.

3plwire: Interesting.

Shaun Stevenson: We think there’s some strong competitive advantages for some shippers. But when you start to talk about high value goods where inventory carrying costs are a key driver for supply chains, where speed and reliability are key, then we think Prince Rupert has a very strong value proposition regardless of what happens with the Panama Canal.

3plwire: Right, and that’s kind of where you start to really get into direct competition with LA/Long Beach cause that’s always been kind of the trade-off where, you know, All-Water service is great if you’ve got the time, but LA/Long Beach you throw it on the rail, you get it to New York, Norfolk, etc. in a pretty quick manner but if Prince Rupert can do that as fast or faster with better value then….

Shaun Stevenson: And that’s where you start to talk about higher value goods like electronics, furniture, or goods that have limited life cycles where you talk inventory turns that are faster, like garments, the clothing industry, that’s where we have a very strong value proposition. And when you look at the Prince Rupert service vs. what’s being realized for LA/Long Beach we’re trimming 3-4 days off of that quite easily. We’re seeing a maximum dwell time here of 2 days, we’re seeing consistent transit times here into Chicago of less than 100 hours.

3plwire: So it’s just a matter of time then, you think, before the demand and the carrier services get to the point where you’re servicing the East Coast on a regular basis?

Shaun Stevenson: Yeah, I think our reach is gonna be somewhat limited into the East Coast but certainly into the Midwest.

3plwire: Ok. Now let’s talk about your carrier-customers at the container terminals: So far Cosco is the only customer you have at Fairview Container Terminal?

Shaun Stevenson: Yeah, we’ve got two services with Cosco, on the CKYH alliance, we’re handling volumes with Hanjin, K-Line, Yang Ming as well.

3plwire: So…you’re handling them….but that’s through their alliance with Cosco, correct?

Shaun Stevenson: Yeah, that’s through the alliance, yes.

3plwire: Ok, but you’re not exactly handling vessels from those carriers….?

Shaun Stevenson: Well, yeah, even within the first service, uh, that commenced, November 1st, there’s nine vessels in the service string, 4 are Cosco, 5 are Hanjin.

3plwire: Oh, ok, got it. What about any other carriers, are there any other carriers planning to come to Fairview Container Terminal? What are some of the carriers you’ve been targeting, what’s going on with that picture?

Shaun Stevenson: Well I think over the past 12-18 months there are few carriers that HAVEN’T had a look at Prince Rupert, there are a number of carriers that are looking at Prince Rupert closely right now. I think there’s a general “let’s wait and see” if the Cosco services work before we commit to Prince Rupert and I think the last nine months has demonstrated that we’re the real deal and that there’s a good opportunity here. I can’t really identify specific carriers, but there’s three that we are actively engaged with right now.

3plwire: Part of the reason for the difficulty with the Southern California ports, I feel, is a result of their success. As they became more successful and attracted increasing volume of business, of course on top of that you’ve got increased congestion, pollution issues, all these other things that arose as they handled more traffic and as the population around there continued to grow as well. As Prince Rupert expands how do you plan to counter the possible negative effects of growth as you start handling more volume; like you said it’s a very small local community and if things really start to boom and grow, how would you counter some of that?

Shaun Stevenson: I think we’re blessed with having a layout within the community where we’re seeing all this port expansion and industrial expansion happening away from where the community is growing where everyone lives and shops and so forth. We don’t have a lot of conflicts between the rail traffic and the terminal activity and the urban environment. And as we grow we’re actually growing away from the community and we think that’s going to be a significant strategic advantage going forward and maintain our social life as we continue to expand and grow the port.

3plwire: Let’s talk about environmental impacts, in line with that. California ports have their own clean air programs, the state just passed a bill to slap a $30/TEU fee on containers moving through the ports to improve air quality and infrastructure, what are some of the current environmental issues facing the Prince Rupert Port now, and into the future, and do you have any long term plans for dealing with them?

Shaun Stevenson: We built the terminal with the view of exploring cold ironing down the road at some point where it made sense. One of the things, I think, just by the nature of our operation we don’t have a large amount of truck activity, it’s 98% pure marine rail and intermodal. So by nature that creates efficiencies and minimizes the carbon footprint of the operations. On top of that if you look at the broader trade route, Asia via Prince Rupert into the U.S., the fact that the shorter distance on the marine legs, the fact that the rail line that we have is the flattest and straightest and so forth, you know it’s pure intermodal, the carbon footprint on a TEU basis running a container of, say, running shoes through Prince Rupert should be dramatically less than alternate gateways because of that.

3plwire: You’ve been asked this question before! (chuckles)

Shaun Stevenson: Actually it’s one of the things that we think might become more compelling as a reason to use Prince Rupert in the future. And we’re looking at completing more analysis on that, not just a per mile analysis, but let’s break it down by DVD-player, by a pair of Nike running shoes and so forth that may have some resonance with the consumer.

3plwire: What about vessel emissions while they’re sitting in the port?

Shaun Stevenson: It’s not a significant issue on our radar screen. Obviously we’re monitoring it and looking to establishing shore power, but it’s certainly not part of our operation right now.

3plwire: Can you talk a little bit about efficiencies in terms of vessel dwell time, container moves per hour, etc.

Shaun Stevenson: We’re seeing many improvements. We started out with a fairly new longshore labor team, from a moves per hour perspective we’re up in the 24-26 net moves per hour. Maximum dwell time in the terminal is just under two days, in fact we’re still tracking it in hours and it’s been around the 36 hour mark for about 6 months. Transit times, I mentioned earlier, have been consistently under 100 hours into Chicago.

3plwire: Now you’ve got some expansion plans in place, Fairview Terminal 1, I believe the capacity is 500,000 TEUs?

Shaun Stevenson: That was the design capacity but we believe based upon what we’re seeing in productivity it could be higher to 700,000-800,000 TEUs.

3plwire: And then you have Phase II which should be coming online in 2013, is that correct?

Shaun Stevenson: That’s correct.

3plwire: And that would be handling how many TEUs?

Shaun Stevenson: That should bring an additional 1.5 million TEUs capacity. Triple the size of the terminal.

3plwire: Last, but not least, the Journal of Commerce recently released their list of the top 50 container ports in the world, when are we going to see Prince Rupert in there?

Shaun Stevenson: (Laughing) We’ve got a ways to go. Depends on how you measure it, in size or in performance, in performance I think we’ll break into there pretty quick!

3plwire: How about in size, be awhile, right? (Laughing)

Shaun Stevenson: That’ll be awhile!

3plwire: Alright, well thank you very much for your time and appreciate it very much.

Shaun Stevenson: Yeah, thanks for you interest.

A special thanks to Barry Bartlett of the Prince Rupert Port Authority for providing and allowing Prince Rupert photos.