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Canada Ports Win as Container Ships Divert on Labor Concern

August 28, 2014
container ship export
  

Prince Rupert, a remote port luring tourists with the slogan "Where Canada’s Wilderness Begins," may want to consider a new motto: "Asia’s Gateway to Chicago."

Container ships sailing across the northern Pacific are carrying more cargo and are setting course for British Columbia to avoid delays from a possible strike by U.S. West Coast longshoremen. Traffic in Prince Rupert soared 49 percent in July from a year earlier, according to data compiled by Bloomberg Intelligence, while volume dropped 19 percent in Seattle, its nearest major U.S. rival.

Canadian ports are gaining an advantage over their U.S. rivals amid an economic recovery that’s increasing container volumes from East Asia. While U.S. West Coast ports are mired in a labor dispute and congestion hobbles local railways, Prince Rupert is winning customers with its shorter sailing times from China and efficient infrastructure that can whisk freight to the U.S. Midwest and beyond.

"If people are using the Canadian ports now out of concern for a slowdown, and they like what they see and they like the processing times and the experience, they’ll continue to funnel some of their traffic that way," Emma Griffith, a director at Fitch Ratings in New York who covers air and sea ports, said by phone Aug. 19.

One of the companies best positioned to benefit from the added traffic is Canadian National Railway Co. Its shares, which were down 0.8 percent at C$76.37 at 10:18 a.m. in Toronto, have climbed 26 percent this year.

The Montreal-based company has exclusive connections to Prince Rupert and its lines help make the port a linchpin in the quickest sea-and-land route linking East Asia and the U.S. Midwest, according to the Prince Rupert Port Authority.

Strong Demand

Container traffic is rising on both sides of the continent. The volume at the biggest U.S. and Canadian ports rose 7.2 percent from a year earlier in May, the latest month for which industrywide data has been published, according to Bloomberg Intelligence. That outpaced April’s 5.9 percent gain.

The container volume indicates there’s strength in the U.S. economic rebound, according to Tony Hatch, a New York-based transportation analyst at ABH Consulting.

"The underlying demand is pretty strong, and this suggests that the economy is going well," Hatch said in a phone interview.

Prince Rupert may be uniquely positioned to benefit from the situation. The town, which lies ice-free 745 kilometers (462 miles) northwest of Vancouver, is as many as 68 hours closer to Shanghai in sailing time than is Los Angeles, according to the Prince Rupert Port Authority.

Shanghai-Chicago

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