On April 4, 2022, GCT Global Container Terminals appeared before the House of Commons Standing Committee on Transport, Infrastructure and Communities.
Opening remarks and responses to questions from committee members during this session are as follows.
Good morning, Mr. Chair and members of the Committee. Thank you for the invitation to be with you today as you continue your important study on the “State of Canada’s Supply Chain.” My name is Marko Dekovic, and I am the Vice President of Public Affairs at Global Container Terminals. I am speaking to you today from the traditional and treaty territories of the Coast Salish people in British Columbia.
GCT is headquartered in Vancouver operating two container terminals. GCT Vanterm (with capacity of about 850,000 TEU), located in the Burrard Inlet in downtown Vancouver. The other is GCT Deltaport, at Roberts Bank near the city of Delta, with current capacity of 2.4M TEU. It is currently Canada’s largest container terminal, but Prince Rupert’s Fairview terminal is catching up. We are anchor tenants of the Vancouver Fraser Port Authority (VFPA).
GCT is a majority Canadian-owned company with three major institutional investor shareholders: the Ontario Teachers’ Pension Plan (OTPP), the British Columbia Investment Management Corporation (BCI), and IFM Investors (IFM). Our shareholders are long-term, experienced infrastructure investors committed to overall growth of trade infrastructure in Canada and abroad.
As a result of our history and experience in the marine transportation sector, we are uniquely positioned to provide input to your Committee on this study focused on how best to strengthen Canada’s supply chain, and I appreciate there are three particular aspects to your current supply chain study.
Firstly, regarding the effects of the pandemic and climate change on the supply chain, there can be no doubt that the last two years have brought a series of major disruptions to the overall logistics network.
Be it from rapid contraction as manufacturing and ports in Asia went into shut down, or the extreme bounce back as things started opening up and consumers shifted their demands.
Canada is not immune from global supply chain challenges. We have seen them materialize in manufacturing, trucking, raw material supply, and inland storage and distribution. Moreover, the extreme weather in B.C., namely devastating flooding and forest fires, furthered the problems with the closing of rail lines and resulting back of cargo ships at anchorages at the Port of Vancouver. The impacts are disruptions across supply chains, increases in shipping costs, and longer delivery times.
But it is important to note, however, that container capacity at marine terminals on Canada’s West Coast, has not been a contributing factor – and there is plenty of container terminal capacity in the system.
In fact, Canada’s Pacific Gateway has done an exceptional job handling pandemic-driven surges thanks to history of incremental, smart, market-driven investments by terminal operators - and industry collaborations such as data sharing and truck reservations, all supported by the hard work of essential supply chain workers.
As such, supply chain challenges we have witnessed point to a need to solve the broader issue - building resilience to ensure reliable operations at port terminals across the country and avoid more climate-related impacts and disruptions within the supply chain.
Our recommendation is that government should invest in off-terminal common-user trade-enabling infrastructure that drives resiliency. The supply chain is only as strong as our weakest link. As we have experienced, having one road and rail corridor going through Canada’s Rockies that can be washed away due to climate change is clearly a gap that government needs to address.
On the second focus of this study - the current state of container transport of products in Canada, it is important to note that the West Coast container terminal capacity has not been a contributing factor to supply chain challenges. The fact is Canada has container terminal capacity available to meet current and future demands.
At present, there are over one million TEUs of excess capacity on the West Coast of Canada. This does not even take into account the additional 1.2 Million TEUs that is currently under construction and will be online in the next 3 years – both in Prince Rupert and Vancouver.
While Canada’s West Coast may eventually need additional container terminal capacity, forecasts show this will be well into the 2030s at the earliest; not 2025 – as others has suggested.
Recently released Vancouver Fraser Port Authority’s own “Container Traffic Report” reported a 2% decrease in laden TEU volumes and a massive increase in empty container exports. This indicates an imbalance in the supply chain. Furthermore, the Port also reported a 9% decrease in container vessel traffic in 2021, indicating that more volume is being moved by fewer, larger ships. This confirms what GCT and other terminal operators have been saying all along: upsizing of vessels and consolidation of ocean carriers does not require building more terminals/berths, rather more supporting infrastructure that will keep the velocity of larger cargo volumes per visit flowing.
Related then, the Vancouver Fraser Port Authority’s RBT2 project is a solution to a problem that does not exist. RBT2 will essentially provide more parking spaces for less cars coming to the parking lot. The Port Authority needs to reflect on what its core mandate is, and how it can actually help address supply chain challenges through collaboration with industry.
As we continue on a path to post-pandemic recovery, our recommendation would be that the federal government examine the business case, needs, and requirements for container terminal capacity expansion on Canada’s West Coast given the current market realities, and well before any significant project-related decisions by government agencies are made. We also believe this would be an important undertaking in context of the Port Modernization Review that is reaching its conclusion hopefully this year.
Thank you again for the invitation to appear today. I look forward to your questions.
QUESTIONS & ANSWERS
Ms. Marilyn Gladu: I have two questions for you, Mr. Dekovic. You mentioned the change that we need to make in terms of off-terminal infrastructure, and I'm interested to know more about that, and then a shift or an idea to take trucks off the road in favour of marine to reduce emissions. I'm interested in what you have to say on those two things.
Mr. Marko Dekovic: Thank you for your question.
To the first question, what we were recommending is that the investments need to be made in the off-terminal common-user infrastructure. So as noted during both extreme climate events, be it flooding or fires, or during the rail blockades early in 2020, the entire gateway on the west coast in particular and the port of Vancouver gets cut off. So you can have seven new terminals built in the port of Vancouver and each one of them would be cut off if the infrastructure coming to it—road and rail— is not enabled or doesn't have resilience.
So that is something key and we feel that there's a gap and that is where government should be [Inaudible] private sector will always invest in a place where rail meets tidewater and road meets tidewater, as has been the case with the British Columbia marine terminals. They have a long and successful history of expansions and private sector investments.
To your second question around short sea shipping, I believe that was more of a comment from one of the other presenters but I can comment on it, in fact, as we are advancing our incremental expansion at GCT Deltaport terminal, Deltaport Berth Four expansion project. In that project we've incorporated optionality to have a short sea shipping berth which could be utilized to move containers by barge in the local, regional area, likely up and down the Fraser River should short sea shipping terminals be developed along the river. Of course moving up to a thousand or so TEUs via barge up the [Inaudible] River could potentially eliminate a thousand or more container truck movements in an already congested lower mainland road network—
Ms. Marilyn Gladu: Excellent.
Mr. Marko Dekovic: —in addition to obviously reducing emissions.
Ms. Marilyn Gladu: Very good.
Mr. Taylor Bachrach: Well, I'm tempted to ask that question to some of the other witnesses. Maybe I'll ask it to Mr. Dekovic. When you think about risks to Canada's supply chain in the decades to come, what rises to the top? I'm thinking particularly of external risks that threaten our supply chain.
Mr. Marko Dekovic: Absolutely, thank you for that question.
It's simply to do with the resiliency of the pipe, road and rail—or the gateway corridor if you want to call it that. That would be the number one risk.
If you look at investments that are happening, in port of Prince Rupert the Dubai Ports World terminal operator there is working hand-in-hand with the port authority and making investments. If you look at the port of Vancouver—be it the grain sector, the breakbulk sector and the container terminals such as ourselves—they are making significant investments, that is not where the risk is. There is no risk that private sector's not going to invest in capacity.
But if next year there's another flood, if next year there's another fire, what have we done to ensure that all those investments in terminal operators that have occurred on the west coast can continue to provide services to the supply chain? It is that risk. How do we build additional road, rail and gateway pipe for the supply chain to reach the west coast? That is the number one risk.
Mr. Taylor Bachrach: Thanks for that. It's a great segue into my next question.
You're familiar, of course, with the plans in Prince Rupert to expand the port's capacity. It's an exciting phase for them and they've seen tremendous growth over the previous years.
Could you explain how investing—and you touched on it a little bit—in alternative ports builds redundancy and how it can alleviate some of the pressures that we see when there are major events that cut off access?
Mr. Marko Dekovic: It's a great question.
Prince Rupert, as you noted, are making investments there with their container terminal operator. You have, here in Vancouver, ourselves building our Deltaport berth for expansion project to add capacity.
Ports and port terminals will be ready but the question is how do we get goods to them and is one redundant for the other. I would say to that—Prince Rupert and Prince Rupert container terminals—we saw when there were challenges in Lower Mainland that some cargos did move there, but ultimately Prince Rupert is a slightly different offering. There is no two million plus local market up in Prince Rupert so it's a great gateway port, serviced by one rail line, but again we should be looking at that as well as resiliency of Prince Rupert for Vancouver. Should it have more rail capacity and more diversity of offerings there to truly be a back-up for the Vancouver gateway?
Mr. Matt Jeneroux (Edmonton Riverbend, CPC): Thank you, Mr. Chair.
It's good to see a lot of familiar faces here again, particularly Mr. Gooch and Mr. Dekovic. We'll focus some of my questions to you guys.
We're seeing a lot of supply chain issues facing the housing market when it comes to supplies and materials when we're building homes.
I look at places like—to you Marko—the English Bay and seeing a number of those barges out there which have a variety of materials on them but they continue to sit there for months and months on end. I understand a lot of the solutions come from, as we heard last time, artificial intelligence and other high investment pieces.
However, when we're facing the situation we are right now hoping that it'd be able to supply us with some supply chain things that we can suggest here that are more immediate.
Again, to start with Marko, and then maybe on to you, Mr. Gooch—I pick on the Vancouver port and it was brought up that it's on both sides of the country—but if we could focus there perhaps just to start would be helpful.
Mr. Marko Dekovic: Thanks for your question.
I assume you're referring to the barge in English Bay. You referred to one barge that has beached itself—
Mr. Matt Jeneroux: Other than that barge.... That's the one that's seizing everybody's attention, but other than that one barge.
Mr. Marko Dekovic: There are vessels in anchorages in Port of Vancouver that you would see in English Bay. There are a variety of vessels, mostly bulk ships. There are some container ships, so I really can't comment much on the bulk carriers, but on the container ships, yes, there are about a dozen or so vessels that are backed up across all terminals.
There are four container terminals in Vancouver, as you know. Two are operated by GCT, our company, and then two by Dubai Ports World.
We're catching up, working away as the loss of rail starts picking up and really, that has been the challenge.
The reason the vessels are backed up in anchorages is because the loss of Via Rail has been a challenge since both the fires and then the subsequent floods. It is picking up. We're working very closely with our rail supply chain partners and we're working on strategies of how to quickly get back to normalcy in the supply chain, but it will take some time. It will probably take another 90 or so days to get there, but there is light at the end of the tunnel.
Mr. Matt Jeneroux: Maybe before we move on to you, Mr. Gooch, on that, Marko, would you mind commenting?
I remember when we were there a few years back, as a committee, and you provided a wonderful opportunity for us to see it firsthand, there were some real trucking issues with a real backlog. Is that less of a factor now as you speak to rail, or is that also on top of the current trucking concerns that were there in the past?
Mr. Marko Dekovic: Yes, local [Inaudible] issues largely, in my opinion, have been solved, largely due to the collaboration between provincial and federal authorities. We have, for a while now, implemented a truck reservation system. There are almost payments paid by terminal operators to trucking operators if we take too long to process. Those are all innovations that don't exist in other ports.
We operate two terminals in the port of New York and New Jersey. In New York and New Jersey there is no truck reservation system. There are no financial incentives for terminal operators to move trucks to their gates.
We're seeing some emergency reservations in L.A. Long Beach, but it's still a long way away of where our terminals operate in Canada.
There are no night gates either. We've been operating night gates as the demand requires for trucking for a while, probably since 2014 or 2015, and those things are just not occurring in other port complexes across North America, particularly in the U.S.
We have addressed those challenges largely. Probably the only thing we're hearing right now from the trucking community is the rapid increase in gas and the cost of fuel to continue providing the services that truckers do.
Mr. Matt Jeneroux: Great.
Ms. Annie Koutrakis (Vimy, Lib.): Thank you, Mr. Chair, and thank you to all our witnesses for being with us today.
My next questions will be addressed to Mr. Dekovic at GCT.
I understand the shortage of containers—we have talked about it a lot this morning and this afternoon—is one of the major causes of problems with global supply chains.
Do you see this shortage as a temporary problem, or potentially a longer-term structural challenge?
Mr. Marko Dekovic: Thank you for that question. I would say it's a short-term challenge.
As I mentioned in my testimony, the number of full containers moving out of our ports was down by 2% but probably about a 50% increase in empty containers moving out. That is due to the imbalance in supply chain where the empty containers are being more rapidly evacuated back to Asia due to the growing consumer demands surge and that kind of volume is being sucked up that way.
That will return back to normal as the supply chain normalizes. We actually, on Canada's west coast, have a pretty balanced trade compared to other north American ports which are much more import ports, we do export of containers. We, in our terminals, handle exports of lumber and specialty crops and other items, so it's pretty balanced. I would say it's short-term and we can probably see some stabilization coming in later this year in that balance.
Ms. Annie Koutrakis: Do you think that manufacturing could be a solution? Is this something that can be done in Canada to address some of this shortage and, if so, how long do you think it would take to increase the supply on a scale large enough to address the shortage?
Mr. Marko Dekovic: Are you talking about the [Inaudible]?
Ms. Annie Koutrakis: Yes, if we were to manufacture them in Canada, is that something you think that's possible?
Mr. Marko Dekovic: I'm not the expert on container manufacturing but I would that the time that it would take, it would probably be too late because by time the system itself will normalize itself.
Ms. Annie Koutrakis: Thank you for that.
Ms. Marilyn Gladu: Thank you.
Mr. Dekovic, you had mentioned that we don't have an issue with container shortage in Canada but I continually hear about supply chain issues due to lack of containers. What is happening there? Could you help us understand where the bottleneck is and what do we need to do about it?
Mr. Marko Dekovic: Thank you for your question.
There is no issue with container terminal capacity or shortage thereof but, as you said, there is a shortage of physical containers that some Canadian exporters may want to use. The challenge there, as I mentioned, is the extreme consumer demand pressure for the North American market that is resulting in ocean carriers and exporters from Asia evacuating containers to Asia more rapidly without them having a chance to go into a cycle of the supply chain here where it may get stuff, be it somewhere in Ontario from a manufacturing facility or somewhere in western Canada with grain products or specialty crops and British Columbia or lumber.
Because the containers, once they come off the ship, are quickly emptied, returned back to the terminal and evacuated on the next vessel out, there's a shortage of empty containers in the system. But as I mentioned to an earlier question, we see that that imbalance is going to start settling down.