Here it is:
PRINCE RUPERT, British Columbia This mist-shrouded port boasts scenic beauty and an abundance of wildlife but a human population of a mere 13,000.
Now, thanks to soaring U.S.-China trade, Prince Rupert may have a very different future: as an important link in the transport chain that supplies DVD players, toys, clothes and other goods to the U.S. heartland.
Large container-ship ports in Los Angeles and Long Beach, Calif., have seen surging volumes as the Asian trade has boomed. This has meant chronic congestion and pushed some cargo to smaller West Coast ports such as Vancouver, British Columbia. Now tiny Prince Rupert 500 miles to the remote north of Vancouver is making a play for a piece of that international trade. And the entry of a well-established U.S. port operator has given the project credibility.
He is M. Brian Maher, whose family-owned company operates the largest container terminal in the port of New York and New Jersey. By October of next year, Mr. Maher expects his giant cranes to be moving Asian goods onto trains at an upgraded Prince Rupert terminal for a 2,600-mile rail ride to the Midwest. He is gambling that big-box retailers and large global shipping companies, frustrated by backups at Southern California ports, will flock to his alternative route.
The project faces plenty of obstacles. A tribal group has filed a lawsuit contending the container-terminal plan violates aboriginal land rights. The city’s small population means there will be almost no local demand for the arriving goods, nor local products to put on the ships for their return voyage to Asia. Workers are having to adapt their schedules to environmental concerns, such as holding off blasting when whales, sea otters or porpoises are sighted. And there is no guarantee that either the shipping companies or the big retailers will want goods sent via Prince Rupert.
Situating a container-ship operation at such an out-of-the way spot turns conventional wisdom about port-building on its head. The usual plan is to build ports next to major cities that generate great demand for cargo, and then to compete for freight bound for elsewhere as well. But more than 98 percent of goods imported through Prince Rupert will leave the area immediately on long train rides.
The Prince Rupert project is part of a wave of port development that attempts an end run around the most historically important Asian gateways farther south. Los Angeles and Long Beach handled more than 60 percent of containers that passed through West Coast ports in the U.S. and Canada last year. They are a magnet for cargo because they have a huge local market and abundant rail lines. Manufacturers and retailers have fed the growth by building vast distribution centers about 40 miles east of Los Angeles.
But traffic has been seriously snarled three times in the past decade, including a 10-day shutdown in 2002 resulting from a stalemate in labor negotiations. The Southern California ports recently expanded capacity by keeping truck gates open at night and on weekends, and by adding more tracks, terminals and dockworkers. But “shippers have already been burned, and they know they can’t just rely on established West Coast ports,” Mr. Maher maintains. “They have to find alternative gateways.”
Prince Rupert has lots of competition in the bid to provide alternatives. Voters in Panama will decide this fall whether to back a $5.5 billion widening of the Panama Canal to handle bigger ships carrying Asian goods to the U.S. East Coast and Gulf of Mexico ports. Houston is building a container terminal to serve Wal-Mart Stores Inc. and Home Depot Inc. distribution centers. The largest container-ship company in the world, A.P. Moller-Maersk Group of Copenhagen, is building a new terminal in Norfolk, Va. New facilities are under way or planned in smaller ports in Mobile, Ala., Wilmington, N.C., and Jacksonville, Fla.
Kansas City Southern is pushing a Mexican port as the answer. The railroad has spent 10 years assembling a rail line linking the Pacific port of Lazaro Cardenas with Kansas City, and recently launched direct cargo trains over part of the 2,200-mile route. Giant terminal operator Hutchison Whampoa Ltd. of Hong Kong plans to build a new container terminal in Lazaro Cardenas by the end of next year.
Describing the Prince Rupert project, Kansas City Southern Chairman and Chief Executive Michael Haverty says: “I mean no disrespect, but it’s isolated, there’s nothing there and you have to go a long way to get there.”
As for the shippers and retailers who will decide how much use to make of Prince Rupert, they express interest but aren’t ready for commitments. “We need options to the existing West Coast ports and Panama Canal,” says Peter Keller, an executive vice president of NYK Line (North America) Inc., a container-ship company. He says Prince Rupert has the water and the rail capacity, but will have to show it can compete on rates and service.
With a deep natural harbor, Prince Rupert has long been a port but not one that could handle container ships. Local authorities such as Don Krusel, president of the Prince Rupert Port Authority, sought to add container capacity and finally won provincial and Canadian national aid for the project. But skepticism remained strong until the port signed up a major terminal operator, Maher Terminals Inc. A terminal operator leases port facilities and provides the cranes that transfer containers from ships for transport over land by truck and train.
The idea of exploiting this isolated natural harbor for major movement of cargo dates all the way back to 1906, when railroad builder Charles Melville Hays had a vision of making it part of a shortcut from Asia to Europe. He proposed to load trains at Prince Rupert with silk arriving from China, speed the freight to Montreal by rail and load it back on ships that would traverse the St. Lawrence River and the Atlantic. But six years later Mr. Hays died on the Titanic.
Prince Rupert developed modestly as a small hub for exporting bulky goods that weren’t being put in standard metal containers. The Fairview Terminal at the mouth of the inner harbor loaded lumber into ships bound for Asia, while other docks handled grain and coal. But coal volume suffered as some mines closed. The port’s cargo dwindled to under five million tons last year from about 14 million in 1994.
Nestled among the coastal mountains and islands of northern British Columbia and drenched by about 10 feet of precipitation annually, Prince Rupert stays lush and green. Its harbor at the end of a narrow inlet extends to an unusual depth of more than 100 feet. Lining the waterfront are old wooden piers, a rail yard, ferry terminals, fish-processing plants, and a few seafood restaurants.
Mr. Maher got interested in the area a few years ago at the suggestion of one of his executives. Mr. Maher, 59 years old, is the son of a onetime longshoreman who got into terminal operation in New Jersey after World War II. The area boomed as trade grew and cargo began moving in containers instead of cartons and other loose items. Maher Terminals, owned by Mr. Maher and his brother Basil, 54, now operates a 450-acre terminal in Elizabeth, N.J., next to the New Jersey Turnpike and Newark airport. Home to 26 container-ship lines, the huge facility handles 5,000 trucks a day.
Convinced the flood of Asian cargo would bring new cargo growth to the Pacific Coast, Mr. Maher looked for ways to expand but missed out on a chance to operate a container terminal in Tacoma, Wash. When one of his executives brought up the idea of developing Prince Rupert, Mr. Maher liked the idea, partly because the deep harbor could accommodate the biggest ships without dredging.
The British Columbia port also appeared to offer the shortest, fastest route from China to the U.S. Midwest, and it had an upgraded rail line with capacity to spare. To move a 40-foot container from Shanghai to Chicago via the Los Angeles or Long Beach docks takes about 22 days and costs about $3,500. Prince Rupert is 1,100 miles closer to Shanghai than Southern California, equal to about two days of travel time.
In addition, in contrast to rail freight from Southern California, once a container is loaded on a train in Prince Rupert, there are few local stops to slow it during its 2,600-mile trek over mountains and prairies to Chicago. While that route is longer than the land route from Los Angeles to Chicago, the rail-transit time might be about the same. “The only thing trains have to worry about is hitting a moose,” says Mr. Krusel of the local port authority. He calculates that Asian freight passing through Prince Rupert should arrive in Chicago nearly two days sooner than if it had gone through the Southern California ports.
When Prince Rupert authorities who were pushing the container-ship project solicited proposals from terminal operators, Mr. Maher jumped in. Maher Terminals won a 30-year lease with an option to develop a larger operation later.
While the losing bidders meant to use Prince Rupert just for overflow, Mr. Maher believed the port could become a major cargo gateway for North America despite its remoteness. He agreed to spend $60 million initially on new cranes and equipment as part of transforming the old docks into a container terminal. Port officials now are drawing up plans for a massive second phase that would expand the terminal far more.
That project could cost hundreds of millions of dollars, meaning that Maher Terminals’ investment could ultimately run as high as $500 million. Mr. Maher argues that continuing rapid growth in cargo from the Far East to the U.S. rising about 10 percent a year means that ship lines will flock to Prince Rupert and other new terminals elsewhere.
While most port terminals have sprawling lanes for thousands of trucks, Prince Rupert because so little cargo will be used locally will have only one truck gate. The vast majority of containers will be loaded onto rail cars waiting in a big rail yard. Prince Rupert’s deep, funnel-shaped harbor has tides that rise and fall 25 feet every 12 hours, so it will need cranes especially designed to adjust to the huge tidal swings.
To help fill containers for the return trip to Asia, Canadian National Railway Co., which runs the rail lines leaving Prince Rupert, plans to build new depots along a route from Memphis, Tenn., that will collect soybeans, cotton, paper and other exports.
Workers now are demolishing the old Fairview Terminal in the shadow of towering Mount Hays to make way for the first phase of the new port. Steel pilings 120 feet long will extend the pier into deeper water. Workers are laying the foundation for the huge cranes, scheduled to arrive next spring. They, too, are coming from China.
Mr. Maher still must overcome opposition from the Coast Tsimshian First Nations tribal group, whose members have longstanding land-title issues in the region and say they weren’t sufficiently consulted about the project. “They are determined that this port won’t operate until their issues are resolved,” says Greg McDade, lawyer for the tribe. Port officials are confident the project won’t be slowed or derailed.
Although the dock will have union labor, some officials of the International Longshore and Warehouse Union express skepticism about port projects such as Prince Rupert, concerned that they may lessen the union’s leverage when the current contracts expire in 2008. Current dockworkers in Prince Rupert, who belong to the Canadian chapter of the ILWU, continued to work during the 2002 labor battle.
As far as competition is concerned, the Prince Rupert project has a big jump on the Panama Canal expansion plan, which some say could take 10 years if approved. The Lazaro Cardenas project in Mexico has suffered from labor strife, such as the fatal shooting by police in April of two strikers at a nearby steel mill. Parts of the railroad connecting the Mexican port to the U.S. are circuitous and slow, using mostly a single set of tracks that forces trains to pull into sidings and wait for other trains to pass on heavily trafficked portions of the route. Meanwhile, the giant established ports in Southern California face the possibility of work stoppages when dockworkers’ contracts expire.
Among the obstacles to be faced in Prince Rupert are the reluctance of some shipping lines to add new ports because of extra costs such as for piloting the ships. But after years in the New Jersey docks, wrestling with the complexities of operating a terminal amid congestion, union wrangling and local politics, Mr. Maher figures he is ready for just about anything at Prince Rupert.
LOAD-DATE: August 8, 2006