Northwest Passage

Hays 2.0 Northwest Passage plans receive mixed reviews

Mixed reaction is pouring in on the feasibility of making Prince Rupert a global trading hub

As the City of Prince Rupert continues to detail its Hays 2.0 plan to the community and to the world, mixed reaction is pouring in on the feasibility of making Prince Rupert a global trading hub using the Northwest Passage and the Northern Sea Route.

David Gillen, PhD at University of British Columbia’s (UBC) Sauder School of Business and director of the Centre for Transportation Studies, YVR professor of Transportation Policy and professor in the Operations and Logistics division, said that while Prince Rupert’s current model is terrific in moving containers in and out of the port at exceptional speeds, changing that model to include a global hub may be ill-advised.

“The charges that the Russians are levying [to travel through the Northern Sea Route], I guess are pretty crippling and that determines the economics of it. A lot of the modelling that’s been done [of the Northwest Passage and Northern Sea Route viability] makes the heroic assumption about fuel. Right now, fuel is about 40 – 42 per cent of [shippers’] costs … The standard bunker fuel they use in the Pacific and Atlantic, for example … is fuel you can’t really use at least in portions of the year in the arctic because of its freezing,” said Gillen, adding shippers would have to purchase fuel that costs 30 per cent more.

“Once you get into that, the economics just don’t start to make sense anymore.”

The professor explained that if refining that fuel became more common in the future, then it may become more inexpensive, but until that time, in terms of costs, it’s not feasible.

The other pitfall a Hays 2.0 vision might encounter is the already established competition from ports like Singapore, the professor explained.

“Singapore, many years ago, decided it would be a transshipment hub for containers. So 98 per cent of containers that go through there never stay there, but its geographic location is far superior to something like Prince Rupert,” said Gillen.

The hub potential gap between Singapore and Prince Rupert is extremely large, he continued. Technological infrastructure, a high population base in the area and its established position in the “middle of the economic centre” makes Singapore hard to compete with in terms of becoming a global shipping hub.

“The kind of model that Prince Rupert has now is just superb because it’s like a conveyor belt. The ship comes in, the containers get on the rail, the rail goes out – extraordinarily reliable into the major centres, particularly into the United States and it’s not clear to me why you would want to move to a different model … or [it’s not clear how] having a ship coming from Shanghai into Prince Rupert, transshipping (shipping goods to an intermediate destination, then to its final destination) and then taking a portion of the cargo with four of 5,000 TEU ships through the Northwest Passage or the Northern Sea Route into Europe – how that’s better than just going directly to Europe out of Shanghai with five or 6,000 TEUs. The distances are substantially smaller,” said Gillen.

He added that the transshipping distance between arriving at Rupert to travel to other North American ports such as Vancouver, Long Beach and Mexico and coming back again to head across the Northwest Passage or Northern Sea Route is also an unlikely scenario.

“There’s no demand side in Prince Rupert … You don’t know where source of the competitive advantage of being a hub lies. That’s the question I have,” said Gillen.

Skeena-Bulkley Valley MP Nathan Cullen is encouraged by the City’s grand vision and sees it as part of northwest B.C. residents taking hold of their future at a time of jobs uncertainty.

“Oftentimes development in the northwest is very haphazard – it’s just whatever happens next, happens next. It’s really great to see a community that’s willing to put some plans down and say ‘This is where we want to be’ and recognize its natural advantages,” said the MP.

“Shortening shipping times has been a big reason for the success of the container port in Prince Rupert. Having an even larger ambition to be a conduit – a gate to the world – I think will be very, very welcome. It’s part of changing the story as well. We’ve lost so many of our core jobs and our resource sectors in the northwest, having another way to create any opportunity is really important,” Cullen added.

The Prince Rupert Port Authority’s manager of corporate communications Michael Gurney said that while the Port was not consulted in the plan, the City is welcome to discuss any long-term plans at any time, keeping in mind Canada’s east coast as a strategic location.

“Since the City of Prince Rupert unveiled its Hays 2.0 vision, I have frequently been asked whether the Port Authority was consulted in its creation. We were not, but we are pleased that the City has chosen to recognize the fundamental importance of the shipping and trade industries to Prince Rupert’s fortunes and future. The City’s affirmation of the Port Authority’s Gateway 2020 growth strategy is particularly invigorating,” said Gurney last week.

“The Port Authority has a strong track record of responding to new markets. Meanwhile we must recognize that Canada’s east coast ports are trading efficiently and profitably with markets that are hypothetically accessible through the Arctic.”

While Prince Rupert Mayor Lee Brain signified the City’s backing of the Port’s Gateway 2020 strategy through Hays 2.0, Brain clarified that the City’s consideration of Lelu Island as a location for an LNG export facility, a part of 2020 Gateway, is still to be seen.

“Right now, we’re actually still under negotiations with [proponent] Pacific NorthWest LNG and we’re still waiting to see what the CEAA (Canadian Environmental Assessment Agency) process is going to come back with … and until we reach a place where we feel like the impacts will be mitigated socially into the community, we’re still going to follow along with the process. In general, the City supports the LNG industry and we want to make sure that things are done right and the science is sound,” said Brain.

Fairview Container Terminal owner DP World’s manager of marketing and communications Angela Kirkham was also enthusiastic about the Hays 2.0 vision.

“Fairview Container Terminal offers the fastest access for vessels travelling between Asia and North America, as well as the highest productivity rates on the west coast and an efficient rail link to the hinterland. Furthermore, the addition of capacity to our portfolio will contribute to DP World’s continued growth. The City’s vision of positioning itself as a global trading and shipping hub is impressive. As the operators of Fairview terminal, we are delighted to hear about the city’s commitment to developing new markets,” said Kirkham.

Rosa Miller, president of the Prince Rupert and District Chamber of Commerce said that “the Chamber enthusiastically welcomes ideas both big and small that will enhance the growing business community”.

“In 20 years time when the Prince Rupert to Rotterdam route is fully established, people will look back to today’s ability to dare to dream big with pride and thank those who helped to make those dreams a reality,” she said, adding it’s refreshing to see mayor and council thinking big in the same vein as Charles Hays once did.

 

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