West Coast Canadian ports are winning market share of US cargo to and from Asia – driven by congestion and longer dwell times in southern Californian ports, as well as the competitive costs of Canadian terminals and their intermodal operators.
Growth at Vancouver and Prince Rupert ports within US imports and exports from Asia is driven by cargo heading to and from the American Midwest.
Canada’s share of Asia-West Coast North America (WCNAM) volumes have shown a steady increase, rising from 14.4 percent in 2014 to 16.9 percent in 2018 and to 17.8 percent in 2019. In contrast, while US ports account for the lion’s share, their market share has fallen from 85.6 percent in 2014 to 82.2 percent in 2019.
While there has been some volatility in demand on a month-by-month basis, Fraser Port & Vancouver’s Asia-WCNAM volumes hit 160,000 laden twenty-foot equivalent units (TEU) in May, its greatest demand since September 2016.
Another clear indication for the shift in TEU transported within the Asia-WCNAM trade lane from the US to Canada is the amount of cargo that gets shipped to Canada to then be transported to the US by land. Our data allows us to track exactly that information. Figure 3 shows that these flows more than doubled in size after 2016 – from 28,000 TEU in January 2016 to 61,000 TEU in June.
Over on the supply side, a similar trend can be seen. The share of Asia-WCNAM supply for Canadian ports jumped from 18 percent in 2015 to 28.8 percent in 2019, versus a fall from 82 percent in 2015 to 71.2 percent in 2019 for US terminals.
Prince Rupert’s supply soared from just over 1 million TEU in 2017 to more than 2.5mn TEU in 2018, beating the growth rates at Vancouver, Long Beach, Los Angeles, Tacoma and Oakland.
Major factors behind British Columbia’s greater share of US Midwest cargo include lower port costs and the efficiency of Canada’s CP and CN railroads, which offer direct intermodal services from Vancouver and Prince Rupert to Chicago and beyond.
Furthermore, intermodal pricing by CN and CP railroads makes it cheaper for beneficial cargo owners (BCOs) in the US Midwest to ship their Asian cargo through these ports rather than through Seattle and Tacoma or LA-Long Beach. The all-inclusive cost of Asian shipments to Chicago is $400-$600 lower from British Columbia ports than through these US gateways, mainly due to the intermodal cost component.
BCOs have also been moving US Midwest cargo from WCNAM ports to British Columbia in order to avoid congestion in LA and Long Beach and the related issues of chassis shortages, limitations in trucker availability and longer dwell times at berth. These have long been issues in the Southern California port complex.
Against this backdrop, there have been times over the last few years when congestion has reached peak point, for example, in the rush to beat the US-China trade tariffs at the end of 2018 through Q1 2019, and in Q4 2014 when the ports struggled with a gridlock. This last episode was made worse by the move from shipping-line-owned chassis to those owned instead by third-party leasing companies, leading to a shortage of chassis where they were needed.
Our data show that container ship call duration at Vancouver and Prince Rupert is much more competitive than those of its Southern Californian port counterparts. Prince Rupert’s average call duration so far in 2019 was only 30 hours, with Vancouver’s at around 60. These times compare to:
- Long Beach: around 90 hours
- Los Angeles: just under 90 hours
- Tacoma: around 55 hours
- Oakland: between 30 and 40 hours
Drilling into the month-by-month call duration for the ports, it is clear that Southern Californian ports suffer from much greater spikes in port call times than regional counterparts. Peak congestion times were especially affected in the push to move cargo before the Chinese New Year and before the US-China tariffs kicked in. These factors meant that in December, average call duration was longer than 100 hours in Long Beach and LA. The impact of higher average volume exchanges at these ports is not taken into account in this particular analysis. It must be noted, however, that despite the rapid evolution in container ship sizes in the last decade and much higher peak container exchanges, ports and terminals face greater pressure to achieve much higher productivity and still handle ULCVs within agreed berthing windows.
While Vancouver and Prince Rupert have experienced port call time spikes, these are much smaller than their US counterparts. Vancouver’s greatest spike since January 2016 was in February when calls times were more than 70 hours, while Prince Rupert’s was around 60 hours in September.
The growth in average ship size has put pressure on ports and been a contributing factor to longer port call times. But interestingly, while the Canadian ports see a similar rise in average ship sizes calling, they have not seen the same peak in port calls. In 2019, average vessel size at Prince Rupert Port hit more than 10,500 TEU, a step above 9,000-9,500 TEU for Long Beach and around 8,700 TEU at LA.
And maximum vessel sizes are roughly the same for 2019, with Long Beach welcoming the largest vessel at 14,500 TEU, followed by Los Angeles, Oakland and Tacoma at 14,424 TEU and 14,026 TEU at Prince Rupert and Vancouver.
The shift of Asia-WCNAM cargo to Canada’s ports is likely to continue. While there will be challenges, including the fact that Canada’s western ports are operating at more than 80 percent capacity, Vancouver and Prince Rupert are developing their facilities to overcome this. Vancouver is increasing terminal and rail capacity in its three largest terminals in the coming years, while Prince Rupert has a two-phase expansion planned.
Lower congestion and dwell times, together with cost competitive port and intermodal services, mean that Vancouver and Prince Rupert look set to keep winning Asia-US Midwest cargo market share.