PORT of vancouver
November 30, 2018 Jocelyne Beaudet Panel Chair, Roberts Bank Terminal 2 Project C/O Cindy Parker, Panel Manager, Roberts Bank Terminal 2 Project Canadian Environmental Assessment Agency 22nd Floor, Place Bell, 160 Elgin Street Ottawa, ON KlA OH3
Dear Mme. Beaudet, From the Vancouver Fraser Port Authority re: Roberts Bank Terminal 2 Container Vessel Call Forecast Study (Mercator 2018)
The Vancouver Fraser Port Authority (VFPA) commissioned Mercator International to provide a forecast of container ship calls at Pacific Northwest ports to better understand how emerging container industry trends would affect container ship traffic at the Port of Vancouver, with and without the Roberts Bank Terminal 2 Project.
The VFPA is pleased to provide two related submissions to the Review Panel, including: • Roberts Bank Terminal 2 Container Vessel Call Forecast Study (Mercator 2018) - which presents the findings of Mercator International's forecast; and • Roberts Bank Terminal 2 Project Ship Traffic Information Sheet - an overview of key conclusions and implications of the Mercator 2018 report.
The VFPA wishes to note the Mercator 2018 report relies on the Container Traffic Forecast Study - Port of Vancouver 2016 undertaken by Ocean Shipping Consultants (available as Appendix IRl-03-A of CEAR Document #897), which itself has recently been the subject of an independent expert review by InterVISTAS Consulting Inc. The VFPA is providing the InterVISTAS review to the Review Panel under a separate cover. Youry s· cerely,
tewart, P.Eng., ICD.D Vice President, Infrastructure
cc Cindy Parker, Panel Manager, Roberts Bank Terminal 2 Project Douw Steyn, Panel Member David Levy, Panel Member Gina Delimari, BC Environmental Assessment Office Alli Morrison, BC Environmental Assessment Office Brendan Mather, BC Environmental Assessment Office
Encl. (2) 1. Roberts Bank Terminal 2 Container Vessel Call Forecast Study (Mercator 2018) 2. Roberts Bank Terminal 2 Project Ship Traffic Information Sheet
Canada Roberts Bank Terminal 2 container vessel call forecast study
November 01, 2018 Contents
1. Introduction...... 3 5. Forecast aggregate head-haul volumes for the PNW...... 59 1.1. Objective 5.1. Overview and methodology 1.2. Report structure 5.2. Baseline fleet forecast schedule 1.3. Executive summary 5.3. Share of imports via Vancouver 5.4. PNW import volume by ship-service routes and port 5.5. Volume forecast: do not build RBT2 scenario 2. Industry events and trends and impacts on PNW vessel services. 9 5.6. PNW import volume by ship-service route and by port 2.1. Major industry events and trends 2.2. Restructuring of carrier alliances and vessel sharing agreements 6. Specific carrier deployments for near-term forecasting...... 69 2.3. Vessel upsizing in east-west trades and smaller vessels in minor trades 6.1. Overview 6.2. Projections of PNW vessel services for 2020 2.4. Expansion of the Panama Canal locks and resulting volume share shifts 6.3. Projections of PNW vessel services for 2025 2.5. Changes in US and Canadian rail line operations 6.4. Projections of PNW vessel services for 2020 and 2025: Asia Eastbound 2.6. New container vessel technology and evolving ship designs 6.5. Projections of PNW vessel services for 2020 and 2025: Other lanes 3. Infrastructure assessment of container terminals in the PNW...... 25 7. Projection of long-term vessel deployments...... 87 3.1. Prince Rupert 7.1. Overview 3.2. Port of Vancouver 7.2. Vessel deployment baseline 3.3. Port of Seattle (NWSA) 7.3. Projection of long-term vessel deployment 3.4. Port of Tacoma (NWSA) 3.5. Capacity assessments of terminals Appendix A 3.6. Vessel service capacity assessments of terminals Maximum ship size capabilities of container NWSA terminals...... 98 A.1. Port of Seattle 4. Vessel deployments to/from the PNW coastal zone...... 52 A.2. Port of Tacoma 4.1. Overview 4.2. Synopses of Asian services by design 4.3. West Coast port rotation sequences for Asian services 4.4. Port competition frameworks 4.5. Competitiveness for Asian imports to key inland regions 4.6. West Coast port rotation sequences for Non-Asian services
2 1. Introduction 1.1. Objective 1.2. Report structure 1.3. Executive summary
3 Introduction
Located on the southwest coast of British Columbia (BC) in Canada, the Port of Vancouver extends from Roberts Bank and the Fraser River up to and including Burrard Inlet. The Port of Vancouver is Canada’s largest port and supports trade with more than 170 economies around the world. More than 90% of the port’s total volume serves Canadian import and export markets across a diversified range of cargoes. The Port of Vancouver offers ship line a choice of four common-user container terminals. The Port is also linked with Central/Eastern Canada, the US Midwest, and selected South-Central US states by transcontinental main lines of the Canadian National (CN) and Canadian Pacific (CP) railways. Continued growth of Asian imports moving to local markets and to interior US and Canadian rail-served markets, supported by exports from BC to the world, will continue to drive volume growth through the port. Due to the projected increase in container traffic, the Vancouver Fraser Port Authority (VFPA) is in the process of developing the Roberts Bank Terminal 2 (RBT2). With a planned annual capacity of 2.4 million TEUs, RBT2 has the potential to attract new business and position the Port of Vancouver to better satisfy increased market demand. VFPA seeks to obtain a forecast of the numbers and sizes of containership deployments that will likely make scheduled port calls in the Pacific Northwest (PNW) region, specifically at: the ports of Vancouver, Prince Rupert, and the Seattle–Tacoma complex, the latter also known as the Northwest Seaport Alliance (NWSA). Study area—ports with container terminals in the Pacific Northwest Objective Prince Rupert Mercator International (Mercator) has been retained to provide a container vessel call forecast for the RBT2 project. This report presents a forecast for the period of 2018 to 2035 analyzing two scenarios: (i) Build RBT2 (ii) Do not build RBT2
Report structure Port of Vancouver In addition to the Executive Summary presented in the subsequent slides, this report is structured according to the following sections: Port of Seattle (NWSA) ▪ Section 2. Industry events and their impacts on PNW vessel services Port of Tacoma (NWSA) ▪ Section 3. Infrastructure assessment of container terminals in the PNW ▪ Section 4. Vessel deployments to/from the PNW coastal zone ▪ Section 5. Forecast of aggregate head-haul volumes for the PNW ▪ Section 6. Specific carrier deployments for near-term forecasting ▪ Section 7. Projection of long-term vessel deployments
4 Executive summary
Background and geographical/analytical framework The number of separate vessel deployments operated to and from a port (or group of proximate ports) is the sum of the number of deployments running in each distinct trade lane corridor linking that port with key offshore regions. Given the geographic location within North America of the PNW region, there are only three distinct offshore regions that are linked directly with Vancouver and the rest of the PNW by dedicated vessel deployments: • Northeast/Southeast Asia, which accounts for nearly 94% of PNW international port traffic • Europe, which accounts for about 5% of PNW international traffic, and • Australia/New Zealand (ANZ), contributing the remainder [PNW traffic to and from Latin America is transported on the vessel deployments that link the PNW region with Europe, and these Latin American containers are relayed in Caribbean Basin/Panamanian ports to and from other vessel services – these volumes are counted already in the 5% portion for Europe. There are no direct vessel services between the PNW and Africa or South America.] All of the international vessel deployments that containership lines operate to serve the PNW region are designed primarily to handle the traffic flows to/from one of these three regions listed above. In particular, there are presently three separate, weekly-frequency deployments running between Europe and the PNW region, via the Caribbean Basin, the Panama Canal, and California – and there is just one service between Australia/New Zealand and the PNW region, with bi-weekly frequency (and which also calls in California ports). Conversely, there are currently ten weekly-frequency deployments that are designed to transport Asia-origin containers to Vancouver and the Puget Sound ports, along with two services that call Vancouver, but not Seattle or Tacoma [all twelve of these services are collectively referred to as “Asia – Salish Sea – Asia” deployments]. There are also two other weekly-frequency deployments that are primarily designed to transport Asia-origin containers to ports in California but which stop first – after sailing eastbound from Northeast Asia – to make short, intermediate calls at Prince Rupert, and thus are carrying containers that would otherwise be carried by dedicated Asia – PNW services. Thus, to address VFPA’s mandate for this study, Mercator is attempting to forecast how many separate vessel deployments are likely to be operated in each of four separate timeframes (2020, 2025, 2030 and 2035) in each of four distinct service-types (Asia – Salish Sea, Asia – Prince Rupert/California, Europe – PNW/California, and ANZ – PNW/California) – and what average sizes of ships are likely to be used in each forecasted deployment.
5 Executive summary
Key factors for consideration and analysis In order to project the number of separate vessel deployments likely to be operated within a particular trade lane corridor in the future (whether it is the Asia, Europe, or ANZ corridor), Mercator needed to take into account a number of key factors for this assignment, including: • The current number of services and the average ships sizes of those services • The average weekly volume of container traffic flow in the head-haul direction for the Asia trade lane, the inbound, import direction is the head-haul to the region and the expected growth rate in that volume, utilizing and adapting the most recent forecast study, Container Traffic Study: Port of Vancouver, 2016, produced for VFPA by Ocean Shipping Consultants (OCS). • Note that the number of vessel deployments likely to call the port of Vancouver is not a function of the head-haul volume of containers destined only to Vancouver, but to Vancouver plus the other PNW ports (for Asian services) or to Vancouver, other PNW ports, and California ports (for European and ANZ services). • The number of separate ocean carriers and composition of vessel sharing alliances that are currently serving the trade, and how these might evolve in the future, considering the changing structure of the liner shipping industry • The relative concentration or fragmentation of market share among the carriers serving the trade • The number of ports and port regions in the offshore region that require (for commercial reasons) direct (non-relay) service • Harbor/terminal/rail infrastructure constraints for the ports in the region that might limit the sizes of ships that can access those ports • The amount of terminal capacity available in Vancouver, based on whether the RBT2 facility is built or not • The number of ships required to operate a commercially competitive deployment with a weekly frequency • The importance of the trade lane corridor to an ocean carrier, relative to the other trade lanes that the carrier serves • The composition of the ocean carrier’s fleet of ships An underlying force that has been driving the number of deployments in a trade lane corridor for more than 40 years, and continues to drive aggregate sailing frequency levels in every corridor, is the ongoing pursuit by ship line executives to enhance the competitive cost position of their respective ocean carriers by achieving economies of scale through the use of the largest ships that can be reliably and effectively utilized in each deployment in the carrier’s network. This ongoing pursuit of scale economies through the assignment of largest-feasible ships to deployments has led to (and will continue to result in) the consistent presence of vessel sharing agreements in most trade lane corridors and in periodic waves of mergers and acquisitions of ocean carriers.
6 Executive summary
Other significant assumptions utilized In constructing our forecasts of the numbers and ship sizes of deployments for each corridor, Mercator employed several assumptions that should be noted here: • The Canadian Class I railway companies will maintain their major cost and transit advantages over the Burlington Northern Santa Fe (BNSF) and Union Pacific (UP) for transporting containers from BC ports to Chicago (and other major US Midwest markets) versus from US West Coast ports to those same Midwest markets, across the forecast period.
• Once the current Centerm Expansion Project is completed in 2021, the footprints, berth lengths, and terminal capacities of Vanterm, Centerm, and Deltaport will remain essentially unchanged through the forecast period to 2035.
• There will be enough suitable berths and terminal capacities in Seattle and Tacoma after 2020 and through 2035 to handle the numbers and sizes of vessel deployments forecasted to call in the Puget Sound. In other words, no Puget Sound port calls for forecasted vessel deployments to/from the PNW region will need to be cancelled (with corollary volumes channeled through Vancouver) due to terminal infrastructure constraints in these two Washington State ports.
• The vessel sharing agreements currently in place in all three corridors will continue to operate through 2025, with relatively few changes in the carrier composition of each agreement.
• By 2030, the liner shipping industry will be dominated by seven to eight very large global carriers, six of which will be supported directly or indirectly by the government of their headquarters country (specifically, China, Japan, Korea, Taiwan, Germany and Denmark) and one or two of which will be privately-owned, family-controlled carriers.
• In the Asia – PNW corridor, most of these seven to eight global carriers will be operating in one of three vessel sharing agreements, with at least one such global carrier operating independently, and there will continue to be one or two niche carriers serving this trade.
7 Executive summary
Principal conclusions • Mercator projects that if RBT2 is built, there will likely be 12 Asia – Salish Sea deployments operated in 2035 that will call at Vancouver. • Seven of the 12 are predicted to call in the Roberts Bank precinct of the port complex. • Four of the 12 are predicted to call in the Burrard Inlet precinct, and 1 of the 12 in the Fraser River precinct. • Two of the 12 would utilize ships with less than 5,000 TEUs of capacity, while eight of the 12 would be operated with ships that have 10,000 TEUs or more of capacity (and six of those 12 would be using ships of 13,000 TEUs or more of capacity). • There would also likely be 2 European services, both of approximately 13,000 TEU scale and both calling in the Roberts Bank precinct, along with 1 ANZ service that would likely need to use one of the Burrard Inlet terminals • Mercator projects that the nine vessel services using the Roberts Bank precinct would generate approximately 4.326 million TEUs in 2035, accounting for about 70% of Vancouver’s total port throughput, and thus the terminals there would operate at about 91% capacity utilization. • In this scenario, we also project that the five vessel services using the Burrard Inlet precinct would generate roughly 1.737 million TEUs in 2035, accounting for about 28% of total port throughput, and resulting in aggregate capacity utilization for this precinct of about 74%. • Should RBT2 not be operational before 2035, Mercator projects that there will still be the same number of services (15) and trade lane distribution of those services (12 for Asia, two for Europe, one for ANZ) as in the first scenario, but with several differences: • Five of the 12 Asia – Salish Sea services would call in the Roberts Bank precinct, and an equivalent number would call in the Burrard Inlet precinct (with two niche services calling in the River precinct). • The five Asian services and two European services in the Roberts Bank precinct would be expected to generate 2.194 million TEUs in 2035, amounting to roughly 47% of total port throughput. • The five Asian services and one ANZ service in the Burrard Inlet precinct would be expected to generate 2.2 million TEUs, equivalent to roughly another 47% of total port throughput. • Several deployments would use smaller ships than would have been assigned in the first scenario, and average consignment sizes for all of the Asian services would be lower, reflecting diversions of Asia intermodal volumes away from the Vancouver gateway to the Prince Rupert and Southern California port gateways. • Thus, if RBT2 is not built, Mercator projects that there will not be a reduction in the number of separate vessel deployments that will likely call Vancouver in 2035 (and in 2030), but average ship sizes will be smaller – this absence of a reduction is because of: • The expected number of carriers and alliances in the Asia – PNW corridor, coupled with the size/importance of the local Vancouver market and carriers’ desires to provide direct links to that market from SE Asia, the Pearl River Delta, the Yangtze Delta, and Busan • The relatively low incremental cost for an Asia – PNW deployment to call in both Vancouver and the Puget Sound • The consignments for the European and ANZ services being unaffected by Vancouver’s terminal development
8 2. Industry events and trends and their impacts on PNW vessel services 2.1. Major industry events and trends 2.2. Restructuring of carrier alliances and vessel sharing agreements 2.3. Vessel upsizing in east-west trades and smaller vessels in minor trades 2.4. Expansion of the Panama Canal locks and resulting volume share shifts 2.5. Changes in US and Canadian rail line operations 2.6. New container vessel technology and evolving ship designs
9 Identification of near-term industry events and trends that could impact PNW vessel services Overview
The global container shipping industry continues to experience major changes that could have potential impacts in the near-term on North American ports, and some of these developments will also affect the sizes and numbers of vessel services calling the Port of Vancouver. The diagrams below outline the major industry events in the boxes to the left, along with their potential impacts in the boxes to the right.
Major industry events and trends
Consolidation of ▪ Specific ports and terminals could experience increased levels of concentration of container volumes. potential impacts ocean carriers ▪ Acquired carriers’ volumes could shift to other terminals being called by the acquiring carriers.
▪ Further concentration of volumes could occur on fewer, larger vessels and in fewer ports. Delivery of high potential impacts capacity vessels ▪ Deliveries of 18,000-20,000+ TEU ships into the Asia – North Europe trade will result in cascading ships of 10,000-15,000 TEU capacity into Asia – North America trades over the next several years.
Opening of new ▪ Ocean carriers are expected to continue increasing vessel service capacities on the Asia - US East Coast route potential impacts Panama Canal locks through the Panama Canal, and use all-water container routings to greater extent.
▪ Some North American terminals will be forced to enhance their infrastructure, with large investments Development of required to handle ultra-large container ships (ULCS) or Mega-Max/Malaccamax (MMX) ships of 15,000- ULCS-capable potential impacts 22,000 TEU scale. terminals* ▪ Volumes will further concentrate, as these terminals will be highly incented to maximize throughput to reduce operating expenses per unit, and could price their services aggressively. *see table on page 44 for explanation of ship-size terminology Potential impacts of particular relevance to Asia - PNW vessel services
Higher capacity vessels ▪ A higher percentage of Asia – PNW services are likely to be operated with ships of 10,000 – 14,000 TEU in Asia trades capacity over the next five to 10 years. potential impacts Consolidation of ocean ▪ Fewer alliances and carriers makes it easier to consolidate deployments and use larger ships. carriers
▪ Due to water depth constraints, Portland has ceased to be called by Asia – PNW vessel services. Changes in North potential impacts ▪ Carriers have changed the sequence of port calls on Asian services within the PNW region in recent years to American port calls facilitate routing more intermodal containers via the BC ports, rather than Seattle and Tacoma.
10 Restructuring of carrier alliances and vessel sharing agreements Consolidation of major ocean carriers
From 2015 to the second half of 2017, the container carrier industry consolidated as a result of merger and acquisition (M&A) activity and the bankruptcy of Hanjin in August 2016, contracting from 16 global carriers to 12.
From 2017 to 2018, the global carrier count contracted further to nine, following COSCO’s purchase of OOCL, and the replacement of MOL, NYK, and K Line by the Ocean Network Express (ONE) alliance. During this time, Maersk also acquired Hamburg Sud.
After this further round of consolidation and the latest configuration of the carrier alliances, the survivors as of 3Q18 now enjoy substantial economies of scale and increased market power over the smaller players in competing trades.
Changes in carrier alliance structure – 2015 to 3Q18 2015-16 2H2017 3Q2018 2M 2M + 2H 2M + H ▪ Maersk ▪ Maersk ▪ Maersk ▪ MSC ▪ MSC ▪ MSC ▪ Hyundai ▪ Hyundai M&A activity included: Ocean 3 ▪ Hamburg Sud ▪ Hamburg Sud ▪ CMA CGM acquired by Maersk ▪ CSCL ▪ UASC ▪ APL and Mercosul Ocean Alliance ▪ Hamburg Sud Ocean Alliance acquired by CMA ▪ CMA CGM/ APL ▪ CMA CGM/ APL CGM CKYH+E ▪ COSCO/CSCL ▪ COSCO/CSCL ▪ OOCL and China ▪ COSCO ▪ Evergreen ▪ Evergreen Shipping acquired by ▪ K Line ▪ OOCL ▪ OOCL COSCO ▪ YangMing ▪ Evergreen ▪ UASC acquired by THE Alliance Hapag-Lloyd G6 THE Alliance ▪ APL ▪ Hapag-Lloyd/UASC ▪ Hapag-Lloyd/UASC ▪ Hapag-Lloyd ▪ K Line ▪ ONE ▪ Hyundai ▪ MOL ▪ YangMing ▪ MOL ▪ NYK ▪ NYK ▪ YangMing ▪ OOCL 11 Restructuring of carrier alliances and vessel sharing agreements Concentration of capacity shares by alliance and carrier
Presently, three major alliances dominate the Far East – West Coast North America (WCNA) trade lane in terms of weekly TEU capacity: Ocean, Transport High Efficiency Alliance (THE), and 2M+H, with the Ocean Alliance being the largest. • There is also an agreement between COSCO (one of the Ocean Alliance members), Wan Hai, and PIL, but this is considered to be a separate vessel sharing arrangement from the Ocean Alliance. • The three alliances operating in this lane have the largest ships deployed, whereas a few independent carriers use smaller vessels.
Recent restructuring of alliances is having corollary impacts, including: • After a brief slowdown in vessel ordering in 2017, order placement, especially of ULCS ships, is more robust this year. • Over-capacity in the major east-west trades persists, resulting in cost-control strategies, such as slow steaming, continuing to be prevalent. • Carriers have been unsuccessful in negotiating higher freight rates in the major trade lanes, and thus, earnings in 2018 are forecasted to be depressed. • The continued ordering of large vessels is putting pressure on marine terminals and port authorities to make costly investments to enhance their physical infrastructures and operating capabilities. • Formation of the ONE joint venture appears to have strengthened the commitment of NYK and MOL to the K Line terminal in Tacoma.
Weekly capacity by alliance: Asia-WCNA trade Weekly capacity shares for Asia – WCNA trade
Ocean 100,000 95,855 2%
75,094 THE Alliance 4% 80,000 4% 7% 60,000 2M 37% 43,463 40,000 HMM 17% 18,182 20,000 Weekly capacity (TEU) capacity Weekly 11,299 10,605 Cosco, Wan Hai, PIL (CMA CGM, APL) 4,705
0 SM Line Ocean THE 2M HMM Cosco, Wan SM Line Zim Alliance Hai, PIL 29% (CMA CGM, Zim APL) Source: Developed by Mercator with data from Alphaliner, August 2018. Source: Developed by Mercator with data from Alphaliner, August 2018. 12 Vessel upsizing in the East-West trade and cascading of smaller vessels to minor trades Impacts of liner industry consolidation on operational capacity and vessels on order Top carriers ranking by operated capacity in TEU (active + on order 3Q18) As of 3Q18, the four mega-carriers (APM-Maersk, MSC, COSCO, and CMA CGM) control 65% of the vessel fleet capacities of the world’s 11 largest APM‐Maersk 4.1 lines. MSC 3.6 65% The next three largest global lines (ONE, Hapag-Lloyd, and Evergreen) COSCO 3.1 control 23% equivalent to 4.9 million TEUs. CMA CGM 2.9 The eighth- and ninth-largest lines (Yang Ming and Hyundai Merchant ONE 1.7 Marine - HMM) are more than 40% smaller than the seventh (Evergreen) Hapag‐Lloyd 1.6 23% in terms of TEU capacity. Evergreen 1.6 This scale dichotomy, coupled with consolidation of carriers in China and Yang Ming 0.9 Japan, is likely causing the Taiwanese government to consider engineering the absorption of Yang Ming by Evergreen and possibly supporting an HMM 0.8 12% Evergreen/Wan Hai merger. PIL 0.5 • As the chart to the right indicates, if Yang Ming is merged with Zim 0.4 Evergreen, it would have a scale much larger than ONE. Million TEUs 0.0 1.0 2.0 3.0 4.0 5.0 • Although there are clearly political and legal hurdles, the likelihood for this transaction taking place within the next few years is high. Evergreen + YM 2.4 • Similarly, SM Line and other Korean lines are potential targets for an acquisition by HMM to gain operational capacity/scale and be more competitive with the top carriers. Container vessels on order and capacity by carrier and vessel size (3Q18) On order Scale dichotomies among the four mega-carriers and the rest are also Carriers 15,100‐ 12,500‐ 10,000‐ 7,500‐ visible when analyzing the number of vessels on order. ≥18,000 <7,500 Total TEU 17,999 15,099 12,499 9,999 Though ONE, Evergreen, and Yang Ming have ordered vessels, they are Maersk 1 3 0 0 0 4 8 80,008 primarily comparatively modest in scale. MSC 11 0 0 7 0 0 18 332,052 COSCO 9 0 8 0 0 3 20 300,691 Overall, the following trends will be predominant going forward: CMA 10 0 0 0 0 6 16 241,054 ▪ Industry leaders ordering the largest scale ships will increasingly Hapag 0 0 0 0 0 0 0 0 continue to pull further away from the smaller carriers in terms of ONE 0 0 8 0 0 0 8 111,740 operational capacity. Evergreen 8 0 0 20 0 8 36 424,584 ▪ Any carrier with under one million TEUs of capacity will have a YML 0 0 10 5 0 10 25 221,450 notable scale disadvantage competing with the mega-carriers. ZIM 0 0 0 0 0 0 0 0 HMM 12 0 8 0 0 0 20 388,000 Source: Developed by Mercator with data from Alphaliner, August, 2018. 13 Vessel upsizing in the East-West trade and cascading of smaller vessels to minor trades Prospects for further concentration beyond 2018
The numbers and sizes of new vessel orders are primarily driven by competitive dynamics among top carriers and infrastructure constraints in key origin- destination ports on each trades. Vessels with capacities between 10,000 and 14,999 TEUs started to enter containership fleets in 2006 and peaked in 2011, making up 49% of the deliveries for that year. After 2015, the delivery of vessels surpassing the 15,000 TEUs started replacing vessels in the 5,100 – 9,999 TEU range. Deliveries of vessels in this smaller range are expected to sharply diminish after 2018, increasingly being replaced by vessels of 15,000 TEUs and above.
Containership deliveries by size, 2010-2020 (net of scrapping) <5,100 5,100-9,999 10,000-14,999 >15,0000 The very largest vessels have typically been deployed on trades 2010 38% 33% 29% 0% between East Asia and Europe due to the size and configuration of that trade. Most of the vessels with a capacity of 10,000 TEUs or greater 2011 15% 36% 49% 0% were originally intended to be deployed in services between Europe and Asia. However, vessels over 18,000 TEUs are increasing their share 2012 24% 26% 49% 1% in this market and are now becoming the norm. 2013 26% 36% 30% 8% As a consequence, a number of 8,000 to 13,000 TEU ships have been 2014 15% 27% 42% 16% cascaded into North American and Latin American trades, calling ports 2015 11% 33% 25% 31% that can accommodate them, driven primarily by two fundamental
Delivery Delivery year reasons: 2016 12% 19% 42% 27% ▪ The slowdown in Europe - Asia trade growth since 2009 pushed 2017 13% 6% 43% 38% ocean carriers to further pursue economies of scale, accelerating purchases of 13,000 TEU and larger vessels for this trade. 2018F 18% 0% 41% 41% ▪ Previous infrastructure constraints were eliminated or mitigated F 2019 17% 1% 28% 54% such as the old Panama Canal locks, the previously lower height of 2020F 8% 0% 35% 57% the Bayonne Bridge at the Port of New York/New Jersey (NY/NJ), and water depths less than -15 m in some ports. 0% 20% 40% 60% 80% 100% Source: Alphaliner, August, 2018.
• Consistent with the cyclical nature of the container shipping industry, January 2018 was a record month for new vessel deliveries, as carriers continue to order bigger ships. • New, larger tonnage is expected to be introduced on the main arterial trade lanes of Asia - Europe and Asia - North America, with existing tonnage cascading onto secondary trade lanes—increasing the average size of vessels deployed across all the main trade routes.
14 Vessel upsizing in East-West trade lanes and cascading of smaller vessels to minor trades Economies of scale
In the search for economies of scale, it is a prevailing pattern of ocean Operating slot costs and savings by vessel capacity scale carriers to constantly assign the largest ships they can effectively utilize in $450 North China-US West Coast service with each service using six ships each trade lane covered by their respective service networks. $400 -7.5% $32 This quest for economies of scale is the ultimate driver of the vessel upsizing -23.7% $101 and cascading trends. $350 $300 This pattern has been exhibited by the liner shipping industry over the last
three decades primarily for the following reasons: $250 US$ / TEU / US$ - $424 • Given that capital and fuel account for the large majority of operating $200 $392 costs of ships, a larger ship will have a lower operating cost/TEU than a $323 smaller one, offering an economic incentive to the ship owner favoring the cost Slot $150 use of larger vessels. $100
• Ocean carriers have unilateral control over the sizes of ships they assign $50 to their respective vessel services, but have relatively less control over other major components of their operating costs, such as the costs of $0 rail transportation, trucking, and moving containers through marine 6,500 8,500 13,500 terminals. Vessel capacity in TEUs Hence, upsizing ships in deployments and reducing the numbers of separate liner services in a given trade lane by sharing those services has become a prevalent response by carrier management to mitigate static or declining rates and earnings. As illustrated in the example above, the economies of scale that can be obtained for a liner service running between North China and the US Subsidization of ship yards and M&A of ocean carriers have further West Coast can be very significant. stimulated this pattern. ▪ Cost savings start becoming noticeable by upsizing the ships in the deployment from the 6,500 TEU scale to 8,500 TEUs with a -7.5% M&A activity and participation in carrier alliances also are drivers of the reduction in the cost per slot. pursuit of economies of scale (and vice versa). ▪ Upsizing the ships in the deployment from the 6,500 TEUs to 13,500 TEUs can save up to 23.7% per slot.
15 Vessel upsizing in East-West trade lanes and cascading of smaller vessels to minor trades Key drivers – fleet capacity growth of industry leaders
Fleet expansion is being influenced by carriers’ vessel upsizing and vessel cascading strategies and keen desire to achieve economies of scale and subsequent cost savings.
Even without acquisitions of other carriers, the four mega-carriers - Maersk, MSC, COSCO, and CMA CGM - expanded their fleets more aggressively than most of their peers over the past ten years as shown in the graph.
Over this same period, carriers deployed increasingly larger vessels in the east-west trades between ports with the physical infrastructure, water depth and operating capabilities that can accommodate these mega-vessels.
The four mega-carriers will continue to drive the upsizing of Far East – WCNA and Far East – East Coast North America (ECNA) services.
Fleet capacity compounded annual growth rates by carrier, 2008-2018 12.0%
10.9% 10.0% 10.0% The cascading of larger ships from the major trade lanes to minor trades (i.e., north-south and inter- 8.0% regional trades) has taken place as well as the 8.2% 7.6% transfer of mid-size vessels to other services calling at minor ports within the east-west lanes. 6.0% ▪ To remain competitive, carriers will likely cascade 5.8% the majority of vessels under 12,000 TEUs from east-west trade lanes to minor trades over time. 4.0% ▪ Mercator expects that the four mega-carriers will
Compoundannual growthrate likely grow their fleets at a more rapid rate than 2.0% the industry overall and faster than market 2.2% growth over the next ten years.
0.0% NAM Global MSK MSC CMA COSCO Port Thruput Capacity Source: Developed by Mercator with data from Alphaliner, August, 2018.
16 Vessel upsizing in East-West trade lanes and cascading of smaller vessels to minor trades Key drivers—cascading of ships from larger trades
As mentioned previously, the largest ships are typically being deployed in the Asia – North Europe trades. Deployment of large vessels in this trade has resulted in a cascading effect on other trades where smaller vessels are being displaced. The following bar charts indicate how the number of Asia – North Europe deployments using ships greater than 16,000 TEUs in size will increase from seven to eleven over the next two years, while the number of services of 12,500 to 14,000 TEU scale will contract from seven to four.
Current size distribution of Asia – North Europe services – 1Q2018 Projected size distribution of Asia – North Europe services – 2020 12 12 2M OCEAN THE HMM 2M OCEAN THE HMM
1 10 10 The 2M carriers are expected to upsize one service with new 20,000+ TEU ships and cascade 11 or more ships to other lanes.
8 8 4 counts 1 6 2 hip 6 1
4 4
Numberservices of Service Service s / 4 6 5 3 2 2 1 1 1 1 1 1 1 1 1 1 1 0 0 <7500 7500- 10000- 12500- 14000- >16000 <7500 7500- 10000- 12500- 14000- >16000 10000 12500 14000 16000 10000 12500 14000 16000
Scale Range (TEU) Scale Range (TEU)
• Presently, 19 separate vessel deployments are being operated • Over the next two years, we expect the Ocean Alliance to deploy 32 or between the Far East and North Europe, six of which use ships with more 20,000+ TEU ships now under construction into the Asia – North capacities in excess of 18,000 TEUs. Europe trade. • This will upsize three of their vessel services in this lane and cascade 32 • The 2M Alliance has a clear scale advantage here, with five services or more Neo-Panamax (NPX) ships to other trades, some of which will using ships greater than 16,000 TEU capacity, versus only one apiece come to the Far East – WCNA lanes. for the Ocean Alliance and THE Alliance.
17 Expansion of the Panama Canal locks and resulting volume share shifts Impacts on Asia – PNW vessel services
Prior to the opening of the larger locks at the Panama Canal in June 2016, the Canal could only transit container ships with capacities of up to about 5,000 TEUs. Currently, the new locks can accommodate vessels in the range of 13,000 to 14,000 TEUs.
The ability for higher-capacity vessels to transit the new Panama Canal locks has had the greatest impact on all-water services between Asia and the US East Coast (USEC), such that there is now only one Asia – Panama – USEC deployment being operated with ships of 5,000 TEU scale, as compared to 11 during the first quarter of 2016.
All-water Asia - ECNA 40’ roundtrip slot cost comparison Panama Canal expansion
13000 $1,405 $610
10000 $1,510 $505
8000 $1,670 Vessel Vessel Capacity $345
5000 $2,015
$0 $500 $1,000 $1,500 $2,000 $2,500 Roundtrip 40' Slot Cost - IFO380 @ $400 per ton
Source: Autoridad del Canal de Panama, 2016.
• As the chart above indicates, the use of larger ships on this route has significantly lowered the ocean transport cost for the carriers, enabling them to route Asian containers into various inland markets (such as Columbus and Atlanta) via East Coast ports more cost-competitively than via West Coast ports.
• However, to date, the loss of share by Pacific Coast ports to Atlantic Coast ports, following the opening of the larger locks, has been modest, without enough volume diversions yet to cause a reduction in the number or scale of Asia – PNW services being operated.
18 US and Canadian rail line operations and routes Comparative inland rail access among West Coast gateway port regions
As the schematic diagram below indicates, neither the NWSA ports nor the San Pedro Bay (SPB) ports of Los Angeles and Long Beach are competitive gateways to Central or Eastern Canada, because neither the UP nor BNSF railways have their own rail lines to those inland Canadian regions. Thus, the BC ports have a duopolistic position for Asian import containers to Central/Eastern Canada.
Conversely, neither Canadian National (CN) nor Canadian Pacific (CP) has its own rail lines from the BC ports into the major cities of the Northeast or Southeast US states, so Asian imports routed over West Coast ports and destined to those states need to be routed through NWSA and/or SPB ports.
Because CN and CP each has a route from one or both BC ports across the prairie provinces to Chicago and selected other US Midwest points, Asian container traffic destined to those Midwest markets is strongly contested among these three gateway port regions.
CN’s route into Chicago also extends to Memphis, New Orleans, and Mobile, which enables the BC ports to compete with the NWSA and SPB ports for Asian traffic into selected South Central and Gulf Coast states.
Key inter-regional Class I rail routes for Asia imports
CN CN CN Central Ontario Quebec CP Canada CP CP
CN CSXT CN CP CSXT
BNSF NS NS UP Midwest CSXT Ohio Valley CSXT Northeast
BNSF UP
BNSF NS Gulf Southeast UP CSXT
19 US and Canadian rail line operations and routes Comparative advantages of CN and CP routes for Asia – Midwest traffic
The two Canadian Class I railways, CN and CP, have certain fundamental Rail network serving the BC ports of Prince Rupert and Vancouver advantages versus the NWSA and the SPB ports: • Ships sailing from Asia can arrive at BC ports two to three days sooner than arriving at Los Angeles or Long Beach at SPB. • Provided that their respective main lines and local networks are not congested, CN and CP can move eastbound intermodal trains away from Prince Rupert the Fairview Terminal in Prince Rupert and Deltaport in Vancouver into uncongested rural areas far faster than either UP or BNSF can move their respective eastbound intermodal trains away from the terminals in either the Puget Sound or in SPB. Rail at BC ports The Prince Rupert terminal, of course, is in an relatively isolated area, and is Port of located at the terminus of the CN main line. The Roberts Bank Rail Corridor Vancouver enables trains departing Deltaport to bypass the rail networks of central CN Vancouver, Burnaby, New Westminster, Coquitlam, and Surrey and access the CP CN and CP main lines in the less congested portion of the lower Fraser River Valley. Rail at NWSA ports Rail network serving the ports of Seattle and Tacoma (NWSA) Conversely, BNSF eastbound intermodal trains departing from on-dock or near-dock rail transfer terminals in the ports of Seattle and Tacoma have to transit on north-south oriented tracks through a congested rail network between Tacoma, Seattle, and Everett (a distance of about 30-65 miles), before they can access the BN’s primary east-west main line to head to Chicago. UP trains have to run south from Seattle/Tacoma to Portland (140- Port of 170 miles) to access UP’s east-west main-line to Chicago. Seattle (NWSA) Rail at SPB ports Similarly, eastbound intermodal trains departing from on-dock or near-dock rail transfer terminals in the ports of Los Angeles and Long Beach must transit out of a congested rail network around the harbor area before they can access a grade-separate, dedicated double-track and triple-track corridor (known as the Alameda Corridor) and then still have to run through 60-70 miles of densely populated urban development before exiting the greater Los BNSF Angeles metropolitan area. UP Port of Tacoma (NWSA)
20 US and Canadian rail line operations and routes Additional advantages of CN and CP routes for Asia – Midwest traffic
The two Canadian Class I railways have certain other advantages versus the NWSA ports, and separately relative to SPB ports as highlighted below. Cost advantages The CN main line over the BC Coast Mountains and then again over the Canadian Rockies has more gradual ascents and descents, as well as a lower elevation at both summits, than the BNSF route from the Puget Sound over the Cascade Mountains (in western Washington) and the US Rockies, or the UP route over the Blue Mountains (in eastern Oregon) and the US Rockies. This means CN trains have lower fuel costs from the BC ports to the US Midwest. Similarly, the CN main line has more gradual ascents and descents, as well as a lower elevation at both summits than the BNSF and UP routes from SPB to Chicago. • Because of rail infrastructure constraints in the Puget Sound area, BNSF and UP have to run shorter-length double-stack trains than CN or CP, giving the latter an operating cost advantage per container. • Because the CN and CP incur their labor costs in less expensive Canadian dollars, but can and do charge ocean carriers in US dollars for rail intermodal services from the BC ports to the US Midwest, they have another cost advantage over the BNSF and UP. • Beneficial cargo owners (BCOs) located in the US that route their Asia import containers through BC ports can avoid having to pay the US Harbor Maintenance Fee (HMF) that is levied on imports moving through US ports. ▪ This fee is levied at 0.125% of the declared value of the cargoes. For a container transporting goods worth US$80,000, the fee amounts to a US$100 penalty for routing Asia – Midwest containers through NWSA or SPB terminals. All of these advantages, and those discussed on the prior page, in combination with aggressive pricing by CN and CP, have enabled the two BC ports to capture an increasing share of Asia – US intermodal imports, especially since the opening of Fairview Terminal in Prince Rupert. Potential implications for future vessel deployments This development has certain ramifications for the evolution of the group of vessel deployments that are designed to transport Asian imports to the PNW region and interior regions of North America that are rail-served over PNW gateway ports. • Carriers and alliances are likely to continue to operate a few vessel deployments that are mainly designed for the Asia – California market segment (along with the Asia – South Central/Southeast/Midwest segments), but which make a brief, intermediate eastbound call at Prince Rupert to discharge intermodal containers to the US Midwest and to East/Central Canada. ▪ Although these deployments delay the transit times by two days to California for the other Asia containers on the ships, it enables the carriers running them to lower their rail transport costs for a portion of their Asia – Midwest containers. • Carriers and alliances will likely have the majority of their Asia – PNW deployments make first-inbound calls in one of the two BC ports, before calling NWSA ports, in order to discharge a higher portion of their Asia – Midwest boxes at ports served by CN and/or CP.
21 New container vessel technology and evolving ship designs Overview
Several innovations are emerging that will change the way vessels are designed and constructed, while others will improve safety, vessel-generated underwater noise levels, and commercial/operational performance. Some are being driven by regulations imposed by government entities and individual ports to mitigate the negative effects of climate change.
Certain innovations, on their own or in combination with others, will likely result in fundamental changes in the industry. Several important and promising ones are described below.
• Compliance with LSF2020. LSF2020 refers to the new “Low Sulfur Fuel” regulations that will come into effect on January 1, 2020. These regulations are the most significant in a series of steps by the International Maritime Organization (IMO) to reduce marine pollution in response to the threat of climate change. The LSF2020 emission regulations mean ships must significantly reduce emissions on the high seas and in coastal areas. There are three methods of compliance:
1. Switch to using new, compliant 0.5% “Low Sulfur Fuel.” Though this is the simplest way to comply, it may prove to be the most expensive. Oil industry experts estimate 0.5% percent Sulfur (“Low Sulfur”) Fuel will be $150 to $250 more expensive per ton than the current 3.5% Sulfur “Heavy Fuel Oil.” This is estimated to increase shipping costs by approximately 10% - around $80 to $120 per TEU.
2. Install an Exhaust Gas Cleaning System (EGCS). An EGCS or “scrubber” is a desulphurization system that removes unwanted particles from exhaust gas flows in a closed-loop, open-loop or hybrid operation, enabling the carrier to continue to burn the cheaper 3.5% Sulfur “Heavy Fuel Oil.”
▪ Operating in open-loop mode removes the pollution from the exhaust gases and then flushes it into the sea instead of into the atmosphere. ▪ Operating in closed-loop mode retains the pollution in tanks on board the ship, which is impractical for long distance journeys. To date, these systems have only been used with cruise liners and short sea ferries, not with large container ships. There is also a risk that regulations will change in the coming years and will prohibit flushing the pollution into the sea at all. 3. Switch to Liquefied Natural Gas (LNG). Consuming clean-burning LNG would satisfy the new emission regulations, but requires special equipment and additional LNG tanks that consume cargo space and increase the cost of the ship.
▪ Also, currently there is low demand for marine LNG and so little infrastructure is available for delivering LNG fuel to ships, but this is expected to change as the fuel is more widely adopted.
• Power and propulsion. Power generation will substantively change, with alternative fuels such as hydrogen fuel cells, energy-saving devices, renewable energy like solar and wind, and hybrid power generation being incorporated. This is being driven by rising fuel costs and fleet overcapacity. • Sensors for wireless monitoring. Sensor technologies, which have been miniaturized and have self-calibration characteristics, can reduce the need for inspection and monitoring by crew. Acquiring such data should enable shipowners to improve maintenance cycles.
22 New container vessel technology and evolving ship designs Overview
• Communications: the connected ship. The growth in communications – from Wi-Fi to 5G connectivity – will bring about the ‘connected’ ship, which will allow operators to access live audio and HD and 3D video from on-board recording devices, further reducing the need for physical on-board inspection, lowering crew costs and maintenance costs. • Advanced materials at the nano scale. Though metals will remain the dominant materials for ship structures, the opportunity to refine their characteristics through microscale or nano-scale manipulation will emerge. More efficient ships could be the result of using advanced high-strength steel, aluminum, glass fiber and carbon-fiber composites. • Autonomous systems. Autonomous systems are finding wider application in the air and automotive sectors, and could gain more traction in the vessel industry, in combination with other technologies. Already, smaller crews than in the past are operating many classes of vessels. Norwegian company Yara has teamed with maritime technology company Kongsberg to build the world's first all-electric and autonomous container ship – the Yara Birkeland (shown in the drawing) - scheduled to be launched in late 2018 initially as a manned vessel before transitioning to remote operation in 2019 and fully autonomous control by 2020. Numerous practical and regulatory hurdles stand in the way of widespread application of autonomous vessels. • Increased size. In May 2018, the Journal of Commerce mentioned the recent paper by Adam Kaliszewski, chief financial officer at Baltic Container Terminals in Gdynia, Poland, in which an academic speculates that the maximum size of container ships could at some point reach 50,000 TEUs. This sheer size would present formidable engineering challenges for naval architects including designing the hull shape and strength able to withstand the hydrodynamic effects of sailing on the high seas safely and efficiently, as well adaptation of port infrastructure and landside transportation networks.
Artist rendering of an autonomous zero emission vessel
23 New container vessel technology and evolving ship designs Implications for the fleet forecast
The ship technology and design trends described in the prior slides fall into two broad categories:
1 2 Those that will increase the cost of ships and ship operations and, Those with the potential to reduce the costs of ships and shipping therefore, reinforce the trend toward larger ships operations
The low sulfur fuel regulations will increase the cost of fuel (or the The introduction of new sensor and communications technology that cost of ships themselves), and therefore, encourage carriers to facilitates remote or autonomous ship operations could reduce the cost continue seeking cost savings through increases in ship sizes and of ship operations, and lead some operators to seek competitive the increases in the fuel efficiency per container-mile that result advantage through technology, rather than through scale. from larger ships. • For example, if the size and cost of crews to operate ships fall significantly, it may become economically and commercially more attractive to operate an increased number of smaller ships rather than fewer larger ships.
Of these two broadly countervailing trends or groups of trends, the more immediate and important trend is likely to be the trend towards higher energy costs, which will continue to support the existing trend toward larger ships. • Mercator does not, therefore, expect that carriers’ preference to operate the largest tonnage that can effectively be utilized in a given trade lane will change in a meaningful way during the roughly 20 year period covered by the fleet forecast. • The potential exists for greatly increased ships sizes, carrying as much as 50,000 TEUs, but even if such ships could be designed and built, there are practical issues with implementation that are likely to make adoption slow and limit it to only the largest trade lanes and port pairs. ▪ Trade volumes would need to increase significantly in order to create the traffic density required for such ships. ▪ Service levels, as measured by transit time and frequency, would be reduced due to the longer port times required for loading and unloading and the reduction in number of sailings required to concentrate cargo on the largest ships. Most BCOs value the better and more flexible service that can be provided by more frequent sailings, creating a commercial disincentive for greatly increasing ship scale beyond current limits. ▪ The cost advantage per unit carried achieved by increasing ship size diminishes as size increases, whereas the negative landside consequences escalate. It is expected, therefore, that a practical limit to ship sizes will eventually be reached. ▪ Massive new investment in ports would be required to support such ships, making rapid adoption of these designs unlikely.
24 3. Infrastructure assessment of container terminals in the PNW 3.1. Prince Rupert 3.2. Port of Vancouver 3.3. Port of Seattle (NWSA) 3.4. Port of Tacoma (NWSA) 3.5. Capacity assessments of terminals 3.6. Vessel service capacity assessments of terminals
25 Infrastructure assessment of container terminals in the PNW Overview
This section presents an assessment of the infrastructure of each terminal within the PNW region in order to be able to support the vessel fleet/service forecasting effort by addressing two key questions:
• What is the largest-sized containership that each terminal in Container terminals in the PNW this region can physically and efficiently handle, considering its current infrastructure and improvements that could Prince Rupert realistically be implemented for that terminal during the ▪ Fairview container terminal forecast period?
• Given the dimensions/layout, acreage, operating mode, rail transfer facility, and gantry cranes for each terminal, what is Port of Vancouver its practical throughput capacity, and how many vessel services that are operated with NPX ships could it handle ▪ Centerm each week? How many services operated with post-NPX ▪ Vanterm ships could be handled there on a normal weekly basis? ▪ Deltaport
Before answering the second question above, this section will first provide high-level profiles of each of the terminals Port of Seattle (NWSA) indicated on the map to the right. These profiles are ▪ T-46 sequenced by port, from north to south. ▪ T-18 ▪ T-30/25 ▪ T-5
Port of Tacoma (NWSA) ▪ PCT–Evergreen ▪ WUT–Hyundai ▪ Husky–ITS
26 Infrastructure assessment of container terminals in the PNW Prince Rupert
Prince Rupert’s only container terminal opened in 2007, following the conversion of what had been a single-berth, break-bulk facility, and is pictured below.
Port of Prince Rupert: Fairview Container Terminal
27 Prince Rupert terminal infrastructure profile Fairview Container Terminal – DPW
Linear berth Fairview Container Terminal layout: existing and expansion areas • 1 section of 390 m (360 + 30 m) • Second section of 410 m Gross terminal area: 79 acres • Water depth of 17.0 m Phase 2A (including Phase 2A) STS cranes • 7 cranes in total ▪ 3 x 25 wide (newer*) ▪ 4 x 22 wide On-dock rail facility • 7 working tracks providing a combined Phase 2A 18,000 ft to load/unload railcars • 7 adjacent storage tracks with 11,000 ft without container handling equipment • 1 arrival/departure railroad track connecting to CN • Nearly all traffic arrives/departs by rail (green shade indicates Container yard expansion) • About 45 acres including Phase 2A 410 m 360 m 30 m (estimated) Depth 17.0 m Depth 17.0 m Estimated capacity *Only 3 of the 4 planned STS cranes (shown in green) were installed as of August 2018. • 1.35 million TEUs/year The Phase 2A project, completed in 2017, increased capacity with the construction of a second berth, the expansion of the container yard, six RTGs, and the installation of only three new STS cranes.
Expansion projects • The Phase 2B expansion, expected to begin construction in 2019 and to be completed in 2022, will increase annual throughput capacity to at least 1.8 million TEUs/year by expanding on-dock rail facilities and adding one more STS crane (for a total of eight STS cranes). The 2017 “No RBT2” diversion forecast assumed a capacity of 2.0 million TEUs for Prince Rupert, which appears reasonable if some further investments are made.
28 Infrastructure assessments of container terminals in the PNW Port of Vancouver
Vancouver’s four existing container terminals are located in three separate areas—two within the Burrard Inlet and proximate to the Central Business District, one at Roberts Bank, and the fourth up the Fraser River, in the Municipality of Surrey.
Port of Vancouver: overview of container terminals and existing surface transportation infrastructure
Centerm Vanterm
Fraser Surrey Docks
▪ Delta Port ▪ Roberts Bank Terminal 2 Project
Source: Adopted from Port of Vancouver Land Use Plan. 29 Port of Vancouver terminal infrastructure profiles Centerm – DP World Linear berth Centerm container terminal: existing configuration and Expansion Project • 1 section of 724 m: ▪ 646 m existing 2018 gross terminal area: 72 acres ▪ 78 m expansion (operational in 2019) Projected gross terminal area: 91 acres • Water depth of 15.5 m STS cranes • 7 cranes in total by 2019: ▪ 1 x 23 wide ▪ 3 x 22 wide ▪ 1 x 19 wide ▪ 2 x 17 wide
On-dock rail facility • 5 working tracks totaling 15,000 ft ▪ 4 working tracks totaling 8,000 ft ▪ New working tracks totaling 7,000 ft (operational in 2019) • 1 arrival/departure track ultimately connecting to both CN and CP
Container yard • 40 acres (2018, estimated) Source: Adopted from Centerm Expansion Project, VFPA Environmental Permit Report, 2016. • 55 acres (post-expansion, reported) Estimated capacity (2018) Expansion project • About 900,000 TEUs/year • The Centerm Expansion Project , illustrated in the figure above, is expected to increase the annual capacity of the terminal from 900,000 TEUs to 1.5 million TEUs on or before December 31st, 2021. • In addition, VFPA is pursuing a multi-year initiative with CN and CP to enhance the capacity for, and fluidity of, intermodal train movements to and from Centerm.
30 Port of Vancouver terminal infrastructure profiles Vanterm – GCT
Linear berth Aerial view of Vanterm container terminal (July, 2017) • 1 section of 619 m Gross terminal • Water depth of 15.5 m area: 76 acres
STS cranes 619 m • 6 cranes Depth: 15.5 m ▪ 4 x 24 wide* ▪ 2 x 22 wide
On-dock rail facility • 9 working tracks totaling 9,600 ft • 1 adjacent storage track of 1,500 ft • 1 arrival/departure track • Urbanization constrains expansions
Container yard • 30 acres (reported)
Estimated capacity • About 850,000 TEUs/year
Expansion plans • As of March 2017, GCT has made public its intentions to invest $160 million in infrastructure improvements at Vanterm; however, no details about the expansion plan have been released.
* For these 4 cranes, the 24 wide across beam has been assumed, based on most recent GCT crane purchases for Deltaport, since crane specifications were not publicly available. This information was not confirmed by GCT or VFPA.
31 Port of Vancouver terminal infrastructure profiles Deltaport – GCT Linear berth Aerial view of Deltaport container terminal (Jul, 2017) • 1 section of 1,100 m • Water depth of 15.9 m 1,100 m Gross terminal Depth: 15.9 m area: 210 acres STS cranes • 12 cranes in total: ▪ 2 x 24 wide ▪ 6 x 22 wide ▪ 2 x 20 wide ▪ 2 x 18 wide
On-dock rail facility • 8 working tracks totaling 28,000 ft • 1 arrival/departure track
Container yard Rail yard • 120 acres (estimated) Estimated capacity • About 2.2 million TEUs/year
Expansion plans • Completion of the ongoing rail yard densification/capacity enhancement project, expected at the end of 2018, will increase capacity to about 2.35 million TEUs/year.
32 Port of Vancouver terminal infrastructure profiles Robert Banks Terminal 2 Project (RBT2)
The RBT2 Project is a proposed new three-berth container terminal at Roberts Bank adjacent to the existing Deltaport terminal. The Project would provide 2.4 million TEUs per year of container capacity, if and when completed. RBT2’s major project elements are illustrated below.
Roberts Bank Terminal 2 Project—conceptual plan view of the terminal layout
Source: The Vancouver Fraser Port Authority
33 Port of Vancouver terminal infrastructure profiles Fraser Surrey Docks – Pacific Rim Stevedoring
Linear berth Aerial view of Fraser Surrey Docks container yard (Jul, 2017) • 1 section of 690 m 690 m • Water depth of 11.7 m Depth: 11.7 m STS cranes • 4 x 13 wide
On-dock rail facility • 1 working track totaling about 1,500 ft • 14 adjacent storage tracks totaling 10,000 ft • 1 arrival/departure track that ultimately connects connected to CP, CN and BNSF
Container yard • 30 acres (reported) Estimated capacity • About 300-400,000 TEUs/year -- however, ship size limitations render it unsuitable for most services in the main east-west Rail yard Transpacific trades
Expansion plans
• None made public. Fraser Surrey Docks is a multipurpose terminal with container handling capabilities; however, it is located 35 km from the mouth of the Fraser River, with an 11.7 m water depth, which allows it to receive ships up to only about 4,500 TEUs capacity.
34 Infrastructure assessments of container terminals in the PNW Port of Seattle (Northwest Seaport Alliance)
There are four marine terminals dedicated for container-handling operations for international liner companies in the Port of Seattle, the names and locations of which are indicated in the aerial photograph below. The T-5 terminal was leased and operated by APL until early 2014, when that carrier prematurely terminated its lease, and the facility has been vacant since then (the picture below was taken in 2013).
Port of Seattle: overview of container terminals
/25
35 Port of Seattle terminal infrastructure profiles T-18 (SSA Marine) and T-46 (TTI)
T-18 (Jun, 2017) Linear berth Gross terminal • 1 section of 1,359 m Channel area: 196 acres • Water depth of 15.2 m 222 m 1,359 m Depth: 15.2 m STS cranes • 10 cranes in total: ▪ 6 x 24 wide ▪ 1 x 23 wide On-dock ▪ 3 x 19 wide rail yard On-dock rail facility • 4 working tracks totaling about 7,600 ft • 10 adjacent storage tracks totaling 10,600 ft • 2 arrival/departure tracks connecting to BNSF and UP Container yard • 120 acres (estimated) Estimated capacity • About 1.7 million TEUs/year T-46 (Jun, 2017) Gross terminal Linear berth 700 m area: 82 acres • 1 section of 700 m Depth: 15.2 m • Water depth of 15.2 m STS cranes • 5 cranes in total: ▪ 3 x 22 wide ▪ 2 x 16 wide 1,523 m Depth: 16.8 On-dock rail facility m • None (near-dock only)
Rail Rail yard Gross terminal Container yard area: 86 acres • 60 acres (estimated) To near-dock rail yard Estimated capacity • About 700,000 TEUs/year
36 Port of Seattle terminal infrastructure profiles T-25/30 (SSA Marine) and T-5
T-30/25 container terminal (May, 2017) Linear berth • 1 section of 470 m (T-30) • 1 section of 353 m (T-25) • Water depth of 15.2 m 353 m 470 m Channel Depth: 15.2 m Depth: 15.2 m 222 m Gross terminal STS cranes area: 70 acres • 6 cranes in total: T-25 T-30 ▪ 3 x 23 wide (T-30) ▪ 3 x 13 wide (T-25) On-dock rail facility • None (near dock rail yard accessed by truck only) Near-dock rail yard Container yard • 40 acres (estimated) Estimated capacity • About 250,000 TEUs/year available for international traffic
T-5 – Improvements Project – Preferred Alternative (currently vacant)
Gross terminal 883 m Linear berth area: 185 acres Depth: 15.2 m • 1 section of 883 m with depth of 15.2 m (existing) • To be deepened and strengthened under improvement project STS cranes • 8 x 24 wide (planned) On-dock rail facility • 12 working tracks totaling about 17,000 ft (existing) • 22 adjacent storage tracks totaling about 54,000 ft (existing) • 2 arrival/departure tracks connecting to UP and BNSF (existing) Container yard • 105 acres (estimated); stacking capacity to be enhanced On dock rail yard Estimated capacity • 1.3 million TEUs/year, if preferred improvement project is completed
Source: Adopted from Terminal 5 Improvements—Project Status, NWSA, accessed August 2018. 37 Port of Seattle terminal infrastructure profiles Near-dock rail facilities
Near-dock rail facilities Port of Seattle terminals and near dock rail intermodal yards • As noted in the previous slides, only T-18 and T-5 have on-dock rail transfer facilities. • Intermodal containers moving inland from or to T-46 and T30/25 are drayed T-46 by truck to or from two near-dock intermodal facilities, which are located on the photo to the right: BNSF's Seattle International ▪ BNSF's Seattle International Gateway (SIG) Gateway (SIG) ▪ UP’s Argo Yard • T-18’s on-dock rail transfer facility has very limited capacity (due to being difficult to switch railcars into and out of it), so a portion of T-18’s intermodal movements are also trucked to and from SIG and Argo. • As the map indicates, both the SIG and Argo facilities are bounded by dense T-30 urban neighborhoods and thus have no ability to be expanded horizontally. • The characteristics of the two near-dock intermodal yards are described next.
T-5 BNSF's Seattle International Gateway (SIG) Yard T-18 T-25 • 6 working tracks totaling about 8,000 ft • 19 adjacent storage tracks totaling 55,000 ft • 2 arrival/departure tracks connecting to BNSF and the UP yard to the south • 58 acres UP Argo Yard • 5 working tracks totaling about 6,300 ft • 12 adjacent storage tracks totaling 42,000 ft Union Pacific • 1 arrival/departure tracks connecting to UP and BNSF’s SIG yard to the north Argo Yard • 48 acres
38 Infrastructure assessments of container terminals in the PNW Port of Tacoma (Northwest Seaport Alliance) Until recently, there were six container terminals in the Port of Tacoma, shown in the photo below, but one of these (West Sitcum) has been repurposed for roll-on roll-off (RoRo) and break-bulk cargoes, and for domestic container services to/from Alaska. Management of the OCT facility was recently consolidated with that of the Husky terminal, and the TOTE facility remains dedicated to that carrier’s Alaskan services. Hence, there are three terminals in this port for international liner services: Husky, Washington United Terminal (WUT), and Pierce County Terminal (PCT), as illustrated below. All three are located along what is referred to as the Blair Waterway. Port of Tacoma: overview of container terminals
North Intermodal Yard TOTE West Sitcum OCT Husky
WUT South Intermodal Yard
WUT Intermodal Yard
PCT
PCT Intermodal Yard
39 Port of Tacoma terminal infrastructure profiles Pierce County Terminal (PCT) – Evergreen
Linear berth • 1 section of 636 m • Water depth of 15.5 m STS cranes Aerial view of Pierce County Terminal (May, 2018) • 7 x 23 wide On-dock rail facility • 12 working tracks totaling 23,800 ft • 1 arrival/departure track connecting to BNSF and UP railroads Gross terminal • Rail facility switched by Tacoma Rail (a area: 140 acres city-owned short-line railroad) Container yard Gate area / storage • 80 acres (estimated) 636 m Estimated capacity Depth: 15.5 m • About 1.0 million TEUs/year
Vessel access • Because PCT is located at the lower end of the Blair Waterway, and because of the latter’s width (at its narrowest points), ships require 3 tugs to safely arrive and depart this terminal. • It is unclear yet whether post-NPX ships can access PCT unless no other ships are on berth in the Waterway. On-dock rail yard
40 Port of Tacoma terminal infrastructure profiles Washington United Terminal – Hyundai
Linear berth STS cranes On-dock rail facility Container yard • 1 section of 792 m • 6 cranes in total: • 4 working tracks totaling 8,600 ft • 75 acres (estimated) • Water depth of 15.5 m ▪ 2 x 24 wide • 4 adjacent storage tracks totaling 6,700 ft Estimated capacity ▪ 4 x 18 wide • 1 arrival/departure track • About 1.0 million TEUs/year, increasing to 1.25 million
Aerial view of Washington United Terminal (May, 2018)
Gross terminal area: 123 acres
792 m 1,523 m Depth: 15.5 m Depth: 16.8 m
Rail Rail yard Gross terminal area: 385 acres
On-dock rail yard
41 Port of Tacoma terminal infrastructure profiles Husky Terminal – ITS
Linear berth STS cranes On-dock rail facility Container yard • 1 section of 900 m • 8 cranes in total: • 8 working tracks totaling 23,000 ft • 75 acres (estimated); about 110 acres with East Sitcum included • Water depth of 15.5 m ▪ 4 x 24 wide • 2 arrival/departure tracks (4 more on order) Estimated capacity ▪ 1 x 18 wide • About 1.5 million TEUs/year ▪ 1 x 17 wide with East Sitcum and planned ▪ 2 x 16 wide cranes
Aerial view of Husky Terminal – ITS (May, 2018)
Husky current gross terminal area: 93 acres 900 m Depth: 15.5 m The Husky Terminal reconfiguration and expansion project is under development, and is expected to include the realignment of the terminal backlands, incorporation of certain areas now part of the East Sitcum (formerly named On-dock rail yard TCT Olympic Terminal) and the building of the Lot-F gate complex.
East Sitcum (former TCT/Olympic Terminal) Gross terminal area 54 acres.
42 Infrastructure assessment of container terminals in the PNW Capacities
To support the regional volume forecast and “no RBT2” diversion estimates, OSC Capacity share by port region in 2018 adopted certain capacity assumptions for each port. Mercator reviewed these P. Rupert assumptions and subdivided port capacity by terminal as shown below in order 12% to assess the scale and number of services that each terminal could 23% accommodate. Vancouver
Seattle 37% 28% Tacoma
Capacity: OSC capacity assumptions by port and corresponding capacity estimates by terminal Mercator estimates* OSC Capacity assumptions Port Terminal Current Future 2017 2025 Prince Rupert Fairview – DPW 1,350,000 2,000,000 1,350,000 2,000,000 Total Prince Rupert 1,350,000 2,000,000 1,350,000 2,000,000
Port of Vancouver Centerm – DPW 900,000 1,500,000 Vanterm – GCT 850,000 850,000 Deltaport –GCT 2,200,000 2,350,000 Fraser Surrey Docks Total VFPA 3,950,000 4,700,000 4,250,000 4,700,000
Seattle (NWSA) T-18 - SSA 1,700,000 1,700,000 T-46 - TTI 700,000 700,000 T-30/25 - SSA 250,000 250,000 T-5 - Vacant 650,000 1,300,000 Total Seattle 3,300,000 3,950,000 3,350,000 3,950,000
Tacoma (NWSA) Pierce County - Evergreen 1,000,000 1,000,000 WUT - Hyundai 1,000,000 1,260,000 East Sitcum (ex Olympic) 400,000 - Husky Terminal - ITS 800,000 1,500,000 Total Tacoma 3,200,000 3,760,000 3,400,000 3,760,000 Total PNW International Terminals 11,800,000 14,410,000 12,350,000 14,410,000
43 Infrastructure assessment of container terminals in PNW Region Port and terminal parameters for vessel services by ship size
Large ships with high container exchange require many cranes in order to achieve manageable lengths of port stay. The duration of port stay is typically a function of three central variables: (i) the number of containers exchanged, (ii) number of cranes and their productivity rates, and (iii) number of shifts worked per day. The following table analyzes this relationship for different services by vessel size. This analysis assumes a container exchange of 55%, typical for a first-inbound call in Vancouver or Seattle/Tacoma. Port stay versus number of cranes Mega-Max Ultra Large Neo-Panamax Large Small Ship class Panamax (MMX) (ULCS) (NPX) Post-Panamax Post-Panamax TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 6-8,000 4,500 Containers wide 23-24 21-22 19-20 18 <18 <=16 Required crane height (m) 50.9 43.9 43.0 41.4 36.6 34.1 Effective ship capacity (TEU) 18,000 15,000 12,500 10,000 7,000 4,000 Utilization 90% 90% 90% 90% 90% 90% % 1st Call discharge / load 55% 55% 55% 55% 55% 55% Weekly TEUs 17,820 14,850 12,375 9,900 6,930 3,960 Weekly lifts 10,011 8,343 6,952 5,562 3,893 2,225
Avg. cranes / shift: basic 5 5 5 4 4 4 Gross moves / hour (gmph) 27 27 27 27 27 27 Number of 8-hr shifts 9.3 7.7 6.4 6.4 4.5 2.6 Days (2 shifts / day) 4.6 3.9 3.2 3.2 2.3 1.3
Avg. cranes / shift: high 7 7 7 5 5 4 Gross moves / hour (gmph) 27 27 27 27 27 27 Number of 8-hr shifts 6.6 5.5 4.6 5.1 3.6 2.6 Days (2 shifts / day) 3.3 2.8 2.3 2.6 1.8 1.3
• MMX or ULCS ships worked with five cranes on day and night shifts would be in port for nearly a week. • Eight or 10 cranes would not be too many to have available for a ULCS or MMX ship with container exchange in the 15-18,000 TEU range, but few terminals have sufficient cranes for that. • Even with high crane counts (seven units), ULCS and MMX ships would be expected to stay in port for 2.8 to 3.5 days, making it difficult to schedule more than one large ship each week on a given berth, given preferred days of the week for sailings from the major Asian ports.
44 Maximum ship size capabilities of container terminals in the PNW Overview
In order to determine the maximum ship size that can be served by a container terminal, the first necessary step is to identify the characteristics and terminal suitability criteria for the ship class categories calling or more likely to call a particular terminal in the near-future. The next table shows the ship characteristics and terminal suitability criteria for five ship classes, which range from just under the 9,000 TEU scale to the 21,000+ TEU scale.
Ship characteristics and terminal suitability criteria
Neo- Large Post- Mega-Max Ultra-Large Ship class Units Panamax Post-Panamax Panamax (MMX/MMX-2) (ULCS) (NPX) (LPPX) (PPX) Vessel scale TEU 18,000 - 23,000 15,000 - 18,000 13,000-14,000 9,000 - 12,000 <9,000 Length overall (LOA) m 400 400 366 335-350 300-335 Number of containers across beam Boxes 23 21-22 19-20 18 16-17 Estimated height (waterline to top tier) m 50-54 44-46 44 41-44 34-36 Required lift height above dock m 50.9 43.9 43.0 41.5 34.1
Subsequently, based on the ship characteristics and terminal suitability criteria, Mercator evaluated the maximum ship size that could possibly call at each of the PNW container terminals analyzed. The next table illustrates the major findings.
Maximum ship size capabilities of container terminals in the PNW •Five terminals could serve MMX ships: Fairview, Deltaport, T-18, T-5 (rebuilt), and Husky. Port Terminal Max Ship Comments P. Rupert Fairview - DPW MMX •Four terminals can serve NPX vessels: Centerm, Vanterm, PCT, and WUT. Port of Vancouver Centerm - DPW NPX Lift height of older cranes may need to be increased. ▪ Vanterm - GCT For Centerm and Vanterm, located behind NPX Lift height of older cranes may need to be increased. the Lions Gate Bridge, the maximum keel Deltaport -GCT MMX to mast height (KTMH) allowed ranges Fraser Surrey Docks Panamax Constrained; not relevant for main T-P services. between 68.5 and 72 m depending on high and low tides respectively (assuming Port of Seattle T-18 SSA MMX minimum draft of 12 m allowing for 1 m (NWSA) T-46 TTI Post-Panamax More large cranes needed to serve NPX or ULCS. clear below the bridge). T-30/25 SSA Post-Panamax Terminal scale and crane sizes not suited to Large PPX. ▪ For PCT and WUT, constraints involve T-5 - when rebuilt MMX Rebuilt, should be suitable for ULCS / MMX. turning basin radii and crane heights. Port of Tacoma PCT - Evergreen NPX Turning basin and access preclude ULCS/MMX. •Only two of the remaining four can serve PPX (NWSA) WUT - Hyundai ULCS Assumes more large cranes acquired for ULCS. ships: T-46 and T-30/25. East Sitcum (TCT/Olympic) Panamax To be redeveloped into part of Husky. Husky Terminal - ITS MMX 900 m berth suitable for 2x MMX per week. 45 Maximum ship size capabilities of container terminals in the PNW Overview
The table below indicates the maximum number of deployments of a given size class that a given terminal could effectively handle each week, considering the facility’s annual capacity, berth lengths, water depths, and number/height/reach of STS cranes, that are currently in place or planned by 2020. The next pages provide the details about Mercator’s calculations and scenario development to arrive at these capabilities for the container terminals in Vancouver and Prince Rupert. [The same analyses for the Puget Sound terminals are included in Appendix A.]
Maximum ship size capabilities of container terminals in the PNW Deployment size class Large Mega-Max Ultra-Large Neo-Panamax Post-Panamax Small Post-Panamax Post-Panamax (MMX) (ULCS) (NPX) (PPX) (SPPX) Port Terminal (LPPX) Max ship P. Rupert Fairview - DPW 3 1 MMX
Port of Vancouver Centerm - DPW Lions Gate Bridge Lions Gate Bridge 2 1 NPX Vanterm – GCT Lions Gate Bridge Lions Gate Bridge 1 1 NPX Deltaport –GCT 2 1 MMX RBT2 Project 2 1 MMX
Port of Seattle T-18 SSA 1 1 1 MMX (NWSA) T-46 TTI 2 Post-Panamax See Appendix A. T-30/25 SSA 1 Post-Panamax T-5 - when rebuilt 1 1 MMX
Port of Tacoma PCT - Evergreen 1 1 NPX (NWSA) WUT - Hyundai 2 NPX See Appendix A. Husky Terminal – ITS 1 1 Panamax E. Sitcum(TCT/Olympic) 2 MMX
• Prince Rupert, which receives relatively smaller container exchanges (due to its lack of a local market, services calling there discharge only about 25- 35% of inbound volume, with the majority discharged at a subsequent port), will have capabilities to handle more MMX, ULCS, NPX, and Large PPX deployments than other terminals in the PNW. • The Port of Vancouver, without RBT2, would only be able to handle first-inbound calls of two MMX deployments (discharging 50-60% or more of inbound volumes), placing the port at a competitive disadvantage against Prince Rupert in that scenario. • Similarly, without T5, the Port of Seattle can only accommodate first-inbound calls of one MMX per week (at T-18). • In Tacoma, only Husky can accommodate up to one MMX, on a first-inbound call basis. • Ship size suitability is considered terminal-by-terminal in the following pages. 46 Maximum ship size capabilities of container terminals in the PNW Prince Rupert – Fairview Container Terminal
FCT is suitable for handling MMX ships. The published capacity planned for Phase 2B is 1.8 million TEUs. OSC has assumed a future capacity of 2.0 million TEUs, which is not unreasonable for the two-berth terminal, which is handling almost exclusively short-dwell intermodal containers. A minimum of nine STS cranes will be required in all scenarios analyzed to handle 2 million TEUs per annum.
Fairview Container Terminal: terminal characteristics and ship-call service menu
Prince Rupert Berth Berth Calendar Cranes Cranes Cranes Total Capacity Crane length depth year 25Wide 22Wide 22Wide cranes TEU/Yr GMPH Current 800m 17.0m 2018 3 4 7 1,350,000 28 2022 2022 4 4 7 2,000,000 Ship classes MMX ULCS NPX LPPX PPX SPPX TEU range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Containers wide 23-24 21-22 19-20 18 17-18 16 Weekly TEUs 11,340 9,450 7,875 6,300 4,725 3,080 TEUs p.a. per weekly call 589,680 491,400 409,500 327,600 245,700 160,160 (35% disch/load) Total no. Service of MMX ULCS NPX LPPX PPX SPPX Terminal Min combinations services TEU/Yr cranes Scenario 1 4 3 1 2,014,740 9.7 Scenario 2 4 3 1 1 2,043,860 9.9 Scenario 3 5 4 1 1,965,600 9.5 Scenario 4 6 6 1,965,600 9.5
• Scenario 1: 1x PPX and 3x MMX would approximately fill FCT to its future capacity of 2 million TEUs assumed by OSC in 2022. • Scenario 2: 1x LPPX, 1x NPX, and 3 ULCS would also likely fill FCT to its future capacity of 2 million TEUs. • Scenario 3: 6x LPPX. • Mercator assumes that the existing or planned berths, for this and all other terminals analyzed, will be able to accommodate all vessels under each scenario based on efficient scheduling and vessel turnaround times. • Similarly, Mercator assumes that additional STS cranes will be installed as required by demand.
47 Maximum ship size capabilities of container terminals in the PNW Port of Vancouver – Centerm
Centerm is not suitable for handling MMX and ULCS ships because the clear height (air gap) under the Lions Gate Bridge is about 61 m (i.e., a maximum KTMH of 72 m, assuming a 12 m draft and 1 m margin), which varies with the tide. The published capacity planned for 2020 is 1.5 million TEUs. Three of the four scenarios analyzed indicate a minimum of eight STS cranes will be required to handle 1.5 million TEUs.
Centerm: terminal characteristics and ship-call service menu
Centerm Berth Berth # Cranes # Cranes # Cranes # Cranes Total Capacity Crane length depth 23Wide 22Wide 19Wide 17Wide cranes TEU/Yr GMPH Current 646 m 15.5 m 1 3 1 2 7 900,000 25 2020 724 m 15.5 m (deliv 2017) 1,500,000 Ship Classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000
TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load)
Service Svc MMX ULCS NPX Large PPX PPX Small PPX Terminal Combinations Count TEU/Yr Min cranes Scenario 1 3 2 1 1,538,680 8.3 Scenario 2 3 Located behind the 2 1 1,415,700 7.6 Scenario 3 4 Lions Gate Bridge 4 1,544,400 8.3 Scenario 4 6 6 1,510,080 8.2
• Scenario 1: 1x SPPX and 2x NPX would likely exceed Centerm’s future capacity of 1.5 million (planned for 2020). • Scenario 2: 1x PPX and 2x LPPX is the only scenario analyzed that would not likely exceed Centerm’s future capacity. • Scenario 3: 4x PPX also exceed Centerm’s future capacity. • Scenario 4: 6x SPPX also exceed Centerm’s future capacity.
48 Maximum ship size capabilities of container terminals in the PNW Port of Vancouver – Vanterm
Vanterm is not suitable for handling MMX and ULCS ships because it is also located behind the Lions Gate Bridge. Currently, Vanterm has a capacity of 850,000 TEUs per year. For all the scenarios analyzed, the minimum number of cranes required do not exceed the six STS cranes already installed in the terminal.
Vanterm: terminal characteristics and ship-call service menu
Vanterm Berth Berth # Cranes # Cranes Total TEUs p.a. Crane length depth 24* Wide 22Wide Cranes Capacity GMPH 619 m 15.2/15.5m 3 3 6 850,000 25 (p. '05-'07) Ship Classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load)
Service Svc MMX ULCS NPX Large PPX PPX Small PPX Terminal Min Combinations Count TEUs p.a. Cranes Scenario 1 2 1 1 895,180 4.8 Scenario 2 2 Located Behind Lions Gate 1 1 766,480 4.1 Scenario 3 Bridge 2 772,200 4.2 Scenario 4 3 3 755,040 4.1
• Scenario 1: 1x SPPX and 1x NPX would likely exceed Vanterm’s capacity of 850,000 TEUs. • Scenario 2: 1x SPPX and 1x LPPX would not exceed Vanterm’s capacity. • Scenario 3: 2x PPX would not exceed Vanterm’s capacity. • Scenario 4: 3x PPX would not exceed capacity.
* For these four cranes, the 24 wide across beam assumed based on most recent GCT crane purchases for Deltaport since crane specifications were not publicly available. This information was not confirmed by GCT or VFPA.
49 Maximum ship size capabilities of container terminals in the PNW Port of Vancouver – Deltaport
Deltaport can handle up to ULCS ships, and recently installed two new MMX STS cranes. Currently, Deltaport has a capacity of 2,200,000 TEUs per year, with a planned expansion to 2,350,000 TEUs expected in 2019. For all the scenarios analyzed, a minimum of 12 STS cranes will be required. In order to efficiently handle MMX vessels, as described in Scenario 1, additional MMX STS cranes would be required.
Deltaport: terminal characteristics and ship-call service menu
Deltaport Berth # Cranes # Cranes # Cranes # Cranes Total TEUs p.a. Crane Length Berth Depth 24Wide 22Wide 20Wide 18Wide Cranes Capacity GMPH Current 1100 m 15.9 m 2 6 2 2 12 2,200,000 25 2019 (deliv 2017) 2,350,000 Ship Classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load)
Service Svc MMX ULCS NPX Large PPX PPX Small PPX Terminal Min Combinations Count TEUs p.a. Cranes Scenario 1 3 2 1 2,239,380 12.1 Scenario 2 3 3 2,316,600 12.5 Scenario 3 4 3 1 2,316,600 12.5 Scenario 4 5 4 1 2,310,880 12.5
The available terminal capacity of 2,350,000 TEUs/year would likely be fully consumed in each of these scenarios: • Scenario 1: 1x PPX and 2x MMX • Scenario 2: 3x ULCS • Scenario 3: 1x PPX and 3x NPX • Scenario 4: 1x SPPX and 4x LPPX
50 Maximum ship size capabilities of container terminals in the PNW Port of Vancouver – RBT2
The RBT2 project is planned to handle MMX. The RBT2 project is expected to have a capacity of 2,400,000 TEUs per year. A minimum of 12 STS cranes will be required for all the scenarios analyzed.
RBT2: terminal characteristics and ship-call service menu
RBT2 Berth # Cranes # Cranes # Cranes # Cranes Total TEUs p.a. Crane Length Berth Depth 25Wide 22Wide 20Wide 18Wide Cranes Capacity GMPH 1100 m 15.9 m 2,400,000 25
Ship classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load) Service MMX ULCS NPX Large PPX PPX Small PPX Terminal Min combinations Svc count TEUs p.a. Cranes Scenario 1 3 2 1 2,239,380 12.1 Scenario 2 3 3 2,316,600 12.5 Scenario 3 4 3 1 2,316,600 12.5 Scenario 4 5 4 1 2,310,880 12.5
• Scenario 1: 1x PPX and 2x MMX would approximately fill RBT2 close to its 2,400,000 TEU/yr planned initial capacity. • Scenario 2: 3 ULCS would also likely fill RBT2 close to its 2,400,000 TEU/yr planned initial capacity. • Scenario 3: 1x PPX and 3x NPX would also fill RBT2 close to capacity. • Scenario 4: 1x SPPX and 4x LPPX would also fill RBT2 close to capacity.
51 4. Vessel deployments to/from the PNW coastal zone 4.1. Overview 4.2. Synopses of Asian services by design 4.3. West Coast port rotation sequences for Asian services 4.4. Port competition frameworks 4.5. Competitiveness for Asian imports to key inland regions
52 Vessel deployments to/from the PNW Region Overview
The map below indicates the segregation of liner shipping services to and from the PNW region by the offshore region that those deployments are designed to serve.
Container vessel services calling at PNW ports
Asia E/B PNW 14 @ 104,200 Europe 3 @ 18,800 Asia W/B 3 @ 23,500
Oceania 1 @ 4,500
• Of the 21 separate scheduled vessel services, 14 are designed mainly to transport Asian imports to the PNW, while another three are deployments that run from Asia to California, but return via stops in Puget Sound ports to pick up exports back to Asia.
• The three European services stop in one or more Caribbean Basin/Panamanian hub ports and thus also carry PNW – Latin America containers via relay.
• The Oceania string has a weekly frequency to/from California, but only a bi-weekly frequency to/from the PNW
53 Vessel deployments to/from the PNW Region Synopses of Asian services by design
As indicated below, there are 12 services, with a collective weekly nominal capacity of about 83,500 TEUs, that operate from Asia to Vancouver (10 of which also call at NWSA ports, and two of which also call Prince Rupert). 100% of the capacity for each of these 12 strings is allocated for Asia – PNW/inland North America traffic. There are also two services that stop eastbound in Prince Rupert en-route to California, which do not call at Vancouver, with a combined capacity of about 21,000 TEUs/week (of which roughly 25% is allocated for the Prince Rupert call). The three services that call in the Puget Sound after calling in California ports discharge minimal eastbound volumes from Asia, and instead are designed to lift export loads, particularly reefers, and empties back to Asia.
Container vessel services calling at PNW ports: Asia trades Min ship Max ship Aug 2018 Trade Alliance Carrier Service P. Rupert Vancouver Seattle Tacoma California No. of ships scale scale Capacity (TEU) (TEU) (TEU/Week) Asia - P. Rupert – California - Asia Asia EB Ocean Cosco PSW2 FCT California 7 10,000 14,500 10,000 Asia EB 2M Maersk - MSC TP-8 FCT California 6 11,000 11,000 10,700 Total Asia - P. Rupert – California 20,700 Asia – Salish Sea – Asia Asia EB Ocean CMA CGM – APL PNW1 GCT Vanterm T18 12 8,500 10,000 10,600 Asia EB Ocean Cosco PNW2 FCT DPW Centerm 12 8,500 10,000 9,600 Asia EB Ocean Evergreen PNW3 GCT Vanterm PCT 6 5,300 7,000 6,300 Asia Ocean OOCL PNW4 GCT Deltaport T18 6 5,500 6,000 6,600 Asia THE Alliance ONE PN1 GCT Deltaport Husky 6 5,300 7,000 5,700 Asia THE Alliance ONE PN2 GCT Deltaport Husky 7 8,100 8,750 8,500 Asia THE Alliance ONE PN3 FCT GCT Deltaport T18 7 13,000 13,100 13,100 Asia 2M Maersk - MSC TP-9 DPW Centerm T46 6 7,000 7,800 7,200 Asia ZIM ZMP GCT Deltaport 15 4,200 4,500 4,700 Asia HMM PN2 GCT Vanterm WUT 6 4,700 5,400 5,000 Asia SM Line PNS FSD T18 6 3,100 4,500 4,200 Asia Westwood PNW DPW Centerm T18 OCT 7 2,000 2,000 2,000 Total Asia-Canadian ports (excl. P. Rupert – California) 83,500 Asia – California – Salish sea – Asia Asia WB HMM PS1 WUT California 6 6,300 6,800 6,500 Asia WB Evergreen PSW8 PCT California 6 8,500 8,500 8,500 Asia WB COSCO/PIL/WHL TP Loop 1 T30 California 6 6,600 11,900 8,500 Total California-PNW 23,500
54 Vessel deployments to/from the PNW Region West Coast port rotation sequences for Asian services
There are six separate port call rotation patterns among the 14 services that transport Asia import containers to the PNW region, as follows:
• Prince Rupert first call + Vancouver second call (one service – PNW2) • Prince Rupert first call + Vancouver second call + NWSA third call (one service – PN3) • Prince Rupert first call + LA/Long Beach second call (two services – PSW2, TP-8) • Vancouver first call + NSWA second call (three services – PNW4, TP-9, PNS) • Vancouver first and only call (one service – ZMP) • NWSA first call + Vancouver second call (six services)
Port rotation sequences of vessel services calling at Canadian ports: Asian trades (September 2018) Alliance Ocean THE Alliance 2M Independent Alliance
Carrier CMA COSCO Evergreen OOCL COSCO ONE ONE ONE Maersk Maersk ZIM HMM SML Westwood Carrier APL MSC MSC
Prince Rupert 1 1 1 1 Prince Rupert
Vancouver 2 2 2 1 2 2 2 1 1 2 1 3 Vancouver
Seattle 1 2 3 2 2 2a Seattle
Tacoma 1 1 1 1 1 Tacoma
California 2 2 California
Service PNW1 PNW2 PNW3 PNW4 PSW2 PN1 PN2 PN3 TP-9 TP-8 ZMP PN2 PNS PNW Service
a Also calls at Everett WA; frequency may vary.
55 Vessel deployments to/from the PNW Region Port competition frameworks
Because of the geography and transportation infrastructure of North America, other port zones compete intensively with the PNW ports for Asia container traffic destined to, or originating from, inland regions (other than the PNW provinces and states).
Coastal zones competing with the PNW coastal zone for Asian traffic
Onshore trade region Key competing gateway ports ▪ Coastal zones on the Atlantic Coast—East Canada, US North Atlantic, US South ▪ East Canada ▪ Halifax, Montreal Atlantic—compete with the PNW ports for Asian traffic in selected inland regions, relying on vessel services that operate through either the Panama or Suez canals. ▪ Northeast US ▪ New York, Norfolk ▪ These zones are especially competitive for traffic originating in Southeast Asia. ▪ US Midwest ▪ Los Angeles, Long Beach ▪ The two Southern California ports compete intensively for Asia – Midwest/Ohio ▪ Ohio Valley Valley and Asia – Southeast traffic with the PNW ports.
▪ Southeast US ▪ Savannah, Charleston
Within the PNW Region, inter-port competition differs by onshore trade region.
PNW ports competing with the Port of Vancouver for Asian traffic by onshore region
Onshore (inland) region Competing PNW ports ▪ Minimal Asia import containers destined to BC consignees are routed through Prince Rupert because the vast majority of those consignees are concentrated in the greater ▪ Central Canada Vancouver area, over 900 miles away (by road). ▪ East Canada ▪ Prince Rupert ▪ Similarly, very few Asia containers destined to BC consignees are routed through ▪ Seattle/Tacoma, given the high costs of trucking such containers across the border. US Midwest ▪ Prince Rupert ▪ Ohio Valley ▪ Northwest Seaport Alliance ▪ US Southeast ▪ Reciprocally, few Asia boxes for importers in Washington, Oregon, or Idaho are routed through Vancouver due to the high cross-border trucking costs.
56 Vessel deployments to/from PNW Region Competitiveness for Asian imports to key inland regions
As noted on the prior page, the PNW Region ports are competing with other North American port zones for Asian imports into different inland regions of the continent. The graphic below depicts the general competitiveness of the PNW Region ports (in aggregate), versus other North American port zones, for each major region of the continent.
PNW Region gateway competitiveness by inland region
Prince BC Canadian Prairies Rupert
Port of Eastern Canada Vancouver Strongest competitive market (US NW, BC, Canadian Prairies) Seattle/Tacoma US Northwest (NWSA) Stronger competitive market (E. Canada for BC ports only) US Midwest Very good competitive market (US Midwest) Portland US Northeast US Southwest, Weaker competitive market (US Northeast and Southeast) Texas, and Oklahoma US Southeast Weakest competitive market (US Southwest + TX) From Asia
From Asia
Via Panama Canal
57 Port rotation sequences of vessel services calling at Canadian ports Non-Asian trades
As of August 2018, four weekly vessel deployments link the PNW Vessel services calling at Canadian ports: Non-Asian trades with the following two “Non-Asian” tradelanes: Alliance THE Alliance • Europe Maersk Carrier ONE MSC H-L CMA Carrier • ANZ H-L
The port rotations of these deployments along the West Coast are Prince Rupert Prince Rupert plotted in the graphic to the right and have the following characteristics. Vancouver 3 2 3 3c Vancouver • As can be observed, for each string, California is called before and after the Salish Sea ports. Seattle 2 3 2 2c Seattle • Also for each string, both Vancouver and an NWSA port are covered Tacoma Tacoma
California 1 4 1 4 1 4 1 4 California
AL5 b Cali- MPS b Oceania Service Service Express b
b Via Panama Canal
Container vessel services calling at PNW ports: Non-Asia trades Min ship Max ship Aug 2018 Trade Alliance Carrier Service P. Rupert Vancouver Seattle Tacoma California No. of ships scale scale Capacity (TEU) (TEU) (TEU/Week) Other – Salish Sea – Non-Asia Europe THE Alliance Hapag/ONE AL5 GCT Deltaport T18 LAX-OAK 10 4,600 5,000 4,900 Europe Hapag/HS MPS GCT Deltaport T18 LBC-OAK 11 4,200 4,800 4,700 ANZ Hapag/HS Oceania GCT Deltaport T18 LBC - OAK 4 4,000 5,000 4,500 Europe MSC Calif-Expr GCT Deltaport T46 LBC-OAK 10 8,800 9,400 9,200 Total Non-Asia – Canadian ports 21,400
58 5. Forecast aggregate head-haul volumes for the Pacific Northwest 5.1. Overview and methodology 5.2. Baseline fleet forecast schedule 5.3. Share of imports via Vancouver 5.4. PNW import volume by ship-service routes and port 5.5. Volume forecast: do not build RBT2 scenario 5.6. PNW import volume by ship-service route and by port
59 Volume forecast input to fleet forecast Overview and methodology Mercator was directed to forecast the number and size of container vessels to call Vancouver on the basis of the volume forecasts previously presented by Ocean Shipping Consultants (OSC) in its 2016 report.
The size and number of ships calling Vancouver depends not only on the volume of containers moving to Vancouver itself, but rather on the total container volume carried in each of the trades in which Vancouver is a regular port of call. The three main tradelanes to/from the PNW include: (i) Asia, (ii) Europe, and (iii) Australia/New Zealand. Said another way, the collection of services calling at Vancouver carries not only traffic for Vancouver, but also for the other ports in the region called by these same services; hence, these services must be sized based on this aggregate demand.
To achieve this, the first step is to forecast the overall cargo flows in these trades, and then determine the portion of ship services in each trade that will call at Vancouver. Using OSC’s volume forecasts prepared in 2016 as a basis, Mercator’s methodology is summarized as follows:
• From OSC’s Table 1.36, the total volume forecast of traffic to and from ports in the PNW (i.e. the N. American West Coast, excluding Mexico and California) was extracted. These port volumes, however, included US domestic flows and other US PNW port volumes that are not part of the main trade lanes serving Vancouver, and therefore needed to be excluded. Because the objective is to isolate the volume that will be moved on services that call in Vancouver, the OSC forecast was refined to include only the international traffic that moves through the ports of Seattle, Tacoma, and Portland. • From OSC’s Tables 1.38 – 1.40, the total volume of traffic to and from the “Pacific Gateway” (comprised of the BC ports of Prince Rupert and Vancouver only) was estimated. Volumes from each of the Tables 1.38 – 1.40 were subtracted from Table 1.40 to yield a “provisional US PNW volume.” This “provisional US PNW volume” would match the actual volume moving through the ports of Seattle and Tacoma (if not for domestic and other traffic included in the PNW forecasts of Table 1.36). The “domestic and other port” traffic to be excluded from OSC’s aggregate forecast was identified by subtracting the actual Seattle/Tacoma/Portland international volumes from the “provisional US PNW volume” for the same historical years. • Finally, the “domestic and other” volumes are subtracted from OSC’s PNW forecasts to get the long-term international trade forecasts for traffic moving on services that call Vancouver.
3 1 2 ▪ Subtracting the “domestic and other” PNW port volumes Pacific Gateway All US PNW volumes traffic (item 5) from the PNW port - (BC ports only) volumes (item 1) results in the = Includes domestic traffic and International Traffic for BC, WA, and OR, From OSC Report, (minus) From OSC Report, Tables which is in the volume moving on the (equal) Non-Seattle/Tacoma/Portland Table 1.36 1.38-1.40 international vessel services through traffic) Vancouver that is required for the fleet forecast.
4 5 ▪ The vessel service capacity requirements Actual US International traffic “Domestic and other” to be are based on volumes moving in the - = deducted from OSC’s forecast head-haul direction (imports for the (minus) (equal) critically important Transpacific T-P Traffic via Deduction leaves the international tradelane). Seattle/Tacoma/Portland traffic driving PNW deployments
60 Volume forecast input to fleet forecast Baseline vessel service forecast schedule
Using the OSC forecast figures for the all PNW / Pacific Gateway / Vancouver traffic, and deducting from them the non-International NWSA traffic included in those forecasts, Mercator prepared the following International Import volume “plan” by PNW port. The vessel services calling Vancouver and the other PNW ports will be sized to carry this forecasted volume plan.
DevelopingDevelopingthe thevolume Volumeschedule Schedulethat Thatdrives Drivesfleet Fleetforecasts Forecasts 2012A 2013A 2014A 2015F OSC PNW* Base Case Table 1.36 7,560 7,790 7,780 8,140 1
OSC Pacific Gateway (BC) Table 1.38 (Import) 1,769 1,812 1,917 2,019 Base Case Table 1.39 (Export) 1,509 1,550 1,614 1,812 Table 1.40 (Combined) Total In + Out 3,278 3,362 3,531 3,831 2
Diff: USA PNW (ALL traffic, incl domestic and other ports) 4,282 4,428 4,249 4,309 3
Actual USA PNW (SEA/TAC/Port) International Volumes: NWSA (SEA + TAC) Intl 2,795 2,664 2,557 2,761 Portland (POR) 183 178 165 23 Subtotal SEA/TAC/POR International TEUs 2,978 2,842 2,722 2,783 4
Diff: Provisional PNW Less Actual PNW Int'l. 1,304 1,586 1,527 1,526 5 This is volume included in the OSC Port TEU forecasts but but NOT carried by PNW International Services This volume needs to be deducted from the OSC forecast to arrive at the PNW International traffic.
Components of this Excluded Volume include: SEA/TAC (NWSA) Domestic 786 821 871 769 Other NA PNW Ports (eg. ANC, Everett, etc.) 518 765 657 757
61 Volume forecast input to fleet forecast Baseline vessel service forecast schedule
Using the OSC forecasts for the all PNW / Pacific Gateway / Vancouver traffic, and deducting from them the non-International traffic included in those forecasts, Mercator prepared the following International Import volume plan by PNW port. The vessel services calling Vancouver and the other PNW ports will be sized to carry this forecasted volume plan.
Base case import TEUs by port in the PNW—with RBT2 Base Case IMPORT TEUs By PNW Port - With RBT2 Historic / Actual Figures Forecast Figures Year Ref: OSC 2016 Report 2012 A 2013A 2014A 2015 2016 2017 2018 2019 2020 2025 2030 2035 Vancouver Imports Table 7.2 & 1.40 1,450 1,508 1,557 1,581 1,636 1,728 1,825 1,919 2,013 2,406 2,740 3,021
Prince Rupert Imports Calculated: PG minus VFPA 320 304 360 438 468 473 475 474 471 501 570 629
Pacific Gateway Imports Table 1.38 & 1.40 1,769 1,812 1,917 2,019 2,104 2,201 2,299 2,393 2,484 2,907 3,310 3,650
OSC's All PNW Port Traffic OSC Table 1.36 (imports = 50%) 3,780 3,895 3,890 4,070 4,445 4,660 4,840 5,035 5,225 5,995 6,730 7,470
Deduct 50% of the Non-International TEUs (652) (793) (764) (763) (833) (873) (907) (944) (979) (1,124) (1,261) (1,400) During forecast period, grow at same rate as OSC's PNW TEUs
RESULT: PNW International Import TEUs 3,128 3,102 3,126 3,307 3,612 3,787 3,933 4,091 4,246 4,871 5,469 6,070
of which are NWSA Imports PNW Int'l. minus Pac Gateway 1,359 1,290 1,210 1,288 1,508 1,586 1,634 1,699 1,761 1,964 2,159 2,420
Total International Import Traffic - With RBT2, Base Case, by Gateway Port Group Prince Rupert, BC 320 304 360 438 468 473 475 474 471 501 570 629 Vancouver, BC 1,450 1,508 1,557 1,581 1,636 1,728 1,825 1,919 2,013 2,406 2,740 3,021 NWSA, WA 1,359 1,290 1,210 1,288 1,508 1,586 1,634 1,699 1,761 1,964 2,159 2,420 Total PNW Region 3,128 3,102 3,126 3,307 3,612 3,787 3,933 4,091 4,246 4,871 5,469 6,070 Pacific Gateway (i.e. BC only) 1,769 1,812 1,917 2,019 2,104 2,201 2,299 2,393 2,484 2,907 3,310 3,650
62 Volume forecast input to fleet forecast Share of imports via Vancouver
The vessel services and port calls will be forecasted on a vessel service lane basis, and so the overall volume forecast is subdivided into trade lanes based on the historic mix of import cargo origins handled at Vancouver. This mix of origins applies to Vancouver. Only Transpacific (T-P) services call at Prince Rupert, so 100% of Prince Rupert traffic is in the T-P service lane. Data for NWSA traffic yielded only a slightly different breakdown origin mix (0.9% ANZ, 7.6% Europe, 91.5% T-P).
ShareShare ofof importImport Containercontainer Tonnagetonnage Throughthrough VancouverVancouver By Origin Region and Ship Service Lanes Svc Lane Region 2014% 2015% Avg % ANZ ANZ Oceania 1.09% 1.22% 1.29% Europe ANZ USA 0.22% 0.05% 4.43% ANZ Subtotal 1.32% 1.27% 1.29%
Europe Africa 0.13% 0.13% Europe Carib 0.00% 0.00% Europe Cen Amr 0.12% 0.18% Europe ECSA 0.31% 0.40% Europe Europe 2.03% 2.13% Europe Mexico 0.41% 0.39% Europe WCSA 1.35% 1.26% Europe Subtotal 4.35% 4.50% 4.43%
T-P E Asia-China 60.80% 60.26% T-P E Asia-HKG 4.08% 3.92% T-P E Asia-Japan 3.04% 3.15% T-P E Asia-Kor 10.27% 10.44% T-P E Asia-Twn 4.24% 4.08% ANZ T-P Middle East 0.06% 0.14% T-P SE Asia 9.84% 10.35% T-P Europe T-P So Asia 1.99% 1.89% 94.28% T-P T-P Subtotal 94.33% 94.23% 94.28% 100% 100% 100%
63 Volume forecast input to fleet forecast PNW import volume by ship-service routes and port
The vessel services and port calls will be forecasted on a vessel service lane basis, and so the overall volume forecast is subdivided into trade lanes based on the historic mix of import cargo origins handled at Vancouver.
PNW International import annual volume by ship-service routes (Transpacific (T-P), Europe, ANZ) and by port PNW International Import Volume By Ship-Service Routes (T-P, Europe, ANZ) and by Port TEUs (000s) per Year 2018 2019 2020 2025 2030 2035 For Vancouver T-P Services 1,720 1,809 1,898 2,269 2,583 2,848 Europe Services 81 85 89 107 121 134 ANZ Services 24 25 26 31 35 39 Total VFPA Import 1,825 1,919 2,013 2,406 2,740 3,021
For Rupert T-P Services 475 474 471 501 570 629 Europe Services ------ANZ Services ------Total Rupert Import 475 474 471 501 570 629
For NWSA T-P Services 1,495 1,554 1,612 1,797 1,975 2,214 Europe Services 124 129 134 149 164 184 ANZ Services 15 15 16 18 19 22 Total NWSA Import 1,634 1,699 1,761 1,964 2,159 2,420
Total PNW Int'l. Per Year T-P Services 3,690 3,837 3,981 4,567 5,128 5,691 Europe Services 205 214 223 256 285 318 ANZ Services 38 40 42 49 55 61 3,933 4,091 4,246 4,871 5,469 6,070
This mix of origins applies to Vancouver.
64 Volume forecast input to fleet forecast PNW import volume by ship-service routes and port
For the purposes of fleet/service forecasting, it is convenient to consider volume flows on a weekly basis, which are shown below.
PNWPNWInternational International importImport Volumeweekly Byvolume Ship-Serviceby ship -Routesservice (T-P,routes Europe,(T-P, ANZ)Europe, and ANZ)by Portand by port TEUs (000s) per Week 2018 2019 2020 2025 2030 2035
For Vancouver T-P Services 33.1 34.8 36.5 43.6 49.7 54.8 Europe Services 1.6 1.6 1.7 2.0 2.3 2.6 ANZ Services 0.5 0.5 0.5 0.6 0.7 0.7 Total T-P 000s/wk 35.1 36.9 38.7 46.3 52.7 58.1
For Rupert T-P Services 9.1 9.1 9.1 9.6 11.0 12.1 Europe Services ------ANZ Services ------Total Van BC 000s/wk 9.1 9.1 9.1 9.6 11.0 12.1
For NWSA T-P Services 28.7 29.9 31.0 34.6 38.0 42.6 Europe Services 2.4 2.5 2.6 2.9 3.2 3.5 ANZ Services 0.3 0.3 0.3 0.3 0.4 0.4 Total NWSA 000s/wk 31.4 32.7 33.9 37.8 41.5 46.5
ALL PNW T-P Services 71.0 73.8 76.6 87.8 98.6 109.5 Europe Services 3.9 4.1 4.3 4.9 5.5 6.1 ANZ Services 0.7 0.8 0.8 0.9 1.1 1.2 Total PNW 000s/wk 75.6 78.7 81.6 93.7 105.2 116.7
65 Volume forecast input to fleet forecast Volume forecast: do not build RBT2 scenario
The VFPA requested that Mercator forecast Vancouver’s vessel service calls for the scenario in which RBT2 is not built, and to base this forecast on the forecasted traffic diversions that were presented in OSC’s 2017 Report, Potential Impact of a Failure to Develop RBT2 at VFPA. The Vancouver traffic diversions as forecast by OSC are summarized below.
Vancouver traffic diversions as forecasted by OSC in 2016
2015 2020 2025 2030 2035 2040 2045 2050 Total Volume ReRouted from VFPA 0 112,638 779,394 1,382,463 1,945,258 2,400,000 2,400,000 Imports (full+empty) 0 0 56,319 389,697 684,254 908,668 1,055,752 1,206,881 Exports (full+empty) 0 0 56,319 389,697 698,208 1,036,589 1,344,248 1,193,119
British Columbia Imports (full) 0 0 0 0 0 0 0 0 Imports (empty) 0 0 0 0 0 0 0 0 Exports (full) 0 0 0 0 0 0 0 0 Exports (empty) 0 0 0 0 0 0 0 0
Alberta & Prairies 0 0 0 0 0 0 0 0 Imports (full) 0 0 0 0 0 0 0 0 Imports (empty) 0 0 0 0 0 0 0 0 Exports (full) 0 0 0 0 0 0 0 0 Exports (empty) 0 0 0 0 0 0 0 0
C&E Canada 0 0 0 0 0 322,203 657,361 741,547 Imports (full) 0 0 0 0 0 161,102 257,028 408,158 Imports (empty) 0 0 0 0 0 0 0 0 Exports (full) 0 0 0 0 0 0 312,011 333,389 Exports (empty) 0 0 0 0 0 161,102 88,322 0
US 0 0 112,638 779,394 1,382,463 1,590,323 1,705,488 1,618,756 Imports (full) 0 0 56,319 389,697 684,254 747,567 798,723 798,723 Imports (empty) 0 0 0 0 0 0 0 0 Exports (full) 0 0 0 0 13,954 95,189 108,041 115,444 Exports (empty) 0 0 56,319 389,697 684,254 747,567 798,723 704,589
Others 0 0 0 0 0 32,732 37,151 39,696 Imports (full) 0 0 0 0 0 0 0 0 Imports (empty) 0 0 0 0 0 0 0 0 Exports (full) 0 0 0 0 0 32,732 37,151 39,696 Exports (empty) 0 0 0 0 0 0 0 0
Source: OSC 2017 Report, Table 3.2
66 Volume forecast input to fleet forecast Volume forecast: do not build RBT2 scenario
The OSC forecast of Vancouver traffic diversions by “new” gateway is summarized below, along with the resulting “No RBT2” import traffic forecast by PNW gateway.
AlternateAlternatecase Case: traffic Trafficby port By PNWin the PortPNW— -do Withoutnot build RBT2RBT2 scenario 2018 2019 2020 2025 2030 2035 Re-Routes (000s TEUs) Derived from Table 5.3, OSC 2017 Report Vancouver - (56) (390) (684) Prince Rupert - 56 390 363 NWSA - - - - SPB - - - 321
Imports w/ No RBT2 (net of Re-Routes) Vancouver 1,825 1,919 2,013 2,350 2,350 2,337 Prince Rupert 475 474 471 557 960 992 NWSA 1,634 1,699 1,761 1,964 2,159 2,741
Pacific Northwest (PNW) 3,933 4,091 4,246 4,871 5,469 6,070 Pacific Gateway (PG - Subset of PNW) 2,299 2,393 2,484 2,907 3,310 3,329
Source: OSC 2017 Report, Table 3.2
67 Volume forecast input to fleet forecast Volume forecast: do not build RBT2 scenario
Making a simplifying assumption that all of the re-routed volume will naturally be T-P volume (very little if any ANZ or Europe volume will be intermodal traffic), and dividing the annual volumes by 52 weeks, the resulting forecast of weekly International TEUs by port and trade is as follows.
PNW import volume by ship-service route (T-P, Europe, ANZ) and by port—do not build RBT2 scenario Distribution of PNW Import Volume By Ship-Service Routes (T-P, Europe, ANZ) and Port - No RBT2 Scenario TEUs (000s) per Week 2018 2019 2020 2025 2030 2035
For Vancouver T-P Services 33.1 34.8 36.5 42.5 42.2 41.6 Europe Services 3.0 3.2 3.4 4.0 4.0 4.0 ANZ Services 0.9 0.9 1.0 1.2 1.2 1.2 37.0 38.9 40.9 47.7 47.3 46.7
For Rupert T-P Services 9.1 9.1 9.1 10.7 18.5 19.1 Europe Services ------ANZ Services ------9.1 9.1 9.1 10.7 18.5 19.1
For NWSA T-P Services 28.7 29.9 31.0 34.6 38.0 42.6 Europe Services 5.0 5.1 5.3 5.7 6.3 7.5 ANZ Services 0.6 0.6 0.6 0.7 0.7 0.9 34.3 35.6 36.9 41.0 45.0 51.0
ALL PNW - 000s TEUs/yr T-P Services 71.0 73.8 76.6 87.8 98.6 103.3 Europe Services 8.0 8.4 8.7 9.7 10.3 11.5 ANZ Services 1.5 1.5 1.6 1.8 1.9 2.0 80.5 83.7 86.8 99.4 110.9 116.8
68 6. Forecasting PNW vessel deployments for the near-term 6.1. Overview and framework 6.2. Discussion of PNW Asia eastbound vessel services for 2020 6.3. Discussion of PNW Asia eastbound vessel services for 2025 6.4. Projections of PNW Asia eastbound vessel services and sizes for 2020 and 2025 6.5. Discussion and projections of PNW vessel services for other trade lanes for 2020 and 2025
69 Near-term projections of vessel deployments Overview and framework
2020 Timeframe In the development of projections for the number of separate vessel deployments that are likely to be operated to and from the PNW region in 2020, as well as the distribution of those deployments by vessel size, Mercator utilized a carrier-specific approach, with the following assumptions: • The Ocean, THE, and 2M alliances will continue in place, with no changes in membership. • The vessel sharing agreement currently in place in the West Coast North America – Mediterranean trade between Hapag-Lloyd and Hamburg Sud (now a Maersk subsidiary) will continue, as will the vessel sharing agreement between those same two carriers and CMA CGM in the West Coast North America – ANZ trade. • Zim, HMM, SM Lines, and Westwood are expected to continue to operate their respective Asia – PNW services. In addition to these assumptions, Mercator takes into consideration various commercial requirements that selected ocean carriers have for particular deployments, the broader service networks and near-term vessel fleet composition of each carrier, and carrier ownership positions in terminals (where applicable), in projecting deployments in 2020.
2025 Timeframe Mercator also utilized a carrier-specific approach for projecting deployments by 2025, but with the perspective that the number and composition of the major east-west global carrier alliances could be different by that time. Some of the structural changes that could conceivably occur between now and then with ramifications for alliances’ T-P networks include: • An absorption by Evergreen of Yang Ming, together with the main Taiwanese carrier ending its alliance with COSCO/OOCL and CMA CGM, and instead joining the alliance between ONE and Hapag-Lloyd • The acquisition of Zim by Maersk or MSC • The termination of the 2M Alliance • A merger between CMA CGM and Hapag-Lloyd (although it is highly uncertain whether the EU would approve such a transaction) Consequently, Mercator addressed the expected sustainability between now and 2025 of each vessel deployment, based particularly on which specific carriers are providing ships to each service, and the expected impacts of potential structural changes on certain services.
70 Projections of PNW vessel services for 2020 Asia eastbound trade lane
Salish Sea deployments: THE Alliance PN-1: Pacific North 1 ONE, Hapag-Lloyd, and Yang Ming currently operate three Asia – Salish Sea deployments, but do not have any of their Asia – California services making intermediate eastbound calls at Prince Rupert. The three strings are as follows: • PN-1 loads in Asia in the Yangtze River Delta (YRD), North China, and Japan, and uses mainly 5,600 TEU ships, all provided by ONE. • PN-2 loads in Southeast Asia (Singapore, Laem Chabang, Cai Mep), Taiwan, and the Pearl River Delta (PRD), and uses ships with capacities ranging from 8100 to 8700 TEU in capacity – four from ONE and three from Hapag-Lloyd. • PN-3 loads in the PRD, YRD, and Korea, and uses 13,000 TEU ships, all provided by Hapag-Lloyd. PN-2: Pacific North 2 It is unlikely that THE will decide by 2020 to consolidate PN-1 and PN-2 because: • Each string covers different origin markets in Asia, with no overlap in the eastbound trade. • A single string would need to operate with ships of about 13,000 TEU capacity, and neither ONE nor Hapag-Lloyd will have enough available ships of that size range by 2020 for a new PN-1/PN-2. However, we would expect ONE to replace the 3 x 8,100 TEU ships in the PN- 2 with 8,500 TEU vessels in the next 18 months, but likely keep the PN-1 at its current scale, given estimated current utilization levels. • The PN-3 cannot be upsized by 2020 because neither Hapag-Lloyd nor ONE nor Yang Ming has larger ships available for this trade. PN-3: Pacific North 3 Mercator thus expects THE Alliance to operate these same three strings in 2020 and will continue to have PN-1 and PN-2 call in Tacoma first, because of ONE’s ownership stake in that port’s Husky Terminal. • If THE Alliance needs additional Asia – PNW capacity by 2020, above the modest increases in the scales of the PN-1 and PN-2, it is expected to have one of its Asia – California deployments stop in Prince Rupert anyway, and will, therefore, be able to shift capacity allocations for the PN-3.
71 Projections of PNW vessel services for 2020 Asia eastbound trade lane
Salish Sea deployments: OCEAN Alliance PNW1 CMA CGM, COSCO/OOCL, and Evergreen presently operate four Asia – PNW deployments within the Ocean Alliance. • PNW1 loads in Asia in Singapore, PRD, South China, YRD, and Korea, and uses mainly 9,500-10,000 TEU ships, all provided by CMA CGM. • PNW2 also loads in Singapore, PRD, and YRD, but does not call in South China (Xiamen) nor in Korea, and instead calls in Vietnam (Cai Mep) and North China (Qingdao). PNW2 uses ships with capacities ranging from 9,400 to 10,000 TEU in capacity—all supplied by COSCO. • PNW3 loads mainly in the PRD, Taiwan, and YRD, and uses ships with capacities ranging from 5,300 to 7,000 TEUs—all provided by Evergreen. • PNW4 loads mainly in the PRD and Taiwan, and uses ships with capacities ranging from 5,700 to 8,000 TEUs—all provided by OOCL. PNW3: • It is unlikely that either CMA CGM or Evergreen will cease to operate their respective PNW strings by 2020, considering their market positions, obligations to the NWSA, and preferences for controlling their core services. • It is also unlikely that COSCO will try to consolidate the PNW-2 and PNW-4 strings into one single deployment by 2020, because: • A single string would need to operate with ships of at least 15,000 TEU capacity, and the COSCO group will not have enough available ships of that size range by 2020 to be assigned to this trade lane. • Mercator thus expects Ocean Alliance to operate these same four strings in 2020, with basically the same rotation. • However, we project that Evergreen will phase out the smaller ships in the PNW3, and that COSCO/OOCL will do the same in the PNW4, operating at PNW4 the 7,000 TEU and 8,000 TEU scales, respectively. • Should the Alliance need additional Asia – PNW capacity, beyond upsizing the PNW3 and PNW4, its members would likely agree to have another of their Asia – California strings add a stop in Prince Rupert (not included in our forecast).
72 Projections of PNW vessel services for 2020 Asia eastbound trade lane
Salish Sea deployments: other alliances and carriers TP9/Maple
Maersk and MSC currently operate one Asia – PNW service (TP9/Maple), using a mix of 7,100-7,800 TEU ships, loading eastbound in PRD, Taiwan, South China, YRD, and Korea. • The world’s two largest carriers clearly do not presently assign a high priority, in terms of sailing frequency and capacity allocation to this market lane, compared to their competitors in the Ocean and THE alliances. • Mercator accordingly projects that by 2020, the 2M Alliance will continue to operate just the current one service, upsizing it to the 7.700 TEU scale.
HMM presently operates one Asia – PNW service, with a mix of 4,700-5,400 TEU PNW ships, loading eastbound in the PRD, Taiwan, the YRD, and Korea. • Because of HMM’s financial condition, Mercator would expect this carrier will only replace some of the smaller ships in this string between now and 2020. • The SM Lines service in this lane is very similar to the HMM deployment and for similar reasons, Mercator expects only a modest upsizing of this string by 2020, through the replacement of some of its smaller ships.
ZIM operates a “pendulum” service, with a Black Sea/East Med – Far East – Vancouver – Far East – Black Sea/East configuration, with a mix of 15 ships, with capacities ranging between 4,200 and 5,100 TEUs. • Here again, because of this carrier’s financial position, Mercator would expect Zim ZMP to replace some of the smaller ships with chartered ships between now and 2020, resulting in a modest increase in capacity.
No changes are expected in the Westwood service and ships by 2020.
73 Projections of PNW vessel services for 2020 Asia eastbound trade lane
Prince Rupert/California deployments TP-8 Eastbound rotation
Maersk and MSC currently operate one Asia – California service via Prince Rupert, TP-8, using a mix of 10,000-13,300 TEU ships, loading eastbound in China, South Korea, and Japan. • The 2M carriers added the Prince Rupert call to the TP-8 earlier this year, when they contracted from two Asia – Salish Sea – Asia deployments down to one and wanted to continue exploiting the service/cost benefits of the Prince Rupert gateway. • Even though the TP-8 call at Prince Rupert adds two days of transit time onto Asia – California eastbound boxes transported on this service, the 2M carriers apparently believe that the benefits of the intermediate stop outweigh any negative commercial impacts due to the extra transit time. • Mercator accordingly projects that by 2020, the 2M Alliance will continue to maintain the Prince Rupert call on the TP-8, and probably will replace the smaller ships in the deployment. PSW-2 Eastbound rotation COSCO presently operates one Asia – California service via Prince Rupert, PSW-2, with a mix of 10,000-13,300 TEU ships, loading eastbound in Xingang, Qingdao, and Shanghai. • COSCO launched this service in April 2017, originally from North and Central China to Prince Rupert and California. • COSCO was the first major carrier to route containers through Prince Rupert, so it is not surprising that the Chinese carrier would maintain this particular service feature (of stopping in Prince Rupert on one of its Asia – California services). • Given the carrier’s schedule of deliveries for new large vessels, and considering that COSCO recently consolidated two strings into one, Mercator expects that it will upsize the PSW2 to the 13,000-14,000 TEU scale between now and 2020.
74 Projections of PNW vessel services for 2025 Asia eastbound trade lane
Overview and Assumptions: Asia – Salish Sea deployments
It is admittedly uncertain what will be the number and composition of vessel sharing alliances covering the Asia – PNW trade lane by 2025.
However, when one considers how each current deployment is supplied, in terms of vessel contributors, it can guide the formation of conclusions regarding the numbers and sizes of Asia – Salish Sea – Asia vessel strings for 2025.
• For example, as noted on a prior page, each of the four of the Ocean Alliance Asia – Salish Sea – Asia deployments has all of its ships provided by a single carrier (one string from CMA CGM, one from Evergreen, and two from COSCO/OOCL).
o Thus, even if Evergreen, for instance, were to leave the Ocean Alliance and join ONE, Hapag-Lloyd, and Yang Ming by 2025, the deployment that it controls would most likely continue operating.
o Similarly, even if CMA CGM and Hapag-Lloyd were to merge by 2025 (as another example), each carrier’s controlled string would likely continue operating (especially since the new company would not have enough 20,000+ TEU ships by then available to be assigned to this trade).
o While COSCO is unlikely to be acquired, and instead might acquire another line between now and 2025, it will undoubtedly want to maintain two separate strings -- not only because of a lack of availability of 16,000+ TEU ships, but also in order to have one service focused on the PRD and South China, and another service focused on the YRD and North China.
o Therefore, we can conclude that all four deployments currently being operated by the four Ocean Alliance carriers are likely to continue to be operated in 2025, regardless of whether CMA CGM, Evergreen, and COSCO/OOCL are in an alliance together or not.
The outlook is less clear for the three Asia – Salish Sea THE Alliance strings, because one of the three uses a mixture of ONE and Hapag-Lloyd ships.
• Nonetheless, whether the ONE is independent or merged with another carrier, it is reasonable to assume that the existing string which is supplied entirely with ONE ships and which is the only Asia – Salish Sea deployment (other than the niche Westwood service) to make eastbound calls in Japan (i.e., the PN- 1) will continue to be operated by 2025.
• Similarly, Hapag-Lloyd appears to be heavily committed to the string in which it contributes all of the vessels (PN-3), because the scale of this deployment and Hapag-Lloyd’s concentration of volumes on it through Vancouver provide it with unit cost advantages.
• We, therefore, conclude that at least two of the three THE Alliance strings are likely to continue to operating regardless of whether or not the current carrier composition of this alliance remains unchanged.
• The outlook for the remaining THE Alliance string (PN-2) in 2025 will depend on whether Hapag-Lloyd and ONE are still together in the alliance, whether Hapag-Lloyd has merged with another line or not, etc. In our forecast, Mercator assumes that Hapag-Lloyd and ONE are still operating together, with or without Yang Ming.
75 Projections of PNW vessel services for 2025 Asia eastbound trade lane
Assumptions for other alliances and carriers: Asia – Salish Sea deployments
Presently, all of the vessels running in the 2M Alliance’s TP-9/Maple deployment are provided by Maersk. Regardless of whether Maersk and MSC maintain their 2M Alliance through 2025, Mercator would consequently expect Maersk to continue operating the TP-9, though potentially with smaller ships if MSC was not sharing its capacity.
Because the term of the Maersk/MSC alliance agreement, as filed with the US Federal Maritime Commission, extends to 2025, Mercator’s projections for 2025 are based on the 2M Alliance continuing through that year.
Moreover, Mercator expects that by or before 2025, Maersk and MSC will rectify the sailing frequency disadvantage that they have in this lane, relative to other alliances, by adding a second Asia – Salish Sea string.
To reduce the financial risks attendant with an additional string, Maersk and MSC are expected to extend their recently-announced collaboration agreement with Zim (for the Asia – US East Coast trade) to include the Asia – PNW lane.
This will enable Zim to upsize its ZMP deployment (now being operated with inefficient 4,200-5,100 TEU ships) and for Maersk/MSC to obtain a second sailing in the lane for far less network cost.
Considering the support that HMM is receiving from the South Korean government, the importance to Korean exporters of having liner service from a Korean carrier, and the one-carrier supplier of ships to the PNS string, it is reasonable to assume that this deployment will continue to operate through 2025.
However, the scale of this service (now at the 4,700 TEU range) could be increased significantly, if SM Lines struggles financially and if accordingly, the Korean government encourages and facilitates the consolidation of SM Lines into HMM – Mercator assumes this scenario in our projections of deployments in 2025, and hence forecasts a significant upsizing of the PNS string.
With an expected consolidation of two Korean-carrier deployments into one string, Mercator assumes that by 2025, another independent, niche carrier will have entered the Asia – PNW trade, using sub-Panamax ships – this carrier could potentially be Wan Hai, PIL, Wan Hai and PIL jointly, or some other Asia-based operator.
Westwood is a unique ocean carrier in this market, being focused on supporting westbound shipments of forest/paper products and on operating specialist ships that can carry containers and break-bulk cargoes. Mercator expects that Westwood will retain its focus on those commodities and accordingly continue to use multi-purpose ships with relatively small capacities for containers through 2025.
76 Projections of PNW vessel services for 2020 and 2025 Asia eastbound trade lane
Forecast summary for Asia – Salish Sea services Projections of Asia -Salish Sea – Asia vessel deployments, 2018-2025 Vessel service scale Vessel service Lead operating By applying all of the assumptions outlined on the preceding pages, and by (TEU/week) considering the current vessel fleet of each carrier (as well as the ships name carrier each line has being built at this time), Mercator derived the projections to 2018 2020 2025 the right. PNW1 CMA 10600 10600 11300 Our assumptions led to the conclusion that in 2020, the vessel services PNW2 COSCO 9600 9600 9600 being operated presently will likely continue in place, along with the vessel PNW3 Evergreen 6300 7000 8400 sharing agreements and carriers by which these services are provided. PNW4 COSCO/OOCL 6600 8000 9400 Aggregate capacity is projected to increase only by 4.5% from the third quarter of 2018 until the beginning of 2020. While this might seem low, PN-1 ONE 5600 5600 6400 relative to the growth forecasted for eastbound container volumes to the PN-3 Hapag 13100 13100 13100 region over the 2018-2020 timeframe (of 7.9%), other factors need to be PN-2 ONE/Hapag 8400 8600 9000 recognized:
• Several carriers (including Zim, HMM, ONE, Hapag-Lloyd, and SM Lines) TP9/MAPLE Maersk/MSC 7200 7700 8400 are under significant financial pressures, and hence are unlikely to be Maersk/MSC/Zim 8000 able to significantly increase the capacities of their respective vessel ZMP Zim 4700 5000 0 strings over the next 18 to 24 months. PN-2 HMM 4700 5000 11500 • All carriers are seeking improvements in rate levels and many have already demonstrated in 2018 that they are willing to reduce capacities to stabilize ocean freight rates. PNS SM Lines 4200 4500 0
• The CMA and COSCO services (PNW1 and PNW2) have pendulum PNW-NEA Westwood 2000 2000 2500 configurations (Arabian Gulf – Far East – PNW – Far East – Arabian Gulf) that require 12 ships apiece to operate. These strings were only established in 2018, and it is unlikely that either carrier will want to TBD New niche line 4000 incur the ship repositioning expenses associated with upsizing a 12-ship string during the next 18 to 24 months. Total Group 83,000 86,700 101,600
77 Projections of PNW vessel services for 2020 and 2025 Asia eastbound trade lane
Forecast summary for Asia – Salish Sea services (continued) Projections of Asia - Salish Sea – Asia vessel deployments, 2018-2025 Vessel service scale Mercator’s projections for 2025 result in a 17% increase in capacity over Vessel service Lead operating (TEU/week) the levels forecasted for 2020, which is relatively consistent with OSC’s name carrier forecast of roughly a 15% growth in import volumes to the region. 2018 2020 2025
As discussed earlier, the 2025 projections were developed partially on the PNW1 CMA 10600 10600 11300 basis that eight of the current twelve vessel deployments (PNW1 thru PNW4, PN-1, PN-3, TP9, and PNW-NEA) are controlled by seven individual PNW2 COSCO 9600 9600 9600 ocean carriers that will likely want to continue these services, whether PNW3 Evergreen 6300 7000 8400 they remain as independent companies or not (and most of the seven will likely remain independent). PNW4 COSCO/OOCL 6600 8000 9400
Our assessment of the expected level of upsizing for each of these eight PN-1 ONE 5600 5600 6400 deployments from 2020 to 2025 incorporated an analysis of each carrier’s PN-3 Hapag 13100 13100 13100 vessel fleet to determine how many numbers of ships of different size classes might be available in 2025 for re-assignment to the Asia – PNW PN-2 ONE/Hapag 8400 8600 9000 trade. TP9/MAPLE Maersk/MSC 7200 7700 8400 The projections for the other four deployments were derived after predicting that: Maersk/MSC/Zim 8000 ZMP Zim 4700 5000 0 • ONE and Hapag-Lloyd will likely still be in an alliance together in 2025, as will Maersk and MSC. PN-2 HMM 4700 5000 11500
• The Maersk/MSC/Zim collaboration in the Asia – USEC trade will be extended to this market. PNS SM Lines 4200 4500 0
• The Korean government will effect a consolidation of HMM and SM PNW-NEA Westwood 2000 2000 2500 Lines. TBD New niche line 4000 • A new, niche carrier will enter the market, in response to the contraction of three strings into two. Total Group 83,000 86,700 101,600 Note – This table is a duplicate of the table on the prior page, and is displayed here for the reader’s convenience
78 Projections of PNW vessel services for 2020 and 2025 Asia eastbound trade lane
Forecast for Prince Rupert/California services As noted earlier, there are presently two vessel strings that carry a portion of the Asia – PNW import traffic flow because they each make an intermediate eastbound port call at Prince Rupert, where the import loads are discharged for movement to central/eastern Canadian markets and US Midwest/South Central markets. • These services are not very competitive for transporting export loads from those same intermodal markets back to Asia because the ships in the deployments spend three to four days transiting south to SPB, and then are along the California coast for five to six days – consequently, the majority of containers loaded onto these ships at Prince Rupert are empties. • Although this causes westbound container equipment positioning issues for Maersk/MSC and COSCO/CMA CGM/Evergreen, these carriers clearly value the commercial advantages and rail transport cost savings that they obtain on the eastbound intermodal boxes that they discharge at Prince Rupert.
The THE Alliance had a similar service from April of 2017 until the third quarter of this year, but eliminated that string to improve overall demand/supply balance in the Asia – California trade. • Between 2020 and 2025, to enhance its competitive position vis-à-vis the 2M and Ocean Alliances, Mercator expects THE Alliance to either add back the Asia – Prince Rupert – California – Asia deployment that was recently cancelled (PS-8), or otherwise upsize and modify one of its current seven Asia – California strings such that it includes an intermediate call in Prince Rupert. We do not expect the 2M carriers to upsize the TP-8 between 2020 and 2025 beyond the 11,000 TEU scale, because they are more likely to add a fourth Asia – California deployment during this period to mitigate their sailing frequency disadvantages vis-à-vis the Ocean Alliance and THE Alliance (that operate eight and seven separate services, respectively, in this lane), and will, therefore, want to avoid adding too much capacity to the market. • We also do not expect COSCO to upsize the PSW-2 by 2025 beyond the anticipated 13,000 TEU scale, because the carrier will likely not have much larger ships available by then that can be assigned to the trade, and also because the complete economic benefits of stopping an ultra-large ship for the intermediate call (with more pronounced and costly repositioning issues for empty containers and with greater delays to more eastbound containers destined to California) become marginal. Hence, we project the following deployments and space allocations for this category of deployments by 2025.
Projections of Prince Rupert/California vessel deployments to 2025 Vessel service scale Allocation for Prince Rupert (TEU/week) (TEU/week) Mercator estimates that the capacity Vessel service Lead operating that these carriers allocate on their name carrier 2018 2020 2025 2018 2020 2025 respective services for Prince Rupert PSW2 COSCO 10000 13000 13000 2500 3250 2600 discharge is currently limited to 25%, TP8/ORIENT Maersk/MSC 10700 11000 11000 2675 2750 2200 and that this would drop to 20% with PS-8 or PS-6 ONE 0 0 9000 1800 the addition of a third service in 2025. Total Group 20,700 24,000 33,000 5,175 6,000 6,600 79 Projections of PNW vessel services for 2025 West Coast port rotation sequences for Asian services
Mercator reviewed the current port call sequences within the PNW region (as shown earlier, and which are assumed to remain unchanged for 2020) and reached the following conclusions regarding expected changes in those sequences for 2025:
• CMA CGM/APL is expected to add a Prince Rupert call before the Seattle call on the PNW1, once its volume guarantee to the Port of Seattle expires in 2024. • The other four Ocean Alliance services, and the three current THE Alliance services are expected to have no changes in their respective port call sequences within this region. • When the 2M carriers incorporate Zim into their vessel sharing alliance in this corridor (as assumed by Mercator to happen before 2025), the second “2M+Z” deployment (an upsizing of what is currently the ZMP) will add a Seattle call after the Vancouver call. • No changes in port call sequences are expected for the existing 2M services, the HMM, and the Westwood services, while the new niche carrier replacing SM Lines is projected to call Vancouver first-inbound. • Evergreen, ONE, and HMM are expected to maintain first-inbound calls in Tacoma in 2025 to maintain competitive advantages in the Puget Sound local market, and to generate additional volumes for their affiliated terminals.
Expected port rotation sequences of vessel services calling at Canadian ports: Asian trades, 2025 Alliance Ocean THE Alliance 2M+ZIM Independent Alliance
Carrier CMA COSCO Evergreen OOCL COSCO ONE ONE Hapag YML Maersk ML/Zim Maersk HMM niche Westwood Carrier APL MSC MSC
Prince Rupert 1 1 1 1 1 1 Prince Rupert
Vancouver 3 2 2 1 2 2 2 1 1 2 1 3 Vancouver
a Seattle 2 2 3 2 2 2 2 Seattle
Tacoma 1 1 1 1 1 Tacoma
California California 2 2 2
Service PNW1 PNW2 PNW3 PNW4 PSW2 PN1 PN2 PN3 PS8 TP-9 TP-4 TP-8 PN2 PNS PNW Service
80 Projections of PNW vessel services for 2020 and 2025 Other trade lanes
European trades – review of current operations AL-5: Atlantic Loop 5 There are three separate deployments that link the PNW with exporters and importers in Europe. All three strings “turn-around” in the Salish Sea and stop in California ports in both the southbound and northbound directions to and from the Panama Canal. • The AL-5, which is operated by ONE and Hapag-Lloyd, is the only direct, weekly-frequency containership service between the WCNA and North Europe, and uses 10 ships of 4,800-5,000 TEU capacity, all provided by ONE (although the largest user of the deployment’s capacity, and the largest carrier by market share for this trade, is Hapag-Lloyd). • The MPS runs between the West Mediterranean region and WCNA, and uses 10 ships of 4,600-5,000 TEU capacity, eight contributed by Hapag- Lloyd and two by Hamburg Sud. • The two carriers have operated this service jointly and continuously since 2012, but Hapag-Lloyd inherited the deployment when it acquired CP Ships in 2005. • The California Express was launched in 2010 by MSC between WCNA California Express and the West Med to put competitive pressure on Hapag-Lloyd’s MPS service (which was then the only weekly containership service in this trade). • There are 10 ships in this string, with capacities in the 8,800-9,400 TEU range – these ships were introduced by MSC shortly after the new locks of the Panama Canal became operational in July 2016. All three deployments make westbound/northbound and/or southbound/eastbound stops in one or more Central America/Caribbean Basin ports, and all three carriers use those stops to relay PNW traffic to and from Latin America. Moreover, MSC uses its North Europe – West Coast South America service to exchange WCNA – North Europe boxes to and from the California Express at its hub terminals in Panama, thereby enabling it to compete with Hapag-Lloyd/ONE in that market as well.
81 Projections of PNW vessel services for 2020 and 2025 Other trade lanes
European trades – outlook
The trades between Europe and the WCNA have typically grown at lower rates than the Asian trades to/from WCNA. Based on statistics that Mercator has viewed on container volumes of the California Express through the WCNA ports, it is apparent that utilization levels on this deployment are not high enough to warrant an upsizing of this service by 2020, considering the expected head-haul traffic growth on this lane. • Moreover, we would anticipate that MSC will not upsize the deployment by 2025 either, but instead will add a shorter-haul deployment (such as a feeder string between Panama and Southern California) to gain more capacity on this route, if needed. What is more uncertain, though, is what Hapag-Lloyd and Hamburg Sud (Maersk) will want to do strategically regarding the MPS deployment. • At present, the MPS has significantly higher ocean transport costs per TEU, versus the California Express, with 4,600-4,800 TEU ships versus 8,800-9,400 TEU ships. • However, the Med – WCNA market is not large enough to support a second string of comparable scale to the California Express. • At the same time, even though they are the only carriers providing direct service between North Europe and WCNA, it is sub-optimal for ONE and Hapag- Lloyd to be operating “old-Panamax” ships (of less than 5,000 TEU capacity) on a long-distance deployment through the Panama Canal. • Thus, Mercator anticipates that Hapag-Lloyd will re-configure its network by 2025 in a manner that enables North Europe – WCNA and Med – WCNA traffic to be transported on the same vessels between WCNA and Panama (or Cartagena), resulting in an amalgamation of the AL-5 and MPS (with or without Hamburg Sud/Maersk), and operating with a larger scale. • If Maersk/Hamburg Sud is not invited by Hapag-Lloyd/ONE to participate in the amalgamated AL-5/MPS, then it will likely upsize its Med – WCSA and North Europe – WCSA services, and relay Med – WCNA and North Europe – WCNA boxes in Panama to an expanded California – WCSA service (that could be extended to the PNW region). However, we have assumed here that Maersk will have capacity on AL5/MPS.
Projections of Europe/PNW vessel deployments to 2025 Vessel service scale (TEU/week) Vessel service name Lead operating carrier 2018 2020 2025 Mercator anticipates that by 2025 AL5 Hapag Lloyd 4,900 4,900 0 Hapag-Lloyd will consolidate its N. MPS Hapag Lloyd 4,700 4,700 0 Europe – WCNA and Med – WCNA AL5/MP5 HL/ONE/Maersk - 0 8500 traffic resulting in an amalgamation of the AL-5 and MPS. Calif-Express MSC 9,200 9,200 9400 Total group 18,800 18,800 17,900 82 Projections of PNW vessel services for 2020 and 2025 Other trade lanes
ANZ trade – review and forecast Hamburg Sud/ANL/Hapag-Lloyd: WCNA-ANZ 'Oceania' joint service
As noted earlier, there is only one direct vessel deployment linking the PNW region with ANZ, operating jointly by three carrier-groups (Maersk/Hamburg Sud, CMA CGM/ANL, and Hapag-Lloyd).
• This deployment is operated with a bi-weekly sailing frequency, using eight ships of 4,000-5,000 TEU capacity, four of which are provided by Maersk/Hamburg Sud, two from CMA CGM/ANL, and two from Hapag- Lloyd. The service calls in Oakland and Long Beach every week, but only runs to the PNW every other week.
• This service is just being launched, after many years in which CMA CGM, Hapag-Lloyd and Hamburg Sud operated one weekly-frequency deployment between California and ANZ with seven ships of 3,500-5,000 TEU capacity, and a separate bi-weekly deployment between Oakland/PNW and ANZ, with four ships of 2500-2,700 TEU capacity.
• Mercator expects minimal changes to this deployment between now and 2020, other than potentially replacing a few of the smaller ships now being assigned to it.
By 2025, we would project the “Oceania Joint Service” to be operating at the 5,500 TEU scale (as there will be no shortages of that vessel type available then), but with the bi-weekly sailing frequency for the PNW region maintained.
• With no competition from other direct services, the three carrier-groups have no need to increase the PNW frequency to weekly, since doing so would cost them several million dollars per year of additional fuel expense without generating any additional volume/revenue.
83 Projections of VFPA vessel services for 2020 and 2025 Summary of all trade lanes
Projected distribution of VFPA services by ship size for all trades, 2020 Expected size distribution of vessel deployments 7 • Mercator’s projections for all three deployment groups relevant to VFPA (Asia – Salish Sea, Asia – Prince Rupert/California, PNW – Europe, 6 and PNW – ANZ) are summarized in the bar charts to the right, for 2020 and 2025. 5 4 4 • As noted on preceding pages, Mercator projects 12 separate Asia 4 services to the Salish Sea, along with three from Europe and one from 3 3 ANZ, to be operated in 2020. 3
• One of the 16 is projected to use ships of under 4,000 TEU capacity, Numberservices of 2 and another four are likely to be operated with “old-Panamax” ships 1 1 (of 5,000 TEU or less capacity). 1 • Four of the 16 are expected to be using ships of 9,000 TEU capacity 0 or larger. 2000-3999 4000-4999 5000-5999 6000-8999 9000-11999 12000-14999 • By 2025, we project the number of deployments for all three groups, Service scale (TEUs) in aggregate, to diminish by one, as a result of a consolidation – driven by Hapag-Lloyd – of two European services into one. Projected distribution of VFPA services by ship size for all trades, 2025 7 • As the chart to the lower right indicates, Mercator projects that 6 seven of the 15 deployments will be using ships of 9,000 TEU 6 capacity or larger. 5 5
4
3
Note: These charts cover the international liner services that do or would call in the Port of Numberservices of 2 Vancouver, but excludes the three services that run from Asia to California to 1 1 1 1 Seattle/Tacoma (but not Vancouver) and back to Asia. These three services (operated by 1 Evergreen, HMM, and COSCO) provide additional sailings to move reefer loads and empties westbound, but also to generate more volumes for the Puget Sound terminals affiliated with those three carriers – we do not project any of these three strings to add 0 Vancouver calls between now and 2025. 2000-3999 4000-4999 5000-5999 6000-8999 9000-11999 12000-14999 Service scale (TEUs) 84 Projections of PNW vessel services for 2020 Distribution of deployments within Vancouver port complex
Precinct distribution Projected split of vessel services and throughputs by harbour precinct, 2020
• The current distribution of vessel deployments among the three harbour precincts of the Vancouver port complex (Burrard Inlet, Roberts Bank, and River) is projected by Mercator to be largely the same for 2020.
• The one change anticipated is a relocation of the HMM PN-2 service from the Burrard Inlet to Roberts Bank, due to terminal capacity constraints in the former.
• With the HMM PN-2 switch, Mercator projects the Burrard Inlet precinct to handle about 42% of the throughput forecasted by OSC for VFPA, with the Roberts Bank precinct handling 49%, and the River precinct moving the balance.
• These projections are summarized in the table to the right.
85 Projections of PNW vessel services for 2025 Distribution of deployments within Vancouver port complex
Precinct distribution Projected split of vessel services and throughputs by harbour precinct, 2025
• By 2025, the additional capacity in the Burrard Inlet precinct (from the completion in 2021 of the Centerm expansion project) should enable this portion of the port complex to handle the upsized ZMP service (by now assumed to be absorbed into a 2M+Zim alliance), as well as an upsized Oceania service that is now too large for the River precinct.
• Although the Roberts Bank precinct is projected to lose the ZMP service by this time, it would likely gain the THE Alliance-driven, consolidated and upsized AL5/MPS service, which will be too large for the River precinct by 2025.
• With each of the Asia services that call in this precinct expected to upsize, throughput levels here are projected to increase modestly.
• The River precinct’s volumes are projected to drop, with the losses of the SM Lines, Oceania, AL5, and MPS services, partially offset by gaining the Westwood service and a new niche carrier replacing SM Lines in the Asia trade.
• These projections are summarized in the table to the right, which show a projected volume split of 48%/45%/7% among the three precincts.
86 7. Projection of long-term vessel deployments 7.1. Overview and framework 7.2. Projections of vessel deployments for 2030 and 2035 7.3. Projections of distribution of vessel deployments and consignment sizes by VFPA precinct
87 Long-term projections of vessel deployments Overview and framework
2030 and 2035 timeframes
The structure of the liner shipping industry, along with the corollary number of vessel sharing alliances (and the carrier memberships in those alliances) becomes increasingly ambiguous beyond 2025.
Nonetheless, in order to formulate a logical view on the number and average vessel size of separate deployments that could be expected to be operated in 2030 and 2035 – especially for the critical Asia – Salish Sea – Asia segment – Mercator makes the following assumptions on liner structure:
• There will continue to be, through the forecast, one global carrier operating one or more Asia – Salish Sea deployments from each of the following countries – China (COSCO), Japan (ONE), Korea (HMM), Taiwan (Evergreen), Germany (Hapag-Lloyd), and Denmark (Maersk) – considering the direct and/or indirect support that those carriers will likely continue to receive from their host governments and major exporting/industrial companies.
• Because MSC and CMA CGM are family-controlled businesses, there is perhaps some possibility that one or both companies are acquired by a member of the first group, or potentially merge with each other to obtain scale advantages. However, between these two carriers (regardless of whether or not they remain independent, or remain in their current alliances, or merge), they will operate at least one Asia – Salish Sea deployment with their own ships through the forecast period.
• With support from forest/paper products exporters in the PNW and importers in Japan/Korea/Northeast China, and with the continued use of multi- purpose ships designed for those commodities, Westwood should be able to sustain its niche operation through the forecast period.
• There is likely to be one non-major ocean carrier operating an independent Asia – Salish Sea deployment at least intermittently through the forecast period, given patterns of the past thirty years, during which new entrants have periodically launched such operations.
Based on these structural assumptions, we further assume that the six to eight global carriers (plus Zim and Yang Ming, if still independent, which is unlikely) will be configured in three to four alliances of unequal scale by 2030.
88 Projections of PNW vessel services for 2030 and 2035 Asia eastbound trade lane (assuming RBT2 is built)
Assumptions and forecast for Asia – Salish Sea – Asia services Projections of Asia -Salish Sea – Asia vessel deployments with RBT2 Vessel service scale Mercator assumes that for the 2030 and 2035 timeframes, there will be Vessel service Alliance or (TEU/week) three separate vessel sharing agreements in place within the Asia – PNW number Carrier (and Asia – California) lanes. 2030 2035 These alliances will be of differing scales, with the largest carrier-group providing four services to the market, and with the other two operating 1 Alliance A 15000 17000 three and two separate deployments, respectively – depending on their 2 Alliance A 10000 12000 respective sailing frequency requirements for different origin regions of 3 Alliance A 9000 10000 Asia. 4 Alliance A 8000 9000 We also assume that there will be one global carrier that chooses to (or is forced to) operate independently, outside of the other three alliances. 5 Alliance B 13000 15000 Two niche carriers – one of which would be Westwood (or a successor 6 Alliance B 10000 13000 specialist ship line) – will also be each running their own independent 7 Alliance B 10500 12000 strings. These projections are displayed in the table to the right, and are 8 Alliance C 9500 11000 consistent with forecasted trade growth rates. 9 Alliance C 8500 8500
Forecast for Asia – Prince Rupert/California services 10 Global Carrier 11500 13000 Mercator projects three services in this category for 2030/2035 as shown below. 11 Westwood 2500 2500
Projections of Asia –Rupert/California vessel deployments with RBT2 12 New niche line 4500 5000 Vessel service scale Vessel service Alliance or Total Group 112,000 128,000 (TEU/week) number Carrier 2030 2035 1 Alliance A 13000 13000 2 Alliance B 13000 13000 3 Alliance C 10000 13000 Total Group 36,000 39,000
89 Projections of PNW vessel services for 2030 and 2035 West Coast port rotation sequences for Asian services
Considering the vessel service projections from the preceding page, Mercator forecasts the corollary port call sequences for these deployments as shown below, with the following notes:
• All three of the alliances would be expected to have at least one service with first-inbound calls at Prince Rupert, but the largest alliance would likely have two of its four Asia – Salish Sea deployments calling Prince Rupert first. • All three of the alliances would be expected to have one of their services make first-inbound calls in the Puget Sound to maintain a competitive position in the latter’s local market. • With three or more Asia – Salish Sea deployments, Alliance A and Alliance B would each likely configure a first-inbound call in Vancouver on one of their respective services. • The independent global carrier and niche carrier will each call Vancouver first-inbound to exploit the favorable rail economics/service levels via that gateway, versus via the Puget Sound gateway. • There should be sufficient terminal capacity in the Vancouver port complex to avoid carriers needing to change Vancouver port calls to be after Puget Sound calls in order to route more intermodal volumes through the latter gateway.
Expected port rotation sequences of vessel services calling at Canadian ports: Asian trades, 2030 and 2035
Alliance Alliance A Alliance B Alliance C Independent Alliance
Carrier Global niche Westwood Carrier Carrier
Prince Rupert 1 1 1 1 1 1 1 Prince Rupert
Vancouver 3 2 2 1 2 1 2 2 2 1 1 3 Vancouver
2a Seattle
NWSA 2 3 1 2 1 2 3 3 1 2 2
1 Tacoma
California 2 2 2 California
Service SAL-1 SAL-2 SAL-3 SAL-4 CAL-1 SAL-5 SAL-6 SAL-7 CAL-2 SAL-8 SAL-9 CAL-3 SAL-10 SAL-12 SAL-11 Service
90 Projections of PNW vessel services for 2030 and 2035 Asia eastbound trade lane with RBT2 not built
Assumptions and forecast for Asia – Salish Sea – Asia services Projections of Asia -Salish Sea – Asia vessel deployments without RBT2 Vessel service scale If RBT2 is not built, the diversions of import volumes forecasted by OSC to be Vessel service Alliance or diverted through primarily Prince Rupert and SPB ports is projected to cause (TEU/week) number Carrier no Asia – Salish Sea deployments to be eliminated (versus the projections 2030 2035 for the Build RBT2 scenario) – because carriers will still need and want to maintain sailing frequencies and Asia-origin direct connections into the local Vancouver market. 1 Alliance A 15000 15000 However, the upsizing projected for selected vessel deployments in the Build 2 Alliance A 10000 10000 RBT2 Scenario (as presented on the prior page) will likely be reduced, and the 3 Alliance A 9000 10000 amount of aggregate weekly capacity for this deployment group will likely be 4 Alliance A 8000 9000 reduced. These impacts can be observed in the table to the right (vessel services using smaller ships in this scenario, versus the build scenario, are indicated with a red font). 5 Alliance B 13000 13000 6 Alliance B 10000 12000 Forecast for Asia – Prince Rupert/California services 7 Alliance B 10500 10500 Mercator projects no increase in the number of separate services in this category for 2030/2035, as a result of RBT2 not being built. 8 Alliance C 9500 11000 However, we would expect at least one of the alliances to upsize its string to 9 Alliance C 8500 8500 the 15,000 TEU scale, in response to the OSC-forecasted diversion of volumes from Vancouver to Prince Rupert, as shown in the table below. 10 Global Carrier 11500 11500
11 Westwood 2500 2500 Projections of Asia –Rupert/California vessel deployments without RBT2 12 New niche line 4500 4500 Vessel service scale Vessel service Alliance or (TEU/week) number Carrier Total Group 112,000 117,500 2030 2035 1 Alliance A 13000 15000 2 Alliance B 13000 13000 3 Alliance C 10000 13000 Total Group 36,000 43,000
91 Projections of PNW vessel services for 2030 and 2035 Other trade lanes – with and without RBT2
Assumptions and forecast for European services Projections of Europe – PNW services Vessel service scale Mercator projects that this lane will continue to be covered by just two Vessel service Alliance or vessel services after 2025. (TEU/week) number Carrier 2030 2035 • The risks of mounting a new, third service will be too great for another carrier or alliance to incur, given the number of ships required for the deployment, the size of the trade, and sizes of ships required to be cost 1 Alliance A 11000 13000 competitive. 2 Alliance B 10000 13000 Whether or not RBT2 is built will have no impact on the number and size of these Europe – PNW strings. Total Group 21,000 26,000
Assumption and forecast for ANZ service
Mercator projects that this lane will continue to be covered by just one vessel service after 2025.
However, at some point during the forecast period, we would expect the sailing frequency to increase from bi-weekly to weekly.
The scale of the service will likely increase from the 5,500 TEU level in 2025 to 7,500 TEU by 2035.
92 Projections of PNW vessel services for 2030 and 2035 Distribution of deployments within Vancouver port complex (with RBT2)
Precinct distribution - 2030 Projected split of vessel services and throughputs by harbour precinct, 2030
• As vessel strings upsize in the Asia – Salish Sea trade segment, with corollary increases in the average weekly consignments (TEUs exchanged between the vessel and the terminal), and as the first phase of RBT2 becomes operational, the smaller capacity terminals of the Burrard Inlet precinct are expected to lose services and volumes to the Roberts Bank precinct.
• Moreover, the Asia services calling at Burrard Inlet terminals are expected to be second- inbound calls, given the relatively lower levels of intermodal transfer capacity at those facilities relative to the Roberts Bank terminals.
• Thus, Mercator projects that the Roberts Bank precinct would likely handle about 61% of the port’s throughput in 2030, while the Burrard Inlet precinct stevedores about 33% of Vancouver’s volume, with the River precinct handling the balance .
• These projections are summarized in the table to the right.
93 Projections of PNW vessel services for 2030 and 2035 Distribution of deployments within Vancouver port complex (with RBT2)
Precinct distribution - 2035 Projected split of vessel services and throughputs by harbor precinct, 2035
• Once RBT2 is fully built out by or before 2035, and as vessel strings upsize further, almost all of the strings using ships of 10,000 TEUs or more will likely be assigned to the Roberts Bank precinct.
• Concurrently, as average consignment sizes increase on the Asian strings, it will be more difficult for at least one of the Burrard Inlet terminals to handle more than one such deployment.
• Hence, Mercator projects the distribution of expected vessel deployments among the port’s precincts in 2035 as indicated in the table to the right.
• The Roberts Bank precinct’s share of the port’s total throughput is projected to climb to 70% by 2035, with only 28% processed in the Burrard Inlet precinct, and only 2% handled in the River precinct.
• Capacity utilization within the Roberts Bank precinct would be in the 90% range, and nearly 75% in the Burrard Inlet precinct.
94 Projections of PNW vessel services for 2030 and 2035 Distribution of deployments within Vancouver port complex (without RBT2)
Precinct distribution - 2030 Projected split of vessel services and throughputs by harbor precinct, 2030
• Without the development of RBT2, Mercator projects that the Roberts Bank precinct will still handle the majority of vessel deployments that call Vancouver and use ships of 10,000 TEU capacity or greater.
• However, greater use will be required of the capacity in the Burrard Inlet precinct.
• Mercator’s projections of the distribution of vessel strings by precinct for this scenario are displayed in the table to the right, with a volume split of 45%/48%/6% among the three precincts.
• In this scenario, we expect the Roberts Bank precinct to be essentially at capacity (98% utilization) by 2030, while the Burrard Inlet precinct would also be operating at a very high utilization level (of 91%).
• Although the River precinct would have some nominal capacity available, beyond the volumes projected for its two services, there would likely be no other deployments calling the port complex by that time that use ships of a size which could feasibly access this precinct.
95 Projections of PNW vessel services for 2030 and 2035 Distribution of deployments within Vancouver port complex (without RBT2)
Precinct distribution - 2035 Projected split of vessel services and throughputs by harbor precinct, 2035
• Without the development of RBT2, Mercator projects that the Roberts Bank and Burrard Inlet precincts will have to split the 10 forecasted Asia – Salish Sea deployments of the major carriers by 2035.
• In this scenario, the River precinct will still be needed to handle the two niche carrier Asia services.
• The upsized European services will likely call in the Roberts Bank precinct, while the upsized ANZ service calls in the Burrard Inlet precinct – should that prove to be unworkable, due to berth conflicts, this deployment could potentially be switched to the Roberts Bank precinct or otherwise the call could be dropped (with containers trucked to and from Seattle).
• Mercator’s projections of the distribution of vessel strings by precinct for this scenario are displayed in the table to the right, with a volume split of 47%/47%/6% among the three precincts.
• In this scenario, we expect both of the main precincts to be close to capacity, at 93% utilization, handling slightly less volume than in 2030, due to diversions of intermodal traffic through other gateway ports.
96 Projections of VFPA vessel services for 2035 with and without RBT2 Summary of all trade lanes
Expected size distribution of vessel deployments in 2035 Projected distribution of VFPA services by ship size for all trades, 2035 (w/ RBT2) 7 • If RBT2 is built, Mercator projects that six of the fifteen vessel services expected to call in the Port of Vancouver in 2035 will be 6 using ships of 12,000 TEUs of capacity or larger, and two of those six (both being Asian services) will employ vessels of 15,000 TEUs 5 or larger. 4 4 4 • There would be only one service expected to use ships of less 3 than Panamax scale (under 5,000 TEU of capacity), which 3 would be the niche deployment of Westwood Line (or its 2 successor).
Numberservices of 2 1 1 • The projected size distribution of the fifteen services under this 1 scenario is presented in the bar chart to the upper right. 0 0 • Conversely, without the development of RBT2, Mercator projects 2000-3999 4000-4999 5000-5999 6000-8999 9000-11999 12000-14999 ≥ 15000 that there will be only four services operated with ships of Service scale (TEUs) 12,000 TEUs size or larger, with a higher number of deployments using ships in the 9,000-11,999 TEU size range. Projected distribution of VFPA services by size for all trades, 2035 (w/o RBT2)
• The projected size distribution for this scenario is shown in the 7 bar chart to the lower right, which also indicates a second service 6 likely to be operated with ships of less than Panamax scale (this 6 would likely be the Asia service of a niche carrier other than Westwood). 5
• The total number of services is expected to remain the same 4 under either RBT2 scenario, because the assumed ocean carrier 3 3 structure for the Asia trade (comprising three alliances of global 3 carriers, one independent global carrier, and two niche carriers)
is a key driver in the number of Asia services operated, together Numberservices of 2 with the size of the PNW market and carrier fleet considerations. 1 1 1 1 0 0 2000-3999 4000-4999 5000-5999 6000-8999 9000-11999 12000-14999 ≥ 15000 Service scale (TEUs) 97 Appendix A: Maximum ship size capabilities of container terminals in the NWSA ▪ Port of Seattle ▪ Port of Tacoma
98 Maximum ship size capabilities of container terminals in the PNW Port of Seattle (NWSA) – T18 and T5
T18: terminal characteristics and ship-call service menu Berth Berth # Cranes # Cranes # Cranes Total TEUs p.a. Crane T18 Seattle length depth 24Wide 23Wide 19Wide Cranes Capacity GMPH Current 1359 m 15.2 m 6 1 3 10 1,700,000 25
Ship Classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load) Terminal Min MMX ULCS NPX Large PPX PPX Small PPX Service Combinations Svc Count TEUs p.a. Cranes Scenario 1 (sim '19) 3 1 1 1 1,693,120 9.1 Scenario 2 3 1 1 1 1,667,380 9.0 Scenario 3 3 2 1 1,673,100 9.0 Scenario 4 3 3 1,544,400 8.3
T5: terminal characteristics and ship-call service menu Berth # Cranes # Cranes # Cranes Total TEUs p.a. Crane T5 Seattle Length Berth depth 24Wide 22Wide 16Wide Cranes Capacity GMPH Current 880 6 6 650,000 25 Future Plan 8 8 1,300,000 Ship Classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load) Terminal Min MMX ULCS NPX Large PPX PPX Small PPX Service Combinations Svc Count TEUs p.a. Cranes Scenario 1 (sim '19) 2 1 1 1,312,740 7.1 Scenario 2 2 1 1 1,287,000 7.0 Scenario 3 3 1 1 1 1,281,280 6.9 Scenario 4 3 1 2 1,287,000 7.0 99 Maximum ship size capabilities of container terminals in the PNW Port of Seattle (NWSA) – T46 and T25/30 T46: terminal characteristics and ship-call service menu Berth Berth # Cranes # Cranes Total TEUs p.a. Crane T-46 Seattle length depth 22Wide 16Wide Cranes Capacity GMPH Current 700 m 15.2 m 3 2 5 700,000 25
Ship classes MMX ULCS NPX Lg. PPX PPX Sm. PPX TEU Range 18-23,000 15-18,000 13-14,000 9-12,000 <9,000 6000 Typ. Cont Wide 23-24 21-22 19-20 18 17-18 16 Wkly TEUs 17,820 14,850 12,375 9,900 7,425 4,840 TEUs p.a. per weekly call 926,640 772,200 643,500 514,800 386,100 251,680 (55% disch/load) Terminal Min MMX ULCS NPX Large PPX PPX Small PPX Service combinations Svc Count TEUs p.a. Cranes Scenario 1 (sim '19) 1 1 643,500 3.5 Scenario 2 1 1 514,800 2.8 Scenario 3 2 2 772,200 4.2 Scenario 4 3 3 755,040 4.1
T25/30: terminal characteristics and ship-call service menu Berth Berth # Cranes # Cranes Total TEUs p.a. Crane T25/30 Seattle length depth 23Wide 13Wide Cranes Capacity GMPH 3 3 6 250,000 25
Ship classes ULCS NPX Lg. PPX PPX Sm. PPX <=P'Max TEU Range 15-18,000 13-14,000 9-12,000 <9,000 6000 3500 Cont Wide 21-22 19-20 18 <18 16 13W Wkly TEUs 14,850 12,375 9,900 7,425 4,840 3,960 TEUs p.a. per weekly call 772,200 643,500 514,800 386,100 251,680 205,920 (55% disch/load) Terminal Min ULCS NPX Large PPX PPX Small PPX <=P'Max Service combinations Svc Count TEUs p.a. Cranes Scenario 1 (sim '19) 2 1 1 592,020 3.2 Scenario 2 1 1 251,680 1.4 Scenario 3 1 1 205,920 1.1 Scenario 4 2 2 411,840 2.2 100 Roberts Bank Terminal 2 Project Ship traffic information sheet
The Vancouver Fraser Port Authority is responsible for ensuring that Canada’s largest port is ready for growing trade and the ships that trade will bring. The Roberts Bank Terminal 2 Project is a proposed container terminal in Delta, B.C. that is needed to ensure Canada is able to meet its trade objectives through the mid- to late-2030s. The project is currently undergoing a federal environmental assessment by an independent review panel.
Ship traffic and the Roberts Bank Terminal 2 Project
In 2015, the Vancouver Fraser Port Authority Rupert. The number of regular services to Pacific submitted to the Canadian Environmental Assessment Northwest ports will not change if Roberts Bank Agency the Roberts Bank Terminal 2 Project Terminal 2 is built. Environmental Impact Statement, which considered • The total number of container ships that serve the impact of the project within a defined scope set Port of Vancouver container terminals will be the out by the agency. At the request of the agency, the same, whether or not Roberts Bank Terminal 2 port authority also submitted the Marine Shipping is built. What will change is the size of the ships, Addendum in 2015, which assessed project-related which will be slightly larger on average if the shipping outside of the port authority’s jurisdiction in project proceeds, and the amount of cargo loaded the Salish Sea. and unloaded in Vancouver, which will increase by In developing those documents, we estimated the approximately 33 per cent. number of ships expected as a result of the Roberts • As a result of industry shipping trends, the 2018 Bank Terminal 2 Project. Since then, there have been study forecasts fewer overall ship calls to the developments in the container shipping industry, such Port of Vancouver in 2035 than there were in as an accelerated trend toward larger ship sizes and 2017, with or without Roberts Bank Terminal 2, the overbuilding of shipping capacity, which led to the despite an increase in container volumes. This is demise of some shipping companies and the formation a continuation of the trend of declining container of new service alliances among others, all of which ship calls and larger ships at the Port of Vancouver motivated us to seek validation of our earlier estimates. since around 2005. • Though the total number of ships calling on the Results of 2018 container ship call study Port of Vancouver will not be affected by Roberts The Vancouver Fraser Port Authority commissioned Bank Terminal 2, its construction will result in Mercator International1 to provide a forecast of a higher number of container ships calling on container ship traffic travelling through the Salish Sea Roberts Bank terminals and fewer calling on and serving Pacific Northwest ports, with or without Vancouver’s inner harbour and Fraser River the Roberts Bank Terminal 2 Project. terminals. Using forecasts for overall container volumes provided • If Roberts Bank Terminal 2 is not built, increasing by Ocean Shipping Consultants, Mercator provided import demand for container cargo by Canadians the following key findings and conclusions about ship will go through U.S. ports. This would result in numbers: higher costs, higher transportation emissions and unrealized economic opportunity, including jobs, • Alliances, or groups of shipping lines, work for Canadians. together to each offer regular, generally weekly, service to Pacific Northwest ports, including the ports of Vancouver, Seattle/Tacoma and Prince 1Mercator International is a consulting agency with experts in the global transportation sector. They have extensive experience working with stakeholders from port authorities, ocean carriers, terminal operators and cargo owners around the world.
1 Vancouver Fraser Port Authority | RBT2 | Ship traffic | November 2018 Container shipping alliances How container ship services operate Three international shipping alliances, made up of Ship services are routes developed by shipping line individual shipping companies, have formed in recent alliances that allow the alliance to call ports on regular, years to more efficiently use their ships by operating usually weekly, schedules. The alliances structure regular-scheduled services around the world. This is routes and schedules in ways that make the most not unlike airline company alliances, which have been sense to them and their customers, based on strategic, common for years. These alliances deploy a number of commercial and volume drivers. Ultimately, their goal is regular services to Pacific Northwest ports from Asia, to maximize the efficient use of their ship assets. Europe and Australia.
International ocean carrier alliances
The Alliance Ocean Alliance 2M + H
Example of a single container shipping alliance service route
Port o anco er Port o Tacoma ajor sian orts
CONTAINER SHIP SERVICE ROUTE R R RT sia to ort merica
ort merica to sia R S TT T
ASIA NORTH AMERICA B T R T S S S S
S TT
T
Alliance continuously operates 1 SHIP CALL PER WEEK at the Port of Vancouver, 6–8 SHIPS on average
2 Vancouver Fraser Port Authority | RBT2 | Ship traffic | November 2018 Implications of the 2018 study on the 2015 documents For the purposes of the environmental assessment of The 2015 documents did consider the changes from the Roberts Bank Terminal 2 Project, we submitted the project on overall container ship traffic to the Port the Environmental Impact Statement and the Marine of Vancouver and Pacific Northwest ports, but did Shipping Addendum in 2015, and assumed that the not consider the effects of various shipping alliances terminal would be operating at 100 per cent capacity that had yet to take shape, nor the changes in traffic in 2030. This allowed us to take a conservative resulting from ship size increases. approach to the assessment of the potential environmental effects of the project on the marine The 2018 container ship call study assumes the shipping and project areas. Roberts Bank Terminal 2 Project is fully operational in 2035, in line with current construction timelines, and considers how ship services to Pacific Northwest ports will be affected by a new terminal at Roberts Bank.
Marine shipping and project areas
B RR R
Pro ose Roberts Bank T 2 Terminal 2 Project
Port o anco er container terminals R S R R R enterm
2 anterm
raser rre ocks R B RTS B elta ort ANA A arine s i in area N A anco er raser Port t orit S T S T na i ational j ris iction
VAN V AN S T B S T
S T S T S T
3 Vancouver Fraser Port Authority | RBT2 | Ship traffic | November 2018 Implications for the 2015 environmental impact statement
The 2018 study concludes that ship calls to Port of Vancouver container terminals at Roberts Bank will increase with the project but by a smaller amount than was assessed in the 2015 Roberts Bank Terminal 2 Environmental Impact Statement, due to the increased use of larger ships.
Annual ship calls at Roberts Bank container terminals
2015 EIS* 2018 Study 2018 Study 2030 2035 without 2035 with RBT2 RBT2
Deltaport 260 364 234
Roberts Bank Terminal 2 260 0 234
Total annual container ship calls 520 364 4682 at Roberts Bank terminals
Roberts Bank annual container 4.80 2.19 4.33 throughput (millions of TEUs)
*EIS stands for Roberts Bank Terminal 2 Environmental Impact Statement.
Implications for the marine shipping addendum
The 2018 study concludes that there will be no larger ships were made in 2017 for Asian, European increase in the number of container ship transits in and Australian shipping services to North America, the marine shipping area (Salish Sea), with or without including the Pacific Northwest. the project, and the same number of container ship services, using slightly larger ships, will visit the Port of The increase in ship size is not expected to alter the Vancouver. conclusions of the effects assessment presented in the marine shipping addendum because ships in the Further, the 2018 study predicts that larger ships will range of 9,000 to 13,000 TEUs are predominantly be arriving sooner than originally predicted in the 2015 represented by the same ship class (Large Post- marine shipping addendum, stating that orders for Panamax) that was assessed in the 2015 documents.
2 Vancouver Fraser Port Authority assumes that ship calls are evenly distributed between Deltaport and Roberts Bank Terminal 2 due to equal terminal capacity.
4 Vancouver Fraser Port Authority | RBT2 | Ship traffic | November 2018 Total weekly container ship services to Port of Vancouver (2035) WITHOUT RBT2 WITH RBT2
7 Roberts Bank 6 Burrard Inlet 2 Fraser River 9 Roberts Bank 5 Burrard Inlet 1 Fraser River
Source: Mercator International
Types of container ships calling weekly at Roberts Bank container terminals (2035) WITHOUT RBT2 WITH RBT2
Post-Panamax PPX 1 0 <9,000 TEUs
Large PPX 4 3 9,000 – <13,000 TEUs
Neo-Panamax NPX 1 4 13,000 – <15,000 TEUs
Ultra-Large ULCS 1 2 15,000 – 18,000 TEUs
Weekly total 7 9
Average ship size 12,143 TEUs 12,944 TEUs
Source: Mercator International
For more information Please visit portvancouver.com/RBT2 or call 604.655.9337