The Port of Halifax found itself in murky waters four years ago. One of the largest employers in Nova Scotia, the port needed to update its antiquated infrastructure. But the funds to do it were hard to come by because the port's bread and butter for centuries, shipping routes between Europe and North America, were stagnant. At the same time, trade between the Far East and North America was exploding. Every day, shipments of textiles and electronics were being boxed up at one of the countless ports that dot the Chinese coastline, before sailing off to ports of call in Canada, the United States and elsewhere. China was rising, and feeding North America's insatiable appetite for consumer goods.
But Haligonians weren't getting in on the action. By virtue of being stuck on the wrong side of the continent, the Port of Halifax seemed destined to be shut out of the booming Asian trade.
At least, that was the theory. But it wasn't something Karen Oldfield ever put much stock in. As president and CEO of the Halifax Port Authority, it was Oldfield's job to turn the port's sagging fortunes around. “I knew we had to think outside the box,” she says, “because in this industry, people who can't adapt to the times get left behind.” Oldfield heads Canada's third-largest port after Vancouver and Montreal. Handling more than 2,000 vessels per year, the port has more than 9,000 jobs riding on it, worth $670 million in 2005. With a reach like that, it's safe to say it is vitally important to Nova Scotia's long-term prosperity. But at the same time, some suggested that the port's location in the heart of the province was the root cause of its problems.
It's a well-documented fact that Chinese manufacturers have been increasing productivity and churning out consumer goods at an astonishing rate. And North America is the primary consumer of all those cheaply produced goods. Conventional wisdom dictated that the fastest, easiest supply route was to take any given Chinese port and draw a straight line across the Pacific Ocean to any one of the eager ports along the western coast of North America. The shipping containers–known in the industry as TEUs, or 20-foot equivalent units–could then be offloaded and sent by rail to destinations across the continent.
For years, that's how it worked. But as Asia's output grew, North American ports started to get choked with overcapacity. To their credit, they all launched ambitious expansion plans to cope with the deluge, but those take time to implement; many projects are still years away from completion. About 2002, amid the taxed cranes, ships waiting for berths and intermittent labour disruptions at other ports, Oldfield saw an opportunity: instead of trying to boost volumes in stagnant transatlantic shipping, the Port of Halifax would piggyback on the world's fastest-growing market, China. “For us, it was simple,” she says. “It was about going where the growth is.”
Problem was, the explosive growth coming out of Asia–from Chinese ports like Hong Kong, Shenzhen and Shanghai, and the Thai port of Laem Chabang–was still some 11,000 nautical miles away. A vessel leaving Hong Kong bound for the west coast of North America could take anywhere from 15 to 24 days to reach its destination. It may well sit idle in the clogged port for days, waiting for a berth. “It just ends up wasting valuable time and money,” Oldfield says. So she offered shippers an alternative: send goods to North America by coming around the other side of the world and docking at Halifax.
To be sure, the ambitious plan had its doubters. But Oldfield insists that Halifax's advantages are numerous. After a $6.5-million dredging project, Halifax has the deepest port (at 55 feet) on the eastern seaboard, which means it can easily accommodate some of the largest ships in the world. In addition, the city itself is much closer to the high-density northeastern region of the continent that manufacturers covet. So the added time at sea–a trip from Hong Kong to Halifax via the Suez Canal takes at least 24 days–can often be somewhat offset by shorter travel times for goods once ships have been offloaded. And the port is nowhere near capacity, which means berths are readily available and vessels are unloaded much more quickly. It all adds up, Oldfield says, to a viable option she hopes more shippers will take advantage of.
It seems her sales pitch is starting to pay off. In August, the port announced a breakthrough three-year deal with China Shipping Container Lines. Every week, one of its 4,200-TEU vessels, on a round-the-world trip via the Suez Canal, will call on Halifax, boosting volumes at one of the port's two container terminals by as much as 30% per year. Bernie Dumas, China Shipping's general manager of sales and marketing in Canada, says the firm didn't need much convincing. “We were looking at the opportunity to put another service into Vancouver, but there's no berth windows,” he says. “And even if you get a window, which is tough, the railways are pretty well maxed out. There just wasn't any opportunity.”
Eager to ship more goods to the lucrative northeastern U.S. marketplace, Dumas says the Halifax option just made sense. And capacity problems aren't only an issue on the west coast. “Berths on the east coast–Norfolk, New York, Savannah–they're pretty tight, too,” he explains. “But Halifax is a deepwater port and has no size restrictions, so that's what made it attractive.”
Saturday, Jan. 21, 2006, was a watershed day for the Port of Halifax. A little after noon, a massive, 5,714-TEU vessel called the OOCL Chicago sailed up to the entrance. Pilots guided her in the rest of the way, moving the Hong Kong-based ship to a prime berth. Heavily weighed down with a full cargo of containers, she used all but six feet of the port's depth. “From the minute she came alongside, we were timing it,” Oldfield says. “The cranes were working that vessel in less than three minutes. I had a nice long chat with the captain…and he was pretty happy [with] how we were ready to rock 'n' roll. We weren't going to throw that vessel off schedule.”
In shipping, the term “post-Panamax” refers to any vessel whose dimensions make her too large to navigate through the Panama Canal, which links the Atlantic and Pacific oceans. Because it was built over a small mountain range, it is a shallow canal and cannot accommodate some of today's huge ships. In contrast to Panama, the Sinai region of Egypt has much more favourable terrain. So the Suez Canal, which links the Mediterranean and Red seas in the area, can accommodate much larger and deeper vessels. The Chicago's arrival was a momentous event for Halifax because it was the first regularly scheduled post-Panamax vessel to come into the port. Over the next few weeks, the OOCL Hong Kong, the OOCL Korea and the OOCL New York all visited Halifax. It's exciting to shippers because people in the industry have been discussing the impact of post-Panamax vessels on the eastern seaboard for 15 years now. “Everything we've been talking about is coming to fruition,” Oldfield says.
China Shipping was the first line with a regular Suez service to Halifax. But if the early reviews from retailers are any indication, more will be on the way. China Shipping's Dumas says customers such as Hudson's Bay Co., Wal-Mart and Target are asking for the service not only to avoid west coast bottlenecks, but also because the majority of their sales come from the highly populated eastern portion of the continent, where Halifax has the geographical advantage.
Scott Bonikowsky, a spokesman for Canadian Tire Corp., says that over the next few years the retailer will move several million square feet of merchandise from Pacific Rim countries to the Port of Halifax. “We have about 125 stores in the Atlantic provinces,” he explains. “We're trying to [use Halifax to] feed those stores because it's more economical.”
Brian Gerrior, national manager of import logistics services for Sears Canada, also sees untapped potential in Halifax. Says Gerrior, who is also chairman of the Canadian Retail Shippers' Association: “The transit time into Halifax via the Suez is much shorter than moving [cargo] from India to Singapore into Vancouver and then by rail to Toronto or Montreal. The huge time savings…was the no-brainer that started the whole initiative.”
Retailers are increasingly looking into the Halifax option as a way to hedge their bets in their supply chains, says Michael Cormier, the Port of Halifax's new vice-president of marketing. Until January, he was CEO of the Greater Victoria Harbour Authority, and prior to that he held numerous positions with the Port of Vancouver. His professional experience gives him a unique perspective on how the sea change happening in international shipping is affecting business on both sides of the country. Cormier acknowledges the capacity expansion already underway in western ports, but says it won't go far enough to accommodate the increases in volume that some have predicted. “Demand for infrastructure in North America is going to come faster than it can be delivered,” he says, adding that Halifax can fill the void. “Ships built and envisaged only for trans-Pacific use are now finding themselves bound and destined for the east coast of North America.”
Cormier also notes that the Port of Halifax doesn't have any labour problems on the horizon. Of the three different International Longshoremen's Association locals that work in and around the port, two are signed up to multi-year contracts, and the third is in negotiations. “We don't have the same monumental [labour] issues to deal with [that other ports have had],” he says. “My sense is that with our business growing the way it is, labour recognizes the huge opportunity, and they have a shared incentive with us to work together.”
It's factors like that that explain why shippers are starting to see Halifax's advantages. But it wasn't all that long ago that things looked quite different. At the start of 2005 Danish shipper Maersk Line told the port that it would be cancelling its transatlantic service. “We started 2005 with grim news from Maersk, but we ended the year with the good news that they'll be coming back,” Oldfield says. “The service that stopped is a different one than the one they're reinstating, and the new one is also a Suez routing.”
Indeed, 2005 ended up being a banner year for the Port of Halifax, which handled a record 550,462 TEUs. That's still a long way off from the 1.76-million TEUs that the much busier Port of Vancouver processed. But after a strong 2000 followed by four lesser years, Halifax is now thinking big: the port expects to be processing one million TEUs by 2012. And unlike its competitors who are spending billions to deal with the increase in ship traffic, Halifax is comparatively underutilized right now. As Oldfield puts it: “We have the capacity today without spending a cent.”
Oldfield credits finding a way to participate in the Chinese market for a significant portion of the port's year-over-year growth, but she's not willing to place Halifax's destiny totally in the hands of Asia. “A good part of our cargo will be based on the European market, so it's still our bread and butter,” she says. “But if we want to grow in leaps and bounds, we've just got to be a player in Asia.”
With lumbering vessels, centuries-old shipping lanes and exorbitant infrastructure costs, the international shipping industry is not one that makes sea changes between one quarter and the next. But if the events of the past year are any indication, the trade winds might just be starting to blow in a different direction.