Gateway 2020

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GATEWAY THE

ISSUE

APRIL 2020

PORT AUTOMATION ASSESSING MACHINE, HUMAN POTENTIAL

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TRADE TROUBLES COVID-19 DISRUPTS SUPPLY CHAINS

ELECTRIC PLANES NEW SKY-HIGH OPPORTUNITIES

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BIV MAGAZINE: THE GATEWAY ISSUE 2020 PUBLISHED BY BUSINESS IN VANCOUVER

CONTENTS

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BIV MAGAZINE

GATEWAY THE

ISSUE

APRIL 2020

PORT AUTOMATION ASSESSING MACHINE, HUMAN POTENTIAL

TRADE TROUBLES COVID-19 DISRUPTS SUPPLY CHAINS

ELECTRIC PLANES NEW SKY-HIGH OPPORTUNITIES

PRESIDENT: Alvin Brouwer PUBLISHER AND EDITOR-IN-CHIEF, BUSINESS IN VANCOUVER; VICE-PRESIDENT, GLACIER MEDIA: Kirk LaPointe EDITORS: Timothy Renshaw, Hayley Woodin DESIGN: Petra Kaksonen PRODUCTION: Rob Benac CONTRIBUTORS: Chuck Chiang, Jeremy Hainsworth, Glen Korstrom, Tyler Orton, Timothy Renshaw, Albert Van Santvoort, Hayley Woodin RESEARCHERS: Anna Liczmanska, Arthur Xie DIRECTOR, SALES AND MARKETING: Pia Huynh SALES MANAGER: Laura Torrance ADVERTISING SALES: Margaret Garrison, Betty Jin, Blair Johnston, Steve Micolino, Corinne Tkachuk, Chris Wilson ADMINISTRATOR: Katherine Butler

FEATURES 6 B.C. TECH POWERS SHIPPING Firms seizing sector-wide opportunities 9 ELECTRIC FLIGHT PLANS Local innovation and sky-high possibilities 12 SOLVING PORT AUTOMATION Accounting for risks will be crucial 18 ELECTRIFYING FUEL OPTIONS Battery energy is going global 21 TRACKING RAIL GROWTH Billions will support West Coast trade 25 MID-SIZE POWER PLAYS Canada, Taiwan eager to grow trade

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26 TROUBLING TRADE WINDS COVID-19 may realign supply chains 28 B.C. REBUILDS SHIPBUILDING Federal strategy to revitalize industry

BIV Magazine: The Gateway Issue is published by BIV Magazines, a division of BIV Media Group, 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6, 604-688-2398, fax 604-688-1963, biv.com.

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BIV MAGAZINE 16 INFOGRAPHIC: Trade by the TEU 30 5 QUESTIONS: Jill Earthy 31 ASK THE 40

PRODUCED BY

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BIV MAGAZINE Message from the editor

Unsettling weather forecast on gateway horizons Dark storm clouds were already gathering on the shipping industry horizon when 2019 gave way to 2020, but the weather forecast really began to unravel in the new year.

Whether the business and economic disturbances of early 2020 combine to embroil global economies and the goods-movement sector in a destructive perfect storm was still up in the air at this writing.

But one thing is certain for both in 2020: it will be a year of living precariously in interesting times.

Because, for the shipping industry and the global economy, dark clouds and choppy waters have arrived.

Costs and complications kicked off in 2020 with the implementation of the International Maritime Organization’s low-sulphur fuel initiative, which promises to add multibillions of dollars to cargo carrier operating costs. It is also

one of several expensive initiatives aimed at cleaning up the global ocean cargo-carrying fleet that will further erode bottom lines in a sector already struggling with overcapacity and a slowing global economy.

As with any other major industry, traders, shippers, freight forwarders, airlines, ocean carriers, ports and terminals face digital disruption. For container and other port terminals, that disruption runs headlong into human resource complications that pit powerful longshore unions against the managers and operators of major trade gateways.

Down on the waterfront, compromise and co-operation between the two sides have traditionally been rare negotiating commodities. But more of both will be required to maintain job security and market share.

However, perhaps the most challenging wild card for shippers and trade gateway

operators in 2020, at least at its outset, is COVID-19.

Threats of a global pandemic are not good for businesses that connect countries all over the world.

Fear, unfounded or not, is bad for business in general; fear, unfounded or not, is bad for trade and the shipping business in particular.

The good news is that the shipping industry remains, by and large, extremely resilient and continues to be the most cost-efficient way to move massive amounts of goods around the world.

It is not about to be permanently shipwrecked by bad weather. No matter how severe.

Timothy Renshaw trenshaw@biv.com @timothyrenshaw

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B.C.’S TECH REP

POWERING SHIPPING INTEREST

From artificial intelligence to blockchain, local companies are seizing on advances in technology to make shipping sector more efficient

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Maritime industry consultant Kaity Arsoniadis-Stein says Vancouver’s access to tech talent has made it increasingly enticing to companies looking to set up operations in the city • ROB KRUYT

TYLER ORTON

T

ucked away in a Burrard Street office tower sits a device its creators believe can change navigation on the high seas.

The digital annealer technology is described as a “quantum-inspired” digital chip, about the size of a credit card, that allows for computing speeds exceeding those of classical computers but operating at room temperature, unlike large quantum computers that require low temperatures to operate.

Fujitsu Ltd. is using the technology in its new artificial intelligence headquarters in Vancouver – the first time the world’s fourth-largest IT services provider has taken a core technology division outside of Japan – to develop AI-powered software that can optimize routes by learning the habits of captains and the history of their ships.

The Vessel Fuel Optimization software can reduce annual fuel costs by $1.3 million per vessel, according to Fujitsu’s estimates.

With as many as 50,000 ships on the seas, the cost savings could be in the billions of dollars.

Norwegian maritime services provider Kongsberg Gruppen ASA has jumped on board with Fujitsu to develop the software in Vancouver.

“It could be personalized based on preferences of the ship captain in terms of where they definitely want to go, where they want to avoid, or previous voyages or looking at modelling of the actual ship and understanding past behaviours,” says Nicholas Lee, Fujitsu’s senior director of global AI solutions and portfolio strategy.

“And that’s one of the advantages of AI. It allows you to take into account all these different features and all this historical data to provide a kind of personalized and optimized solution for specific captains.”

It’s among the recent developments to manifest from Vancouver’s relatively recent rise as a technology hub and its historical connections to the shipping industry.

“In maritime we’ve got global leaders right here: Seaspan [ULC], Teekay [Corp.], Norden [Shipping (Canada)],” says industry consultant Kaity Arsoniadis-Stein, former executive director of the Vancouver International Maritime Centre (VIMC).

“At the core of the companies’ values is environmental sustainability, and a lot of solutions are

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tech solutions.”

The VIMC was a government-backed pilot project that attracted 15 new shipping companies to Vancouver over three years before funding from Ottawa ran out.

It estimated the economic impact of the initiative will eventually amount to $1.3 billion for B.C. Arsoniadis-Stein says she’s continued to work with companies like METIS Cyberspace Technology SA, a Greek firm specializing in using AI to acquire data about ships’ systems, to draw them to Vancouver.

“They want to set up here in Vancouver because of the strong marine industry that already exists here, because of the strong technology and the high-skilled [labour] market that’s available here and also the brand,” she says.

“Globally we’re seen as Vancouver being green and high-tech.”

A September 2019 study from U.K.-based Inmarsat Global Ltd., Trade 2.0: How Startups Are Driving the Next Generation of Maritime Trade, found that the global maritime startup accelerator community had graduated a total of 226 startups to date.

Those startups raised US$200 million in venture capital in 2018 alone, while the report estimates the value of ship technology will increase to US$278 billion by 2030.

“The opportunity to leverage the world’s ports as centres of technological innovation for maritime trade cannot be overstated. There is already a natural clustering effect in existence in the industry,” authors Nick Chubb and Leonardo Zangrando state in the report.

“In 2018, just US$4.2 billion of digital spending went to startups and small innovators, with the rest going to large corporations that also sell operational technology and hardware. As the barriers to the consumption of digital services come down, thanks in part to improved connectivity at sea, total spending on digital services provided by startups and SMEs [small and medium-sized enterprises] is predicted to be a little over US$111

THEY WANT TO SET UP HERE IN VANCOUVER BECAUSE OF THE STRONG MARINE INDUSTRY THAT ALREADY EXISTS HERE, BECAUSE OF THE STRONG TECHNOLOGY AND THE HIGH-SKILLED [LABOUR] MARKET THAT’S AVAILABLE HERE AND ALSO THE BRAND j Kaity Arsoniadis-Stein Maritime industry consultant

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B.C.’S TECH REP POWERING SHIPPING INTEREST

Fujitsu’s new artificial intelligence headquarters in Vancouver is using the company’s digital annealer technology to develop software that could save the shipping industry billions in fuel costs •TYLER ORTON

billion by 2030, representing a compound annual growth rate of 120%.”

Specific technologies highlighted in the report, such as blockchain, are positioned particularly well to benefit from the rising demand in digital services.

Vancouver-based GCT Global Container Terminals Inc. revealed last fall it was deploying a blockchain-backed supply chain platform across its operations at different ports throughout North America.

Some may be skeptical about blockchain’s association with volatile cryptocurrencies like Bitcoin, but the technology itself is sound.

Blockchain acts as an expanding list of records – or blocks – that are linked through cryptography, serving as a secure electronic ledger that cannot be manipulated by a third party.

Applied to the container shipping industry, blockchain technology could eliminate millions of pages of paper documents, track containers more efficiently and reduce related costs.

GCT is using the TradeLens platform – a joint venture between IBM Corp. and shipping giant A.P. Moller– Maersk Group – for its own deployment.

While the joint venture has been modified since it was

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first announced in 2018, the platform itself has added more than 100 partners, including carriers, ports and terminal operators.

A 2018 report from the research arm of global logistics firm DHL International GmbH estimates the technology could result in “billions of dollars in savings” by reducing delays and fraud through more efficient tracking of tens of millions of shipping containers annually.

The current plan is to roll out the TradeLens platform in phases at GCT’s four North American terminals.

In addition to operating GCT Vanterm and GCT Deltaport, the company operates GCT Bayonne in New Jersey and GCT New York.

While the private sector is recognizing the potential behind Vancouver’s growing reputation as a tech hub, Arsoniadis-Stein says the city is facing one notable disadvantage compared with its global rivals.

“You’ve got places like Singapore and Norway, where there’s a lot of government subsidies given to the industry,” she says, adding governments there are on board funding initiatives such as low-emissions transportation options.

“That’s something that we’re not doing in the marine industry.” É

2020-03-26 12:47 PM

ELECTRIC FLIGHT PLANS

Harbour Air CEO Greg McDougall believes electric planes will eventually reduce the cost of air travel • CHUNG CHOW

Multinational giants join Harbour Air in flightmobility revolution

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ELECTRIC FLIGHT PLANS

GLEN KORSTROM

A

s Harbour Air CEO Greg McDougall drives across Vancouver during a snowstorm on his way to Vancouver International Airport, he envisions the future of air travel.

No, his vision does not quite resemble the 1960s animated series The Jetsons, where flying cars zip along aerial freeways that never have black ice and do not require salt. McDougall, however, is convinced that flying cars are coming, and society is on the cusp of massive change.

“Urban air mobility is definitely something that will be much more prevalent in the next 10 years,” he tells Business in Vancouver during the drive. “It will become more prevalent as these technologies evolve. There are too many major players and smart people working on that. It’s the next evolution of electric flight.”

His thought that electric flying cars in any form will be available in the 2020s might be dismissed as being fanciful were he not an aviation pioneer in his own right.

Last December 10, McDougall conducted what he touts as being the world’s first electric flight on a commercial airplane. He piloted a six-seat de Havilland Beaver aircraft on a flight over the Fraser River that was slightly longer than nine minutes and was about 15 minutes if taxiing time is included. His company modified the plane to include an electric motor that was made by Washington state-based technology company MagniX and is part of that company’s proprietary Magni500 propulsion system.

No commercial passengers joined McDougall on board that pioneering trip, but he describes the plane as a commercial aircraft because he registered it that way, and because it spent most of its 63 years in service as a commercial plane with a combustion engine.

In reality, only the plane’s serial-number plate is 63 years old, McDougall says with a laugh.

The expensive reality of operating seaplanes is that the frames need to be rebuilt every five years.

“The plane was a good candidate for the flight, with a very resilient air frame,” he says.

“Its power-to-weight ratio is good. It’s able to lift a lot of weight for the amount of horsepower that’s required to do that even though it’s an older aircraft. It’s really a tribute to the de Havilland aircraft.”

The flight made international headlines and generated excitement among climate change activists curious to know whether the carbon-intensive aviation industry could, with a flip of a switch, become environmentally sustainable by going electric.

Others were surprised that a relatively small Lower Mainland company would lead the world with such a feat.

Harbour Air has about 40 aircraft, and it flies about 300 flights daily, serving around 500,000 passengers each year.

Competition is on the horizon from large multinationals and government-funded giants.

Rolls-Royce may be best known for its luxury cars, but it has long made aircraft engines, and one of the venerable corporation’s more recent forays has been to branch into making electric motors.

Harbour Air CEO Greg McDougall • CHUNG CHOW

For those on the proper nomenclature, comOpportunities are in the north andunclear in the niche bustion systems that use fossil fuels are called engines, as the sector rationalizes mill capacity while those that use electricity are called motors. It is a

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distinction that McDougall took time to point out.

Regardless, on December 19, Rolls-Royce unveiled a plane that uses its electric propulsion system, and the company aims to have the single-passenger vehicle beat the 483-kilometre-per-hour world speed record for an electric plane.

Then there’s NASA, which announced plans to f ly an electric plane later next year. The space agency has poured resources into investigating the advantages of battery-powered flight as part of its mandate to develop advanced technology.

Boeing and the Volkswagen AG subsidiary Porsche have also paired up. They announced in October that they are teaming up to “explore the premium urban air mobility market and the extension of urban traffic into airspace.”

They plan to create an electric vehicle that can fly.

“We’ll be a part of it,” McDougall says of what could be a revolution in how humans travel. “We’ll evolve with it.”

Part of why McDougall is so convinced that electric vehicles, including planes, are part of the future of flight is that they are better for the environment as well as being more cost efficient.

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Much like electric cars, which plug into electrical outlets and do not use gas, electric planes burn no environmentally damaging fossil fuel.

“We generate hydro in B.C., thankfully, from water,” McDougall says. That means that even the electricity does not require any fossil fuels to be produced.

“The amount of energy required to recharge the aircraft from a half-hour electric flight is infinitesimal compared with the amount of cost in buying the jet fuel to do that flight.”

McDougall pauses a bit to do some math in his head and then relays that his best guess is that it will cost about $12 to recharge an electric plane after a flight.

For the same flight using fossil fuel, he says the cost will likely be about $200.

There are also savings tied to less maintenance.

Fossil-fuel engines require maintenance workers to wash, inspect and lubricate regularly, and then the engines tend to last for about 6,000 hours’ worth of flying time.

Electric motors, in contrast, do not require the

maintenance work after each flight, and McDougall says the motors tend to last about 10,000 hours.

Therefore the savings reaped by companies that operate electric planes will likely eventually trickle down to their customers.

Consumers should for now contain their excitement about slashed airfare costs because commercial travel is years away and in the early years planes will carry fewer people.

Harbour Air has filed paperwork with Transport Canada, and McDougall expects the process to take about two years to get what he calls a supplemental certificate, and be able to fly commercially.

“With battery technology being the way it is, and where we anticipate it to be within two years in our certification process, there will be some reduced load at the outset,” McDougall says.

“Batteries will still be a bit heavy for a full load so you have to offset that lack of capacity. Eventually, as the batteries evolve and we can carry passengers longer distances and more people, that will reduce the cost [for the end consumer].” É

THE AMOUNT OF ENERGY REQUIRED TO RECHARGE THE AIRCRAFT FROM A HALF-HOUR ELECTRIC FLIGHT IS INFINITESIMAL COMPARED WITH THE AMOUNT OF COST IN BUYING THE JET FUEL TO DO THAT FLIGHT j Greg McDougall CEO, Harbour Air

Strong and Secure With a history spanning more than 150 years, BLG lawyers have unsurpassed depth of knowledge and experience in maritime law and are committed to delivering insightful, pragmatic legal advice to drive value and advance our clients’ objectives.

Graham Walker Managing Partner 604.640.4045 gwalker@blg.com

Dionysios (Dino) Rossi Partner 604.640.4110 drossi@blg.com

blg.com/shipping Canada’s Law Firm Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.

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CRUNCHING PORT AUTOMATION EQUATIONS Incorporating the right factors in those equations is critical to 21st-century port efficiency and competitiveness

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CHUNG CHOW

TIMOTHY RENSHAW

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etting the automation equation right is crucial to the success of 21st-century ports. But failing to get the factors in that equation right will be fundamental to their failure.

Consider that it took close to 18 months to secure a new collective agreement between B.C.’s port workers and maritime employers, but it will take far longer to secure consensus between the two sides on how the province’s terminal operators will incorporate automation in their cargo-handling processes in the wake of that June 2019 contract settlement.

And automation is not an option. It is as inevitable as it is necessary. Competition for transpacific trade has determined that.

A 2019 Drewry container ports briefing notes that the average time spent in West Coast North American (WCNA) ports for larger container ships can range up to six days. That compares with the estimated median time of 23.4 hours container ships spent in port in 2018, according to the United Nations Conference on Trade and Development’s 2019 Review of Maritime Transport report.

Responding to industry questions about how those ports could speed up vessel handling, the U.K.-based shipping consultancy notes that because WCNA ports do not operate 24 hours per day, in part because of the high cost of night-shift labour, their cranes and other infrastructure assets are not used as intensively as those assets are elsewhere in the world.

So the struggle to secure automation consensus is not exclusive to port employers and employees in B.C. The fight over plans by the port division of the world’s largest container carrier company to upgrade Pier 400 infrastructure at the Port of Los Angeles has been a major flashpoint example for North American port operations.

The spectre of robotic cargo carriers being rolled out and

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widespread electrification of cargo-handling infrastructure being installed at the container terminal, which is run by the Maersk Group’s APM Terminals, raised the ire of powerful port unions in California.

The International Longshore and Warehouse Union (ILWU) and the International Transport Workers’ Federation argued that their membership would pay huge social and financial costs from any significant automation of containerized cargo movement.

In a 2019 Random Lengths News story on the Pier 400 controversy, ILWU leaders state that automation is not good for labour unions, the community or America.

Some analysts believe that a wholesale shift to automation might also not be that great for container terminal productivity.

However, major West Coast ports know that technological change is on the near horizon in a sector that has traditionally been slow to commit the investment needed to incorporate digital and other technology in its operations.

In a discussion with Let’s Talk Supply Chain podcast host Sarah Barnes-Humphrey, the deputy executive director of administration and operations for the Port of Long Beach (POLB) notes that technology is fundamental to competitiveness.

Noel Hacegaba points out that the POLB is close to reaching its physical capacity. It therefore needs to maximize the efficiency of what it has.

Incorporating new supply chain technology in a global sector whose major pieces are interdependent but not necessarily connected, he says, is vital to the port’s future development and its ability to compete with major ports in Mexico and B.C.

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CRUNCHING PORT AUTOMATION EQUATIONS

Hacegaba points out that POLB has therefore committed US$4 billion over the past 10 years to modernizing its terminals and other infrastructure.

Long Beach and the adjacent Port of Los Angeles make up the San Pedro Bay complex, which is the world’s ninth-busiest marine cargo hub.

Back in B.C., port automation was a major hurdle in longshore contract negotiations.

Prior to settlement of the port workers contract in June 2019, ILWU Canada leadership declined to comment on the most contentious automation issues in the union’s current contract negotiations with the BC Maritime Employers Association (BCMEA).

ILWU president Robert Ashton would say only that ILWU Canada is “concerned about anything that could harm a worker’s daily life.”

In some cases, new technology might improve that life.

GTC Global Container Terminals Inc.’s rail densification project at its GCT Deltaport at Roberts Bank went live late in September 2018.

According to what is Canada’s largest maritime employer, the $300 million project was the first semi-automated initiative of its kind in the country and has increased GCT Deltaport’s container cargo capacity 33% and its ability to move railcar boxes by 50%.

But what did it do for dock workers?

GCT president and CEO Doron Grosman provides an example following the completion of the project, which was developed in collaboration with ILWU Local 502, and his chats with workers after the new technology was up and running.

He says a GCT Deltaport worker told him he had worked at the container terminal for 20 years and was now having the most fun at his job.

Why? “He said, ‘Let me tell you [why]. I used to come to work and have to climb a ladder and sit in a box all day. It was cold; it was lonely; if I had to pee I had to go back down [the ladder]. I ate lunch over there; I had nothing. Now I’m sitting in a control room; I’m sitting with six other guys. We are playing video games all day long. We are not actually working; we are monitoring that the automation is working correctly … the washroom is there, the refrigerator is there. I can talk to my buddies, and I am working with the greatest technology since who knows when.”

That new technology might make some working conditions better, but Lars Jensen, the CEO of Copenhagen-based SeaIntelligence Consulting, says inevitably it will reduce the number of jobs at container terminals.

Automation will also change the nature of those jobs and the training required to do them.

Blue collar will shift to white smock.

As a simple example, Jensen says, if a terminal today has 100 workers hired to drive ground vehicles around and they are replaced with robots, “you eliminate those jobs, but then you need highly qualified engineers to maintain those vehicles, but [the terminal] won’t need 100 trained engineers to do that. So there will definitely be new jobs, but they won’t be as plentiful as the old jobs.”

Automation, which is extremely expensive for container terminals to install, might also not increase port productivity significantly.

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Jensen points out that there are several practical logistic restrictions that weigh against the advantages of automation at a container terminal. For example, unloading a container from a ship with a crane “does not go any faster whether it’s a robot or a human moving the crane. You can’t speed up the crane. You would only wreck something.… If you have an experienced crane driver, he is every bit as good as a robot.”

However, Jensen says that while automation would not necessarily make moving containers more efficient, it would deliver more stable productivity.

“With automated solutions, there is less variability between ‘Yes, this was a good day; yes, this was a bad day.’ So you can’t say that if we put in robots we are going to be twice as productive; it doesn’t work that way.”

A McKinsey & Co. analysis agrees.

The Future of Automated Ports found that, while operating expenses at automated ports decline, so does productivity.

That results in lower returns on invested capital than in other industries.

However, the report concludes that, if planned and executed well, automated ports can cut operating expenses by between 25% and 55% and increase productivity by 10% to 35%.

Automation’s value, it says, “includes not only cost savings but also performance and safety gains for ports and companies that do business there.”

Jensen says there are few fully automated ports in the world and that retooling infrastructure at established ports to be 100% automated is not the answer, because “going 100% automated is not necessarily cost efficient.”

He says the answer is to look at the cost and productivity fundamentals of all areas of a terminal or port operation to determine where automation would deliver the most savings and efficiency gains.

“It’s as simple as that.”

Grosman agrees.

He says if automation does not make a terminal money and succeeds only in upsetting a unionized workforce, “what’s the purpose of it?”

Automated port infrastructure also delivers benefits elsewhere along the complex cargo movement chain.

For example, Weston LaBar, CEO of the Long Beach-based Harbor Trucking Association, says his organization strongly supports container terminal modernization projects, because, if done right, they improve the efficiency, consistency and predictability of trucker turn times and dual transactions in an appointment-driven ecosystem where time is money for truckers and shipping customers.

“We think that what APM Terminals is doing is going to help them immensely.”

LaBar points to Long Beach Container Terminal (LBCT) as an example of shipping automation done right.

LBCT is fully automated, and when completely built out it will be able to handle about 3.4 million 20-foot-equivalent units per year. That’s roughly what the entire Port of Vancouver handled in 2018.

It is also, according to LaBar, “probably the best terminal in North America.”

Why? “If you look at things like [trucker] turn times, dual transactions

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GTC Global Container Terminals Inc.’s rail densification project at its GCT Deltaport at Roberts Bank went live late in September 2018 • CHUNG CHOW

[when a trucker drops a container and picks one up rather than just dropping or picking up] versus single transactions, LBCT leads the way on everything. Their worst month from a turn-time perspective since they opened was 52 minutes for a dual transaction, whereas the best month for any other conventional terminal is close to an hour, and we regularly see some of the terminals at 80, 90, 100 minutes. So when you take into consideration that in a good month LBCT’s turn time is closer to 30 minutes, that is phenomenal.”

Union concerns over port automation in B.C. were also aired during Canadian Environmental Assessment Agency (CEAA) review panel public hearings over the proposed $2.8 billion Terminal 2 project in May and June 2019.

In his May 16 presentation to the CEAA panel, Tom Doran, president of ILWU Local 502, said the net economic impact of the proposed new container terminal at Roberts Bank had not been adequately assessed “particularly as it relates to the impact of automation on our industry and our communities.”

He claimed that fully automated and digitized marine terminal operations elsewhere in the world have reduced port workforces by as much as 70% to 80%.

Doran added that the container cargo sector generates roughly 70% of longshore worker hours in B.C. The percentage of Terminal 2 operations that will be automated depends on its final design and who the Vancouver Fraser Port Authority (VFPA) chooses as

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the terminal’s operator.

But Cliff Stewart, the VFPA’s vice-president of infrastructure, told the review panel that the terminal’s main yard would likely be semi-automated because there are some port and cargo movement jobs that robots and automation do better and some that humans do better.

Doran emphasized that “automation is a choice, and it’s not a foregone conclusion in economic development or decisions around productivity, sustainability or the environment.”

However, he pointed to the way new technology was introduced with the GCT Deltaport railyard project as a model of automation integration at port facilities.

In California the Pier 400 issue was largely defused after APM agreed to invest in job training for 900 unionized workers to reskill them for new technology and new positions at Pier 400.

In B.C., the new five-year contract ratified June 25 allows for the formation of a new technology committee platform that Jeff Scott, chairman of the BCMEA board, says allows representatives of port workers and employers to discuss any new incoming technology or innovation “about what that looks like, what that means, and work together to look at the implications and minimize any impact.”

But it remains unclear what authority the committee would have over decisions on instituting major automation infrastructure at a B.C. container terminal. É

WITH AUTOMATED SOLUTIONS, THERE IS LESS VARIABILITY BETWEEN ‘YES, THIS WAS A GOOD DAY; YES, THIS WAS A BAD DAY.’ SO YOU CAN’T SAY THAT IF WE PUT IN ROBOTS WE ARE GOING TO BE TWICE AS PRODUCTIVE; IT DOESN’T WORK THAT WAY j Lars Jensen CEO, SeaIntelligence Consulting

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TRADE BY THE TEU PORT OF VANCOUVER The Port of Vancouver’s empty export 20-foot-equivalent unit (TEU) rate reached 46% in the last month of 2019. The number is eight and 12 percentage points higher than the average and median empty export TEU rate for all of 2019, respectively. The number shows a weaker international demand for Canadian exports, including a weaker demand for partial U.S. exports that go through the Port of Vancouver.

The empty import TEU rate is down by one percentage point month-to-month but is still higher than the average and median empty import TEU rate. The data shows a slight decrease in Canadian demand for imported goods in the last two months of 2019.

PORT OF VANCOUVER: EXPORT AND IMPORT TEUS EMPTY RATE 2019 Import empty rate

Export empty rate

80% 61% 55%

60%

40%

38%

34%

35% 27%

32%

30%

25%

41%

46%

33%

20% 1%

1%

3%

Jan

Feb

Mar

2%

1%

1%

May

Jun

1%

2%

1%

1%

4%

3%

Aug

Sep

Oct

Nov

Dec

0% Apr

Jul

Source: Accumulated container traffic report YTD September 2019 (Port of Vancouver)

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PORT OF PRINCE RUPERT

ONE HUNDRED PORTS 2019:

The Port of Prince Rupert’s export TEU empty rate has risen constantly since March for almost 18 percentage points, showing weaker international demand for Canadian or U.S. goods that go through the Port of Prince Rupert. The number has been slightly improved in the last quarter of 2019, which brought the export TEUs empty rate to 61.71%. Import TEU empty rate, on the other hand, has remained close to zero, indicating a constant solid Canadian demand for imported commodities that went through the Port of Prince Rupert.

17

U.S. and Canada rankings from Lloyd’s List of the world’s largest container ports

LOS ANGELES, U.S.

VANCOUVER*, CANADA

LONG BEACH, U.S.

VIRGINIA, U.S.

20 23

NEW YORK/ NEW JERSEY, U.S.

37

Source: Port of Prince Rupert Cargo Volumes

68 69

HOUSTON, U.S.

73

OAKLAND, U.S.

SAVANNAH, U.S.

44

80

CHARLESTON, U.S.

SEAPORT ALLIANCE, U.S. Note: *Vancouver does not include cargo volumes of the Port of Prince Rupert

CAPRR: Total TEUs Empty Rate 2019

50

98

MONTREAL, CANADA

North American Port Rankings 2019

by TEU Throughput

Source: One Hundred Ports 2019 | Lloyd’s List AVIGATOR FORTUNER/SHUTTERSTOCK

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Sean Puchalski, Corvus Energy’s executive vice-president of strategy and business planning, at the company’s Richmond plant. The cruise ship industry is a growing market for the B.C. company • CHUNG CHOW

ELECTRIFYING FUEL INITIATIVES B.C. company spearheading integration of battery energy options in global marine transportation sector

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TIMOTHY RENSHAW

B

oosting battery mix and energy storage capacity in the new fuel marketplace for marine shipping is atop the Corvus Energy business game plan.

The Richmond-based company is making a lot of headway close to shore. But the wider world of deep-sea freight movement is a different story.

At least in the near term.

Corvus was founded in December 2009. It secured its first investors and generated its first revenue roughly two years later.

Last year, its revenue hit around $56 million; five years ago it was closer to $6 million.

So the Corvus battery-power playbook is starting to pay some significant dividends.

Sean Puchalski says the company’s business bread and butter thus far has been concentrated in shorter-range ferries, harbour tugs and nearshore vessels that service oil rigs. There is also a growing market in electrifying cranes and other port equipment.

But a big new arena for Corvus, says the company’s executive vice-president of strategy and business planning, is the global cruise ship industry.

High-profile public visibility and a green awakening on both sides of that sector are seeing to that.

Black bunker fuel smoke and glacial bays are not a good look for cruise line public relations.

So there is a big push, Puchalski says, into decarbonizing cruising.

That push is generating what he says are a lot of orders from the cruise ship sector for very large batteries – so many orders that Corvus is developing a new battery product for large cruise ships.

The federal government has chipped in $6 million via the National Research Council of Canada Industrial Research Assistance Program to aid in that development.

Puchalski says the batteries will allow cruise ships to operate on battery power while cruising through pristine environments and into harbours where cruise lines have come under fire for their contribution to air and water pollution.

Using battery power to augment diesel, marine gas oil and other deep-sea ship fuel results in operational savings, reduced maintenance costs and better environmental outcomes.

But for cruise ship lines it also offers potential for another revenue stream: a business brand differentiator.

“You can get operational savings with a smaller battery, but by buying larger batteries than is

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necessary for operating savings … [a cruise ship line] could maybe offer a low-emission cruise.

So we are having European cruise lines buying these enormous batteries [that are] far larger than they need to get the fuel and maintenance savings, so that they can come into port with no smoke and cruise next to a glacier or pristine fiord with no smoke, and presumably customers are willing to pay for that.… That is bigger business for us than operational savings.”

But while the market for batteries in the global marine transportation business is growing, battery technology is currently viable primarily as auxiliary power to augment diesel generators in diesel-electric propulsion systems, where bow thrusters and other machinery improve manoeuvrability for ferries, cruise ships and near-shore vessels that don’t rely on tugs to help them dock.

Batteries are also increasingly used for powering refrigerated containers, lights and other auxiliary load energy needs aboard ships.

As DNV GL points out in its Assessment of Selected Alternative Fuels and Technologies report, “Batteries and hybrid power plants represent a transformation in the way energy is used and distributed on board vessels.… Fully electric ships represent a leap forward in power system design, but at present they are only feasible in limited applications such as ferries and short-sea shipping.”

Batteries store energy; they do not produce it.

They are therefore not a propulsion option for ocean-going container cargo ships, says Puchalski.

“The math just doesn’t work out. We have put batteries on large ocean-going ships already, but they haven’t been for propulsion. They are for making things more efficient dockside.

“The largest ships crossing the world’s oceans will never be fully battery powered, because the battery just stores energy, so you still need a source of energy. That either comes from burning fossil fuel or shore charging.… If you were just charging onshore and travelling to China, the battery would need to be so big that it would sink the ship.”

The main challenges now for battery technology in the shipping sector are cost and size.

And while batteries produce no emissions during operation, manufacturing them is energy

THE LARGEST SHIPS CROSSING THE WORLD’S OCEANS WILL NEVER BE FULLY BATTERY POWERED, BECAUSE THE BATTERY JUST STORES ENERGY, SO YOU STILL NEED A SOURCE OF ENERGY. THAT EITHER COMES FROM BURNING FOSSIL FUEL OR SHORE CHARGING.…

IF YOU WERE JUST CHARGING ONSHORE AND TRAVELLING TO CHINA, THE BATTERY WOULD NEED TO BE SO BIG THAT IT WOULD SINK THE SHIP j Sean Puchalski Executive vice-president of strategy and business planning, Corvus Energy

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ELECTRIFYING FUEL INITIATIVES

intensive. Batteries for ships also have to be far more robust than those used in automobiles or other consumer arenas because they are typically run harder and longer under more demanding conditions.

For example, Puchalski says, Corvus batteries are expensive and heavy-duty because “they might be working 16 hours per day, 300 days per year, which is much more than people would drive their Tesla.”

Energy generation for recharging batteries is also a consideration in calculating overall emission contribution of batteries.

BC Ferries is using Corvus battery technology in what will be six of its new Island Class vessels. The first two hybrid electric ferries arrived in B.C. from a shipyard in Romania on January 18.

Mark Collins, BC Ferries’ CEO, says the corporation could order up to six more of the battery-powered Island Class ferries over the next 10 years.

“And they are the most feasible to put batteries into because they are the smallest.”

Collins says BC Ferries’ next big challenge is incorporating battery power in its fleet’s larger ships, designs for which are underway.

“The batteries won’t be big enough to propel those ships exclusively, so it will be another hybrid system, probably with natural gas and batteries to give us the power and range we need.”

One of the challenges for battery-powered ferries and any other larger vessel is shore power infrastructure, which Collins says is very expensive to manufacture and install.

“You have to deal with transmission lines, substations, shipto-shore connectors, and, again, at BC Ferries we don’t get the capital funding for that from any outside sources. We have to raise all that money ourselves, so it comes down to prioritization, and there is never enough capital to go around.”

Collins adds that batteries are also space hogs that add a lot of weight to a ship.

The total capital cost for BC Ferries’ first two hybrid-electric

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Puchalski says Corvus Energy’s batteries can be used while cruise ships pass through pristine environments • CHUNG CHOW

Island Class ferries was $86.5 million.

On the industrial side of the port, GCT Canada, which operates GCT Deltaport container cargo terminal at Roberts Bank, started offering shore power to visiting container ships last November.

The company, which also operates Vanterm container terminal in the Port of Vancouver, estimates that its new shore power system will eliminate up to 95 tonnes of air pollutants from each container ship that docks at GCT Deltaport.

Funding for the $6.8 million shore power project came from the federal government’s Shore Power Technology for Ports program and the Vancouver Fraser Port Authority. Both contributed $3.4 million.

Cost and size might weigh against battery power for a lot of marine shipping applications, but operating cost savings are in its favour.

Puchalski estimates that annual maintenance costs on large hybrid-electric ferries, according to numbers from Corvus clients, are typically 40% lower than on their diesel-mechanical counterparts. Savings on fully electric ferries in Norway, he says, have ranged up to 80%.

Corvus is continuing to make inroads into marine freight arenas.

While the market for batteries is expanding into differentsized ships, Puchalski says it is also expanding geographically.

“Whereas it used to be just a northern European phenomenon, now Japan, China, Korea are really big. Even North America is coming along now.” É

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TRACKING RAIL TRANSPORTATION GROWTH

Billions invested in track, bridges, transloading and port terminal projects to support West Coast trade

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TRACKING RAIL TRANSPORTATION GROWTH

JEREMY HAINSWORTH

C

anada’s rail giants and governments are responding to growth in West Coast ports’ cargo traffic with millions of dollars in funding to strengthen supply chain infrastructure on more than 43,000 kilometres of track nationally.

During 2018-19, senior levels of government a n d C a n a d i a n N ational Railway (CN) and Canadian Pacific Railway (CP) have invested significantly in adding track, bridges, transloading facilities a nd term i na l assistance to help ease backof-ya rd con ge st ion problems at waterside operations.

Much of the federal investment comes f rom t he $2 bi l l ion National Trade CorTrevor Heaver, professor emeritus ridors Fund designed of the Sauder School of Business for i n f ra st r uctu re projects for ports, airoperations and logistics division • ports, roads, railways, SUBMITTED intermodal facilities, international bridges and border crossings.

Federally, 81 projects have been funded – 13 in the Lower Mainland and five in Prince Rupert – representing more than $500 million in investment. In the B.C. Interior, $9.2 million was provided for improvements to infrastructure at Ashcroft Terminal to support the inland port’s movement and storage of railcars and containers to improve efficiency through Canada’s Pacific Gateway, Transport Canada spokesman Simon Rivet says.

In the Lower Mainland last July, Ottawa targeted specific sectors for growth assistance with: ■$42.7 million to consolidate the operations of the Annacis Auto Terminal and the Richmond Terminal to accommodate growing Asian automobile markets and improve rail operations; ■$12.2 million to improve road and rail traffic operations and develop new rail-serviced bulk export marine terminals at Fraser Surrey Docks; ■$39.4 million to improve traffic flow and reduce congestion in Richmond’s Portside/Blundell corridor; ■$1.6 million to explore ways to handle increased trade volumes by evaluating short-sea shipping viability in Greater Vancouver; and ■$6 million to develop a real-time dashboard for the ports of

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Vancouver and Prince Rupert to measure end-to-end performance of the supply chain for all cargos.

In June 2018, the federal government announced initiatives to assist all rail operators moving goods through B.C. The $167 million for three projects was used in co-operation with the railroads and the Vancouver Fraser Port Authority (VFPA).

Two projects led by the VFPA with investment from CN and CP included redesigning rail corridors, redesigning roads to accommodate rail corridors and building 9.4 kilometres of new siding track and reconfiguring train-switching operations within the CP railway corridor.

Another project led by CN with investment from the port involved designing and building a 4.2-kilometre secondary track, parallel to Vancouver’s Burrard Inlet line, to increase rail capacity and support goods flow through the port’s south shore.

Last September in Prince Rupert, Minister of Transport Marc Garneau announced three projects valued at $153.7 million to increase port capacity and goods movement.

In partnership with CN, the port received $60.6 million for the $122 million Zanardi Bridge and Causeway project.

Building a double-track bridge across the Zanardi Rapids into port land will increase rail capacity on key rail routes and accommodate growth in imports and exports. The bridge will allow trains to arrive and depart simultaneously.

Additional rail capacity will be added to Ridley Island to reduce rail congestion to improve rail service to and from the bulk and container facilities and contribute to the development of a hub to transfer shipments from one mode of transportation to another.

The third project will develop land for import and export logistics facilities strategically located near Prince Rupert’s Fairview Terminal and a container yard. The facilities will provide capacity adjacent to the port from which to load and unload 175,000 20-foot containers (equivalent to more than 66,000 railcars) per year, increasing the region’s trade growth and the Port of Prince Rupert’s overall efficiency.

“Expanding capacity at the Port of Prince Rupert, including making better use of the Ridley Island area, strengthens economic prospects for the middle class by supporting immediate trade diversification and increases exports to Asian markets,” the ministry says.

The funding’s end goal is to improve the flow of goods and people in Canada and increase the flow of trade in and out of the country.

And, Canada’s national rail giants are on board with capacity increases.

In Vancouver, CP opened its Vancouver Automotive Compound

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Part of the federal government’s $2 billion National Trade Corridors Fund will support rail operations in B.C. • CHUNG CHOW

covering 36 acres with 12,000 vehicle bays capable of accommodating 168,000 vehicles annually.

Further, the two railways co-operate through the Fraser Canyon Directional Running Agreement and the Vancouver Co-production Agreement, which allow the railways to share track for operational efficiencies. Such inter-railway agreements also allow for greater market penetrations.

And, in Ottawa, the VFPA and CN signed an agreement to upgrade key infrastructure to double-track a four-kilometre section of rail linking expanding import and export terminals on the Burrard Inlet’s south shore to the national rail network.

In March 2019, CN announced plans for $345 million in investments across B.C. to expand and strengthen the company’s rail network. It was part of CN’s $3.9 billion in capital investments in 2019 focused on promoting growth from all commodity segments, including consumer goods, grain, agricultural, forest and energy products. Over two years, CN will have made a $7.4 billion capital investment, the company said. “Following a record capital program in 2018, CN has been able to take on more traffic from different commodity sectors based on contracts with our customers,� says CN western region vice-president Doug

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YOU NEED TO MAKE ADDITIONS AND ADJUSTMENTS TO THE INFRASTRUCTURE, BUT YOU ALWAYS NEED TO ALTER THE OPERATING PRACTICES. INFRASTRUCTURE CONCERNS NEED TO BE SEEN IN A BROAD CONTEXT j Trevor Heaver Professor emeritus, Sauder School of Business operations and logistics division

Ryhorchuk.

He adds that in 2019, CN planned to invest even more than it had in 2018 “to continue boosting capacity and network resiliency and to meet growing traffic on our corridors across B.C.” Passenger services continued to operate from Vancouver with Via Rail taking passengers to Edmonton while the private Rocky Mountaineer runs luxury services through the Interior on runs abandoned by the national carrier years ago.

On Vancouver Island, provincial work continues on reviewing goods and passenger services.

The Southern Railway of Vancouver Island could be back on track soon, as the provincial government assesses rail lines, bridges and buildings.

An in-depth track and bridge assessment of the Island Rail Corridor was completed by in late 2019.

The Ministry of Transportation and Infrastructure is now reviewing the final report on the rail corridor. It will be released publicly once that review is done.

“The Island Corridor Foundation has requested that the provincial government provide funding to help upgrade the corridor in order to reinstate rail service,” the ministry says. “This assessment is necessary before any decisions are made around investing significant public dollars along the Island Rail Corridor.”

Professor emeritus Trevor Heaver of the University of British Columbia’s Sauder School of Business operations and logistics division likens the situation facing ports to a number of people living in a house where rules must be established or rooms added for proper functioning.

Add or subtract people and house practices shift, he explains.

Similarly he says that dealing with port needs is not just a matter of infrastructure investment. Rather, it’s about the change in practices over time to meet the interest of logistics.

“You need to make additions and adjustments to the infrastructure, but you always need to alter the operating practices.

Infrastructure concerns need to be seen in a broad context.”

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Heaver sees four challenges facing the port as it relates to its support infrastructure: ■traffic growth; ■uncertainty about growth and its variability in the shorter term, particularly within years, which makes operations and planning for growth difficult; ■handling competing sector interests such as moving containers, coal and grain; and ■modifying operating practices of railways and shippers as logistical challenges evolve over time. “ It’s an evolving and difficult corporate relationship over time and establishing new practices isn’t easy because they’ve all got their own commercial interests,” Heaver says.

And, managing those interests is a top-of-mind issue for the port as its container-handling capacity is projected to run out in the 2020s.

The proposed $3 billion Roberts Bank Terminal 2 project (RBT2) in Delta, if approved, is expected to provide some of that needed handling capacity.

“Without RBT2, we will not be able to meet the demand for container trade, which will create significant negative impacts on port users and local communities as a result of terminal congestion, including truck and train backups, vessel scheduling challenges, cargo redirection, increased reliance on U.S. ports, increased transportation costs for Canadian goods and the loss of business for importers and exporters,” VFPA president Robin Silvester told the Port of Vancouver’s June annual general meeting.

Heaver also points to the Fraser River railway bridge at New Westminster as a concern.

A 2016 Greater Vancouver Gateway Council report says the bridge is owned by the federal government, operated and maintained by CN and used by all area railways.

The swing bridge is closed to rail traffic about five hours a day to accommodate river marine traffic. That limits rail traffic to approximately 65 train movements per day.

“If that thing goes out it would be catastrophic,” Heaver says.

VFPA spokeswoman Danielle Jang says the port authority plays an integral role in bringing all partners together to collaborate on ways to make B.C.’s trade gateway efficient in facilitating Canada’s trade.

“We’re working to prepare the Port of Vancouver to handle anticipated trade growth, but we rely on the networks that connect the port to the rest of Canada. A lot has been done to improve infrastructure and the supply chain, such as increasing the efficiency of existing terminals, but more needs to be done, especially given new trade agreements with Asia.”

Jang adds that the Greater Vancouver Gateway 2030 infrastructure strategy involves projects designed to improve the flow of port cargo.

She says that in 2018 Ottawa pledged to invest more than $220 million to advance several Greater Vancouver Gateway 2030 projects and in 2019 the port authority received more than $100 million from the federal government’s National Trade Corridors Fund to support five more infrastructure projects. É

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MID-SIZE POWER PLAYS Canada offers Taiwan opportunities that the U.S. can’t, and both economies are eager to grow their trading relationship ALBERT VAN SANTVOORT

T

aiwan is eager to increase its business trade with Canada and Vancouver.

Taipei’s trade strategy includes showcasing Taiwanese products and companies to Canadian businesses, senators, members of Parliament and even mayors and councillors.

The Taipei Economic and Cultural Office invited dignitaries from all levels of government to the Globe 2020 business summit in Vancouver to showcase the sustainable innovations the island nation has to offer.

One of the favourite items at the show among the dignitaries in attendance, including MP Alice Wong, was a sugar-cane straw developed by Taiwan-based Plan Tech.

“I won’t feel guilty now having bubble tea using the sugar-cane straw,” said Wong to a response of laughter.

Canada and Taiwan share many similarities. Both are gateways to the Pacific. Both are small countries with mid-size power and both operate in the shadows of one of the two most powerful and influential countries on the planet.

Canada’s relatively small economy doesn’t always make it the most desirable international market, but a component of Canada’s allure for Taiwan is its potential to be an entry point to the United States, according to Andy Chen, director general of the Taipei Economic and Cultural Office in Vancouver.

Canadian businesses could also use Taiwan as a gateway into China.

Taipei sees opportunity in Canada, not just in terms of foreign markets but also as an ally in negotiating and trading with the world’s superpowers.

Chen says smaller mid-size powers need to work together to foster trade not just between themselves but with the rest of the world.

“Mid-sized powers like Taiwan, Canada, Japan and Korea should work together as a coalition. We have to help each other create our own competitive advantage.”

Other Canadian politicians also see the importance of increasing trade relations with Taiwan.

Port Coquitlam Mayor Brad West has been outspoken about the Chinese government practices and has been pushing the Union of BC Municipalities to sever any funding received from the country, especially in light of China’s detention of two Canadians.

West says we should be fostering relations with countries that share Canada’s values of democracy and the rule of law rather than strengthening relationships with China.

“We should be prioritizing our economic relationship with countries like Taiwan that have shared values,” says West. “We should be prioritizing countries that we know aren’t going to kidnap two of our citizens and hold them hostage or that aren’t going to arbitrarily ban Canadian imports because [Canada is] following the rule of law.”

Trade tensions between China and the U.S. could also benefit

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Sugar-cane straws developed by Taiwan-based Plan Tech on display at the Globe 2020 business summit • ALBERT VAN SANTVOORT

trade between Taiwan and Canada.

Frank Chen, director of the Taiwan Trade Center, says that the trade war has encouraged Taiwanese companies to seek new opportunities outside of China. Chen thinks that opportunity exists in Vancouver and Canada.

“Many Taiwanese companies moved out of China, and they are looking for a new investment destination,” says Chen. “I think Canada and British Columbia has the chance to attract more investment from Taiwan.”

Both Andy and Chen say there are numerous reasons why Taiwanese companies might choose Canada over the U.S. Canada’s immigration policy and the country’s general sentiment toward immigrants are generally more welcoming, though not without their problems.

Chen also highlights Canada’s education system and the benefits Canada’s well-educated workforce can provide to Taiwanese companies looking to expand. É

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TROUBLING TRADE WINDS B.C. ports face challenging freight market, regardless of whether coronavirus disruptions continue CHUCK CHIANG

W

hile ports in Metro Vancouver and Prince Rupert have been grappling with major disruptions stemming from protest barricades throughout the Canadian rail system, another issue on the near horizon – a sharp drop in the global container freight business caused by the COVID-19 coronavirus outbreak – could be even more difficult to tackle in 2020.

That is because, experts say, the B.C. ports with heavy exposure to the Asian market put their terminals not only directly in the path of the container traffic slowdown, but also in the path of an eventual glut of freight that may overwhelm Canada’s already compromised transportation system when the outbreak-related regional quarantines end.

Such a no-win situation, says FreightWaves Inc. market expert for international freight forwarding Henry Byers, would heavily dent the gains that B.C. ports have made in the North American West Coast port/shipping sector in the last five years.

The prospects of historically slow container freight traffic from Asia would hurt everyone from rail and truck operators to manufacturers and retailers. The alternative – a tandem of the eventual freight glut occurring before the Canadian rail system gets back on its feet – would be catastrophic for Canada’s reputation as a reliable shipping route.

“One of the big reasons why a lot of the shipments have been routed into Canada from the United States during that time is because of the congestion at Los Angeles/ Long Beach stemming from the port strikes in 2015 – as well as the U.S. tariff congestion in 2018,” Byers says.

“Shippers got very frustrated, and they decided to go to the Pacific Northwest to bypass Southern California;

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now, a lot of the reasons why you guys gained market share [in B.C.] will be the same reasons why you will lose market share. If there are huge delays, shippers will just say, ‘We can’t risk Canadian protesters.’”

Vancouver Fraser Port Authority president and CEO Robin Silvester confirmed in late February that the Port of Vancouver has already seen more blanked – or cancelled – freight ship sailings from Asia so far in 2020.

The slowdown, attributed to Chinese factories still being in semi-lockdown after COVID-19 killed more than 3,100 people there, means that there’s no demand for shipping capacity from China to other markets, and the effect is starting to ripple through the global supply chain.

Silvester adds that the outbreak has already affected shipments of Teck Resources’ metallurgical coal into China, as well as shipments of fish on the same route.

In February, the port also reported the number of containers stuck on docks in Vancouver had spiked in the “significant disruption” presented by the blockades.

There were approximately 50 ships waiting at anchor versus the 30 or 40 normally waiting to be unloaded or loaded around this time of year.

The Prince Rupert Port Authority issued a similar statement of concern. It called for the clearing of the backlog of cargo and a resumption to normalcy “in the

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coming weeks,” although it focused its attention on the protest blockades rather than the coronavirus outbreak.

According to container analytics firm Alphaliner, there had already been 40 blanked sailings of container ships on the bellwether Asia-Europe shipping lane in the eight-week period following Chinese New Year in 2020. That amounted to a staggering 700,000 20-foot-equivalent units (TEUs) of capacity wiped off the board. The Asia-Europe trade loop is a leading indicator of global trends.

During the same period last year, there were only 15 blanked sailings on the same route, usually to accommodate Chinese manufacturers taking a two-week new year’s break in producing goods for export.

The same Alphaliner report shows the transpacific shipping lane (Asia-North America included) lost roughly the same freight capacity – about 680,000 TEUs – as the Asia-Europe lane in the same period.

In total, the global carrier sector lost more than 1.67 million TEUs of capacity due to cancellations, amounting to estimated revenue losses exceeding US$1.5 billion for shipping companies.

Byers says freight carriers are cancelling sailings to maintain shipping rates at a set level, but they cannot cut their way to profitability if the production lull in China continues.

The problem extends beyond maritime shipping.

Byers notes that rail lines – something in which Beijing has invested heavily as part of its One Belt, One Road trade route initiative – have been facing the same challenges of service disruptions as COVID-19 has spread beyond China and around the world Aga i n, Byers poi nts to the potentia l of a “V-shaped” rebound once the COVID-19 outbreak is contained and generates a transportation capacity shortage as railways, ships and planes try desperately to meet demand to move the glut built up throughout the system.

“If things go back to normal, what you are going to see is a tightening of capacity in a way that rates will just get driven through the roof. I would expect them to go as high as they’ve ever been in the last three to four years, because space will all of a sudden come at a premium, for air freight, ocean freight, intermodal, truck rates – everything will skyrocket.”

Baltic and International Maritime Council chief shipping analyst Peter Sand says the COVID-19 outbreak shows just how much China has intertwined itself into the core of the global supply chain, and disruptions like the ones in early 2020 expose the fragility of the entire system.

“When China sneezes, we all catch the flu,” Sand says in a report on the impact of the coronavirus outbreak on global shipping. “Since the SARS outbreak in 2003, the global economy has become much more interlinked with China, and the

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Aerial view of the Port of Prince Rupert. Ports in British Columbia have been grappling with major disruptions this year, from protest barricades that affected rail operations, to a sharp drop in the global container freight business due to COVID-19 • SUBMITTED

Chinese economy has grown to become the second largest in the world.… Nations heavily reliant on trade with China, such as Singapore and Japan, have issued recession warnings, and the coronavirus could also have a macroeconomic impact on advanced economies in the West.”

Byers agrees, noting that the COVID-19 saga might have triggered the dawn of a massive realignment in supply chains worldwide that makes China a destination to avoid.

“The U.S.-China trade war probably already pushed some companies out.… You had the scenario in China where wages are rising in a way where companies are already shifting outside of the Chinese market. The trade war sped everything up, and the outbreak is again another thing that will propel all that. “[Sourcing and manufacturing is] the same [as] shippers withdrawing shipments from Canada. If I’m exposed, if I’m operating in a certain country, and I’m a multibillion-dollar business – and this country is putting my entire business at risk – I have to look elsewhere. It could really be the last straw for a lot of U.S. importers to get out of China – maybe forever.” É

A LOT OF THE REASONS WHY YOU GUYS GAINED MARKET SHARE [IN B.C.] WILL BE THE SAME REASONS WHY YOU WILL LOSE MARKET SHARE. IF THERE ARE HUGE DELAYS, SHIPPERS WILL JUST SAY, “WE CAN’T RISK CANADIAN PROTESTERS” j Henry Byers Market expert, FreightWaves Inc.

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B.C. REBUILDS SHIPBUILDING

Federal strategy to promote Canadian companies credited for resurgence of oncemoribund sector

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ALBERT VAN SANTVOORT

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ritish Columbia’s shipbuilding industry has come back with a vengeance after virtually shuttering operations roughly 10 years ago.

“In Vancouver, we’ve never had the shipbuilding capabilities that we have today,” says Amy MacLeod, vice-president of corporate affairs at Seaspan Shipyards. “We were building barges [in the past], which was a great business, but it’s an entirely different scale of operation that we have today.”

A decade ago, Seaspan employed approximately 200 people in B.C.; that number has ballooned to more than 2,000 today, according to John McCarthy, Seaspan’s chief program officer.

Last June, the company delivered the first ship under the National Shipbuilding Strategy, a program introduced in 2010 to revitalize Canada’s naval fleet using Canadian shipyards. Seaspan delivered two ships under the program last year, and the work for West Coast shipyards doesn’t seem to be slackening.

In January, the company held a keel-laying ceremony to celebrate the beginning of construction for the Joint Support Ship, which MacLeod says will be the largest naval ship ever built in Canada.

These kinds of projects seemed out of the industry’s reach less than a decade ago. After sitting idle for three years, Canada’s largest shipyard, which is in Saint John, New Brunswick, shut down in 2003 and became a drywall factory. Without a stable flow of business, the shipbuilding industry fell dormant.

“The biggest thing is having a continuous build,” McCarthy says. “You can’t say, ‘I’m going to build ships for 20 years and then stop for 20 years.’ It just doesn’t work that way.”

Shipbuilding is capital intensive, and closing down shipyards means that required capital and equipment is sold, and people with shipbuilding expertise go elsewhere. This adds to the time and resources required to restart the industry. Shipyards are not like, say, the Winnipeg Jets, able to shut down for two decades and come back to a roaring consumer and fan base.

It typically takes a country 10 years to recapitalize a shipbuilding industry, according to McCarthy, but Seaspan was able to reduce that time under the federal shipbuilding strategy.

“This is a huge success story, and people should be talking about it more,” McCarthy says. “Unfortunately, it took longer than some people originally

envisioned, but that’s because they didn’t understand, once you have shuttered the doors on shipbuilding capabilities, how long it takes to recapitalize that, and it’s close to a decade.”

Public-private partnerships within the industry are critical to the industry’s long-term success.

The Canadian government is far from Seaspan’s only client; it has built cruise ships for Disney’s cruise line subsidiary and Carnival Corp.’s Holland America and Princess Cruises lines, as well as other commercial products.

However, contracts from the federal government help ensure a continuous workflow and level out some of the peaks and valleys experienced throughout the economy.

Shipbuilders are not the only ones benefiting from the National Shipbuilding Strategy. The knock-on economic effects have helped spawn new sectors.

By investing in the National Shipbuilding Strategy, the government has enabled large companies like Seaspan to feed the supply chain across Canada by issuing more than $1 billion in contracts to over 650 Canadian companies, according to McCarthy. Before the National Shipbuilding Strategy was launched, that number was zero.

Having a large anchor company like Seaspan not only creates opportunity for other business but, says Macleod, also drives socioeconomic benefits.

Seaspan has partnered with the University of British Columbia and the British Columbia Institute of Technology to develop programs and curriculums to train engineers and tradespeople for a career in shipyards.

By developing an entire supply chain, Canada’s shipbuilding industry is now able to compete on the world stage. While it may not be the size of industry behemoths like the United States, it can serve the international market in a meaningful way. McCarthy estimates that Canada’s shipbuilding industry is in the top 10 globally, and credits its rise to the National Shipbuilding Strategy.

“We’re eight years into the journey, and it’s really impressive how far we’ve come in that short period of time. So I believe Canada can be a player on the international stage.” É

IN VANCOUVER, WE’VE NEVER HAD THE SHIPBUILDING CAPABILITIES THAT WE HAVE TODAY. WE WERE BUILDING BARGES [IN THE PAST], WHICH WAS A GREAT BUSINESS, BUT IT’S AN ENTIRELY DIFFERENT SCALE OF OPERATION THAT WE HAVE TODAY j Amy MacLeod Vice-president of corporate affairs, Seaspan Shipyards

Seaspan Corp. has expanded its workforce from about 200 people a decade ago to more than 2,000 now • ROB KRUYT

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BIV MAGAZINE

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BIV MAGAZINE: THE GATEWAY ISSUE 2020 PUBLISHED BY BUSINESS IN VANCOUVER

5 QUESTIONS ON DIVERSITY

CHUNG CHOW

JILL EARTHY, INTERIM CEO, WOMEN’S ENTERPRISE CENTRE In February, Jill Earthy tweeted that she had just participated in her last all-white panel. Earthy is co-chair of We for She, an Influential Women in Business award winner and a diversity champion, and here, she answers five questions on diversity.

1. WHY DID YOU DECIDE THAT WAS YOUR LAST ALL-

we have to shift to action.

WHITE PANEL? I have been advocating for diversity and inclusion for most of my career. Although I have been focused on gender equity, my ultimate goal is deeper diversity and inclusion that considers all intersectionalities.

There were several circumstances which led to a lack of diverse representation on that particular panel, but I was deeply moved by the comments of the under-represented women in the room. Leaving that discussion, I knew that I needed to use my voice to be an ally. I am now much more aware and ask questions in advance of each speaking opportunity to ensure diverse voices and perspectives are represented. I also try to suggest different people who don’t always have the opportunity to lift up and support others. We are still in a period of education and awareness, and we need to use the opportunities

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2. WHAT DOES IT MEAN TO TRULY CHAMPION DIVERSITY? I believe it means using our voice to share our beliefs, and to ensure diverse perspectives are represented whenever possible. We are slowly shifting from gender diversity to diversity, inclusion and belonging. Diversity can be described as a fact (for example, the number of women on a board). Inclusion is a behaviour and belonging is an emotional outcome.

We recently launched the 2020 We for She action plan, which includes five key actions we can each take to champion diversity: promote and advocate, create positive mindsets, champion women, activate men and measure progress.

In order to more forward, all genders need to take action.

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WE ARE SLOWLY SHIFTING FROM GENDER DIVERSITY TO DIVERSITY, INCLUSION AND BELONGING

ASK THE 40

We polled BIV Forty under 40 winners about what they are doing to challenge themselves. Here are their answers.

j Jill Earthy Interim CEO, Women’s Enterprise Centre

I say yes to a lot of things.

Keeps things interesting Partner

I am coaching my son’s high school basketball team and we are off to the provincial championship

Varshney Capital Corp.

David Chapman

Relentless prioritization

Yellow Point Equity Partners

Praveen Varshney

3. UNCONSCIOUS BIASES CAN LEAD PEOPLE TO MAKE BUSINESS OR INVESTMENT DECISIONS THAT ARE NON-DIVERSE BY DEFAULT. HOW CAN

Managing partner Adil Ahamed Managing director

LEADERS SHIFT THEIR THINKING?

Destination Auto Group

We all have bias. We need to understand this and actively seek out additional perspectives. This path can be more challenging and can sometimes take more time and effort, but the outcomes are much stronger and include increases in resiliency, effectiveness, innovation and profitability.

The business case is clear for addressing unconscious bias and increasing diversity. A Boston Consulting Group study found that companies with more diverse management teams have 19% higher revenues. Yet it is easy to default to what we know and what we are comfortable with. We need to shift beyond this and take a more active role in embracing differences, championing others and leading authentically.

I continue to be diligent and more mindful as a leader

Setting goals beyond my lifetime Daryl Ee

4. WHAT HAS SHAPED YOUR PERSPECTIVES ON

Principal 18 Wheels Logistics

Chelsea Graham Western Canada regional director of operations CBI Health Group

By regularly doing something that makes me uncomfortable, like growing into new markets or speaking at events with larger audiences Cybele Negris Co-founder and CEO

AND ACTIONS AROUND DIVERSITY?

Webnames.ca

My perspective has been shaped by my own experiences and interactions, and actively working to embrace different perspectives. I have many role models and am constantly reading new research and reports.

Having been diagnosed with Parkinson’s disease in 2007, every day presents new and growing challenges. I challenge myself to live my daily life as closely as possible to what I would do if I was healthy

Learning to be OK with constantly living outside of your comfort zone because that’s where the growth happens Jeff Ward CEO Animikii

Have this internal trigger that forces me to toss myself into unknown situations to force growth Greg Malpass

5. HOW DOES DIVERSITY DRIVE INNOVATION? Bringing people together who represent different ethnicities, backgrounds and experiences is a key driver of innovation. W hen different questions are asked and thoughts are challenged, ideas are enhanced and outcomes become more robust and impactful. Diversity brings increased profitability, creativity, governance and problem solving. A recent study by McKinsey indicated that companies in the top quartile for ethnic and cultural diversity are 33% more likely to outperform companies in the bottom quartile. Organizations with inclusive cultures are six times more likely to be innovative and eight times more likely to achieve better business results, according to research by Deloitte.

Within the technology sector, women represent only 25% of the workforce and just 5% of technology founders.

Women entrepreneurs receive less than 3% of venture capital funding, and less than 1% goes to women of colour. We need diverse representatives creating the technologies of the future, and we need diverse leaders influencing decisions within large organizations to ensure continuous innovation that benefits all. We are missing out on a huge opportunity. É

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James Smerdon

CEO Traction on Demand

Constant, aggressive learning about new technologies in our field Ian MacKinnon Co-founder and CTO Later Media Inc.

Vice-president and director Colliers International

I say yes first and then figure out how to execute

I challenge myself to actually assist and facilitate the advancement of women in science and business

Andrea MacLeod Manager, environmental programs Vancouver Fraser Port Authority

Caitlin Dunne Pacific Centre for

Pushing myself and my team to be a little better each day

Reproductive Medicine

Cody Green

Painting a vivid painted picture for three years from now

Canada Drives

Co-director

Founder and co-CEO

President and CEO

Learning. I have just enrolled in a course through the Harvard Extension School

Meetingmax

Danielle Wilson

Jeff Duncan

President and founder Sweet Peanut

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Plugging in to protect the environment

We collaborated with the Government of Canada, BC Hydro, and terminal operators to install shore power at two container terminals so ships can run on clean energy while docked. It’s just one way we are working to protect the environment.

Learn more at portvancouver.com/shorepower

Vancouver Fraser Port Authority BIV_Gateway2020_32R.indd 32

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