Prince Rupert Traffic contributes to Intermodal Gains at CN

Implications: A second container vessel will make weekly stops at CN’s container terminal in Prince Rupert BC potentially bringing 1000 more containers per week to CN for movement to the Midwest and possibly raising the terminal’s inbound volume to over 2,000 containers per week.  At that volume, more than one train per day will be needed to handle the traffic and the train movements will be more evenly distributed throughout the week, decreasing the equipment and crew costs per load. Thanks to the rising price of bunker fuel that is increasing the shipping costs for ocean carriers, CN’s investment in this line may break even faster than even they might have anticipated.

Analysis:

While U.S. West Coast ports were reporting significant traffic losses, Canada’s terminals in Vancouver and Prince Rupert were registering 5% gains for all of 2007 and for YTD in 2008. In Vancouver, CN has to share the traffic with CPR, but they own all of the traffic coming into Canada via Prince Rupert and have recorded traffic gains of 6.5% in 2008 versus CPR’s 1.5% increase in intermodal traffic. For foreign shippers, the overall transit time from the Orient to Chicago is about the same via most West Coast ports, since the lower transit times via water to the Canadian ports is offset by higher land transit times by train in Canada versus the U.S.  Steamship companies will see lower costs and may start shifting more traffic to the northern ports.

 

Last October when the first ship began making weekly calls at Prince Rupert, it looked like it might take a long time to get traffic up to the densities needed to justify the investment in track and structures that were required to handle the inbound shipments. All West Coast ports and railroads were upgrading their capacities and container handling efficiencies and it looked like the only advantage Prince Rupert had was a shorter sailing time. The dramatic jump in fuel costs has given the northern ports another advantage, and CN’s intermodal traffic gains seen to indicate that Canadian ports are starting to gain market share.