Ocean Transport: Next door competition knocks

Friendlier international trade policies and recent container terminal investments by Canada and Mexico should keep ports across the United States looking over their shoulders.    U.S. ports coast to coast enjoyed a rebound in their container volumes during 2017, but the country’s neighbors to the north and south are stepping up their game through the initiation of new, friendly international trade policies that are expected to attract more cargo to their shores.
   In fact, the Canadian market is already benefitting from the Comprehensive Economic Trade Agreement (CETA) with the European Union, which entered force Sept. 21, 2017.
   In addition, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was signed on March 8 and includes Canada and Mexico, as well as all the original Trans-Pacific Partnership signatories—Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam—excluding the U.S.
   “Once it enters into force, the CPTPP will reduce or eliminate almost all tariffs between CPTPP member countries, while removing non-tariff barriers to trade,” the Canadian government said.
   In regards to when the trade deal will take effect, New Zealand’s Ministry of Foreign Affairs and Trade said it believes it “could happen within a year to 18 months of signature.”
   The world’s container carriers are also taking notice.
   Maersk said in its recently released Mexico Trade Report that it believes CPTPP will spur both Canada and Mexico to compete more aggressively for U.S. trade opportunities.
   “Long Beach/Los Angeles remains the top container port in North America, but congestion related to rail, trucking and other variables are impeding it from competing as effectively as it could be, providing opportunities for Mexican ports of call such as the Lazaro Cardenas semi-automated TEC II terminal to compete,” Mario Veraldo, managing director for Maersk Line in Mexico and Middle America, said in the report.
   APM Terminals’ TEC II terminal on Mexico’s West Coast, which can already handle the world’s largest containerships, received its first vessel in February 2017.
   “On the imports side, CPTPP will increase Mexico’s attractiveness as a gateway for trade to the U.S.,” added Jaap de Mots, head of trade and marketing for Maersk Line Mexico and Middle America, and an author of the carrier’s report.
   “For exports, we believe Mexican agriculture to be among the main beneficiaries of CPTPP in 2018, but it is going to take time for Mexican industry, as well as agriculture, to diversify as a whole and explore the opportunities that the trade agreement provides,” he added.
   In regards to Mexico’s exports, Veraldo told American Shipper that Maersk firmly believes Mexico will be one of the countries in the world that will continue to provide a lot of food, particularly avocados and bananas. He noted how Mexico has a lot of land available to produce food.
   Mexico also has trade leverage with its booming automobile industry, as more manufacturers continue to set up shop there. To keep these manufacturing plants humming, they must receive a continuous flow of parts shipments.
   Canada’s West Coast ports already have strong ties to transpacific container shipping, and its outlook in this trade appears to be growing stronger.
   At British Columbia’s Port of Prince Rupert, North America’s closest container port to Asia, DP World completed its expansion of the Fairview Container Terminal in 2017, increasing the facility’s annual container-throughput capacity by 60 percent.
   Once cargo arrives at the Port of Prince Rupert, it can be swiftly transported using Class I railroad Canadian National to retailers and manufacturers in the U.S. interior, allowing shippers to avoid congestion at U.S. West Coast ports.
   “The Port of Prince Rupert remains well-positioned to accommodate growth of Canadian trade in the Asia-Pacific region, and we continue to advance expansion that will see us become Canada’s second largest port by volume in the next decade,” said Bud Smith, chair of the Prince Rupert Port Authority.
   Trade with Asia has also benefitted British Columbia’s other longtime container port at Vancouver.
   “Year-over-year we continue to see an increase in the global demand for Canadian products shipped in containers and Canadian demand for consumer and manufacturing goods from Asia,” said Robin Silvester, president and CEO of the Vancouver Fraser Port Authority. “To meet future demand, we are taking steps to ensure the Port of Vancouver is ready to handle growing container volumes through Canada’s West Coast. A number of investments in infrastructure are already underway in the port to build container capacity.”
   Overall, Maersk is projecting total container volumes for the U.S. will grow just 2-4 percent in 2018, while it’s forecasting growth of 7 percent for Canada and 6 percent for Mexico.
   This appears to be fair projection on the part of the ocean carrier, considering the U.S. continues to grapple with tightening trucking capacity, which has exacerbated congestion at some of the major ports around the country.
   Trucks remain an essential ingredient to transporting containers to and from the terminals.
   While changes in Canadian and Mexican trade policies, as well as these countries’ respective container terminal infrastructure investments, aren’t expected to initiate a wholesale drain on U.S. port volumes, it’s a competitive knock on the door worth recognizing.

Desormeaux is Associate Editor of American Shipper. She can be reached by email at hdesormeaux@shippers.com.