(The following editorial appeared on the Chronicle Herald website on July 17.)
HALIFAX, N.S. — The downturn in the U.S. economy is hitting many North American ports hard, especially on the East Coast. Halifax is no exception.
The American subprime mess flooded the market with housing stock as people unable to keep up with their debts defaulted on mortgage loans and lost their properties to foreclosure. That increase in supply then drove home prices down in general. Meanwhile, the slowing U.S. economy, in large part due to skyrocketing energy costs, has translated to fewer home sales. At the same time, the weakening U.S. greenback has made imports pricier for American shoppers.
The impact of all these events on the shipping business, not surprisingly, has been a drop in container traffic carrying consumer goods to North America. For example, imports into the U.S. of big-ticket items traditionally sought by new home buyers, like furniture and appliances – the types of goods that are most efficiently moved by sea – are reportedly down 20 per cent from last year.
Shipping lines have also had to deal with sharply higher oil prices. Bunker fuel now represents more than half of what it costs to operate a vessel.
That’s why shipping lines, to stay competitive, have been aggressively consolidating routes and reorganizing vessel use to maximize efficiency.
CN’s recent decision to drop the number of trains serving Halifax container traffic from two daily to just one is based on similar, sound reasoning. Although the optics aren’t great for a port now facing challenges – or, as Port Authority CEO Karen Oldfield puts it, handling some “short-term chop” in the business outlook – the railway can’t be faulted for wanting to save money by moving the same number of containers on one train rather than two. As long as service to shippers is not affected, for instance by delaying product to market – CN insists its customers will not be hurt – the impact of the rail line’s actions should hopefully be minimal.
The Port of Halifax’s team – combining the port authority, terminal operators and CN – has been aggressively looking for new business in the face of the current downturn. Although the numbers – container traffic is down more than 15 per cent since the start of the year, continuing the trend of recent years – suggest those efforts haven’t paid off yet, Ms. Oldfield says she’s confident the port is well-positioned for future growth.
Besides, as port authority officials have pointed out in the past, Halifax’s success as a port relies on far more than just container traffic. Non-container cargo actually accounts for the majority of tonnage that moves through Halifax. And the cruise line sector is a major contributor, as well.
Meanwhile, according to experts, that future growth in East Coast container traffic is indeed coming. Despite the current downturn, analysts say, container traffic for northeast North American ports is expected to surge in the next decade as bigger ships link Asia with North America via the Suez Canal.
Projections are at least two to three million TEUs (20-foot equivalent units) of container traffic will be added to northeast coast tonnage by 2015.
Countering criticism that fuel costs may crimp that growth, port officials reasonably point out that the bigger, more efficient ships now rolling out will still be the cheapest transportation available, and that global trade is too important to the world economy to be seriously threatened.
The strong belief in future container traffic growth, in fact, is driving development of two new private container terminals, one on the Strait of Canso and the other in Sydney.
The question, say critics, is whether there’ll be enough container traffic to support three destinations in Nova Scotia – Halifax, Melford and Sydney. Halifax Port Authority officials say they can easily double their capacity, up to 2.5 million TEUs, while Melford’s capacity will be 1.5 million TEUs and Sydney’s another 750,000 TEUs. Considering the private money being invested – $300 million in Melford, $200 million in Sydney – backers of the two projects, ready by 2011 and late 2010, respectively, are also clearly confident that the business will be there.
But, as one official said, no one has a crystal ball. Nova Scotia’s container industry is living in interesting times.