A C$750 million project to build a sprawling logistics complex connecting to the Port of Prince Rupert’s container terminal sends a strong signal to ocean carriers looking for a better import-export balance and taps into new markets. 

US-bound cargo is no longer flowing through the ports of Vancouver and Prince Rupert like it used to, Canada’s two Class I railroads have told their investors, blaming this summer's dockworker strikes and a broader slowdown in North American imports from Asia. 

“We continue to see lighter US discharge at Rupert and Vancouver, and we’re working hard with our customers to get that volume back,” Doug MacDonald, chief marketing officer at Canadian National Railway (CN), said during CN’s third-quarter earnings call Oct. 24.

The next day, John Brooks, MacDonald’s counterpart at Canadian Pacific Railway (CP), called the freight dip a “structural change,” with fewer US cargoes running on its network connecting to Vancouver. And recent talks with container lines based in Europe and Asia “didn’t paint a very bright picture” for future import demand, Brooks added. 

“Certainly, there’s a reason why Vancouver and Prince Rupert have had success,” he said during CP’s earnings call, a reference to economic advantages such as favorable currency exchanges, as well as port fluidity. “As things tighten back up and as the volume improves in [Los Angeles]-Long Beach, that is really what will be the tell on if you see that freight moving back up there.” 

But the cracks in the Western Canadian gateway’s attractiveness to container lines, and importers and exporters out of the US Midwest, were showing before this July’s work stoppage — the longest on the West Coast in 25 years — and the decline in import demand across North America. 

US imports to the Midwest via Western Canada began softening in early 2021, according to an analysis by Lawrence Gross, an intermodal analyst and Journal of Commerce contributor. International cargoes through Canada then dropped precipitously in late 2022, hitting lows not experienced since 2017, as cargo shifted to BNSF Railway and Union Pacific Railroad networks connecting to the ports of Seattle and Tacoma, Washington. 

On the basis of containerized import volume — not intermodal rail moves — Vancouver has actually gained a greater share of US discretionary cargo, according to a Journal of Commerce analysis of inbound laden volumes through the BC ports and the Pacific Northwest. Vancouver, Canada’s largest port, commanded 51.9% of all inbound cargo into the region in the first three quarters of this year, having steadily seen its share rise from below 46% just four years ago. 

Prince Rupert, however, has experienced a steady decline of import share for the last few years. The port’s share of inbound cargoes coming through the region slipped to 12.5% in the first nine months of the year, down from more than 17% in early 2020.  

First came the blanks 

When North American port congestion snarled during the COVID-19 pandemic, container lines began skipping calls to Prince Rupert to restore some degree of reliability to out-of-whack schedules, racing to join the lines building off the coast of Southern California. 

CN, the sole railroad serving Prince Rupert, failed to fully capitalize on the surge in inbound volumes to North America due to equipment imbalances, according to three people familiar with the matter. Record import container rates made carriers loath to let equipment move too far inland, thereby reducing the time it took to get empty containers back to Asia. 

Similar to many other major North American container gateways, dwell times at the DP World-operated marine terminal at Prince Rupert soared as the mix of inbound volumes tilted toward more Canadian domestic cargoes. That, in turn, made it more difficult to build density for US destinations other than Chicago, cramping service, according to two of the sources familiar with cargo flow during the period. 

Then the International Longshore and Warehouse Union (ILWU) Canada went on strike. The length and intensity of the strike stunned the Canadian shipping industry. There was an announcement of a 24-hour lockout by West Coast employers in May 2019, but while ILWU workers protested automation at Vancouver’s Deltaport terminal, their Prince Rupert brethren kept working, according to four people familiar with the matter. 

This summer’s work stoppage was different, with ILWU Local 505 showing full solidarity by not working ships. To some in the industry, that was a sign of not just international labor increasingly flexing its power, but new and more aggressive local leadership. 

US discretionary cargo will return gradually, CN CEO Tracy Robinson said during the earnings call, touting the ability of Chicago importers to get goods two days faster through Rupert than any other routing. Customers moving cargo through Prince Rupert say they’ll ramp up volumes over the next year, added Ed Harris, chief operating officer at CN. 

Changing the ratio 

Robinson said the C$750 million project to build a rail-to-container transloading facility at Prince Rupert showed CN’s confidence in international intermodal business and how it was leaning into its structural advantages. Those include a deep harbor, super-post-Panamax cranes and a direct rail connection to the largest North American freight hub at Chicago. 

In recent years, CN has invested hundreds of millions of dollars in new sidings on the corridor connecting Edmonton with Prince Rupert, increasing its capacity. CN is contributing to the transloading project, along with the port, the Canadian federal government, the government of British Columbia and Ray-Mont Logistics, an existing transloader at Prince Rupert.  

The opportunity to tap outbound volumes of forest products, resins and agricultural commodities is more than just a volume play. It’s seen among stakeholders as pivotal to achieve a better import-export mix, thus giving ocean carriers a greater incentive to call Prince Rupert. 

In the last decade, the import-export ratio has widened from more than two-to-one to closer to three-to-one. Exports currently account for 33% of Prince Rupert’s volume. The transloading project promises to change that, delivering an annual capacity of 400,000 TEUs. 

“It will be enormous in size and scale — 10 times the size of the temporary one,” Brian Friesen, vice president of trade development at the Price Rupert Port Authority, told the Journal of Commerce in mid-October. 

When it opened in 2007, Prince Rupert’s Fairview Container Terminal offered West Coast importers a new option, even as many grumbled that it wouldn’t work. Cosco Shipping saw the opportunity, launching the first container service to Fairview later that year. Automotive, consumer goods and other US importers, drawn to the end-to-end transit reliability and ability to avoid US West Coast longshore labor issues, urged more container lines to start calling the then-relatively obscure bulk port, and they did just that. 

Before the pandemic, Prince Rupert stakeholders, including global terminal operator DP World, had envisioned a sprawling logistics park seamless interwoven into marine terminal operations. The timing appears ripe for the port’s second act.