Barry Prentice

Churchill and Prince Rupert: A Tale of Two Grain Ports

Barry Prentice, PhD Professor, I.H. Asper School of Business

Dept. Supply Chain Management, Transport Institute University of Manitoba

December 12, 2011

How do we effectively use the ports of Churchill and Prince Rupert?

•  What are the incentives for the private sector to utilize these ports?

•  What is the likely impact on these ports of CWB change?

•  How much will grain sales through these ports change?

•  Are there profitable strategies for using these ports?

•  Are there policy initiatives that would be desirable for the grain marketing, handling and transportation system?

Port Nelson or Port Churchill? Bay route began the fall 1910 completed September 1929. By 1920, $13.9 million spent on the rail line and $6.3 million on Port Nelson. Churchill was selected as the port in 1927.

Hudson Bay Railway

Length: 627 miles

Fleet: 25 locomotives 80 railcars

Traffic: 19,500 carloads

Perishables Automobiles Construction material Heavy and dimensional equipment Scrap Hazardous materials Kraft paper Concentrates Containers Fertilizer Wheat/grain

VIA Rail

Port of Churchill Bulk Shipping program 2011

Traffic: four berths 90-95 percent of all traffic is grain 50 million litre petroleum terminal 82,000 sq. ft. warehouse

140,000-tonne elevator Unload rate 100+ railcars per day Load out rate 1,200 tonnes per hour Panamax vessels

Viability of Churchill Grain Terminal?

•  Small catchment area (need for cross-hauling)

•  Dependence on Board grains for majority of traffic

•  Non-grain company ownership terminal •  Competition with Thunder Bay-Montreal route •  Dependence on high-cost short-line railway

Source: Jean-Marc Ruest, Richardson International, 16th Fields on Wheels, Winnipeg, 2011

Prince Rupert Strategic Advantages

•  Closest North American Port to Asia

•  Deepest natural harbor in North America

•  Safe, sheltered & efficient access from international shipping lanes

•  Exceptional community & labor support for expansion

•  Best crossing of Rocky Mountains from west coast (rail grade under 1%)

•  Trains run longer, faster (less urban congestion)

•  Reliable - Fewer weather-related interruptions

•  No congestion on main line (<25% utilization)

•  CN invested in capacity expansion and upgrades

Marine Rail

Source: Andrew Hamilton, Prince Rupert Port Authority “Welcome to North America’s Leading Edge” 15th Fields on Wheels, Winnipeg, 2010

Source: Andrew Hamilton, Prince Rupert Port Authority “Welcome to North America’s Leading Edge” 15th Fields on Wheels, Winnipeg, 2010

Viability of Prince Rupert Grain Terminal?

•  Board grains account for 85- 90 percent of the traffic in most years

•  Ownership, financing, and legal structure of elevator is complicated

•  Financed by Alberta Government, losses added to outstanding principal – due 2035

•  Grain companies have incentive to use PRG as a surge terminal

•  Revenues to CN Rail ~ $100 million annually Source: Brian Hayward, Aldare Resources “Back To The Drawing Board” 16th Fields on Wheels, Winnipeg, 2011

Prince Rupert 1 Facility

209,000 MT Storage 4.6 MMT Avg. Annual Movement

Inventory Turns ~ 22

Churchill 1 Facility

140,000 MT Storage 0.5 MMT Avg. Annual Movement

Inventory Turns ~ 3.6

Vancouver 6 Facilities

954,290 MT Storage 14.6 MMT Avg. Annual Movement

Inventory Turns ~ 15.3

Thunder Bay 8 Facilities

1.25 MMT Storage 5.9 MMT Avg. Annual Movement

Inventory Turns ~ 4.7

Grain Terminals and Inventory Turnover

Source: Derived from - Mark Hemmes, Quorum Corporation, “Where Are We Going? - A Supply Chain Perspective” 16th Fields on Wheels, Winnipeg, 2011

Port of Prince Rupert versus Port of Churchill

•  Year round operations

•  Asian market focus •  Bulk and

containerized freight •  CN mainline •  Mix of grain, coal,

forest products, containers, potash

•  July to October season

•  European-African market focus

•  Bulk freight only •  HBR short-line •  Grain dependent

Churchill Strategic Advantages

•  The Arctic has the largest undeveloped reserves of minerals in the world. •  Churchill is the only deepwater Arctic Port in Canada and the shortest route. •  The Northwest Passage could be a significantly shorter global trade route

Tourism, Mining and Defense are

growth industries

New airships under construction

How do we effectively use the ports of Churchill and Prince Rupert?

•  What are the incentives for the private sector to utilize these ports?

•  What is the likely impact on these ports of CWB change?

•  How much will grain sales through these ports change?

•  Are there profitable strategies for using these ports?

•  Are there policy initiatives that would be desirable for the grain marketing, handling and transportation system?

Conclusions

Port of Churchill: - The port will never close because of its strategic military value - Climate change presents positive and negative potentials - Tourism should continue to grow - Grain traffic will require enough volume to pay variable costs - Resource development and transshipment could replace grain

Port of Prince Rupert: - Positive future in general - Grain terminal needs ownership change - Containerized wheat shipments could become new traffic