Container crunch could add to price pressures, Port of Vancouver warns
The head of Canada’s largest port anticipates it will run out of container capacity by the second half of this decade, threatening to prolong the price pains of Canadian importers and exporters.
Robin Silvester, president and CEO of the Vancouver Fraser Port Authority, said that even with a current project set to expand capacity by the equivalent of 600,000 containers, the Port of Vancouver’s current spacing will mean logjams and worrisome congestion could begin anytime between 2025 and 2028.
Container capacity broke records in the first half of the year at the port, the federal agency reported on Sept. 23. The number of containers flowing in and out of the maritime gateway surged 24 per cent from the same period last year and topped 2019 figures by 15 per cent, a reflection of growing demand for consumer goods and raw materials amid the pandemic.
“It’s frustrating that we can sit here and look five years out and see that we’re going to be short on capacity,” Silvester said in an interview.
The grim outlook comes at a time when, worldwide, ocean ports are experiencing severe backlogs that have ships waiting days or weeks to unload cargo as a result of rotating consumer demand during the height of the COVID-19 pandemic, said Trevor Heaver, professor emeritus at the University of British Columbia’s Sauder School of Business.
“The current situation is very much exceptional,” Heaver said. As people stayed home because of virus containment measures, he said, they piled items in their online shopping carts that led to shortages for such products as cleaning supplies and electronics. Businesses, in turn, began stockpiling inventory, which boosted demand for shipping containers to transport materials throughout the supply chain. At the same time, natural disasters — such as a typhoon in China — along with labour shortage at ports, either due to outbreaks or low supply, exacerbated container pile-ups at various ports, he said.
Currently the container capacity at the Port of Vancouver is at 85 per cent utilization, but with usage for the large, metal boxes that transport many items, from home furnishings to machinery, expected to climb two to three per cent annually, “it’s not a great situation” for the future, Silvester said. A spokesperson for the port authority said container operations are “fluid” currently with limited congestion and one ship at anchor, unlike the 70-ship backlog beleaguering ports in Los Angeles, Calif. this week “Having said that, our terminals are operating at a very high level which creates the risk of congestion as a result of supply chain disruptions,” the spokesperson said in an email. A separate report from A.P. Moller – Maersk A/S, one of the world’s largest transport and logistics company, said, overall, capacity at the port has become constrained. Vessel waiting time had reached five days, the Sept. 23 report stated
The port authority is currently in the process of getting permit approval to build an expansion to the Roberts Bank Terminal that will make additional room for the equivalent of 2.4 million containers, but the proceedings have been in the works for 10 years and the earliest the capacity will be available is in the first half of the 2030s, Silvester said. “We really can’t see anything we can do to rectify (the shortfall) other than to go ahead as fast as we can with the Terminal 2 project,” he said. “We’ll have an uncomfortable period.”
If the forecasts prove to be true, Silvester said, it could add to inflation pressures. Already, consumer prices are rising sharply largely due to supply chain bottlenecks, with inflation hitting an 18-year high of 4.1 per cent in August.
“No doubt, (there) will be pressure on prices for importers — for all of us (too with) the things you buy at the shops — and it will put pressure on exports. It’ll increase the costs of exporting, making them less competitive in global markets.”
Source: Financial Post