Vessel waiting times at the Port of Vancouver this year are as bad as they’ve ever been, says the company that monitors grain movement for the federal government.
And it doesn’t look like they’re about to improve any time soon.
Mark Hemmes, president of Quorum Corp., said some ocean vessels scheduled to haul western Canadian grain to overseas customers waited nine weeks or longer to be loaded earlier this year.
Other ships were partially loaded and then forced to wait for more grain as railways and export terminals matched incoming deliveries with waiting ships.
Meanwhile, port terminal capacity at the West Coast is fully booked until late February or early March.
“I don’t think it’s time quite yet to start ringing the alarm bells, but it’s time to get our heads out and notice that we’ve got a problem,” Hemmes recently told members of the Inland Terminals Association of Canada in Saskatoon.
“This is the third year in a row where this problem has been going on and every year we look at it … it’s getting worse.”
Statistics used to measure grain movement don’t always paint an accurate picture of what is happening in the industry.
Grain deliveries to the country elevator system are up slightly from 2012-13, Hemmes said.
As well, the number of rail cars spotted at country locations has been running close to 10,000 per week for the past couple of months, which is a high number compared to other years.
However, demand for rail cars is extremely high this year.
Unfilled car orders are increasing weekly and wrong grain is arriving on the West Coast at the wrong time.
As a result, ships are spending more time than ever anchored at port.
The only saving grace is affordable ocean freight rates, which translate into lower demurrage costs.
The cost of a Panama vessel capable of hauling 50,000 to 60,000 tonnes of grain ranges from $5,000 to $7,000 a day this year, down from the 10-year average of $25,000 to $30,000 per day.
Inexpensive shipping rates and demurrage charges have afforded grain companies more leeway in managing logistics and booking ocean vessels.
“They (the inexpensive rates) kind of gave a lot of grain companies an opportunity to get a little bit sloppy in how they manage some of the logistics of these vessels,” Hemmes said.
“(Earlier this year), some boats sat for as long as 65 days out on the coast waiting for grain.”
Numerous factors are contributing to shipping congestion and delays at the West Coast.
For starters, grain production in Canada is increasing because of improved production practices and greater spending on agricultural inputs.
Producers routinely grew 40 to 45 million tonnes of grain and oilseeds in the 1980s, but 50 to 60 million tonnes are now considered normal.
This year, volumes are expected surpass 65 million tonnes, approaching 70 million.
As well, prairie farmers are diversifying their crop mix, meaning larger volumes and more types of grain are being squeezed through existing export channels.
West coast terminals could expect to ship 16 or 17 million tonnes of grain and oilseeds 10 or 15 years ago, but it has averaged more than 20 million tonnes for the last four years, with this year’s total nearing 21.5 million.
Further complicating the situation are rail and ocean freight differentials that provide strong incentives for grain companies to move prairie grain west rather than east, through Thunder Bay.
“We’ve got a problem right now, and if you want to talk about the future, we’ve got to talk about the issues that we’ve got today,” Hemmes said. “And part of the problem that we’ve got right now is very dominant movement toward the West.”
Tim Heney, chief executive officer at the Thunder Bay Port Authority, said there is no congestion at Thunder Bay this year.
Grain movement through the Great Lakes has been down this year, although Heney is optimistic that this year’s large crop will translate into increased volumes into next year.
Grain movement patterns are adjusting to the current environment, which involves inexpensive ocean freight on the West Coast and an open marketing environment without single desk selling, he added.
“I think there’s more grain heading off the West Coast … trying to take advantage of those cheap Panamax ships out there,” Heney said.
“And I think it’s an adjustment period between the companies here.… We have different ownership now and also no wheat board … so those changes have to be worked through.”
Accommodating larger grain export volumes in Canada could be a tall order, especially if demand for rail capacity from the oil and potash industries continues to grow.
Hemmes said using available capacity in Thunder Bay is one solution, and ensuring better co-ordination and faster unload times at Vancouver is another.
“Our future is going to be tied to improving our rail car unloading capabilities at the West Coast,” Hemmes said.
More tonnes of Canadian grain could move through U.S. corridors to the Pacific Northwest and the Gulf Coast, Hemmes added.
That has the potential to relieve pressure at Vancouver, although improving efficiencies at home is critical.