Recent Western Producer reporting about dysfunctional Pacific Northwest ports made clear an often overlooked fact: producers gain access to empty containers at the whim of ocean carriers, not railways.
But before we can hold these behemoths to account, we have some homework to do.
Three ongoing transformations in the shipping industry will affect producers’ access to containers over the next five years. First, a digitization revolution is occurring. Anyone who has ever called a freight forwarder to book containers is mystified by the inefficiency and lack of transparency. Comparing prices is impossible. Vessel and container tracking is sporadic and unreliable.
Now, a plethora of IT companies have entered the space, giving cargo owners increased price visibility, simpler documentation requirements, and enhanced traceability.
Carriers like Evergreen and Yang Ming are contracting with third-party online booking platforms and increasingly dealing with cargo owners directly. Better data is going to allow dynamic pricing similar to that used by airlines and will drive down the cost of repositioning containers.
Second, operations of ocean carriers are becoming increasingly integrated with global port operators. The pursuit of economies of scale has led to gigantism in ships, the largest of which can hold 22,000 20-foot containers (TEUs), and to the consolidation of shipping companies in three monopolistic shipping “alliances”: THE, 2M, and Ocean. Mega-ports then developed in tandem with mega-ships, and a hub-and-spoke system grew up where the big ships only operate on trunk routes.
What does that mean for agricultural shippers? Companies like Maersk, the world’s largest shipping company, is investing in a transload facility at CP’s intermodal site so that its empty containers can be rushed back to “high-value” Asian markets, never going inland. To the extent carriers do invest in inland projects, they typically work with big port operators.
Third, dysfunction around ports specifically related to agricultural transloading serves as a bottleneck, hampering carriers that want to get their boxes back to Asia, and leading to detention and demurrage charges so hated by cargo owners.
Vancouver intermodal and transload facilities are a disorganized jumble and do not inspire confidence in carriers who earn negligible fees for backhaul loads of peas and beans. More than 250,000 containers leave Vancouver empty each year.
What can we do? First of all, government agencies and industry groups have a role to play.
Better advocacy must be done, and Canada should start by looking at the United States where the soy industry established the Soy Transportation Coalition to tackle transportation bottlenecks. The Agriculture Transportation Coalition (AgTC), a lobby specifically addressing ocean shipping issues, recently teamed up with Tradelanes, an IT company that works with agricultural cargo owners to digitize trade and precisely identify ag shippers’ problems at port.
We also need better access to data. We must better tap our robust trade commissioner network, relying on them not just for spreadsheets of buyer names and addresses, but also for on-the-ground information about logistics conditions affecting buyer decisions.
Finally, we must spend some money. This year the Saskatchewan government will spend about $4.2 million on its overseas offices and another $3.5 million on the Saskatchewan Trade and Export Partnership.
Federal funding through Protein Industries Canada will spend another $153 million trying to develop 200 new protein products. Public money should also be diverted to ensure a supply of containers on which all these exports depend.
We could bang on the doors of the ocean carriers, telling them to shape up or ship out. But if we haven’t done our homework, and we haven’t, such actions will produce few results.
Paul Sinclair is associate professor at the University of Regina’s faculty of business. Boey Leung and Danyka Maurer are graduating students in Regina’s business administration program.