Canadian National and rival Canadian Pacific Railway were rationing space on trains travelling in the Vancouver area and prioritized some commodities over others to deal with congestion, causing complaints from shippers.

Canada is a top shipper of crops, fertilizer, oil and pulp, but has in recent years needed government intervention to keep commodities moving, as new free trade deals with European and Pacific nations drive up demand.

Fluidity in Vancouver improved this month because of actions taken by CN and other companies in the supply chain, CN spokesman Jonathan Abecassis said in a statement. He was not immediately available for comment on whether CN is continuing to ration space and prioritize some commodities.

The Canadian Transportation Agency is holding a hearing next week in Vancouver for shippers to voice concerns about congestion at the port in late 2018 and early this month.

— Rod Nickel is a Reuters correspondent covering the ag and mining sectors from Winnipeg.

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That move prompted Canada’s transport regulator last week to start an investigation into rail services around Port Metro Vancouver, after shippers complained of “discriminatory treatment of certain commodities” by Canadian National Railway (CN) and Canadian Pacific Railway (CP).

Canada is a top shipper of crops, fertilizer, oil and pulp, but has in recent years needed government intervention to keep commodities moving, from ordering railways to clear grain backlogs to Alberta’s crude oil curtailments this month due to full pipelines.

Free-trade deals with the European Union and Pacific nations are boosting demand for commodities, adding further strain to Canada’s transportation infrastructure. Currently, the U.S. and Mexico account for at least 75 per cent of Canadian exports.

Both railways last month rationed the volume of traffic around Vancouver by restricting movement of some commodities, such as peas, lentils, pulp and paper, according to shipper notices seen by Reuters.

The restrictions, called embargoes, are usually a tool of last resort for railways to ease congestion by temporarily limiting traffic. But in December, shippers allege that CN and CP used them more often than normal, harming some commodity sellers more than others in an effort to push through the maximum overall volume.

CP imposed embargoes on three specific transloaders — facilities that empty rail cars into containers for loading onto vessels. These transloaders handle peas and lentils, but were prevented from doing so in December for days at a time, said Greg Northey, director of industry relations at Pulse Canada.

‘Total mess’

The delays caused some containers to miss their vessels, triggering contract breach penalties, Northey said.

“It was a total mess,” he said.

Embargoes also added costs for pulp and paper producers, who are trying to bolster ties with Asian buyers amid ongoing tariff disputes with the United States.

For a second consecutive year, the railways imposed more embargo restrictions on pulp and paper than usual in December, leading to shipping delays, according to the Forest Products Association of Canada, whose members include Canfor and West Fraser Timber.

“We can’t do business like this if we want to diversify markets,” said association CEO Derek Nighbor. “It’s just a missed opportunity.”

Poor rail service costs the forest products industry $500 million annually, the association said. December’s problems cost mills as much as a further $1 million each, it said.

Several shippers said the transportation agency will be asked at a hearing in late January to consider whether the railways discriminated against shippers that fill manifest trains — those carrying a variety of products. The investigation could also consider whether the railways violated their common carrier obligations to haul a full range of freight.

For CN and CP, the investigation raises the risk of further regulation in an industry where they already complain of too much government control.

In a statement, CN said the transportation agency’s investigation should examine the full supply chain and take into account the impact that rain and wind had on operations late last year.

CN said freight shipments are up 10 per cent from November to mid-January year-over-year.

CP CEO Keith Creel said he takes “great exception” to CP being included in the agency’s investigation, adding in a statement that he is not aware of formal complaints.

Since the railways’ embargo and permit system was implemented in December to clear backed-up freight, the flow of cars to grain terminals has improved. But it is unclear how the backlog happened in the first place, said Wade Sobkowich, executive director of Western Grain Elevator Association. It indicates that railways have failed to invest in adequate capacity to move goods at peak times, he said.

Canpotex, the offshore sales arm of potash producers Nutrien and Mosaic Co., has also been affected by congestion and delays around Vancouver, spokeswoman Natashia Stinka said.

— Reporting for Reuters by Rod Nickel in Winnipeg; additional reporting by Susan Taylor in Toronto.

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Regina-based, publicly-traded AGT announced Monday it has reached a long-term terminal services agreement with Fibreco Export Inc., a wood fibre and canola meal exporter majority-owned by forest products firm Tolko Industries.

The 20-year agreement calls for Fibreco to add a new agriproducts export terminal at its own bulk handling and loading facility on the north shore of Burrard Inlet at Port Metro Vancouver.

The deal also calls for Fibreco to provide “terminal services and additional services” to AGT, for the “guaranteed throughput of agricultural commodities.”

Financial terms of the terminal services agreement deal won’t be released, an AGT representative said Monday via email.

Fibreco, on its project website, has described its terminal enhancement project as providing a “$20 million direct injection” into the Vancouver economy, along with “anticipated annual indirect contributions” of $60 million.

Port access is “an essential infrastructure piece” for AGT, “particularly on the West Coast of Canada where access to port facilities is in limited supply to reach key markets in Asia,” AGT CEO Murad Al-Katib said in a release Monday.

AGT’s deal with Fibreco, he said, “complements our shortline rail system and works in concert with our recent investment in CanEst in Montreal.”

AGT in July locked in a deal for a minority stake and 16-year terminal agreement with CanEst Transit, giving it access to that company’s bulk export terminal at the Port of Montreal.

Since 2015, AGT has had a direct stake in railway operation through its investment in West Central Road and Rail, and in logistics through its purchase of Mobil Capital Holdings, which includes subsidiaries such as Mobil Grain, Big Sky Rail, Mobilex Terminal and Mobil Transloading.

The new agriproducts facility Fibreco has committed to build at Vancouver is expected to include about 43,000 tonnes of dry bulk storage capacity, a rail spot for full unit trains, and a new shiploader and expanded berth capable of loading Panamax vessels, AGT said Monday.

Fibreco is no stranger to bulk export, having moved wood chips and wood pellets from its Vancouver terminal to pulp and paper manufacturers worldwide on behalf of its stakeholders in the B.C. forestry sector since 1979. The company more recently also began shipping canola meal pellets.

Its terminal upgrades, it said, are meant to allow “product diversification” at the site, including handling food ingredients for the international ag trade.

AGT’s spokesperson said Monday the planned terminal will handle pulses, oilseeds and grains railed in on standard grain hopper cars, rather than in bulk bags moved via rail containers.

Fibreco already has a permit in hand from the Vancouver Fraser Port Authority for the project and is still waiting on development permit approval from the District of North Vancouver, AGT said.

The Fibreco port terminal agreement “allows us to target increased volumes to our key markets for pulses as well as diversified products such as durum wheat and other agri-commodities,” AGT executive chairman Huseyin Arslanis said in the same release.

“The fact that Fibreco owns the land at the port was attractive to us and the major shareholder of Fibreco is a Tolko affiliate, which is a strong partner for us for the long-term.”

On its project website, Fibreco said it expects the expanded terminal to offer “relief to Canadian agricultural producers and railroads with an additional outlet to export agricultural and food ingredient products to emerging Asia-Pacific markets.” –– AGCanada.com Network

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The Winnipeg-based partnership of Saudi Arabian agriculture company SALIC and U.S. grain handler Bunge Ltd/ had been considering the project, which will cost more than $500 million, since last year.

Some in the industry worry the new terminal may worsen congestion at the port.

G3 Global, which acquired the Canadian Wheat Board and Bunge’s Canadian grain operations in 2015, is a small player in a Canadian industry dominated by Richardson International and Glencore’s grain unit Viterra.

The terminal, capable of handling eight million tonnes of crops annually on the north shore of Burrard Inlet, would be the first new grain facility in nearly 50 years at the port, Canada’s busiest. Canada, a major canola and wheat shipper, has recently produced some of its largest harvests ever.

The north shore is home to grain terminals owned by Richardson and Cargill as well as Neptune Terminals, which handles potash and coal. It is served only by Canadian National Railway (CN) track.

Adding G3’s terminal, which will store up to 180,000 tonnes of crops, and Kinder Morgan’s planned oil pipeline expansion, may “significantly exacerbate” congestion, said Wade Sobkowich, executive director of the Western Grain Elevator Association, whose members include Richardson and Viterra.

Without major government spending to ease bottlenecks and improvements through federal railway legislation, terminal investments may not produce net gains for the industry, he said.

G3’s terminal will include a unique loop track, allowing three 134-car trains to unload without stopping, however.

“We think we are the solution, not the problem,” G3 CEO Karl Gerrand said in an interview, adding that he expects “very competitive” jostling among shippers for rail cars.

CN spokesman Jim Feeny said the railroad, port and shippers were working with Ottawa on long-term solutions to the north shore’s congestion.

To feed the terminal, G3 plans to build eight to 10 more country elevators in Alberta and Saskatchewan to collect grain from farmers, Gerrand said.

Elevators cost up to $45 million each to build, but G3 has no plans to go public to raise funds, he said.

The company has seven elevators across Saskatchewan and Manitoba, along with port terminals in Ontario and Quebec.

Peter Kiewit Infrastructure Co. is the design-build contractor, with construction starting in March.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.

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Bunge Canada and Saudi-owned crown corporation SALIC Canada, in their joint venture G3 Global Holdings, have agreed to a separate joint venture with West Coast port logistics firm Western Stevedoring Co. for a feasibility study on a new export grain terminal.

“The planned combination of CWB and Bunge’s Canadian grain assets will provide a highly competitive eastern footprint,” G3 CEO Karl Gerrand said Tuesday in a release. “We now are looking west to determine whether this is the right time and location to take the next step.”

The terminal, if feasible, would be built on port space Western Stevedoring now leases from Port Metro Vancouver for its Lynnterm West Gate facility.

The Lynnterm Terminal, on the north shore of Vancouver’s Burrard Inlet, includes West Gate and East Gate facilities, which today provide a total of seven berths with total length of 4,974 feet, and 50-foot depth alongside at low water.

The facilities on the sites today include eight warehouses designed for storage of forest products (lumber, pulp, paper), steel and “general cargo,” plus equipment to handle and stuff and destuff cargo containers.

Lynnterm has direct service through Canadian National Railway (CN) and nine kilometres of track serving its facilities; it also has interchanges with “all major railways” and is “minutes away” from the Trans-Canada Highway.

However, the head of Quorum Corp., the contractor handling grain transportation monitoring on behalf of the federal government, told Reuters on Tuesday that a new grain terminal in that area could further tighten an existing rail bottleneck.

The North Shore alone is already home to the Richardson International and Cargill grain terminals, as well as Neptune Bulk Terminals, which handles crops and other bulk commodities, plus four other bulk terminal operations.

If a new terminal in that area were to move six million tonnes of grain per year, Mark Hemmes told Reuters correspondent Rod Nickel, that would mean two more trains per day going through a single tunnel and bridge across Burrard Inlet to reach the North Shore.

In all, Port Metro Vancouver’s terminals handled 19.62 million tonnes of grains, specialty crops and livestock feed in 2014, up 22 per cent from 2013.

Gerrand, in a Bunge release, said a “number of matters” will need to be resolved and permitting issues must be considered before a decision is made whether to move such a project ahead.

G3 and Western Stevedoring also believe “an open relationship with First Nations and the community is critical to the long-term success of the project,” he added.

If the two companies decide to move ahead with the project, they said they’ll make an announcement “at the appropriate time.”

G3 was named in April as the successful investor to take a 50.1 per cent interest in the grain handler now branded CWB. The remaining stake in CWB is to be held by a farmers’ trust, though G3 holds an option to buy out the trust’s stake as early as 2022.

G3’s $250 million investment in CWB still needs to get a favourable ruling from the federal Competition Bureau and meet other conditions, all expected sometime next month. — AGCanada.com Network

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The chemical fire, which prompted a massive emergency response late on Wednesday and shut down a large portion of Canada’s biggest port, continued to smoulder at the container yard just east of downtown Vancouver.

“Fire officials have isolated the fire and continue to monitor the container,” said Port Metro Vancouver spokesman John Parker-Jervis in a statement, adding there is a 100-metre exclusion zone in place around the burning container.

Operations had resumed at all other port facilities on the south shore of the Burrard Inlet, he added. Port operations in Delta and along the Fraser river were not impacted by the fire.

The Centerm facility is one of four container terminals in Metro Vancouver and is operated by DP World Ltd. The Dubai-based company confirmed on Thursday that the burning container contained trichloroisocyanauric acid, commonly used as an industrial disinfectant and bleach.

“DP World is communicating directly with customers impacted by the event and working to address any cargo or operational concerns,” it said in a statement.

— Julie Gordon is a Reuters correspondent covering the energy and resource sectors from Vancouver.

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Capacity is already limited at Canada’s largest port, Port Metro Vancouver, which is also staring at the possibility of another crippling strike by container truck drivers.

Tensions are mounting as talks to resolve longstanding complaints at the port drag on between government, management, and union and nonunion drivers, and there are rumblings of a possible work action, which would spur further shipping delays along North America’s West Coast, hampering trade flows to Asia.

“Things are definitely starting to heat up,” said Gavin McGarrigle of Unifor, which represents many unionized container truck drivers in Vancouver. “If these issues aren’t resolved there’s going to be a major problem.”

Adding to the labour concerns, British Columbia ports are operating near ideal capacity, leaving little room to take diverted shipments from U.S. ports.

While expansions are in the works at both B.C.’s Port Metro Vancouver and Prince Rupert, to meet a projected doubling of container traffic over the next 10-15 years, most of that new capacity is still years away, and even when complete would only add up to a fraction of West Coast U.S. capacity.

Vancouver and Prince Rupert together handle just 15 per cent of total West Coast container shipments, importing consumer goods and other products for both Canadian and U.S. markets, and exporting Canadian commodities like lumber, wood pulp and grains.

“We do roughly three million containers on the West Coast of Canada per year. On the West Coast of the U.S. they do about 20 million,” said Mark Gordienko, president of ILWU Canada, the union representing dockworkers in Western Canada.

Gordienko said Canadian dockworkers are also loath to undermine U.S. colleagues by handling diverted ships.

Cargo shipments to ports on the U.S. West Coast have been backed up for the last three months, with the congestion most pronounced at the twin ports of Los Angeles and Long Beach, the nation’s two busiest cargo hubs.

The congestion has already delayed shipments for such retailers as Lululemon Athletica and Ann Inc., along with the export of fruit and food products to Asian markets, such as potatoes for McDonald’s French fries in Japan.

The fast-food chain’s Japanese arm said Monday it would only offer small-sized fries at its 3,100 stores across the country.

Record traffic

Container traffic at Prince Rupert’s Fairview terminal is up 12 per cent so far this year, with volumes at Vancouver’s four container terminals up three per cent despite a month-long strike by container truck drivers in the first quarter.

With demand high, three Vancouver terminals added an extra shift at midyear. The terminal operators say some of that new capacity is still available, with volumes currently at roughly 65 to 75 per cent of maximum capacity.

But those numbers mask the severity of the issue, as operators generally aim to stay within 85 per cent of their maximum capacity to keep shipments moving smoothly.

“When they go above 85 per cent things start to slow down,” said John Parker-Jervis, spokesman for Port Metro Vancouver. “It slows down the supply chain quite a bit and you get congestion on the dock.”

The port wants to avoid a repeat of the backlog that formed earlier this year, when truck drivers walked off the job for a month in protest over long wait times and low rates.

The drivers returned to work after hammering out a joint action plan with government and the Port Authority. They say they are happy about progress made over the last nine months, but are frustrated over planned changes to truck-age standards and unresolved differences on pay rates.

— Julie Gordon is an energy and resources correspondent for Reuters in Vancouver.

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