Port of Montreal expansion costs soar to $1.4-billion

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The rapid rise in inflation and higher construction costs have triggered a dramatic jump in the price tag for the Port of Montreal’s container terminal expansion project in Contrecoeur, a key piece of supply chain infrastructure for Quebec, Ontario and the U.S. Midwest.

Cost estimates for the new terminal on the southern flank of the St. Lawrence River have ballooned to $1.4-billion, roughly 50 per cent more than the maximum $950-million calculated in 2019 before the COVID-19 crisis, according to two sources familiar with the project’s advancement. The Globe and Mail is not naming the people because they were not authorized to speak publicly about the situation.

Executives with the Montreal Port Authority launched negotiations with federal government officials roughly six months ago aimed at obtaining additional financing for the project beyond a $300-million loan pledged through the Canada Infrastructure Bank (CIB). The talks have so far not yielded any firm commitments from Ottawa.

An agreement from the federal government is seen by port officials and industry groups as imperative to finalize funding for the project and begin construction on new container capacity, which is expected to reach its limit in 2027. Port management is seeking $150-million from Ottawa, the sources said.

Prime Minister Justin Trudeau’s government is under growing pressure to improve Canada’s transportation and logistics infrastructure, hit in recent years by a series of disruptions from blockades to wildfires and floods, even as the cost to carry out such work continues to climb. Canada’s supply chain is approaching its “breaking point,” a federal task force concluded in a report last October. Easing congestion at ports is a priority, the group said.

Any delay in Montreal stretching further into spring could have knock-on effects for the rest of the Contrecoeur financing. In the event the full funding is not secured, the port authority faces having to delay the project further or change its scope to something less ambitious. Internally, port executives have already begun looking at different options, including changes that could affect the emissions footprint of the facility, one of the sources said.

In addition to the CIB, Quebec has pledged $130-million of public money for the new terminal, increasing its commitment by $75-million in its spring budget. The balance of the project financing will come from the port authority’s own borrowing and one or more private-sector investors that have yet to be announced.

“The Montreal Port Authority confirms that discussions are under way with the federal government regarding a grant, but that these discussions have not yet been concluded,” spokesperson Renée Larouche said in an e-mail. “We do not wish to negotiate in the public arena, but we confirm that the participation of the Government of Canada is essential in order to carry out the desired project within the required timeframe.”

Nadine Ramadan, spokesperson for Omar Alghabra, Canada’s Transport Minister, said the minister spoke Tuesday with Port Authority chief executive officer Martin Imbleau and that the minister is “committed to resolving this and getting a solution for the terminal project.” She declined to say why a financing deal hasn’t been concluded.

With five container terminals now nearing their handling limits and space almost exhausted on the island of Montreal, the Port Authority is turning to sites off the island to meet anticipated growth. Contrecoeur, located about 40 kilometres downstream from Montreal, would boost the port’s capacity by 1.15 million TEUs (20-foot equivalent units), to more than three million. Plans for the new terminal call for a 675-metre-wide docking platform with berths for two ships, eight loading cranes and a container storage yard.

East Coast ports such as Philadelphia and Baltimore have spent billions in recent years to upgrade and expand their container facilities as demand continues to increase. U.S. President Joe Biden’s infrastructure program pledges billions more, including US$6.5-billion exclusively for port programs and another US$27-billion that ports would be eligible to apply for, according to the American Association of Port Authorities.

Montreal is holding its own, tallying a 5.4-per-cent gain in overall cargo volumes last year, preliminary results show. But Canada’s second-biggest port needs to remain attractive for shippers and analysts have said it will lose business to competing ports if it’s not able to expand and modernize its facilities.

Some 80 per cent of Canada’s container traffic with the European Union passes through Montreal. Goods to and from Ontario make up 30 per cent of the port’s container volumes.

Business organizations urged Ottawa to act swiftly.

“Any delays in the port’s expansion could have adverse consequences on industrial projects, manufacturing commitments, and businesses integration with already-strained international supply chains,” said Daniel Safayeni, vice-president of policy at the Ontario Chamber of Commerce.

“If we can’t move goods efficiently and reliably though Canadian ports, Canadian business will have no choice but to rely on ports in the United States,” said Robin Guy, vice-president and deputy leader of government relations for the Canadian Chamber of Commerce. “That means higher costs for Canadian consumers and producers.”