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Bump in container shipping a boon to Canada

The MV Maersk Mc-Kinney Moller arrives at the harbour of Rotterdam in August, 2013. Shippers are using larger vessels, which means ports need to invest in infrastructure to support those bigger boats and higher volumes.


The world's largest shipping company is seeing signs of stronger global container traffic, something already reflected in activity at several Canadian ports where trading volumes have been on the rise.

On Tuesday, Denmark's A.P. Moller-Maersk AS said its second-quarter profit nearly tripled from a year earlier to $2.3-billion (U.S.), helped in part by a particularly strong 6.6-per-cent increase in shipping volumes in its container business unit Maersk Line. The company also raised its full-year profit forecast.

"Asia, Europe [region] is up by around 9 per cent, which is much above what you would expect given the economic development," Nils Andersen, chief executive of Maersk, said on a conference call with analysts. The company has forecast global container demand to grow by 4 to 5 per cent in 2014.

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Other major shipping companies such as Hong Kong's Orient Overseas Container Line (OOCL) and Germany-based Hapag-Lloyd AG have also posted increases in container shipping volumes in recent financial reports.

Global trade is conducted largely at sea. About 80 per cent of internationally-traded goods are sent by ship at some point in their journey, according to The Baltic Exchange, which tracks the maritime market.

And Canada is getting a piece of the action. Trade volume moving in and out of Canada by water is expected to double in 15 to 20 years, according to the Association of Canadian Port Authorities (ACPA). This will be a boon for both shipping companies and the ports that service them.

The growth will be fuelled in part by the country's aggressive trade strategy, which is expanding access to markets and products offshore, said Wendy Zatylny, president of ACPA. The port authorities, she added, "are seeking ways to support their customers in getting Canadian goods and resources to new markets."

Canada's National Ports System has 18 major port authorities involved in shipping of 310 million tonnes of goods each year. These items include imported electronics and clothing, and exported natural resources, such as lumber, and are valued at more than $162-billion (Canadian) per year.

The Port of Halifax, the closest deep-water port to Europe in North America with 17 shipping lines connected to every European Union country, said it has already benefited from increased traffic. The volume of containerized cargo moving through the port, which also connects to Asia, was up 6.1 per cent in 2013. This is part of a five-year growth trend that officials expect will continue.

The shipping industry endured stormy seas during the recent recession, which depressed trade around the world. The Baltic Dry Index, which tracks transportation costs by sea, has zigzagged through the last few years, but currently sits 89 per cent below its all-time high in 2008.

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For transport companies, excess shipping capacity can cause prices to fall. As a result, shippers are using larger vessels and forming alliances to drive economies of scale.

Ports need to invest heavily in infrastructure to support those bigger boats and higher volumes. The Halifax port has spent more than $100-million in upgrades since 2011. This includes modifications to three terminals, new docks and extended piers at its container terminals to accommodate more of these large boats. There are also two new giant shipping cranes for lifting containers.

"The future of the global shipping industry is larger vessels," said Lane Farguson, spokesman for the Halifax Port Authority. "We expect that this size of vessel will become the industry workhorses, moving goods up and down the east coast of North America."

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About the Author
Financial Services Reporter

Jacqueline Nelson is a financial services reporter at the Report on Business. Prior to that she was a staff writer at Canadian Business magazine, covering news and writing features on a wide variety of subjects. More


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