Heralded by some as the new engine for sustainable growth for the Port of Halifax, Far East cargo transiting the Suez Canal has now become a reality.
Last month, a group of major Canadian retailers selected our Port to route growing volumes of import products from Southeast Asia and the Indian Sub-continent. Also in June, China Shipping Container Lines selected the Port of Halifax as the first North American port of call for its new Round the World service. Shipments will commence from the Far East on July 26th and arrive at the Port of Halifax on August 29th.
In short, the concerted marketing efforts of the Halifax Port Authority and related stakeholders are paying off. And aside from the incremental revenue that will accrue to our terminal operators, the new business endorses the Port of Halifax as an effective portal for Asian trade into North America.
But with all the chatter surrounding Far East Cargo these days, many have failed to take notice of our own burgeoning interprovincial cargo trade within Atlantic Canada. Leading the charge locally is Oceanex (OAX.UN:TSX), a Montreal-based transportation company that has emerged as a significant carrier to the Atlantic Provinces, more specifically to the Province of Newfoundland and Labrador.
Oceanex itself was officially formed in 1990 through the merger of ACE-Atlantic Container Express Inc. of Montreal and ASL-Atlantic Searoute Limited Partnership of Halifax, but the company and its predecessor firms have been providing transportation services since the mid-1970’s. Before making its debut as a public company in 1997, Oceanex was closely held by A. Harvey & Company Limited, Newfoundland Capital Corporation Limited (NCC SVA:TSX), Fednav Limited, and CSL Equity Investments Ltd.
Oceanex owns and operates three modern ice-class Ro/Ro containerships and one ice-class containership, which operate at efficient speeds on a year-round basis, insuring passage to Newfoundland for a number of consumer and industrial products, including containers, trucks, trailers, automobiles, and machinery. The company also operates the only container terminals in the province of Newfoundland and Labrador that are fully equipped to handle containers and trailers.
Two of its vessels, the Avalon and the Cabot, operate from Montreal, while the Sanderling and the Cicero are assigned to the Halifax – St. John’s route. The Avalon is a brand new $58 million, 1,004 TEU vessel specially designed to carry containers ranging in size from 20 feet to 53 feet. It was christened in her home port of St. John’s in May this year. The significant investment signals an optimistic outlook for container movements to Newfoundland, and affirms Oceanex’s commitment to provide the highest level of service to its customers.
Last year, Oceanex handled a total of 76,037 TEU’s (twenty-foot equivalent units) and approximately 18,524 vehicle shipments to/from Newfoundland, representing an increase of 63% and 16% respectively over levels experienced a decade ago. The decline in the fishery has led to a reduction in backhaul traffic, but the company has demonstrated its ability to deal successfully with the seasonality and directional trade imbalance Newfoundland experiences. Further, the lack of backhaul traffic has actually proven to be an advantage to Oceanex. It is the only carrier using scheduled container vessels to service the Newfoundland and Labrador market. And because it is the low cost leader, transport companies are increasingly subcontracting their Newfoundland shipments to the company.
Oceanex’s competition comes from a cross section of road carriers and rail that utilize the subsidized ferry service from North Sydney, Nova Scotia, to Port aux Basques, Newfoundland and Labrador. Generally speaking, shipping by sea is the most economical method of transporting cargo longer distances when compared to road, air and rail. In the case of Newfoundland and Labrador, however, the shorter marine travel distance results in equivalent travel times for each of the foregoing. Depending upon commodities, volumes, origins and destinations though; past studies suggest that Oceanex’s rates are in the range of 10-20% lower than most road transportation rates.
Going forward, Oceanex appears well positioned to benefit from ongoing developments in the Newfoundland resource sector and will continue to participate in the final construction phase of the White Rose project, as well as ongoing development at Voisey’s Bay.
Newfoundland and Labrador’s real GDP growth is projected to slow this year, but rise by 4% in 2006. Vehicle shipments dipped in 2004, but have been higher in the first quarter of 2005, and should exceed last year’s in response to incentives offered by various car manufacturers.
With the addition of the Avalon to its fleet, Oceanex will be able to increase its Montreal service carrying capacity by an estimated 45%-50%. This should permit the company to increase its share of the container movements to and from Newfoundland. The new vessel will also supplement its older one, which should result in improved efficiencies and delivery times for its Newfoundland-based clients.