Evidence of meeting #30 for International Trade in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was containers.
A recording is available from Parliament.
12:10 p.m.
Senior Director, Policy and Regulatory Affairs, Association of Canadian Port Authorities
Our organization? It hasn't been a long time, but I do know, since it was brought up by members, that it's been a while.
12:10 p.m.
Conservative
Kyle Seeback Conservative Dufferin—Caledon, ON
Can you hazard a guess on how long the members have been raising this issue? Is it two years, five years?
12:10 p.m.
Senior Director, Policy and Regulatory Affairs, Association of Canadian Port Authorities
It's a couple of years.
October 18th, 2022 / 12:10 p.m.
Conservative
Kyle Seeback Conservative Dufferin—Caledon, ON
Okay. Thanks very much.
You talked about financing challenges and your ability to raise your own capital for expansions. What are the specific impediments of the rules and regulations that are in place? If you could change them so you could have access to private capital and speed up projects, what would those be?
12:10 p.m.
President and Chief Executive Officer, Association of Canadian Port Authorities
Currently, what we have in place for the larger ports would be the borrowing limits. The airport authorities or a private business just doesn't deal with artificially set borrowing limits. What we would like to see is, ideally, a more flexible process whereby the ports would be able to go out and finance projects in the same way an airport authority or a private business would be able to.
We talk a lot about flexibility. It goes a bit beyond that. I was talking with one of our ports the other day, and I think his challenge is an interesting case study. They have the opportunity to expand within the confines of their current land, but to do that they need to move some things around. They need to move part of their cruise operation to another part of the harbour. It would have tremendous benefits for that part of the community. That traffic would revitalize businesses, shops and restaurants, and doing that would open up container terminal capacity. The borrowing limits mean that even though that project in its entirety may be commercially viable and able to provide a good financial return, they don't have the ability to go and borrow the funds required for it. Now they're looking for funding. With the national trade corridors fund, you can get funding for the container part of that project, but that's not where the costs are; the costs are on the cruise side. Maybe a regional economic development agency might be able to fill the gap there, but they're not eligible for those funds.
Will they figure it out? Of course they will. Our ports are innovative and will find a solution. However, an airport authority would not have the same challenges. It would be a very different situation.
12:15 p.m.
Conservative
Kyle Seeback Conservative Dufferin—Caledon, ON
The best solution would be to allow you to borrow the money you need in order to finance these projects.
12:15 p.m.
President and Chief Executive Officer, Association of Canadian Port Authorities
What our ports are looking for are the tools to be able to do what makes the most sense. Debbie spoke to another side of the challenge. For those smaller ports that have lower revenues, it's more of a funding issue. For the national trade corridors fund, it may not be the best project. You may not be successful, for example, in getting funding to replace a dock. The revenues the port generates would not be sufficient to cover the costs associated with that project. It's something we see across Canada when it comes to transportation infrastructure in small communities.
12:15 p.m.
Conservative
Kyle Seeback Conservative Dufferin—Caledon, ON
If the rules were changed, you wouldn't have to try to pigeonhole yourself into these various programs. You could have a whole-of-business approach.
12:15 p.m.
President and Chief Executive Officer, Association of Canadian Port Authorities
Correct.
12:15 p.m.
Conservative
12:15 p.m.
Conservative
Kyle Seeback Conservative Dufferin—Caledon, ON
What's the impediment to having surge capacity? I've heard that come up a whole bunch of times.
12:15 p.m.
Chief Marketing Officer, Canadian National Railway Company
On the rail side I'll say it's the fact that we don't have a business case for it. You don't have business attached to it.
Everything has a return on its investment. We don't have customers specifically asking for it until they need it. By then it's too late and it takes a long time to get it into place and it's a lot of money and there are a lot of rules we have to conform to.
12:15 p.m.
Liberal
12:15 p.m.
Liberal
Terry Sheehan Liberal Sault Ste. Marie, ON
Thank you very much to all of our presenters. Some of the questions that I was going to ask have already been answered, and I thank you for that.
I wanted to dive into the shortage of the shipping containers. In some of my reading, I saw that there was a shortage of containers, and there was a hope in 2021 that there would be a rebound and that there would be more shipping containers made in 2021. The stat that I saw was that it was only about 7% up from the year before.
I would like to ask any of the witnesses for an update on where the physical shipping container production is. We know a lot of it is produced in China. There have been suggestions by the witnesses that there are also attempts to monopolize on the containers, so through you, Chair, to our presenters, I would like to get an update.
12:15 p.m.
Vice-President, Environment and External Affairs, Vancouver Fraser Port Authority
I can answer at least part of that question. I can't speak to the production of containers, but I can speak to the availability of containers.
What we saw is that when you're paying.... Your shipping line's earning $10,000 for the front-haul to North America, and you're only getting a tiny fraction of that for whatever cargo you're taking back from Canada. There's a huge financial incentive for you to get that container back to Asia as quickly as possible—or wherever it originated from—and fill it up for another front-haul cargo load.
There was a lot of discussion during the pandemic about whether there should be some policy change or something to try to keep more containers in Canada and force them for export. However, no matter how you look at it, the kinds of fees and punitive levies you'd need to get the shipping lines' attention in that kind of market dynamic would have been hugely destructive to trade in Canada. That's why we're very much in favour of always looking for a better market-based solution.
That said, hopefully that problem is now starting to be addressed and you will see greater availability of containers. I think it's probably less about the quantity—that global population of containers, if you will—and more about making those containers available to Canadian exporters.
12:20 p.m.
Liberal
Terry Sheehan Liberal Sault Ste. Marie, ON
Marko, you were shaking your head throughout the comments. Would you like to add something?
12:20 p.m.
Vice-President, Public Affairs, GCT Global Container Terminals Inc.
I think last year, the largest growth in exports from Canada was in air, because the empty containers were going back to Asia at rates—as you heard from Mr. Wilson—that were extremely beneficial to the ocean carriers. Of course, they were incentivized to bring those containers back and move them back. Those numbers are definitely coming down today, and have been over the recent months.
As I mentioned, with the extreme collapse in the rates, we're seeing a much lower volume of those empty exports leaving. It's still larger than in the past, but it's quickly adjusting to a new normal, so I think some of those availabilities that were an issue at the peak of the postpandemic supply chain challenges are going to right themselves.
Ultimately, if we project out, seeing the volumes and the rates declining.... As the rates decline, they are usually following a decline in volume. My suspicion is that next year, in Q1 and Q2, we're going to see a significant economic downturn. Some are already predicting that container volumes and rates are like the canary in the coal mine. Based on what we're seeing now, next year is going to be challenging when it comes to our economy.
12:20 p.m.
Liberal
Terry Sheehan Liberal Sault Ste. Marie, ON
Thank you for that. It's very helpful.
My family is in the trucking business, and my friend had a trucking business as well. We always hate to see things going back empty. We'd like to fill it full of things and send it, so there's something that we have to think about on that one.
The other question I had is about the national trade corridor fund, which has significant dollars associated with it to help with the supply chains. Have any of the companies that have presented applied to it? If yes, where?
I know that the short-line rails are finally eligible under this particular program. That was one of the things that they were talking about in the last seven years. Short-line rails, such as Huron Central, are important in my neck of the woods. I know that in western Canada and Quebec, short-line rails are critical to getting this whole supply chain moving.
Has anyone applied? If so, for what particular areas?
12:20 p.m.
Chief Marketing Officer, Canadian National Railway Company
For the rails, very briefly, we've only started in the last couple of years, and you'll see us apply for capacity expansions in our network. That's key where we're doing it now, and you'll see more of that in the future.
12:20 p.m.
Vice-President, Environment and External Affairs, Vancouver Fraser Port Authority
We've received $300 million in contribution funding towards about a billion dollars' worth of road and rail infrastructure in the Lower Mainland.
12:20 p.m.
Liberal
12:20 p.m.
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you, Madam Chair.
I want to thank the witnesses for being here.
I come from Oshawa, where we do have a port, and it's wonderful to have that infrastructure there. I wanted to ask you a couple of questions, one focusing on how to increase capacity. The other question would be on border modernization. I think it was Mr. Gooch who talked about harmonization with the United States. I'd like to delve into that a bit more, but the first one is on the capacity.
Madam Murray, maybe that's a question for you. Friends of mine from out west mentioned to me that with the lack of pipeline capacity, oil and gas are now being loaded onto rail, and you mentioned the requirement to have a task force that would look at the infrastructure and how important the logistics are there.
If we were able to get a lot of that oil and gas off rail and put that into safe pipelines, has anybody looked at how much of a capacity increase we would get from that? For this task force you're recommending, would this be something that they would take into account?
12:20 p.m.
Senior Director, Policy and Regulatory Affairs, Association of Canadian Port Authorities
I can't comment in terms of the capacity and the demand between pipeline and rail. I will say that I suspect rail will continue to move oil and gas.
With regard to your second question on the task force, I think it is something that they should potentially look at. It is part of the determination as to what sort of infrastructure we need nationally. I mean, it's critical, and not just the pipelines and the rail but the intermodal to ports: Tracking everything should definitely be assessed by the task force.
