Evidence of meeting #110 for Transport, Infrastructure and Communities in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was capacity.
A recording is available from Parliament.
Director, Logistics, Teck Resources Limited
Thanks for the question, Ron.
To respond to your first question around costs, the way we look at our business is that we compete globally. There's no purpose in talking about capacity if you can't compete with your peers. We compete against Australia and against the U.S. into Asia, and there are a couple of smaller players, but it's a very—
Conservative
Director, Logistics, Teck Resources Limited
Teck's logistics costs are double that of our Australian peers, for two reasons. One is monopolies, or a captive shipper. The second one would be that we're 1,000 kilometres from tidewater. In fairness to the railway companies, that adds a bit of a challenge.
The reason we focus on transparency is that we want to ensure that across the supply chain—we view ourselves as a Canadian champion—we're all working together to get our products to market sustainably. A lot of our Canadian competitors went bankrupt.
A third of our spend on steelmaking coal is in logistics. Steelmaking coal is used for steel. It's the only way you can make steel.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I'd like to get comments from both of you as well, and then, to conclude, touch base on Prince Rupert.
I think Prince Rupert is such an underutilized facility. Somehow, it should be able to absorb a lot of that bottleneck. If we're shipping forest products from northern Alberta to the west coast, it isn't any further to go to Prince Rupert than it is to go to Vancouver.
I'd like both of you two gentlemen to make some comments about rail costs versus efficiency, and then about Prince Rupert.
Vice-President, International Trade and Transportation, Forest Products Association of Canada
Thanks so much for the question.
For us, costs and service are both concerns. We actually asked for the same thing that Michael outlined in his presentation to be in Bill C-49, but the amendments we were asking for did not come through.
I'll let you know that right now, in our operations across Canada, northern Alberta is one of the biggest pain points. They're having a lot of trouble moving stuff by rail from places like Edmonton to Winnipeg. It's been that way for a number of months now, and we're not even into the serious winter conditions yet. What's going to happen in January and February? That makes us extremely anxious about how bad it might be again this winter.
Prince Rupert is definitely an option. We have members who ship through Prince Rupert already. Of course, CN is the only one that's there. It would help us if both railways were using the port.
I think it is a bit of a game of who is going to move first. Are terminals going to build up there to bring in more traffic, or are the railways going to invest there first? We need somebody to show some leadership there and make a move so that we can—
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Okay. I'd like Greg's comments from the agriculture sector.
Director, Industry Relations, Pulse Canada
Agriculture is a bit unique, because we have what's called the maximum revenue entitlement, the MRE. Essentially, it's an entitlement for the railways on the revenue they can make for moving grain. It guarantees them a 20% rate of return or whatever on grain, but prevents them from charging monopoly prices, because they have the entitlements.
Cost is still an issue, at least for our members. Containerized movement has been pulled from the maximum revenue entitlement. That's one of the changes made in Bill C-49. We have seen some increases in rates for moving containerized grain as a result, because it's not protected under the maximum revenue entitlement.
Service in general for agriculture will be the number one issue, as opposed to rates. In the event the MRE disappears, we—
Director, Industry Relations, Pulse Canada
We just had a transloading facility, Ray-Mont, go into Prince Rupert in the past year, so we are seeing some investments there for that kind of movement. Essentially, they're able to take hopper cars and stuff them into containers and ship them.
Conservative
Conservative
Director, Industry Relations, Pulse Canada
Yes, there's a big one there, but generally the push has moved through Vancouver, because that's where a lot of the companies.... It's jointly owned by several different grain companies, so they've been investing a lot in their facilities in Vancouver. Prince Rupert is still a destination, but it's not a big push.
Liberal
Ken Hardie Liberal Fleetwood—Port Kells, BC
We've heard some of these stories before in some of our earlier studies. To Ron's point, sometimes you almost make me feel bad for the railroads, because, gentlemen, what I hear from you consistently is that you want government action to force them to tell what their profit margins are, what they should be charging you, and all the rest, so you want to suppress their price as much as you can, but at the same time you also want government to put pressure on them to give you more capacity. It's nice if you can get it both ways, to be honest with you.
You can respond to that. I'll give you a chance to do that.
However, is there a forum that exists today for you to sit down with all of the players in the supply chain and work through the kinds of issues that you brought up today. Is there a forum? Do you actually have an opportunity to sit down with the railroads or the terminals or whomever and say, “Look, this is our situation here. What can we do collaboratively to make this work better?”
September 26th, 2018 / 3:35 p.m.
Director, Industry Relations, Pulse Canada
I can start.
On your last point, one of the items that came out of the process of Bill C-49 was that Transport Canada started a collaborative forward planning exercise. They worked through on the quantity supply chain table. They are trying to wrestle to the ground some of these points as a larger group, so that includes the railways and the shippers.
Director, Industry Relations, Pulse Canada
Right, they're facilitating, which is one of the abilities of government, to facilitate. I'm not sure how that's going to go, but generally these issues have been discussed for years and years. A lot of them have to be dealt with commercially, individually between shippers and railways, so there's only so much movement you can get from talking about these larger issues within a forum like that.
Liberal
Ken Hardie Liberal Fleetwood—Port Kells, BC
Maybe we'll give the others a chance, because my time is short, as always.
Vice-President, International Trade and Transportation, Forest Products Association of Canada
I'll focus on the service. Let's say that for the last three or four months, the fulfillment rates have been basically 60% of all the cars that are ordered and show up. What about that 40%? That's revenue that's not being generated for those communities that work in those mills.
Liberal
Ken Hardie Liberal Fleetwood—Port Kells, BC
What do you say to the pressures that they face from common carrier obligations? They have to try to carry everything that comes at them.
Vice-President, International Trade and Transportation, Forest Products Association of Canada
Unfortunately, that doesn't work effectively enough in the real world, and I think the biggest threat is to investment in Canada. We have a lot of CEOs at our boardroom table now who have operations on both sides of the border, and oftentimes—too often now—when they're investing their money, they invest in the United States and not in Canada. This was one of the reasons.
For me, that is of great concern.
Director, Logistics, Teck Resources Limited
On our side, there are forums where we can have conversations. The port of Vancouver and other groups facilitate that.
Also, because we're such a material partner for CP Rail and Westshore, we try to have coordinated meetings. CP Rail service, unlike CN this year, has met its commitments, and it services our mines in the Elk Valley.
The challenge we have is that CP and Teck have run into issues getting our product through terminals in the Lower Mainland. As a result, we've had to shut mines and have lost opportunities and railed 1,000 kilometres further to Ridley Terminals, so access to market has been suffering.
Liberal
Ken Hardie Liberal Fleetwood—Port Kells, BC
I understand that the actual shipping costs in Canada are pretty low compared with other countries, but it's the distance. It's the fact that this is a big country and it's a long way to get to the ocean.
