Port of Vancouver continues to provide essential services
There’s no question that Canadian coal, met or thermal, is among the best in the world and that the Port of Vancouver is better positioned to deliver it to the U.S. and coal-hungry Asian markets than most other ports along the Pacific Northwest.
Plus, the Port of Vancouver is a full day-and-a-half closer to China, and that’s a huge bonus.
As Daniel Rusz, a senior research manager at Wood MacKenzie put it at a meeting of the Coal Association of Canada in Vancouver three years ago, “High-growth Asia markets will be the primary markets for Canadian coal” as the net trade flow “swings” from the North American ports in the Atlantic to the Pacific.
But Rusz said something else at that meeting which might give us pause. While affirming that long-term fundamentals for coal exports remained strong, he also admitted that “metallurgical export capacity is saturated globally” and that “Canada is no different.”
Since then of course, the price of coal has continued to decline, prompting Canadian firms such as Teck Resources and Anglo American PLC to put coal mining projects on hold, all of which begs a clear question: Why do we continue to talk up additional coal-handling capacity at the Port of Vancouver?
In this issue we try to find out by speaking with principals involved in three significant coal capacity upgrades at the Port of Vancouver.
Westshore Terminal
It’s been more than a year since Westshore Investment Corporation upped its estimates for replacement of aging production equipment at Westshore Terminal from $230 to $275 million. Nevertheless, if things go right over the next four years, Corporate Secretary Nick Desmerais said at the time, 30-40-year-old stacker reclaimers would be replaced by three new stacker reclaimers which will easily offset the increased price tag by improving improve productivity. How much more productive?
“At the end of the day we’re going to have a capacity of 2-3 million tonnes more than our current run rate,” says Desmerais. “But most of that is going to come from having new equipment that doesn’t need as much maintenance downtime.”
Desmerais has been associated with plans for the upgrade since its inception, handling among other things corporate contracts with offshore fabricators. Cautious about referencing too much about the expansion beyond existing facts, Desmerais dutifully mentions the terminals 44-year history of feeding coal-hungry markets around the world and points us to the facilities that make that possible today: two twin-rotary dumpers, each with an unloading capacity of 63 cars per hour, two deep sea loading berths (including a new shiploader at Berth One) and seven kilometers of high-speed conveyor systems.
The corporation’s continued goal, Desmerais says, will be to send coal to Asia from BC’s coal mining hub in the Elk Valley, but also from mines in Alberta and Montana. A year ago Desmerais acknowledged that the terminal was vulnerable to forces beyond its control, including the slide in coal prices. Still, he adds, fixed, long-term contracts out to 2024 should help to insulate Westshore from fluctuations in price and demand.
Another concern: increased tax costs and a Canadian-U.S. dollar exchange rate which by 2014 had deteriorated about 10% year over year. With so much of the new equipment coming from the U.S., increased import costs “did cause concern a year ago, says Desmerais, “But since the contracts have been entered into before the end of the year and before the further deterioration of the Canadian dollar, that doesn’t have any incremental impact on us.”
Meantime, work has begun on a spate of 40-year-old offices, employee facilities and maintenance shops. “Right now they’re under many roofs and it’s inefficient,” Desmerais says.
Carried out within the terminals existing footprint, the upgrade will include consolidation of those facilities within a single complex by the end of this year.
Might all of this be still delayed because of slowing growth in China and delayed coal development projects in B.C. “Hopefully not,” says Desmerais, “but thank goodness for fixed-volume, fixed-rate contracts that carry us beyond 2019.”
Fraser Surrey Docks
Desmerais is quick to deflect any questions about what all this activity might mean for local contractors, except to talk about what coal means to smaller companies and workers across B.C.; roughly 26,000 people in high-paying jobs and generating combined tax revenues up to $900 million.
Equally guarded about why, when coal companies are delaying expansions plans, upgrades at Fraser Surrey Docks are needed, Director of HR & Communications Jill Buchanan will only say “the need for metallurgical coal” in Asia “is not gone,’ and that where shipping coal to China is concerned, “we’re not in a place where there is an alternative.”
Not everyone agrees. The plan at Fraser Surrey Docks is for coal from the Powder River Basin in Wyoming and Montana to be delivered and unloaded by the Burlington Northern Santa Fe Railway at a new Direct Transfer Coal Facility at the southwest end of the existing Fraser Surrey docks. But in a report released in November, the Institute for Energy Economics and Financial Analysis (IEEFA) warned “ambitious” expansion plans, like the one for the Fraser Surrey, “are challenged by the same risks faced at the other Canadian ports and U.S. new projects,” that is, a decline in a demand for coal-port capacity.
“Port capacity in British Columbia will likely remain available to U.S. coal companies,” said the report’s author IEEFA Director of Finance Tom Sanzillo, “but that capacity and the planned expansions are unlikely to benefit U.S. coal shippers as there is little market for their product either now or for the foreseeable future.”
Despite the warning, the State of Washington continues with its ambitious plans for moving U.S. coal from Powder River basin as well. And, but for the fact that low coal prices hurt them too, delays in B.C. would come as good news to developers of the $650-million U.S. Gateway Pacific Terminal at Cherry Point, just 17 miles south of the Canadian border.
However, with their eyes equally fixed on lucrative Asian coal markets, project advocates are currently mired in a lengthy environmental approval process involving federal, state and local governments and well behind developments at the Port of Vancouver.
Will U.S. ports like the proposed Gateway Pacific Terminal compete one day? Probably, Buchanan says, but not soon. For one thing, Fraser Surrey Docks is a brown space terminal. “We’ve got the infrastructure in place while a lot of the ports in the U.S. are years behind in getting up and running. We’re more of a turn-key solution to provide the product at this time.”
The man in charge of making all that happen is Jürgen Franke, P Eng, Director Engineering and Terminal Development. Franke says once the 12-month construction schedule is complete, the new Direct Transfer Coal Facility will easily handle up to four million additional metric tonnes of coal per year. In addition to installing new rail track and realigning existing track within the FSD lease area, 12 new fender piles will be installed for the new barge loading system at Berths Two and Three.
“We have about a metre-and-a-half to two-metre tide and when the barges pull up against the berths, there’s the potential for the barges to slip underneath the berths during a rising tide. The piles are placed vertically along the length of the berth to prevent that.”
The receiving pit for the rail cars and conveyors systems will all be brand new, he adds, with most of that manufactured in Canada
, and thus safeguarding the project “to some degree” against high import costs from U.S. manufacturers. But when all this might get underway Franke, like Buchanan, cannot say.
Neptune Terminal
Neptune saw its metallurgical coal-handling capacity jump from 8.5 to 12.5 million metric tonnes after installation of a new stacker reclaimer in 2013. The terminal will see that capacity rise by another six million tonnes with one additional railcar dumper, an additional rail track, new conveyors and replacement of a longer mobile shiploader boom at Berth One. How much of that work will go to B.C. contractors and workers?
“The best predictor of the future is the past,” answers Neptune President Jim Belsheim.
“Where we were doing the stacker reclaimer, the phosphate building and years before, we would spend $15-20 million or more at the peak of the project on 126 small North Vancouver businesses.”
“Plus, we have an impact on businesses right across the province. In construction alone, we order components from Kelowna, we order components from Fort Langley and Surrey. And long term, Neptune has increased its workforce to this point by about 100 full-time equivalent jobs over four years ago.”
Enclosed in a shed, the new railcar dumper will be located on an inbound rail track at the northeast corner of the terminal. It will be approximately 12 metres high and rely on automated electric railcar positioning equipment.
Like Surrey, Fraser Docks and Westshore, Neptune is anxious to ship more coal to Asia, in particularly China with its seemingly insatiable appetite for steel making coal for China’s vast industrial sector.
Most of Neptune’s coal will come from Canada, notably Teck operations in the Elk Valley. What may complicate that, according to the French-based International Energy Agency, is China’s recent embarkation on a campaign to diversify its energy supply (increases in gas, nuclear and renewable energy) but also to reduce its energy intensity.
Does that give Belsheim pause? Only momentarily. “Clearly the demand for steel is impacted by a number of variables,” he admits, at Korean and Japanese steel mills as well as Chinese.
Nevertheless, “We’re long-term thinkers on the process and I’m pretty optimistic that long-term demand for steelmaking coal, particularly high quality Canadian steel, will be good.”
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