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Home Shipping & Logistics Ocean Freight

Canada Ocean Freight Update

January 22, 2020
Canada Ocean Freight Update
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Canadian importers and exporters faced new challenges with ocean freight in 2019, but used good forecasting and planning to work around these obstacles while also taking advantage of new opportunities.

The ocean freight landscape in Canada was marked by several new challenges and opportunities in 2019, a year when blank sailings, unreliable schedules, and global issues like the trade wars all impacted the industry.

Canada’s ocean freight market also experienced numerous “wins” in 2019, one of which was the acquisition of the Halterm Container Terminal at the Port of Halifax by Singapore-based PSA International Pte Ltd (PSA). The only container terminal on the Eastern Canada that can serve mega-container vessels, Halterm operates three container berths covering more than a kilometer of quay length with depth of up to 16 meters.

According to PSA, the terminal is currently undergoing further berth expansion, including the delivery of a fifth Super Post-Panamax Quay Crane, which will enable Halterm to handle two mega container vessels concurrently in 2020. “We are excited to welcome Halterm into PSA’s global family of ports, as PSA’s first coastal terminal in Canada,” Tan Chong Meng, Group CEO, PSA International, said in a press release.

“We look forward to working alongside the Halifax Port Authority, customers, staff, and the local community, as well as key stakeholders like the International Longshoremen’s Association and Canadian National Railway Company (CN),” he continued, “to further enhance Halterm’s capabilities and connectivity to serve the needs of shippers in the greater hinterland of Canada and beyond.”

Brian Holden, Vice President, Head of Trade Management, Americas at DB Schenker, sees PSA’s acquisition of Halterm as a positive sign for Canada’s ocean freight industry. “This acquisition shows a great investment in the Halifax gateway,” says Holden, who adds that DB Schenker will be working to move even more cargo through that port in 2020. “We’re already one of the top importers at this growing port, and we plan to continue using this stable, reliable gateway well into the future.”

 

Navigating Blank Sailings and Unreliable Schedules

Sailings that have been cancelled by a carrier—as in, a port has been skipped or an entire trip has been cancelled—blank sailings were prevalent in 2019 and Holden expects them to continue happening in 2020. Caused by shifts within the ocean carrier sector and the fact that Canada “shares” some vessels with the U.S., Asia, and India, these blank sailings have impacted shippers’ ability to get their goods in and out of Canada via ocean carrier.

The unpredictability associated with blank sailings makes it difficult for shippers and their logistics providers to manage their cargo and their overall transportation plans. “The uptick in blank sailings definitely made things more challenging this year,” says Holden. The ongoing trade wars and resultant tariffs have also created a more unpredictable environment for any company that’s shipping to and from Canada. Finally, Holden says his team has also been working closely with customers to manage the inconsistent carrier schedule and service reliability issues, but this is expected to be the new normal, as ocean carriers attempt to deal with the supply and demand challenges of the respective trades.

“Shipments coming into North America in the June/July timeframe were posting 50% on-time performance levels,” says Holden. “That had improved by October, when on-time performance had risen to 80 to 85%.”

 

“There’s a Lot Happening Right Now”

As he looks to the future, Holden sees the introduction of IMO 2020 as one of several events that could create new challenges for Canadian importers and exporters during the year ahead.

Beginning January 1, 2020, the limit for sulfur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass), versus the previous 3.50% m/m.

Some ships will limit the air pollutants by installing exhaust gas cleaning systems, also known as “scrubbers.” Holden says DB Schenker is keeping a close watch on this development, namely because not all required scrubbers may be installed on ships by the time IMO 2020 goes into effect.

“We’re looking closely at the cost impacts, what shippers need to do to navigate this issue” says Holden. “There’s a lot happening right now.”

Another bright spot for Canada’s ocean market is the growing transpacific trade industry. Also, companies seeking to circumvent the tariff issues are looking to do more business in countries like Cambodia, Vietnam, and Thailand. Others are exploring European countries such as Turkey, and the East Coast of Africa.

“At this point, it’s all about avoiding tariffs,” says Holden. “The shift is taking place slowly due to the fact that many of these companies have a small logistics footprints in South East Asia”

 

Focus on Forecasting and Demand Planning

Currently, DB Schenker’s Ocean Innovation Team in Canada is helping customers map out their transportation plans for the year ahead, walking them through the tariff issues, and helping them tackle other problems that could affect their global supply chains. The Team also utilizes advanced visibility tools that help customers track their shipments and quickly identify risks like blank sailings.

“Every year brings new challenges,” says Holden, “but in the end, shippers can avoid some of these issues by planning ahead, being prepared for possible cancellations, and sharing accurate forecasting and demand planning with their logistics providers.”

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