Contrecoeur: Expansion or Relocation of the Port of Montreal?
Montreal: Boxed In
The port of Montreal is a strategic gateway on the Eastern Seaboard, deep within the North American hinterland, a position it has capitalized on since its inception. With a draft of about 11.3 meters it could handle containerships of around 2,500 TEU, but this capacity limitation was improved through technical improvements and ships of 4,200 TEU are able to call Montreal (a record of 5,000 TEU is also possible). Further, a new generation of wide beam containerships handling 5,000 to 6,000 TEU with the same draft are available. However, the St. Lawrence navigation channel between Montreal and Quebec was designed to handle the joint circulation of one Panamax-sized ship in each direction. The use of wide beam ships would create notable disruptions over this navigation system since the channel would only be able to handle one ship passage at a time.
The port benefits from excellent rail connectivity, having access to the North American network of Canadian National and Canadian Pacific. However, since the container terminal facilities are on the island of Montreal, truck access is limited to a few congested bridges. Further, existing container terminals are constrained by their narrow footprint along the river bank and cannot expand to take the standard rectangular configuration that optimizes container terminal operations. The local expansion of terminal facilities is limited; the port of Montreal is boxed in.
Container Traffic at the Main East Coast Ports, 2016.
Contrecoeur, Catching up to a Delayed Future
Expansion options for the port of Montreal have been discussed for several decades with relocation to the Contrecoeur site, about 30 km upstream, a retained option. The matter was always under which circumstances to put the project forward and in which form. With an estimated capacity of around 1.8 M TEU, the port of Montreal seemed ready in the mid 2000s to put the project forward as its traffic exceeded 1.4 M TEU for the first time (80% of the port's capacity when an operator starts to be constrained by capacity limitations; the technical capacity of the port has increased to 2.1 M TEU in 2016 after a new container terminal was opened). However, the financial crisis of 2008 forced the cancellation or the postponement of infrastructure projects across the industry and Montreal followed through. After a sharp decline, traffic was back around 1.4 M TEU by 2014, inciting the port authority to move forward.
The commercial environment has meanwhile changed with the expansion of the Panama Canal in 2016 and increasing competition on the hinterland. American East Coast ports, namely New York, are close and not restricted like Montreal. Adding capacity to the port of Montreal must thus take careful considerations to the drivers of the industry, the interests of the shipping lines, cargo owners (importers and exporters) and land transport service providers (rail and trucking).
Traffic Forecast and Exuberance
It is often stated that the Port of Montreal is having a ongoing growth of its traffic to portray the port in a positive light. Although this is true, such growth must be placed in its context. Montreal had a traffic of 1.53 million TEU in 2017, compared with a traffic of 1.47 million TEU in 2008 (its pre recession peak). This means that 2017, the port's best year ever (and new peak), saw 60,000 more TEUs handled than in 2008 and 90,000 more TEUs than in 2016. Compared with the growth pattern other ports along the North American East Coast (some competing), the Port of Montreal is somewhat stagnating.
The expansion of a port's infrastructure is dominantly based on traffic growth expectations and the hope that they will be realized. Prior to the financial crisis of 2008, these expectations were commonly comfortably met, but since then the environment has been volatile, undermining the validity of many forecasts. For the environmental impacts assessment of its Contrecoeur project, the port of Montreal provided the Canadian Environmental Assessment Agency a comprehensive review, including its latest traffic projections. These documents, including traffic forecasts, are available here.
Container Traffic at the port of Montreal, 1990-2017 and Projections to 2030 (in TEU; base scenario). Source: adapted from Port of Montreal, Agrandissement du terminal portuaire de Contrec?ur, Volume 3 - études sectorielles - Tome 4.
The forecast is a bit puzzling. The anticipated traffic is an extrapolation based on an annual compounded growth of 3.9% for the base scenario. There is also an optimistic (4.8%) and a pessimistic (3.0%) scenario. 3% annual growth is considered to be pessimistic...
Interestingly, these figures appear to put limited consideration on the past growth patterns that has been volatile (and negative at times) for the last decade. Growth forecasts assume a non linear trend of compound annual growth while we observe on the above figure two clear linear growth trends; before 2008 and after 2008. Surprisingly, it is the pre-2008 pattern which appears to be extrapolated upon, while the recent years show a completely different trend pointing out to 600,000 less TEU in 2030 than the expectation of 2.5 M TEU. Thus, if the post 2008 growth pattern is followed, traffic in 2030 should be around 1.9 M TEU. Traffic expectations appear to be on the exuberant side.
A Relocation or an Expansion?
Irrespective of the potential growth, it is accurate to state that additional capacity must be provided to the port of Montreal within a decade time frame. However, how this additional capacity would be provided could be more flexible than anticipated by the port authority.
Although it is stated that the Contrecoeur project is an expansion of the port of Montreal, it represents a classic case of port relocation to a more suitable site. The relocation of terminals has taken place in many ports around the world where the initial containerized facilities were on sites unable to handle changing volumes and operations. Ports relocated by building new terminals and closing old terminals and piers. Older sites were converted to other uses, which at times were a substantial source of additional income for the port authority. For instance, the port of New York is now almost entirely in New Jersey. Maasvlatke II is the latest expansion of the port of Rotterdam, a surface reclaimed from the edge of the Rhine delta on the North Sea.
One of the challenges of this partial relocation of the port of Montreal is that the draft technical constraints remain unchanged, which is usually not the case when a port relocates to new facilities. Thus, the main focus is on terminal efficiency improvements and hinterland accessibility since the technical constrains of the draft cannot be improved without dredging the navigation channel to new technical standards. An important question remains about the long term viability of the existing container terminals on the island of Montreal.
For the current container terminal operators (MGT & TerMont), the Contrecoeur project is both an opportunity and a threat. If a new operator takes over the Contrecoeur terminal, then the outcome could be increased competition, particularly if growth prospects are less than expected (likely to be the case) and particularly if the new operator has a global portfolio and deep pockets (e.g. APMT, DPW, PSA, HPH). It is thus logical to assume that one existing operator would like to undertake a terminal swap to the new Contrecoeur site and transfer its activities there. This leaves the question to what would happen to the old terminal facility, which would represent for the port of Montreal the risk of a loss in capacity. In this case, we have a relocation, but not likely an expansion, unless the expansion phases of Contrecoeur are quickly put forward.
Port Regionalization and the setting of the St. Lawrence Gateway
An innovative opportunity would be for the port of Montreal to have within the same time frame a relocation to Contrecoeur and a form of port regionalization to be able to escape its technical draft constraints. A dual container port strategy on the St. Lawrence could be an option than would include a post-Panamax facility around Quebec City (e.g. the Beauport project). The outcome would be the setting of a St. Lawrence gateway supported by a rail corridor between Montreal and Quebec. Such a strategy is prone to risks and uncertainties and would most likely involve less traffic at Montreal. It would give more flexibility for the future and anchor the competitiveness of the St. Lawrence as a North American gateway, particularly for a shipping industry that has been driven by economies of scale for the last 20 years. A key challenge remains the hinterland connectivity of a post-Panamax terminal, which would require the upgrade of road and rail infrastructure. This hinterland corridor development would be much more cost effective than any dredging along the navigation channel between Montreal and Quebec to make it deeper and wider. Maybe it is time for the port of Montreal to move out of its box to build a St. Lawrence gateway strategy.
Professor, Texas A&M University - Galveston
7 年In reply to Mr. Auclair, VP, MPA: Vessel size: This can be a misconception. A (close to) Panamax containership can call Montreal, but only partially loaded. Irrespective of the stated vessel size, the port of Montreal is limited to a regular load configuration of about 2,500 TEU (or a bit more if the draft at the time of sailing is higher than 11.3 meters). I assume a ship could be fully loaded with empties. A post-Panamax vessel can certainly come to Montreal, but partially loaded and blocking circulation in one direction of the St. Lawrence navigation channel, which can be disruptive for counter navigation. Draft. Shipping lines allocate vessels taking guaranteed drafts into account, since authorities such as the Coast Guard are liable if this draft is not met. Shipping lines have to contact the pilots before leaving the last port of call before Montreal to confirm the draft forecast and see how much extra containers they can truly bring to Montreal. The seasonal draft fluctuations are more an headache than anything else since it leaves shipping lines with a level of uncertainty about what they can truly bring in and out of Montreal. The recent years have been good for Montreal with a better average drafts, but a shipping line cannot plan long term vessel allocation using fluctuating figures. They benefit from them through overloading opportunities. (btw, it is not mentioned if this draft is for the port or for the full St., Lawrence navigation channel all the way to Quebec City). Port Capacity. I have corrected the text to include the added capacity. Growth forecast. Forecast is not a science, but an educated guess that borderlines charlatanism at times. All models have one characteristics in common: they are almost always wrong by either over estimating or underestimating a trend. These flaws are so common that I have developed sections in my transportation textbook that underline them. Forecast are used to spin the strategies of the promoter and anchor his cognitive dissonance. https://transportgeography.org/?page_id=1629 Using CAGR is questionable since it assumes that ports behave like financial instruments. Just last week, I was talking with a forecaster from a large consulting firm competing with OSC. They are mostly using linear models since CAGR is a bit too optimistic; it fitted well the pre-2008 environment. Montreal: a unique model: Montreal is indeed a unique port in the North American context because of its geographic and traffic characteristics. Balanced ports are rare, with Savannah and Vancouver (to an extent) notable exceptions. I cannot think of another destination port of that size in this hemisphere, a characteristic that has served Montreal well. However, this can be at the same time a strength and a weakness since all of Montreal's eggs are in the same basket, even if this basket is well weaved. With all this said, Contrecoeur is a project that needs to be undertaken and I will be a voice supporting it. There is however an opportunity to extend this in a more comprehensive strategy.
CHRO, Tranformational leader, Strategist
7 年To follow up on your article, we would like to bring some clarifications. Vessel size The Port of Montreal today handles container ships of 5,059 TEU of capacity on one of its Mediterranean services. Two terminals are currently equipped with post-Panamax cranes. Moreover, as of May 2013, the Coast Guard amended regulations as to allow post-Panamax vessels to navigate the Quebec-Montreal segment. Since then, the Port of Montreal has handled post-Panamax vessels (bulkers) of up to 112 000 deadweight tons. Draft Draft available on coastal and river ports are referenced differently. Coastal ports use ocean level, and tidal fluctuations are bi-daily. River ports use chart datum, fluctuations occur with seasons. The 11,3 meters referred to in the text is the minimum guaranteed depth in the navigation channel, knowing that well over 90% of the time the water column exceeds 11,3 meters. For instance, during 2017, the port recorded water levels averaging 12.8 meters (12.2m in 2016; 12.0m in 2015). Port Capacity Total port capacity for its five container terminals today stands at 2.1 M TEU, not 1.8 M TEU (as stated in the paper). This includes the new Viau container terminal inaugurated in November 2016. Growth Forecast Volume forecasts were provided by Ocean Shipping Consultants, an independent consulting firm with a vast and recognized experience in the maritime field, including experience with Canadian port projects (e.g. Vancouver Roberts Bank T2). Container volume projections to 2030 are given under three scenarios: 3.0% (low), 3.9% (base) and 4.8% (high) based on a sound and tested methodology. Simply looking at the last decade to judge the validity of the forecast is insufficient. To put this forecast in perspective, a historical lens may reveal useful. The compound annual growth rate (CAGR) of the port’s container throughput over the past 20, 25 and 30 years has been 2.9%, 4.3% and 3.3%. Moreover, the port celebrated its 50th anniversary of containerization last year for which the CAGR stands at 10.3% since the first containers appeared in Montreal. This historical perspective testifies to sustainable growth and the fact that ports are able to withstand economic cycles and bounce back to support their economies. Looking at specific horizons or economic cycles is clearly insufficient. The past decade has witnessed volatility in maritime trade as well as deep structural change in the industry, affecting ports to a varying extent. While it is true that the CAGR of the past 10 years (2007-2017) for the port stands at 1.2%, all ports in North America have had to contend with a major financial crisis in 2009, port labor crises and structural changes in logistics and procurement. What must be remembered is that Montreal does not behave the same way as its competitors since it is a destination port, namely a port where ships unload and reload 100% of their contents. Ships in Montreal may be smaller but are running balanced and at full capacity. Vessel sizes are optimal for this unique trade. And while other East Coast ports have benefitted from cargo rerouting out of the West Coast following port labor crises of 2014-2015, Montreal has not benefited from this to the same extent because of its unique status as the only container port on the Saint Lawrence River. Other U.S. East Coast ports bounced back faster in part for that reason, while Montreal followed a steady yet sustainable growth path. As a matter of fact, in interpreting forecasts, the past five years hold more interest as they have seen the acceleration of new growth driver: emerging markets. In 2016, China became the port’s largest trading partner, surpassing long-time and established partner the U.K. Container traffic to/from Asia alone has averaged annual growth rates of 116% over the past decade. This is set to continue with the recent signature of an agreement between the Port of Montreal and Adani Ports Mundra. This positive outlook is further enhanced by prospects around CETA and the Quebec maritime strategy, the only such provincial strategy throughout North America. Montreal: a unique model Caution must be exercised when interpreting water draft for ocean vs. river ports. Montreal is a river port located 1,600 km inland. Yet, it has been able to compete with ocean ports for over half a century. Unlike its North American competitors, Montreal embodies a unique model as a destination port. This means that every ship calling at the Port of Montreal is completely unloaded and reloaded, which is not the case at other ports along the East Coast, where ships can stop over to unload a portion of their cargo before moving on to the next port. Typically, ocean carriers’ services on the East Coast will make 3 to 5 ship calls, thus unloading only a fraction of their cargo at each port. By contrast, Montreal being the only container port on the St. Lawrence River, ships will unload their entire cargo at the Port of Montreal before reloading at full capacity. The strategic location of the Port of Montreal is unique, and as such, the MPA sees little interest in engaging in a race for gigantism. Instead, it operates on the basis of stable economic foundations and sustainable growth of its traffic.
Principal Senior Scientist/Engineer, Research, Development & Deployment - Multimodal Transportation and Logistics / See disclaimer in the *About* section.
7 年Where such solutions from the science of operations research (as link hereafter) considered to expand capacity within boxed-in terminals: Hongkong International Terminals Gains Elastic Capacity Using a Data-Intensive Decision-Support System https://www.google.ca/url?sa=t&source=web&rct=j&url=https://pdfs.semanticscholar.org/f43c/94e2e46f9ceaa41f9eae023eb5f9d8baa0ab.pdf&ved=2ahUKEwjysLCa9K7ZAhVMnFkKHWm6Dk4QFjAAegQIERAB&usg=AOvVaw1bIbRMqrH7CUp_Dyw6r-FN
Board member, Advisory Board,
7 年Good article based on solid facts and innovative ideas forward
Lawyer, Partner at Davies | Montreal Real Estate Enthusiast
7 年Quite an interesting article, thank you for the insightful analysis and figures.