B.C.'s container terminal operators brace for virus impact

No major cargo flow disruptions thus far at Vancouver and Prince Rupert, despite bleak outlooks and slowing global trade

Container cargo being loaded at GCT Deltaport at Roberts Bank | Chung Chow

COVID-19’s rapid erosion of world travel and trade has yet to significantly disrupt operations at B.C.’s largest container cargo terminals.

But increased border closures and travel restrictions and global economic stagnation will inevitably slow goods demand and freight flow around the world.

In its most recent briefing on the global container terminal sector, U.K.-based shipping consultancy Drewry noted that the share price of major publicly traded container terminal operators was down an average of 14% compared with the same time a year ago.

Eleanor Hadland, Drewry’s senior ports and terminals analyst, said that drop would have been closer to 17% if not for DP World’s (Nasdaq Dubai:DPW) decision in February to delist from the Nasdaq. As Business in Vancouver previously reported, under DP World’s Nasdaq-delisting plan, its Port and Free Zone World corporate parent will acquire 19.55% of DP World’s shares at a 29% premium over the price announced in mid-February.

DP World operates the Fairview container terminal in Prince Rupert and the Centerm container terminal in Vancouver.

Hadland said Drewry’s base-case scenario for COVID-19’s impact on container traffic, based on containment of the coronavirus in China, projects a slowdown in global GDP growth and even a contraction, but a potential contraction of GDP “will depend wholly on the size of the consumption areas affected and how quickly and effectively each location controls the outbreak.”

She added that, under the base-case scenario, global economic recovery would be pushed back to 2021 and bounce-back would be far more limited than Drewry’s more optimistic scenario.

The first wave of the virus outbreak resulted in a spike in cancelled container ship sailings between Asia and Europe.

Container analytics firm Alphaliner noted that in the eight-week period following 2020’s Chinese New Year, 40 container ship sailings were cancelled on the Asia-Europe trade loop compared with 15 during the same period in 2019. Alphaliner has estimated that 2020’s extended Chinese New Year holiday, instituted in an effort to reduce the spread of COVID-19, will cut container cargo volumes at Chinese ports by six million 20-foot-equivalent units in 2020’s first quarter.

Since then, with the virus rapidly spreading into consumer markets elsewhere around the world, Hadland said, significant softening in demand will reduce more sailings and port volumes.

Under Drewry’s pessimistic scenario, the pandemic tracks through into a global recession “as both consumption and production economies are badly impacted and results in a large-scale contraction in container demand across 2020 and increasingly uncertain prospects for 2021.”

Citing the coronavirus outbreak’s spread and the deteriorating global economic prospects, Moody’s Investors Service has downgraded its outlook for global shipping to negative from stable. In a report released last week, the U.S. credit rating agency said it expected earnings before interest, tax, depreciation and amortization (EBITDA) of rated shipping companies to drop by between 6% and 10% in 2020 compared with EBITDA growth of almost 40% in 2019. The report added that there is a downside risk that “the EBITDA of shipping companies globally could decline by between 25% and 30%, similar to levels last seen in 2016 when Hanjin Shipping Co. Ltd. went bankrupt in one of the largest recent failures in the sector.”

Meanwhile, a Global Port Tracker report released in early March by the U.S. National Retail Federation and Hackett Associates warned that “the coronavirus outbreak is expected to have a longer and larger impact on imports at major U.S. retail container ports than previously believed as factory shutdowns and travel restrictions in China continue to affect production.”

February container traffic through the Port of Long Beach, one of North America’s busiest container ports, was down 9.8% compared with the same month in 2019, as imports fell 17.9% and exports dropped 19.3%.

However, B.C. container terminals servicing the transpacific trade loop have thus far been spared any significant disruption from COVID-19.

Marko Dekovic, vice-president of public affairs for GCT Global Container Terminals Inc., said in an email that “there are currently no impacts, and operations at our terminals remain fluid. We are in close communication with appropriate government authorities and supply chain partners to ensure goods continue to move.”

GCT operates GCT Deltaport at Roberts Bank and Vanterm in Burrard Inlet.

Dekovic added that the company has implemented several measures aimed at limiting the spread of the coronavirus at its terminals. They include travel restrictions, increased cleaning regimens on terminals and in offices and providing work-from-home options for employees not required on site.

Angela Kirkham, DP World (Canada) Inc.’s manager of marketing and communications, said the company is following the guidance of the World Health Organization and local health authorities at its operations around the world to prevent the spread of COVID-19.

“We are closely monitoring any impacts on trade flows, although it is too early to give an assessment.”

The BC Maritime Employers Association (BCMEA) and the International Longshore and Warehouse Union Canada (ILWU) are also working together on a plan to address COVID-19’s potential impact on B.C. port operations.

BCMEA president and CEO Mike Leonard said interim mitigation strategies include a shift to digital dispatching for ILWU casual workers in Vancouver, increased cleaning of port facilities, providing work-from-home options and limiting travel.

He added that there has been a “material slowdown” in cargo volumes through B.C. ports “due to a number of events, including the effects of COVID-19 on imports from Asia.”

But he added that “at this time, it would be premature to assess the specific impacts of COVID-19 on cargo throughput and demand of labour.”

B.C.’s other gateway port, Prince Rupert, employs about 1,500 people in a city of about 13,000. As such, said port authority CEO Shaun Stevenson, operations where face-to-face interaction is not needed have been suspended, as have open houses on proposed developments.

“The port’s ongoing operation is vital to Canada, and North America’s response to COVID-19, and as safety is integral to our sustainability as a gateway, we are working to ensure that trade is conducted as carefully as possible in this situation.”

Stevenson said the port is working closely with tenants and partners to implement practices to mitigate COVID-19’s spread.

Those partners include Transport Canada, the Canadian Border Services Agency, the Public Health Agency of Canada, shipping lines, masters and crews, port authorities and terminal operators. •

– With a file from Jeremy Hainsworth

trenshaw@biv.com

@timothyrenshaw