Guarded optimism in uncertain times

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The result of US presidential election could have widespread implications for cargo flows through US and Canadian ports if protectionist trading emerges.

The election of Donald Trump as the 45th president of the US has caused consternation among free traders and most executives involved in the global shipping industry. Yet his plans to invest billions of dollars in new infrastructure could provide a valuable cargo boost and particularly for the neobulk and dry bulk sectors.
 
For shipping lines trading to/from the US and for ports handling the nation’s international trade, these are very uncertain times, with sentiment generally more negative than positive.
In many respects, Mario Cordero, chairman of the Washington (DC)- based Federal Maritime Commission, summed up many people’s feelings in a keynote address at the World Shipping Summit conference held in Shanghai. “If trade is perceived by the average citizen as to be an exploitative system, we are handing over fuel and matches to those who seek to indict international commerce as the cause for economic woes,” he said.
“Free trade helps to keep inflation in check, adds to economic growth, improves economic efficiency, and spurs innovation. Perhaps most importantly, trade bridges distances and helps create meaningful relationships between nations and people.” 
 
Positive signs?
But it is not all doom and gloom. In particular, the US will need to import raw materials, steel and construction materials to support Trump’s intended massive expenditure on roads, bridges and airports. This could result in a firming in charter rates for Handymax and Supramax tonnage, and provide ports with additional cargo volumes, but how long-lived the boost might be and/or the scale of it are unknowns. 
 
Meanwhile, prospects in the US’s traditional dry bulk export sector appear encouraging. The demand for coal, particularly from countries in Asia (China, Malaysia and Thailand), has picked up since the summer, and India and Pakistan are in the midst of developing a large number of thermal power stations to support their ambitious industrial development programmes. Trump has also pledged to invest in and revitalise the US’s coal mining sector. 
 
North America’s grain trade remains robust with maize and soybean exports from the US at or close to record levels. The most recent report published by the UKbased International Grains Council, for instance, predicted that the total production of wheat and coarse grains in the 2016/17 fiscal year will be 23 Mt higher than the 2.05 Bt record posted in 2015/16. 
The report stated: “Output is now placed at an all-time high of 2,069 Mt, with the largest adjustment this month for maize, and this is nearly entirely due to a sustained improvement in crop prospects in the US. Also due to an improved outlook in the US amid favourable growing conditions, world soybean production is projected to be 4 Mt higher in 2016/17.” 
 
Demand drivers
The strong demand for protein (meat and fish) foods in Asia, especially China, is driving the demand for animal feeds while the requirements for specialised grains for use in the brewing, baking and food processing industries are also increasing. With middle class populations with disposable incomes rising rapidly in China, Indonesia, Vietnam and Indonesia, producers in both the US and Canada are well positioned to increase their share of the  market. 
 
Inevitably, whether it is coal or grain, these trading opportunities are bound to be impacted by Trump’s ultimate policies on foreign affairs and trade and the relationships he builds with the respective leaders of these Asian nations.
At this point in time, for ports handling dry bulk cargo on the Pacific seaboard of North America, such as Vancouver (Canada), Portland, Lewiston, Stockton and San Diego, considerable opportunities exist. Several port authorities andterminal operators are in the midst of investment programmes aimed at modernising, improving and expanding their dry bulk handling facilities, and in attracting new tenants and cargoes. 
 
At the Columbia River port of Longview, the authority is seeking proposals from companies interested in its Bridgeview Terminal. The facility, which has two cargo handling berths and associated storage areas, became available earlier this year following expiration of a lease with Kinder Morgan Terminals (KMT).
Although the port authority is keen to work with a terminal operator/stevedore that wants to handle dry bulk imports/exports, a spokesperson for the port said it had not ruled out deals with companies interested in pursuing other marine-dependent uses. 
 
Laurie Nelson-Cooley, business development manager for the port, explained: “Opportunities to establish new terminal operations or terminal redevelopments are minimal on the west coast. Our intent is to maximise this terminal based on cargo throughput, job creation and return on investment to our customers and community partners.” 
 
It is hoped to have the new lease in place for operations to commence from April 2017, and for it to have an initial term of 10 years. 
 
Longview’s main advantage is its location as the first port on the deep-draught Columbia River shipping channel and, therefore, its proximity to international markets, and its expertise and traditional customer base in the grain, mineral, fertiliser and lumber sectors. 
 
At the US port of Vancouver (Washington), the port authority is seeking Statements of Interest for the design, permit, construction and operation of a high-volume mineral bulk cargo handling facility at Terminal 5. Interested parties have until 23 December 2016 to submit their plans. 
 
The 86-acre area that the port authority wants to develop is located in the southern part of T5 and is, according to Alastair Smith, chief marketing and sales officer of Vancouver, “unparalleled on the whole of the west coast of North America when it comes to access to river, road and rail”. 
 
He elaborated: “There’s a lot of possibility in this site and we look forward to hearing from firms interested in partnering with us to grow their business in our community.” 
 
T5’s design includes 4 x 8,500ft tracks that loop the facility and allow trains with multiple cargoes to be accommodated. A fifth such track can be laid if demand warrants it.
Improved access 
The port authority has invested heavily in modernising its infrastructure and, in particular, upgrading its access for customers, with US$275M committed to its West Vancouver Freight Access project alone. This will be fully completed by 2018 and should allow the port to handle 400,000 railcars a day. This compares with just over 50,000 railcars currently. 
 
Vancouver’s management sees many opportunities in several sectors of the dry bulk market, believing that demand from the emerging economies in Asia will continue. It also sees its location as being highly desirable, given that it is only 106 miles up the Columbia Snake River system, but closer to the interior than US Gulf coast ports, and can, therefore, offer its customers more effective and cost-competitive cargo supply chain options. Currently, Vancouver handles 6 Mtpa of mainly dry bulk cargoes. 
 
At the Canadian port with the same name, several improvements are also being carried out as the port plans for a bigger role in both the dry bulk and container shipping sectors. 
Despite a generally disappointing H1 2016 trading performance, which saw total cargo volumes dip by almost 6% to 66 Mt, Robin Silvester, president and CEO of Vancouver Fraser Port Authority (VFPA), expressed considerable optimism about the future.
“The long-term outlook for Canada’s trade is one of growth, and the port will be ready to handle increased volumes through Canada’s west coast.”
 
In the first half of the year, Vancouver’s main bulk cargoes registered contrasting fortunes. While grain exports posted another record, climbing 4.8% on the same period of 2015, the export of thermal coal dropped by over a third.
Venturing north
Perhaps it is no surprise, therefore, that one of the biggest development projects being carried out by the VFPA is the construction of a new export grain terminal at Lynnterm West Gate in northern Vancouver. The facility will be operated by G3 Global Holdings, a limited partnership established by Bunge Canada and SALIC Canada Limited, which is a wholly owned subsidiary of Saudi Agricultural and Livestock Investment Company. 
 
The development includes removing existing buildings and facilities and preparing the site to accommodate:

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