A combination of new rail cars and an 8,500-foot dedicated train model would grow the volume of grain moved per train by 35%, said Murray Hamilton, assistant vice-president of grain and fertilizer sales and marketing team, CP.
“It’s going to change the landscape of Canadian grain and origination and movement once this whole program is put through and enabled,” he said. “I think it really does drive reliability, more consistency and puts a better product out on the marketplace that anyone who is shipping grain in Canada can be proud of.”
Hamilton addressed the issue of rail reliability during the symposium in Toronto, Ontario, Canada, at the end of March against the backdrop of a rail system that is experiencing significant delays in moving grain. In mid-March, the Canadian government expressed its concerns over the delays with the CP and CN railroads and asked them to clarify how they plan to address the backlog.
Hamilton stressed three messages during his talk:
- Despite what might be the common belief, grain is critically important to CP.
- The supply chain must be considered from a macro perspective, from farmgate through to vessel.
- CP is stepping up investments in products and services to drive more accountability and reliability in its movement of Canadian grain.
In 2017, grain from Canada and the United States represented about 24% of revenues in total for CP. Canadian grain accounted for about $1.04 billion of the revenue and U.S. grain for about $500 million.
Rail delays
Cold weather, heavy snowfall and a large 2017 harvest along with increased demand from intermodal freight shipments and fracking sand from Wisconsin have been causing rail capacity issues since September, according to a report from the U.S. Department of Agriculture’s Foreign Agricultural Service (FAS). Shipments of oilseeds, grains and pulses are backlogged out of Thunder Bay, Vancouver and Prince Rupert.
Producers were told grain that was expected to ship months ago may not move until April, the report said. Total grain volume at the three main ports are 5.5% behind last year, but on par with the five-year average.
Canadian National’s (CN) overall car order fulfilment rate dropped to 56% in fall 2017, according to the Ag Transport Coalition. CN and CP combined provided only 38% of the railcars ordered by grain shippers in the week of Feb. 12. CP delivered 66% of its orders and CN delivered 17%.
The Canadian government has introduced the Transportation Modernization Act (Bill C-49) to provide long-term solutions to the transportation issues, but is still making its way through Parliament.
This is the second time in five years that the railroads have struggled to move the Canadian harvest. In 2013-14, the perfect storm of a bumper harvest and an extremely snowy and cold winter caused significant delays and led to a loss of between C$6 million and C$8.5 million for Canadian farmers. In response, the Canadian government set minimum grain movements for a set period of time and required monthly reporting on weekly rail car cycles and the status of rail cars used to move grain.
CP’s response
Since 2012, CP’s operating performance has been improving, Hamilton said. Train speed is up 23% while terminal dwell, the amount of time assets sit idle as they are moving from origin to destination, was down 7%.
Fuel productivity improved 8% due to better technology in the locomotives along with better management. Train lengths are also up 10%.
“That’s a big opportunity looming for us, particularly in Canadian grain, as we think about longer trains moving more grain,” Hamilton said.
CP has one of the strongest origination footprints for grain in North America, he said, with customers operating 78 high throughput elevators (112 train cars or greater) and five 8,500-foot loop track elevators with another two coming online by the end of summer. With the current loop tracks, trains are 112 cars long; with an 8,500-foot loop, trains could grow to 134 cars.
“That represents a 20% increase of grain per train,” Hamilton said. “We would be moving less trains, and less movement in the supply chain, by extension, creates more reliability.”
Taking it a step further, with new larger capacity rail cars, those trains could grow to 148 cars, for a 35% increase in the amount of grain moved per train. This works because the new railcars are shorter than the current ones, so trains won’t exceed 8,500 feet even with the additional 14 railcars.
“For every three trains we move today, we’ll move two trains,” Hamilton said. “So, for the grain shipper, the number of trains and movements they need to make to fill a vessel starts to compress and shrink.”
CP plans to spend between C$1.3 billion and C$1.5 billion on capital expenditures in 2018. A significant portion of that, about C$500 million, is tied to passage of C 49. If passed by the government, the law would trigger investment in new hopper cars to replace all of the existing government hopper cars, Hamilton said. The new cars would be 56-feet long, high capacity cars, creating a fleet to move grain in Canada and the United States.
Another benefit of the 8,500-foot model is that the power stays with the train. Under the system, the CP crew would move the train off the main rail line and onto the elevator’s loop. CP employees would get off the train and get their required rest time, while elevator employees took care of loading the grain. When the train is ready 12 to 16 hours later, the same crew can get back on the train and take it to its final destination.
All of this activity takes place clear of the main track, so other trains passing by won’t have to stop and wait for the grain train to finish.
“The amount of savings in terms of cycle time that we think will get developed through this model could be up to two or three days,” Hamilton said. “In a 10- to 14-day cycle, that’s a significant improvement.”
There’s no doubt railroads have a critical role to play in the logistical management of grain from elevator to port terminal. At any step along the way, from farmer to elevator to railroad to port, there can be variables that impact movement of grain.
“It has to be and needs to be a very integrated supply chain,” Hamilton said. “The tighter we work in terms of visibility, information and communication, the more successful we are in moving grain to market.”
The variability in the size of harvest from year to year makes it difficult to plan ahead on what resources the railroad will need to move the crop. Up until the end of October, the grain industry was saying the harvest would be around 64 million to 66 million tonnes, but it actually came in at around 71 million tonnes. That’s a 10% increase in production the railroads have to provide resources for.
“In our business, getting crews and adding power doesn’t happen overnight,” Hamilton said. “The better visibility we get to where were going to end up in total capacity helps make our job easier and creates greater reliability.”
Port’s sustainable expansion
The Port of Vancouver also is expanding to meet the needs of burgeoning grain and specialty crop shipments, but it must do so in the context of sustainability, said Duncan Wilson, vice-president of corporate social responsibility for the port.
In 2017, the port handled 23.6 million tonnes of grain, an increase of 8.2% from the 21.8 million tonnes handled in 2016. Wheat and canola volumes were up 7.9% and 2.7%, respectively. Animal feed volumes reached 1.2 million tonnes, an increase of 106.9%, most of it headed to China and Vietnam.
Overall cargo traded through the port reached a new record of 142.1 million tonnes, a 5% increase from the previous year. Overall container traffic (measured by twenty-foot equivalent units or TEUs) saw a significant increase of 11% in 2017 to reach new record of 3.3 million TEUs, with loaded imports up by 11%.
With these new cargo records and significant increases in grain volumes, there is a lot of attention focused on the port, he said. The port is required to protect the environment, ensure a high level of safety, consider the import of surrounding communities, all while being self-sustaining financially. Sixteen municipalities touch the port, which has 350 kilometers of coastline, and traditional territories of 32 First Nations also intersect the Port of Vancouver.
“So, we’re growing this port and gateway in a very complicated context,” Wilson said. “Those things are challenging enough. What’s more challenging is that we’re in a province that has lots of environmental interests. It is the birthplace of Greenpeace and other activist movements. Grain can get swept up in some of the issues that affect other sectors, like petroleum.”
Because of the immense passion surrounding environmental and social issues, port officials recognized that the port must grow sustainably, and have the support from the community, he said.
To that end, port officials worked with those who have an interest in the port to define sustainability. The result was three pillars of sustainability: economic prosperity through trade, healthy environment and thriving communities.
“Everything we do, we think about through this lens,” Wilson said. “We’ve embraced the vision to be the world’s most sustainable port.”
Several projects that will expand the port’s capabilities to handle grain are under construction, and more are in the planning stages. The amount of grain and specialty crops moving through the Port of Vancouver have doubled in the past decade, and the projected annual growth rate is 6.2% over the next five years.
Examples of completed projects include the Roberts Bank Rail Corridor, the Northshore Trade Area and the Southshore Trade Area, which led to private investment in new and expanded terminals, he said. Port officials recognized there was still a need to invest so they came up with a list of priority projects throughout the gateway that will increase capacity.
Recent private sector projects that have increased grain capacity include a C$170 million project by K+S Potash, a C$145 million terminal expansion by Richardson International and C$100 million in upgrades to Viterra’s Pacific Terminal.
G3 is building a facility at the port, the first totally new grain terminal in the port since the 1960s. Fraser Grain Terminal has proposed building a facility that could handle 3.5 million tonnes of bulk grain cargo, and Fibreco is looking to upgrade its terminal so it can handle agricultural products. The terminal currently handles wood chips and wood pellets.
“Unlike other projects that are on port land and port jurisdiction, this is municipal jurisdiction,” Wilson said. “They are struggling their way through that permitting process to get that project approved.”
A major challenge in handling grain in particular is coordinating the arrival of vessels with the readiness of cargo at the terminal. Three Class 1 railroads come into the Port of Vancouver. When there are rail delays, such as those in the last several months, the port provides extra anchorages so vessels can remain close by when the cargo is ready.
“It not only causes you grief, it causes us grief,” Wilson said. “When the cargo isn’t there and the ship has to wait, it’s sitting in the Gulf Islands and the residents complain.
“It’s an area that represents one of the biggest challenges for us: How do we achieve the highest efficiency in the grain supply chain in terms of the interface between the cargo coming by land and vessel arrival?”
Along with infrastructure changes, the port is implementing a number of data initiatives. These include equipping the entire trucking fleet with GPS, which has led to industry-leading turn time in the container sector. The port has partnered with Transport Canada to provide accurate cargo forecasts and is working with rail and terminal operators on a supply chain visibility project.
Key transportation data is available to industry and communities through an app called PortVan EHub. It shows all transportation data, including rail crossings, vessels in harbor and truck turn times.
“We see this area as a critical complement to our infrastructure program to make sure we’re getting full use out of the existing supply chain,” Wilson said.
