The Canadian Press
Tim Arsenault (email@example.com)
Canadian National Railway confirmed Thursday that it is bidding to acquire a stake in Halterm. Halifax is Canada’s fourth-busiest port in terms of container traffic.
Employment could double, plus opportunity to grow Halifax as an eastern gateway
Canadian National Railway is bidding to acquire a stake in Halterm, the largest container terminal in Eastern Canada, and the intended deal shows the company is keen on an enhanced presence in the region, according to an industry expert.
“I think it didn’t occur to me that CN would be interested, but having heard that they are, this gives me a lot of hope because it says that they really are committed to an eastern gateway that’s not Montreal,” said Mary R. Brooks, professor emerita at the Rowe School of Business in Halifax, during an interview Thursday.
“In other words, they’re not putting all their eggs in a Montreal basket.”
Montreal-based CN confirmed Thursday it is joining a partner to bid for an interest in Halterm, a 30-hectare site at the Port of Halifax, but declined to provide details.
“As part of our action-oriented approach to grow trade volumes on our eastern network, CN is exploring the opportunity with a partner of getting involved in the acquisition of Halifax’s Halterm container terminal,” company spokesman Jonathan Abecassis wrote in an email.
Halifax is Canada’s fourth-busiest port in terms of container traffic, behind Vancouver, Montreal and Prince Rupert in northwestern British Columbia.
CN Rail is the lone railway operator in Halifax.
The Halterm Container Terminal was purchased by Macquarie Infrastructure Partners in New York for $172.7 million in January 2007.
Halterm has always had an advantage when it comes to transit time, Brooks said.
“For people who have fairly high inventory carrying costs on their cargo, the Halifax gateway has always been a first choice … This is a good advantage for CN to be able to take something like Halterm, and because you would now have that interface between ship and rail destinations controlled by one provider, as opposed to two companies co-ordinating, you have the ability to a) figure out how to do it better and b) figure out how to do it cheaper.”
More than 100 longshoremen work at Halterm, which is at the entrance to Halifax Harbour, next to Point Pleasant Park in the city’s south end.
Union spokesman Kevin Piper said CN appears to be interested in transforming Halifax into a so-called gateway port that can handle larger ships and trains that are more than three kilometres long.
“That’s what these big ships need,” said Piper, president of Local 269 of the International Longshoremen’s Association.
“They need to have the rail capacity when they dump off. You don’t want to stockpile the containers. You want to load them directly to the rail. That’s what they do in Prince Rupert.”
Piper said most of the cargo that arrives in Halifax is shipped by rail to Montreal, Toronto and through a tunnel at Sarnia, Ont., to the U.S. Midwest.
CN’s proposal could help the Port of Halifax almost double its container traffic, which currently stands at about 500,000 20-foot equivalent units per year, said Piper. Each unit is equal to a standard 20-foot shipping container.
“If you’re going to double the capacity, you’re going to double the workforce,” he said, adding that the port supports about 12,000 direct and indirect jobs.
“That’s long-term growth and long-term, sustainable, well-paying jobs.”
The acknowledgement of the Halterm bid did not come as a surprise to officials working to bring a container terminal to Melford.
“The process has been ongoing now for a number of months, where Macquarie had gone out for requests for proposals for someone to purchase the operating concession they have,” said Richie Mann, vice-president of marketing and government relations for the proposed Melford Atlantic Gateway terminal, during an interview Thursday.
“We know about some of the people who have been doing that; we obviously have been dealing with many of the same people for many years. We knew a lot of people were going to take a look at this.”
Mann said the news is positive for the Melford project, which would be located along the Strait of Canso in Guysborough County, near Port Hawkesbury. The intention is to have three berths with up to nine container-handling gantry cranes to serve the largest ships.
“It provides the opportunity for us to encourage anybody that’s looking at the Halterm concession to also look at what Melford’s proposing. As we’ve said all along, we’ve got a pretty good mousetrap here and can provide a lot of opportunity and sustainability and so on going forward.”
However, Brooks said CN is likely playing Halterm, Melford and Quebec City against each other as a bargaining strategy.
“The three are all possibilities for CN. I would argue that it’s a way for them to put pressure on Macquarie to take the bid very seriously because what they’re saying, in essence, is ‘If we can’t do a deal, we’ve got options.’
“I would think that at this point in time there’s enough capacity that there’s not going to be multiple choices. I would say that there’s probably a winner.”
Industry analyst Walter Spracklin of RBC Capital Markets said the purchase of a minority Halterm stake, although not large for CN, would be strategically positive for Canada’s largest railway.
“With a ‘seat at the table’ along with an experienced partner, we believe that CN ensures that capital and strategic planning at Halterm is conducted with long-term growth in mind,” he wrote in a report.
The bid follows the acquisition several months ago of TransX, another non-rail deal, that suggests a new strategy for CN Rail’s new chief executive Jean-Jacques Ruest, whose ambition is to create a Prince Rupert of the east, Spracklin added.
The terminal has two piers with five berths that range in depth from 14 to 16 metres, though the longest pier can handle only one ultra-class container ship at a time.
The Halifax Port Authority has been working on a plan to expand the port since 2016. The plan calls for increasing capacity at Halterm to allow the terminal to accommodate two ultra-class vessels at one time.
In October, the authority confirmed that construction of a temporary berth extension had started, with a completion date slated for the first quarter of 2020. The second phase of the authority’s plan calls for expanding the terminal itself to make room for more equipment, trains and trucks.
In October 2017, Halterm announced it would expand its container handling capabilities by purchasing new equipment worth $10 million.