Inland container ports are wave of the future

Cities like Regina could benefit from this global shift, Paul Sinclair writes.

For the past 90 years, Saskatchewan agriculture has revolved around our Class 1 railways and their bulk cars, around a handful of big grain companies and the handful of crops they figured they could market in sufficient volumes overseas. The future is going to look very different.

Agriculture is going to increasingly depend on what moves in and out of ports and cities in containers, and how fast. Even small cities, like Regina, are going to get drawn into a massive global consolidation. It is already happening.

Consider this: China Merchants Port Holdings (CMPH), mover of 100 million containers (TEU) a year and a subsidiary of China’s largest state-owned company, recently began a buying spree in regions with access to natural resources.

In 2018, CMPH bought a 90 per cent stake in TCP Participacoes S.A, which operates the port in Paranagua (TCP), the second-biggest container port in Brazil. The CMPH bought a 50 per cent stake in the Port of Newcastle in Australia, which it wants to turn into a major container port.

Such big players have already begun to scramble for control of Canada’s steadily growing container traffic. DP World, which moves 70 million containers a year, took over Centerm in Vancouver in 2005, the Fairview Terminal in Rupert in 2015, and the Fraser Surrey Docks in 2019.

This year, Singapore-based PSA International bought Halterm, the port of Halifax, after fending off a joint bid by CMA CGA, a French container shipper, and CN. CN and terminal operator Hutchison Ports are going to run a $775 million container terminal at the Port of Quebec.

The big players have also begun reaching their fingers deep into the hinterland. PSA International took a majority stake in Ashcroft Terminal, a container trans-loading hub in interior B.C. that has its eye on the agricultural business, among other things. China’s CMPH is pursuing rail networks in Brazil’s interior. DP World and the government of Rwanda have set up DP’S first inland dry port near Kigali in Rwanda.

Even more interesting for landlocked Saskatchewan, DP World is managing the world’s largest dry port near the “centre of the world.” Located in the Almaty region on the border with China near the world’s farthest point from any ocean port, the Khorgos Gateway takes advantage of the point where the railway gauge changes from the Western European one in China to the Russian gauge in Kazakhstan.

These global flows of capital have already begun to shape Regina. This fall the lights came on at Intermobil, a state-of-the-art intermodal facility owned by AGT Foods in south Regina. A result of a synergistic arrangement involving CN, an innovative Saskatchewan logistics company, and a global pulse trader, Intermobil can now reposition substantial volumes of empty containers to be filled with Saskatchewan products for export.

But this development too must be seen in the context of its vast global backdrop. Coinciding with Intermobil’s launch, Fairfax International announced in May it had taken on 59.6 per cent controlling equity interest in AGT Foods, the parent company.

This was not the first time Prem Watsa, Fairfax CEO and “Canada’s Warren Buffett,” had given careful thought to containers. In 2017, Fairfax bought a controlling share of Saurashtra Freight, a Mumbai company on the hunt for logistics acquisitions. Early this year, Hong Kong-based Seaspan, the world’s largest owner-operator container leasing company, announced Fairfax had just completed in US$1 billion aggregate investment commitment to the company.

Could the behemoths DP World, PSA International, CMPH, or CMA CGM be interested in Regina’s Global Transportation Hub (GTH) asset currently on the auction block? Who knows. But all this consolidation is a window on the future.

The global agriculture system is going to increasingly revolve around port cities, including dry port cities. The City of Regina may not care if Canadian Pacific ever drops off an empty container at the GTH. Just remember: interior cities in West Asia, South America, and East Africa have already started unlocking wider opportunities by plugging themselves into the global port system.

Sinclair is an associate professor in the faculty of business administration at the University of Regina.