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February 17 2020

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14 The Journal of Commerce | Februar y 17 2020 International Maritime CANADIAN NATIONAL RAILWAY (CN) aims to replicate in Eastern Canada the Port of Prince Rupert model that has driven US-bound cargo through the Canadian West Coast, but offi- cials hope to have it humming in a few years rather than a decade. That's requiring the largest Canadian freight railroad to take a more hands-on approach to the ports of Halifax and Quebec. CN last year took a 25 percent stake in a plan with global terminal operator Hutchison Ports to build a C$775 million ($590 million) container terminal in Quebec. The railroad has commercial partners at the ports of Vancouver and Prince Rupert, but its willingness to work as a financial partner in a port project is a first for the carrier. With PSA International having taken control of the largest Halifax terminal last year, CN is working closely with the world's largest ter- minal operator to capitalize on the economies of scale larger ships and longer trains bring. PSA Halifax, for- merly known as Halterm and owned by Australia's Macquarie Infrastruc- ture and Real Assets, sits on the deepest harbor on the East Coast of North America and can handle ships up to 16,000 TEU. PSA wants "to change the model from what the prior owner was doing," CN CEO and President Jean- Jacques Ruest said in a December interview at the railroad's Montreal headquarters. "For them to redeploy or rework inside this brownfield is to have something modern, cost- effective, and able to handle as big a ship and as long trains as possible." As in Prince Rupert, CN is the sole rail provider at Halifax. Limited reach CN's new approach to developing both ports, Ruest said, comes after a "limited amount of success" over the last five years in growing inter- modal volumes out of the Port of Montreal, the largest port in eastern Canada and the second-biggest in the country. Ruest said Montreal's ability to serve the Midwest has been slowly shrinking because the ships calling from Asia and Europe haven't gotten larger. "So what does the train manager of the shipping line do? They man- age their yield, and eventually either they add another small ship, or they basically dedicate more capacity to the local market," Ruest said. "Mon- treal as a port is growing, but it's growing more and more as truck-in and truck-out." Saint Lawrence River drafts limit Montreal to handling ships with capacities of slightly more than 5,000 TEU; most services calling the port deploy 4,500-TEU ships. The discharges of such vessels, though, are some of the strongest — if not the strongest — on the East Coast, according to the Montreal Port Authority. The port said its volume headed to and from Midwest via CN and Canadian Pacific Railway rose 10 percent last year from 2018. The challenge in growing inter- modal volume to and from Mon- treal goes beyond ship size limits, Ruest said. Because the market is truck-centric, ship discharges priori- tize containers for the local market, and the port's marine terminals are connected by a short or belt line, making building unit trains difficult. "There has been a huge amount of capital investment on the US East Coast. So [CN's eastern port efforts are] as much offensive as defensive," he said. New and improved The dream of creating a new — or at least fully realized — gateway in eastern Canada isn't new. Two Nova Scotia projects in Sydney and Melford have worked to attract con- tainer services for years but have yet to do so. Prince Rupert is the only new major Canadian container gateway created in decades, thanks in large part to CN, which solely serves the +15% +16% -2% -0.1% 80,000 180,000 280,000 380,000 480,000 580,000 680,000 2015 2016 2017 2018 2019 TEU Halifax cargo volume growth stagnates in 2019 Source: Halifax Port Authority © 2020 IHS Markit Laden import and export volume at Port of Halifax, with year-over-year change Importing & Exporting | Ports | Carriers | Breakbulk | Global Logistics Prince Rupert redux CN taking hands-on approach to development at Halifax, Quebec ports By Mark Szakonyi "We bring more than just money; we bring the rail expertise."

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