Red Sea attacks could bring more cargo to Vancouver port: CEO

Whether the trend continues depends on developments closer to the Suez Canal, which container ships have largely avoided for months due to the ongoing conflict in the region.

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Attacks on cargo ships in the Red Sea could drive more shippers to the port of Vancouver after a year of record volumes, its chief executive said.

“We know that the impacts of the Red Sea have caused significant diversion of cargo for ship operators to all markets,” Peter Xotta, head of Vancouver’s Fraser Port Authority, said in an interview Friday.

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“I hope that could result in an increase in the short term of cargo at the Port of Vancouver,” he said. “We’ve seen an increase in volume in early 2024. Some of that could be partly related to those events.”

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Whether the trend continues depends on developments closer to the Suez Canal, which container ships have largely avoided for months due to the ongoing conflict in the region.

Since December, maritime attacks by Iran-backed Houthi militants have forced carriers to stay away from the Red Sea and divert around Africa, adding weeks to the journey.

On March 6, fighters attacked the bulk carrier True Confidence, killing three civilians, the first deaths since militants began attacking ships linked to Israel, the United States or the United Kingdom.

A handful of cargo ships have opted to head east across the Pacific Ocean toward North America from parts of Asia rather than make the lengthy westward journey around the Cape of Good Hope.

“Any of these things that create greater volatility in the supply chain ultimately impacts its performance and its cost,” Xotta said. “So greater stability is a good thing.”

Last year, a record 150.4 million tonnes of bulk, breakbulk and containerized goods passed through the docks of Canada’s largest port, Vancouver’s Fraser Port Authority said.

The increase marked a six percent increase from 2022, despite a faltering global economy and a big drop in container shipments.

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Bulk exports (wheat, canola and oil, especially) drove the increase, as did containerized exports and auto imports.

However, excess retail inventories and cooling demand dragged down container imports (and container shipments in general), the port authority said.

“It was a mixed year at the Port of Vancouver, with growth in some sectors and weakening in others,” the federal agency said in a news release.

“With the pandemic at the beginning, we saw very strong consumer buying driving container volumes,” Xotta said in the interview.

It also noted the subsequent decline in spending on consumer items amid a higher cost of living and spending increasingly shifted toward services rather than products.

“It could be predicted that throughout 2024 and certainly early 2025 we will begin to see a recovery,” he said. “At least that’s our hope.”

A big drop in household goods — the category accounts for nearly a third of incoming containerized items, from towels to televisions — led to a 12 percent decline in overall container shipments at the port.

About 79 percent of household products came from China, with Vietnam and South Korea in second place. Fewer imported construction materials and industrial and automotive parts also drove the decline in container numbers.

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Rising containerized exports – especially boxes loaded with wood pulp and specialty crops such as lentils bound for India – helped offset the drop in receipts.

An economic slowdown, a 13-day strike by British Columbia dockworkers in July and continued disruptions along the Red Sea and Panama Canal trade routes posed challenges to facilitating operations at the port, Xotta said.

Its 12 percent increase in total exports to 142 countries despite those obstacles showed the value of a wide range of shipping types and domestic partners, he added.

Grains and crude oil (China and the United States, respectively, received the most) drove the rise in bulk exports following a bumper harvest and a record increase in Alberta oil production. Lower exports of forest products and fertilizers reduced the numbers.

Meanwhile, the number of vehicles entering Canada through the port rose 36 per cent to more than 454,000, as manufacturers smoothed supply chains.

But for many shippers, the year began on stormy seas.

The drought in Central America aggravated more problems amid the Red Sea crisis. The drought has sapped water from the Panama Canal, which is used to raise and lower ships in a dozen locks, prompting officials to reduce the number of ships they let through the waterway.

“I anticipate that, as a result, people will be looking at the potential across Canadian supply chains,” Xotta said.

However, routes between East Asia and the West Coast are generally less affected. While freight shipping rates to the western United States from East Asia have tripled over the past year, freight rates in the opposite direction have fallen 28 percent, according to transportation analytics firm Xeneta.

On Asia-Europe routes, rates for cargo ships coming and going have skyrocketed.

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