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Chartered Institute of Logistics and Transport

Trade/FDI and Transport

November 16, 2015

Louis-Paul Tardif Transportation and Economic Analysis Transport Canada

Stage 1 : Canada’s gateway’s and corridor’s (2008)

Monitoring of the transportation system – end to end approach

Fluidity indicators (exports and imports)

Port utilization indicators

Stage 2 : Borders traffic – 15 strategic border points

Measuring wait-times of trucks and its economic impact

Stage 3 : Multimodal transportation and supply chain framework

Demand and supply of transportation system (performance, utilization of the system)

Multimodal

Outlook/forecast

Moving from gateway to a multimodal transportation and supply chain analytical framework

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Context

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Transport analysis framework to support evidence-based decisions Framework

Demand data

Supply data

Current/future data

National/Regional/Corridor/Modes data

Data

Monitor economic/transportation for key supply chains

Forecast demand of transport and capacity pressures Data analytics

Validation and engagement

Within the Federal Government (e.g.Agriculture Canada, International Trade, NRCan, Industry Canada,)

Outside the Government including industries, provinces, and international (e.g. U.S. and Mexico)

What are the objectives?

Provide authoritative and neutral information on transportation system issues

Strengthen the evidence-based analysis on transportation issues, complemented with validation

Increase transparency by reducing information asymmetry among the different stakeholders

What is required?

Sharing and reporting

Working through a number of forums to promote data cooperation

Report on performance, capacity and transportation outlook

Policy Questions

System Analysis related to international trade: Utilization

• What is the modal flow of key commodities in a multimodal supply chain context?

• What is the current and projected system utilization of the multimodal transportation system?

System Analysis related to international trade: Performance

• Has the performance of Canada’s supply chains’ components improved or deteriorated over time?

• Supply chain performances for various commodities?

• Are there predictable trends in performance leading to potential bottlenecks?

Providing a diagnostics and advice on the Health of the Transportation System in an oversight capacity and Foreign Direct Investment context

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Stakeholder Interests & Concerns

The framework is an attempt to address the following questions:

• What are the roles of each component of the transportation system on key commodity supply chains?

• What is the supply chain performance of respective sectors?

• What are the impacts on system utilization and performance, as a result of changes in key commodities’ demand?

• What are the impacts of a surge in one particular commodity on the transportation system and on the performance of the other commodities?

• What is the health of our transportation system?

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International Trade

Performance and Outlook

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Canadian Export and Import Values (Millions Current $) Selected Countries

2010 % of total 2014 % of total

Jan - June

2015 % of total

Exports

United States 299,075 74.9% 403,084 76.8% 196,723 76.8%

European Union 34,513 8.6% 38,772 7.4% 18,729 7.3%

China, P. Rep. 13,232 3.3% 19,388 3.7% 9,704 3.8%

Japan 9,195 2.3% 10,739 2.0% 4,689 1.8%

Mexico 5,008 1.3% 5,509 1.0% 3,015 1.2%

Brazil 2,563 0.6% 2,176 0.4% 1,189 0.5%

India 2,059 0.5% 3,225 0.6% 1,514 0.6%

Russia 1,190 0.3% 1,241 0.2% 238 0.1%

Other Countries 32,464 8.1% 40,893 7.8% 20,293 7.9%

TOTAL 399,300 525,027 256,094

Imports

United States 250,814 62.1% 278,050 54.3% 142,589 53.9%

European Union 40,500 10.0% 57,806 11.3% 30,583 11.6%

China, P. Rep. 26,190 6.5% 58,659 11.5% 30,255 11.4%

Mexico 13,881 3.4% 28,832 5.6% 15,273 5.8%

Japan 10,042 2.5% 13,295 2.6% 7,624 2.9%

Russia 2,765 0.7% 726 0.1% 530 0.2%

Brazil 2,484 0.6% 3,466 0.7% 1,711 0.6%

India 1,615 0.4% 3,182 0.6% 1,903 0.7%

Other Countries 55,459 13.7% 67,609 13.2% 264,439 12.8%

TOTAL 403,750 511,625 264,439

Source: Statistics Canada

Emerging international and domestic trends will create challenges and pressures for the Canadian transportation system

Changing demographics and urbanization leading to growing urban congestion

Shifting economic activity, trade and transportation patterns, e.g., busiest world’s ports located in Asia, mega-ships/carrier alliances, Panama Canal and Suez Canal expansion, etc

Commitments to reduce environmental footprint and address Changing climate,

Greater scrutiny on transportation safety and security

Accelerated pace of technological innovation,

Unique transportation and infrastructure challenges in the North

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Source: World Shipping Council.

Results: Outlook

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The global economy will grow at a slower pace over the short term

The OECD revised its World economic outlook downward for the third time in September 2015 (3% from 3.7% in November 2014):

The outlook for China is now 6.7%, down from 7.1% in November 2014

Canada is expected to grow 1.1%, down from 2.5% in November 2014

The slowdown of the economy in the short run will negatively impact demand for Canadian coal and crude oil:

However, demand for potash and wood products should record strong demand

Mitigated growth prospects in the short term will ease pressure on the transportation system and create favourable conditions for planning and investments

Results: Outlook

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1

2

3

4

5

6

7

8

World Canada US Euro area Japan China India

% growth in real GDP

Source: OECD Economic Outlook June 2015 and June 2015 and OECD Interim Economic Outlook, September 2015

Economic Growth Outlook for 2015

Nov-14 Jun-15 Sep-15

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World economic activity will grow in the 3% range annually over the next 10 years

Emerging markets will remain the main poles of growth and drive world commodity demand:

China’s share of global GDP will reach 21% in 2025, outsizing the United States as the biggest economy in the world

However, China will be outperformed by India between 2020 and 2025

0

1

2

3

4

5

6

7

8

9

102010-2013

2015-2019

2020-2025

Real GDP growth outlook by selected country and region

Source: Conference Board, Global Economic Outlook, 2015*Includes: Bangladesh, Cambodia, Indonesia, Malaysia, Pakistan, Philippines, Sri Lanka, Thailand and Vietmam

Advanced Economies

Emerging Economies

Despite the short-term slowdown, emerging markets will post the fastest growth to 2025

Results: Outlook

U.S. Midwest: growth barometer and one of North America’s largest container markets

Shift in traffic to this region from North American East Coast & Gulf to West Coast ports

This shift was mostly due to 67% of U.S. Midwest-destined containers coming from East Asia in 2013, vs. 58% in 2004

Most growth at Canadian ports of Vancouver and Prince Rupert, while East Coast Canadian ports lost significant market share

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Inbound Laden TEUs to U.S. Midwest by Port of Unload

2004 2013

Inbound Laden TEUs to U.S. Midwest by Port of Load Country

2004 2013

Source: U.S. customs data; Canadian customs data; Canadian Port Authorities

Major destination in North America

Key markets

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International Trade and Competitiveness

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Higher logistics costs make goods more expensive, thereby reducing a country’s competitiveness and increasing the cost of consumer goods

Canada’s logistics costs comprise about 9% of GDP, which is lower than developing countries but higher than both the U.S. and Japan

2014 GDP

(Millions of

current USD)

Logistics

(GDP %)

Exports

European Union 18,114 9.2%

United States 17,420 8.2%

China, P. Rep. 10,360 18.0%

Japan 4.770 8.5%

Brazil 2,244 11.6%

India 2,048 13.0%

Canada 1,794 9.0%

Mexico 1,296 12.0%

TOTAL – all countries 78,220 11.7%

Global Logistics Costs as % of GDP, 2014 (Select Countries)

Source: Armstrong Associates (2015)

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The World Bank’s Logistics Performance Index is a benchmarking tool to help countries identify challenges and opportunities in trade logistics and performance

As of 2014, the LPI compared 160 countries based on a worldwide survey of global freight forwarders and express carriers

Canada’s overall LPI ranked 12th best in the world in 2014, down slightly from 10th in 2007, but up from 14th in 2010

4.12

4.00

3.91

3.86

3.83

3.72

3.67

3.59

3.0 3.5 4.0

Germany

Netherlands

Belgium

United Kingdom

Singapore

Sweden

Norway

Luxembourg

United States

Japan

Ireland

Canada

France

Switzerland

Hong Kong SAR, China

Australia

Denmark

Spain

Taiwan

Italy

Korea, Rep.

Austria

New Zealand

Finland

Malaysia

Top 25 Countries: Overall Logistics Performance Index (LPI), 2014

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However, Canada’s liner

connectivity has been deteriorating over the past decade and now ranks 35th in the world

Countries such as Denmark, Poland, Sweden, and Vietnam now surpass Canada

Possible factors behind this deterioration include:

A decrease in the number of shipping lines offering services to/from Canada

Low global market share of import/export; and

Small volumes

Source: United Nations Conference on Trade and Development

A high transport connectivity provides a competitive advantage in the global market

Liner shipping connectivity index rankings

Top 10 Countries & Canada (Sorted by 2015 ranking)

Country 2005 2010 2014 2015

China 1 1 1 1

Singapore 4 3 3 2

China, Hong Kong SAR 2 2 2 3

Korea, Republic of 9 10 4 4

Malaysia 12 6 5 5

Germany 7 4 8 6

United States 3 9 6 7

Netherlands 5 5 7 8

United Kingdom 6 7 9 9

Belgium 8 8 10 10

Canada 17 22 34 35

Canada’s Maritime Trade Connectivity

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Toronto Pearson International Airport’s top six countries by air cargo capacity are routinely over 65% of total capacity

The top 5 destination countries are stable, with China’s capacity nearing Germany’s

Air Side: Cargo Capacity

Destination Country

Cargo Capacity

per week

(tonnes)

Proportion of

Total Capacity

(%) Destination Country

Cargo

Capacity per

week (tonnes)

Proportion of

Total Capacity

(%)

Canada 3196 28% Canada 3617 29%

United States 2500 22% United States 2075 16%

United Kingdom 712 6% United Kingdom 1096 9%

Germany 511 5% Germany 590 5%

China 472 4% China 577 5%

Hong Kong 378 3% Italy 444 4%

Toronto Pearson International Airport - Air Cargo Capacity by Country

Capacity ORIGIN - Toronto (or Outbound from Toronto) - tonnes/week

One week during March 2015 One week during September 2015

Source: G.E. Simpson & Associates Ltd. (2015)

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Results

Current Performance and Productivity

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2014 System Utilization*

Content suppressed due to confidentiality.

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2014 Commodity Utilization Rate1

Intermodal (Container)

1 Based on number of rail cars

2014 Rail System Utilization Rate*

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The rail system could be facing near term and medium term constraints in these areas – depending on commodity surges/growth. Further validation and refinement of methodologies and assumptions will improve our understanding of rail operations and related issues in these areas.

* Based on preliminary analysis and to be validated – the associated methodology continues to be refined.

Container Scorecard

Volume August 2015 / August 2014 = 11.4%

YTD August 2015 / August 2014 = 5.0%

Indicators August 2015

[Target] YTD 2015 August 2014 YTD 2014

TR

AFI

C

1 Monthly Volume - TEU 133,087 988,538 119,450 941,589

2 Number of vessel calls – container ships only 41 299 34 316

TER

MIN

AL

3 Terminal dwell time (import rail) - days 3.6

[< 2.0] 3.3

3,0

[< 2.0] 2.9

4 Terminal dwell time (import rail) - % under 48 hrs 47%

[> 75%] 55%

60%

[> 75%] 56%

5 Terminal utilization rate - % of design capacity 93%

[< 85%] 90%

92%

[< 85%] 91%

6 Container truck volumes (portal) - # of unique trips per working day 1,465

[< 2,000] 1,523

1,556

[< 2,000] 1,604

7 Truck turnaround time - minutes 24

[< 30 min] 36

31

[< 30 min] 33

8 Berth productivity - lifts / hr 42

[> 42] 44

41

[> 42] 39

FLU

IDIT

Y

9 Rail transit time Mtl-Chicago - days 3.3

[1.7] 3.1

3.2

[1.7] 3.1

10 Total transit time Antwerp-MTL-Chicago - days 17.6 18.2 16.7 17.5

CONFIDENTIAL Target achieved Within 10% of target Target not achieved

Performance

August 2015

Note: All KPIs now include temporary operations at Viau as of April 2015.

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Challenges Challenge example: Intermodal pressure points

Intermodal transfers are now pressure points for freight transportation: Low coordination, information-sharing between modes and within supply chains Ports impacted, as marine vessels, terminals, railways and trucks all intersect; urban rail yards also

challenged

Source: Transport Canada

When average container dwell times are above 3 days, this is usually an indication of operational inefficiencies somewhere in the supply chain

Source: Transport Canada and Port of Prince Rupert

Container Terminal Capacity Utilization

Competitiveness

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Performance

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Jan

Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May Jun

2012 2013 2014 2015

Days

Total Transit Time: Shanghai to ChicagoSupply Chain 1: Via Various Ports

Los Angeles/Long Beach PMV Prince Rupert Seattle/Tacoma

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2014 Commodity Utilization Rate1

Grain

1 Based on number of rail cars

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GRAIN SUPPLY CHAIN PERFROMANCE METRICS Monthly updates as of

September 15, 2015

Great Lakes – St. Lawrence Seaway Grain Terminals

Sources: Transport Canada, Canadian Coast Guard Innav Data, Canadian Grain Commission, Toledo Port Authority , Duluth Seaway Port Authority

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Though depending on the border, overall truck crossings increased by 3.1% from 2014 to 2010

The 95th percentile (i.e. 95% of trucks wait less than this) is often considered to be a good

measure of the average wait time during congested periods

Border crossings to the U.S. are generally fluid; only 5% of trucks wait more than 30 or 40 minutes

Port Name

2010

2014

Jan-June

2014

Jan-June

2015

2015/

2014

Border Waiting

Times Median

(Minutes)

Jan -June 2015)

95th

percentile

(Minutes)

Jan-June

2015

Share of

Canadian

trucks (%)

Jan-June

2015

Windsor-Ambassador Bridge, ON 2,681,950 2,567,458 1,303,756 1,207,804 -7.4% 15.5 43.3 55.9%

Sarnia, ON 1,542,466 1,637,506 797,596 803,286 0.7% 14.8 33.6 77.8%

Fort Erie, ON 1,184,860 1,230,264 616,454 603,284 -2.1% 12.4 48.0 77.6%

Pacific Highway, BC 697,874 793,588 393,378 414,630 5.4% 15.3 45.3 65.6%

Queenston-Niagara Falls, ON 676,748 714,752 352,724 359,164 1.8% 12.5 36.4 77.5%

Lacolle, QC 605,582 515,382 328,322 338,982 3.2% 11.9 29.3 83.5%

Emerson-West Lynne, MB 341,602 414,092 214,310 206,814 -3.5% 14.7 28.7 65.2%

Lansdowne, ON 350,356 332,816 171,034 169,418 -0.9% 17.2 33.5 87.2%

Coutts, AB 280,380 327,146 172,398 136,976 -20.5% 12.3 26.8 63.1%

North Portal, SK 193,908 243,568 122,244 115,412 -5.6% 13.4 27.6 57.1%

Top ten Crossings 8,555,726 8,776,572 4,204,114 4,083,558 -2.9%

Other border crossings (trucks) 1,842,378 1,943,210 1,167,178 1,179,002 1.0%

Grand Total (trucks) 10,398,102 10,719,782 5,371,292 5,262,560 -2.0%

Source: Transport Canada adapted from Statistics Canada, International Travel section, and unpublished data

Top 10 Canada-U.S. Truck Border Crossings: Two-Way Traffic Volume (Number of Crossings)

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Border crossing times to the U.S. are generally very fluid; only 5% of trucks wait more than 30 or 40 minutes

Canada-U.S. Truck Border Crossings

Northern Canada Infrastructure

Transport Canada is looking forward to further enhance its evidence-base capability

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Continue developing an understanding of the challenges and opportunities of

supply chains to provide solid information to the policy process Continue engaging with industry, provincial, and federal stakeholder for the

validation of the information Strengthening TC’s forecasting and scenario development capacity The urban issue will likely become a focus and a challenge

Positioning of the freight questions in a system approach

What we found thus far:

Each transportation mode performs well on an individual basis

Efficiency and performance issues are more challenging in an intermodal context – when freight is transferred between modes and often in an urban environment

Issues, such as coordination among modes, visibility of supply chains, and infrastructure challenges are often raised

Issues often most apparent at ports, where vessels, port terminals, railways and trucks all intersect

Need to define the first-mile/last-mile concept in a Canadian context

Conclusion