Capitalizing on the trade rush

Don Krusel, CMA, has a vision for a new shipping paradigm. With new federal and provincial investment in Prince Rupert’s Port Authority, he may soon see it come to fruition

By Robert Colman

The growth of trade with China, and trans-Pacific trade in general, has bolstered competition along the west coast of the U.S. and Canada for the business of moving goods. Well established ports like Los Angeles, Long Beach and Vancouver are already feeling the strain of heavy demand, and with trade expanding, ports from Mexico to Prince Rupert are developing or expanding capacity to address the challenge.

For instance, Oakland is reportedly spending $1.2 billion for port improvements over 10 years to lure shippers. In January, the port of Tacoma opened a $210 million terminal. And Vancouver hopes to triple its container volume through a 15-year expansion project. Expansion is also occuring on the east coast, with ships traveling through the Panama Canal to make deliveries in Newark, N.J. and the port of Halifax. 

The biggest news in Canada right now, however, is probably the plan to create a container terminal at the Port of Prince Rupert in B.C. The Government of Canada announced in April that it would invest $30 million in the project, and the provincial government agreed to match the federal funding. The whole conversion project will cost approximately $170 million.

Making Prince Rupert’s case

“As Canada’s only Pacific province, we have the potential to almost double our share of West Coast container traffic and create up to 45,000 new maritime jobs over the next 15 years — and the expansion of the Port of Prince Rupert will play a critical role in that,” said B.C. Premier Gordon Campbell at the announcement. “The federal government’s planned support of this project shows that Ottawa recognizes its importance not just to British Columbia, but to the national economy as well.”

Federal lawyers have to craft the details of the financing carefully because the Canada Marine Act prohibits Ottawa from directly investing in Canadian ports. But as Premier Campbell pointed out, encouraging traffic to Canadian ports is important, and the mandarins in Ottawa were well aware of this.

“I heard at one point that there was a meeting and quite literally 30 different people from six different departments in Ottawa were trying to work to solve our issue here,” said Don Krusel, CMA, president and CEO of the Prince Rupert Port Authority shortly after the deal was done. “With the aid of our many supporters, we were able to stress that the inherent nature of this project was national in scope and not restricted to our own special interest.”

Krusel has worked for the Prince Rupert Port Authority since 1987, when he joined as manager of finance and administration. He was made president and CEO in 1992, two years after receiving his CMA designation.

As president and CEO, Krusel has spearheaded the campaign to expand the capacity of the Port of Prince Rupert. As he noted at the Authority’s annual general meeting in June, “We spent the last 10 years trying to change our course, to do what was necessary to alter the direction we were heading in.” Financially, the port has struggled for several years, and to bring it out of that difficult situation, it was necessary to change from a port that was solely dependent on the export of raw commodities into a more diversified one that focused on containers and tourism.

But as Krusel himself says, for that to happen “the planets had to align perfectly. It was like running a marathon, although I’m glad I didn’t know where the finish line would be. Everytime I got discouraged or wanted to give up, I convinced myself that just over the next rise or just around the next corner we would meet success.”

A new shipping paradigm

Last year seemed to be the turning point. It was then that the Port Authority chose Maher Terminals of New Jersey to operate a new container handling facility that would expand to become a 150 acre, 2 million TEU (twenty foot equivalent unit shipping container) per year container operation.

“We initially talked of a 250-350,000 TEU facility that would handle the mid-sized container ships,” notes Krusel. “But with dramatic changes occuring in the industry and the rapid escalation of volume hitting the west coast of North America, we all realized that we had to think bigger — much bigger. Today, we are talking about an initial development of a terminal handling 500,000 TEUs per year capable of serving the largest ships in existence, and even ships yet to be built. By 2009, Prince Rupert will have one of the largest container terminals in North America.”

There was a lot of skepticism about plans for the Port of Prince Rupert. The Canada Marine Act was one piece of that skepticism, but the location was another.

“Many people said Prince Rupert could never be a container port because it is a small rural port in the hinterland, and the thinking of the day was that container port facilities need to be in a metropolitan area,” explains Krusel. “Some people said the approach we proposed in Prince Rupert just wouldn’t work. That was and still is the view of many in the industry.”

Krusel and his supporters, however, see the location as a crucial benefit.

“The Fairview Container Terminal is the first in a new paradigm; it creates a model for port facilities that will help to overcome congestion problems in urban areas,” Krusel says. “What appeared to be weaknesses — the rural location and small population base — are today considered two of our most significant strengths. Room to expand and large tracts of industrially zoned land (about 1,500 acres) mean the ability to develop businesses that will supply and service the new port without creating problems in the local community and that will not slow down the movement of imports and exports as they move through the port facilities.”

At least one-third of the new facility will be a rail yard. From the start, at least 98% of the traffic at the terminal will move directly from ship to rail, or rail to ship. This is the big advantage — unclogged rail routes to the mid-west, where about 50% of the traffic coming from Vancouver and other ports ends up. But the hope is that eventually the development of the port will be a boon to northern B.C. businesses as well — giving local business the opportunity to export value-added goods from the region.

“We could easily be economically closer to Asia than we are to Alberta,” says Krusel. He sees a market for, among other products, cabinet and wood flooring manufacturers. “Ultimately, the impact on our economy will depend on the entrepreneurial spirit in the North — how people take advantage of this opportunity and run with it.”

Diversifying the shoreline

This isn’t the only initiative that is changing Prince Rupert, however. In 2004, the port opened its new Northland Cruise Terminal. The inaugural visit of Norwegian Cruise Line’s 2,000-passenger Norwegian Spirit was on May 20, 2004 — the first of 35 large cruise ships to call into Prince Rupert in 2004. This year, projections are even better, with about 50 ships visiting before the end of the season.

“The real significance of the cruise initiative is the effect it is having on the local community,” says Krusel. “It has demonstrated the ability of people in Prince Rupert to create small business opportunities. The shore excursion program, developed under the cruise initiative, has created new businesses and new jobs in a wide variety of sectors and continues to do so.”

The Port Authority has been instrumental in supporting these developments as well, partnering with the local community to develop excursion packages for cruise line passengers, including rail trips, grizzly-bear viewing in the Khutzeymateen Valley, boat tours on the Skeena River, whale watching, sea kayaking and First Nations cultural programs.

“I was told once by one of the cruise ship company executives that the second hardest thing to do is to get a cruise line to come to your port for the first time,” recalls Krusel. “The most difficult thing to do is to woo them back once they’ve had a bad experience. Our shore excursions have kept them happy.”

Estimates from a study conducted over the year in 2004 indicate that cruise passengers and crew spent $6.4 million in Prince Rupert.

Future vision

Although the first phase of the container terminal won’t open until 2007, the port will be plenty busy in the meantime, with as many as 400 construction jobs being created over the coming year.

At the same time, Krusel and his management team aren’t resting on their well-earned laurels. They are working with a number of developers to create a container stuffing operation in the port, which would load lumber, pulp and agricultural products into containers for shipment to Asia. This should lessen the impact of sending empty containers back to Asia.

The Authority is also working with WestPac LNG to develop a liquified natural gas import and distribution plant in Prince Rupert. A crude oil terminal is also being discussed.

Asked how his CMA designation and MBA have helped him stay the course at Prince Rupert, Krusel doesn’t hesitate. “They gave me the fundamental, foundational skill sets to effectively manage an enterprise. Although there was a lot of good basic management knowledge learned, it was the critical thinking and judgement skills that have become critical to what I do — not just looking at the surface, but looking at the whole picture — where we’ve been and where we’re headed. By considering this, and keeping the Port Authority focused on a vision, and a strategy to realise that vision, I’ve been able to help guide the organization to where it is now. It’s all about leadership.”

Robert Colman is editor-in-chief of CMA Management.

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