Supply chains deliver everything from food and household goods to the raw materials for factories, but until COVID-19 few of us realized how fragile they are.
In this six-part series, The Logic examines the weaknesses in Canada’s supply chains, the solutions some companies are trying to apply, and how a shift from “just in time” to “just in case” thinking brings challenges of its own.
VANCOUVER — Jared Girman stands in a dimly lit industrial building on Vancouver’s waterfront where one fight over the future of Canadian trade is being waged.
At the north end of Commercial Drive, a few bus stops from touristy Gastown and the luxury hotel district, Girman regards a metal-lined pit about two metres deep and filled to the brim with poultry parts. Mostly leg bones stripped of meat, from many hundreds of birds. Some whole carcasses, rejected for some reason by the processing plant.
“The volume of chickens the human race consumes is astronomical,” Girman says.
Another pit nearby is full of white feathers, sodden and limp. Another holds fish slurry, a uniformly grey goo. Some unidentifiable guts lie on the paved floor.
These are the inputs for West Coast Reduction’s rendering plant, which has been on this site on Burrard Inlet since 1964 and now takes in 450,000 tonnes—about a billion pounds—of food waste from the Lower Mainland every year.
“In the past, our big customers were oleochemicals—lipsticks, soaps and things along those lines,” says Girman, WCR’s director of government relations and strategic initiatives. “But in the last five years, we’ve had a dramatic shift in some of our products, and we are creating feedstocks for biofuels.
“Five years ago, we didn’t have any relationship with a company like British Petroleum, and now they’re one of our largest customers.”
Girman is boyish and tall, wearing dark jeans and a button-down shirt under his safety gear. He has a degree in fine arts; he found his way here via industrial design and then a stint in renewable energy.
https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr.jpg?quality="90&strip=all&w=576 2x" height="750" loading="lazy" src="https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr.jpg?quality=90&strip=all&w=288" width="1000"/>West Coast Reduction has plants from Nanaimo to Saskatoon, processing varying combinations of scrap food. With grinders, heat, pressure, giant centrifuges, drying and sifting, the facilities transform animal parts, bakery waste, used cooking oils and the noisome contents of grease traps into industrial oils, greases, chemicals, and a variety of powdery “meals” that go into animal food and garden supplements.
“It’s basically a great big kitchen,” says Girman. The plant uses minimal additional chemicals in its processing and blasts its exhausts with enough heat to disintegrate most particles. You have to get quite close to catch the smell.
It’s not the stench of rotting roadkill—more the odour of something left in the fridge two days too long. Indeed, it’s multiple smells, depending on the inputs processed in the building you’re in: chicken, fish, pig, all gone just a little off. The oppressively hot “cook rooms” have the funk of spoiled food put in a stockpot to boil.
You get used to it, Girman says. But if you’re a newbie, you’ll notice that it stays in your nose after you leave. You won’t want soup for a while.
For WCR, more than just the customer base is changing. The company is preparing to leave the site. It doesn’t want to, but the federal agency that runs Canada’s biggest, busiest port, the Vancouver Fraser Port Authority, is declining to renew WCR’s lease, saying it might—might—need the land to expand the container terminal next door.
The port handles about $240 billion worth of goods every year, making it a critical link in Canadian supply chains. Vast quantities of consumer goods come in through its container terminals; Canadian commodities go out to the world through its bulk terminals.
The overload of container ships carrying consumer goods from China last fall was global news and although the surge has abated some, the basic problem remains: Under normal circumstances the port’s container terminals can function, but before long, container traffic will grow to unsustainable levels.
“There was no resilient capacity during the last crisis because we’re out of land. So we had to quickly scramble and go take some valuable marine land [in Richmond], that will be a future marine terminal, and use it for container storage,” says Duncan Wilson, the port authority’s vice-president of environmental and external affairs.
This is why there’s a fight. Impelled by a desperate shortage of industrial land in the Lower Mainland of B.C., which is even more acute by the sea, the port authority is in a permanent game of three-dimensional Tetris, trying to make maximal use of its limited space so that goods and commodities can flow in and out of Canada with minimal friction, and that means some people will win and some will lose.
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The supply chains that deliver food and household goods, the raw materials for factories, the drugs that keep us alive, even the bags we take stuff home from the store in—they’re more fragile than most of us realized before COVID-19 strained some of them past breaking.
In this series, The Logic is examining the weaknesses in Canada’s supply chains the pandemic has exposed, aggravated or created, and that will persist after the virus is gone. We’re looking at solutions some companies are trying to apply, and how a shift from “just in time” to “just in case” thinking brings challenges of its own.
One of the longstanding weaknesses is transportation capacity. It’s evident in the fight playing out in Vancouver.
The port authority is a regulator, landlord and coordinator, leasing land to the terminal operators that directly service the ships that call at sites on Burrard Inlet or farther south, around the mouth of the Fraser River. There are some quirky exceptions—Lantic Inc. owns the site of its own sugar terminal, home of the historic British Columbia Sugar Refining Company—but that’s the model.
The second huge container depot you encounter along Burrard Inlet if you head east from downtown Vancouver, GCT Vanterm, is between West Coast Reduction and the water; WCR’s pipelines run beneath the terminal, to a berth that GCT Vanterm operates. Ships and barges dock there and load up with WCR’s liquid products (plus canola oil, which WCR doesn’t produce but does handle for export). They carry those to refineries up the inlet and in Washington state, and across the ocean to Asia.
The port authority has projections showing its four existing container terminals running out of “practical capacity” within a few years. Meanwhile, its plans for a new container terminal well to the south in Delta have been languishing in approvals for nine years.
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The Roberts Bank Terminal 2 project, as it’s called, would deal with the shortage of industrial land by making more, constructing a three-berth terminal on 177 hectares of fill in the Salish Sea, near the mouth of the Fraser. It’s habitat for salmon and orcas and a flight path for migratory birds, and adjacent to the Tsawwassen First Nation. Evaluations don’t get much more gruelling. The port authority has bought sidewalk ads in downtown Ottawa near Parliament to pitch decision-makers on the urgency.
If the approvals don’t come through, the port says it might need West Coast Reduction’s land to increase container-handling capacity at GCT Vanterm instead. The port authority has already bought a 40-acre site in Richmond, B.C., with federal assistance, just to store empty containers.
In the meantime, the port authority is hedging its bets, moving to end the leases of West Coast Reduction and a grain terminal that also abuts the Vanterm container terminal.
A briefing note prepared in February for Liberal minister Harjit Sajjan (who is responsible for the federal Pacific economic-development agency) and obtained by The Logic under access-to-information law warned that West Coast Reduction’s lease is an “issue” with the Roberts Bank project.
“We need to manage this limited land base and assets in the best interest of Canadian trade,” says Wilson.
There are other places in the port that West Coast Reduction’s bulk-export facility could go, he says, but nowhere else for containers. “We can’t give up our options around those properties until such a time as we have a decision on Terminal 2.”
Girman says West Coast Reduction and its 150 workers will need two years to dismantle and clean up before the scheduled end of its lease in 2026. The rendering plant can go someplace else, he says, and indeed that’s what the company is planning for regardless. When the plant is gone, WCR wants to use the space to double the size of its tank farm to boost its exports. The port authority says no—unless the Roberts Bank plants are approved soon, West Coast Reduction has to go.
Moving would cost $200 million to $300 million, Girman said, just to replicate what the company already has.
“For them to put at a company like ours, that is interconnected with so many important systems in Western Canada, at risk over hedging a bet that they don’t get the Roberts Bank Terminal 2 project is pretty egregious, in our eyes,” Girman says.
https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr2.jpg?quality="90&strip=all&w=576 2x" height="750" loading="lazy" src="https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr2.jpg?quality=90&strip=all&w=288" width="1000"/>He says adding a few acres more capacity to one of the Vancouver port’s four existing container terminals is not a better use of land than a terminal that exports to Asia rather than importing from it. The food waste WCR takes in would otherwise be garbage, the end of a supply chain, turned into compost at best. Instead, by converting it into biofuels and feeds, WCR turns that chain into a circle.
If the company loses its port site, “the canola portion of our business would just disappear,” Girman says. There’s enough demand for the company’s biofuel products to justify relocating, though. “We might just end up moving that portion of our business to the States or something along those lines, but who knows?”
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An executive at the Port of Prince Rupert, 750 kilometres up the B.C. coast, complained about slow approvals for its own expansion plans to MPs studying Canada’s supply chains, in a May meeting.
Prince Rupert has multiple projects, with private-sector money behind them, awaiting approvals, said Ken Veldman, the port’s vice-president of public affairs and sustainability. They include a new transfer platform for export commodities and a causeway for a better rail link. They’re not as big as Vancouver’s Roberts Bank proposal so they don’t get maximal environmental scrutiny, but they still take years.
“To be able to develop these kind of competitive capacities within Canada, we need to have a fully integrated, leading-edge supply chain,” he said. “Lagging behind our competitors, in terms of being able to put these capacities and capabilities in place, [is] to our own detriment. The rest of the world is moving very fast.”
The federal Impact Assessment Agency of Canada has dozens of marine-terminal projects in various stages of review, and not just in B.C. Many are for containers, but they include facilities handling Asian car imports and natural gas.
On the East Coast, a Newfoundlandmine extracting fluorspar—a mineral that can be used in batteries—opened in 2018. Its owner proposed a new shipping terminal in 2019 to export its product, then went bust this year, partly because of trouble getting its fluorspar out. The environmental assessment was terminated in August because the insolvent company hadn’t met the Impact Assessment Agency’s deadlines. A court is supervising the sale of its assets.
The Port of Montreal’s plan for a new container terminal down the St. Lawrence River in Contrecoeur, Que., got environmental approval in March 2021, after a five-year examination. Quebec City’s port got bad news: for environmental and social reasons, a container expansion spent six years in the approval process before the federal government rejected the “Laurentia” project last summer.
The federal government is also reviewing the way port authorities like Vancouver’s operate. This has been underway since 2018 and the last public thing it produced was a consultation report in fall 2020. Transport Canada spokesperson Sau Sau Liu told The Logic in an email that finishing the review is on minister Omar Alghabra’s to-do list and “any potential changes would be publicly announced in due course.”
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The Lions Gate Bridge is Vancouver’s iconic road crossing of Burrard Inlet. Most of the port’s Vancouver terminals are on the waterfront between that bridge and the Second Narrows to the east. The Trans-Canada Highway soars over the water there between Burnaby and North Vancouver.
Next to it is the Second Narrows Rail Bridge. Opened in 1968, the rail bridge is low, but with lifts so its centre span can be raised. That allows ships to pass beneath, to and from destinations farther up the inlet, but at the cost of cutting the rail connection to nine terminals on the inlet’s north shore.
“Any time a ship goes underneath that bridge, the bridge needs to be raised. So it’s a capacity limitation,” Wilson says.
Right now, that doesn’t happen very often, but something big is about to change.
https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921Second-Narrows.jpg?quality="90&strip=all&w=576 2x" height="750" loading="lazy" src="https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921Second-Narrows.jpg?quality=90&strip=all&w=288" width="1000"/>When the Trans Mountain pipeline expansion is functioning, sometime after its scheduled “mechanical completion” in the third quarter of 2023, it will deliver Alberta oil to a terminal in Burnaby, up Burrard Inlet from the Second Narrows. The Westridge Marine Terminal will go from serving about one tanker a week to more than one a day.
The port authority assigns anchorages for ships that have to wait for berths at any of its terminals, but otherwise, “we don’t actually manage the movement of vessels the way, say, an airport would manage the movement of planes on the tarmac,” Wilson says.
The port’s people began thinking that should change as they contemplated the passage of 300 more ships under the rail bridge every year. That has turned into twin data projects, called the West Coast Supply Chain Visibility Program and the Active Vessel Traffic Management Program. Together, they’re far more ambitious than just timing the raising of the rail bridge.
“You’ll have a ship that is somewhere in the middle of the Pacific Ocean heading over here to pick up a load of grain, say, and the grain may not be at the port. And the ship arrives and it takes up an anchorage for weeks and weeks and weeks,” Wilson says.
Ships holding in the inlet or in English Bay are common, and there are about 30 more anchorage slots farther away in the Southern Gulf Islands, close to Vancouver Island.
“As you can appreciate, lots of folks have waterfront homes here [and] they like to have peace and quiet and they don’t want to see ships,” Wilson says, with the rueful laugh of someone who hears about this a lot.
At the time we’re talking, a coal ship—of all things—has been waiting at anchorage amid those islands for three weeks and will probably wait at least one more because there’s no berth available for it, he says.
“If we can tell a ship when it can come to port, it could, for example, reduce its speed as it’s transiting across the Pacific Ocean so it arrives closer to the time when the cargo is ready, and doesn’t tie up an anchorage for weeks.”
Besides burning less fuel, and making much more efficient use of the port’s limited berths as they become ever-more congested, that would mean fewer angry neighbours. But it’s no small task.
“On the land side, you’ve got all the railways, you’ve got the grain companies, you’ve got all those folks,” Wilson says. “And then on the marine side, you’ve got all the shipping lines, the chamber of shipping, the pilots, the Coast Guard, Transport Canada.”
As it is, competitors working at the port cooperate in certain ways. Canadian National owns the rail line on the north shore of Burrard Inlet and Canadian Pacific the line on the south, but they share the tracks. The two container operators, DP World and GCT, have serviced each other’s customers during crunches because they’d rather keep business in Vancouver than have shipping lines consider going elsewhere.
The idea is that the port authority can be an honest broker, aggregating data from multiple competitors into a system that can match ships with cargo and berthing capacity at maximum efficiency. It already does this in a micro way, with a public smartphone app showing what ships are berthed and at anchor and where, and what traffic is like in the container terminals.
“For this to work, it’s essential that everybody puts their piece in. Every supply-chain player is going to get value out of it, because the intent is to make the system more efficient for everyone,” Wilson says.
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Although this is contested by GCT, which operates the container terminal next to West Coast Reduction, the authority says it’s in danger of running out of container capacity imminently and is acting accordingly.
The port is simply jammed, Wilson says, and that means the port authority is jammed up.
To buy time, a recent theme for the port has been going vertical: a new overpass (practically a whole elevated road) that allows trucks into the other major Burrard Inlet container terminal—the one closer to downtown Vancouver than West Coast Reduction’s neighbour—without having to cross rail tracks, for instance. That means trucks can roll in and out continuously without waiting for trains to pass.
That other terminal, DP World’s Centerm, has undergone a $600-million-plus refit and expansion in the last three years, which is still six months from completion.
“We’ve only increased the land capacity by 15 per cent. But we are going to increase terminal capacity by close to 70 per cent,” says Joel Warner, the terminal’s general manager.
It’s a drizzly day and he’s with The Logic on a driving tour of the port’s facilities, stopped on the end of Centerm’s quay closest to the city. One of the orange cranes is smoothly transferring containers on and off the SM Yantian, a South Korean-flagged ship berthed in Vancouver between port calls in Prince Rupert and Seattle.
The Yantian’s containers are like passengers on a bus circling the Pacific, Warner says—at every stop, some get off, others get on. The system depends on a rough balance between loading and unloading at each port. That’s why North America’s desperate hunger for container-shipped goods amid the COVID-19 pandemic—which threw the balance out of whack—was such a problem, and why the Vancouver port bought land to store empty sea cans in such a rush.
https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr3.jpg?quality="90&strip=all&w=576 2x" height="750" loading="lazy" src="https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/no0921wcr3.jpg?quality=90&strip=all&w=288" width="1000"/>It remains a problem that shipping things to North America is much more profitable than shipping things to Asia, Wilson said. Companies want to get containers back to Asia to be refilled with high-value goods so badly they’re willing to take them empty rather than wait for them to be loaded on this side of the ocean, leading to shortages of containers for Canadian and American exporters.
For the Centerm expansion, the additional land came from filling in some of the harbour, and from taking over the former Ballantyne cruise terminal next door, once the cruise ships moved to Canada Place. Unlike the Roberts Bank Terminal 2 project, which is big enough to be examined by the Impact Assessment Agency, the harbour-filling and other work for this container terminal was minor enough that the port authority could supervise the approvals on its own. Wilson says signing off took about twice the 120 business days a project of this scale is supposed to.
Much of the additional throughput, however, came from installing modern gantries to handle containers once they’re already on shore.
These are less visible than the huge construction-style cranes that load and unload the container ships—the gantry cranes are shorter and, from any distance, they blend into the multicoloured mass of containers stacked four and five high within the terminal. The new gantries are on rails rather than tires, electric rather than diesel, fitted with scanners and systems to automatically rotate containers into the right orientations. But more than that, Warner says, they can be operated remotely.
For safety reasons, equipment on the yard can’t be manned while a train is moving in or out. “This results in a lot of downtime—we lose several hours a day of operating capacity due to the switching,” he says.
Take the operators off the gantries and trains can move in and out while loading and unloading continue.
The older diesel gantry cranes are still operating, and DP World is working with the port and the B.C. government on a project to replace their diesel power with hydrogen fuel cells. Battery power is adequate for moving even heavy weights horizontally, but Warner says hoisting containers up and down demands more oomph.
“This is a really interesting project because we’re using technology that is developed here in the Lower Mainland, from local Canadian companies entirely, to bring it to life,” Warner says.
The hope is to have the first conversion done by the end of the year, but there’ll be a very different supply constraint on retrofitting the other 18 gantry cranes: Just one of them would consume about 12 tonnes of hydrogen fuel a year, a third of the Lower Mainland’s current output, Warner says.
“As part of the project we’ll bring new production capacity online locally here, and that’ll need to grow and proliferate if we want to push that way,” he says. “But that’s the only way we can take these energy-intensive applications to zero emissions.”
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Cutting emissions is part of what drives West Coast Reduction, too, and another reason its predicament is so vexing to Jared Girman.
The company is in a dirty business and its headquarters, in an industrial neighbourhood a few blocks south of the rendering plant and tank farm, feels like a throwback. The staff work in cubicles with computers, but the building is stuffed with art relevant to the company’s work (and to the taste of its second-generation owner, Gordon Diamond).
On one wall in the main boardroom hangs an immense canvas of a cow. The headquarters art gallery—there’s an art gallery—features paintings of freighters in port and a massive print of an Edward Burtynsky photo of impoverished shipbreakers, people who strip dead vessels to sell their metals and other valuable components for reuse.
But WCR’s marketing image is relentlessly modern. Nothing Left Behind*, reads the company slogan. On its website, the asterisk leads to a footnote: *Except sustainable solutions. In a pocket-sized handbook the company gives new employees, asterisked items are chapter headings:
*Except a better world
*Except a bigger commitment to a smaller footprint
*Except more effort toward less waste
This is what bugs Girman about the company’s uncertain fate: Canada is already behind on its commitments to cut greenhouse-gas emissions. “If we move, it sets us back five, 10 years, and we’re already not going to hit our targets for 2030,” he says.
But as the Vancouver port grapples with Canadians’ endless appetite for Asian goods and its vital function exporting Canadian commodities to the world, the tradeoffs are getting tough.
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