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MAINTAINING CANADA’S COMPETITIVENESS

TRANSPORTATION SYSTEM ANALYSIS

Presented by

Louis-Paul Tardif Multimodal Transportation Performance & Capacity Analysis

Transport Canada

November 16, 2016

Minister’s vision for transportation 2030 focusses on five themes

A new transportation vision that supports economic growth, job creation and Canada’s middle class

The vision for the future of transportation is founded on five pillars: • Enhancing the experience of the Canadian travelers; • Further improving transportation safety; • Investing in the future of our transportation sector so that it is cleaner, more efficient

and more environmentally responsible; • Better protecting our waterways and coasts, including in the North; and • Investing in our infrastructure and trade corridors – to ensure our goods and

resources can move efficiently within Canada and on to foreign markets.

Trade Corridors to Global Markets

The Traveler Waterways,

Coasts and the North

Safer Transportation

Green and Innovative

Transportation

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OBJECTIVES OF OUR WORK ON SYSTEM ANALYSIS • Four overall objectives:

– To provide macro economic factors influencing the outlook for commodities.

– To present performance metrics and system utilization analysis providing an indication of the overall health of the transportation system.

– To develop a framework for an advanced “risk monitoring” of potential stresses on the multimodal transportation system.

– To combine this work with scenario development to provide short-term predictive analytics on a few commodities: automotive, coal, grain, forest products, import containers, oil and potash

• The aim is the production of indicators that are evidence-based and repeatable.

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STAKEHOLDER INTERESTS & POLICY QUESTIONS The following questions came from Stakeholders through the Commodity Supply Chain Table:

• 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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ECONOMIC OUTLOOK

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US$ 35G (7%)

• Trade with North America remains the most important flow, but trade with Asia is increasingly important

– Imports from Asia have increased from 5% in 1995 to 16% of total imports in 2015 • Trade with Europe has remained relatively stable with imports slightly above

exports

1995 2015

1995

2015 1995

2015

Routes and Composition of Trade are Changing

US$ 152B (80%)

US$ 320B (78%)

US$ 247B (59%)

US$ 12B (7%)

US$ 30B (7%)

US$ 17B (10%)

US$ 48B (11%)

US$ 5B (3%)

US$ 25B (6%)

US$ 8B (5%)

US$ 66B (16%)

US$ 114B (69%)

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Commodity prices have rebounded despite weak economic growth

• GDP growth in June more than offset May’s wildfire-induced declines, pushing year to date growth to 0.2% for the first half of 2016

• Energy prices are up nearly 30% since the beginning of the year ― They are still about 50% below their 2014

peak

• With the exception of Forestry, other key commodity prices have also rebounded in 2016 ― Metals and minerals are up 7% since the

start of the year ― Agricultural prices have risen 13.2% so far

in 2016, regaining their 2014 levels ― Forestry saw an early year rebound that

reversed course in July and has remained flat since

Sources: Bank of Canada, Statistics Canada

Jun May Apr YTD 2015GDP 0.6 -0.6 0.1 0.2 1.1

From:

Total excl.

energy EnergyMetal & mineral Agric. Forestry

1 Week 0.0 0.0 0.0 0.0 0.0YTD 5.9 27.9 7.1 13.0 -0.3Jun 2014 -16.8 -53.7 -14.6 -0.7 -29.7

Monthly Real GDP Growth (2016)

Commodity Price Growth: Aug 31 2016

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30

40

50

60

70

80

90

100

110

Jun Sep Nov Feb May Aug Oct Jan Apr Jul

Energy

Forestry

Agriculture

Metal & mineral

Total excl. energy

2014 2015

(Jun 2014=100)

2016

CANADA’S COMPETITIVENESS POSITION

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9 Source: Armstrong and Associates, Inc

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Logistics Cost as a % of GDP for Selected Countries, 2015

- At a logistics cost to GDP ratio of 9%, Canada is comparable to South Korea and Taiwan. - China’s logistics cost relative to their GDP is the highest at 18%, while the United States has the smallest relative share at 8.2%.

10 10 Source: Armstrong and Associates, Inc

2015 GDP vs. Logistics Cost Share

US: GDP= 17,970; TLC = 8.2%

- Logistics costs relative to GDP seem to exhibit regional trends, as European countries tend to have lower relative percentages.

- The South American and some Asia-Pacific nations have higher relative percentages.

China: GDP= 11,380; TLC = 18%

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-The World Bank has been tabulating these indices since 2007. The last three iterations are the most comparable among them. - In 2016, Canada performed better in the Customs component, but worse in Timeliness, Logistics quality and competence and International Shipments.

1: The frequency with which shipments reach consignees within scheduled or expected delivery times 2: The ability to track and trace consignments 3: The competence and quality of logistics services 4: The ease of arranging competitively priced shipments 5: The quality of trade and transport infrastructure 6: The efficiency of customs and border clearance

- Geography seems to be a factor for International Shipments, as the top three ranked countries are Luxembourg, Hong Kong and Belgium. - This does not seem to be the case for Timeliness as Germany is ranked number 2.

CANADA’S SUPPLY CHAINS PERFORMANCE

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Rail and Port System Utilization

Multimodal System Utilization – 2015

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ANNUAL RAIL SYSTEM FLOW COMPARISON 2015 CARLOADS VS. 3 YEAR AVERAGE

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TRUCK CORRIDORS: INTERCITY EXPECTED TRUCK TRAVEL TIME INDEX

• Intercity Expected Truck Travel Time Index is a comparison of the actual travel time to the expected travel time. • Index = (Average Actual Transit Time)/Expected Transit Time

• Expected travel time was provided and measured by trucking dispatchers and it represents the operational travel time, including required and anticipated rest stops, and some amount of industry “acceptable” congestion delay.

• The actual travel time is based on recorded truck GPS data of 30,000 unique truck IDs.

TRADE CORRIDOR – TRAVEL TIME INDEX* (6AM-8PM) TORONTO-MONTREAL

HWY402 London - Sarnia

GTA GMA

*TTI is a comparison of the free flow speed to the actual speed, indicating the amount of additional travel time required. For example, a TTI of 2.0 indicates that a motorist’s trip was two times longer for that particular road segment and time period.

17 Source: Transport Canada, CANSIM

• On average, Southbound truck wait times were less than 20 minutes at every border crossing across the country

• However, delays during busy periods (represented by the 95th percentile) exceeding 40 minutes at some of the high-traffic borders in Southern Ontario and B.C.

• And as shown on the following page the traffic at our busiest border crossings are not even close to their peak of the past five years (which in itself is far less than the traffic peaks reached before 9/11),

Q2 2016 SOUTHBOUND TRUCK BORDER CROSSINGS PERFORMANCE MONITORING

Traveling Speed Analysis Ambassador Bridge

SEC 1

SEC 2

SEC 3

SEC 4

SEC 1

SEC 2

SEC 3

SEC 4

•Total Length of Study link : 2.3 km •Direction : US-Bound (NW)

•Total Length of Study link : 2.0 km •Direction : CAN-Bound (SE)

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TRANSPORTATION SYSTEM MONITORING – GRAIN 2016-17 CROP YEAR

PROTECTED B

Note: CYTD = Crop Year to Date, *- 5 year average

Vancouver Marine Metrics

Indicators 2016- Sep

3 year avg.

2016-17 CYTD

3 year avg.

1 Vessels Anchoring off Nanaimo & Gulf Islands 5 3 5 4

2 Average Time in Canadian Waters 11.0 12.8 10.5 12.1

Vancouver Terminal Metrics

Indicators 2016 - Sep

3 year avg.

2016-17 CYTD

3 year avg.

1 Average Berth Productivity – tonnes per hour at berth 767 611 651 685

2 Average Port Productivity – tonnes per hour 2,339 2,482 2,294 2,266

Rail Metrics

Indicators 2016 - Sep

3 year avg.

2016-17 CYTD

3 year avg.

1 Rail Unloads at Vancouver Terminals – MMT 1.7 1.6 3.0 3.1

2 Car Cycle – Prairies to Western Ports – Days 12.2 12.1* 12.6 12.3*

Prairie Elevator Metrics

Indicators 2016 - Sep

3 year avg.

2016-17 CYTD

3 year avg.

1 Total to Move - MMT 2.4 4.1 4.7 6.8

2 Total Shipments 2.6 3.7 5.2 6.7

• The Western grain transportation system has performed well during the first month of the 2016-17 crop year– Although, it has been a slow start to the crop year with total shipments and rail unloads both down from the 3 year average

• 5 Vessels anchored off Nanaimo & the Gulf Islands, indicating some congestion at the port, but loading times have been fluid, averaging less than 12 days in Canadian waters, 1 day less than the 3 year average

o Vessel loading is about 150 tonnes per berth hour greater than the 3 year average, but overall port productivity is down from the 3 year average – This indicates that the port wasn’t moving as much grain as it was historically, but it was doing so efficiently

• Both CN and CP rail provided fluid Western grain transport to port positions

o Average car cycles from the Prairies to the 3 major western ports is equal to the 5 year average

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Warning of potential congestion/bottlenecks/competiveness issues Alert of likely congestion/bottlenecks/competiveness issues

TRANSPORTATION SYSTEM MONITORING – CONTAINERS Port Indicators 2016 - June 3-Year avg. 2016 - YTD 3-Year avg.

Port of Vancouver

Container volumes –TEUs 230,442 248,4551 1,420,813 1,519,6631

% of imports 51 50 51 50

Import container dwell time - days 3.4 2.9 3.3 4.0

Vessel on-time performance - % 77.0 52.3 56.8 46.3

Berth Productivity – TEUs per berth hour 100 108 105 97

Ratio of railcar footage supplied over planned N/A N/A N/A N/A

End-to-end transit time – Shanghai to Chicago - days 24.2 24.4 24.5 26.6

U.S. comparison – Shanghai to Chicago via Seattle/Tacoma – days 22.1 25.4 22.6 26.3

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0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0

50,000

100,000

150,000

200,000

250,000

300,000

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

2013 2014 2015

Port Throughput vs. Import Rail Dwell Time at Port Metro Vancouver

Volume Dwell Time TargetSource: Transport Canada; PMV

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Rail system utilization in the lower mainland is among the highest in the country, and intermodal containers generate roughly 45% of the traffic going to/from the region.

2015 Commodity Utilization Rate * 1 Intermodal (Container)

1 Based on number of rail cars

2015 System Flow*

* Estimate of road traffic volume forecasted in 2009

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MULTIMODAL TRAFFIC FLOWS – GTA

* Preliminary analysis of CN and CP mainline rail traffic – to be adjusted for rail transit and freight traffic diversion

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Source: https://www.cn.ca/en/investors/shareholder-resources/key-weekly-metrics

Source: http://www.cpr.ca/en/investors/key-metrics

RAIL NETWORK VELOCITY

10.0

15.0

20.0

25.0

30.0

35.0

Jan

Feb

Mar Ap

rM

ay Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun

2013 2014 2015 2016

Days

Total Transit Time: Shanghai to Chicago Direct Rail: Via Various Ports

Los Angeles/Long Beach Vancouver Prince Rupert Seattle/Tacoma

COMPETITIVENESS AND RESILIENCE

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Source: Transport Canada; Canada Port Authorities; Canadian Class 1 Railways

2013/14 harsh winter

U.S. West Coast port congestion

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Retail Supply Chains

Source: Canada Post

- Several retail segments are undergoing significant growth in e-commerce volume.

- Shipping to consumers directly from distribution centres or from retail outlets, represent “Omni-Channel” solutions, but increase complexity and cost for retailers.

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Retail Supply Chains

Source: Canada Post

2014/2015 Year over Year growth

-The geographic dispersion of Canadian urban centres does not bode well for economies of scale to meet urban demand in a timely manner. - E-commerce shipments in urban areas that are closer to traditional freight hubs seem to be growing at faster rates.

THE SEAWAY

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Great Lakes – St. Lawrence Seaway Grain Terminals

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Western Ports Terminal Unloads (Crop Week 13)

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Weekly Grain Supply Chain Performance at Port of Vancouver

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Sources: BC Chamber of Shipping; INNAV; Canadian Grain Commission; Note: Grain vessel counts based on single day snapshot of situation at end of the week; N/A – not applicable

Grain Vessel Monitoring Threshold Number of vessels anchored off Nanaimo/Gulf Islands >= 3 When grain vessels anchor outside the Port of Vancouver’s waters – at the Port of Nanaimo or the Gulf Islands – it is a signal of an issue somewhere in the

supply chain (e.g. congestion, lack of right type of grain to meet sale specifications) Grain vessels are instructed to use these anchors when:

o All of Vancouver’s anchor spaces are occupied, signaling congestion at the port; or o The type of grain the vessel is loading is not available in available in the shipper’s terminal elevator

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Upbound Vs Downbound Traffic

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Transport Canada – Centre of Excellence in Economics, Statistics, Analysis and Research (CEESAR) 33

DRAFT

Iron Ore

Source: Trade Database

Iron ore direct exports by continent Iron ore direct exports to Asia

Source: Trade Database. Direct shipments only. Values are in millions of dollars.

Some of the Issues We Need to Better Understand

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Transport Canada – Centre of Excellence in Economics, Statistics, Analysis and Research (CEESAR)

DRAFT

Multimodal Connections Catchment area

Commodities Shipped Integration into North American

Economy

Changing Dynamics and Vulnerabilities

Conclusion • Great Lakes and Seaway supply chains have many of the commodities that fit

our supply chain tracking model • We need a platform to determine the metrics that would fit into our indicators

Next steps Data

• Transport Canada and Seaway Management have a data agreement in place since mid-2016

• Transport Canada is addressing the data issues raised in the CTA Review and marine statistics is definitely an area where developments will be initiated

Partnerships

• We may need to create a specific Seaway supply chain working group to define the metrics and how these metrics will be communicated

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Conclusion and Next Steps