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Cablegate: Capturing Asian Container Traffic: Investors Promote New

VZCZCXRO6050
RR RUEHGA RUEHQU RUEHVC
DE RUEHHA #0059/01 2331800
ZNR UUUUU ZZH
R 211800Z AUG 07
FM AMCONSUL HALIFAX
TO RUEHC/SECSTATE WASHDC 1206
RUEHOT/AMEMBASSY OTTAWA 0460
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHHA/AMCONSUL HALIFAX 1278

UNCLAS SECTION 01 OF 02 HALIFAX 000059

SIPDIS

SIPDIS

DEPARTMENT FOR WHA/CAN

E.O. 12958: N/A
TAGS: EWWT ELTN ETRD EINV ECON CA
SUBJECT: CAPTURING ASIAN CONTAINER TRAFFIC: INVESTORS PROMOTE NEW
GREENFIELD SUPER-PORT IN NOVA SCOTIA

REF: A. HALIFAX 000055; B. 06 VANCOUVER 1366 AND PREVIOUS

HALIFAX 00000059 001.2 OF 002

1. Sensitive but unclassified. Protect Accordingly

2. (U) SUMMARY: A team of local Nova Scotia investors
confirmed that they have the financial backing and the right
partners to build a new world-class container handling facility
in the Strait of Canso at Melford. With Asian trade volumes
booming and lots of U.S. business interest in both the import
and export potential of the project, the proponents are looking
at a start-up date of 2010 for the new, 1.5 Million
twenty-foot-equivalent unit (TEU) facility, a possibility which
has Halifax officials worried about the impact on their port's
competitive status. END SUMMARY

3. (U) On August 8, Consul General, FCS Senior Commercial
Specialist, Pol/Econ Specialist, and CBP Port Director met with
Paul Martin, President of Melford International Terminal Inc
(MITI), and his colleague, MITI CEO Bob Stevens, to discuss
their proposal to build a US$300 million container facility in
Melford, Nova Scotia. Melford is an industrial port 190 miles
east of Halifax on the mainland of the Strait of Canso, which
separates mainland Nova Scotia from the Island of Cape Breton.
Martin and Stevens are also principals of Trident Holdings,
Inc., a Halifax-registered merchant bank and lead investor in a
group that includes several other Nova Scotia private entities.
U.S. companies involved in the venture include terminal operator
SSA Marine of Seattle, CenterPoint Properties of Chicago as the
primary developer of an adjacent logistics park, and RailAmerica
as the provider of a new rail spur line to the terminal.
TransSystems of Kansas City, MO, is engaged in the planning and
design of the terminal. (A map and a summary of the project are
available on Canada's Economy and Environment Forum at:
http://www.intelink.gov/communities/state/can ada/archives/c
apturing_asian_container_traf.html)

3. (U) The MITI principals acknowledged that there were
tremendous risks involved in building a greenfield container
facility in a province that already has two underutilized
container piers in the Port of Halifax (ref A). Nonetheless,
Martin told the CG they are convinced that the tremendous
upswing in Asian cargo through the Suez Canal to North American
ports makes the project a viable proposition and, given the
capacity crunch in west coast ports, there would be more than
enough cargo for both Halifax and Melford. In fact, Martin and
Stewart envision the Melford terminal to be a natural complement
to the port of Halifax as opposed to a competitor.

4. (SBU) Martin noted that like Halifax, Melford has many
geographic advantages such as a deep, ice-free harbor capable of
handling even ultra post-PANAMAX vessels (which can carry over
12,000 TEUs), plus the advantage of shorter steaming times from
Europe and from Asia through the Suez canal than eastern U.S.
ports. However, unlike Halifax and other new port developments
in North America, Melford is a greenfield site. Rather than
retrofitting or modernizing an existing port facility, the
developers can take advantage of a surplus of vacant land to
construct a state-of-the-art container facility capable of
handling the largest container vessels and an adjacent logistics
park that would provide distribution and warehouse facilities
for importers. Yet another advantage is a skilled labor force,
which Stevens believes would be inclined to accept a more
competitive labor agreement than their counterparts at other
North American ports.

5. (SBU) Disadvantages of the project include the absence of a
rail line to serve the new port and no Canadian and U.S. customs
inspection facilities. Nonetheless, Martin indicated that Rail
America, which operates the short line railway that passes near
Melford, was committed to expanding its line to link up with the
port. Martin indicated that Canadian National Railways was also
interested in the project. He described CN as having already
put its "stake in the ground" by its proposal to build a customs
clearance facility, which would go a long way in confirming the
viability of the project

6. (SBU) So far the proponents have spent C$5 million to
complete their market assessment overview of the proposal (all
without government help as Martin and Stevens were quick to
point out). In terms of customers for the port, Martin said
they are focusing on those carriers who do not have dedicated
ports, and targeting those shippers who are looking for a
variety of ports to ensure uninterrupted service. For example,
according to Martin, Wal-Mart is looking for an additional five
ports of entry in North America through which to bring in its
merchandise. Other potential customers are located in the
Atlantic region, Quebec and Ontario, New England, the Ohio
Valley and the U.S. mid-west. Interestingly, Martin revealed
that the governments of Ohio, Massachusetts, Maryland, Maine and

HALIFAX 00000059 002.2 OF 002


Pennsylvania have expressed an interest in using Melford to
export goods from their states.

7. (U) With the marketing overview already complete, the next
step is the permitting phase (including environmental
assessments) and detailed design work, followed by the actual
marketing of the facility. Both Martin and Stevens are
confident that they will have no regulatory problems in securing
the go-ahead for their project and envision starting the
construction phase in the first quarter of 2008 with a start-up
date of late 2010. The likelihood that the project would move
forward on schedule was increased when, on July 27, the local
municipal government voted to expropriate three privately-owned
properties to create an access corridor from the industrial park
to the Strait of Canso.

8. (SBU) Comment: The Melford International Terminal project
has been the talk of the shipping community in Halifax for the
past few months. Our local industry contacts tell us that the
MITI principals seem to have the potential customers lined up, a
feat which they applaud given the highly competitive nature of
the container business. However, despite MITI's vision of a
complementary relationship with the port of Halifax, these
executives view the new kid on the block as a definite
competitor, especially since Halifax is struggling to keep the
customers it already has. Whether the MITI idea of a
complementary relationship with Halifax is feasible remains to
be seen. Regardless, with their C$5 million already invested
and an impressive array of investors, partners and prospective
customers, all indications are that the Melford project bears
watching as Stevens and Martin implement a risky, but
potentially lucrative development plan. END COMMENT
FOSTER

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