A user's guide to the Great Lakes St Lawrence Seaway System

by Array

Chances are you know a thing or two about short-sea shipping on the Great Lakes St Lawrence Seaway System (GLSLS)—or HWY H20, as it’s commonly branded. You probably know it comprises the St Lawrence River, the St Lawrence Seaway and the Great Lakes. You probably know it’s an artery for grain, iron ore, steel and other bulk commodities, and that it holds great potential for containers and project cargo. You’ve likely also heard that it is significantly underused, operating at about 50 percent of its capacity. But do you really know if—and how—you can use it to your supply chain’s advantage? Deborah Aarts consults the experts and lists what you can expect.

You’ll get economies of scale
The factor that most draws shippers to short-sea shipping is the price structure. On a pound-by-pound basis, it’s tough to beat the rates marine offers.

“At the end of the day, the more cargo you can carry, the more money you save,” says Paulo Pessoa, vice-president of sales at McKeil Marine Limited.
The recession is causing shippers to reconsider the value of marine, says Tim Heney, CEO of the Thunder Bay Port Authority.

“Right now some of those shipping rates are lower than they’ve been in some time,” Heney says.“People are looking for opportunities to save that extra dollar.”
Brent Kinnaird, marketing development manager at the Hamilton Port Authority, has witnessed a similar phenomenon.

“A year ago…people would look at a value proposition that would save $10 per tonne of cargo and say ‘looks interesting, but it’s not really enough of an incentive to make me switch from what I’m doing now,’” he explains. “Now, that’s a lot of money because everyone’s margins have shrunk.”

The value of short-sea shipping really emerges for heavy loads. Unlike trucking and rail companies, marine carriers tend not to add premiums for extra weight. McKeil Marine, for example, can carry TEUs of up to 27 tonnes—roughly twice the weight of an average container.

Marine is also valuable to shippers who can afford longer lead times. If a product does not have to be at destination right away, there’s a sound economic argument to be made for sending it by a slower—and cheaper—mode.

“A lot of commodities in the trailers you see on the highways—those aren’t all necessarily just-in-time needs,” points out Bruce Hodgson, director of market development with the St Lawrence Seaway Management Corporation (SLSMC), which runs the Canadian side of the waterway.

You’ll have to fork out some fees…
While the freight rates are generally affordable, shipping on the GLSLS carries its own set of fees. You can expect charges like ice-breaking fees, marine service fees and tolls to pass through strategic points like the Welland Canal.

There may also be stevedoring fees, which can run between $8 and $13 a tonne.

“In terms of the vessel costs, [short-sea shipping] is a lot cheaper,” explains Aldert Van Nieuwkoop, president of Great Lakes Feeder Lines, which provides marine transportation across the GLSLS and Atlantic Canada. “Where the challenge comes is in loading and unloading those containers.”

His company’s flagship short-sea vessel, the Dutch Runner, has built-in cranes, which are meant to ease the cost of the loading/unloading process.

…But incentives are available
Some jurisdictions along the GLSLS are courting shippers with incentives. The Quebec government, for example, offers tax credits to shippers who switch from truck or rail to marine, and recently expanded the program for cargo moving into Ontario.

Hodgson would like to see the federal and US governments offer similar programs. “We think that’d go a long way towards helping short-sea shipping. The actual benefit would go to the shipper, who is controlling the merchandise.”

For its part, the SLSMC lowered its tolls last year. Hodgson reports that the effort has attracted new customers—particularly those interested in cutting costs and their carbon footprint at the same time.

Ports are eager to grow…
Virtually every port on the GLSLS is hungry for business, and many are working to creatively address shippers’ needs.

Larger ports—like Halifax, Hamilton and Montreal—are pursuing container feeder services, in which a large mainline ship from Europe or Asia calls at a major port, its cargo is transloaded to a smaller vessel or barge and the shipments move as close as possible to destination by water.

One of the leaders in this has been the Port of Hamilton. Late last year, it launched a pilot for a feeder service to and from Montreal. It’s in the early stages, but interest is growing, and if all goes as planned a weekly service could be operational as early as July.

…But many could use a spruce-up
Not every port on the GLSLS is equipped with the state-of-the-art capabilities of major ports. Many could use upgrades—particularly smaller ports accustomed to modest amounts of cargo.

But with a limited stock of guaranteed customers, it’s difficult to drum up the cash to add container cranes, on-dock capabilities and the other improvements required to handle cargo efficiently.

“It’s a chicken-and-egg situation,” Van Nieuwkoop explains. “Do they upgrade their port facilities in hope that they’ll be able to service new markets, or do they go get those markets first and, as demand increases, make a case for an upgrade?”

Some relief is coming in the form of federal cash. The government prioritized short-sea shipping infrastructure projects in its 2009 budget, and the US government did the same in its recent stimulus package. If ports use this money in a way that’s useful to shippers, the short-sea segment could take off.

“In some ways, there’s probably never been a more opportune time to get it to the next level,” says Patrick Bohan, manager of business development at the Halifax Port Authority.

You can get close to major population centres…
One advantage of short-sea shipping on the GLSLS is the ability to move product to or from major markets—like Ontario’s Golden Horseshoe or the US Midwest—with minimal time on road or rail.

Great Lakes Feeder Lines, for example, is pursuing liner service at some underused ports near major US population centres—places like Buffalo, Cleveland and Toledo. “It makes a big difference, because trucking or railing cargo to major railheads is where the cost comes in for the shipper,” explains Van Nieuwkoop.
At the Port of Toronto, interim president and CEO Alan Paul is seeing an uptick in cargo destined for the downtown and surrounding area. “We know that the road system is congested,” he says. “It makes a lot of sense to move it as far as possible by water.”

The same strategy works going west. The Port of Thunder Bay has both CN and CP service at the dock, meaning shipments can be whisked westward quickly—an attractive option if the cargo is oversized or overweight. There’s a ready supply of grain for backhaul, too.

…But not in the winter
There’s one inescapable reality of shipping on the GLSLS—much of it is frozen for two or three months of the year. If you are moving cargo year-round, you’ll have to make other arrangements in winter. “During those three months you’re going to have to go back to rail or truck,” admits Heney.

But if your product is seasonal, the downtime may not affect you. Similarly, if you have long lead-times, you may be able to adjust your scheduling to have deliveries made in the navigation season.

You’ll have less paperwork to deal with
One benefit proponents of short-sea shipping are quick to tout is the sheer bureaucratic efficiencies it can afford. For instance, a ship requires only one bill of lading. Since a vessel on the GLSLS can transport the equivalent of hundreds of trucks, taking this tack cuts the necessary documentation to a fraction of what is required on land.

For cross-border shipments, as is the case with other modes, Customs and security paperwork must be submitted ahead of time. But since there is generally little congestion to contend with at the landing port, clearance is usually a relatively quick process.

If you commit, they will come
Despite all these benefits, container traffic remains in its nascent stages on the GLSLS. Regular services exist, but they’re few and far between.

“There’s been so much talk about short-sea over the past few years, but not a lot of true action,” Kinnaird admits.

Much of the problem is the high start-up costs and risks associated with launching a marine service. The out-front investment is much more than that required for rail or trucking, which makes carriers hesitate.

“For modern short-sea shipping, you need the vessel that’s going to move the cargo cost-effectively, and they’re not as available as you might think,” Heney explains.

Working in the carriers’ favour is the relative affordability of vessels since demand has slackened around the world. Still, few are likely to invest without some form of shipper commitment, especially since foreign-made vessels are still hit with a 25 percent duty in Canada.

Many feel that for the GLSLS to really take off, all stakeholders—including cargo owners—are going to have to pitch in.

“Every port in the Great Lakes would love any ship owner to come in with their ship. But it doesn’t quite work that way,” says Van Nieuwkoop. “You can’t put all the pressure of operating the line, especially in the start-up phase, on the ship owner.

“If you are able to manage that risk among the stakeholders that benefit from it—the stevedores, the shippers, the ports, etc—then it becomes palatable and doable.”