Is the Great Lakes-St. Lawrence Seaway on the verge of a huge surge in traffic?

by Canadian Shipper

TORONTO, Ont. — As downturns go, the current one has been quite benign on the Great Lakes-St Lawrence Seaway complex. In October the Seaway registered a 9.8% increase in cargo volume over October 2011 to a record 4.4 million tonnes. For the shipping season period to date, March 22 to Oct. 31, cargo shipments totalled 29.5 million tonnes, a rise of 1.4 percent compared with the same period in 2011.

 Future volumes could be a lot better yet. According to some pundits and operators who spoke at the recent Highway H2O conference in Toronto, the system is poised to see a potentially huge surge in traffic. There are various trends that suggest a larger role for the Seaway in Canadian exports as well as indications or a large boost in container imports heading inland from the east coast.

 Mark Hemmes, president of Quorum Corporation, provided an update on developments since the dismantling of the Canadian Wheat Board. While it is too early to draw definitive conclusions, there are some encouraging signs of improvement, he noted. As the market is expanding into a North American Arena, flow patterns are going to shift, potentially leading to an increase in eastbound flows, notwithstanding the predominance of exports to Asia. With its large storage capacity and ample availability of rail cars, the port of Thunder Bay could emerge as a major conduit for these grain flows, Hemmes said. The port’s car cycle performance has improved by 36% over the past 12 years, he added.

Helen Goldenberg, president of Thunder Bay Terminals, outlined another commodity flow scenario with potentially huge ramifications for the port and the Seaway. While demand for coal has fallen off a cliff in North America, thanks to the availability of huge quantities of shale gas and to tighter environmental regulations, coal is the fastest growing source of electricity production in Asia, leading to a strong focus on exports by coal producers. This is further boosted by historically low shipping rates, she added.

 According to Goldenberg, the ports on the West Coast do not have sufficient capacity to handle the volumes involved, and neither do the ports in the Gulf of Mexico. This opens an opportunity for the Seaway, which is a tried and tested route for exports, she stated.

 Richard Sawall, director of business development, crude oil at US Oil, pointed out that the new pipeline capacity that is being built to move oil from the Bakken formation that straddles North Dakota, Montana, Saskatchewan and a part or Manitoba is coming on too slow, necessitating other modes of transportation. Shipping it by rail has become more economical on the back of the railroads’ experience with ethanol, but rail cars have been in short supply and many refineries are not set up to receive oil by rail, he remarked. However, oil could be shipped by rail to ports on the Great Lakes, which would also eliminate the need to move through Chicago, he continued. On the flip side, there is currently only limited active infrastructure for liquid cargo on the Great Lakes, Sawall pointed out.

What these presentations did not address was the question of backhaul. This might be taken care of in part by another development outlined by Hazem Ghonima, president and CEO of Ottawa-based TAF Consultants.

 Ghonima predicted a change in global container traffic patterns. The main catalyst for this is the emergence of Triple E class container ships that can take up to 18,000 TEUs. The first one of these is due for delivery next year.

Combined with the container port at Port Said, the entry of Triple E class vessels is shifting the separation line between east- and westbound routings out of Asia to the east. Currently at Singapore, it will extend to the Pearl River Delta, allowing exports from China’s largest production base to be sent via the Suez Canal to the east coast of North America, Ghonima said.

 He predicted that these vessels will increasingly be deployed on such routings. American West Coast ports are congested and lack the ability to expand sufficiently to absorb this traffic, and the Panama Canal will not be able to accommodate the new generation container ships, he remarked.

“Even after the expansion which is currently in progress, the Panama Canal will not be able to take these new ships. It can accommodate ships of 12,600 TEU maximum,” he said.

 According to him, in terms of lead times, there is virtually no difference between a  routing from Asia to the US heartland via Suez and the route through the Panama Canal.

This should bring about a revival of the fortunes of the port of Halifax, which lost out on China’s rise as the world’s factory floor. “Atlantic Canada can attract about 1.2 million TEU,” Ghonima reckoned, adding that about 10% of that volume could move on the Seaway, while the vast majority would go by rail.

This could go some way toward the establishment of a liner service in the Seaway system, something that is generally viewed as a huge catalyst for growth in the system. Marc-Andre Roy, vice president for North America of consulting firm CPCS, is an advocate for a liner service. Consolidation of project cargo traffic might be a step towards that end, he suggested.

CPCS carried out a competitiveness study for the Seaway, which examined multiple routings for cargo from 12 commodity groups on a total cost basis from origin to destination. It concluded that the Great Lakes-St Lawrence Seaway is cost-competitive for many commodities and routings. However, some shippers are put off by the complexity, Roy pointed out.

 “Arranging a Seaway routing is complicated. It is a lot more complex than putting your shipment on rail,” he said, adding that it is not always easy to obtain quotes for all the elements of the routing.

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