Lawrence Seaway carriers grappling with sluggish freight demand

MONTREAL, Que. — For both the inland and ocean carriers, there were a few bright spots during the 2011 navigation season on the St. Lawrence Seaway but the overall volume of activity was a disappointment.

According to preliminary estimates, total cargo on the waterway advanced just over 1% to 37 million tonnes, despite substantial new business in coal exports to Europe and healthy increases in Canadian grain and petroleum shipments. Observers expect little improvement in 2012 in light of a looming recession in Europe and slow growth in the United States and Canada.

There was a double-digit upswing of traffic on the Seaway in 2010, in the wake of a sharp recession-related decline in 2009, and Terence Bowles, president of the St. Lawrence Seaway Development Corporation, had last March forecast a cargo increase of 7% to 39 million tonnes in 2011. But big drops in iron ore and US grain tonnage undercut total throughput.

The shipments of coal, which totaled nearly 3.4 million tonnes at the end of November, were bolstered by the Seaway being increasingly chosen by shippers as a viable transportation route for exporting low-sulfur coal to European markets.

For instance, between mid-summer and mid-October, Canada Steamship Lines carried more than 300,000 tonnes of coal from Superior, Wisconsin to the Port of Quebec for transshipment onto ocean vessels destined for Europe. From ports like Rotterdam, the coal is distributed to European utilities.

“What we are attempting to do, basically, is to promote the northern corridor to take coal out of the United States for Europe,” said Tom Brodeur, CSL’s Vice-President of Marketing and Customer Service.

With the U.S. exporting 100 million tonnes of coal annually, Brodeur pointed out that congestion is taking place at US East Coast and Gulf of Mexico ports and railway networks are strained.

In an interview, he hinted that the CSL coal shipments from Superior could go up significantly in 2012 – to between 1.5 million tonnes and 2 million tonnes.

Wayne Smith, senior vice-president, commercial of Algoma Central Corporation, which operates the largest domestic fleet, said that “demand has been stronger than anticipated, although the risks remain over the strength of the economic recovery. It was a good year for Canadian grain, and we moved a lot of salt (Sisco) out of Goderich where there was a tornado. The product tankers which had lagged the recession have been quite busy.”

At Montreal-based Fednav Ltd., the largest ocean-going user of the North American waterway, co-CEO Paul Pathy underlines a priority “to keep the fleet as flexible as possible during times of economic uncertainty and market volatility. Generally, we were slightly up in 2011 from 2010, even though often we can’t tell what is coming on steel or grain.”

Fednav vessels, he noted, were bringing in coke but a lot less finished steel to the Great Lakes – “and there is a greater diversity of cargoes in and out of Hamilton.”

Like other Canadian Great Lakes shipping executives, Pathy professed optimism over the long-term future of the Lakes trade and added that such optimism was underscored by new ships coming on stream.

Between now and 2013, Fednav, Canada Steamship Lines and Algoma Central Corporation are all expanding their fleets with new, ‘greener’ and more fuel-efficient vessels.

Chief catalyst for the sudden, multi-billion dollar renewal of the Canadian fleet was the federal government announcement in October 2010 of the removal of a long-standing, 25% import duty on foreign-built ships.