Great Lakes/Seaway waterway fighting headwinds… made-in-China

Among Canadian and U.S.-flag operators on the continent’s Great Lakes/St. Lawrence Seaway System, largely the same refrain is uttered to explain the disappointing cargo trends of 2015 and forecasts for little likely improvement in 2016. It’s not just the global plunge in commodity prices, especially iron ore, but the accelerating massive influx of cut-rate Chinese steel into North America. “There is a continuing glut of foreign steel, mainly from China, impacting significantly on iron ore movements in the Great Lakes,” Glen Nekvasil, vice-president of the Cleveland-based Lake Carriers Association (LCA), told AJOT. The latter represents 15 American companies that operate 56 U.S.-flag vessels on the Great Lakes. It’s estimated that it takes one and a half tons of iron ore to manufacture one ton of steel. At early November, Nekvasil indicated that four of the 13 large 1,000-foot ships (captive to the Great Lakes) in the fleet were laid up. Canadian-flag operators have similarly not been able to function at full capacity, although they were anticipating a late season surge in grain shipments. According to the LCA, shipments of iron ore on the Great Lakes totaled 5.3 million tons in October – a decline of 23% from a year earlier. Loadings at U.S. ports in October of 4.6 million tons were down 27%. And through October, the Lakes/Seaway ore trade stood at 44.4 million tons, representing an overall decrease of 6%. On the other hand, the strong U.S. dollar has spurred volume at ports on the Lower Lakes. In addition to handling a flood of import steels, ports like Cleveland, Burns Harbor, Toledo and Oswego have been reporting spikes in project and grain cargoes. In the region, Federal Marine Terminals has been enjoying brisk business in imported steel products. For the Port of Cleveland, it has been a banner year, with cargo volume exceeding the 2014 numbers and with Spliethoff planning to increase the frequency of its Cleveland-Europe Express service to three times monthly from fortnightly in 2016. Cargo volumes on the St. Lawrence Seaway in 2015 fell well short of repeating the strong recovery in 2014 from pre-recession levels as had been hoped, resulting in Great Lakes operators not generally functioning at full capacity The Seaway handled nearly 40 million metric ton in 2014 versus 37 million tons in 2013, representing a 7.64% increase. In the period to end October 2015, total cargo was down 9.4% at 27 million tons. However, Seaway officials were anticipating an improved end to the 2015 commercial navigation season following more robust activity in October that has helped to close the deficit. With economists forecasting slow growth, Terence Bowles, President and CEO of the St. Lawrence Management Corporation, recently told an industry conference that one can expect “stable demand for Seaway cargoes” in 2016 – “leading perhaps to a modest increase in overall volume.” Grain shipments to end October were down 9.7% at 7.6 million tons. Iron ore was down by nearly 12% and coal had plunged by 37%. Most positive feature was dry bulk, thanks to healthy movements of cement, gypsum, and stone tied to a vibrant construction sector in Ontario and Québec. As noted by Bowles, certain project cargoes like wind energy components have shown growth. CN Shipping Lines Still Bolstering Their Fleets Canadian Great Lakes carriers have not ceased to demonstrate their faith in the waterway’s long-term future by upgrading or expanding their fleets. The last quarter of 2015 witnessed an important transaction involving a subsidiary of Norway’s Klaveness Shipholding AS, Algoma Central Corporation and the CSL Group. Klaveness Selfunloaders reached agreement to sell the five self-unloading bulk carriers in its fleet to affiliates of Algoma Central Corporation and the CSL group in a transaction valued at $190 million. Earlier this past fall, Algoma underscored its commitment to renew its fleet by signing a contract to build three new Seaway-max self-unloaders with a Croatian shipyard. This replaced contracts with a Chinese shipyard that were cancelled. The new Equinox ships will feature a boom forward configuration designed to provide greater flexibility in certain delivery situations. In other related developments, Lower Lakes Towing, which transports bulk cargo to Canadian and U.S. Great Lakes ports, took delivery late this year of the MV Manitoulin from a Chinese shipyard. “This vessel is the first new river class self-unloader to be introduced in the Great Lakes in over 40 years,” says Scott Bravener, President of Lower Lakes Towing and Grand River Navigation Company, both subsidiaries of Rand Logistics. The new addition increases the size of Rand’s fleet to 16. More than half of Lower Lakes business is generated by the aggregates trade facilitated by the smaller vessels able to access many ports. And observers consider the carrier is well placed to take advantage of a rebounding housing market and future infrastructure projects. Hamilton-based tug and barge operator McKeil Marine also recently added a bulker ship to the fleet to serve its customers throughout the Great Lakes/St. Lawrence waterway and the East Coast of Canada. In late October, at the Oshima (Japan) shipyard, a new vessel, the Federal Biscay, was delivered to Montreal-based Fednav Limited, the largest ocean-going user of the Seaway. The Federal Biscay is equipped with a ballast water treatment system that is a first for ships transiting the Great Lakes. Fednav announced in the spring of 2015 that it would equip twelve of its new ships with these systems, well before the regulatory requirement. The Federal Biscay, an ocean-going laker of 34,500 dwt, is destined to ship general cargo to the Great Lakes and bulk commodities, such as grain, from the Midwest to world markets. The Federal Biscay was in fact the last of six Seaway-sized vessels received in 2015 that were part of a 27-ship order (14 of which are lakers).