Even though dark clouds hang over the global economy and low water levels dog the Great Lakes, the opening of the St. Lawrence Seaway for the 2013 season on March 22 stirs optimism that last year’s better than forecast performance was no fluke.
Terence Bowles, President and CEO of The St. Lawrence Seaway Management Corporation (SLSMC), will be disappointed if the growth in Seaway traffic doesn’t exceed 2 per cent and pass the 40 million tonne level during 2013. “After years of guarded optimism about the system’s prospects, we’re a bit more optimistic than that this year.” In addition to the prospect of a Canada-Europe free trade deal finally being reached, the United States economy is showing signs of improvement and the European Union “seems to have stabilized after the economic turmoil in Greece, Italy and Spain,” he added in an interview. “The U.S. home construction and automotive sectors look stronger and Congress seems to have avoided the fiscal cliff.”
Raymond Johnston, President of the Chamber of Marine Commerce, said in an interview, “Canadian traffic has rebounded since the low point of 2009. The North American economy is growing at a steady pace and conditions do appear reasonably certain going forward. However, there are so many variables and, as always, some uncertainty.”
Most discussions he has heard about the Seaway’s 2013 prospects “suggests there’s nothing to be pessimistic about at this time.” Iron ore and coal should continue flowing to China as they did last year. There is still plenty of Canadian grain left from the 2012 harvest.
A late season surge in grain exports from Western Canada lifted the Seaway to a 4-per-cent increase in traffic last year. The 38.9 million tonnes of cargo bested SLSMC’s forecast by 300,000 tonnes. Overall, the waterway finished 1.4 million tonnes ahead of 2011’s result of 37.5 million tonnes. And it was accomplished with 4,083 vessel transits, 144 lower than in 2011, a sign that more ships passing through the waterway are loaded.
Bruce Hodgson, SLSMC’s Director of Market Development, said iron ore and coal exports should rise again this year and hopefully a return to normal in U.S. crop production will bring more American grain to the waterway. International ore prices have improved with stronger demand from China. While world coal prices are low, delivery contracts are in place and that should keep product moving. Steel imports could rise if the American economy keeps gaining strength. It appears the end of the Canadian Wheat Board monopoly is changing grain export patterns through the Seaway “to a series of peaks and valleys,” he adds. With Parrish & Heimbecker and other prominent grain companies having significant assets in Eastern Canada, “they will be looking to make more use of them than in the past.”
While the Seaway will open with water levels on the low side, ships shouldn’t have much trouble with the light ice coverage on the Lakes.
The Canadian Hydrographic Service says water levels on the lower Lakes and in Montreal are below normal levels for this time of year although still above the Chart Datum. Lake Superior and Lake Michigan-Huron are below their average for this time of year and are below the level of Chart Datum.
The Service said shipping lines have to be especially cautious in high winds during low water periods “when water levels can rise or fall significantly in a short period of time.”
Meanwhile, about 8 per cent of the Great Lakes were ice-covered by late February, which is below the average of 12 per cent since 1980 but above last year when only 5 per cent of the Lakes were ice covered, the Canadian Ice Service reports. Michael Broad, President of the Shipping Federation of Canada, says reports that the U.S. economy is picking up steam make him think “there could be a modest improvement in tonnage.” That could include more steel imports. The biggest uncertainty is grain exports from both Canada and the United States because of ongoing worries about a repeat of last summer’s drought.
Robert Lewis-Manning, President of the Canadian Shipowners Association, is also hopeful about the prospects for 2013, although water levels “could be a big challenge. We’ll continue to come out of the recession.”
While Glen Nekvasil, Vice-President of the U.S. Lake Carriers Association, says his members are still struggling with a drop in cargo last year, the No. 1 issue for them this year will be low water levels. “We have lost four feet of draft in Lakes Huron and Michigan and the St. Mary’s River and that means our ships have to carry 18 per cent less cargo to enter most Great Lakes ports.” American freighters carried 89.5 million tonnes of cargo in 2012, down 4.6 per cent from 2011 and 1.5 per cent below the five-year average. Iron ore volume last year was down 4.3 per cent from the previous year, while coal dropped 13.1 per cent to 17.6 million tonnes of coal. The 21.8 million tonnes of limestone transported by LCA members was 1.7 per cent greater than 2011. Grain rose 31 per cent, cement increased 13 per cent, sand was virtually unchanged and salt loadings slipped almost 30 per cent.
Craig Middlebrook, Acting Administrator of the Saint Lawrence Seaway Development Corporation expects offshore demand for low-sulphur U.S. coal will keep ships moving through the Seaway this year. China and India “will increasingly look to import coal from North America, particularly low-sulphur coal. This is already occurring as Great Lakes coal exports through the Seaway in 2012 have seen tremendous growth, up 25 per cent from 2011 level, and are expected to surpass tonnage levels not experienced since 2004. In fact, Seaway coal exports have steadily increased over the last three years and are expected to remain strong in the years ahead.”
The Seaway could also draw encouragement from a mid-February meeting in Moscow of the G20 finance ministers and central bank governors. They said in a statement that the “risks to the global economy have receded and the financial markets have improved. However, we recognize that important risks remain and global growth is still too weak, with unemployment remaining unacceptably high in many countries.” The report points to investment in long-term infrastructure building as a key to continuing economic growth.
The traffic highlights of the 2012 Seaway navigation season include iron ore posting the biggest increase at nearly two million tonnes higher while coal was almost one million tonnes ahead of 2011. Both commodities benefited from strong export shipments that were transshipped through the Seaway to St. Lawrence ports. Meanwhile, the International Joint Commission says the organization hasn’t decided yet whether to recommend remedial measures to Ottawa and Washington to reverse falling water levels on the Great Lakes. It has to report on the findings of its Upper Great Lakes study board, which examined the water level issue during 2012.