By Brian Dunn
As it celebrates its 75th anniversary this year, Fednav is showing its appreciation for the support it has received from the Montreal business community, by naming its two new Lakers Federal Montreal and Federal St. Laurent. It’s the first time Fednav has named a vessel after a city. Federal Montreal will be delivered at the end of August and Federal St. Laurent is expected to arrive at the end of June. The 35,000-tonne Lakers are being built by Oshima Shipbuilding in Japan with six holds, four cranes and onboard ballast water system.
“It’s a small token of our appreciation for our home city,” Fednav President and CEO Paul Pathy said during a presentation to a luncheon meeting on May 8 organized by the Conseil des Relations Internationales de Montréal.
As part of its year-end results for 2018, Port of Montreal noted dry bulk shipments (Fednav`s main business) were down 16.1 per cent from 2017, while container and liquid bulk volumes were both up. Mr. Pathy said in an interview following his presentation the port’s dry bulk decline doesn’t reflect Fednav`s own results. “The last year was a good one for us, especially in the Great Lakes and St. Lawrence Seaway and the opening season of this year has been strong. But the reality is that there is a lot of uncertainty in the global environment, tariffs and trade wars and growth concerns around the world make people nervous and nervous people ship less.
“Every variable creates another ripple so initially it was to our benefit, because when the U.S. sanctions (went into effect) on China, the U.S. stopped shipping soybeans to China, so we actually started shipping Canadian soybeans to China, which we never do. Plus, when the U.S. doesn’t ship soybeans to China, someone else has to, and in this case it was Brazil. So Brazil sells all its soybeans to China, and now the U.S. has to sell its soybeans to Brazil which creates an extra (shipping) leg, so that was to our benefit.
But now what’s happened is China is not buying any Canadian canola which traditionally moves from the west coast. Now Fednav has to compete with ships coming from the west. “A year ago, you would never have said we would lose business to a Panamax carrying canola off the west coast through Panama to Europe. But we’re actually losing business to European and North African customers off the west coast which is totally a new thing for us. So all this uncertainty ((Huawei controversy, tariffs and trade wars) alters the flow of trade and you have to adapt.”
As for the steel and aluminum tariffs imposed by the U.S. on Canada, the results were negative last year due to the high prices of metals and the booming U.S. economy, resulting in a record year for the Seaway, Mr. Pathy noted. “But this year I’m hearing rumblings in the market that things are starting to bite and that certain suppliers are starting to stop buying from overseas. So I suspect you might see some impact this year.”
Frustrated with the lack of movement in Canada’s newbuild icebreaker program, Fednav proposed to the federal government over two years ago it would handle the design and construction of three icebreakers in Norway’s Havyard shipyard that could be delivered in two years. Under the proposal, Fednav would finance the construction of the vessels, and lease them to the Canadian Coast Guard for 15 years. Each icebreaker would cost around $240 million or about half the cost of building them in Canada, according to Mr. Pathy. So far, no word from Ottawa.
“It’s unfortunate for Canada and the users of the St. Lawrence Seaway and river, because ice is not being broken. There is a massive hole in icebreaking capability and they’re trying to plug it with a political solution that is highly wasteful of taxpayer dollars.” A National Shipbuilding Strategy was introduced in 2010 and still no icebreakers have been delivered, noted Mr. Pathy. He pointed out that the Polar-class icebreaker CCGS John G. Diefenbaker is supposed to join the fleet in 2021-22. The estimated cost of the vessel was $720 million when it was due to be delivered in 2017. The price tag jumped to $1.3 billion in the 2013 federal budget. Construction has still not begun. “By the time it is delivered 20 years late, it will be out of date. It’s absurd. You could have had it in two years from Japan or northern Europe at probably a third or a quarter of the cost.”
The lack of icebreaking capacity results in delays of port deliveries. At one point this spring, there were 13 ships prevented from docking due to ice jams in the St. Lawrence River, said Mr. Pathy. “The system is inefficient, and trade is fluid. So if you’re thinking of shipping to Montreal, you might be concerned about spending ten days in an ice jam. So then you might consider going to another port like Halifax or Norfolk, which affects the competitiveness of our city and our country, because we can’t deliver.”
And when it comes to patrolling the Arctic and to assert our sovereignty, neither Canada nor the U.S. has the requisite capabilities. “We need icebreakers to protect our sovereignty in the Arctic which we are not doing. And when we do, we are doing it in an efficient way.”
Turning to its own operations in the Arctic, Fednav manages the port operations of Baffinland’s Mary River iron ore mine on northern Baffin Island which expects to deliver six million tonnes of ore this year, up from five million tonnes last year.
Fednav also is involved with other northern mining operations including Vale’s nickel mine in Voisey’s Bay, Labrador, Glencore’s Raglan nickel mine in Nunavik and the Canadian Royalties copper and nickel mine in Val d’Or, QC.
“We’re running three Arctic icebreakers, of note, MV Arctic which is a Canadian-built icebreaker getting on in years, is being replaced. We have a state-of-the-art icebreaker being ordered in Japan which will be a sister ship to the other two which will be delivered in 2020.”
During his luncheon presentation, Mr. Pathy explained the challenges of running a shipping company with a chart showing shipping rates of $10,000 a day in 2000, peaking at $70,000 a day before the 2008 recession and dropping back to around $10,000 today. “When things are good, everyone wants to be in shipping. But when you’re losing $40,000 a day (when rates were at $3,000 a day in 2016), it becomes uncomfortable. But I believe in the future of shipping in growing organically and we’ll try to be the best we can as we wait for the return to higher rates.”