During an interview with Terence F. Bowles, President and CEO of The St. Lawrence Seaway Management Corporation (“SLSMC”), Bruce Hodgson, Director of Market Development, and Andrew Bogora, Communications and Public Relations Officer, the Seaway’s prospects for 2012 were reviewed.

With total tonnage of 37.6 million tonnes passing through the Seaway system dur­ing its 2011 navigation season, the Seaway continued its recovery from depressed 2009 levels when total cargo volume hit a near all-time low of 30.7 million tonnes. The 3 per cent increase in tonnage achieved in 2011 was considered to be moderately successful, in light of continuing economic underperformance in the United States, and major economic uncertainties prevailing in Europe. For the upcoming year, there are encouraging signs of a recovering U.S. economy, as evidenced by increasing activities in the automotive industry, as well as construction. With the U.S. steel industry presently operating at 78.8 per cent capacity, raw steel production was up by 8 per cent compared to levels a year ago, even though it still has a long way to go before it will come close to its historical peak in capacity utilization of 90 per cent.

In contrast to the United States, economic progress in Europe is difficult to gauge, with many predicting there will be zero growth in 2012.

Against this uncertain backdrop, prospects for the Seaway’s core commodities of iron ore, grains and coal were reviewed.

As for iron ore, although over­all tonnage shipped dropped from 9.7 million tonnes in 2010 to 8.8 million tonnes in 2011, prospects are looking up. Although the vast majority of higher-quality iron ore from Northern Quebec – once shipped through the Seaway to mills along the lower Great Lakes – is now being exported overseas, and therefore no longer enters the Seaway system, higher volumes of lower-quality taconite mined from the Mesabi Iron Range in Minnesota are being exported to Mexico and China through the Seaway system.

These export tonnages do not make up for lost tonnages that once travelled in a southern direction from Northern Que­bec; however, they do transit through the entire Seaway system, and are thus subject to toll charges all the way from the Welland Canal to Montreal. Seaway management expects continued growth of these export volumes, and also ex­pects higher volumes of southbound volumes from Northern Quebec, once the U.S. Steel plant in Hamilton re-starts its blast furnaces after a prolonged strike.

The Seaway also witnessed a drop in grain shipments during 2011, from 9.2 million tonnes shipped in 2010 to 8.6 million tonnes. Canadian grain shipments were stronger than usual. However, U.S. grain shipments were well below normal, resulting from farmers’ inability to plant crops, or experiencing delays, due to flooding. For 2012, weather permitting, management expects modest increases in shipments. Factors that it considers to be in favour of increasing volumes include growth of Ontario grain shipments resulting from the new Parrish & Heimbecker storage facility at Port of Hamilton, increasing demand from African and Middle Eastern nations, and opportunities created by the abolition of the Canadian Wheat Board’s monopoly marketing powers.

Coal tonnage grew in 2011, and Seaway management considers coal to be a bright spot. The Seaway is in the early stages of becoming a conduit for the movement of low-sulphur thermal and metallurgical coal from the Powder River Basin, situated in Montana and Wyoming, to export markets in Europe, which have opened up because some of the traditional suppliers to Europe have focused on supplying China instead. Power River Basin coal is moved by rail to ports in Duluth, where Superior Midwest Energy Terminal loads lakers owned by Canada Steamship Lines, which transports the coal to a trans-shipment facility in Quebec operated by Quebec Stevedoring Limited. From there, the coal is loaded on Panamax or Capesize vessels for transport to Europe. Midwest Energy loaded three cargoes last year, accounting for total export volumes of 350,000 tonnes. The company has orders on its books to move 1.5 million tonnes during each of the next three years, all of which is destined to move through the Seaway. In fact, Midwest Energy sees tremendous growth opportunities and is aiming for export volumes of 4 million tonnes annually by 2014.

For its part, with U.S. supply chains approaching capacity, the Seaway has received a number of other inquiries regarding trans-shipment of coal, produced in the Midwest and Pennsylvania, through ports located on Lake Superior and Lake Erie to facilities in Quebec and Nova Scotia.

Another highlight of the 2011 shipping season was the Seaway’s liquid bulk business. The liquid bulk business received a boost when petroleum products were transported into Ontario through the Seaway to compensate for lost production at the Shell and Suncor refineries in Sarnia, which had shut down or reduced production because of major upgrades and maintenance activities.

The expansion of the Panama Canal, slated to be completed by 2014, will present new opportunities to the Seaway as post-Panamax container vessels will be able to voyage from Asia to Eastern Seaboard ports. These ports will see larger and greater numbers of vessels arriving, which will put more strain on an already strained transportation infrastructure. This increases the likelihood that exporters in the Northeast and Midwest will choose the Seaway as their preferred export channel, as has recently begun to happen vis-à-vis export of coal. In addition, importers may find it to their advantage to have vessels call on eastern Canadian ports, rather than congested eastern U.S. ports. This may translate into short-sea opportunities for the Seaway, transporting containers from eastern Canadian ports through the Seaway to central Canadian and Midwestern destinations.

Given the near record low tonnage that transited through its system in calendar 2009, revenues for the fiscal year ended March 31, 2010 dropped sharply and, as a result, SLSMC’s operating expenses exceeded its revenues by $9.8 million. With total revenues increasing by 19.5 per cent in fiscal 2011, the Corporation was able to report a significantly reduced operating deficit of just over $1 million.

In summary, the future is beginning to look brighter for SLSMC as a recovery in the U.S. will create more economic activity, as export opportunities for coal begin to unfold, and as the widening of the Panama Canal will result in more and larger vessels calling on ports along the increasingly congested Eastern Seaboard, which, in turn, will cause exports and importers to seek less congested, more cost-efficient routes to get the goods to their customers.