By Jack Kohane
Hilary Goldenberg, President of Thunder Bay Terminals Ltd. (TBTL), isn’t a geologist but she knows tonnes about coal, an age-old fossil fuel that is been getting some bad press of late. But when Goldenberg talks up the merits of coal, people listen. “Canada’s coal business is bright,” she says firmly. “Canada has lots of excellent coking coal and the world wants it.” Metallurgical coal is an essential ingredient for steel production and drives the steel industry on a global scale. In addition, thermal coal that is produced in North America is also in growing demand in Europe and Asia where government policies have not undermined its use. As a result of strong pricing overseas, these products are moving in ever greater volumes into the export market.
Coal shipments handled at TBTL peaked at 3.8 million tonnes in 1989, and have since declined to 756,000 tonnes in 2012, primarily because of Ontario’s decision to shut down its coal-fired power generating plants, but also suffering the negative effects of lower levels of domestic steel production. But, that’s the past, and the future looks decidedly better.
Coal consumption in North America is on the decline, resulting primarily from conversions of electric power plants changing from burning coal to much cleaner natural gas, brought about by environmental pressures, coupled with low prices and an abundance of natural gas. In addition, the aftermath of the 2008/2009 recession as well as continuing trend for manufacturing jobs to be relocated to low-cost countries has resulted in lower demand for both thermal and metallurgical coal.
“However, macro forces are at work in the world economy,” notes Ms. Goldenberg. “There is increased demand for North American metallurgical and thermal coal in European and Asian markets. Coal is the resource of the future.”
Ms. Goldenberg sees supply and demand economics in action, keeping a close eye on the ebb and flow of commodities, including coal as well as potash, urea, grains, and agricultural products, moving through her vast marine cargo handling facility serving domestic and international markets. “Metallurgical coal has become a key focus at TBTL,” she points out. “Given an uptick in the world economy, demand for thermal and metallurgical coal in North America, Europe and South America could result in even greater throughput at Thunder Bay Terminals. We are working to ensure that these markets are well aware of our terminal and our capabilities.”
Ms Goldenberg points to a number of demand-related factors she views as forces for change, particularly the rapid growth in demand for electricity in Asia, and the significantly higher cost of liquefied natural gas in Southeast Asian markets. “In that market, coal is the most rapidly growing fuel source,” she observes. “We believe that coal demand will continue to grow to serve this growing need.”
World stats on coal use concur. Between 2000 and 2011 global coal consumption increased by 2.8 billion tonnes to approximately 7.8 billion tonnes. During the current decade, coal use will expand at least another 22 per cent or an additional 1.7 billion tonnes.
According to IEA World Energy outlook, 1.3 billion people in the world today have no access to electricity. Construction and operation of coal-burning power generating stations is the fastest and, in most cases, the lowest cost alternative to bringing electricity to developing nations or developing regions. Increased urbanization in Asia also points to growing demand for coal, since urbanization is associated with higher energy consumption.
In China in 1990, about 26 per cent of the population lived in urban areas. By 2010 that number grew to 49 per cent. By 2025, 65 per cent of the population of China is expected to live in cities. Increased demand for electricity resulting from urbanization will typically go hand-in-hand with increased demand for housing, commercial and industrial space, higher levels of production of industrial goods, and construction of infrastructure such as roads, bridges, utilities, etc., all of which require steel, which requires metallurgical coal for the conversion of iron ore into steel. Accordingly, developing economies need more energy and more steel production which, in most cases, translates into increased demand for both thermal and metallurgical coal.
In India, almost 290 million people are without electricity, and per capita electricity consumption is only about 3 per cent of Canada’s. Generating capacity is expected to grow rapidly in future years, relying on all forms of electrical generating capacity, including nuclear, fossil fuels and renewable sources. However, with 57 per cent of installed capacity relying on coal, and with domestically mined coal being of inferior quality, imports of thermal coal, in 2010 estimated at 75 million tonnes, will likely double within the next few years.
Spurring more demand for coal from North America are the recent actual and proposed shutdowns of nuclear power plants in some countries. In response to the nuclear disaster in Japan, that country shut down almost all of its nuclear capacity. Other countries like Germany are following suit. The result of these shut down nuclear facilities is an increased demand for coal in these countries to produce the electricity that is required.
Ms. Goldenberg spotlights Thunder Bay Terminals as having the terminal capacity available to handle expected increased global demand for Canadian (and U.S.) resources. “With challenges facing the construction and expansion of West Coast terminals and Gulf terminals, and with the cost of rail to the East Coast being as high as it is, that leaves producers and customers seeking alternatives. This presents an opportunity for the Great Lakes and the St. Lawrence Seaway and to us at Thunder Bay Terminals.”
A wholly owned subsidiary of Russel Metals Inc., a $3 billion publicly traded metals distribution company, Thunder Bay Terminals was built at the time of the oil crisis in 1978 to ensure a reliable flow of Western Canadian coal to Ontario Hydro. However, several years ago the Ontario government’s decision to abandon coal as a source of power for the province’s generating stations resulted in volumes of thermal coal being handled through the terminal being reduced to practically zero. Since that time, TBTL has been handling Western Canadian metallurgical coal, as well as a range of other bulk commodities, for both domestic and export clients. Metallurgical coal moves onto vessels at TBTL, destined for North American steel producers on the Great Lakes.
Asked what he believes drives TBTL, John Kepes, the Terminals’ GM and Vice-President of Finance, replies that, “Customer service trumps all. For over 30 years Thunder Bay Terminals has provided reliable service to our customers by a business-savvy, customer focused staff who can work cross-functionally to get the job done day in and day out.”
“We’re supported by the latest in materials handling technology,” adds George Strandberg, operations supervisor at TBTL, who oversees the coordination of traffic and materials movement at the sprawling 236-acre facility. “Our personnel, primarily operators, electricians, and millwrights are proficient in the use of these sophisticated machines. They are among the industry’s best minds.”
One of the terminal’s key customers agrees. “We have developed a strong relationship with Thunder Bay Terminals thanks to the collaborative approach of Hilary and her team,” says Brad Johnston, General Manager, Logistics, Teck’s coal operations, a diversified resource company headquartered in Vancouver, B.C. “Thunder Bay Terminals is an important gateway helping Teck meet the needs of our customers.”
That’s music to the ears of Ms. Goldenberg, a graduate of the University of Toronto and of the Rotman School of Business Institute (Directors’ Education Program), and TBTL’s President since 1997. “I love business and teaming with great people, and as soon as I joined Thunder Bay Terminals, everything just clicked,” enthuses Ms. Goldenberg. “I especially liked studying economic geography in university, and this business is all about those principles.” Her passion for the job, she says, “keeps growing.”
Moving forward, the TBTL team plans to take advantage of its throughput capacity of eleven million tonnes of coal, and the constraints on throughput capacity in the West Coast terminals, to divert volumes of Western Canadian and Western U.S. commodities (primarily coal) through TBTL and the Seaway system for transportation to Europe, and the East Coast of South America. Currently, some 15 million tonnes of Powder River Basin thermal coal (Colorado, Wyoming and Montana) are railed to the port of Superior in Wisconsin for shipment to power plants on the Great Lakes, and some going through the Seaway to the port of Quebec, where these cargoes are transloaded into larger vessels destined for Europe. Ms. Goldenberg is eyeing a piece of that action, in competition with Superior. Ms. Goldenberg also has her eye on potash: existing potash mines in Saskatchewan are being expanded, and new ones built. “TBTL is a straight rail shot out of Saskatchewan and a natural point for transfer to vessel,” crows Ms. Goldenberg, adding that it only makes sense to divert bulk products moving to Europe and East Coast of South America Eastbound through Thunder Bay Terminals and the St. Lawrence Seaway – and that is the business that TBTL hopes to develop and capture.
Ms. Goldenberg says, “The Seaway is a tremendous and underutilized asset. We believe that the Seaway is an ideal transportation route that has the existing capacity to transport the large incremental volumes of coal now in demand by overseas customers. Working with our partners, we can secure this business to the collective advantage of us all.”
Undoubtedly, other opportunities will be identified, both in commodities that TBTL has traditionally handled, as well as in new ones (crude oil by vessel?), and when they are, Ms. Goldenberg will have a plan to exploit those opportunities.