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Grain transport systems deal with aftershocks of bumper crop
Canada’s annual grain exports top 40 million tonnes
Canada’s lumber exports rising as U.S. housing starts recover
Court grants First Nations greater say over forestry
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COMMODITIES
Grain transport systems deal with aftershocks
of bumper crop
A
year after a bumper grain crop in Western Canada clogged the
nation’s transportation systems, farmers and grain handling
companies are still having trouble getting their crops to market.
“Demand for rail cars is exceeding the supply of rail cars for grain,”
said Wade Subkowich, Executive Director of Western Grain Elevator
Association, which represents Canada’s major grain handling companies.
He now knows from week to week just how far that demand is
outstripping supply, courtesy of the recently formed Ag Transport
Coalition, of which the grain elevator association is a part. (Other
coalition members include the Alberta Wheat Commission, the Canadian Canola Growers Association, the Canadian Oilseed Processors
Association, the Inland Terminal Association of Canada, the Manitoba
Pulse Growers Association, and Pulse Canada.) Among the coalition’s
efforts is producing weekly performance measurement reports of how
well the railways are doing, or not doing, in moving Canada’s grain.
The coalition has received funding from Growing Forward 2, a ﬁveyear federal-provincial initiative of Agriculture and Agri-Food Canada
that focuses on improving agricultural markets. Growing Forward 2
made possible the coalition website, where the reports can be downloaded by anyone willing to register on the site. “It was all about
transparency and all about data measurements,” Mr. Subkowich said.
“If we don’t have good information, then we don’t have a good concept of the problem.”
Railways respond to coalition allegations
Canada’s two major railways don’t see it that way. Canadian
Paciﬁc Railway, in a Jan. 30 news release, ripped the coalition for failing to include “transportation partners in the discussion.” “The use of
public funds to drive a single, self-serving agenda under the guise of
solving large, complex supply chain issues is unconscionable,” the railway’s CEO, E. Hunter Harrison, said in the news release. CP called on
the coalition to communicate with all the other supply chain links,
including terminals, ports, and elevators. “It is our belief that any discussions about commodity movement should include all pieces of the
supply chain puzzle,” Mr. Harrison said in the news release. “It is
disingenuous for the Ag Transport Coalition to say it wants to improve
6 • Canadian Sailings • March 30, 2015
Photo: Port of Montreal
BY KEITH NORBURY
the agricultural supply chain if it doesn’t want to involve transportation stakeholders in the discussion.” The release added that CP’s
innovations to improve speed and efﬁciency, such as its Dedicated
Train Program, resulted directly from “consultation with, and input
from, shippers and producers of agricultural products.”
Meanwhile Canadian National Railway in a recent update on
Western Canadian grain, said it doesn’t accept Ag Transport Coalition’s analysis and claims, calling them “neither comprehensive nor
transparent.” CN added that the coalition’s order fulﬁllment data
“appear to be based at least partly on ‘phantom orders’ carried in a
‘shadow order book’ maintained by and only visible to the Ag Transport Coalition or its contractor.” The update went on to explain that
in March 2014 “so-called unﬁlled orders reached an unprecedented
level, well beyond the capacity of the overall supply chain” and that
“tens of thousands” of those orders ended up being cancelled. CN says
that it instituted a new system in September 2014 to address the problem of grain companies using phantom orders to jockey for market
share. Among the new system’s provisions is that “valid car order
requests must now specify the origin and the destination unloading
facility (for destinations served by CN), or the interline gateway (for
destinations served by another railway).” Outstanding requests also
cannot exceed twice the capacity of a loading facility or site. However,
the rules do allow for larger order requests so long as the shipper provides CN “with ample forward visibility to plan service and
deployment of its assets and resources at times when the grain supply
chain is in high gear, and provide grain shippers with the means to
communicate priorities.”
Finger pointing prevails a year after bumper crop
The spat over the coalition is only one of the more recent examples of ﬁnger-pointing in the wake of the bumper grain crop of 80
million tonnes that overwhelmed the transportation system during the
2013-2014 crop year. Last year at this time, Mr. Subkowich and other
industry insiders predicted that the railways wouldn’t be able to ship
all that grain by the time the 2014-2015 crop year began on Aug. 1.
The prediction proved correct. He estimated the surplus at about 16
million tonnes. That surplus combined with a grain harvest of about
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COMMODITIES
60 million tonnes in the current crop year places the system is in
much the same predicament it was in a year ago. “But it’s hard to
know how much of last year’s grain is left versus this year’s crop,” Mr.
Subkowich said. “It’s ﬂuid. It just gets mixed.”
The surplus did, however, mean there was grain for the railways
to move in August 2014 and early September in advance of this fall’s
harvest. So that has made the weekly averages for grain shipments
higher than they would have been in a year without a surplus and no
grain to move in the ﬁrst two months of the crop year. “So it stands
to reason that we’ve moved more grain to date,” Mr. Sobkowich said.
It’s important to examine the data closely week by week rather
than just concentrate on averages, Mr. Subkowich said. “It’s like
saying, I have one foot in a block of ice and another foot in a campﬁre
and on average I’m comfortable,” Mr. Subkowich said, noting that it
takes about two weeks of planning to arrange a sale of grain.
According to Ag Transport Coalition’s report for Grain Week 28,
which ended Feb. 14, total unfulﬁlled shipper demand for the year
had reached 22,884 cars, while the net unﬁlled demand — “orders
that shippers continue to expect the railways to supply, excluding
orders associated with rejected cars, denied orders and railway cancellations” — stood at 10,685 orders. The shortfall of those 22,884
hopper cars represents about 11 per cent of shipper demand, the
report noted.
“The number of hopper car orders not ﬁlled by CN and CP has
continued to increase each week since the beginning of the crop year;
overall, unfulﬁlled orders have levelled off at about 10 per cent of total
shipper demand in recent weeks, indicating that the railways are not
making up ground for prior weeks’ shortfalls,” the Ag Transport Coalition report continued.
The reports also examine dwell times. For example, origin dwell
time measures how much time elapses between a shipper releasing
loaded cars and a railway physically pulling the cars from a shipper’s
siding to move them to the destination. Bulk grain shippers expect the
origin dwell time to be less than 24 hours in order to avoid railway
demurrage charges, Ag Transport Coalition maintains. Meanwhile,
destination dwell time measures how long it takes a rail car upon
arrival at the destination yard to be placed at the receiver’s unloading
facility. As of week 28, 34 per cent of bulk grain shipments had
waited for more than 48 hours at origin for pick up while only 28 per
cent of shipments were picked up within 24 hours, the report said.
CN, however, said that in early February its waitlist for Western
grain hopper cars was just over 1,800 cars – down from around 3,000
at the end of December.” That, the railway added, “represents only a
few days’ worth of car supply based on CN’s average run rate for spotting Western grain hoppers in the 2014/15 crop year to date.”
Mr. Subkowich said the coalition’s data speak for themselves.
However, it’s difﬁcult to make comparisons with previous years
because those measurements weren’t in place until this year. In fact,
the coalition’s reports didn’t begin until Grain Week 21.
million over and above the 20 per cent level “deemed fair and adequate under the Western Grain Transportation Act.” That excess
worked out to $8.36 per tonne, said the Travacon Research Limited
report, which was commissioned by a coalition consisting of Agricultural Producers Association of Saskatchewan (APAS), Saskatchewan
Wheat Development Commission, Saskatchewan Barley Development Commission, and Saskatchewan Pulse Growers. Based on the
report, the coalition conservatively estimates that the railways
earned about $2 billion in excess grain charges from 2008-2014,
said news release announcing the report. “What these numbers
mean is that grain producers are being overcharged — grain is
paying full freight, and then some,” APAS President Norm Hall said
in the release. “As part of the ongoing review of Canada’s grain transportation system, we need a full costing review to determine fair
costs for freight.”
In December, that same coalition submitted 38 pages of recommendations to amend the Canadian Transportation Act to address
the $5 billion that the group estimates Western Canada grain producers have lost and stand to lose because of “failures in the
transportation and handling systems” during the 2013-2014 crop
year and the current one. That $5 billion is what Richard Gray of the
University of Saskatchewan estimated is the additional grain export
basis farmers have had pay the last two years.
Grains companies also field blame
Not everybody with an interest in grain transportation thinks
the railways are to blame for the system backlogs, or are its major
culprit. Bob Gehl, who chairs Saskatchewan Wheat Development
Commission and formerly chaired Canadian Wheat Board Alliance,
says the grain companies are just as culpable. So does Dr. Barry Prentice, a professor in the supply chain management department at
University of Manitoba’s Asper School of Business. The federal government also takes heat for its role in the debacle. However, in that
case, Mr. Subkowich and Mr. Gehl think more railway regulation is
the answer, while Dr. Prentice maintains that the regulatory measures of the federal government are making matters worse.
Another culprit by Dr. Prentice’s thinking is the railway revenue
cap, introduced in 2000, years before the current Conservative government came to power. It established the maximum that railways
can charge to move grain based on the volume and distances moved,
Dr. Prentice explained. Exceeding the cap results in hefty ﬁnes.
Undershooting it means the railways just don’t receive that revenue.
“Effectively what it does is it creates a ﬁxed average cost,” Dr. Prentice said. “So the railways don’t change their pricing around a lot
because they can’t really.”
It’s all about car supply
Photo: Wikipedia
The grain transportation system is driven by car supply, which is
where the bottleneck is, Mr. Subkowich said. If the car supply were
greater, grain companies and farmers could sell more grain at peak
price periods as well as more grain to the premium U.S. market, he
said. “But we ﬁnd that car supply is set at a percentage or some level
shy of demand so that the railways enjoy 100 per cent utilization of
their assets,” Mr. Subkowich said. “No business in a normal functioning marketplace, no business that intends on growing its business, can
function without some excess capacity.”
Meanwhile, yet another coalition, this one consisting of
Saskatchewan agricultural groups, recently commissioned a report
that concluded the railways in the 2013-2014 crop year earned $322
March 30, 2015 • Canadian Sailings • 7
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COMMODITIES
Canada has growing container exports
through the west coast
As a result of that ﬁxed price, when a
huge crop causes high demand in the fall, the
railways can’t keep up. The cap serves as a
rationing mechanism but provides no incentives to invest in new technology or expand
the ﬂeet, Dr. Prentice said.
Last March, in response to the grain
transportation troubles, the federal government issued an order that required each of
the two major railways to ship at least
500,000 tonnes of grain each week or face
ﬁnes of up to $100,000. The government
subsequently passed the Fair Railway for
Farmers Act, which included that provision,
but which Dr. Prentice called an “ill-thought
out government policy”, just like the revenue cap. “They never did anything to help
the surge and if we have a surge next year
we’ll have the same problem because none
of the regulations that have been put forward
do anything to help because you cannot
expand the existing system,” Dr. Prentice
said.
The new Act’s provision to increase to
160 kilometres the “interswitching radius,”
which enables a shipper to switch carrier for
part of the journey, is “another backﬁring
policy,” he said. “All it does is eat up capacity
on the Canadian system and then move the
grain to the American system, which weakens the Canadian railways, which then don’t
have money to invest in the rest of the
system,” Dr. Prentice said.
The federal government had earlier
passed the Marketing Freedom for Grain
Farmers Act, which stripped Canadian
Wheat Board (CWB) of monopoly power and
was supposed to increase competition. However, the way Dr. Prentice sees it, the
government’s response since then has undermined those efforts. “It’s so ironic. Here we
have a Conservative government that is actually putting in place more communist types of
policies for grain transportation instead of
having a free market. In fact, they have a
ﬁxed priced and a rationing system for the
cars and we have a quota system for the railways to deliver. Stalin would smile upon this
system,” Dr. Prentice said.
Fines are fine, say grain growers
Grain farmers, however, are happy that
the government is penalizing railways for
lack of performance, said Gary Stanford, President of Grain Growers of Canada. “It doesn’t
matter to us how much the penalty is,” said
Mr. Stanford, who has a 5,000 acre farm near
Magrath, Alta., about 30 kilometres south of
Lethbridge. “It’s just the fact that they are getting penalized because that way it looks bad
Canada’s annual grain exports top 40 million tonnes
For the 2013-2014 grain year, Canada exported 40.1 million
tonnes of grain, according to statistics from the Canadian Grain
Commission. Most of that — 24.1 million tonnes was exported
through the Paciﬁc coast ports of Vancouver and Prince Rupert.
St. Lawrence ports accounted for 6.2 million tonnes, Great Lake
terminal elevators east of Thunder Bay (and excluding Prescott,
Ont.) 2.7 million tonnes, Thunder Bay, 1.7 million, and Churchill
1.7 million. Another 4.8 million tonnes was exported from Prairie
elevators.
Wheat was by far the biggest grain export at 17.3 million
tonnes. Canola at 8.6 million tonnes was the second largest
exported grain. And amber durum, a variety of wheat categories
separately from other wheat, was third at 4.8 million tonnes.
Most of Canada’s grain exports ﬂow through the Port of Vancouver. And 2014 was no exception. Port Metro Vancouver
exported 23.17 million tonnes of grain, speciality crops and feed
in the calendar year 2014, according to the port’s statistical
overview for the year. That was 20 per cent more than the 19.34
million tonnes in 2013. Wheat exports increased 19 per cent and
accounted for 9.07 million tonnes in 2014. Canola exports
increased 31 per cent to 6.08 million tonnes. Exports of specialty
8 • Canadian Sailings • March 30, 2015
crops from Vancouver only increased to two per cent in 2014 to 5.62
million tonnes. Vancouver exported 2.67 million tonnes of those speciality crops in containers, which was six per cent more than in 2013.
At Prince Rupert, grain shipments increased 25.7 per cent in the
calendar year 2014 to 6.46 million tonnes compared with 5.14 million tonnes in 2013. About 69 per cent of 2014 grain volumes were
wheat with canola making up about 27 per cent. Overall grain shipments had been up about 8.6 per cent in 2013 over 2012. However,
most of that increase was in 32.7 per cent higher canola volumes
with wheat rising less than one per cent in 2013.
Thunder Bay grain volumes soar
At Thunder Bay, grain volumes totalled 8.33 million tonnes in
calendar 2014. That was the highest since 1997, when they surpassed 10 million tonnes. (The 8.3 million handled was far more than
the 1.7 million tonnes exported because most of that grain was
shipped to other ports, such as along the St. Lawrence River, before
leaving the country.) The 2014 haul was 54 per cent higher than the
5.4 million tonnes in 2013. And that was after a slow start to the
Seaway shipping season in April when year-to-date grain shipments
tallied only 135,254 tonnes compared to 698,074 tonnes to start the
2013 season. Tim Heney, CEO of Thunder Bay Port Authority, said
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COMMODITIES
for them that they’re not doing the work
they should.” Mr. Gehl said the federal government’s new penalties that ﬁne railways
$100,000 a day when they fail to move their
quotas grain have actually hurt small and
medium sized farmers who aren’t close to a
main rail line. “You can forget about getting
a producer car or you can forget about the
small shippers getting cars,” Mr. Gehl said.
That’s because the railways have a disincentive to spot cars anywhere unless they can
spot 100 or more at a time, he said. “We had
mills in Ontario last winter running out of
wheat,” Mr. Gehl said. “For gosh sake, we’re
one of the ﬁnest producers of wheat in the
world and our own domestic mills can’t get
product? That’s a problem.”
While Dr. Prentice says ﬁnes and revenue caps on the railways are working
against efﬁciencies, he nevertheless says consolidation of the grain elevators might be one
of the best things ever to happen to farmers.
“Under the old system they were moving
grain from their farms to these local elevators
in ﬁve- and 10 ton-trucks,” Dr. Prentice. That
was low utilization for those trucks. Now the
grain moves in tractor-trailers, which costs
more, but frees up farmers to manage their
holdings. “And some of these guys are very
big farmers now,” Dr. Prentice said. “They
don’t have time to drive a truck.”
Meanwhile, Mr. Gehl’s litany of complaints includes problems with ships waiting
at port, and sometimes having to move in
and out of berth ﬁve or six times to ﬁll their
holds. “You have added demurrage and, of
course, all those berthing costs as well,” Mr.
Gehl said. “Those are issues that are compounding a whole bunch of other logistical
problems.” He blamed much of those logistical problems on the neutering of CWB which
formerly exercised de facto control over the
movement of wheat and barley to the ports.
“And they could make sure that that grain
got there in the proper shipping week,” Mr.
Gehl said.
Mr. Subkowich said it’s a red herring to
bring up the Wheat Board. First of all, he
doesn’t see it regaining its monopoly. Secondly, he said, grain companies are now
he expects 2015 to be another reasonably strong year for grain. “I
don’t know if we’ll quite get to last year’s levels or not,” Mr. Heney
said.”Time will tell. We did miss a month of service last year,
though, due to the ice. So who knows?”
One factor that helped pushed grain volumes up was record
steel imports from Europe to U.S. ports on the Great Lakes. That
resulted in ships looking for cargo to take back across the Atlantic.
“It’s an imbalanced trade to Europe, especially when you increase
imports of steel,” Mr. Heney said. “Your choices become pick up
grain in Thunder Bay or maybe go back empty.” Those ships will
load up with the 23,000 tonnes maximum they can carry through
the St. Lawrence Seaway and then top up at grain elevators in
Quebec, he said. The majority of that grain will have arrived at the
elevators by laker vessels. “It’s kind of an interesting system but it’s
working quite well for them,” Mr. Heney said.
Following the changes last year at CWB, Mr. Heney didn’t
know what would be in store for Thunder Bay. For decades, since
the Seaway was established, the Wheat Board had allocated roughly
the same amount of grain for Thunder Bay. “So I always wondered
is that allocation going away or would it in natural markets grow
bigger?” Mr. Heney said. “And it seems to be getting bigger.” He
attributed that to the major grains companies — which have elevators at Thunder Bay and in Quebec — regarding the Seaway as a
favourable route. “The railroads are another bit of a puzzle,” Mr.
more efﬁcient because they can plan their
own logistics for all crops, just as they have
always done with canola, instead of having
the Wheat Board steer the movement of
wheat and barley.
Coalition recommends railway
regulations
Yet despite their divergent views, both
Mr. Gehl and Mr. Subkowich agree that the
solution to the transportation problems is
more regulation of the railways. “We need to
have some authority in place that can match
what we’re growing to the amount of capacity that’s in the system,” Mr. Gehl said. In its
Heney said. “They seem to be favouring carrying grain only as far as
Thunder Bay, in other words, not much winter rail.” He didn’t wish
to say anything negative about the railways, though, “because it
came out positive for us.” Mr. Heney noted that Thunder Bay has a
quick turnaround time for rail cars, which enables the railways to
move their unit cars quickly back to the grain ﬁelds.
Montreal also experiences surge
At the Port of Montreal, grain volumes also surged in 2014.
Bulk marine grain ﬁgures for both inbound and outbound rose
51.76 per cent to 3.06 million tonnes, compared with 2.02 million
tonnes in 2013. “It was quite congested really,” said Hani Matta, an
economic analyst with Port of Montreal. “It was unusual. But this
year is normal up to now. We haven’t had the inﬂux that we had last
year. But we’ll see how the year goes.”
Another 1.1 million tonnes of bulk grain arrived at or departed
by rail. That was a 63.4 per cent rise over 2013. Almost all of the
inbound grain would have come up the St. Lawrence Seaway and
then shipped from there to other markets, said Mr. Matta. “A lot of
railed grain comes in during the winter from December to March
because the Seaway is closed,” Mr. Matta said. Port of Montreal also
handled 987,662 tonnes of grain in containers in 2014. That was an
increase of 37.02 per cent over 720,805 in 2013. Most of the grain
carried in containers is specialized products like lentils, beans, and
peas.
March 30, 2015 • Canadian Sailings • 9
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10 • Canadian Sailings • March 30, 2015
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COMMODITIES
submission to the Canadian Transport Act review panel, the
Saskatchewan grain producers’ coalition makes several recommendations, which include:
• “a formal costing review” and adjustment of the maximum revenue entitlement;
• a commitment from the federal government to keep the maximum revenue entitlement “to ensure fair compensation to
railways for hauling grain”;
• legislation to provide mandatory information reporting “for the
grain handling and transportation system to function effectively”;
• creation of a rail oversight group;
• creation of a meaningful dispute resolution mechanism;
• enhancing the use of running right provisions in the act;
• changing the act to “support small shipper innovation, diversiﬁcation and investment”;
• recognizing the needs of producer cars shippers and shortline railways in legislation; and
• empowering the Canadian Transportation Agency “to investigate
and rule on a railway’s genuine ‘operational interest’ in underserviced and unused rail lines in which other parties have expressed
an interest.”
Because Canada is the northern part of the wheat production
zone, output varies from year to year, Mr. Gehl said. So it’s critical to
match production in a timely manner to customers’ needs, as well as
provide quality assurance because the world marketplace relies upon
Canada for that. “Even with all these problems that we’re having, cus-
tomers are still coming to Canada, wanting Canadian wheat,” Mr.
Gehl said.
Mr. Subkowich said the grain companies want to see regulatory
changes that mimic competitiveness and cause railways to move more
grain. “What we feel is necessary is a better deﬁnition of adequate and
suitable accommodation in the Canada Transportation Act,” Mr. Subkowich said. “That’s a critical piece. And the second thing is to be
allowed to have ﬁnancial consequences for non-performance or inadequate service spelled out in service agreements.” As it stands, the
grain companies can’t charge railways when they fail to provide rail
cars on time, Mr. Subkowich said. As for those $100,000 penalties,
Mr. Subkowich characterized them as “more of a token than anything” and “pocket change for a railway.”
Containers can provide surge capacity
Dr. Prentice of University of Manitoba said the troubles with
Canada’s grain transportation system boil down to a question of surge
capacity. His solution, which he outlined at the 19th annual Fields on
Wheels Conference in Winnipeg in December, is to employ shipping
containers whenever a bumper crop overwhelms the system. “You
can’t solve this with regulations because what you have is a limited
resource, which is rail cars,” Dr. Prentice said. And even if the system
had all the rail cars it needed, it would back up at the grain elevators
because they lack the capacity to handle a 30 to 40 per cent increase
above the average crop.
“Containers operate outside the normal grain handling system,
because the grain never has to go to a grain elevator or touch a hopper
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March 30, 2015 • Canadian Sailings • 11
sailings1060 2015-03-27 3:01 PM Page 12
COMMODITIES
car,” Dr. Prentice said. “So you can get the maximum utilization of the
existing system. Plus we have an almost perfectly elastic supply of
containers overseas.”
Modern farms are so large that they resemble small grain companies in their own right, Dr. Prentice pointed out. So they’d easily be
able to store, move, and ﬁll containers. Australians are using plastic
liners to protect wheat, which is often shipped to Asia, he pointed out.
“I think it’s a good idea because you never know what was in the container before,” Dr. Prentice said.
Grain can also be shipped in containers just by using a customized bulkhead to keep the grain from spilling out the doors, said
Adrian Samuel, President of Coast2000 Terminals Ltd., which operates a container yard, rail yard, and warehouse in Port Metro
Vancouver. Filling a container would require some type of elevation
facility — “but there’s plenty of those on the prairies,” Mr. Samuel
said — as well an apparatus to tilt up the box. “And then you just
open up the back doors and ﬁll it up,” he said. That part is easy. Getting the containers to the Prairie farms would be the hard part.
“Steamship lines won’t want them there,” Mr. Samuel said.
“They won’t have a need to have them there unless somebody
wanted to go out and buy a whole bunch of them. But then, as you
can imagine, once Mr. Farmer has ﬁlled up his container with grain
and sent it off, how is he going to get it back?” Yes, a lot of containers
arrive from Asia with all those consumables that stock store shelves.
But most of the containers are either destuffed in Vancouver for distribution by truck or railed to large population centres like Toronto or
Chicago. “Once that container’s been destuffed, then that container
Fold
becomes available. But there just isn’t the density of demand for any
of those containers to stop on the Prairies and be destuffed there,” Mr.
Samuel said. “That’s the biggest challenge for that economic model.”
It’s a dilemma that Dr. Prentice noted: It often makes economic sense for a container to return empty to Asia. “If you’re
making twice as much on the front haul as you are on the back
haul, then waiting around extra time to ﬁnd a low-paying load to go
back may not be as economic as just coming back empty and getting
another high-paid load.” Nevertheless, he pointed out that the
newest generation of massive container ships are capable of handling 20,000 TEUs, which he calculated would take about 40
mile-long unit trains double-stacked with containers to ﬁll. A ship
loaded with dense cargo like grain would probably only carry half
its limit of containers, lest it sink to the bottom. Even so, the ships
are so huge that they’re going to be hungry for cargo, Dr. Prentice
said. And grain, which he expects will be in increasing demand, can
help sate that hunger.
“You look at the total logistics costs from the farm right to the
baker, then I think that moving containers can actually save money —
especially for small companies in foreign countries because they can
get their deliveries in smaller lots on a just-in-time basis,” Dr. Prentice
said.
And as it turned out, Mr. Samuels said, the container terminals
in Vancouver weren’t set up to handle the huge volumes of grain last
year. Nor did transloaders have the capacity to handle containers
either. It wasn’t exactly a supply chain failure, he said, “but it certainly
strained the supply chain.”
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12 • Canadian Sailings • March 30, 2015
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sailings1060 2015-03-27 3:02 PM Page 13
COMMODITIES
Canada’s lumber exports rising as U.S. housing starts
recover
BY KEITH NORBURY
C
anada’s lumber production and
trade has steadily increased since
bottoming out in 2009 in the wake
of the global financial crisis. Expected to
add fuel to that rising trend in 2015 are a
stronger U.S. economy and increasing
U.S. housing starts, a sagging Canadian
dollar, and the global drop fuel prices,
according to forest industry experts and
analysts. Looming over those prospects,
however, is uncertainty about whether or
not Canada can forge a new softwood
lumber agreement with the U.S. after the
current deal expires later this year.
It’s a big business
Photo: Tembec
Canada’s forest products industry is
split almost 50/50 between lumber and
pulp and paper, said David Lindsay, President and CEO of Forest Products
Association of Canada, which represents
the country’s major forest products companies. “It’s a big business,” Mr. Lindsay said.
“We export huge volumes. Our total production is something like $55 to $57
billion, and more than $35 billion of that
goes to international sales.”
According to Statistics Canada, the
country’s sawmill production has been on
a more or less steady increase since 2009.
In that year, production was 45.45 million
cubic metres. In 2014, it had risen to
59.62 million cubic metres. More than 97
per cent of that volume in 2014 was softwood lumber, and over 90 per cent of that
was spruce, pine, and fir. Volumes in
2014, however, were still well below the
80 million plus levels of 2004, 2005, and
2006. Total lumber shipments, meanwhile
are within one or two per cent of production levels. Sometimes shipments are
slightly higher, such as in 2009 or lower, as
in 2014.
The value of Canada’s lumber exports
in 2014 was higher than it had been since
2006, according to Industry Canada’s
Trade Data Online. Those 2014 lumber
exports totalled C$8.67 billion dollars,
more than C$1 billion greater than the
$7.66 billion in 2013, and more than
twice the value of the C$3.94 billion in
exports in 2009. As has been the case historically, the U.S. market accounted for the
majority of those 2014 exports with a 65.8
per cent share.
U.S. housing starts slowly rising
Annual U.S. housing starts peaked at
just over two million in 2005, according to
the U.S. Census Bureau. They were still
strong, at 1.8 million in 2006. They subsequently dropped to less than 1.4 million in
2007, and to 905,000 in 2008 before
scraping bottom at 554,000 in 2009. The
DAVID LINDSAY
effects of that crash on Canada’s lumber
exports were profound, resulting in a
“huge drop in demand,” Mr. Lindsay said.
Since then, they’ve inched upward, finally
edging above one million last year. “So U.S.
housing starts are coming back,” Mr. Lindsay said. He hesitated to call the market
“robust” instead characterizing it as a
return to “a reasonable level of demand.”
“Depending on how the global economy’s
going, the U.S will continue to grow at a
fairly good rate,” he predicted.
Considering that the historic annual
average for U.S. housing starts has been
1.5 million, the present market of around
one million still represents a major slump,
said Jim Lopez, CEO of Tembec Inc., a
Montreal-based company, which has four
sawmills in Ontario and three sawmills in
Quebec. “So you think about it from that
standpoint, the demand for new homes is
still poor,” Mr. Lopez said. Nevertheless,
U.S. demand has doubled since the market
hit bottom, Mr. Lopez noted. As a result,
most of the mill capacity that was shut
down during the slump is back online.
That’s notwithstanding “seasonal fluctuations” this winter when heavy snow
pounded the eastern side of the continent.
“But we have a relatively balanced market.
And our forecast is not for a major comeMarch 30, 2015 • Canadian Sailings • 13
sailings1060 2015-03-27 3:11 PM Page 14
COMMODITIES
back in the short term,” Mr. Lopez said. “I think that U.S. housing
will continue a very slow but steady improvement in the coming
years. And if that happens, it will continue to lead a slow steady
recovery in the lumber business and, obviously, earnings for producers of lumber.” A quarter of Tembec’s $1.5 billion in annual
sales are in the lumber category, with 38 per cent of the firm’s total
sales going to the U.S. Lumber places second to Tembec’s business
in specialty cellulose, which accounts for 34 per cent of its revenues.
Mark Kennedy, a Calgary-based forest products equity analyst
with CIBC World Markets Inc., said that the pace of the U.S. housing recovery continues to be the biggest driver of Canada’s lumber
industry. “We just have to continue to show patience on that
front,” Mr. Kennedy said. “But I have no doubt that it’s still going
to get back to 1.5 million starts. Maybe it takes until 2018, but I’m
still convinced we’re going to get there.”
Canadian National Railway, meanwhile, expects its U.S.-destined volumes of lumber “to increase at the same pace as U.S.
housing starts,” said Mark Hallman, the railway’s Vice-President of
Corporate Communications. “CN expects a low double digit
volume growth going to the U.S. in 2015.”
A tale of two markets
Coast2000 Terminals Ltd., which is part of the Western Group.
That, combined with increasing demand for their products from
North America, is encouraging shippers to sell in North America,
at the expense of (Asian) export markets,” Mr. Samuel said.
Mr. Lindsay, however, said that the leaders of many Canadian
forest companies have told him they value customer diversification
and are “very cognizant” about keeping their Asian customers. He
also applauded Canada’s recent trade deal with South Korea, and
noted that those in the industry are also exploring markets in
India. “I think we’ve learned that you cannot be totally dependent
on the U.S. market,” Mr Lindsay said.
Beware of effects on overseas markets
Russia poses possible competition
Rosalyn Kunin, an independent consulting economist based
in Vancouver, cautioned that Canadian producers might be
tempted to abandon their recently cultivated Asian markets once
the U.S. market resumes full steam. During earlier U.S. housing
slumps, Canadian producers also turned to Asia only to drop those
new markets and head south as soon as the U.S. market picked up.
“And then at the next downturn we were hit on the head all over
again,” Ms. Kunin said. “So right now, I am sincerely hoping that
as the U.S. market picks up, Canadian lumber producers will not
all give up en masse on Asia and other markets, but they will keep
that customer base. And that also gives them a slightly better position in the bargaining for a new (softwood) lumber agreement.”
One reason that shippers might shun Asian markets is that it
is becoming more costly to ship containers through the often congested port of Vancouver, said Adrian Samuel, President of
If CN’s business is any indication, though, a shift away from
Asia has already begun. The railway’s lumber export traffic to Asia
— mainly out of B.C. and Alberta — now accounts for 15 per cent
of its lumber total. That compares with 20 per cent in 2012 and
2013. That decrease coincides with 10 to 14 per cent increases in
lumber traffic to the U.S. in the past couple of years, Mr. Hallman
said.
And while the overall value of lumber exports to China
increased in 2014 to C$1.49 billion, China’s share of lumber
exports dropped to 17.14 per cent compared with 18.93 per cent
in 2013, according to Trade Data Online. Meanwhile, fluctuating
exchange rates are having a big impact on the Asian market, Mr.
Kennedy said. The Russian ruble has declined about 45 per cent in
the last three or four months. The euro has also lost about 22 per
cent against the U.S. dollar while Canada’s buck has dropped about
14 • Canadian Sailings • March 30, 2015
Photo: CN
Canadian forest companies worked very hard during the U.S.
housing slump to diversify their markets by increasing sales to
China, Mr. Lindsay pointed out. In 2005-2006, annual sales to
China were less than $2 billion. Today they are $4.7 billion. Now,
as the U.S. economy picks up steam, Canada’s forest industry is
looking at a “tale of two markets,” Mr. Kennedy explained. He
expects U.S. housing starts to “notch up” again in 2015, by about
150,000 starts. That would push them to 1.15 million, which is
still well below that historical average of 1.5 million. On the other
hand, he said, exports markets “have taken a turn for the worse.”
And by that, he means Asian markets. “We’re seeing a bit of a slow
down in the Japanese housing market and, more importantly, a bit
of a slowdown in the Chinese market for both logs and lumber,”
Mr. Kennedy said. “And that’s being driven by their real estate
slowdown, hence construction slowdown.” Trade Data Online figures bear that out: Canadian lumber exports to Japan dropped to
$783 million in 2014 from $899 million in 2013.
Mr. Kennedy said the gains in lumber exports to the U.S.
appear to be offsetting the losses in Asia, although it varies from
company to company. But generally speaking, the U.S. gains, combined with a weaker Canadian dollar, “should still more than offset
the weakness we’re seeing in some of these export markets,” Mr.
Kennedy said.
sailings1060 2015-03-27 3:02 PM Page 15
COMMODITIES
20 per cent in the last few months.
“It’s very easy for the Russians to
compete for Chinese export markets,
given the significant devaluation they’ve
seen in their currency in the last four
months,” Mr. Kennedy said. Russia, however, is limited in how much it can exploit
that market. While Russia has about a
quarter of the world’s softwood timber, it
suffers from corruption, poor labour reliability, and substandard infrastructure,
including rail lines of a different gauge
than Chinese ones, Mr. Kennedy pointed
out last year. So while the weak ruble
makes it easier for Russia to compete on
its existing markets in China, “they can’t
necessarily substantially ramp up their
volume in the short term because of those
logistical challenges.”
Middle East markets prove
challenging
New Future Lumber, which has
offices in Halifax and Moncton, is concentrating on selling softwood lumber —
spruce, pine, and fir — harvested in the
Maritime provinces to markets in the Persian Gulf region such as Saudi Arabia,
Egypt, Jordan, Israel, and Pakistan. “It’s
challenging, just the same as every other
market,” said Paul Sibley, the company’s
Vice-President. “You just kind of have to
go after the niche and develop some good
relationships with some good customers.”
His partner, company President Mazin
Louis is originally from the region, where
he has done business for about 15 years.
Mr. Louis and Mr. Sibley started doing
business together about nine years ago
and formed their company in 2008. At
that time, the Gulf was fairly stable
market compared to the U.S., where the
housing market had collapsed. “So we
focused on that market and built some
relationships. Right now it’s worked out
for us and we don’t want to abandon that
market even if the U.S. market does come
back,” said Mr. Sibley, whose company
also has its own sawmill, called MP
Atlantic Wood Ltd., in Dieppe, N.B.
At present, about 70 per cent of New
Future’s production, which includes construction and furniture grade lumber, is
exported to the Gulf Region. The rest is
sold in the Maritimes. “We’re competing
against the Scandinavian countries so it’s a
tough market to be in,” Mr. Sibley said of
the Gulf. Asked if the current unrest in the
region is having an impact on business,
Mr. Sibley simply answered: “Yes.” So it’s
no surprise that the company is looking at
expanding into Europe and into the U.S.
“But we don’t want to be considered fair
weather friends,” Mr. Sibley said.
Shrinking loonie bolsters profits
The shrinking Canadian dollar has
been a boon to Canadian lumber producers, even though production has only been
marginally higher this year over last. “Even
if the volumes haven’t gone up because of
other circumstances, suddenly lumber will
be more profitable,” Ms. Kunin observed.
The lower dollar also makes Canada more
competitive in Asian markets, she added.
Russ Cameron, President of Independent Wood Processors Association of
B.C., said the low Canadian dollar has
“absolutely” benefited association members who make specialty value-added
products like siding, mouldings, and
panels. “And the converse was true when
it was high, when it was $1.05,” Mr.
Cameron said.
Dealing with currency ﬂuctuations
isn’t a problem for the small wood processors, he said. “We’re really nimble. We sell
service and specialty products. But what
we can’t deal with is a Canadian-imposed
tax,” Mr. Cameron said, referring to penalties imposed at times under the 2006
Canada-U.S. Softwood Lumber Agreement.
Mr. Lopez of Tembec said the effect of
the lower Canadian dollar depends on the
product. In some cases, the price differential goes straight to the bottom line. In
other cases, a producer will use the difference to become more aggressive in
building market share. “Here’s my rule of
thumb: you keep about half of it,” Mr.
Lopez said. “The other half tends to go
away mainly in price.” Also, as the company’s Canadian revenues increase in the
U.S. it also charges a higher price to its
Canadian customers in Canadian dollars.
“So the markets really move pretty much
in unison as currency changes,” Mr. Lopez
said.
ROSALYN KUNIN
Battle looms over lumber treaty
While the weak Canadian dollar gives
lumber exporters a competitive edge, it
also makes lumber producers in the U.S.
nervous, Ms. Kunin pointed out. “The
Americans are going to be even more concerned about access to their markets
because we will have that competitive
edge,” Ms. Kunin said. That huge differential will make it much harder for Canada
and the U.S. to negotiate a new softwood
lumber agreement, she said. The current
deal, signed in 2006 and extended in
2012, is now set to expire this Oct. 12.
Should the parties not renew the agreement or fail to forge a new one, the terms
of the existing agreement will extend for
JIM LOPEZ
another year.
South of the border, the U.S. Lumber
Coalition has voiced its opposition to
renewing the agreement. The lobby
group’s Executive Director, Zoltan van
Heyningen, was quoted in Business in Vancouver last November as saying, “We are
not in favour of extending the current
agreement because as it is currently structured, we see problems moving forward.”
That position seems at odds with comments Mr. van Heyningen made on a
Youtube video in 2013 when he called the
March 30, 2015 • Canadian Sailings • 15
sailings1060 2015-03-27 3:02 PM Page 16
COMMODITIES
2006 softwood lumber agreement a “source of pride” for his
organization “because it allowed the industry and the communities that depend on that industry to fare a lot better than they
otherwise would have.”
Mr. Kennedy said he’s not sure what the U.S. objections are
about. Over the last three years, delivered log prices in the B.C.
Interior have risen 60 per cent, whereas in the U.S. South, the
increase has been around 10 per cent, he said. “So there’s no way
you can argue that there’s any kind of free ride being given to the
Interior lumber producer,” Mr. Kennedy said.
Mr. Lopez is also puzzled by the U.S. Lumber Coalition’s objections, considering that B.C. and Quebec implemented considerable
reforms in their lumber pricing in advance of the 2006 deal. “What
we have now are systems in those provinces that resemble a freemarket system,” Mr. Lopez said. “So I would say that the number of
irritants, trade irritants, between Canada and the U.S. have diminished greatly since the signing of the last softwood lumber
agreement.” For that reason, Mr. Lopez is optimistic that the parties
will transition quickly into a new agreement.
But even without a deal, Canada will ﬁnd markets for its
lumber, Mr. Kennedy said. “So the person that’s going to get disadvantaged the most, if there’s some sort of artiﬁcial trade structure
put in place, is going to be the U.S. consumer again.” Canada,
though, isn’t as dependent on the U.S. housing market as it used to
be. During the last peak in the housing cycle, Canada had a 35 per
cent share of the market. Should starts again reach those levels of
1.5 million starts annually, “the most we could take would be 25
per cent of the market,” Mr. Kennedy said.
Some Canadians dislike softwood deal too
Not everyone in Canada’s lumber industry is a big fan of the
current softwood lumber agreement. Mr. Cameron said independent wood processors “just got slaughtered” by the deal, especially
during periods when the agreement triggered an export tax. The
tax, or export charge, varies depending on price. It can be as high
as 15 per cent when the index price of lumber dips below US$135
per thousand board feet. But once the price surpasses US$355 per
thousand board feet, the tax disappears. (Another option allows for
a combination of export charge plus a quota.) According to the
Random Lengths framing lumber composite price index, compiled
by an Oregon-based company, the index price hasn’t dipped below
US$355 since July 2013, although in February 2014 it came close
when it sat at US$358.
While Cameron and his group “are enjoying having no tax for
the last two years,” they’re worried that a new agreement would
result in a higher cutoff for imposition of the tax. Mr. Cameron and
his group would be happy if the deal isn’t renewed. He said Canada
has always won lumber trade disputes with the U.S. under the
North American Free Trade Agreement and at the World Trade
Organization. He is conﬁdent that if the U.S. were to impose such
duties in the absence of a softwood lumber deal, that Canada would
again receive refunds. “However, if they sign a deal and Canada
imposes a tax on B.C.-produced value-added products, we don’t get
any refunds,” Mr. Cameron said. “That money’s gone.”
While the Canadian government acknowledges that it won
those cases, it was the harms caused during the challenges, “as well
as the time and cost involved in such challenges,” that led to the
2006 Softwood Lumber Agreement, according to a backgrounder
on the website of Foreign Affairs, Trade and Development Canada.
The agreement provides for charges and quotas on Canadian
lumber while prohibiting the U.S. from launching any new countervailing and antidumping cases.
Also noting Canada’s winning history in lumber disputes, Mr.
16 • Canadian Sailings • March 30, 2015
Lindsay said he hopes the U.S. lumber interests “come to their
senses because they’re not supporting the forest industry, they’re
supporting the legal community.”
Lower oil prices
Lower oil prices should make a difference to lumber companies,
Ms. Kunin said, although she couldn’t begin to guess how much of
the savings “are being passed on to the ultimate customers.”
Mr. Lindsay of Forest Products Association of Canada doesn’t
think lower fuel prices are beneﬁting the industry at all, “unless the
railway companies are now going to give us a fuel discount.” However, he couldn’t comment speciﬁcally on what fuel surcharge deals
individual forest companies might have signed with the railways.
Mark Hallman of Canadian National said by email that lower fuel
prices didn’t have any impact on the railway’s business. That’s
because its contracts include a fuel surcharge that ﬂuctuates based
on the fuel cost. However, he noted that the low Canadian dollar
improves customers’ margins when they ship to the U.S.
Mr. Lopez of Tembec said the biggest impact of fuel prices is
on the inbound freight. The company spends a lot of money hauling
logs to its sawmills. A fuel index applies to car-tractor prices, so
when the cost of diesel goes up, the company pays more, and when
diesel prices drop, the company pays less.
“That said, as you are aware of, it’s amazing how robust diesel
prices have been relative to gasoline. I’m not an expert in this, so I
couldn’t even venture a guess as to why that is, but I’m frustrated
by it,” Mr. Lopez said. On the other hand, Tembec hasn’t noticed
any beneﬁt in fuel prices on its outbound transportation. That’s
because it pays for that fuel in U.S. dollars. So the stronger U.S.
buck eats into any fuel savings.
Lumber mills called “captive shippers”
Depending on the location of the mill, about 30 per cent of the
cost of forest products is in transportation, Mr. Lindsay said. For an
inland operation, such as northern Manitoba, the costs are even
higher.
Total annual production in Canada is about 58 million tonnes
of forest products. About 28 million of that goes by truck, and 28.5
million by rail. The remainder is intermodal trafﬁc. “So we’ve got
almost an even split between rail and trucking,” Mr. Lindsay said.
A large majority of the mills in remote communities are in the
forested northern hinterlands of the provinces. The most practical
way to move products from those mills is by rail. That’s because it
takes three or four trucks to match the capacity of just one rail car.
And each truck requires a driver.
“A mill in any given week might require 10, 12 rails cars,” Mr.
Lindsay said. That would be the equivalent of 30 or 40 trucks and
drivers, who need to make a round trip. The logistics of having that
many drivers and trucks in a small remote community “is almost
impossible,” he said. As a result, these mills are “captive shippers.”
“They’re captive to the railways because their big bulky commodities have to go by rail,” Mr. Lindsay said. “And so they’re subject to
whatever the railway companies are able to make available for service or are able to charge them.”
CN’s Mr. Hallman said the railway handled about three per
cent less lumber in 2014 than the year before. He blamed the
reduction mainly on a severe winter in which customers elected to
haul more export lumber by truck than in previous years. Even so,
the railway shipped three per cent more lumber in 2014 than in
2012. The record shipments of grain that the railway handled last
year didn’t have a signiﬁcant impact on lumber shipments by rail,
Mr. Hallman said. “During winter months when extreme cold
weather affects our network and our ability to run our operation
sailings1060 2015-03-27 3:02 PM Page 17
COMMODITIES
normally, we do have to look at all of our trafﬁc and prioritize it,”
Mr. Hallman said via email. “But this does not stop us moving the
lumber trafﬁc that is offered to us.” The vast majority of CN’s
lumber trafﬁc — 64 per cent — moves from Canada to the U.S.,
with only two per cent travelling from the U.S. to Canada, Mr. Hallman said.
Mr. Kennedy said transportation was a bigger challenge for
Canadian forest companies in the ﬁrst quarter of 2014. “It doesn’t
seem like things are as dire right now,” Mr. Kennedy said, noting
that in February CN and Unifor had averted a railway strike with a
last-minute agreement. “But companies have also been working to
put into place more contingency plans.” Mr. Lindsay noted also that
Canada’s climate and geography are other factors that make it difﬁcult to move products from far inland to tidewater. “It’s a big
country,” Mr. Lindsay said.
The shift in lumber trade away from the U.S. and toward
China in recent years has also created transportation challenges,
Mr. Lindsay said. “We have more than doubled our sales to China,”
Mr. Lindsay said. “That offset some of the reduction of demand in
the United States. But, of course, railway lines that go north-south
can’t be used to go east-west.”
Tembec, however, exports very little lumber outside of North
America, said Mr. Lopez. “When you are landlocked like us, the
expense of going overseas is quite prohibitive,” Mr. Lopez said. His
company does, however, experience railcar shortages. They weren’t
as pronounced this winter as last year, when the company shut
down some mills and reduced shifts on others. “This year we went
in with our eyes wide open and we came with a more balanced sales
plan, balancing truck and rail cars,” Mr. Lopez said. “Other than the
sporadic shortages of railcars we’re in a much better position this
year and our transportation issues are relatively minor.”
Mr. Hallman said a major challenge for CN last year was a
greater than expected increase in long-cycle lumber trafﬁc to the
U.S. as opposed to short-cycle domestic lumber trafﬁc. The
increased average cycle reduced the railway’s ability to ﬁnd enough
empty cars during the ﬁrst quarter of 2014 “despite removing from
storage all of the cars that we had in there, in some cases for more
than ﬁve years,” Mr. Hallman said. The railway also added 950 cars
to its “centerbeam” ﬂeet, a 10 per cent improvement, and implemented initiatives to reduce the average ﬂeet cycle, Mr. Hallman
said. For example, an ordering process for high- and low-velocity
lanes basically supplies 100 per cent of the demand for fast-cycle
lanes. And a pipeline management process stops the sending of cars
to congested destinations until backlogs are cleared. “Both of these
initiatives have the same goal: Reduce cycle time and increase car
supply to CN’s customers,” Mr. Hallman said.
They also sound like examples of what Mr. Lindsay characterized as “right sizing the transportation system,” which was the
subject of a panel discussion he took part in recently in Ottawa.
Right sizing includes identifying the bottlenecks on rail lines as well
as protecting rights of way and access in the rural and remote communities where many mills are located, he said. “Making sure that
the carriers’ obligations to supply rail service is an issue that we’re
concerned about.”
Dealing with bottlenecks at ports is also critical. Port Metro
Vancouver is particularly stretched, he said. As more forest products move east to west, companies need more capacity on west
coast tidewater to access markets in Asia and India. “There’s no
one silver bullet here,” Mr. Lindsay said. “There needs to be a good
discussion about a whole mix. We’d like to see increased competition for rail freight services. We’d like to see more multi-modal
transportation capacity. The hubs of the ports need to be
expanded.”
Court grants First
Nations greater say
over forestry
In a highly publicized case last June, the Supreme
Court ruled that the Tsilhqot’in Nation had proven that
it has aboriginal title to a 1,750-square-kilometre area of
the B.C. interior. The most significant part of that complex ruling is that any third party wishing to extract
resources, such as a logging company, now requires the
consent of the First Nation. Aboriginal groups hailed that
case as a game changer. While the ruling in its most
narrow sense only grants aboriginal title to the Tsilhqot’in Nation, it also sets a precedent for any other First
Nation that have not ceded its territory by treaty and
which can prove in court that it had a historic and exclusive jurisdiction over a swath of land.
Shortly after the Supreme Court decision in the Tsilhqot’in case, an analyst with RBC Capital Markets told
clients that the ruling could have as big an impact on
B.C. forest industry as the pine beetle devastation,
according to the Vancouver Sun. If the ruling limits logging in B.C., it could tighten the lumber supply and raise
prices, analyst Paul Quinn said.
However, in a column that Vancouver economist
Roslyn Kunin wrote for Troy Media shortly after the
ruling, her forecast wasn’t nearly so dire. “Businesses
will have to listen and come up with adequate responses
to First Nations issues and concerns.” she wrote. “They
will have to start using the good economic tool of
cost/benefit analysis to show that any incremental activity will be of net advantage to the First Nation on whose
territory it occurs.”
In July, in what is called the Grassy Narrows case,
the High Court concluded that an Ontario First Nation
does not have aboriginal title to Crown land in Ontario
because it surrendered that right in an 1873 treaty.
David Lindsay, President and CEO of Forest Products Association of Canada, acknowledged that the
Tsilquotin and Grassy Narrows decisions by the Supreme
Court will require different approaches to forest tenure.
But, he said, “it has been ever thus” in Canada. Each
province has its own tenure system based on its history
and settlement patterns. For example, in Atlantic
Canada, where settlement goes back more 250 years,
much more of the land is privately owned than in B.C.
“In Quebec it’s a different system. In Ontario, it’s a different system,” Mr. Lindsay said. “So we have a
patchwork or a variety of tenure systems across the
country already.” But the most important thing he
wanted to stress is that forest companies have “a very
good record of working with First Nations across the
country,” Mr. Lindsay said, noting that 20 per cent of the
forestry work force in Saskatchewan and Manitoba are
First Nations people. “Our member companies want to
work with First Nations.”
March 30, 2015 • Canadian Sailings • 17
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COMMODITIES
Low oil prices, swelling supply create havoc in natural
gas and LNG markets
BY R. BRUCE STRIEGLER
Surging LNG production: can Canada be among
the winners?
Just as global demand for LNG continues to increase, so does
global supply, with projected exports post-2015 coming from Equatorial Guinea, Australia, Indonesia, Russia, Canada and the United
18 • Canadian Sailings • March 30, 2015
Photo: Wikimedia
I
t’s impossible to discuss natural gas markets without factoring in
the price of oil, which then takes the conversation to liqueﬁed
natural gas (LNG). Patricia Mohr, Scotiabank economist and
commodity specialist explains, “In the Asia Paciﬁc region, especially
Japan, which is one of the world’s biggest markets for LNG, historically prices for LNG have been tied to the landed price of crude oil
in Japan, referred to as the Japanese Crude Oil Cocktail.” The term
is a commonly used reference price index for long-term LNG contracts in Japan, as well as Taiwan and South Korea. It’s published
monthly by the Japanese government representing the average
crude oil import price into Japan.
The Canadian natural gas market is facing depressed prices in
an integrated market, requiring signiﬁcant capital requirements for
unconventional gas drilling. This, combined with no current means
to export LNG to offshore markets, lack of capital to build LNG facilities, shale gas depletion curves, and U.S. natural gas exports into
eastern Canada, presents a challenge. With Canada’s exports destined solely for the U.S., now awash with its own recently
developed massive shale gas supply, Canadian gas exports declined
6.1 per cent over the same period last year. Natural gas is produced
in quantities in British Columbia, Alberta, Quebec, Nova Scotia and
the Northwest Territories. Signiﬁcant exploration of natural gas
reserves is taking place offshore Nova Scotia, B.C. and Quebec.
However, forecasts from the 2012 U.S. Energy Administration’s
Annual Energy Outlook suggests that Canadian gas exports into the
U.S. will continue to decline between now and 2035.
Canadian natural gas prices fell 36 per cent last year, together
with oil prices, ending the year at US$2.46 per thousand cubic feet.
This after having spent the year consistently below the US$3 level,
and creating signiﬁcant economic pressure for producers. Canada is
the world’s ﬁfth largest producer of natural gas at 14.1 billion cubic
feet per day. Statistics from the Canadian Association of Petroleum
Producers estimate Canadian year-end 2013 reserves at 69.3 trillion
cubic feet. This compares to U.S. Department of Energy ﬁgures
showing a sharp increase in proved natural gas reserves in 2013,
more than offsetting the signiﬁcant decline in 2012, and setting a
new record of 354 trillion cubic feet.
Bucking the trend, in December the B.C. government generated $38 million in bonus bids for oil and gas leases to energy
companies, compared with $7.8 million in December 2013. In
total, B.C. generated $330 million from oil and gas leases in 2014,
according to the Ministry of Natural Gas Development, and 90 per
cent of all drilling activity last year took place in just one of B.C.’s
four natural gas plays: the Montney. The Montney is a massive shale
gas formation straddling the B.C.-Alberta border. It’s one of four
major unconventional gas plays in northern B.C. but is considered
the richest because of its abundance of “wet” gas (natural gas liquids).
States. With greater competition in the global export market,
demand for Canada’s LNG is at risk of decreasing. Australia especially is poised to be a challenge to would-be producers including
Canada, with dramatic increases forecast for their production of
LNG. Australia is well into development of required infrastructure
for gas liquefaction plants and marine terminals. The industry
rational is that ﬁrst to market is ﬁrst to lock in international contracts.
Global export capacity is expected to surge by 34 per cent,
jumping from 290 million tonnes per annum (mtpa) at the end of
2013 to almost 400 mtpa by 2018. Australia in particular is in the
midst of a massive LNG construction phase, with export capacity
expected to more than triple over the next three years. Worldwide
demand for natural gas is on the rise: 81 per cent of the forecasted
growth is expected to come from non-OECD countries like India
and China, with growth rates of 400 per cent in China.
Transportation sector increasing use of natural gas
The transportation sector is the single largest contributor to
greenhouse gas emissions, making it a natural target for ‘clean’ fuel.
Natural gas vehicles are increasing at a rate of 15 per cent per year,
with 15 million operating in more than 80 countries. With commercially-produced LNG, the reduced bulk that makes LNG portable
sailings1060 2015-03-27 3:02 PM Page 19
COMMODITIES
also makes it a viable transport fuel. In
October last year, China unveiled a policy
speciﬁcally designed to spur the transport
sector’s use of LNG as part of its push to
clean up the heavily polluted air of its cities.
The policy targets buses, taxis and shipping.
It sets a target for natural gas to ﬁll 10 per
cent of energy demand by the end of the
decade. Five LNG import terminals have
already sprung up along China’s east coast,
and another dozen are planned.
In British Columbia, the government
promotes the use of natural gas as a fuel in
heavy-duty transport vehicles. Utilities can
spend up to $62 million on vehicle and
ferry incentives, $12 million on compressed
natural gas (CNG) fuelling stations, $30.5
million on liqueﬁed natural gas stations, for
a total of $104.5 million. Utilities also have
up to March 31, 2017 to deliver these programs. Abbotsford trucking company
Vedder Transport operates a ﬂeet of 50
Peterbilt 360 liqueﬁed natural gas trucks
featuring Westport HD systems. The trucks
are used on routes within southern British
Columbia, primarily servicing the bulk food
Industry.
Royal Dutch/Shell’s market-leading
investments in LNG have been widely publicized, as are its LNG-powered trucks in
Canada. In October last year, it also commissioned two LNG-powered ships to
service its Gulf of Mexico offshore rigs from
Houston. A report by ship classiﬁers Det
Norske Veritas last year predicted that 30
per cent of new vessels will be LNG-powered by 2020. Tankers that carry LNG are
an obvious early target. Another classiﬁer,
Lloyd’s Register, said the use of LNG as a
fuel will pick up from 2019 and could be as
much as eight percent of global bunker fuel
demand before 2025. This February, BC
Ferries signed a 10-year contract with FortisBC to supply liqueﬁed natural gas for
three ferries currently under construction.
The ﬁrst vessel is expected to be operating
in late 2016, with the other two ferries set
to join the ﬂeet the following year. Fortis
will supply about 7.8 million litres of gas a
year by the time all three vessels are in service.
Asian utilization of LNG continues
to rise
To underscore the volume of LNG consumption in Japan, in early February Tokyo
Gas, the third-largest Japanese LNG
importer, reported natural gas sales last
month of 1.65 billion cubic metres, equivalent to 1.2 million tonnes of LNG. That’s a
rise of over four per cent compared with the
same month a year ago. In the residential
sector, volumes totalled 511.7 million cubic
metres, up 1.2 per cent, sales in the industrial sector were 632.4 million cubic
metres, a rise of 9.8 per cent. Wholesale
supplies to other gas companies totalled
224.2 million cubic metres and business
sector sales were little changed at 286.2
million cubic metres. A month earlier,
Japan’s largest utility, Tokyo Electric Power,
said its imports of LNG in January
amounted to 2.28MT, up 2.9 per cent compared from 2.21MT a year ago.
Canadian natural gas production is
split almost evenly, 7.95 billion cubic feet
per day (CFD) is exported to the U.S. and
7.9 billion CFD is used domestically.
Domestic demand is split between industrial use, including gas used in oil sand
extraction, at 41 per cent, residential use at
20 per cent, electricity production accounts
for 18 per cent, commercial use is 15 per
cent and transportation and agriculture
March 30, 2015 • Canadian Sailings • 19
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COMMODITIES
make up the remaining 5 per cent.
Indonesia’s Ministry of Energy and Mineral Resources is spending IDR 10.8 trillion ($849 million) over the next three years on oil
and gas infrastructure, including transmission and distribution
pipelines, CNG refuelling stations and ﬂoating storage and regasiﬁcation units (FSRU’s) to ensure the domestic market can use more of
its own resources. The government is looking to double the length
of the country’s gas transmission pipeline network, work expected to
take until 2025, from 7,910 km to 15,528 km, and to expand the
gas distribution pipeline network from 4,629 km to 42,524 km.
Domestic buyers used 54 per cent of the gas Indonesia produced last
year, and Jakarta hopes infrastructure development will enable a
greater shift from oil to gas in the power, industrial and transport sectors. After accounting for more than one third of global liqueﬁed
natural gas exports throughout the 1990s, Indonesia’s share of the
global market is currently about 7 per cent. This declining share is a
result of both growing global LNG demand and lower Indonesian
exports.
Patricia Mohr says that in this volatile environment, it’s not surprising that some of the big players that have announced major plans
to develop LNG processing operations and terminals in B.C. are
taking a second look. “Petronas, (Malaysia’s state-owned oil and gas
corporation) is an example. They’ve delayed making a decision on
their Paciﬁc Northwest LNG project. I think they probably did it
because they really need to re-assess what the price outlook will be
for LNG in the Asia Paciﬁc market, under a new scenario for crude
oil.”
Perhaps the federal government’s mid-February announcement
that companies will receive a capital cost allowance of 30 per cent
for equipment used in natural gas liquefaction and 10 per cent for
buildings at a facility that liqueﬁes natural gas, will provide the
incentive needed to complete LNG deals with some of the multinationals who have made initial investments in B.C. Tax relief will
be available for capital assets acquired between now and 2025.
Mohr says it is not obvious where prices will settle. “I think the
current price for crude, both international prices as well as West
Texas Intermediate (WTI) in North America is way over-sold. I
expect, initially, there will be a quite a drop in drilling activity across
the U.S. and Canada, as well as internationally.” Mohr forecasts that
there will be a supply-side adjustment to much lower oil prices. “At
these low prices, exploration and production are really almost
uneconomic in most regions, except for the very low-cost producers
in the Persian Gulf. I think that by the middle of this year, oil prices
will start to ﬁrm-up again. But I don’t expect a big improvement, we
may see it rise to just under $100 per barrel; for 2016, I’d use the
forecast of about $70 per barrel.”
Coal hampered by global oversupply, low prices and
new environmental regulations
BY R. BRUCE STRIEGLER
L
ast year, 2014, was not a good year for coal. Prices for both
metallurgical and thermal coal hit multi-year lows, and both
have been troubled by oversupply and falling prices. Continued cost-cutting on the production side has led to an ever-dropping
ﬂoor. Patricia Mohr, Scotiabank economist and commodity specialist
says, “FOB Vancouver, metallurgical coal prices and lesser grades of
met coal are currently trading at a low ebb of US$117 per metric
tonne (Mt.).” Mohr points to the ﬁrst quarter of 2014 when prices
were in the $144 range, and compares it to the fourth quarter 2013
when prices were about $152 per tonne.
“These are not record low prices, but they’re down because of
substantial new mine development in eastern Australia, particularly
in Queensland and New South Wales.” She adds that a huge expansion of port and railway facilities in eastern Australia has made it
possible to efﬁciently ship the premium grade hard coking coal to
Southeast Asia. “In the medium term, prices may improve, but it’s
my perception that it will take a while to turn around.”
Mohr explains that one of the problems that Australian miners
are facing are the ‘take-or-pay’ contracts with transportation companies and ports. Under those contracts the coal miners pay rail or port
operators an agreed minimum amount even if they require less, or
require no access at all. Miners struck these haulage deals at the
height of the coal boom in 2011 and now are producing coal at costs
20 • Canadian Sailings • March 30, 2015
higher than the market price. Others are being forced to declare contingent liabilities on their balance sheets where they have obligations
to pay for committed but unused port and rail capacities.
Take or pay but still no mine closures
In mid-February this year, the Sydney Morning Herald reported
that while the falling Australian dollar and cheaper oil may be providing some relief for the nation’s coal producers, these conditions
are preventing what the sector needs, which is mine closures. At the
same time, resources consultancy Wood Mackenzie says that while
the quality and scalability of Australian mines has enabled producers
to hold their own in the challenging market and displace major competitors in the U.S., Canada and Indonesia, local miners are also
helping to keep the market over-supplied, and prices down. Despite
coal prices plunging over the last three years, there have been few
closures and minimal impact to coal production, with Australian
exports of metallurgical coal and thermal coal increasing by 14 million tonnes and 20 million tonnes respectively in 2014.
Patricia Mohr adds that in this difﬁcult market, China remains
all-important, as does Japan, for premium grade coking coal. “China
is now 50 per cent of world carbon steel production.” In response to
a question as to India’s potential, Mohr says, “Over time, India
should be a growth market for coking coal as its own domestic steel
industry moves ahead. There is a lot of potential in that market. It’s
March 16, 2015 • Canadian Sailings • 20
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Photo: Wikipedia
COMMODITIES
not quite there yet, but the Indians have
very ambitious targets for carbon steel production and they have domestic iron ore. I
think that maybe late this decade or next,
the demand from India should be a lot
stronger. It will be one of the growth markets in years to come.”
While Mohr is referring to metallurgical coal, used to produce steel, the
International Energy Agency (IEA) reported
in December 2014 that worldwide demand
for thermal coal over the next ﬁve years will
continue to grow, breaking the 9-billiontonne level by 2019. Despite China’s efforts
to moderate its coal consumption, it will
still account for three-ﬁfths of demand
growth during the outlook period. Moreover, China will be joined by India, ASEAN
countries and other countries in Asia as the
main engines of growth in coal consumption, offsetting declines in Europe and the
United States. Similar results came from
BP’s Statistical Review of World Energy
2014 which reported coal’s share of global
primary energy consumption in 2013
reached 30.1 per cent – the highest since
1970. Coal was also the fastest growing
fossil fuel, with coal consumption growing
by 3 per cent.
Governments move to reduce or
eliminate coal’s emissions
It’s not just oversupply that is troubling
coal. New environmental regulations in
both Europe and the United States have had
also had an impact on demand. In the U.S.,
while there are limits at coal-ﬁred power
plants for pollutants like arsenic and mercury, there have been no national limits on
carbon. Power plants are the largest source
of carbon pollution in the U.S., accounting
for roughly one-third of all domestic greenhouse gas emissions. Over strenuous
objections of the coal-ﬁred power producers, the U.S. Environmental Protection
Agency is using its authority under section
111 of the Clean Air Act to issue standards,
regulations or guidelines to address carbon
pollution from new and existing power
plants, including modiﬁcations of those
plants. The Act also establishes a mechanism for controlling air pollution from
stationary sources.
The new Clean Power Plan will help
cut carbon pollution from the power sector
by 30 per cent from 2005 level, also cutting
pollution that leads to soot and smog by
over 25 per cent in 2030. European Union
(EU) countries, driven by the 2009 Renewable Energy Directive which requires
member countries reduce greenhouse gas
emissions by 20 percent, produce 20 percent of total energy from renewables and
decrease energy consumption by 20 percent. In Europe, these regulations have
created a new and growing market for
wood pellets to replace coal.
Canada’s much-praised contribution to
reduction of carbon emissions was the 2014
launch of SaskPower’s Boundary Dam coal
carbon capture and storage (CCS) plant.
Boundary Dam integrates a rebuilt coal-ﬁred
generation unit with carbon capture technology, resulting in low-emission power
generation. This is the world’s ﬁrst postcombustion coal-ﬁred CCS project,
transforming an aging coal-ﬁred unit into a
reliable, long-term producer of 110
megawatts (MW) of base-load electricity,
reducing greenhouse gas emissions by one
million tonnes of carbon dioxide each year.
In a statement issued February 13,
2015, the World Coal Association called for
greater investment in cleaner coal technologies, in order to meet growing global energy
demand and reduce CO2 emissions. The
Association cites IEA’s forecasts showing
that coal use is set to grow by around 17 per
cent in the next twenty years. “With 1.3 billion people globally without access to
electricity, it is clear all sources of energy
will be needed to meet this demand, including coal. Greater investment is needed in
cleaner coal technology to meet global
energy demand, alleviate energy poverty
and minimize CO2 emissions.”
As China rebalances its economy and
works to protect the country’s domestic coal
miners, Wood Mackenzie expects China to
be a major cause of depressed global import
demand this year. The Company is forecasting thermal coal to average $US63 a tonne
in 2015 and $US67 in 2016. The consultancy expects metallurgical coal to average
$US116 a tonne this year and $US129 per
tonne in 2016. But even in China, environmental issues will have an effect. With an
increased focus on reducing environmental
degradation, China’s National Development
and Reform Commission has ordered the
country’s power generators to cut coal
imports by 25 million tonnes through the
end of 2014 and into 2015. Woods
Mackenzie says that uncertainty over
China’s next steps is exacerbating the structural oversupply in seaborne coal markets
and putting prices under pressure.
March 30, 2015 • Canadian Sailings • 21
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COMMODITIES
World’s copper miners wait out low prices;
new production expected
BY R. BRUCE STRIEGLER
O
n February 1st, Codelco, Chile’s state-owned copper mining
company and the world’s largest copper company,
announced a billion dollar cost-reduction plan for 2015.
Nevertheless, copper’s low prices have not stalled Codelco’s mining
expansion plans which call for an investment of about $22 billion by
2018. Patricia Mohr, Scotiabank economist and commodity specialist says, “Copper in recent years has been an extraordinarily
proﬁtable metal. This is due to very little new supply brought onstream internationally, and it was also a period where global demand
growth, especially from China, was very good.”
Mohr says the LME (London Metal Exchange) ofﬁcial cash settlement price for copper peaked at an all-time high, on February 14,
2011, at $4.60 pound. ”At that level, the average proﬁt margin over
full break-even costs was over 50 per cent. It was exceptionally profitable.” With prices slipping since 2011, last year’s average of $3.11
per pound was down slightly from 2013. “But that is still a reasonably proﬁtable level for most mines around the world, including
those in Canada.”
Mohr says the pace of new development is about to change,
“New supply is expected to come on stream in 2015-16. From
Zambia ( with Vancouver’s First Quantum Minerals Ltd.), from Peru
(with Toronto’s Hudbay Minerals Inc.), from the Democratic Republic of Congo, and from Chile, for example, where there are currently
three new copper mines ramping up.” One of the new Chilean mines
is Las Bambas, now owned by a consortium led by China Minmetals
Corp. Las Bambas is scheduled to produce 400,000 tonnes of copper
a year beginning in 2015, equivalent to 12.5 per cent of 2013
imports of copper metal by China. The list also includes Peru’s
Minera Chinalco project which now has started production, and
Freeport McMorRan’s Grasberg mine in Indonesia, the largest gold
mine and the third largest copper mine in the world. “This is an older
mine that is moving into higher ore grades, very proliﬁc, with substantial production from that mine is expected to come on stream in
2015-16.”
Copper demand will continue to grow worldwide
The composition of global mined copper production has undergone a material shift over the last 30 years. According to statistics
from The International Copper Study Group (ICSG), in 1980 global
mined copper production was regionally balanced, with North America representing roughly 28 per cent. Much has changed since then
as production in North American has stagnated, while Latin America
and, to a lesser extent, Asia have increased production signiﬁcantly.
In 2012, Chile alone represented 33 per cent of global mined
copper production, and ﬁgures from ICSG show that Latin America
accounted for 42 per cent of 2013’s production. North America by
contrast, produced 13 per cent. Internationally, at US$150 billion,
the global market for copper is the third largest of all metals after iron
and aluminum. From ICSG’s 2014 World Copper Factbook, preliminary ﬁgures reveal 2013’s copper production worldwide reached
18.1 million tonnes, Chile was the largest producer at nearly 5.8 million tonnes. Smelter production hit 16.8 million tonnes and in 2013,
copper reﬁnery production increased to 20.9 million tonnes. ICSG
expects continued mine growth of 4.7 per cent in 2014 and 7.3 per
cent in 2015.
22 • Canadian Sailings • March 30, 2015
It’s easy to see why copper demand remains sizeable. An average North American car contains over 50 pounds of copper; an
average railroad locomotive uses 11,000 pounds, while electric
subway cars, trolleys, and buses contain a weighted average of 2,300
pounds. Combined with farm and industrial equipment as well as airplanes, copper is critical. Developing Asia is transitioning from rural
agrarian economies toward urban manufacturing economies that
require increasing amounts of copper. China and India are expected
to require massive infrastructure investment as urbanization continues, with copper playing an instrumental role. In China, between
2002 and 2012 over 178 million people moved into urban centers.
BHP Billiton reports copper usage in China increases by a factor of 23 times when comparing urban centers to rural villages. In the U.S.,
the average single-family home of approximately 2,100 square feet
contains 439 pounds of copper, while the average multifamily unit of
1,000 square feet contains 278 pounds of copper.
New mines and increased production; producers
anticipating improved prices
Canada is the third largest copper producer in the world, after
Chile and the U.S. Ontario and B.C. are the two largest copper-producing provinces. Mine output in Ontario is processed locally, while
most of the copper mined in B.C. is shipped as copper concentrate to
Asia for smelting and reﬁning. In 2013, Canadian production of
copper, according to Natural Resources Canada reached 613,500
tonnes.
China consumes almost half the world’s annual copper output
and to some economists, recent inﬂation data from China renews
their fears of a worsening economic outlook for the world’s top
copper consumer. A worse than expected 3.3 per cent drop in factory
gate prices in December was interpreted as further evidence of inactivity in the country’s real economy. While consumer prices showed
a small uptick, producer prices in China have now fallen for 34
months in a row.
In B.C., Imperial Metals has completed its 30,000 tonne per day
copper/gold Red Chris project, with the mine now in ﬁnal commissioning stages. Red Chris will be Imperial’s third operating B.C. mine.
Imperial Metal’s Mount Polley, an open pit copper/gold mine in central B.C. suffered a tailings pond rupture in August 2014, pouring 10
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COMMODITIES
million cubic metres of water and 4.5 million cubic meters of ﬁnely ground rock
containing potentially toxic metals into local
streams and lakes. Since that time, the mill
has been on care-and-maintenance and it is
unknown at this time when production may
resume.
In recent years, Teck spent $475 million to modernize and extend the life of a
40-year-old mill at its Highland Valley copper
mine, about 75 kilometres southwest of
Kamloops, B.C. Teck also reported sales volumes of coal and copper were also lower in
2014 than in 2013 and gross proﬁts fell
2014 to $2.9 billion compared with $3.7 billion in 2013, a 22 per cent decline. At
Taseko’s Gibraltar Mine in B.C.’s Cariboo, a
third phase of modernization and upgrades
was completed in 2013. Taseko’s Gibraltar is
now the second largest copper mine in
Canada and currently employs approximately 700 people.
In December 2014, Environment
Canada approved development of Seabridge
Gold’s KSM project in British Columbia, the
world’s largest undeveloped gold-copper
project by reserves. Seabridge Gold plans a
combined open-pit and underground gold,
copper, silver and molybdenum mine
located approximately 65 kilometres northwest of Stewart, BC and roughly 35 km
northeast of the Alaska border. The deposit
boasts 38.2 million ounces of gold, 9.9 billion pounds of copper, 191 million ounces of
silver and 213 million pounds of molybdenum provable and probable reserves. The
mine is expected to process 130,000 tonnes
per day of ore over an anticipated mine life
of 52 years.
Some mining companies have recently
cut projected output for 2015 by 300,000
tonnes (Rio Tinto at Kennecott, BHP Billiton
at Escondida and Glencore at Alumbrera),
helping to trim an expected surplus this year
to a modest 250,000 tonnes. One miner
bucking the trend of production cut-backs is
Vancouver-based Capstone Mining Inc. Consulting ﬁrm pwc reports in its 2014 price
survey of gold, copper and silver miners that
Capstone is planning to signiﬁcantly increase
production over the next several years.
Driven in part by its 2013 purchase of the
Pinto Valley open pit copper mine in Arizona
and its 70 per cent stake in a major copperiron project in Santo Domingo, Chile, pwc’s
report quotes Capstones founder and CEO
saying the company is happy to be doing the
exact opposite of what everyone else is
doing. He explains that while Capstone’s
Santo Domingo project is going into production, others will be just ramping up
construction on their projects.
Patricia Mohr, Scotiabank economist
and commodity specialist concludes, “I
think because of this new mine supply,
copper is going to gently edge down in the
next several years. For 2015, I’m using an
average of $2.90 per pound, in 2016 slipping to $2.85 pound, and then from 2017,
I have copper snapping back. We’ll get
through this period of mine expansion
around the world, the market will tighten
again and prices will move up, probably
quite substantially and it will return to
being a lucrative metal.” Mohr suggests that
the demand will still come from China, in
spite of appearances of slowing growth. “In
2014, the demand for reﬁned copper was
up about eight per cent in volume terms. It
has to do with the build-out of high speed
rail, which is still on-going, the build-out of
subway systems across the country, the
electricity grid, household appliances and
automobiles.”
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March 30, 2015 • Canadian Sailings • 23
sailings1060 2015-03-27 3:02 PM Page 24
COMMODITIES
Rare niobium a growing niche metal
market with a Canadian stake
BY R. BRUCE STRIEGLER
T
he world’s second-largest producer of
niobium (Nb) is Magris Resources
Inc.’s Niobec mine located in SaintHonoré-de-Chicoutimi in the Saguenay-LacSaint-Jean region. Described as an alloying
element in steels and superalloys, niobium
is a rare and soft transition metal primarily
used in the production of high grade steel.
Global production is estimated at about
63,000 tonnes per year. Brazil is the
world’s leading niobium producer with
more than 80 per cent of global production
followed by Canada with nine per cent.
The Niobec mine, the sole niobium producer in Canada, was sold in 2014 for
$530 million to Toronto Magris
Resources Inc.
The niobium market is comparatively
new, dating back only a few decades.
Demand is driven by overall growth of the
global economy, and the demand for superalloys, such as those used in aerospace,
nuclear and military applications. Niobium
is consumed in very small amounts, fractions of a per cent in terms of gross weight
of steel, which nonetheless cause dramatic
changes in the characteristics of the steels
it is being alloyed with.
Use of niobium has been long-established in many industrial economies. In
China, India and Russia there is a developing demand. Use of niobium in
steel-making in these countries is currently
far below the global average. They also
have the highest forecast rates of growth in
steel production and there is an anticipation that they will increasingly move from
producing mild steel to high-strength lowalloy steel (HSLA). This is the growth area
for niobium demand.
Niobium uses primarily in
strengthening steels
Steel containing niobium is stronger,
lighter, and highly resistant to corrosion.
Niobium in the form of ferroniobium and
nickel niobium are used in nickel, cobalt,
and iron-based superalloys for such applications as jet engine components, rocket
subassemblies, heat-resisting and other
similar combustion equipment. Another
important application for niobium is as an
alloying element to strengthen HSLA steels
used to build automobiles and high pressure gas transmission pipelines.
24 • Canadian Sailings • March 30, 2015
An important secondary role for niobium is to provide creep strength in
superalloys operating in the hot section of
aircraft gas turbine engines. (Engineers
explain that under elevated temperatures
materials ‘deform’ at a slow rate. This is
called ‘creep’, and after a certain amount
of deformation, the rate of creep increases,
and fractures soon follow.) Niobium is also
utilized in stainless steel automobile
exhaust systems and in the production of
superconducting niobium-titanium alloys
used for building MRI magnets. Minor
applications include electronic ceramics
and camera lenses. Niobium is considered
a “strategic metal” by the U.S., deemed
essential for U.S. National Security.
A high-value metal found rarely
around the world
With no central exchange for niobium, it’s difficult to obtain trading prices,
and producers sell directly to steelmakers
or trading houses, with prices subject to
confidentiality agreements. The U.S. Geological Survey, Mineral Commodity
Summaries, January 2015 reports the unit
value of U.S. imported ferroniobium
between 1990 and 2005 declined from
about $20,000 per tonne (pt) to about
$13,000 pt. It then rose steadily to about
$44,000 pt in 2012, before declining to
$40,000 pt in 2014, interrupted only in
2008–09 as a result of the global economic
downturn. Although Brazil and Canada are
the top exporters of niobium, other
sources of niobium ore and concentrate
include Australia and a number of African
countries.
Forty-three companies in the United
States produced niobium-containing materials from imported niobium minerals,
oxides, and ferroniobium. The U.S. Geological Survey reports major end-use
distribution of reported niobium consumption in the U.S. with steel leading at 79 per
cent and superalloys accounting for 21 per
cent. In 2014, the U.S. estimated value of
niobium consumption was $500 million,
as measured by the value of imports. Currently, the U.S. imports 100 per cent of its
niobium.
As of 2011, the British Geological Society estimates put global niobium ore reserves (proved and probable) at around 485
million tonnes with more than 93 per cent
occurring in Brazil and seven per cent in
Canada. From a presentation provided to
Canadian Sailings by Camet Metallurgy Inc.
of Montreal, world consumption of niobium
(ferroniobium) by region show Europe leading (from 2012 statistics) at 25,000 tonnes,
or 30 per cent, the Americas at a little over
18,000 tonnes or 22 per cent, China at a little over 18,000 tonnes or 25 per cent and
Japan registering about 9,000 tonnes or 11
per cent.
Little in the way of new mine
development in the works
Significant U.S. niobium mine production has not been reported since 1959. The
U.S. has approximately 150,000 tons of
niobium-identified resources, all of which
were considered uneconomic at 2013
prices for niobium. Domestic niobium
resources are of low grade, some are
extremely complex, and most are not commercially recoverable. Based on data for
part of 2014, U.S. niobium consumption
(measured in contained niobium) was estimated at 10,000 tonnes, 23 per cent
higher than 2013 levels.
Vancouver-based NioCorp Developments Ltd. is developing the only known
primary niobium deposit in the U.S., near
Elk Creek, Nebraska. The Elk Creek project is touted as the highest grade
undeveloped niobium deposit in North
America. In December 2014, the company
completed an infill drilling program providing information on the hydrology,
metallurgy, geochemistry and geotechnical
properties of the site with the data being
used to advance design of an underground
mine and ferroniobium production plant
for the project, scheduled to commence
production in 2017. Niocorp plans to capture significant global market share,
targeting a production rate of 7,500 tonnes
annually.
In British Columbia, Taseko Mines
Ltd., which did not respond for this article,
owns the undeveloped Aley Niobium Project in northern B.C. Covering about 433
square kilometres, the site contains 104
mineral claims and following recent exploration, Taseko asserts the project, should it
be developed, could produce an average
9,000 tonnes of niobium annually, in the
form of ferroniobium, over a lifespan of 24
years. Taseko recently entered an environmental review process for the proposed
new $870 million niobium mine.
Australian junior mining company
Globe Metals & Mining continues with
testing and negotiation with the Government of Malawi for the Kanyika Niobium
sailings1060 2015-03-27 3:02 PM Page 25
COMMODITIES
Project, which will produce high purity
niobium pentoxide and tantalum pentoxide powders. In 2014, the company
completed testing of the Kanyika demonstration pilot plant at China’s Guangzhou
Research Institute of Non-Ferrous Metals.
The project shipped a 40-tonne sample
from the proposed mine-site to the Chinese research institute. The company says
the tests showed ways to improve recovery, improve concentrate grade and
revealed ways to enhance the processing
plant design. It’s unclear when the company may move ahead with development
of the proposed mine.
Cradle Resources Limited, another
Australian junior miner is working to
become an international niobium development company with its ownership of a 50
per cent interest (and rights to acquire the
balance) in the Panda Hill Niobium Project in Tanzania. Located in the Mbeya
region in south western Tanzania, approximately 650km west of the capital Dar es
Salam, the Panda Hill Project encompasses three granted Mining Licenses
totalling 22.1 square kilometres. The site
has access to infrastructure, with existing
roads, rail, airports and 220kV power. The
three granted Mining Licenses are due for
renewal in November 2016, and under
Tanzanian mining legislation can be
renewed for a further ten year period on
completion of the approved work programs on the project.
Niobec mine
Brazilian company responsible for
developing niobium market
Brazil’s CBMM operates the Araxá
mine, the largest niobium mine in the
world, which suffers from decreasing
grades and increasing operating costs.
CBMM is credited with the development
of applications for the metal. When the
Company was founded in the 1950s, there
was neither a market nor a manufacturing
process for niobium. CBMM created the
uses for the element and its market
through a program to develop niobium
technology and promote the element’s
effectiveness by illustrating the advantages
that make niobium a super metal.
CBMM’s production techniques are
such a closely-guarded secret that the
Asian steelmakers that bought a stake in
the company, including China’s Baosteel
Group Corp. and Japan’s Nippon Steel &
Sumitomo Metal Corp., have never been
allowed to carry out technical due diligence work. The process is complex and
capital-intensive and requires multiple
refining stages to turn powdery brown
earth with just three percent niobium content into an iron alloy with 66 percent
purity, which is what global steelmakers
buy. CBMM processes 750 tonnes an hour
at its site in Araxá, about 350 miles north
of São Paulo, On average, only 200
grammes of the niobium alloy are necessary to strengthen a tonne of steel,
allowing manufacturers to make lighter,
more efficient cars and sturdier bridges and
buildings.
March 30, 2015 • Canadian Sailings • 25
sailings1060 2015-03-27 3:02 PM Page 26
COMMODITIES
CN moving specialty crops processors to containerized
shipping
BY R. BRUCE STRIEGLER
W
hile many Canadians may be unfamiliar with the term
‘specialty crops, this agricultural subset is a growing segment of Canadian exports. Grains are divided into
several classifications, and most specialty crops are known as
‘pulses’, derived from the Latin word ‘puls’ which can be defined
as ‘thick soup’. The classification refers to grain legumes including
chickpeas, dry beans, dry peas and lentils. While Canadian grains
and oilseeds are shipped around the world, India and China are by
far the two biggest destinations for Canadian specialty crops. Traditionally, India was the single most important market, but China
has been closing the gap in recent years, and actually has recently
become the largest market. In fact, so far this year China has
already purchased as much as it did during the entire season just
a couple of years ago.
The term “special crop” also defines buckwheat, canary seed,
forages, ginseng, herbs (medicinal plants), spices, industrial hemp,
mustard seed, safflower seed, and sunflower seed. It is a catch-all
category for those crops not included in major grains and oilseeds
or horticultural crops. An estimated 70 per cent of Canada’s production is exported, including significant quantities of dry peas,
lentils, canary seed, mustard seed, chick peas, dry beans, and buckwheat.
CN’s Senior Manager, Specialty Crops, Hamath Sy, says “We
like to think of CN as a supply chain enabler, that is, we offer customers end-to-end service with a view to improving efficiency for
the entire process.” He explains that in the past, CN has offered
traditional grain hopper cars, for growers of Canadian specialty
grains. “They’ve been made available to grain elevators or processors who load the grains, ship the product to the port, where it is
loaded onto ships or loaded into containers for various markets.”
Mr. Sy explains that more and more specialty crops are being produced, and that the market has diversified. “Importers of Canadian
specialty crops generally buy smaller quantities of these specialty
grains, rather than shiploads of 50 or 60 thousand tonnes. Being a
supply chain enabler, we are now making containers available to
these smaller shippers.”
While small in comparative volume to the grains and
oilseeds, pulse exports are climbing
The seven key Canadian specialty and pulse crops are dry
peas, lentils, dry beans, chickpeas, mustard seed, canary seed and
sunflower seed. In late December 2014, Agriculture and Agri-Food
Canada’s Market Analysis Division calculated the 2014-15 specialty crop ending stocks at 345,000 tonnes versus 623,000 tonnes
the previous year. Total exports of the seven major specialty and
pulse crops are expected to be 5.280 million tonnes in 2014-15,
up from the last estimate of 5,200 million tonnes in 2013-14.
Saskatchewan is the heart of the Canadian pulse industry. In 2012,
Saskatchewan farmers grew 96 per cent of Canada’s lentil crop, 90
per cent of Canada’s chickpea crop and 70 per cent of Canada’s dry
pea crop
Mr. Sy explains that these crops are very small, noting canary
seed is about 100,000 tonnes per year, peas are about three million
tonnes, yet they are in the same group. “Pulses require a certain
26 • Canadian Sailings • March 30, 2015
type of soil and other specific agricultural conditions. They are
grown in a cluster, an area found in southwestern Saskatchewan
and southeastern Alberta.” He notes that there is little produced in
Manitoba and none in B.C. Mr. Sy says that the industry is in the
middle of a revolution. “Specialty crop processors used to be small
scale, under-funded operations, often a family-owned and -operated farm, with operators having little expertise in marketing.”
Today, he says, these small units are disappearing, and are being
replaced by large modern operations with merchandising capabilities around the world.
Mr. Sy explains that pea production is most often successful
when grown in rotation with cereals such as barley, spring or
durum wheat. “A pulse crop fixes nitrogen from the air and provides a sound way of extending and improving crop rotations. The
crop following a pulse crop in the rotation generally yields more
than the same crop grown after cereals or oilseeds, and the nitrogen will reduce the cost of applying nitrogen the following year.”
Export capacity key factor for producers
Like any commodity, prices for the grains and pulses rise and
fall. In the last five years, with higher prices there have been larger
crops of canola and wheat, and fewer specialty crops, including
some of the big-acreage crops like the pulses. However, with wheat
and canola prices now lower, interest in specialty crops has
rebounded as farmers start to look carefully at profitability. This
past season saw field peas in Saskatchewan leap in popularity, with
an estimated 2.6 million acres in production, a 21 per cent
increase over the year before, according to StatsCan.
When asked whether processors are moving to containerize
more of their export traffic, or whether they prefer the older
hopper/bulk carrier method, Sy says “Processors are looking at the
capacity that is available. Right now it is easier to add capacity
through containers rather than hopper cars.” He continues,
explaining that the container model is most suitable for fragile
product. “If you look at peas, yellow peas are much harder and
green peas are very fragile. They do best with less handling,
making containers a perfect transport solution.”
Sy says that while containers may be a little more expensive
than hopper cars, the advantage is that it helps exporters protect
product quality and makes deliveries more portable and secure.
Furthermore, processors are trying to become more multi-functional by building facilities that can load bulk and containers.
“They’re collecting large volumes of product and have the ability
to use a variety of transfer methods.”
Explaining how steamship lines operate large vessels transiting the Atlantic and Pacific, Mr. Sy notes that they arrive at
Canadian ports loaded with full containers. “But to further participate and grow their business they need to find export commodities
to off-set their round-trip costs. Our job at CN is to help where we
can, to find these export commodities for them, one of them being
the specialty crops.” CN’s role, he says, is to provide a platform
where they can get the boxes (containers) moved from centres like
Toronto, Montreal or Chicago, repositioned to cities like Saskatoon
and excite the steamship lines about this business opportunity.
sailings1060 2015-03-27 3:02 PM Page 27
sailings1060 2015-03-27 3:02 PM Page 28
28 • Canadian Sailings • March 30, 2015
sailings1060 2015-03-27 3:02 PM Page 29
Relationship between Port of Prince Rupert, Maher
Terminals Holding, and CN one of inter-dependence
BY BRIAN DUNN
Photo: Port of Prince Rupert
T
he recent announcement of a planned
expansion of the Fairview Container
Terminal in Prince Rupert, BC, was
well received by CN which handles about 95
per cent of the port’s discharged trafﬁc.
The expansion of the terminal, operated
by Maher Terminals Holding Corp. and
scheduled to be completed by mid-2017, will
increase container capacity from 850,000 to
1.3 million TEUs. It is served by the CKYHE
Alliance, offering three weekly marine carrier
services from Asia.
The expansion will include the creation
of an additional 155 metres of wharf at the
north end of the terminal, installation of
crane rails to support an eight-crane, twoberth operation and upgraded rail capacity
from the creation of three additional working
tracks, supported by up to rubber tire gantry
cranes.
Since its conversion from a breakbulk to
a container handling facility in 2007, trafﬁc
through Fairview has grown at the fastest
pace of any container terminal in North
America, with container volume up 15 per
cent last year from 2013 to 618,167 TEUs,
according to Don Krusel, President and CEO
of Prince Rupert Port Authority. It ranks
second behind Port of Vancouver in terms of
revenue dollars generated for CN, noted JeanJacques Ruest, CN’s Executive Vice-President
and Chief Marketing Ofﬁcer. In the fourth
quarter of 2014, it represented 30 per cent of
CN’s international intermodal business in
terms of volume.
While CN has no equity in the port and
is not contributing ﬁnancially to the expansion, the two are very co-dependent. “The
terminal and CN work closely together. Without CN, the terminal would not be ﬁnancially
successful and vice versa,” explained Mr.
Ruest. “We would not be able to grow our
inland terminals such as Chippewa Falls,
Arcadia, Detroit or Chicago without having
an increased capacity on the west coast. So
we very much encouraged them to see that
our investment strategy inland was going to
support the capital risk they were taking on
the waterfront and vice versa.”
Most of the commodities that land at
Prince Rupert are destined for the U.S. Midwest as far south as Memphis which includes
furniture, footwear, apparel, household
goods, electronics, building materials and
automotive parts.
For the return trip back to Prince
Rupert, CN has created container stufﬁng
facilities in places like Chicago, Saskatoon,
Edmonton and Prince George for grain and
agricultural products, lumber, pulp and
plastics.
The port expansion is an important component of CN’s growth plans, according to
Mr. Ruest. “For a number of years, CN was
growing through acquisitions. We’ve bought
ﬁve railroads in the last decade. The last one
we bought was a very small railroad around
Chicago. But that was ﬁve years ago, so for
the last ﬁve years we’ve had to grow organically. We had to ﬁnd a way to bring more
business on the existing network that we
have.”
To do that, CN is looking to bring more
products in from Asia through Prince Rupert
and Vancouver to serve the U.S. Midwest and
eastern Canadian markets. But the U.S. Midwest is where CN sees the most
opportunities. “Our share of that market is
quite limited and there we compete with U.S.
railroads. So the more we grow with a Canadian port, the more we will need to get more
than just our regular share of the U.S. Midwest market. And Maher also recognizes that
more than half their investment is for the U.S.
market.”
While the port expansion will not
change what CN currently handles, the company would like to increase its auto parts
business in Detroit, Ohio and Ontario. And
having increased capacity in a ﬂuid port like
Prince Rupert should give CN that opportunity, said Mr. Ruest. “In order to do auto parts
very well, we need a port that’s very ﬂuid,
which is not the case in the U.S. and sometimes it’s challenging in Vancouver. But we
would also welcome a similar expansion in
Vancouver.”
While CN has no equity in the Fairview
Terminal, it has invested heavily to improve
its rail capacity just outside the property by
adding a second track at a cost of $17 million
that included infrastructure work near the
water. The investment allows CN to operate
12,000-foot trains to maximize the ﬂuidity
and productivity of the terminal. Before it
added a second siding, CN was limited to
two trains in and two trains out per day.
Now, it can accommodate four trains a day in
and out if the port expansion warrants that
increase.
In terms of ﬂuidity, the average dwell
time at the terminal during January and February was two days, according to Mr. Ruest.
“Transit time to Chicago is a little over four
days, so you discharge the cargo from the ship
and it arrives in Chicago in a week. This was
the best dwell time on the west coast this
year.”
CN is also planning for the future by purchasing land around some of its existing
inland terminals, including Detroit, and has
available land in Chicago where it has two
terminals and can expand if necessary, and
has been holding discussions to acquire more
land in Memphis in addition to some cities in
Eastern Canada. “We’re always looking at
expansion as we look at the business we want
to target,” explained Keith Reardon, VicePresident Intermodal. “We also work with
our existing customers as they grow their
business. We try to keep ahead of it by at least
two years, because that’s how long it takes to
expand most of our terminals. “It’s not only
expanding the Port of Prince Rupert, but also
the organic growth each one of our customers
represents.”
March 30, 2015 • Canadian Sailings • 29
sailings1060 2015-03-27 3:02 PM Page 30
CN to build new $250-million intermodal and logistics
hub in Milton, Ont., west of Toronto
C
N plans to build a 400-acre, $250million intermodal and logistics hub
adjacent to its main line in the Town
of Milton, Ont., located approximately 30
miles west of Toronto. Milton has ready
access to major highways reaching key
industrial and commercial areas in the
Greater Toronto and Hamilton Area
(GTHA).
Claude Mongeau, CN President and
Chief Executive Ofﬁcer, said: “CN’s
advanced intermodal and logistics facility in
Milton will help us efﬁciently handle growing intermodal trafﬁc. The new hub will
beneﬁt our customers and the regional
economy by improving central Canada’s
access to the key transborder market as well
as the Paciﬁc and Atlantic coast trade gateways we serve.” CN’s intermodal business
— principally containerized international
and domestic cargo moving in cooperation
with trucks and ocean-going ships — is one
of the company’s fastest growing business
segments and its largest single business unit
with 2014 revenues of more than $2.7 billion.
The new Milton facility will complement CN’s existing Toronto-area intermodal
terminal in Brampton, Ont., which is nearing capacity, but will continue to operate for
the long term. CN expects the new hub to
attract more warehousing distribution centres (DCs) and associated employment —
new DCs have opened near Milton in
recent years owing to land availability and
good access to the highway system. In addition, the facility is expected to facilitate
supplying additional intermodal capacity
and container availability for exporters
located in the southwest area of the GTHA.
CN will submit a complete project
description of the planned Milton hub to
the Canadian Environmental Assessment
Agency for review. Mongeau said: “CN is
committed to a comprehensive engagement
process with the community at every step of
this project in Milton.”
However, according to the Toronto
Star, Milton City ofﬁcials are ﬁrmly opposing
the plan, saying the region’s growth management plan had earmarked the land in
question for a mix of residential and commercial development, and does not want
1,500 trucks and four additional trains to be
brought into Milton every day. Milton is in
the federal riding of Halton, and federal
Transport Minister Lisa Raitt is the Member
of Parliament for Halton.
PROTOS SHIPPING LIMITED
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30 • Canadian Sailings • March 30, 2015
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sailings1060 2015-03-27 3:02 PM Page 31
New Transport Canada support for electronic logging
devices benefits trucking industry and other road users
B
C Trucking Association (BCTA) applauds the announcement
by federal Minister of Transport Lisa Raitt supporting the use
of electronic logging devices (ELDs) in commercial vehicles
and electronic stability control (ESC) in new trucks as positive steps
for the trucking industry that will improve safety for all road users.
ELDs in particular will ensure driving time is accurately recorded,
removing the temptation for some individuals or companies to work
outside the rules and increase their crash risk.
BCTA, in company with its national counterpart, the Canadian
Trucking Alliance, and other provincial trucking associations, has
been asking for both standards for years, given that they will have
multiple beneﬁts for everyone from day-to-day road users to governments at different levels. “We’re very pleased with Transport
Canada’s decision about ELDs,” says Louise Yako, BCTA’s President
and CEO. “BCTA supports an ELD mandate as the single most important opportunity to transform the trucking industry to ensure
companies and drivers are paid for all their work, including waiting
time. ELDs replace paper logbooks, so truck drivers using the technology will no longer need to ﬁll these in manually. ELDs also provide
convenient, reliable records to support compliance with rest breaks
and on-duty driving time. And that means enhanced road safety –
always a top priority for BCTA.”
Professional long-haul truck drivers are required to record
speciﬁcs about their work shifts in a logbook, including time during
the shift spent driving or doing other work, rest breaks, and off-duty
time. Trucking companies are in turn expected to check driver logs.
Introducing an electronic process makes record-keeping less onerous
and removes the possibility of falsifying records to squeeze in more
work than is wise or safe, leveling the playing ﬁeld for all. Shippers
who may pressure some trucking companies to operate beyond hours
will also be held to account with these devices.
According to Ms. Yako, “Most trucking companies comply with
hours of service regulations because that’s just good business. ELDs
are one way to help reduce driver fatigue, which is often cited as a
crash causation factor. A heavy truck crash is not only emotionally
and physically distressing, it causes property damage, involves emergency and road maintenance crews, creates a loss of reputation for
the company, and affects other road users. ELDs can be an important
tool for preventing and reducing these outcomes.”
Also, requiring manufacturers to comply with a standard for
ESC is also good news. ESC improves the safety of trucks by automatically applying brakes when a loss of traction is detected, a feature
some Canadian truck manufacturers already offer.
The Federal Motor Carrier Safety Administration in the United
States has also announced it will be publishing a ﬁnal rule requiring
ELDs in September 2015 that will give the trucking industry two
years to research, install and become familiar with the technology
before the rule is enforced. Canadian companies that haul goods
across the border will be required to comply, although many Canadian and American companies have already incorporated ELDs in
their ﬂeets. The U.S. has an existing ESC standard for new trucks as
well.
ELD technology, which may be part of a complex ﬂeet management system or a simpler standalone device monitoring one truck,
supersedes previous devices called “electronic on-board recorders” or
EOBRs. “Our next step as an industry representative is to work with
government on enforcement and transition rules for ELDs to ensure
this is done in a thoughtful and practical manner,” says Ms. Yako.
Nanaimo Port Authority’s Doug Peterson retires
after 22 years
L
ong term Manager of Marketing &
Sales, Douglas P. Peterson, retires after
a 22 year career with Nanaimo Port
Authority. Mr. Peterson arrived at the Port
Authority from an international trading
company where he was responsible for the
procurement and transportation logistics of
frozen foods, bulk commodities and wood
products. He subsequently moved to a
Canadian based marketing consortium
exporting a bulk commodity worldwide,
directing marketing & sales, marine transportation coordination and vessel
chartering.
Bernie Dumas, President & CEO –
Nanaimo Port Authority, stated: “Nanaimo
Port Authority was fortunate to enlist Doug
with his skill set for our Marketing and Sales
portfolio. He was a key member of the management team over his many years of service
when we were so deeply engaged in the
forestry-based industry and developing our
cruise and short sea shipping strategies. On
behalf of the Board of Directors and Port
Authority staff, I want to thank Doug for his
professional approach to his day to day
work, his long term commitment to us and
to our valued clients. Doug introduced and
developed many long term relationships in
the local and port community which will
continue to be beneﬁcial to us for many
years to come. We all wish Doug well for his
retirement and hope that he ﬁnds time to
stay in contact with his ‘port family’.”
Doug is married to Patricia with son
Duncan, a graduate of Queens University.
Doug holds a BA Degree - Commerce & Economics from Simon Fraser University, a
diploma – Marketing & Sales Management
from UBC, Certiﬁcate in Vessel Chartering
from Cambridge England Academy of Transportation and BCIT Certiﬁcates for Port
related work. He is currently on the
Nanaimo Museum Board, and is one of the
founding Directors of Cruise BC. He intends
to stay in Nanaimo for the foreseeable future
and is open to travel opportunities that he is
looking forward to sharing with his family.
DOUG PETERSON
March 30, 2015 • Canadian Sailings • 31
sailings1060 2015-03-27 3:02 PM Page 32
32 • Canadian Sailings • March 30, 2015
sailings1060 2015-03-27 3:02 PM Page 33
New owners of Montreal Gateway Terminals see
more room for growth
BY BRIAN DUNN
Photo: Montreal Gateway Terminals Partnership
T
he sale of Montreal Gateway Terminals (MGT) to a group of local
investors is a vote of conﬁdence for
the company, according to its CEO, Michael
Fratianni. A consortium led by independent
portfolio management ﬁrm Fiera Axium
Infrastructure Inc., along with Desjardins
Group, Manulife, Fonds de solidarité FTQ
and Industrial Alliance, paid a reported
$650 million, an amount Mr. Fratianni
would not conﬁrm, to acquire MGT from
Morgan Stanley Infrastructure Partners.
Fiera Axium manages funds with more
than $1.2 billion in assets under management. It invests primarily in wind farms and
hydroelectric projects in Canada and the
U.S. Fiera Axium is jointly controlled by
Fiera Capital Corporation with approximately $82 billion in assets under
management and Axium Infrastructure
Management.
MGT is the largest terminal operator in
Montreal, handling 800,000 TEU’s in 2014,
accounting for 58 per cent of all containers
handled at the port through its Racine and
Cast terminals, according to Mr. Fratianni.
“Morgan Stanley was a great investment partner and we were very happy with
their involvement. But it is a closed end
fund and after a certain period of time, they
turn the investment over. The new owners
have a much longer term outlook and they
have an appreciation of the resiliency of the
business. They also have a lot of trust in the
staff and management.”
There is also added value being owned
by local players who want to see the business and the region expand. They also want
to invest in technology which differentiates
MGT from the rest of the pack, said Mr. Fratianni. “With our new investment partners,
we are conﬁdent that MGT will continue to
raise the bar of reliability and consistent
service to our customers who depend on a
predictable supply chain. “We’re operating
at about 60 per cent capacity, therefore we
have more capacity to grow. We can put
more containers through by making certain
operational adjustments and adding more
equipment. And we have capital expenditure plans to accommodate future growth.”
“This investment ﬁts well within our
core infrastructure strategy as Montreal
Gateway Terminals represents an essential
infrastructure asset, agreed Stéphane Mailhot, President and CEO of Fiera Axium.
“Our consortium is comprised of partners
with a long-term investment horizon and
vested interests in the economic develop-
ment of Greater Montreal, Quebec and
Canada.”
MGT is coming off a strong year with
growth up ﬁve per cent over 2013, according to Mr. Fratianni, and he sees similar
growth in 2015. He expects the new Canest
Transit grain handling terminal in the former
Elevator No. 3 will result in an additional
4,000 to 5,000 containers a year alone. “I’m
very optimistic. The lower Canadian dollar
will make Montreal more attractive. If you
look at the volume handled by the Port of
Montreal, there is diversiﬁcation, a signiﬁcant amount coming in from Asia and the
Middle East.
“There is a lot of optimism among the
shipping lines as well. Montreal is a great
place to have cargo come through with its
very ﬂuid movement. Montreal doesn’t
expect to be one of the biggest ports, but it
is one of the most efﬁcient. “
Canada Steamship Lines wins 2015 Lloyd’s List
Inland/Coastal/Lakes Operator of the Year Award
C
anada Steamship Lines was recognized as one of “the best
and brightest in North American shipping,” winning the
prestigious Inland/Coastal/Lakes Operator of the Year award
at the 2015 Lloyd’s List North American Maritime Awards Dinner.
“This recognition solidiﬁes CSL and its new generation of Trillium Class vessels as the market leaders in safe, efﬁcient and
environmentally responsible shipping in the Great Lakes and StLawrence Seaway,” said Allister Paterson, President of Canada
Steamship Lines.
“Our Trillium Class vessels reﬂect CSL’s philosophy to continuously strive for operational and service excellence, to invest in
innovation and to actively pursue opportunities to improve our environmental and safety performance,” added Rod Jones, President and
CEO of the CSL Group. “In North America and throughout our
global divisions, CSL conducts its operations based on core values
and a business approach that reﬂect this philosophy.”
Before a crowd of 250 marine professionals, Dan McCarthy,
Canada Steamship Lines’ Vice-President of Marketing and Customer
Service, accepted the award on behalf of CSL.
“CSL is proud to be accepting the award in the company of
industry leaders such as Green Marine, the innovative organisation
committed to strengthening the marine sector’s environmental performance,” said Mr. McCarthy. “Collaboration among industry,
government, customers and marine professionals is essential to drive
forward the environmental and technological advances necessary to
ensure a strong future for shipping throughout North America.”
March 30, 2015 • Canadian Sailings • 33
sailings1060 2015-03-27 3:02 PM Page 34
EDC: Is the weak loonie a worry?
BY PETER G. HALL, VICE-PRESIDENT AND CHIEF ECONOMIST
A
merica is worrying about its strong
currency. For the most part,
Canada’s weak currency has been
hailed as a good-news story, a beneﬁt to
the long-suffering manufacturing sector.
On a net basis, the immediate effects will
be positive, boosting nationwide GDP
growth by up to 1.2 per cent over the next
18 months. But the news isn’t all good. In
a globalized economy, there is a greater
inﬂow of goods and services associated
with higher exports to the rest of the
world. Is there a downside to recent movement?
The strong positive impact of a falling
currency has to do with our huge exposure
to the U.S. dollar. Almost three-quarters of
Canada’s trade is with the U.S., a strongly
dominant position that is more or less permanent. On top of that, much of the global
commodities trade is denominated in U.S.
dollars, and as such, the greenback determines an even larger part of Canada’s
global trade activity. A third key factor is
that trade across the globe in less-developed markets is often cleared in U.S.
dollars as a means of avoiding currency
risks in countries where no hedging facili-
34 • Canadian Sailings • March 30, 2015
ties are available. Given this further dominance of the U.S. dollar in our trade
activities, is that the end of the story?
Not quite. Increasingly, larger emerging markets are moving toward local
currency transactions. As global ﬁnancial
markets expand, derivatives are increasing
the scope of currency hedging and other
means of mitigating currency risk. At the
same time, Canada’s international trade is
diversifying away from our traditional markets. Exports to emerging markets have
almost tripled as a share of GDP since 2000,
a trend that is expected to continue into the
long-term future. At the same time, as the
world continues to globalize, spreading
technology further aﬁeld and intensifying
competitive pressures, import options are
also expanding at a very rapid pace.
Not only that, but Canada is increasingly investing in emerging markets as the
scope of domestic operations expands globally. A depreciating currency makes foreign
investments that much more expensive. But
given the increasing dispersion of trade and
foreign investment, it follows that, more and
more, Canada is exposed to a variety of
global currencies. How then are we doing
against a broader basket of currencies?
Here, the news brightens. While we
have depreciated against the greenback by
12 per cent in the past 8 months, the tradeweighted index of non-U.S. currencies is
actually remarkably ﬂat. Versus the Euro,
there has been volatility, but little overall
movement in the trend CAD-Euro rate.
Given that Canadian manufacturers are
beginning to ramp up investment in machinery and equipment, this is very good news –
Europe is a well-known source of high valueadded equipment, notably in the auto sector.
With the CETA moving closer to reality, currency stability is actually a plus.
Canada has also been an avid investor
in Mexico. Happily, the CAD-peso rate has
not moved signiﬁcantly from its trend rate,
so peso deals will not be as affected as they
might otherwise be. The same is not true
for all countries, but in general, there are a
good number of locations where, in terms
of the goods and services that we import
and the foreign investments we are
making, the currency movements are much
more stable than is currently the case with
the U.S. dollar.
This situation suggests that there may
well be a shift in the sourcing of inputs to
the Canadian production process. Sales to
the U.S. will beneﬁt from the lower loonie,
but inputs, carefully selected from other
locations, could boost margins even further.
True, many supply chains are well-established, so the ﬂexibility may not be there –
but as global growth ramps up, there are
sure to be new sources of product popping
up in a broad array of locales that provide
alternatives to Canadian buyers.
The bottom line? A weaker Canadian
dollar poses a threat to imported inputs to
Canada’s production machine, and to
future Canadian investments abroad. But
the soaring U.S. dollar isn’t the only currency in play. Movements in other
currencies are less dramatic. Perhaps this is
an opportunity to scan the globe both for
inputs to our production process and for
direct investment undertakings in less-traditional markets.
This commentary is reprinted courtesy of EDC. It is presented for
informational purposes only. It is not
intended to be a comprehensive or
detailed statement on any subject and no
representations or warranties, express or
implied, are made as to its accuracy, timeliness or completeness. Neither EDC nor
the author is liable whatsoever for any loss
or damage caused by, or resulting from,
any use of or any inaccuracies, errors or
omissions in the information provided.
sailings1060 2015-03-27 3:02 PM Page 35
Groupe Morneau opens new terminal in Anjou
Photo: Groupe Morneau
I
n the presence of numerous invited
guests, Groupe Morneau, a family company, inaugurated its brand new
transport terminal in Anjou (Montreal),
which was constructed at a cost of some
$25 million. With a surface area of
105,000 square feet, this terminal which
contains 82 loading docks will enable over
500 truck trips every day.
The location of the terminal, at the
junction of Autoroutes 40 and 25, will
allow the company to further develop its
activities across Quebec and Ontario. The
new terminal will merge the activities of
Morneau Transport, Morneau Solution,
Morneau Sego, and Morneau Global under
one roof.
“This new terminal will establish our
expertise on an even more solid foundation
by offering our clients the most important
LTL transport terminal in Quebec. Over
10,000 pallets per day can be handled in
this space, which is designed to minimize
the risk of damaging goods. As such we
maintain virtually unmatched claim rate
scores of less than 0.5 per cent, which
greatly beneﬁts all of our customers,”
explained Mr. Andre Morneau, President of
Groupe Morneau.
“In a territory as vast as ours, transportation is a vital aactivity in our economy
and crucial to maintaining the supply of
goods and services to many communities. I
would thus like to congratulate Groupe
Morneau for its growing capacity to innovate and adapt to their clients’ needs for
over 70 years now,” said Mr. Jacques
Daoust, Quebec Minister of the Economy,
Innovation, and Exports.
These new facilities will also contain a
maintenance centre and a technology
centre, as well as equipment for the treatment of containers destined for intermodal
and international transport via Morneau’s
Global division.
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For additional information, please visit our website at
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Or contact your closest
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destinations
March 30, 2015 • Canadian Sailings • 35
sailings1060 2015-03-27 3:02 PM Page 36
CN continues major rehabilitation work on
Quebec Bridge
36 • Canadian Sailings • March 30, 2015
Photo: Wikipedia
C
N announced its annual major work
program for the Quebec Bridge. The
cost of the work to be undertaken in
2015 is estimated at C$7 million, bringing
the total investment in the bridge since
2013 to C$17 million. CN plans to invest
up to C$95 million over 10 years to ensure
the safety and long-term viability of the
Quebec Bridge. The work is part of the
major work program that CN and the Ministère des transports du Québec (MTQ)
agreed upon in 2013 following a thorough
inspection of the entire bridge by engineering ﬁrm Roche. The agreement reﬂects the
dual purpose of the bridge and takes into
account the fact that the bridge will mainly
be used for road trafﬁc.
In addition to providing for major
investments, the agreement also outlines
up-to-date road surface design and management by best practices. MTQ has indicated
it intends to replace the entire roadway
deck over the next few years. The new
deck, which is expected to cost tens of millions of dollars, will feature improvements
mandated under the agreement, including
an improved drainage system allowing deicing salt-contaminated water to drain off to
prevent wear and extend the life of the
bridge. MTQ’s investments are in addition
to those made under the major rehabilitation program in partnership with CN.
Claude Mongeau, President and Chief
Executive Ofﬁcer of CN, said: “CN has
been investing heavily in the Quebec Bridge
for over a century to extend its life even
though it has been used less and less for rail
trafﬁc. The major rehabilitation program,
which covers the 2015 program announced
today, conﬁrms CN’s ongoing commitment
to preserve a strategic piece of infrastructure
for Quebec City.”
sailings1060 2015-03-27 4:38 PM Page 37
Hapag-Lloyd has its work cut out to turn the business
around after a poor 2014
BY MIKE WACKETT
Photo: Wikipedia
A
nother “highly dissatisfying result” from ocean carrier HapagLloyd saw it post a net loss of 604 million euros ($654
million) for 2014, which its Chief Executive blamed on low
freight rates and the integration costs of the merging of CSAV’s container business. In a teleconference presentation of the German
carrier’s results – signiﬁcantly worse than the $134-million loss in
2013 – Chief Executive Rolf Habben Jansen claimed that 2015 was
“off to a good start”, but warned, “we have our work cut out for us
in the next 24 months” to turn the business around.
The world’s fourth largest container line since the takeover of
CSAV, Hapag-Lloyd grew volumes by 7.5 per cent last year to 5.9m
TEUs, while revenue rose 3.7 per cent to 6.8 billion euros. However,
average freight rates fell by 3.2 per cent to $1,434 per TEU. This
compares with the $1,325 per TEU average rate of the highly profitable Maersk Line last year.
An EBIT loss of 383 million euros was recorded in the
accounts, which includes 107 million euros of “transaction and
restructuring costs” and 127 million euros of impairment charges as
it off-loaded 16 ships that were “old, inefﬁcient and too small”,
according to Mr. Habben Jansen. The restructuring costs were
mainly in the form of severance payments, payments to agents and
the consequence of ofﬁce closures, he said, adding that “staff selection is nearly 90 per cent complete” and that the new ofﬁces had
been selected, which he said would “see us moving around a lot” in
the next few months. But, Mr. Habben Jansen admitted that the
underlying EBIT loss of 112 million euros was “most worrying”,
given that freight rates, which he described as the “big joker in the
pack”, continued to be under tremendous pressure on all trades and
were unlikely to improve anytime soon. Indeed, Hapag-Lloyd suffered a full-house of average freight decreases on its ﬁve main
tradelanes in 2014 – with a notable 6 per cent decline between Asia
and Europe, which had deteriorated to $1,122 per TEU by the
fourth quarter.
Nevertheless, the executive maintained that the integration of
CSAV into the ‘new’ Hapag-Lloyd was on track and expected to be
completed by the end of June. He remained conﬁdent that the promised annual $300 million in synergy savings could begin in
2016/2017. “We are preparing ourselves for rates that do not go
up,” said Mr Habben Jansen. In order to achieve its aspiration of a
“substantial positive operating result in 2015”, the improvement
will have to come purely from cost reduction. Moreover, HapagLloyd will be praying that fuel prices stay at their current levels, not
least because around 20 per cent of the fuel now used in HapagLloyd ships has to be low sulphur content.
Mr. Habben Jansen said he hoped that the alliances could bring
some stability to trades, but admitted to not being “super-satisﬁed”
with Hapag-Lloyd’s membership of the G6 last year – although there
had been an improvement.
At 1m TEU of capacity, Hapag-Lloyd is now the world’s fourthlargest carrier following the integration of CSAV in its quest to “catch
up the top three players”. Its position in the rankings could be shortlived however, given that ﬁfth-placed Evergreen, with 900,000-TEU
capacity, has aggressive intentions to join the “18,000-plus TEU
vessel club”.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)
Port of Toronto experienced strong growth in 2014
M
ore than two million tonnes of cargo were delivered last
year through the port of Toronto, marking an eight-year
high for marine imports and confirming the port’s position as a key contributor to Toronto’s transportation infrastructure
and economic strength. More than 160 ships visited the port in
2014, resulting in the highest level of imports since 2007 and
representing a 30 per cent increase over 2013 tonnages. The
cargos carried into the port last year included stone and aggregate
imports which increased by 50 per cent, and salt imports which
increased nearly 150 per cent, over the year prior.
“From the salt used on our roads to keep drivers safe to the
concrete used in Toronto’s booming construction industry, the
goods delivered through Toronto’s port have a significant impact
on the people, projects, and industries of Toronto,” said Geoffrey
Wilson, Chief Executive Officer, PortsToronto. “This eight-year
high underlines the importance of maintaining and marketing the
operation of the port.” Increased imports through the port has a
positive impact on the environment and traffic congestion, given
that the more than two million tonnes of cargo delivered by ship
took approximately 50,000, 40-tonne trucks off Toronto’s already
congested roads and highways.
In addition to the increase in cargo delivered through the
port, six cruise ships carrying a total of more than 2,900 passengers visited PortsToronto’s Cruise Ship Terminal in 2014, nearly
five times the number of passengers who visited Toronto via the
port the year prior. The 2015 cruise season is expected to be one
of the Port’s busiest to date, with 15 ships bringing more than
3,500 visitors to Toronto from May through to October.
Since 1793, Port of Toronto has served as Toronto’s gateway
to the St. Lawrence Seaway and to marine ports around the
world. Before the introduction of the shipping container, and its
use as the major means of moving non-bulk cargo, such items as
automobiles, rubber and farm machinery were common cargo
through the port. Now serving primarily as a bulk cargo facility,
the port’s unique location minutes from downtown Toronto provides a network of intermodal links to road, rail and air
transportation, allowing goods from overseas and the U.S. to flow
in and out of the city.
March 30, 2015 • Canadian Sailings • 37
sailings1060 2015-03-27 3:02 PM Page 38
OOCL profits soar with increased market share and a
bonus from cheaper fuel
BY MIKE WACKETT
OCL parent Orient Overseas International Ltd has posted a net proﬁt
of $271m for 2014, compared with
the $47m plus achieved the year before, as
the carrier beneﬁted from a 10 per cent
annual fuel bill reduction as a result of both
decreased bunker prices and reduced consumption by its ﬂeet. The line’s liftings
increased by 5.5 per cent to 5.6m TEUs,
while revenue improved by 3.5 per cent to
$6.5bn with average freight rates declining
1.9 per cent – not too far away from
market-leader Maersk Line’s 1.6 per cent
fall in rates.
OOCL was clearly successful in grabbing market share between Asia and
Europe last year, its volumes spiking by an
above-par growth of 16.1 per cent on
2013, to reach 979,659 TEUs and revenues of $1.2bn, up 14.4 per cent. With
the exception of the transatlantic, OOCL
reported growth on all tradelanes – the
biggest, intra-Asia & Australasia, growing
3.9 per cent to reach 2.9m TEUs.
Unlike G6 partner APL, which blamed
much of its performance ills on U.S. west
coast congestion, OOCL achieved a 4.5 per
cent increase in its transpaciﬁc trade last
year to reach 1.29m TEUs, although it
admitted logistics bottlenecks in the U.S.
had been a challenge. Chairman CC Tung
described 2014 as an “eventful year” with
a mix of challenges – from political instability in Eastern Europe and the Middle-East
and an “unexciting growth picture in
emerging markets”. However, Mr Tung
also said that, despite geopolitical uncertainty, the company believed that global
economic demand was on a “positive trajectory”.
OOCL took delivery of two 13,208
Photo: OOCL
O
TEU ships during 2014 and this year will
receive four 8,888 TEU class vessels to
complete its current orderbook.
In an interesting development, OOCL
sold two 10-year-old 8,063 TEU ships to
non-operating containership owner Global
Ship Lease, with part of the deal seeing it
chartering the units back for a three-year
period.
Referring to OOCL’s membership of
the G6 alliance, Mr Tung was positive: “In
2014, the G6 alliance extended its network
with services covering all major east-west
trades and opened the Singapore-based
service centre to ensure that product quality is consistent and at the highest level.
Looking forward, we will continue to work
with alliance members to ensure efﬁciency,
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This full-time position is available immediately.
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38 • Canadian Sailings • March 30, 2015
quality and competiveness.”
With seven of the top-twenty ranked
carriers now having reported results for
2014, ﬁve, including OOCL, have posted
positive earnings, with only APL and MOL
delivering losses. Nevertheless, the full
beneﬁt of substantially lower fuel costs has
still to work its way through into the
accounts of carriers, but the danger is that
lines may erode much this cost beneﬁt by
discounting rates in order to ﬁll half-empty
ships in what is now a soft market, following the Chinese New Year shutdown. Most
carriers seem to agree that freight rate pressure will continue for the foreseeable future
as overcapacity continues in the industry.
Reprinted courtesy of The Loadstar
(www.loadstar.co.uk)
CARGO
NAVIGATORS
Tel.: (905) 405-0808 • Fax: (905) 405-0202
Email: [email protected]
TO PLACE YOUR ADVERTISEMENTS IN
Canadian Sailings “CAREER CENTRE”
Please call France Normandeau at
514-556-3042 x226
Career ads appear on our website
canadiansailings.ca
sailings1060 2015-03-27 3:02 PM Page 39
Abusing dangerous goods
shipping rules should be a
criminal offence, says IATA
BY ALEX LENNANE
2015
ATA members have called on governments to criminalize the act
of shipping misdeclared dangerous goods. In an strong speech to
delegates at the World Cargo Symposium in Shanghai, James
Woodrow, head of IATA’s Cargo Committee and Chief of Cathay
Paciﬁc Cargo, told the industry it must unite to stop non-declared
dangerous goods being sent by air. “Flagrant abuses of dangerous
goods shipping regulations, which place aircraft safety at risk, must
be criminalized, as are other actions which place aircraft safety at
risk,” he said. “Government authorities must step up and take
responsibility for regulating producers and exporters.”
The industry has seen an increase in the mislabelling of batteries and in non-declared shipments – in particular from e-commerce
sites which use normal postal services. Mr. Woodrow’s remarks
echoed comments by IATA CEO Tony Tyler, who noted that a supplier on Alibaba claimed it would re-label 300-watt-hour batteries as
100-watt-hours simply so they could be sent by air without restrictions.
Recent research from the U.S. FAA concluded that badly packaged batteries could cause ﬁres and threaten aircraft.
“Disappointingly, we are seeing some wilful non-compliance in the
area of lithium batteries,” said Mr. Tyler. He added: “The rise of ecommerce and the ability of small businesses to export to a global
audience has created a signiﬁcant new market of shippers who are
not necessarily familiar with the rules.”
IATA said it was working with Alibaba and other e-commerce
companies to help try to educate shippers. It also called for labelling
at post ofﬁces and the wide dissemination of information. “The problem is not with the regulations, but with people who don’t conform
to regulations,” said IATA Cargo chief Glyn Hughes.
Pledging a series of campaigns both to widen awareness and try
to make non-declaration a criminal offence, he added that counterfeit batteries should also be more heavily regulated. “There is a
double risk here – and it’s a consumer safety issue.” Mr. Woodrow
said the industry would try to ensure shippers who obeyed the rules
were not affected by any more stringent measures.
“We must increase the level of shipment assessments and
trusted shipper programs, in order that those who comply with the
regulations are not unduly impacted, and call upon reputable manufacturers in the hi- tech sector to join us in this demand.” Somewhat
ironically, at the event companies handed out battery banks for delegates. IATA issued a warning that they must be carried in hand
luggage, not aircraft holds.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)
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www.green-marine.org/greentech
418 649-6004
March 30, 2015 • Canadian Sailings • 39
sailings1060 2015-03-27 3:02 PM Page 40
Port of Montreal receives award of excellence for
cruise operations
Photo: Montreal Port Authority
P
ort of Montreal’s cruise operations
were singled out yet again by the
prestigious magazine Cruise Insight.
The port received the Best Turnaround
Destination award on March 16, in parallel
with the Seatrade Cruise Shipping international convention and trade show in
Miami. This award recognizes cruise destinations around the world that offer
disembarking and boarding passengers a
superior welcome.
This is the fourth time that Port of
Montreal has won this award (2010, 2011,
2012 and 2015) and the eleventh recognition that the magazine has awarded it since
2008. It received the Most Efficient Port
Services award in 2013, Most Responsive
Port in 2012, Most Efficient Terminal
Operator in 2011 and 2012 and Best Turnaround Port Operations in 2008, 2009 and
2011.
“This award conﬁrms Montreal’s
importance as a destination of choice for
cruise passengers while drawing attention
to the efforts of our personnel and our Montreal Cruise Committee partners, who are
the keys to success in the steady expansion
of the cruise market,” stated Sylvie Vachon,
President and CEO of Montreal Port
Authority.
Ms. Vachon thanked the shipping companies and all the workers involved in
cruise operations in Montreal, without
whom Port of Montreal could not have won
this award.
Montreal’s cruise market has ﬂourished in recent years, and continued growth
is projected. In 2014, the port welcomed
71,044 passengers and crew members, a
2.1 per cent increase. The new cruise
season, which starts May 7 and ends October 29, should break records with more
than 90,000 passengers and crew members
expected. Onassis Prize awarded to Sauder Business School (UBC)
Professor Emeritus Trevor Heaver
T
he $200,000 Onassis Prizes are awarded once every three
years to leading researchers of shipping, ﬁnance and international trade. Professor Emeritus Heaver is sharing the shipping
award this year with globally renowned maritime economist Martin
Stopford. Heaver’s win marks the ﬁrst time the award has gone to
an academic in Canada.
“Heaver has long been a highly valued and distinguished
member of Sauder’s research community and this recognition is very
well deserved,” says Sauder’s Dean Robert Helsley, Grosvenor Professor of Cities, Business Economics and Public Policy. Heaver
introduced courses on international shipping and logistics to the University of British Columbia in the 1960s and has conducted
extensive research on the railway industry and transport policy as
well as shipping and logistics.
Heaver is widely recognized in the ﬁeld of transport economics
and logistics. He was a founding member of the World Conference
on Transport Research and of the International Association of Maritime Economists. Having represented UBC as chairman and
president of the two bodies, he helped elevate the global stature of
UBC and Vancouver in the ﬁeld. He was elected a fellow of the Chartered Institute of Logistics and Transport, and although retired, he
has undertaken teaching and research assignments in Australia,
South Africa, and Europe.
“I am particularly pleased to receive this award as an academic
based at UBC,” says Heaver. “It reﬂects a belief that I and others
have had since the 1970s that maritime economics is a global indus40 • Canadian Sailings • March 30, 2015
try requiring a truly global community of researchers and academics.
I am very glad to have helped bring this vision to reality. I have
enjoyed the support of colleagues and enthusiastic students at UBC
and of the maritime industry and federal government programs. This
support was essential to establish Vancouver as an internationally
recognized centre for maritime economics. The leadership of former
students in corporate management, and of broad economic rather
than corporate interests, led to the policy changes enabling international shipping to be based in Vancouver. It was an innovation from
which we still beneﬁt,” he said.
Heaver also notes that the recognition helps him to advocate for
continued innovation and related supply chains in Canada. “I would
like to see Canada step up its innovation in logistics and in collaboration among governments, industry and universities. It is my hope
that the current review of the Canada Transportation Act, chaired
by the Honourable David Emerson, will examine the leadership of
government in transport and logistics innovation and ﬁnd that targeted, collaborative research initiatives are warranted.”
The winners of the three Onassis Prizes – in shipping, ﬁnance
and international trade – were announced March 20 in London,
U.K. The prize is awarded by the Cass Business School in London
and sponsored by the Onassis Public Beneﬁt Foundation, bestowed
by shipping magnate Aristotle Onassis in memory of his son Alexander. The award was judged by a panel of highly regarded academics
that included two Nobel laureates.
sailings1060 2015-03-27 3:02 PM Page 41
Logistec and MSC announce expansion of Termont’s
container handling activities in Montreal
L
ogistec Corporation, a marine and environmental services
provider, and its partner MSC Canada announced that Termont Terminal Inc. has signed a long-term lease agreement
with Montreal Port Authority to manage its new Viau Terminal.
This redeveloped site will include a full-service berth for container vessels, two state-of-the-art post-Panamax cranes, a
modern automated truck-marshalling gate, an efficient intermodal service using on-terminal rail operations, and a
high-density container yard.
Termont Montréal Inc. is owned by Termont Terminal Inc.
(owned by Logistec Stevedoring Inc., a wholly-owned subsidiary
of Logistec Corporation, and Cerescorp Company) and Cortelina
International Corp. (MSC Canada through affiliated companies).
Termont Montréal Inc. has signed a long-term contract to handle
the majority of the business of Mediterranean Shipping Company
S.A. (MSC) at the port of Montreal.
“The port of Montreal is a strategic gateway for container
shipping in North America. The development of this new capacity
is not only good for Termont, MSC, and the Port, but also for
Montreal, Quebec and Canada. With its intermodal networks,
Montreal is a key facilitator for international trade. The new Viau
terminal will provide Termont with the additional space it needs
to deliver quick turnaround times and efficient cargo handling
services to Port of Montreal’s current and future customers, and
thus support MSC as it continues to grow its services through the
port of Montreal,” said Madeleine Paquin, Chair of Termont Terminal Inc. and President and CEO of Logistec Corporation.
The Viau Terminal will be operated by Termont Montréal
Inc. (Termont). In addition to its existing business at the Maisonneuve Terminal, Termont will oversee day-to-day activities at the
new Viau facility, and provide cargo and container handling,
inventory management, and transloading to truck or rail via CN
and CP rail lines.
Construction of the Viau Terminal will be completed in two
phases, the first of which will create container-handling capacity
for an additional 350,000 TEUs by 2016. The second phase will
provide facilities for another 250,000 TEUs, for a total of 600,000
TEUs at the new facility. Termont will be investing approximately
$42 million in new equipment at the Viau Terminal over a twoyear period. This includes two new ship-to-shore post-Panamax
cranes, five rubber-tire gantry cranes, six reach stackers, electrically-powered reefer stations, and a variety of tractors, trailers and
lifters. During construction of the first phase, Logistec has made
its newly purchased LHM 600 mobile harbour crane available to
support Termont’s activities.
“MSC’s commitment to the Canadian market along with the
strategic growth plans of its customers are at the core of all our
business decisions”, said Mr. Sokat Shaikh, President, MSC
Canada. “The continued expansion of our Canadian services,
hand in hand with the expansion of our global network is literally
second to none. We have learnt from our customers’ growing
needs that our supply chain network must have stability through
land-based infrastructure investments. The expansion of Termont
(Viau) terminal will further reinforce MSC’s commitment to
Canada, and serve our partners in business for years to come. We
are simply proud to be a part of Canada’s future.”
“Termont is currently operating at full capacity and handled
over 500,000 TEUs in 2014. This project will allow us to efficiently handle well over one million TEUs of container traffic and
accommodate customer growth,” said Julien Dubreuil, General
Manager of Termont Montréal Inc. “With Canada’s free trade
agreement with the European Union coming into effect next year,
this expansion will also help us maintain our competitiveness and
provide quick turnaround for our clientele.”
“I am extremely pleased that the future Viau Terminal will be
operated by Termont, a great partner for Port of Montreal since
1987,” said Sylvie Vachon, President and CEO of the Montreal
Port Authority. “I am sure that this project will be a great success,
adding a capacity of 600,000 TEUs annually.”
CITT adds logistics courses this spring to study toward
CCLP designation
“One of the most common questions CITT gets is ‘how quickly
can I earn my CCLP designation?’ People who are working toward
the CCLP designation are very career-driven and success-oriented
and don’t always want to take a break in spring and summer. They
also want the advantages of having industry’s most respected logistics designation as quickly as possible,” says Catherine Viglas,
President of CITT.
After analyzing this need, CITT adds two advanced logistics
courses to its spring-summer semester: Integrated Logistics—a key
required course for the CCLP designation—and the popular elective
Logistics Decision Modelling. These will be presented in addition to
other, CCLP-required logistics courses, Transportation Systems and
Logistics Processes. And a full suite of business courses will be available for anyone who needs these courses.
“Offering more of our advanced logistics courses year-round
will help industry people earn their CCLP designation faster. Irrespective of when they start with these industry-speciﬁc courses,
people can earn the CCLP designation in two years or less, depend-
ing on their individual situation” Viglas explains. “People with a
business background can now complete the educational requirement for the CCLP designation in only ﬁve consecutive semesters,”
she says.
The move stands to beneﬁt employers as well. The skills gap
and capacity crunch remain hot issues throughout the industry, and
more employers are using external professional development sources
to prepare promising employees for more senior roles, or support
designations as proof that their staff are highly qualiﬁed in the ﬁeld.
HR research reveals another compelling dynamic. When companies support their staff to develop their knowledge and credentials
beyond company-speciﬁc training, these companies are rewarded
with more loyal employees—not less. “This is a really important paradigm shift for companies to make,” urges Viglas. “Really
competitive organizations have already ﬁgured this out.
CITT’s spring term starts on April 23rd and runs through July.
Students can register up until April 22nd —or until individual
courses are ﬁlled – whichever comes ﬁrst.
March 30, 2015 • Canadian Sailings • 41
sailings1060 2015-03-27 3:02 PM Page 42
Contact FRANCE NORMANDEAU
[email protected]
April 1
May 18-21
THE GRUNT CLUB
Annual General Meeting (Members only)
Bonaventure Hotel (Bonaventure Room), Montreal
Contact: Wendy Altona, [email protected]
www.gruntclub.org
BREAKBULK EUROPE 2015
Antwerp Expo, Antwerp, Belgium
Contact: 973 432-5535, Adrian van Beuningen
[email protected]
www.breakbulk.com
April 14-15
IBC ENERGY'S 6TH ANNUAL CONFERENCE
Arctic Oil & Gas North America
Delta St. John’s Hotel & Conference Centre,
St. John’s, Newfoundland
Contact: +44 (0)20 7017 4402, Paul Skinner
[email protected]
www.ibcenergy.com/event/arcticnorthamerica
April 29
TRAFFIC CLUB OF MONTREAL
Inauguration & Appreciation Night
Restaurant La Verita, Dollard-des-Ormeaux, Quebec
Contact: 514-874-1207, Richard Parent, [email protected]
www.tcmtl.com
May 6
SHIPPING FEDERATION OF CANADA
14th Annual Conference
Ritz Carlton Hotel, Montreal
Contact: 514-849-2325 ext. 221, Farah Ahmad
[email protected]
www.shipfed.ca
May 7
CIFFA
66th Annual General Meeting & FCA Gala Dinner
Mississauga Convention Centre, Mississauga
Contact: 416-234-5100 x232, Nick Lutz
[email protected]
www.ciffa.com
May 21
TRAFFIC CLUB OF MONTREAL
18th Annual Lobster & Crab Party
Alexandra Dock, Iberville Terminal, Port of Montreal
Contact: 514-874-1207, Richard Parent
www.tcmtl.com
May 27-29
GREENTECH 2015
Renaissance Seattle Hotel, Seattle, Washington
Contact: 206-409-3943, Eleanor Kirtley
www.green-marine.org
June 8
TRAFFIC CLUB OF MONTREAL
Spring Golf
Rosemère Golf Club
Contact: 514-874-1207, Richard Parent
[email protected]
www.tcmtl.com
June 12
CANADIAN INTERNATIONAL FREIGHT FORWARDERS
ASSOCIATION – EASTERN REGION
FCA Gala Dinner
Plaza Volare, Montreal
Contact: 416-234-5100 x232, Nick Lutz
[email protected]
www.ciffa.com
Canadian Sailings is not responsible for errors. Please verify with event organizers for possible changes or cancellations.
BUREAU VERITAS verigates.bureauveritas.ca................................... 11
MONTREAL GATEWAY TERMINALS PARTNERSIP mtrtml.com ..... 32
CANFORNAV Canfornav.com ............................................................ 5
MSC (CANADA) mscgva.ch.............................................................. 3
CARGO NAVIGATORS carrib-trans.com ......................................... 38
CHINA SHIPPING chinashipping.ca .............................................. 35
PORT METRO VANCOUVER portmetrovancouver.com ..................... 12
PORT OF HALIFAX portofhalifax.ca ................................................. 25
CIFFA ciffa.com ............................................................................. 23
CN cn.ca................................................................................. 2, OBC
GREEN MARINE green-marine.org.................................................. 39
PROTOS SHIPPING protos.ca........................................................ 30
SEABOARD MARINE seaboardmarine.com ..................................... 36
HWY H2O hwyh20.com................................................................... 10
SHIPPING FEDERATION OF CANADA shipfed.ca............................ 27
MAHER TERMINALS maherterminals.com ..................................... 28
SVITZER svitzer.com ...................................................................... 19
42 • Canadian Sailings • March 30, 2015
sailings1060 2015-03-27 3:02 PM Page 43
ISSUE DATE
APRIL 27
2015
Be part of this year’s
port feature, containing
everything you need to
know about Port of Montreal
and its partners and much,
much more …
This timely feature
affords you an exceptional
advertising opportunity
to showcase your facilities
and port services to
the transportation and
import/export community
across Canada.
ADVERTISING
DEADLINE
APRIL 17
PORT OF
MONTREAL
FEATURE
IN THIS ISSUE:
• 2015: Pivotal Year for Port of Montreal
• Port strategically well-positioned to serve Europe, ready
to capitalize on Canada-EU free trade
• Port’s markets, cargoes continue to diversify
• Big year for port developments, projects
• ‘Port+’ strategy: a commitment to provide value-added
services
… and more
FOR ADVERTISING INFORMATION
Joyce Hammock
Publisher & Editor
Tel.: (514) 556-3042
Don Burns,
Advertising Representative
Tel.: (450) 458-5833
Canadian Transportation &
Sailingswww.canadiansaiings.ca
Trade Logistics
March 30, 2015 • Canadian Sailings • 43
sailings1060 2015-03-27 3:02 PM Page 44
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