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Marine industry to see trade benefits

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By: Leo Ryan
2014-01-01

For Canadian ports, shipping lines and terminal operators, especially in Eastern Canada, vastly-enhanced European horizons are beckoning. Although last fall’s Canada-European Union Comprehensive Economic and Trade Agreement (CETA) in principle may not be ratified or implemented until late 2015 or in 2016, the potential benefits of virtually total free trade across the Atlantic for shippers and the marine shipping are already high up on the radar screens.

On several occasions recently at industry events, Transport Minister Lisa Raitt went on record as an avid booster of CETA, hailing it as an important opportunity to diversify Canada’s trade. “The US is important but the EU represents an even bigger market.”

Wendy Zatylny, president of the Association of Canadian Port Authorities, has declared that the expected future “increased volume of cargo will have a direct positive impact on Canadian ports.”

But she has also cautioned that the ports need additional infrastructure funding from the federal government complementing private investments to cater to growing cargo demand. She refers to a study conducted by the Association and Transport Canada pointing to “a $5.8 billion gap in funds needed to pay for port infrastructure needs.”

While some analysts question federal claims from a joint study that CETA will boost economic activity in Canada by as much as $12 billion and create about 80,000 jobs by obtaining privileged access to a market of 500 million people, there is a wide consensus that the historic accord will boost trade – the great bulk of which moves by ship. In sectors like agriculture, strong gains are foreseen for Canadian exports. In others, like commodities, the gains may be marginal, at least initially, due to global market conditions. In certain finished goods, advances are anticipated.

With two-way merchandise trade of nearly $90 billion, the 28-nation European Union is Canada’s second largest trading partner after the United States in goods and services. The trade balance is largely in the EU’s favor. Generally-speaking, the Canadian exports affected include passenger cars, auto and aerospace parts, medical and IT equipment, chemicals and plastic products, grains and oils, dairy products, forest and lumber products, seafood products, metals, minerals, iron and steel.

Among Canadian carriers, Fednav’s FALLine, which has been operating a regular service between northern Europe and the St. Lawrence Seaway-Great Lakes corridor for many years, appears well positioned to expand its business. Montreal-based Fednav is the largest ocean-going user of the waterway, accounting for approximately 40% of the deep-sea vessel transits.

Comments Mark Pathy, co-CEO of Montreal-based Fednav: “We would expect the agreement to improve the economics of both traditional FALLine cargoes inbound, namely steel and general cargo, as well as agri-exports outbound, which could be quite positive for the Seaway.”

Terence Bowles, president of the St. Lawrence Seaway Management Corporation, agrees that CETA “holds promise for increased Seaway cargo.”

In the past few years, traffic on the bi-national waterway has slipped below 40 million tonnes. Operating at below 50% capacity, there is clearly room to grow beyond the success of various incentives encouraging new cargo.

With the prospect of the elimination of EU tariffs averaging about 14 per cent on agricultural products, Tim Heney, president and CEO of the Port of Thunder Bay on the tip of Lake Superior, says: “We are a natural port to benefit from shipping increased grain exports to Europe. Quality wheat from the Prairies remains in high demand, and we have the largest storage area in North America for grain products.”

During the peak years of the early 1980’s, prior to a major shift of Canadian grain exports away from Europe to Asia via the West Coast, Thunder Bay handled as much as 16 million tonnes annually. Current levels of 6 million tonnes should evolve upwards, particularly if increased imported steel brings more ocean vessels through the Seaway, suggests Heney. These vessels would carry more grain to Europe on their backhaul voyages.

According to the Canadian Agri-Food Trade Alliance, once in force, CETA will bolster Canadian agriculture and food exports to Europe by $1.5 billion on an annual basis. This would encompass $600 million in extra beef sales, $400 million in pork, $100 million in grains and oilseeds, $100 million in products containing sugar and $300 million in processed foods, fruits and vegetables.

Exports to Europe of Canadian beef, mainly from Alberta, will increase fourfold to an estimated 65,000 tonnes. The annual quota for Canadian pork exports, chiefly from Quebec, is to soar from a current 6,000 tonnes to some 80,000 tonnes.

Port of Montreal well placed among St. Lawrence ports

One port that appears especially well-placed to benefit from CETA is Montreal.

Indeed, when the tentative deal was announced in late October, Sylvie Vachon, president and CEO of the Montreal Port Authority, was quick to remark: “We are the leading port on the North American East Coast for (container) trade between Northern Europe and North America’s industrial heartland. Within the context of the new free trade agreement with the European Union, our vision to expand the port to our land at Contrecoeur (on the St. Lawrence River) takes on added significance.”

“It’s a home-run for Canada, and certainly opens the door, for instance, to increased exports in reefer containers of beef and pork as well as some manufactured products,” enthusiastically declares Kevin Doherty, CEO of Montreal Gateway Terminals Partnership, biggest container operator at the port.

European markets presently account for two-thirds of Montreal’s container throughput of 1.3 million TEUs.

In an interview, Tony Boemi, vice-president of growth and development, agreed that the advent of CETA was a key factor sparking the creation on port territory of a facility specialization in the containerization of agricultural products for local and international markets. It is slated to open in the second quarter of this year.

For his part, Mario Girard, president and CEO of the Quebec Port Authority, has qualified CETA as “excellent news not only for the Port of Quebec but also for the region and the country as a whole.” The port trades with 10 European countries, notably in agro-food and energy products, metals and minerals.

On the north shore of the St. Lawrence River, the Port of Sept-Iles is enjoying a tremendous boom as North America’s leading iron ore port thanks to a surge of mining developments in the Labrador Trough, with 2013 cargo likely surpassing 31 million tonnes and much more predicted in the years ahead.

But Pierre Gagnon, president and CEO of the Sept-Iles Port Authority, stresses that China-led Asia constitutes the leading market rather than Europe in the foreseeable future. In an opinion shared by the management of local aluminum producer Aluminerie Alouette, the reduction or elimination of customs duties alone is not a sufficient element to provoke a significant transfer of markets in Europe from current world commodity and metals suppliers.

Global alliances maintain Atlantic commitment

On the Atlantic Coast, the Port of Halifax, which is operating at under half capacity, has been a long-time supporter of freer trade with Europe. Karen Oldfield, president and CEO, sees CETA contributing to increased cargo (including seafood exports) through the Nova Scotia port that has invested heavily in new infrastructure and can today handle the largest containerships calling on the North American East Coast.

CETA could also be potentially beneficial for proposed container terminal projects in the Strait of Canso and Sydney, Nova Scotia going back several years. But the viability of these projects still not fully launched in construction remains a question mark for industry observers.

Meanwhile, there seems no danger that Canadian shippers and the ports of Montreal and Halifax will be negatively affected by major rival, global shipping alliances focusing on the giant US market and revamping their schedules. Maersk Line, MSC and CMA CGM recently announced they will include the transatlantic trade lane alongside the Far East-Europe and Transpacific routes in their P3 network alliance from the second quarter of 2014. And Hapag-Lloyd, a member of the G6 alliance, has indicated it will continue to operate its two Montreal services of SLCS 1 and SLCS 2.



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