Weakened by the recession in 2009, the Great Lakes shipping industry experienced a turnaround in 2010 that is reflected by statistics: U.S.-flagged tonnage was up 34 percent through November, with a 17 percent increase in exports through the St. Lawrence Seaway.
|Bulk carriers sail in the St. Lawrence Seaway. After volumes plunged in 2009, Great Lakes shipping has staged a comeback, as shipments of grain and iron ore are increasing. (Photo courtesy St. Lawrence Seaway Development Corp.)|
For operators like Mark Barker, the rebound registered in a more personal way. All of his companyâ€™s ships were back on the water, and there were more jobs for people who wanted them.
â€œItâ€™s gone a lot better,â€ said Barker, president of Interlake Steamship Co. of Richfield, Ohio, as the season was winding down in mid-December. â€œWe had ships tied up in 2009 and this year we brought our whole fleet out. We tried to cycle guys through (in 2009) to get everyone some work, but there were definitely some people who didnâ€™t get as much as they needed. Weâ€™ve had more people working and more consistent work.â€
The gains have been paced by an increase in demand for iron ore, as U.S. and foreign steelmakers respond to a recovery in the manufacturing sector. Thatâ€™s been the case for Interlake, which operates a fleet of 10 â€œlakersâ€ transporting coal, iron ore, stone and grain between U.S. ports.
â€œIn 2009, steelmaking utilization was down to about 40 percent, and itâ€™s back up in the 60 to 70 percent range now,â€ Barker said. â€œI donâ€™t think weâ€™ll be back to pre-2008 levels real soon, but things come back. Weâ€™ve rebounded a little bit as far as the steel sector goes.â€
|Interlake Steamship Co.â€™s 767-foot Kaye E. Barker delivers a load of coal to a power plant at Marquette, Mich. (Photo courtesy Interlake Steamship Co.)|
That trend is reflected at major U.S. ports. At the Port of Duluth-Superior on Lake Superior, the largest port on the lakes, year-to-date tonnage was up 25 percent through November. Domestic shipments of iron ore nearly doubled. At the Port of Toledo on Lake Erie, overall tonnage was up 20 percent, led by a 45 percent increase in iron ore.
U.S. ports and shippers on the Great Lakes also got a boost in 2010 from an unlikely source: Russia. Drought and fires devastated the grain harvest there and in the former Soviet republics, prompting the government to ban grain exports. Flooding in Canadaâ€™s prairie provinces further reduced the global wheat supply.
â€œThe shortages abroad caused increased demand from grain-importing countries that the U.S. was able to fill,â€ said Nancy Alcalde, spokeswoman for the St. Lawrence Seaway Development Corp. â€œU.S. farmers planted record acreage for wheat and benefitted from excellent weather.â€
Exports of grain and grain byproducts at the Port of Duluth-Superior were up 42 percent through November, with grain tonnage through the St. Lawrence Seaway rising 4 percent despite a sharp decline in Canadian shipments. Alcalde said high barge freight rates on the Mississippi River and low freight rates for smaller seaway-sized vessels contributed to the increase.
Russia has announced that its ban will extend until July, and the seaway is expected to maintain a favorable position in the world grain market until then, Alcalde said. But the lakes industry will likely give back those gains in the future.
â€œThe unique circumstances that led to the substantial increase in (U.S.) grain exports through the seaway in 2010 are not considered to represent a long-term trend,â€ she said.
Glen Nekvasil, vice president of corporate communications for the Lake Carriersâ€™ Association (LCA), said the gains of 2010 are tempered by the fact that U.S.-flagged cargos were still 10 percent behind the five-year average through October. The LCA represents 18 American companies operating in the Great Lakes.
â€œThe revival in steel production is driving the upswing,â€ he said. â€œIt is important to remember, however, that our economy is still not hitting on all cylinders. … The construction industry is still struggling, so that impacts demand for aggregate (limestone). Ontarioâ€™s decision to phase out coal-fired power plants has really bit into the coal trade.â€
While the prospects for continued improvement for the fleet hinge on the economic recovery, three other concerns loom large for the industry: what Nekvasil calls â€œthe dredging crisis;â€ tougher ballast water treatment rules designed to prevent the introduction of invasive species into the lakes; and the need to upgrade vessels to comply with stricter air pollution regulations.
The most pressing need, Nekvasil said, is reducing the backlog of dredging. That will require more federal funding, but a bill to provide it â€” the Water Resources Development Act of 2010 â€” was awaiting action by Congress at press time.
â€œAfter a couple of years of reducing the backlog, it grew again (in 2010) and so in total, 15.5 million cubic yards of sediment clog our ports and waterways,â€ Nekvasil said. â€œLight loading â€” carrying less than full loads â€” remains the norm on the lakes.â€
Barker said his company is frequently in contact with the U.S. Army Corps of Engineers about areas that need to be dredged. The Corps has to prioritize which harbors are dredged by the tonnage they handle, which is problematic for shippers.
â€œThere are harbors that have been neglected because of funding,â€ he said. â€œDunkirk (New York) has been shut down altogether because they canâ€™t justify dredging that harbor. So that power plant now has to get fuel via rail instead of water. There are issues where we have to light-load, so weâ€™re not maximizing efficiency.â€
New restrictions for ballast water treatment and air emissions pose a more expensive hurdle for the industry, with tougher ballast guidelines scheduled to be implemented as soon as 2012 in New York. While shippers await the outcome of a U.S. Maritime Administration (MarAd) study of the potential impact of the new rules and how the government might help companies comply, many have already taken steps to be prepared.
Barker said Interlake has been following a best management practice from the LCA for ballast water, even though his vessels donâ€™t leave the Great Lakes and donâ€™t discharge water from outside the ecosystem.
â€œWeâ€™ve been doing best practices for many years now where we check our ballast screens and pump in and out instead of (the water) just gravitating,â€ he said. â€œWeâ€™re waiting to see what comes up for rules. We donâ€™t introduce invasive species.â€
One of the biggest concerns about the installation of new systems to treat ballast water is the volume of water that lakers discharge when theyâ€™re in port, Barker said.
â€œRight now I donâ€™t know that thereâ€™s a system that can handle the amount of water that we pump in during the time that weâ€™re in port,â€ he said. â€œWe are unique up here because I can discharge 60,000 tons of cargo in eight hours, so Iâ€™m putting on or taking off a lot of water in the process of that. When saltwater vessels come in, theyâ€™re here for a longer duration.â€
MarAd has recognized that problem, with Maritime Administrator David Matsuda citing â€œthe lack of available shipboard-proven technologiesâ€ for treating such large volumes of water. If the technology existed, Barker said, the costs would be great.
â€œSome of my ships have up to 18 ballast pumps, so youâ€™d need a system for each pump,â€ he said. â€œIf you took a system that we donâ€™t even think will work and you just install that system, weâ€™re talking over $20 million a ship, maybe, and I still wonâ€™t be guaranteeing my ballast discharge flow rates. So that means a ship might unload slower, which means how much cargo I can carry in a year decreases.â€
Nekvasil said legislation is needed to establish a uniform national standard for ballast water management, because itâ€™s difficult to comply with the patchwork of state rules.
â€œOn the lakes, there must also be a recognition that our vessels never leave the system, so they have never introduced an exotic,â€ he said.
In November, MarAd announced it was providing $4 million to upgrade the Great Ships Initiative facility in Duluth-Superior Harbor to test new technologies for removing â€œunwelcome speciesâ€ from ballast water tanks. MarAd also commissioned the U.S.-Flag Great Lakes Fleet Revitalization Study, scheduled to be completed this fall, which will review market conditions, port infrastructure, and public and private investment options to help the fleet comply with changes in ballast water and air emissions regulations.
Barker said air emissions continue to be a focus for Interlake, which recently upgraded three of its vessels â€” two steam and one diesel â€” with new engines. Repowering vessels helps them stay in compliance while improving profitability, Barker said.
â€œIt ensures the longevity of the vessels and makes them more efficient,â€ he said. â€œTheyâ€™re projects we undertook on our own nickel. Some of my ships date back to 1952. There comes a time to bring the reliability back up to par, and the way we do it is to reinvest in the vessel and technology.â€
While shippers await the completion of the MarAd study and specifics on what theyâ€™ll need to do to keep their vessels in compliance, Barker is cautiously optimistic about the future of the Great Lakes fleet.
â€œI think we have a pretty steady business up here,â€ he said. â€œThere hasnâ€™t been real growth along the lines of the container industry, but we supply critical manufacturing: steel, power plants, generating stations and the construction side. Seventy percent of manufacturing in the United States is based around the Great Lakes, and weâ€™re a key component to that. But if the nation is weak, I think our business will be along those lines.â€
Nekvasil agreed, noting that while many shipping companies put people back to work in 2010, more needs to be done to restore the work force to pre-recession levels.
â€œWeâ€™ve seen a major upturn, but still had several ships that did not operate last year,â€ he said. â€œItâ€™s hard to say we gained jobs â€” we brought back 10 to 15 percent of laid-off mariners. America is on the mend, but there is still much ground to be regained.â€