BREAKBULK SPECIAL REPORT
By JAN BERINGER
October 5, 2009
Rohde & Liesenfeld Canada’s current unloading of the heavy-lift vessel Jumbo Vision at Thunder Bay once again validates the viability of this new gateway. The shipment consists of 34 heavy wall vessels, which are destined for the Fort McMurray oilsands region. The heaviest is 282 tonnes and the dimensions of the largest are 42 metres long and seven metres wide.
Cargo from all over the world can be brought up the St. Lawrence Seaway and through the Great Lakes to the geographic centre of North America where Thunder Bay is located. Delivery to the rail terminal at Lynton is capable with a single rail line, CN, or over the road by truck service.
Thunder Bay’s Keefer Terminal has a 200-railcar marshalling yard to build trains, a 10-acre paved intermodal yard with toplifter and four warehouses totalling 550,000 square feet. Heated storage is available up to 60,000 square feet. There are 15 acres of outdoor paved storage and three acres of outdoor gravel storage with 30 acres available for immediate development.
The Thunder Bay facilities have numerous advantages. The single rail line connection via CN simplifies the clearance procedure and avoids the onerous insurance requirements of U.S. railroads. The rail transit time to Lynton is faster and a direct one railroad price can be negotiated.
The Port of Thunder Bay offers a wide open lay-down area for project cargoes, paved storage surfaces, a direct dock wall rail line to the ocean vessel and local fabricator and trade shops operated by the Thunder Bay Oil Sands Consortium.
The route, which uses water and rail modes, is considered greener than utilizing truck transportation.
In addition, CN Rail has made significant investments to convert its track between Thunder Bay and Fort McMurray to a true OD & H/H (over dimension and half height) corridor, including purchasing Athabasca Rail, which maintains the section up to the terminal at Lynton. In addition, current dimensional clearance windows allow for larger and heavier pieces than via Duluth.
CN’s investment also shows a long-term commitment to developing oilsands business through Thunder Bay and, therefore, stable rate levels should be achievable.
Besides rail access for both CN and CP, Thunder Bay also provides direct access to the Trans-Canada Highway, and truck routing, although not comparable to Houston, can still accommodate small- to medium-sized OD & H/H cargoes.
The disadvantages are that the port closes between mid-December to mid-March due to winter conditions. The long navigation distance from common sourcing points, such as Southeast Asia and China, require full charter vessel quantities of cargo to justify the ocean freight cost as compared to entry ports such as Vancouver, Wash., or Houston.
The distance from Busan, Korea, to Thunder Bay is also longer – 12,371 nautical miles that takes 45 days – compared to the distance to Houston (30 days) and Vancouver, Wash. (15 days).
Future developments
When reviewing the future of Thunder Bay, we have to look at two aspects: the port itself and the rail line to Fort McMurray. The Thunder Bay Port Authority is continuing a very aggressive plan with the recent acquisition of 30 additional acres of waterfront property adjacent to the main Keefer Terminal. This new property is currently home to inoperable grain terminals but as demand grows the plan is to remove old buildings and complete a conversion to OD & H/H cargo handling.
The rail section is the second area where future developments are going to have a large impact on the feasibility of OD & H/H transport. In a recent meeting with CN Rail, we were informed that they are continuing to push the dimensional envelope on this route with test runs of larger pieces. They have identified the latest constraint to be a bridge running above the track and discussion is taking place to modify the support posts in order to increase the allowable cargo width.
In September, R&L was also to deliver 34 heavy wall vessels to Thunder Bay and the clearances obtained for the largest of those will again be pushing the envelope beyond what has been done before.
(Currently, we are limited to 69,000 pounds per axle. As of mid-2010, the maximum of 71,500 pounds per axle will be able to move 12 months of the year on the CN track from Thunder Bay to the Lynton siding at Fort McMurray. The general weight limitation is therefore 286,000 pounds per four axles. Currently, underslung counterweights on the railcars have to be removed prior to two bridge crossings, one at Saskatoon and the other at Edmonton, and then re-installed.)
The transit time from Thunder Bay to the Lynton siding is approximately two weeks for dimensional/heavyweight vessel movements.
Breakbulk trend
I always say in the shipping business, “If it’s not coming in, then it’s going out.” No more is that truer than in today’s market, where we have taken an about-face from the mega projects in oilsands and wind energy fuelling our economic growth, to the stark reality of a growing trend of dismantling and shipping out Canadian assets. Assets, for example, such as auto parts plants, forestry and steel mills, shipyards and other brick and mortar businesses that are being loaded onto breakbulk and container vessels destined for growth markets like India and China. In addition, mobile assets such as drilling rigs, cranes and heavy equipment are being auctioned off across Canada and shipped out to overseas buyers. This trend is directly linked to the downturn in our Canadian oil and gas and mining sector, where this equipment is now no longer required and equipment owners are desperate to dispose of the assets as quickly as possible.
The economic reality is that increasing environmental restrictions and the high cost of unionized labour in North America are shifting our brick and mortar plant and equipment assets to overseas markets.
Since the economic crisis hit us head on, we have seen a substantial increase in our own business revenues involving the dismantling and shipping of plants and equipment – almost to the point that we are as busy shipping out equipment as we were previously shipping in new equipment. The assets are often almost new equipment, as in the case of plastics injection moulding equipment and certain forest products equipment, imported by companies in the last one to five years. All are now being shipped out to overseas buyers after an abrupt change in market conditions that makes these plants no longer viable business operating units in Canada.
Dismantling and shipping out Canada’s assets is not a sustainable business model for fuelling export growth. As long as the economics of operating plants in Canada are what they are, the assets will continue to be relocated.
Other areas of current breakbulk activities in the project sector can be traced to mining equipment being imported and exported for the development of potash plants. The mining sector involving potash seems to have ignored the economic downturn, primarily because the end-product of these mines, potash, is essentially the main ingredient of fertilizer, and is and always will be a growth market as the world’s population grows.
We are currently handling the logistics for several large potash mines being developed in Saskatchewan.
An emerging new business opportunity in Canada is setting up plants for processing essentially waste logs from pine beetle-damaged forests in Western Canada to produce wood pellets. These pellets are then shipped to markets in Europe for wood burning stoves and other heating and power uses.
In my opinion, short term, the relocation of assets out of Canada does represent a stimulus package for both breakbulk and container line vessel operators.
Having said that, the mega projects in the oilsands area of Western Canada are going to come back on stream in a big way once oil levels attain a sustainable price point in the $80 range. This will again result in mega amounts of equipment coming in from offshore markets filling the holds of heavy-lift ships calling traditional project ports like Houston and Duluth.
Watch, though, for emerging new project ports such as Thunder Bay – due to the efforts of CN Rail to open up a high-wide rail corridor from Thunder Bay out west – and Vancouver, Wash., at the mouth of the Columbia River, for moving breakbulk cargoes up the Columbia and connecting Snake River to ports inland all the way up to Lewiston, Idaho, where the trucking routes to the oilsands are being worked on by both private and government sector players.
The breakbulk project market is bad, but not that bad, and, in my opinion, the market demand for space – be it in breakbulk holds or on container vessels being driven by new trends in cargoes – is making it very difficult to say where we will be in 12 months. Right now, Rohde & Liesenfeld, as an international project freight forwarding company, is still very busy.
Jan Beringer is president and CEO of Rohde & Liesenfeld Canada Inc.