Posted on: November 19th, 2017
By Keith Norbury
Has a recently reported uptick in the Alberta economy resulted in more project cargo shipments across the prairie province? It depends on the company doing the hauling.
“Ultimately, we have seen an increase in the heavy haul freight — and definitely in western Canada for sure, over the past six months, eight months,” said Scott Trousdale, Vice-President and Director of Business Development with Calgary-based Totran Transportation Services Ltd. However, Kevin Hutchings, owner of Leduc-based Ryash Transport Inc., said business has remained slow. “There’s no projects,” Mr. Hutchings said.
Meanwhile, John E. Stevens, President and CEO of Entrec Corporation, said that conventional oil and gas activity has picked up relative to what it was in 2016 and 2015. “But it’s not returned to the activity levels we’ve seen in 2014 and before that,” Mr. Stevens said. In addition, oil sands construction “is still a significant void compared to what it was in the past.”
And at the Port of Vancouver, Doug Mills, senior account representative for bulk and breakbulk, said that “project cargo volumes haven’t really been that strong and to that end I guess ports in general haven’t been moving a lot of overweight, oversized cargo.”
Analysts see improvement
According to news reports this summer, Alberta’s economy has been recovering. In late July, for example, a Bloomberg survey of economists predicted Alberta’s gross domestic product would increase 2.9 per cent this year. The survey also predicted growth for all the provinces for the first time since 2011. “The Canadian economy is firing on all cylinders,” the Calgary Herald quoted Bank of Nova Scotia deputy chief economist Brett House.
ATB Financial, an Alberta Crown corporation and financial institution rooted in the Social Credit government of the 1930s, forecasted in late August that Alberta’s GDP growth would be 3.2 per cent this year and a more modest 2.1 per cent in 2018. “Alberta’s economy is recovering, but it is not returning to what it looked like in 2014,” ATB’s chief economist Todd Hirsch said in a news release accompanying that August economic outlook. “Instead, the economy is evolving into one that is more diversified, and more typical of other Canadian provinces. It is a slow process and it may be a few more years before we see a full economic recovery.”
Statistics Canada revealed in late September, though, that Canada’s real GDP growth in July had flattened, the first month that had happened since October 2016, the Globe and Mail reported. In a research note cited in that article, Bank of Montreal chief economist Doug Porter said it was a “rare misstep” for Canada’s economy this year. Although he cautioned against reading too much into a one-month trend, he added, “it could also mark a return to a more sustainable and realistic growth rate for the economy, after a year of staggeringly good news.”
Too much capacity in oil sands
For some Alberta heavy haul companies, the news has been good. For others, it has been staggering, although not in a good way. The increase in Totran’s heavy haul business has been mainly in the energy sector, Mr. Trousdale said. “Totran is very unique in that we kind of hit all the energy industries,” he said. That includes wind turbines and power transformers, which have experienced recent spikes in activity. “But the main one that’s spiked probably more in the past little bit has definitely been the oil and gas,” said Mr. Trousdale, who company has about 80 power units, 500 trailers, and 100 employees.
Mr. Stevens of Entrec said he has noticed a similar improvement but only in conventional oil and gas. The publicly traded company’s second quarter report released in June noted that it had achieved high activity levels in Canada, “from several sectors,” including maintenance, repair and operations — MRO — in the oil sands. “Unfortunately, this growth was offset by a significant decline in oil sands construction activity over the past year,” the report said. As a result the company’s Canadian revenue for the quarter was “relatively flat,” rising to $22.7 million from $22.5 million in the same period in 2016. On the plus side, Entrec’s infrastructure and power projects revenue has been increasing this year. And its recent moves into Manitoba and Newfoundland and Labrador is “strongly positioning Entrec to capture more power-related opportunities,” its Q2 report said. Overall revenues for Entrec during the first six months of 2017 were $73.2 million compared with $55.6 million in the same period in 2016. Mr. Stevens said in September that nothing had changed with respect to the oil sands. “There’s too much capacity on the heavy haul to service the existing market,” he said. When the oils sands were booming, two large multinationals — ALE Roll-lift and Sarens — began competing with existing players like Entrec, NCSG Crane & Heavy Haul Services, Mammoet, and Premay Equipment, Mr. Stevens pointed out. “Margins were good and activity levels were high and they’re both companies that operate in that mobile market,” he said. “Western Canada was a good place to be, so they brought equipment into this market.” Other sectors haven’t filled that oil sands void. Conventional oil has improved, but to a “new normal,” Mr. Stevens said, using a term he dislikes. Wind is small player in western Canada. But there a lot of yellow iron is moving around the province for construction projects, he said, admitting that much of that is from companies selling their fleets.
Demand soars for used equipment
Mr. Hutchings of Ryash Transport said that hauling construction equipment has lately been a major part of his business — what’s left of it. “My biggest amount of work right now is coming out of Ritchie Bros. auctions,” Mr. Hutchings said. “One guy sells it, another guy buys it.” Most of that equipment is relocated to western Canada.
About 18 months ago, his company auctioned off 29 pieces of equipment, including trucks, trailers, and boosters. He now has only a couple of trucks and trailers left, and only a few employees, down from about 12. “I’ve got no other choice,” Mr. Hutchings said. “There’s no money. Not much sense to leave it sit out in the grass and let it rust. So get rid of it.” It’s something he sees other companies doing: A contractor will buy about $3 million in used equipment at auction, do a job, and then auction it off again. “I’ve seen some of this equipment that I’ve hauled three and four times out of Ritchie’s in the last three years,” Hutchings said. He himself has vowed never to buy a new truck again. He plans to stick with pre-emissions-control models that he says last much longer. It’s cheaper to buy and sell than to rent “because you just about get every nickel back that you paid for it,” he said. “You’re picking up a million dollar dozer for $300,000,” he added. “So you bring it out, you use it for six months, and you pretty well get your $300,000 out of it again.”
At an unreserved auction in Edmonton in early September, Vancouver-headquartered Ritchie Bros. sold more than 6,600 trucks and pieces of equipment for over C$75 million. Canadian buyers accounted for 89 per cent of the purchases, with 57 per cent of bidders from Alberta, noted a news release from the auctioneer. Among those items was a Caterpillar D6T dozer that sold for $300,000.
Before the price of oil collapsed three years ago, Mr. Hutchings’ company hauled about 150 loads into the Athabasca oil sands. But, unlike Totran, he hasn’t bothered to pick any slack by hauling wind turbines. “That stuff’s so damn cheap, it cost you money to haul it,” Mr. Hutchings said.
Fabricators turn to export markets
Even before the oil price crunch, Totran still did a lot of domestic cargo moves from fabrication shops in Alberta. In fact, Mr. Trousdale has seen an increase in export business from those shops in western Canada in the last six months. That includes equipment for oil and gas compression, vessels, and fracking equipment to locales such as Texas and North Dakota but also to elsewhere in the world.
“We’ve hauled a lot more to the ports than we had been,” Trousdale said. “I haven’t seen that in a long time. That used to be a big part of our business five or six years ago.”
During the construction boom in western Canada, the fabrication shops concentrated on the domestic market, he said. But with that slowing, those companies are turning again to exports, which he speculates have also been encouraged by the weak Canadian dollar. In any case, he said, “We have been seeing a spike of hauling stuff south.”
For B.C. projects, the biggest recent spikes for Totran have been for wind turbine projects in the northern part of the province and Okanagan, as well as on Vancouver Island. For the Okanagan, those turbines arrived through the port of Everett, Wash., as opposed to the Port of Vancouver, B.C. “No, the port of Vancouver is not a good port for breakbulk for that size of stuff,” Trousdale said.
Nor is the port of Thunder Bay, he said. That’s not because of the ports themselves, which he called “great ports, especially Thunder Bay.” The trouble is the road routes are restricted, he said. “Out of Thunder Bay there are really only two roads you can take heavy haul through. If any of those get shut down, you’re stuck. Coming out Vancouver — one road. If there’s anything restrictive there, you’re not coming out of Vancouver,” Mr. Trousdale said.
B.C. project corridor expected soon
Doug Mills at Port of Vancouver is hopeful that the provincial government will soon open a long-promised pre-approved project corridor for loads of up to 125 tonnes. “We just have a few little things to follow up with,” said Mr. Mills, who is part of a project cargo working group that been collaborating with the provincial government on the corridor. “Most of the work has been completed. There are just small bureaucratic hitches that we’re currently overcoming, and it’s just taking a little longer because we had a change in government.”
The New Democratic Party took control of the B.C. government this summer after 16 years of Liberal rule. The Liberals had, in their 10-year B.C. on the Move transportation plan, called for establishing to the corridors. Mr. Mills doubted that the new NDP transportation minister, Claire Trevena, has even been briefed on the proposal. “But I anticipate that once the ducks are in a row, this will be something they want to announce.”
Of late, the oil downturn has put a damper on major project cargoes moving through the port anyway. The last big pieces were for local use. They included a new stacker reclaimer of about 100 tonnes for Westshore Terminals’ coal facility in Delta. “However, it was mostly handled off the ship and onto a barge,” Mr. Mills said. “So it didn’t get introduced to the roadway at all. But it certainly showed that we could handle large pieces as far as pulling them off a ship.”