The Seaway Channel

Take a few moments this wekend to relax and enjoy some great images of ships sailing up and down the St. Lawrence River.

Even though iron ore shipments on the Great Lakes in July were 53 percent below a year ago, the trade did show some signs of life. Loadings totaled 3.5 million net tons, an increase of 635,000 tons compared to June. The uptick in shipments reflects a slight increase in production rates at steel mills. The capacity utilization rate at mills had been mired around 45 percent, but has risen to about 52 percent.

For the year, the Lakes iron ore trade stands at 12.8 million tons, a decrease of 60 percent compared to a year ago. The decrease is slightly less – 58 percent – when compared to the trade’s 5-year average for the January-July timeframe.

Higher water levels did not totally erase the negative impacts of the dredging crisis, but did hint at what vessels could accomplish if the U.S. Army Corps of Engineers adequately dredged the Great Lakes Navigation System. On July 31, a 1,000-foot-long U.S.-Flag laker loaded 68,363 tons of iron ore, the largest cargo of the season. Nonetheless, the record for an iron ore cargo that transits the Soo Locks is 72,117 tons, so even the year’s top cargo represents only 95 percent of what vessels were able to carry in 1997, a year of very high water levels.

Seaway cargo tonnage levels remained weak through the month of July as the lingering economic slowdown continued to depress demand for key Seaway commodities. Overall combined cargo tonnage through July 31 was almost 38 percent lower than at this same time last year. Most noticeably, iron ore throughput is off by more than 61 percent. The decrease in coal tonnage through the end of July is roughly 35 percent compared to this time in 2008 and the drop off in cargo identified as "other bulk" is down by nearly 37 percent compared to the figures from last year.  

With that distressing bit of news the book of business for the first half of this navigation season is now largely closed. It tells a story of economic distress in key industries in North America which normally rely heavily on the Great Lakes/St. Lawrence Seaway shipping industry for its raw and semi-finished materials. The woes of the automobile, construction, large appliance and major manufacturing industry in 2009 have been well-chronicled and the decrease in Seaway tonnage serves as direct evidence of the lower level of economic activity in those areas.    

The middle of August is generally considered the midpoint of the Great Lakes/St. Lawrence Seaway navigation season. From late March, when the Seaway's locks open for the new navigation season until about this time of year about half of the Seaway's annual tonnage is moved in typical years. After a relatively quiet time in the weeks of mid-August shippers make their fall transportation plans and business begins to bustle again in the fall as freight logistics professionals try to take advantage of relatively cheap water transportation rates through the Great Lakes before the Seaway closes again at the end of December.

The question that confronts our industry and others is the same. "Is the recession almost over and if so, when can we expect to see recovery in anything more tangible than the Dow Joes Industrial Average?"  The answer may be forthcoming and writ large on the waters of the Great Lakes.  If the second half of this navigation season show us higher levels of tonnage than the second half of last year, when capital liquidity market locked up, the freight market crashed and the economy began to tank, we'll all have reason to hope that better times are just ahead. If things in the second half of this navigation season show no improvement compared to the second half of 2008, then you should stock up on firewood because it could be a long cold economic winter.       

Anti-shipping groups hoping that the state of Minnesota might impose a more draconian regulatory regime regarding ballast water management on Great Lakes/St. Lawrence Seaway shipping were dealt a decisive blow by the Minnesota Court of Appeals last week.

The St. Paul, MN-based, Minnesota Center for Environmental Advocacy claimed in a lawsuit that new and stricter ballastwater regulations scheduled to take effect in 2016 were not strict enough.

The Minnesota Court of Appeals, however, last week ruled in favor of the state government and against the more radical approach favored by some self-described environmental organizations.

The ruling is likely to have an influential impact on the neighboring state of Wisconsin where the Wisconsin Department of Natural Resources (DNR) which is expected to release a set of its own rules for the overseas shipping industry by the end of the summer.

The DNR earlier this year proposed a largely unrealistic package of ballast-treatment regulations far more stringent than anything that has so far been adopted by any Great Lakes state other than New York.

Those regulations,which were slated to come into effect in 2012, were widely criticized by experts testifying at a public hearing that DNR held in Milwaukee in march of this year. The DNR seems to be sending signals that the message delivered in March has been heard and a more reasonable and moderate regulatory course is now expected.

Todd Ambs, administrator of the DNR's division of water was recently quoted in the Milwaukee Journal Sentinel as saying, "There will be some adjustments to (the rules) based on the comments we received, but we're literally still in the process of developing what those are going to be." Last week's court ruling in Minnesota carries no legal weight over the border into Wisconsin but it does show that the policy environment may be finding a new equilibrium that respects the notion that ballast water management regulations are best left to scientific and shipping industry experts rather than groups whose aim seems to be the end of shipping in the Great Lakes.

On August 1^st, the U.S. Coast Guard increased U.S. Great Lakes pilotage rates by 10.77 percent.