Fednav Limited Incorporated in 1944
Privately held
Largest Canadian dry cargo shipping group
Headquartered in Montreal
275 employees
About 1,200 crew members and hourly labour
Offices in Asia, Australia, Europe, and North and South America
Main Lines of Business | Dry Bulk & Breakbulk Freight Operators
Fednav International Ltd. (FIL)
• Worldwide trade routes
• 25,000 shipdays of operation
• Leading international Great Lakes operator
• 23 million tonnes carried in 2009
• Current long-term fleet of 61 vessels
• Total of 2.2 million MT DWT
• Average age of 9.4 years
• Current order book of 14 vessels
Evolution of North Atlantic Trade
Traditional two-way trade between North America and Europe has stalled
Severity of the situation has been amplified by the 2008/2009 financial crisis
What is the situation for the St. Lawrence Seaway and Great Lakes’ port system?
Benefits to the St. Lawrence Seaway and Great Lakes
St-Lawrence river and Great Lakes ports have ample and efficient capacity
They are competitively priced
No congestion in comparison to overseas ports
Port Congestion
Venezuela: • One month to discharge 20,000 MT wheat
Brazil: • One month to discharge 30,000 MT potash• One month to load 35,000 MT sugar• 25 ships at anchorage awaiting iron ore berth
Australia:• 129 ships at anchorage awaiting coal berth
China:• Up to 13 days waiting for iron ore discharge
berth
Shipping as a Chain
Shipping can be seen as a chain:
From inland place of origin to inland destination
Ports are links in the chain
Cheapest and most efficient chain wins and designates the ports
Does the chain still pass through the Great Lakes/St. Lawrence Seaway port system?
Shifts in World Trade
Bulk demand growth has shifted from the Atlantic to the Pacific
World bulk fleet is adapting to new reality
Environmental concerns that may break the chain
Some ports will lose out
Some should benefit
Deep Sea Bulk Trade Evolution (2000 – 2010)
Asian Infrastructure Development
Iron ore/coke-coal imports
2000 2010 %
Asia 575 1250 +117%
Europe 175 150 -14%
China 70 750 +971%
In Million Metric Tons
St Lawrence Seaway and Great Lakes Ports
Distant from import markets
Situated in a mature economic market
• Geographically linked to other mature economies with minimal growth
Ships are drained from Atlantic to Pacific
• Atlantic freights are higher for trade within the Atlantic
• Also at premium for Pacific destinations
Deep Sea Bulk Fleet Evolution (2003 – present)
Fleet Additions Less Deletions
1985 2003 2009 2010 e 2011e
10/39,999 5.3 1.5 -1.3 6.0 10
40/59,999 4.0 3.5 8.5 20 18
60/99,999 1.4 2.0 4.2 17.0 28
100,000+ 2.8 5.0 26.0 45.0 58.0
In Million DWT Tons
Deep Sea Bulk Fleet Evolution (2003 – present)
A huge investment for vessels unable to trade physically or economically above Québec
High scrapping and low investment in the 10/39,999 sector which trades above Québec and the Great Lakes
This emphasis on larger vessels has repercussions for the St. Lawrence Seaway and the Great Lakes
Consequences for St. Lawrence Seaway and Great Lakes Ports
Capesize + post Panamax (85,000+ DWT)• Abundance of vessels will bring freight rates down
from Québec/Port Cartier/Sept Iles
• Asian iron ore importers seeking diversification of origin despite distance
• Capesize vessels load iron ore directed to Asia and returns empty
• Chinese coke to Great Lakes steel mills only need to offset part of ballast cost favouring Québec as transshipment port
• Panama Canal: new dimensions as of 2014/2015 shortens distance for baby capes from St. Lawrence to Asia
Consequences for St. Lawrence Seaway and Great Lakes Ports
Supramax
• Ships mostly used to support imports/exports in/out of infrastructure lacking ports in countries in development
• Almost all vessels not suited or refusing to breach IWL
• Bigger and deeper: cutting cargo intake to trade above Québec
• Need to lighten or top off below Québec to achieve full load
Consequences for St. Lawrence Seaway and Great Lakes Ports
Handysize
• Fleet is old – Large investment made in the 80s – will be the most numerous vessels to be demolished in weak market conditions
• Least of recent years’ investments made in this sector of the fleet
Deliveries Scrappings
2009 162 231
2010 (31J) 124 35
Consequences for St. Lawrence Seaway and Great Lakes Ports
Handysize
• Investment shifting towards larger Handies of 37,500 DWT – Not lakes suitable
• Numerous new environmental protection regulations for air/water for technologies not yet developed
• Cost increase as volumes decline
• Possibility for Great Lakes to be closed to Salties and domestic Lakers
Worst Case Scenario
What if the Seaway closed for Salties and domestic Lakers?No inbound/outbound transshipment of iron ore/grain/coal involving domestic LakersMontreal/Sorel/Three Rivers have rail connections but are draft restrictedQuébec has rail and deep draftPort Cartier and Baie Comeau receive no grain
Less Damaging Scenario
If seaway closed only to Salties:River ports need to increase transshipment capacity provided:
• Cost of shipping via Pacific Coast or Mississippi River is not cheaper than the domestic Laker alternative
• Demand for Canadian grain in Euro-Med-North Africa does not lose out to FSU competitors
Steel Imports vs. Grain Exports
2010 imports approximately double 2009 imports
Volumes are immensely less than previous ten year averages and unlikely to revert to similar levels
The composition of steel cargoes has changed from heavy coils/slabs to lights structurals and wire rods
Steel mills are not working to capacity and the car industry is moving South
Steel Imports vs. Grain Exports
Salties with inbound cargo can provide competitive rates to the grain trade
When/If grain export volumes exceed inbound volumes, Salties need to ballast up from the St. Lawrence River
Cost of such operations keep mounting as the overall cost of services in the lakes is shared amongst fewer vessels
Steel Imports vs. Grain Exports
Salties are facing a multitude of environmental constraints
Overall, Salties loading at lake ports become a last resort safety valve to use when/if grain exports exceed predictions
Conclusion
Many challenges remain ahead
A lot of government help is needed to ensure that the seaway remains competitively open
A lot of hydroelectricity needs to remain available to the aluminium and titanium industries to maintain operation
Québec has to remain attractive to mining development
Thank You