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March 21, 2016

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4 • Canadian Sailings • March 21, 2016

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March 21, 2016 • Canadian Sailings • 5

A R T I C L E S

March 21, 2016CONTENTS

The contents of this publication are protected by copyright laws and may not be reproduced, in whole or in part, without the written permission of the publisher.

47 Upcoming Industry Events 47 Index of Advertisers

REGULAR FEATURES27

26

6A warming international Arctic

Vancouver Island transshipmenthub proponents court investors

Seaway opens 58th navigationseason earlier than usual

21The Marine Club holds 77thAnnual Dinner

U.S. – Canada joint statement onArctic leadership

1421 The Marine Club holds 77th Annual Dinner26 Seaway opens 58th navigation season two weeks earlier than usual27 Vancouver Island transshipment hub proponents court investors32 Algoma Central reports 2015 results and announces changes to business

strategy33 NOL racks up its third successive year of losses, reporting $181 million of red

ink in 201534 CSAV acquisition seems to have helped Hapag-Lloyd turn 2014 losses into a

profit in 201534 ‘Adapt and optimize’ the strategy for stormy financial waters, says CMA

CGM chief35 Blow to express airlines as Amazon leases 20 767Fs and eyes ATSG share deal36 Peace breaks out as new affinity grows between ports and unions on U.S.

west coast36 Carriers in dire straits as spot rates continue in freefall right across ocean

container trades37 Port of Halifax anticipating larger vessels, more passengers in 201638 Atlantic Container Line signs new contract with Ceres Halifax Inc.38 Van Horne Institute proposes an Alberta to Alaska railway39 Positive train control; when finally implemented will make North American

railways safer40 Oceanex Inc. requalifies as one of Canada’s Best Managed Companies41 EDC: Export success in China42 Lake Carriers Association warns mild winter must

not derail effort to build another heavy icebreaker42 Logistec announces 2015 year-end results43 ZIM Integrated Shipping Services reports results for

201544 OPINION: Can we really afford delaying dealing

with climate change?

6 A warming international Arctic8 Arctic marine response- Arctic mariners matter

11 Breaking bread and the ice in Washington13 Will Canada spend more on Arctic development?16 U.S. – Canada joint statement on Arctic leadership18 Logistec partnering for success with mining companies in the

Canadian Arctic19 Martech Polar at the forefront of polar shipping and research20 Stuart Milton Hodgson, O.C.: a Canadian Arctic elder passes away

Arctic Shipping

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Arctic shippingA warming international ArcticBY K. JOSEPH SPEARS

The drop in oil and commodity prices are having a realimpact on proposed commercial Arctic activities on a vari-ety of fronts, including Arctic offshore oil exploration, and

shipping associated with resource development. This article willattempt to summarize selected international developments whichmay impact Arctic shipping.

The Greenland Ice CapUncertainty in the Arctic Ocean Basin is being driven by cli-

mate change and a warming Arctic where temperatures are risingsignificantly more rapidly than elsewhere on the planet. Recent stud-ies have shown that the Greenland ice cap melting is accelerating,resulting in accelerated increases in sea levels caused by this melting.The environmental changes are also causing more icebergs to form,which can affect Arctic shipping.

International Arctic Shipping.With the price of crude oil near multi-decade lows, the cost sav-

ings brought about by Arctic shipping routes seem to have less of aneconomic impact than had been predicted. In fact, in some cases,shipowners are transiting around Cape of Good Hope to avoid SuezCanal fees. To them, it is less expensive to sail the longer sea route,involving higher crewing and chartering costs and higher fuel burn,as weighed against the shorter route but involving Suez Canal transitfees.

It seems clear that the Arctic will continue to warm, and manynon-Arctic nations are positioning themselves to benefit from poten-tial climate changes in the Arctic Ocean Basin and their future

impact on trade routes. It is important to realize that the watersaround the North Pole are international waters and not subject tothe jurisdiction of any Arctic coastal state. Many believe a transpolarshipping route across the centre of the Arctic Ocean crossing theNorth Pole will become an established shipping route in the comingyears. While that remains to be seen, this winter saw record warmtemperatures in the region and decreased winter sea-ice.

Arctic Council The United States is presently chair of the Arctic Council and

has been leading initiatives with respect to sustainable developmentand climate change which has the support of President BarackObama who is nearing the end of his presidential term. The UnitedStates has taken a climate-based focus to the Arctic and wants toensure that any decisions or governance of activities in the region arebased upon scientific evidence. The Unites States stated position isOne Arctic: Shared Opportunities, Challenges and Responsibilities.

The United States has set out a detailed policy of what it wishesto accomplish and is been working through that process under thevarious working groups of the Arctic Council its various governmentagencies.

The United States The United States realizes that there is a capability gap espe-

cially as it relates to icebreakers and has recently put out to call fordraft proposals with respect to icebreakers that are required byUnited States Coast Guard.

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Arctic shippingFinland

Finland will take over chairmanship ofthe Arctic Council in 2017, and will belooking for sustainable development andregulation of shipping and other commer-cial activities in the Arctic. Finland is aworld leader in icebreaking technology andicebreaker construction. It is interesting tonote that Canadian vessel designers andnaval architects who were originally con-tracted to work on Canada’s planned Polar8 icebreaker project in North Vancouvertook their expertise to Finland when theCanadian project was cancelled in the1980s. This, combined with the Finns’long-standing expertise, resulted in develop-ment of some of the world’s leadingicebreaking technology, with Finnish yardshaving constructed many of the world’smost technologically advanced icebreakers.For a country of little over 5 million people,it has done an amazing job developing thisexpertise.

Arctic Offshore DrillingAlthough it is thought that up to 25

per cent of the world’s oil reserves are con-tained in the region, the collapse of oilprices has rendered offshore oil explorationin such hostile territory uneconomic.

Russia Northern Sea Route Russia proposed its Northern Sea

Route (NSR) as an alternative to Suez andPanama Canal traffic. However, after anencouraging start some years ago, traffic hasdropped to a trickle. Cargo tonnage oninternational voyages was 274,000 tonnesin 2014 and 40,000 tonnes in 2015,according to the NSR Administration. TheRoute continues to play a key role in themovement of Russia’s Arctic hydrocarbonproduction.

In June 2015, the Russian Prime Min-ister announced availability of year-roundshipping on the NSR, with Russia continu-ing to develop Arctic bases, adding to itsfleet of icebreakers, and improving itssearch and rescue capability. Russia clearlyconsiders the Route a long-term investment,and has been trying to interest China ininvesting in infrastructure and railways toits Northern ports.

ChinaChina continues to position itself as a

near-Arctic state and has an ambitious Polarresearch program working in both theArctic and Antarctic. One of the stated rea-sons is to understand climate changeprocesses that originate in the region. Thispast season its research icebreaker XueLong circumnavigated around Antarctic.

China is presently is building a secondresearch icebreaker, and continues toengage in the Arctic Council’s work as a par-ticipant in the various working groups. It isclearly a serious Arctic player, and is in it forthe long haul.

There is a great deal of concern aboutwhat China’s true intentions are in theregion. Given the complex internal politicalprocesses, is difficult to determine, as itsobjectives have never been stated. It shouldnot be forgotten that the Arctic Ocean Basinis a potential source of protein from theundeveloped fisheries in the region. Thesefisheries have the potential to be a majorsustainable protein source for the world ifthey are properly managed. Presently thereis very little data on these fish stocks. Chinais undoubtedly considering the use of Arcticshipping routes, given its dependence onglobal trade and shipping.

Looking ForwardWhile the Arctic is warming up, it is

not heating up, geopolitically. The Arcticcontinues to change and the underlyingwork of the Arctic Council is criticallyimportant. Canada played a key role in thedevelopment of this bilateral organizationscoming up on its 20th anniversary. Therecently announced bilateral agreementsbetween the United States and Canadashow that there is going to be increasedcooperation in the region. Commercialactivities and related shipping activities will

proceed as economic forces warrant.Arguably, this represents an understandingat the international level that it is time todevelop the necessary scientific researchunderpinnings to support proper decision-making. It is on this foundation that theArctic statutory framework continues todevelop and evolve for commercial activi-ties. It is important to underline thatsustainable economic development requiresinput from the people that live in theregion.

A good example of international coop-eration is the development of the PolarCode, which, while not perfect, is a goodstep forward. However, coastal states areresponsible for providing the necessary ship-ping infrastructure which includesicebreakers and appropriate search andrescue capability. Marine infrastructure isexpensive and at a time of shrinking govern-ment budget it remains to be seen howthese resources will be developed. Canadahas a key role to play in all of this and needsto be fully engaged at the international levelthrough the Arctic Council and bilateralnegotiations. Our economic future and sta-bility in the Arctic depends on it.

K. Joseph Spears is Ocean policy con-sultant is been involved in Arctic marineactivities for the last 37 years and has beenfollowing these developments in involvedand policy with respect to Arctic gover-nance. Joe can be reached atkjs@oceanlawcanada.

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Arctic shippingArctic marine response- Arctic mariners matterBY K. JOSEPH SPEARS

While forecast levels of Arcticshipping have not meshedwith actual traffic, recent

marine incidents such as the close call withNunavut owned and operated shrimptrawler Saputi off Greenland last month,and the forthcoming 2016 North West Pas-sage voyage of the cruise ship CrystalSerenity highlight the need for a robustmarine response capability to respond topossible arctic incidents. These events raisequestions and heighten need for interna-tional cooperation on marine response inArctic waters. The Arctic Council has beensuccessful in reaching international agree-ments on both Arctic search and rescue andpollution response. However, these treatiesrepresent agreements to cooperate - but donot require the Arctic nations to take tangi-ble steps with regard to capability andcapacity. These agreements are in additionto existing international agreements thatapply globally to shipping and in the case ofsearch and rescue, aviation. The devil is inthe details. Arctic states, including Canada,must commit to spend money to create thenecessary marine response capability andinfrastructure.

The Polar CodeThe International Code of Safety for

ships operating in Polar Waters (PolarCode) was implemented by the Interna-tional Maritime Organization (IMO) in2014, and set the standards for various reg-ulatory requirements, including vesseloperation and crewing. It will come intoforce in 2017, with voluntary guidelines in

place since 2009.The goal was to set up aninternational uniform regime, rather than apatchwork of marine regulatory require-ments imposed by the various Arcticnations. While many commentators haveindicated that this represents a wateringdown of Canada’s Arctic shipping regula-tory requirements, the Polar Code does notaddress specific requirements detailing the

nature of individual countries’ individualresponse capabilities and marine infrastruc-ture. It goes without saying that providingappropriate services in such a hostile andsparsely-populated part of the world isextremely costly which in a time of shrink-ing budgets and restraint creates addedchallenges to Arctic Ocean governance.Arguably, Canada has an opportunity towork with its Arctic neighbours to developa robust Arctic capability. This can build onthe announcement made in Washington onMarch 11 with respect to Canada - UnitedStates cooperation on the Arctic.

Lessons from AntarcticOn February 27, the Australian

research icebreaker Aurora Australis ranaground in Horseshoe Harbour,near Mawson Station, Antarctica, afterbreaking its mooring during a blizzard. Shewas refloated on 27 February 2016 and isreturning to port for repairs. The Japaneseicebreaker Shirase, operated by the JapanMaritime Self-Defense Force in support ofAntarctic research, was offered to assist ingetting the scientific researchers returnedto Australia. In December 2014 a privately-

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Arctic shipping

owned Australian icebreaker came to theaid of the Russian research vessel MVAkademik Shokalskiy which had beentrapped in the ice for ten days, and hadbeen assisted by the Chinese icebreakerXue Long and the U.S. Coast Guard ice-breaker USCG Polar Star. What theseAntarctic incidents show is a need for inter-national cooperation and the fact that inpolar regions, no one coastal nation can goit alone: the distances are vast and the costof specialized marine assets that operate inthe polar regions is high.

F/V Saputi near-miss The near sinking of Saputi last month

raises important questions about Arcticmarine response and SAR capability. Thevessel, an ice strengthened stern trawlerwas fishing for turbot in Davis Strait, struckice which caused water ingress into thecargo space below the waterline. The sub-sequent flooding of the vessel whichcarried a crew of 30 represented an immi-nent danger of loss of the vessel andsurvival of the crew.

The incident occurred within Canada’sHalifax Search and Rescue Region overseenby JRCC Halifax. Halifax SAR Region is ledby Rear Admiral John Newton of the RoyalCanadian Navy who pulled out all the stopsin this response. Canada is responsibleunder international agreement for providingsearch and rescue services in the HalifaxSAR region which extends north into theCanadian Arctic. JRCC Halifax planned toevacuate most of the crew from the vesselusing a helicopter from Greenland. How-ever, because of weather conditions, thiswas not possible. A massive search andrescue operation was launched from bothCanada and Greenland, a Danish protec-torate. The following morning, in anincredible feat of airmanship, Canadian C-

130H SAR aircraft based at Greenwood,N.S. were able to parachute four gasolinesalvage pumps to the vessel which assistedin keeping the vessel afloat. The incidentoccurred outside the operational range ofCanada’s CH-149 Cormorant search andrescue helicopters which have a limitedrange over open water. The Canadian CoastGuard icebreaker CCG Louis St Laurentwas also tasked, but was at least two daysaway from the vessel. JRCC Halifax notifiedDanish Arctic command of the incident,resulting in the assistance of Danish Navypatrol vessel HDMS Knud Rasmussen. Thisvessel was able to get its technicians andanother pump aboard Saputi to keep theholed and listing vessel afloat. CanadianSAR aircraft stayed continuously overheadthroughout the operation to assist shouldthere be possible sinking of the vessel.

The Danish vessel stood alongside asthe Saputi made its way slowly throughheavy seas under its own power with thepumps working at full capacity. Thecrewmembers were required to stay aboardthe vessel and reported that the wheelhouse wings were touching the waterbecause of the list as she made her way tothe nearest port, Nuuk, Greenland. Thatthe vessel survived the longest two dayvoyage is a testimony to both its Norwegianconstruction and its skilled Newfoundlandand Nunavut crew who fought to keep thevessel afloat. It was a very serious SAR inci-dent with a positive and happy outcome.

Looking Forward- Voyage of theCrystal Serenity

The Saputi incident highlighted theindispensable need for ongoing interna-tional cooperation and SAR planning. Weare seeing a similar approach with theplanned voyage of the cruise ship CrystalSerenity through the North West passage in

August 2016 on her voyage from Alaskathrough Canadian waters to Greenland andthen down to the New York. The vessel willcarry 1070 passengers and up to 655crewmembers. The vessel’s voyage hasbeen sold out for over a year and there is awaiting list of 400.

While there are no mandatory pilotagerequirements in Canadian Arctic waters,the vessel will carry two experienced icenavigators. Canadian regulations requireone ice navigator who is experienced in icenavigation. These mariners have a wealthof commercial experience in the Arctic, andare an invaluable asset. In West CoastCanadian waters, all foreign flagged cruiseships carry two marine pilots at all timesunder the Pilotage Act.

Crystal Serenity’s voyage is a seriouschallenge for SAR planning and marineresponse in Canadian waters. As the obliga-tions of the International Arctic SARAgreement are no longer theoretical, butbecoming very real, Canada is moving for-ward to undertake planning around thisvoyage by mobilizing all appropriate gov-ernment resources. In the Canadiancontext, vessel regulation is administeredby Transport Canada Marine Safety whilethe Canadian Coast Guard has only a lim-ited role to play in this prevention aspect.

This April, Canada will be workingwith the United States Coast Guard inAlaska in a series of tabletop mass casualtyexercises with respect to Crystal Serenity’svoyage. This builds on the U.S. CoastGuard’s forward leaning work in this area,and the coming together of the tabletopexercise is a very positive step, as it is betterto stay on the prevention side and deal withproblems before they become major inci-dents, potentially stretching Canada’s andother Arctic nations search and rescueresources to the limit.

In a positive step forward, the govern-ment of Canada has been working withCrystal cruise line to develop contingencyplans for a variety of possible issues. Giventhe pioneering nature of the voyage, collab-oration with knowledgeable governmentofficials is to be congratulated, but is notmandated by the legislation. AccompanyingCrystal Serenity will be the chartered RSSErnest Shackleton, a support vessel that hasbeen used for the British Antarctic Survey,which has the ability to break ice and isequipped with a helicopter for a variety ofuses, including ice reconnaissance. Thevessel will also make use of Canada’s Cana-dian Ice service, a specialized agency ofEnvironment Canada that uses a variety ofaircraft and space-based sensors to recom-

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Arctic shippingmend the most ice free route given the vessel is not ice-strength-ened.

Ernest Shackleton has icebreaking capabilities and a long his-tory of operating in Antarctic and European Arctic waters. It willcarry another ice navigator, a helicopter and other equipment foremergency response. It has been reported that the cruise line hassought the assistance of a variety of experienced Arctic mariners inplanning this historic voyage. One Canadian consultant is experi-enced Arctic elder and highly experienced ice navigator, Capt.David “Duke” Snider of Victoria of Martech Polar Consulting Ltd.The vessel owner has developed a set of response and contingencyplans, in keeping with and exceeding the international safety man-agement regime to cover a variety of marine contingencies. Nodoubt marine underwriters have also had a lot to say about the nav-igational requirements of the voyage. A successful outcome is ineveryone’s interest.

Arctic Mariners MatterWhile some question the international status of the Northwest

Passage, Canada’s Arctic Waters Pollution Prevention Act and reg-ulations gives Canada the necessary authority to regulate shippingin the region through a variety of mechanisms. Given the experi-ence of the parties, involved, the preplanning of the CrystalSerenity’s voyage is a positive step forward to engaging marineoperations, especially when they may pose significant search andrescue, mass casualty, and pollution risks. The key is to develop aclose working relationship and the sharing of information with allconcerned, so that the risks of Arctic operations are minimized.This goes beyond the requirements of Polar Code and builds on les-

sons learned from past incidents.

Going ForwardFollowing the Saputi incident, there is call for a search and

rescue base in the region, based on increased fishing and shippingactivity. This base could be operated on a seasonal basis or could beforward deployment of search and rescue assets during times ofincreased marine traffic. What people don’t realize is that the Arcticfishery is becoming more important as melting ice increases fishingopportunities. Fishing vessels operate through the year in theregion. While Canada awaits its fixed wing SAR aircraft capabilityand new icebreakers under the National shipbuilding procurementstrategy (NSPS), we need to develop sustained dialogue and collab-oration in greater formalized fashion in the future, rather than aftermarine incidents occur.

If we are to have sustainable Arctic development whichincludes marine ecotourism, we need to get this right. Cooperatingwith the United States as seen in Crystal Serenity planning andwith working with Denmark/ Greenland as in the Saputi incidentis a positive step forward. It appears that Crystal Serenity’s voyageis giving rise to collaborative approach, but does not lessen the needfor Canada to invest in Arctic shipping infrastructure to meet obli-gations under existing international agreements. Canada also needsto ensure that knowledge of our arctic mariners is central in anymarine response regime.

Joe Spears, principal of Horseshoe Bay Marine Group hasbeen involved in Arctic SAR and the development of Canada’sArctic Shipping policy. Joe can be reached at [email protected]

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Arctic shippingBreaking bread and the ice in WashingtonK. JOSEPH SPEARS

Since being elected on October 19,2015, there has been a great interestin the future direction of Prime Min-

ister Justin Trudeau’s federal governmentand what tack would be taken withCanada’s future Arctic policy. There wascriticism that there was no direction forth-coming in the first 100 days of the newgovernment other than brief statements ofinstruction contained in the Ministerialmandate letters issues by the Prime Minis-ter to his new ministers on the Arctic.

There is a unique opportunity with thenew government to hit reset and getCanada’s Arctic policy in mesh with awarming Arctic.

Canada’s Arctic policy is becomingclear after the first state visit to Washingtonby a Canadian Prime Minister. On March10, 2016 a statement were released afterhigh level meetings between PresidentObama and Prime Minister Trudeau thatmakes it clear that the United States andCanada are becoming aligned on Arcticissues, while some sticking points remain,such as the status of the Northwest Passage.In a joint statement, the shared visionbetween our two countries was expressedas follows:

“They emphasize and embrace thespecial relationship between the twocountries and their history of close collab-oration on energy development,environmental protection, and Arcticleadership. The two leaders regard theParis Agreement as a turning point inglobal efforts to combat climate changeand anchor economic growth in cleandevelopment. They resolve that theUnited States and Canada must and willplay a leadership role internationally inthe low carbon global economy over thecoming decades, including through sci-ence-based steps to protect the Arctic andits peoples. Canada and the U.S. will con-tinue to respect and promote the rights ofIndigenous peoples in all climate changedecision making.” See more at:pm.gc.ca/eng/news/2016/03/10/us-canada-joint-statement-climate-energy-and-arctic-leadership#sthash.FiUAjTWh.dpuf

The communique needs to be placedin the context of rapidly changing Arcticenvironmental conditions. A warmingArctic is changing the region in ways neverimagined, with impacts of global climate

change are being felt most rapidly in theArctic and Canada’s North. This past Febru-ary was the warmest on record and theextent of sea-ice in the Arctic Ocean Basinhas been the lowest since records have beenkept.

In addition, the volume of Arctic sea-ice is decreasing. Each year, climate recordsin the Arctic are being broken. It is impossi-ble to predict the potential positive feedbackloops caused by warming conditions andthe impact of methane release in the regionfrom melting permafrost and seabedhydrates. The Arctic is arguably the canaryin the global coalmine. Canada is greatlyimpacted by these changes, and does nothave the luxury of lingering. Canada needsto get its Arctic policy focussed and flexiblein this time of rapid environmental change.

Some of the specifics of the commu-niqué dealing with shipping andcommercial activities (broadly stated)include the following:

Low impact shipping corridors: Wewill work together to establish consistentpolicies for ships operating in the region,taking into account important ecologicaland cultural areas, vessel traffic patterns,Indigenous and Northern Arctic input, andincreased cooperation of our CoastGuards. The two countries will also worktogether to share assessments of naviga-

tion data quality and capacities for support-ing safe and low-impact shipping in theBeaufort Sea. In addition, we will deter-mine with Arctic partners how best toaddress the risks posed by heavy fuel oiluse and black carbon emissions from Arcticshipping.

Abundant Arctic fish: The leaderscall for a binding international agreementto prevent the opening of unregulated fish-eries in the Central Arctic Ocean topreserve living marine resources and pro-mote scientific research in the region.Canada offers to host the next round ofnegotiations, to continue momentum andbuild on a precautionary, science-basedprinciple to commercial fishing that bothcountries have put in place in their Arcticwaters.

Science-based approach to oil andgas: If oil and gas development and explo-ration proceeds, activities must align withscience-based standards between the twonations that ensure appropriate prepara-tion for operating in Arctic conditions,including robust and effective well controland emergency response measures.

The commitments will require Canadato increase its scientific infrastructure andprograms to build the necessary data set toanalyze changes in the Arctic, as well asguide science-based governance.

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Canada will need to work closely with the United States todevelop the necessary marine infrastructure including the construc-tion of expensive new icebreakers which form part of the NationalShipbuilding Strategy. This may open the door to Canada and theUnited States cooperating on a joint construction program based onCanada’s Polar class icebreaker CCG John G. Diefenbaker. A collab-orative approach would enable lower-cost icebreaker construction,as well as integrate oceanographic knowledge through shared datacollection. While collaboration is not a new concept, it is nowembodied in bilateral agreements and has the support of the seniorleadership of the two countries. This bodes well for future scientificresearch and Arctic cooperation in many shared areas of interestand governance. It has done this successfully with North Americanair defense with NORAD for 50 years.

Canada’s mandate to its Foreign Affairs Minister, StéphaneDion, did not set out any specific references to the Arctic. However,the joint statement released on March 10 provides an opportunityfor Canada to once again lead at the international level on Arcticissues. As we move more away from the militarization issue andfocus on sustainable commercial development (which is criticallyimportant for the people of the region), as well as potentialonslaught of international marine traffic, Canada will have to investsignificant resources for shipping infrastructure.

Independent of what Canada may think, the world is comingto the Arctic. We are seeing with respect to the planned voyage ofthe cruise ship Crystal Serenity that Canada can achieve a greatdeal of influence by engaging both bilaterally, through the ArcticCouncil and specialized organizations like the International Mar-itime Organization (IMO) which develop the Polar Code.

One long experienced Ottawa insider, Tom Axworthy, in arecent op-ed stated “Canada’s North could be Trudeau’s policysweet spot”. He described how to reach that sweet spot throughpromoting a larger role for the Arctic Council to bring togetherthinking around climate change, science ocean governance, theemerging Arctic fisheries and sustainable development for theregion, taking a collaborative approach of balancing commercialactivities against the need to preserve and protect this pristine and

sensitive environment and integrating indigenous peoples into deci-sion making..

The recent review of the Canadian Transportation Act alsodescribed a variety of transportation infrastructure requirements forour Arctic and recommendations with respect to marine shippingand the Canadian Coast Guard.

The above issues will have to be considered within the contextof Canada’s overall Arctic policies, and confirming these broadparameters and guidelines will show that the government ofCanada is committed to the long-term sustainable development inthe region as well as protecting the pristine and sensitive Arcticenvironment. As I noted in 2014 in an earlier article, “Canadaneeds to walk the walk. Canada needs new icebreakers, new fixedwing search and rescue aircraft, new rifles for its Canadian Rangers,vastly improved pollution countermeasures capability, increasedcommunications and Arctic marine domain awareness, and morehydrographic surveying and charting. But more than anything,Canada needs a new perspective. Canada needs to look at thesechanging conditions as an opportunity,…..”

We now have a new perspective an opportunity to get thisright. In the Arctic, getting anything done is based on personal rela-tionships and limited infrastructure and financial assets. As TomAxworthy stated in this recent opinion piece -”Canada will alwaysbe a bit foreign policy player in the Middle East. In the Arctic,Canada can be a major force.” As Canada moves forward in awarming planet and thawing Arctic ice, we are going to have tomake use of all the relationships and goodwill we have to achieve asafe and environmentally friendly sustainable economy and safeshipping, both domestically and internationally. Prime MinisterTrudeau breaking the ice in Washington, and the resulting cooper-ation will go a long way to ensuring Canada remains an Arcticnation at the forefront of Arctic governance and thinking. In theArctic, Canada can and will become a major force and influence.

K. Joseph Spears is the principal of the Horseshoe Bay MarineGroup and is involved in the development of various Arctic gover-nance regimes and an regulation of shipping. Joe can be reachedat [email protected]

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Arctic shippingWill Canada spend more on Arctic development?BY BRIAN DUNN

One of Canada’s biggest “nationalweaknesses” is how little is beingdone in the Arctic, according to a

leading Arctic specialist. In fact, The Cana-dian Arctic is the least developed part of theArctic, whereas Russia is a superpower inthe region, said John Higginbotham, SeniorDistinguished Fellow, Carleton Universityand the Centre for International Gover-nance Innovation. “We are now seeing akind of Putin Master Plan with free accessto oceans due to melting ice and large scalestate investments,” he said during a presen-tation at the third annual Cargo LogisticsCanada Expo and Conference in Montrealon February 19, entitled Exploring ArcticCorridors.

Alaska has a population of 750,000compared to 250,000 in Canada’s three ter-ritories with Nunavut being the leastdeveloped territory. It has promising min-eral wealth but a weak government andsmall communities spread thinly through-out the territory, noted Mr. Higginbotham.

“Exploration of the Canadian northstopped with the opening of the SuezCanal. The S.S. Manhattan traversed theNorthwest Passage in 1969, but it got stuckin ice. That’s why the Alaskan Pipeline wasbuilt. But shipping in the north is beingrevived with melting sea ice, particularlysince 1979 when eight million square kilo-metres of sea ice has been reduced to less

than six million square kilometres and icedensity has also declined,” said Mr. Higgin-botham. “Canada has claimed sub-soilresources beyond the 200-mile sovereigntylimit of each country, but it should have a20-year infrastructure development plan forthe Arctic if it doesn’t want to remain aminor player. And its system of navigationfor Polar traffic is not as advanced as that ofthe U.S. Coast Guard.”

The cruise ship Crystal Serenity with900 passengers aboard plans to traverse the

Northwest Passage later this year, pointingto the long-term future of Arctic cruisingthat could benefit some northern communi-ties, remarked Mr. Higginbotham. Inaddition, Russia is building ten LNG vesselsin South Korea to transport liquefied naturalgas to Asia in the summer and Europeanmarkets in the winter via the Northern SeaRoute. Overall, however, traffic on the routeis drying up due to higher insurance ratesand hostilities towards Russia.

“The Northwest Passage is the quick-

John Higginbotham

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Arctic shipping

est route between Northwest Asia and theNorth American East Coast and there iscooperation on the route between Canadaand the U.S.”

In fact, by 2040, more patrol coastalships and tanker class ships will transit theArctic Ocean via the Northwest Passagethan either the Northern Sea Route orTranspolar Sea Route than runs betweenthe two, due to melting sea ice, according

to the National Academy of Sciences of theUnited States of America.

In September, 2013, the first COSCOcontainer ship travelled from Dalian, China,to Rotterdam in 35 days via the NorthernSea Route, shaving 13 days off the tradi-tional Suez Canal route. The majordrawback, apart from icebergs, is the North-ern Route is only open from July toNovember which may be extended as the

sea ice melts, suggested Mr. Higginbotham. Cargo in transit and cargo traffic to and

from Russian ports using the Northern SeaRoute is expected to increase from 5.1 mil-lion tons last year to 88 million tons by2030, according to the Russian Ministry ofTransport.

Ottawa has recognized the changinglandscape of the north. On Dec. 21, the2014-2015 Canada Transportation ActReview was submitted to the Minister ofTransport. Issue 7 in the Review mandate isconsidering “how to address rapid changesin the north and associated challenges forthe continued safety, security and sustain-ability of the northern transportation systemand specifically, the federal role in support-ing the northern transportation system.”

The new Liberal government is hon-ouring a promise made by the Conservativeslast July of providing funding for the IqaluitMarine Infrastructure Project which willinclude a small craft harbour and a potentialbase for military and search and rescue oper-ations in Iqaluit. At the time, the federalfunding was pegged at $63.7 million of thetotal $85.5 million price tag. A spokesper-son for Infrastructure Canada said “we areworking with the Nunavut government onthe terms of the contribution agreement.”

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Arctic shippingU.S. – Canada joint statement on Arctic leadership

As part of a U.S. – Canada statement on climate, energy andArctic leadership released by the White House and thePrime Minister’s Office on March 10, the following text

pertained to the two countries’ commonly expressed position onArctic issues:

Beyond deepening cooperation to reduce greenhouse gas emis-sions – which will have an outsized impact on the long-term healthof the global Arctic – President Obama and Prime Minister Trudeauare announcing a new partnership to embrace the opportunities andto confront the challenges in the changing Arctic, with Indigenousand Northern partnerships, and responsible, science-based leader-ship. Arctic communities rest on the territories of Indigenouspeoples, who possess a wealth of knowledge, distinct ways of life,and a richness of cultural diversity. It is home to natural marine, landand air migrations that know no borders. It is also the frontline of cli-mate change. Acting for a shared future, we call on all Arctic nationsand those with Arctic interests to embrace a new future for Arcticleadership, with our four objectives:

Conserving Arctic biodiversity through science-based decisionmaking. Canada and the U.S. re-affirm our national goals of protect-ing at least 17% of land areas and 10% of marine areas by 2020. Wewill take concrete steps to achieve and substantially surpass thesenational goals in the coming years. Specifically, we will work directlywith Indigenous partners, state, territorial and provincial govern-ments to establish this year a new, ambitious conservation goal forthe Arctic based on the best available climate science and knowl-edge, Indigenous and non-Indigenous alike. We will also play aleadership role in engaging all Arctic nations to develop a pan-Arcticmarine protection area network.

Incorporating Indigenous science and traditional knowledge

into decision-making. Canada and the U.S. are committed to collab-orating with Indigenous and Arctic governments, leaders, andcommunities to more broadly and respectfully include Indigenousscience and traditional knowledge into decision making, including inenvironmental assessments, resource management, and advancingour understanding of climate change and how best to manage itseffects.

Building a sustainable Arctic economy. We confirm that forcommercial activities in the Arctic - including shipping, fishing, andoil and gas exploration and development - we will set a world-classstandard by basing development decisions and operations on scien-tific evidence. Further, commercial activities will occur only whenthe highest safety and environmental standards are met, includingnational and global climate and environmental goals, and Indigenousrights and agreements. Canada and the U.S. will work to developthis year a shared and science-based standard for considering the life-cycle impacts of commercial activities in the Arctic.

Low impact shipping corridors: We will work together toestablish consistent policies for ships operating in the region, takinginto account important ecological and cultural areas, vessel trafficpatterns, Indigenous and Northern Arctic input, and increased coop-eration of our Coast Guards. The two countries will also worktogether to share assessments of navigation data quality and capaci-ties for supporting safe and low-impact shipping in the Beaufort Sea.In addition, we will determine with Arctic partners how best toaddress the risks posed by heavy fuel oil use and black carbon emis-sions from Arctic shipping.

Abundant Arctic fish: The leaders call for a binding interna-tional agreement to prevent the opening of unregulated fisheries inthe Central Arctic Ocean to preserve living marine resources andpromote scientific research in the region. Canada offers to host the

Prime Minister Justin Trudeau and President Barack Obama hold a joint press conference in Washington, D.C.

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Arctic shippingnext round of negotiations, to continue momentum and build on aprecautionary, science-based principle to commercial fishing thatboth countries have put in place in their Arctic waters.

Science-based approach to oil and gas: If oil and gas develop-ment and exploration proceeds, activities must align withscience-based standards between the two nations that ensure appro-priate preparation for operating in Arctic conditions, includingrobust and effective well control and emergency response measures.

Supporting strong Arctic communities. We commit to definingnew approaches and exchanging best practices to strengthen theresilience of Arctic communities and continuing to support the well-being of Arctic residents, in particular respecting the rights andterritory of Indigenous peoples. All Indigenous Peoples in the Arcticare vital to strengthening and supporting U.S. and Canadian sover-eignty claims. We commit to working in partnership to implementland claims agreements to realize the social, cultural and economicpotential of all Indigenous and Northern communities. With part-ners, we will develop and share a plan and timeline for deployinginnovative renewable energy and efficiency alternatives to dieseland advance community climate change adaptation. We will do thisthrough closer coordination among Indigenous, state, provincial,and territorial governments and the development of innovativeoptions for housing and infrastructure. We also commit to greateraction to address the serious challenges of mental wellness, educa-tion, Indigenous language, and skill development, particularlyamong Indigenous youth.

In moving forward, we welcome the upcoming White HouseArctic Science Ministerial this fall, which will bring together Science

Ministers from nations with Arctic interests, and the twentiethanniversary of the Ottawa Declaration, which established the ArcticCouncil in 1996. Canada and the U.S. commit to a regular bilateraldialogue to ensure progress towards the realization of these objec-tives, to continuing their strong cooperation on scientific work andresearch, and to advancing our shared Arctic leadership modelthrough the Arctic Council.

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Arctic shippingLogistec partnering for success with mining companiesin the Canadian Arctic

Prospectors, geologists, and other min-eral exploration professionals oftentravel to remote locations when look-

ing for world-class ore deposits. Developing apromising site into full-scale mining opera-tions therefore requires careful attention toshipping, logistics, and infrastructure.

“New mines need a partner they canturn to for guidance, and who is willing to beflexible as they get things off the ground,”says Madeleine Paquin, President and CEOof Logistec. “Our project management andoperations staff are experts in what they do,and make us an innovative, hands-on partnerevery step of the way.”

In 2008, Logistec travelled to BaffinIsland, Nunavut, to provide cargo handlingand terminal management for an iron orecompany that needed to deliver approxi-mately 150,000 tonnes of samples to itscustomers for testing purposes. Logistecbrought partners on board to help manageinfrastructure development and coordinate

shipping through the Canadian Arctic.“Within two months, we’d filled three

bulk carriers destined for Europe. This meantbuilding a floating wharf and loading iron oreonto ‘hopper barges’ to bring the productfrom shore to deeper water in small batches,”says George Di Sante, Vice-President, MarketDevelopment at Logistec. “Conveyors werelined up in a series and the platforms on thewater had to be designed to safely handle thecargo’s heavy weight.”

Logistec also assumed responsibility forinstalling a temporary dock, made sure thata qualified workforce was available at alltimes, and managed the supplies and equip-ment needed to meet the client’s tightschedule. Furthermore, Logistec ensuredthat the site was restored to its original con-dition by disassembling the dock at the endof the project.

“The North is a demanding environ-ment, and we drew on this experience inBaffinland when we were approached to

develop our current project in DeceptionBay,” says Daniel Jodoin, Vice-President,Bulk Cargo at Logistec. “The lack of infra-structure in this isolated area meant that theclient needed much more than just steve-dores. We ship the mine’s entire productionoutput, and manage the influx of suppliesand machinery that the mine requires tooperate. You need to plan carefully for thepeople and equipment you need as well asthe duress of the extreme cold.”

With the help of qualified personnel,including local Inuit and fly-in,fly-out employ-ees, Logistec manages a nearby nickel andcopper mine’s entire terminal. This includesreceiving and stockpiling truckloads of con-centrates, a detailed sampling process,inventory control, and loading M/V Nunavik,the most powerful bulk-carrying icebreaker inthe world. Logistec also handles resupplycargo operations, including containers andgeneral cargo, as well as the mine’s vitalsupply of diesel fuel.

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Arctic shippingAdvertorial

Martech Polar at the forefront ofpolar shipping and research

Global climate change is manifestingitself in the Arctic shipping worldas a gradually increasing summer

shipping season and reduced overall icecover. These two factors will facilitate accessto previously expensive resource extractionprojects, and will increase Arctic shippingactivity. Still, sea ice remains a hazard inmuch of the Canadian Arctic for all but thehighest ice class vessels, even in thesummer navigational season. It remainsvital that vessel operators ensure both theirships and bridge teams are ready forencountering ice.

Martech Polar Consulting Ltd. is at theforefront in the Polar marine service industry,providing the experience and knowledgenecessary to operate vessels in any ice or coldweather environment, bringing togetherdecades of polar shipping experience from

highly qualified and experienced mariners toensure safe and efficient vessel operations inice. Martech Polar’s team provides clientswith both global onboard ice navigation andice pilotage guidance, as well as polar ship-ping consultation services for those new orless experienced in polar operations. Theglobal team of experienced and active IceMasters that Martech Polar can call uponprovides the broadest spectrum of knowl-edge and input. This ensures that voyagefeasibility studies, guidance in or completedevelopment of shoreside or onboard ice andcold weather procedures required for SafetyManagement Systems, newly required PolarWaters Operations Manuals and other con-sultative reports cover all the details.

Both onboard and ashore, MartechPolar has provided support around the globe.Clients have included: Alaska Maritime

Agencies; Arctia Shipping; Canarctic Ship-ping Company; Cirrus Research Associates;Crossing the Line Films; Enfotec TechnicalServices; Fednav; Furness Whithy (Charter-ing) Ltd; Global Ocean Development;Greenwood Maritime Services; IBC Asia;IBC Lloyds Maritime Academy; Informa;Mitsui OSK Lines – LNG Carrier Division;MOL LNG Trasnport (Europe) Ltd; PolarviewObservation Ltd; Shell International Shippingand Tanker Company; Tactical Marine Solu-tions; Teekay Canadian Tankers Ltd; TeekayShipping (Australia) PTY; Teekay Shipping(Canada) Ltd; Transport Canada; and WrightMaritime Group.

Company founder and Principal Con-sultant Captain David (Duke) Snider is an icenavigator and ice pilot with extensive icenavigation experience in Arctic and Balticwaters and the Gulf of St. Lawrence. AFellow of The Nautical Institute, andpresently Senior Vice President, he has con-tributed to the IMO Polar Code as TheNautical Institute’s delegate on all mattersrelated to ice navigation and polar shipping.He is author of the book “Polar Ship Opera-tions – A Practical Guide”.

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Arctic shippingStuart Milton Hodgson, O.C.: aCanadian Arctic elder passes awayBY K. JOSEPH SPEARS

As we consider the need for collab-oration in Arctic governance weshould not forget Canada’s long-

standing past of engaging with the Inuit inthe management and governance of theregion. A solid foundation was laid bysome amazing Canadians. One such indi-vidual is Stuart Hodgson O.C. who passedaway on December 18, 2015 in Vancouverat the age of 91.

Stuart had an amazing career as anantiaircraft gunner in the Royal CanadianNavy during World War II downing a Luft-waffe Junkers aircraft off Northern Norway,and experience on the heavily fought Mur-mansk Arctic convoy run. This arguablytriggered a lifelong interest in the Arctic.

Stuart was appointed as Deputy Com-missioner of the Northwest Territories in1963 by then Prime Minister Mike Pear-

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was affectionately known by the Inuit asUmingmak (Musk-Ox), a big warm,friendly, generous, wise and protective pres-ence. Stuart made a point of visiting everycommunity in the North on a yearly basisand listening to the concerns of residents.Often these meetings would go on late intothe night.

Through Stuart’s efforts, the North-west Territories, Canada’s Arctic, wasplaced on the international map and he fre-quently hosted British Royalty and thenPrime Minister Pierre Trudeau. There is nodoubt that Canada’s present Prime MinisterJustin Trudeau’s deep interest in the Arcticwas influenced by Stuart Hodgson’s in hisvisits to the North with his father, Pierre.Canada can learn much by reflecting on thelife and achievements of Stuart Hodgson, agreat Canadian and visionary and ground-breaking Arctic pioneer and elder.

son. When Stuart, a former labour organ-izer, questioned his lack of experience ingovernment the Prime Minister quipped“that is exactly why I am appointing youto this position”.

Within months of his appointment asCommissioner, he developed a fledglingcivil service, and created the foundationfor devolution towards independent gov-ernance of the Northwest Territories andNunavut. In September 1967 he movedhis 30 employees from Ottawa to the newcapital of Yellowknife, a small, isolatedmining town on the north shore of GreatSlave Lake. Houses had yet to be built andoffices were in a dilapidated, condemnedschool.

Stuart became Commissioner of theNorthwest Territories in 1967 andremained in that position until 1979. He

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The Marine Clubholds 77th

Annual Dinner

First Vice-President Capt. FarrokhKooka, President Marc D. Isaacs and

Guest Speaker Richard Martyn

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77th ANNUAL DINNER HEA

2016 Marine C

Peter L. Kelly, Marine Club President

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PAST PRESIDENTS22 • Canadian Sailings • March 21, 2016

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R HEAD TABLE

BOARD OF DIRECTORS

e Club DinnerThe 77th Annual Marine Club dinner, which

took place January 15, 2016, in Toronto, waspresided over by Marine Club President

Marc D. Isaacs. The more than 1,000 guestsattending the dinner this year enjoyed the keynoteaddress by archeologist Richard Martyn, Producer,Director and Writer.

Richard Martyn is one of Canada’s most expe-rienced verité and factual TV professionals. Formore than 20 years, he has been directing, writingand producing programming in a variety of dynamicand sensitive environments.

Since 2010, Mr. Martyn has been the SeriesProducer for Exploration Production Inc./Discov-ery Canada’s most successful series, Mighty Ships.From EPI’s offices, he supervises all aspects of theshow – from research, to production, to editing. Heregularly writes portions of the story or entireepisodes, and occasionally ventures out of the officeto direct film crews aboard the larger vessels.

Now in production on its ninth season, MightyShips is seen in more than 100 countries. In 2014,the series spawned a spin-off, Mighty Cruise Ships,which Mr. Martyn also produces. A second seasonof that series is currently in development.

Prior to producing Mighty Ships, he directedand wrote for the series – just one of a number ofdocumentary-based productions in which he haslent his talents. From rinks to hospitals, construc-tion sites to zoos, Martyn has been recognized withsubstantial audiences, as well as nominations andawards from the Geminis, the Banff InternationalTelevision Festival, Worldfest Houston and the LosAngeles Film & Video Awards.


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5

1 2

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Awards1. Marine Engineering Technician Cadet JosephBrawley with First Vice-President Capt. FarrokhKooka.

2. Marine Engineering Management StudentKristjan Van Wissen accepts bursary from Capt.Farrokh Kooka.

3. Marine Navigation Cadet Michael Malonniaccepts bursary from Second Vice-President PaulO’Reilly.

4. Zack Peters, Marine Navigation Cadet, acceptsbursary from Paul O’Reilley Isaac.

5. Alec Murdock, Marine Club Gold Awardwinner, with Capt. Farrokh Kooka.

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Immediate Past-President PeterL. Kelly (right)

accepts HonoraryMember plaque

from MarineClub PresidentMarc D. Isaacs.

February 16, 2015 • Canadian Sailings • 25

Head Table

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Seaway opens 58th navigation season two weeksearlier than usual

The St. Lawrence Seaway Manage-ment Corporation (SLSMC) markedthe opening of the Seaway’s 58th nav-

igation season on March 21, with thetransit of Canada Steamship Lines’ ThunderBay through Lock 3 on the Welland Canal.The ship, carrying a load of road salt, willbe replenishing stocks depleted by icestorms which repeatedly struck EasternCanada over the winter.

“We certainly welcome the warmerweather. A return to an opening in thethird week of March provides our clientswith the opportunity to move cargo in atimely manner, and make the most of thenavigation season” said Terence Bowles,President and CEO of SLSMC.

Allister Paterson, President of CanadaSteamship Lines, served as the keynotespeaker at the opening. “It’s an honour forCSL to be opening the Seaway this yearwith Thunder Bay, one of our state-of-the-art Trillium Class self-unloading Lakers.Like her five sister ships, this vessel is partof a new generation of vessels in the Lakesthat are more energy efficient, environ-mentally-friendly, reliable and safe” saidPaterson.

“The ongoing investment in new ves-sels by a variety of Seaway carriersunderscores our customers’ faith in thefuture of the waterway” said Bowles. “Inparallel with our customers’ investments,the Seaway’s award winning moderniza-tion program is now well-over 50 per centcomplete, with Hands-Free Mooring oper-ational at eight of the Seaway’s locks. Weare making steady progress in bringingabout gains in efficiency and safety for all

Left to right: Terence Bowles, CEO of The St. Lawrence Seaway ManagementCorporation; Chief Engineer Jerry Stemmler; Captain Jason Church; Betty Sutton,Administrator of Saint Lawrence Seaway Development Corporation; FrancoisAllard, Director of Marine Distribution for K+S Windsor Salt Ltd.; and AllisterPaterson, President of Canada Steamship Lines.

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concerned, ensuring a highly competitivetransportation system for years to come.”

K+S Windsor Salt ships the majorityof the production from its Ojibway Mine inWindsor via the Great Lakes / SeawaySystem. Francois Allard, Director MarineDistribution for K + S Windsor Salt Ltd.,said: “Not only is the Seaway transporta-tion system the most cost-effective way toreach our markets, it also minimizes our

impact on the environment. Thunder Bay’stransit from the Ojibway mine to Bow-manville takes almost 1,000 truckloads offOntario highways. It’s important that alllevels of government continue to invest ininfrastructure along this waterway and weapplaud the modernization of the locksystem.”

“The Great Lakes St. LawrenceSeaway System continues to be an environ-mentally sustainable, vital route forcommerce in the global supply chain,” saidBetty Sutton, Administrator of the SaintLawrence Seaway Development Corpora-tion. “The Great Lakes region, NorthAmerica’s ‘Opportunity Belt’, is a thrivingand influential destination and the SeawaySystem connects this region to the world.Businesses are choosing to move theircargo through the Seaway System becauseof the economic benefits, safety, and relia-bility of our waterway, and its direct accessto the heartland of North America.”

In terms of the outlook for 2016,SLSMC’s Terence Bowles noted that a lowerCanadian dollar may spur more Canadianexports this year. “The combination of a re-bound in Canadian manufacturing activity,a solid U.S. economy, and the prospect ofmore trade with Europe brings about severalcatalysts which may boost Seaway tonnage”,said Bowles.

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Vancouver Island transshipment hub proponents courtinvestorsBY KEITH NORBURY

Amassive terminal capable of han-dling 3.5 million containers a yearis being proposed for the West

Coast of Vancouver Island. The project,earmarked for Sarita Bay near the mouthof Barkley Sound about 75 kilometressouthwest of Port Alberni, would becomea transshipment hub for Vancouver andSeattle. The proposal calls for the terminalto load and unload the world’s largest con-tainer ships — vessels with capacities ofup to 22,000 TEUs — and barge theinbound and outbound cargo between ter-minals on the mainland. Estimated cost ofthe project is $1.7 billion to $2.2 billion.

Called the Port Alberni Transship-ment Hub, or PATH, it would be the focalpoint of a hub-and-spoke system thatwould revolutionize container shipping inthe Pacific Northwest, proponents argue.By cutting transit time across the PacificOcean by up to three days, it would saveon shipping costs, reduce carbon emis-sions, create hundreds of thousands ofjobs, and negate the need for new con-tainer terminal space in areas of expensivereal estate such as Greater Vancouver. “Itreduces one port call, right off the bat,”said Zoran Knezevic, President and CEO ofPort Alberni Port Authority, in a recentinterview.

Each container ship that now entersthe Salish Sea — the water body betweenVancouver Island and the mainland thatencompasses Juan de Fuca Strait, Georgia

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Zoran Knezevic, CEO of Port Alberni Port Authority

Strait and Puget Sound — offloads cargo atSeattle-Tacoma, then Vancouver, and “aweek or so later passes by in front of PortAlberni yet again on its way out back toAsia,” Mr. Knezevic said.

If the Port Authority can obtain thenecessary seed money, construction canstart immediately, Mr. Knezevic said. Theaim would be to have the terminal com-mence operation as early as 2022. Fine

details and analysis of the proposal are con-tained in a 420-page report ofpre-feasibility studies undertaken by well-known engineering and consulting firms— including CPCS (Canadian Pacific Con-sulting Services), Hatch Mott MacDonald,SNC Lavalin, and Dillon Consulting. PortAlberni Port Authority and TransportCanada shared the $450,000 cost of thereport, which was released in August 2014

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and can be found on the Port Authority’swebsite.

“The barges will deliver pre-sortedcargo at the right time and at the closestpoint to the end destination,” says thereport’s project brief. “In addition, PATHconceptually envisions servicing Vancou-ver Island’s ‘captive’ market and evergrowing business and population base.PATH also provides an opportunity to serv-ice coastal trade; providing an opportunityto combine Pacific Northwest and PacificSouthwest service in one.”

Seed money soughtThe project has received the backing

of the International Longshore WorkersUnion Canada, whose members wouldtake on most of the 400 to 500 jobs at theterminal, from Port Alberni’s Chamber ofCommerce, and from the Huu-ay-aht FirstNations, which occupies the traditionalterritory of the proposed terminal. On theother hand, a Victoria transportation con-sultant who has looked closely at theproposal says the project is a risky proposi-tion in today’s shipping environment.

Using the barges, PATH will distributecargo to ocean terminals, railways, truckterminals, or even customers like Walmartwhen they need it, Mr. Knezevic said.PATH would provide efficiencies for thoseexisting operations on the vast coastline of

the Salish Sea mainland, which has a pop-ulation of about 8 million, he added.Shipping to Portland and other ports alongthe Columbia River is another possibility,Mr. Knezevic said.

To get the project off the ground, thePort Authority is seeking federal govern-ment money. Mr. Knezevic is looking toobtain 30 per cent of the project’s fundingfrom the $14 billion New Building CanadaFund that was created by the previousConservative government. That fund sup-ports “projects of national, regional andlocal significance that promote economicgrowth, job creation and productivity,”according to a posting on the Infrastruc-ture Canada website. Within that fund is a$4 billion National Infrastructure Compo-nent for projects of “national significance.”“And there would be enough, in my opin-ion, for the seed money to get this projectoff the ground,” Mr. Knezevic said.

The company is also looking for amajor investor, such as a shipping line orshipping alliance, to come to the table. ThePort Authority has talked with a few smallcompanies in Asia and has signed a memo-randum of understanding with asmall-scale investor, he said.

Project faces challenges, saysanalyst

Darryl Anderson, a Victoria, B.C.

transportation analyst, said shipping linesaren’t the partners the Port should be seek-ing out. (Mr. Anderson happens to be aformer CEO of Port Alberni Port Authority.However, he wished to make it abundantlyclear that he was not speaking as the Port’sex-CEO. He was speaking solely in hiscapacity as managing partner of WavePoint Consulting.)

“The point is that the shipping linefollows the cargo,” Mr. Anderson said. “Sowho determines were the cargo goes? It’sthe beneficial cargo owner.” And thesedays that means mega retailers likeAmazon and Walmart. “Certainly if thePATH project can answer the value-addedthat those large shippers would need, thenyou’re actually in a stronger business caseto talk to shipping lines,” Mr. Andersonsaid. “But I haven’t seen it.”

Mr. Knezevic said the Port Authorityhas already spoken to Canadian Tire andother smaller retailers although it hasn’tyet talked to Walmart. Finding such part-ners is just one of the numerous challengesin today’s shipping market when the costof moving containers is weak, Mr. Ander-son said. “The risk for a large project likethis is if the uptake was lower than antici-pated in trying to get some of that traffic,or if the traffic didn’t materialize,” Mr.Anderson said. He noted, for example, aslowdown in growth of import and export

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volumes on certain trade routes, such as with China.Aside from those high-level economic challenges, the project

faces other obstacles, Mr. Anderson said. For example, buildingbarge and ramp facilities on the Fraser River would involve acquir-ing dredging permits and environmental clearances to ensure theprotection of riparian zones around the river, he noted while point-ing out that early in his career he worked for the federal FisheryDepartment. “And we witnessed going through the regulatoryprocess that any large development project takes longer than theoriginal project proponents envisioned,” Mr. Anderson said.

Report also raises questionsSections in the pre-feasibility study appear to shed doubt on

the argument that PATH would appeal to shipping lines. For exam-ple, the analysis by CPCS notes a current oversupply of shipcapacity. “… In such a context, ship time is not perceived as valu-able, and the perspective of reducing days at sea is not aconvincing argument in favour of a trans-shipment port,” thereport says.

Some 20 pages later, after outlining ways that new barge ter-minals in the Vancouver area could lower handling costs“significantly,” the CPCS report points out that the PATH systemwould encounter challenges with loading cargo onto rail for inlandmarkets like central Canada and the U.S. midwest.

“In particular, while direct barge-to-rail movements can bedone, it is even done currently in rail-intensive terminals (in theport of Montreal, for example), it requires strong coordinationbetween barge and rail services,” the report says. “Railcars must beavailable to be loaded, but not too early because the terminal usu-ally doesn’t have the space to store them.”

While the report says it would be feasible to handle containersdirectly from barge to rail at an existing berth on the Fraser River,it “would require capital investment to increase the number andlength of rail tracks.” The report also notes that there aren’t anyother existing facilities “which could handle high levels of con-tainer barge traffic to rail without very significant investments, andit is unclear whether such facilities could be built and operatedcost competitively.”

Terminal site also potential LNG siteWhile the pre-feasibility study identifies five potential loca-

tions for the terminal along the Alberni Canal and Barkley Sound,the favoured ones are on Sarita Bay, about 75 kilometres from PortAlberni. At present the sites are all served by gravel forestry roads,

“which would no doubt have to be substantially upgraded andpaved in order to accommodate significant truck traffic and othervehicular traffic associated with the terminal,” according to thepre-feasibility study report.

Sarita Bay is also the location of Steelhead LNG’s proposed$30 billion liquified natural gas facility. Mr. Knezevic said the areahas plenty of room for both ventures and that they would evenshare some synergies, such as tugboats and supporting infrastruc-ture.

Among the options is to build all or part of the PATH terminalon land owned by the Huu-ay-aht First Nations, which has signeda protocol agreement with the Port Authority to develop a world-class port. “The Alberni Inlet is a very big inlet,” said RobertDennis Sr., the elected Chief of the Huu-ay-aht First Nations. “Andone of the advantages of Alberni Inlet is that it’s very deep water.”Still, Chief Dennis said his people have expressed some “loud andclear” environmental concerns about both projects.

“The marine portion of the site is going to be quite large so itis effectively going to remove some key fishing areas of the Huu-ay-aht people,” Chief Dennis said. “And it would probably impact therecreational fishery. They would no longer have access to areasthat they would normally fish.”

Despite those downsides, Chief Dennis is heartened that theproject proponents have consulted with the Huu-ay-aht beforegoing ahead. “You know what the old case was before — they usedto develop projects without (First Nations) consultation,” he said.

Terminal would cover 250 acres or moreThe project brief of the pre-feasibility study envisions a

modern fully automated container terminal that would cover 250acres, have two main berths of 1,500 metres, three barge berths,14 dual-hoist trolley ship cranes, six dual hoist barge cranes, 43yard cranes, eight gate cranes, and 135 battery-operated yardtruck/robots. (Elsewhere, the report refers to a 400-acre terminalwith annual capacity of 3.5 million TEUs.) About half the cost ofthe PATH project would be for the equipment, Mr. Knezevic said.But he hinted that the costs of the cranes for the project might beless than anticipated. ZPMC, the Chinese port crane manufacturer,recently agreed to build cranes for Port of Long Beach, Calif., for20 per cent less than PATH’s price estimate, he said.

The terminal itself would employ 400 to 500 people full-timebased on one vessel calling there each week, Mr. Knevevic said.The International Longshore Workers Union Canada has written aletter of support for the PATH project and its job creation potential.“We’re excited about it,” said Rob Ashton, ILWU Canada’s Vice-President. “Any new investment into our port systems in B.C. isgreat.”

This diagram illustrates one of the proposed configurationson Sarita Bay for the Port Alberni Transshipment Hub.

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The only drawback from the union’s perspective is that itwould be a fully automated facility. “The use of labour is hinderedby that. We prefer fully manned terminals,” Mr. Ashton said.

Terminal would complement existing portsThe PATH pre-feasibility study report notes that markets for

the Port Alberni hub would likely focus on those currently servedby existing Pacific Northwest ports. However, Mr. Knezevic saidPort Alberni wouldn’t necessarily compete with those ports butwould handle the increased volumes that are expected to come tothe region over the next 15 years. “We are adding to the gatewayrather than restricting. We are enabling the gateway to handlemore,” Mr. Knezevic said.

If PATH does “steal” any cargo from PMV, for example, itwould be cargo destined for Vancouver Island, which would nolonger have to go through Vancouver. Nanaimo’s container termi-nal might also lose some traffic, at least initially, but it should gainalso as the overall volumes grow, Mr. Knezevic said.

Using PMV’s growth projections as a guide, Mr. Knezevicposits that annual volumes for the region, including Seattle-Tacoma, would be about 10 million containers a year in 2024.Should PATH be operating by then, it would handle about a 10thof that volume. “So it’s a small amount.”

The recent slump in the world economy, particularly in China,and the consequent drop in oil prices would only have a smallimpact on getting the PATH project off the ground, Mr. Knezevicsaid. “I still believe even with the economy going down (that)people will be looking for savings and more efficient ways of doingthings,” Mr. Knezevic said. “And this project essentially offersimprovements … to the existing logistics in the lower mainland.”

Mr. Knezevic said he has an intimate understanding of con-tainer transportation networks on B.C.’s lower mainland fromhaving worked in those industries for 15 years, including a dozenyears at Deltaport, Greater Vancouver and Canada’s busiest con-tainer terminal. “And I have seen a lot of troubles and issues thatlower mainland is facing, predominantly that you have container ter-minals on the outskirts of the industrial areas,” Mr. Knezevic said.

He does not expect those congestion problems to diminish,noting that Port Metro Vancouver anticipates a doubling of con-tainer volumes by 2030. Plans to address that growth includeadding a 2.4 million TEU facility called the Roberts Bank Terminal2 project. “There is no doubt that without mitigation, increasedcontainer traffic at Roberts Bank will create increased congestionon major corridors in Vancouver,” says the CPCS report.

Savings of $540,000 per vessel call predictedAn attraction for big ships, according to the PATH report, is

that PATH shaves three days off the sailing time, which works outto $20 per TEU, and $540,000 per vessel call to the Pacific North-west. Another analysis in the report calculates that deploying a

single string of 13,000 TEU ships in place of 6,000 or 8,000 TEUstrings “would generate a vessel network cost savings of $143 perround trip TEU.”

Mr. Knezevic said the estimate was based on the operatingcosts in 2013-2014 and were heavily dependent on fuel prices,which have since plummeted. However, the report’s estimatedidn’t take into account recent surcharges related to rules requir-ing the use of low-sulfur fuel within 200 nautical miles of theNorth American shoreline. Mr. Knezevic said those eco chargesprobably balance out the lower fuel prices. “But I haven’t recalcu-lated the cost.”

The executive summary of the pre-feasibility study notes thatcompeting ports, including Vancouver, are also expected to investin equipment to become capable of handling the ultra-large ships.However the report adds that “the PATH facility could potentiallybe an early mover in accommodating ULCSs.” Mr. Knezevicdoesn’t take that to mean that there’s a narrow window of oppor-tunity for PATH. “It’s not necessarily that strict with timing,” Mr.Knezevic said. “Even if PATH gets built, it will not be able tohandle all of the volume that passes in front of our doors.”

At present about six million TEUs sail past Port Alberni eachyear, Mr. Knezevic said. PATH could handle a maximum of fivemillion TEUs per year. If container volumes for the region doubleby 2030, as Port Metro Vancouver predicts, about 12 million con-tainers in total would traverse the Salish Sea annually by that year,by Mr. Knezevic’s calculation. Even if the infrastructure in Vancou-ver and Seattle is upgraded to handle 18,000 TEU ships, thoseports “cannot change the hinterland infrastructure where the dis-tribution centres and warehouses are located,” Mr. Knezevic said.“They still have congestions on land and still have issues of how tomove that cargo the last mile from the waterfront to the ware-house.”

Soaring land costs poses riskMr. Anderson, however, pointed out that the shortage of

industrial land around Vancouver and its soaring prices also pres-ents a big obstacle to the PATH prospect. “So it may flow in termsof a logistics model — in other words you can physically transshipcargo,” Mr. Anderson said. But acquiring the land “is a real chal-lenge.” That’s because other users — such as constructioncompanies — of those “small-bay” industrial sites are willing topay more for those sites, he said.

A Jan. 19 article in the Vancouver Sun supports that conclu-sion. “There’s just no available vacant industrial land in Vancouver.Full stop. Period. Nothing,” the article quoted Vancouver devel-oper Brent Sawchyn. Mr. Knezevic, however, made it clear thatPATH plans to use existing facilities, at least in the early stages.

“Fraser Surrey Docks right now, without touching anything,has all the equipment and infrastructure to handle more than a mil-lion TEUs of cargo as of today,” Mr. Knezevic said. “So the beautyof this (PATH) system is it could be distributed to the existing facil-ities with zero added investment on the land side or requirementsfor additional land at this point.” He envisions distributing thecargo to multiple nodes along the river, as well as to Deltaport, theCN rail yard at the Port Mann Bridge, and the CP rail yards at PortCoquitlam.

“Basically Port Alberni’s argument is that congestion alonewill drive traffic to PATH,” Mr. Anderson said. “Maybe. But maybenot.” He questioned why the operator of a transload facility in Van-couver would even want to transload the cargo one more time inPort Alberni. “They’re not going to do it,” Mr. Anderson said.

Is hub-and-spoke model passé?Another major issue Mr. Anderson has with the PATH project

is that the hub-and-spoke-model is becoming outdated in a worldof omni-channel distribution. That’s a reference to the multipleways that consumers now buy their products, such with their cell-phones and computers. An upshot of that trend is that dominant

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retailers, like Amazon, are building huge distribution centres of upto a million square feet. The logical strategy then for a transship-ment hub would to be to plug directly into those omni-channeldistribution centres. “So how does the PATH project meet theneeds of the primary shippers of the world like Amazon?” Mr.Anderson said.

Mr. Anderson also observed that companies are increasinglymoving goods to these massive regional distribution centres to per-form final assembly of products or other value-added activities and“not just transload it from a marine container into a domestic inter-modal and then ship it on.” That’s also a reality that Vancouver —including the T2 project proposed for Roberts Bank — will have toconfront. But at least Vancouver already has customers, Mr. Ander-son said. “So they’re not going to disappear overnight,” Mr.Anderson said. “But if you build a new facility and new infrastruc-ture, (as Port Alberni proposes) you want to be at the leading edgeof the current trends and needs, which is much bigger buildings,and much bigger density. They’ll come with bigger, higher prices,unfortunately.”

Mr. Anderson also questioned whether PATH’s focus on mega-ships is properly timed, pointing out that vessels of 5,000 to 8,000TEUs still dominate the high seas. “The really large megaships arenot carrying the dominant amount of freight. It’s going to get there.But capital stock takes time to renew,” Mr. Anderson said. Heexpects that process to take decades, not years.

Either way, shippers need incentivesMr. Knevevic said the PATH plan doesn’t just hinge on the

larger ships. And even if Vancouver and Seattle can handle largervessels, they still have problems moving cargo from the terminals tothe hinterlands, he said. Doubling Deltaport’s capacity would addthousands of trucks to lower mainland roads each day, adding to pol-lution and congestion. “Secondly, nobody in the shipping world isgoing to deploy an 18,000 TEU ship to sit in the port for a week orso to be offloaded,” he said. (According to the pre-feasibility report,an 18,000 TEU ship would take three days to unload at PATH, andanother three days to reload, for a total dwell time of six days.)

Hub-and-spoke systems such as PATH are used all over theworld, Mr. Knezevic pointed out, adding that western Europe

moves about 40 per cent of its cargo by barges. “The only way inmy opinion that we can continue to grow in the container businessindustry is by using the short-sea shipping route for freight,” Mr.Knezevic said.

But Mr. Anderson said that most transshipment hubs takeadvantage of intersecting trade routes. Transshipment facilitiesaround the Panama Canal, for example, intersect north-south andeast-west trade routes. For Port Alberni, the traffic would be almostexclusively east-west.

On the subject of the Panama Canal, Mr. Knezevic regardsPATH as a strategy for countering the “imminent threat” thecanal’s expansion poses to West Coast ports, in that the canal willsoon be able to accommodate 14,000 TEU vessels, which willreduce the cost of shipping containers directly to the Gulf and Eastcoast from Asia. “We have to maintain a gateway fluid enough toprovide incentive for the shipping lines to bring the productshere,” Mr. Knezevic said, adding that the PATH project will reducetrans-Pacific shipping costs by eight to ten per cent.

One thing in PATH’s favour is that the container terminal inPortland, Ore., recently shut down because of a labour dispute,Mr. Anderson said. So Port Alberni could serve it with barges,which Mr. Knezevic said is part of a plan that would also serveother terminals along the Columbia River. Then again, Mr. Ander-son observed, “If we really were at capacity constraints forcontainer terminals on the West Coast, would a shipping line reallyhave walked away from Portland?”

The open question is whether proponents of PATH have madea convincing enough argument to potential financial backers.ILWU’s Mr. Ashton is optimistic. “People used to say the containerterminal in Prince Rupert would never fly,” he said. “And look atit now. It’s massive and growing.” Mr. Anderson, though, cited thesuccess of Prince Rupert as just another strike against PATH notleast because of Rupert’s much lower cost of industrial land. Newterminals at Seattle-Tacoma are also becoming more competitive,he said. The factors all suggest to Mr. Anderson that for themedium term at least, “unless there’s a fundamental economicrealignment, the PATH project will probably remain at the conceptstage.”

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Algoma Central reports 2015 results and announceschanges to business strategy

Algoma Central Corporationannounced results for its 2015fourth quarter and fiscal year. During

the fourth quarter, the Companyannounced its intention to divest of its realestate portfolio to focus on its existing ship-ping businesses and opportunities in nicheinternational markets. The results for theperiods reported on have been restated toreflect the real estate segment as a discon-tinued operation.

For the year, the Company’s consoli-dated revenues were $413.5 millioncompared to $473.4 million in 2014. Fuelcosts declined significantly during the yearand approximately $38 million of thedecrease in revenue is a direct result of thepass-through effect of decreased fuel costs.The balance of the decrease in revenuesresults from a drop in rates earned due tostiff competition in the company’s domesticdry-bulk business and to a drop in volumescarried in its product tanker and ocean dry-bulk business units.

Net earnings from continuing opera-tions for the year were $21.0 million,compared to $49.0 million for the prior yearperiod. The decrease in earnings year-over-year was driven primarily by the drop inrevenues and partially offset by a gain result-ing from the cancellation of shipbuildingcontracts earlier in 2015. Cash flow fromcontinuing operations for the year was$57.8 million, down from $97.7 million in2014.

Business conditions softened notice-ably in the second half of 2015 andrevenues for the fourth quarter were$119.2 million, compared to $141.6 mil-lion in the same period last year. Netearnings from continuing operations for thefourth quarter were $9.0 million, comparedto $34.2 million in 2014. Revenues andearnings from all business segments werenegatively impacted by softer market condi-tions that resulted in lower demand andreduced customer volumes.

The company’s two most importantdry-bulk industries domestically are the ironand steel industry and the grain industryand both faced their share of challenges thisyear. Grain customers faced much strongercompetition from Russian and Eastern Euro-pean suppliers, as strong harvests enabledsuppliers in those regions to re-enter exportmarkets they had largely been absent fromin recent years. Grain shipments headedeast were down as inventories grew in theSt. Lawrence elevator network.

The iron and steel market has also suf-

fered from growing competition, in this casefrom cheaper foreign imports. AlthoughAlgoma’s principal customer in this market,ArcelorMittal, is well positioned in thehigher quality steel markets, two of thethree large, integrated steel companies inCanada are operating under creditor protec-tion. Industry volumes were downsubstantially this year.

One bright spot is the continuedimprovement in construction materials.Algoma’s customers in this industry arereporting stronger sales, driven by theimproving strength of construction in thekey U.S. markets and the lower value of theCanadian dollar. Volumes in constructionmaterials rose, although rates wereimpacted by the stiff competition amongstmarine carriers. Salt volumes were alsostrong in 2015, coming on the heels of twoabnormally cold and long winters.

At year end the company decided toretire five domestic dry-bulk vessels and aproduct tanker that had reached the end ofits economic life. The decision to retire thedry-bulk vessels reflects management’s viewthat current domestic market capacityexceeds customer demand and certain oldervessels are no longer economic to operate inthese market conditions. As a result ofremoving these vessels from service, themanagement has accelerated depreciationon them and recorded an additional depre-ciation charge in the domestic dry-bulksegment in the fourth quarter of $3.3 mil-lion.

During 2015, Algoma introduced itsnew strategic vision for the Company topursue growth opportunities beyond the tra-ditional domestic markets in which it

operates. In November, the companyannounced the first growth investment withthe acquisition of two vessels then belong-ing to one of its partners in the InternationalPool, and the purchase of a 50 per centinterest in a third vessel. This transactionclosed in January 2016 and these vesselswill contribute to Algoma earnings for all of2016. As a result of these purchases,Algoma’s interest in the Pool has doubled.

In January 2016, Algoma announcedthe creation of a new joint venture, NovaAl-goma Cement Carriers, through which itwill partner with an established player inthe pneumatic cement carrier business toform a specialized global fleet of pneumaticcement carriers to support infrastructureprojects world-wide. Algoma already hassome insight into the business already astwo of the vessels for which it providestechnical management services on theGreat Lakes belong to cement manufactur-ers serving the Canadian and U.S. markets.With newer pneumatic vessels providingservice capabilities that cannot be matchedby older vessels, Algoma believes thismarket is primed for consolidation and fleetrenewal. Algoma is looking forward toannouncing further investments in this ven-ture and others as we roll out our newstrategy.

On February 16, 2016, Algomaannounced that the London ArbitrationPanel hearing the Mingde shipbuilding con-tract cancellation dispute issued an award inAlgoma’s favour on three of the four out-standing claims. Algoma has beguncollection proceedings on these refundclaims, which are valued at US$53.2 mil-lion as at February 16th.

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NOL racks up its third successive year of losses,reporting $181 million of red ink in 2015BY MIKE WACKETT

Singapore-based shipping line NOL posted a net loss of $181million in 2015, after a disastrous fourth quarter which sawits APL container line heavily discounting freight rates to fill

ships. Although the result represented a 30 per cent improve-ment on the $260 million loss in 2014, the company was obligedto submit a note to the Singapore stock exchange after recordingthree consecutive years of losses.

APL’s revenue slumped 24 per cent on the previous year, to$5.4 billion, as box volumes fell 13 per cent to just under 2.5 mil-lion TEUs and its average rate plunged 17 per cent to $1,877 per40ft. “The last quarter of 2015 was particularly difficult,” saidNOL Group President and Chief Executive Ng Yat Chung, blam-ing “historically low” freight rates across the major tradelanes andnew capacity being introduced into a “softening market”.

Indeed, APL’s average freight rate in the final three months of2015 fell to $1,699 per 40ft, with revenue tanking 29 per centquarter-on-quarter as the carrier endeavoured to keep its headhaulvessel load factor at an industry ‘healthy’ 90 per cent. APL said ithad achieved cost savings of $435 million in 2015, mainly due tothe dramatic drop in the price of bunker fuel, but this was allhanded back to shippers in the form of freight rate reductions.

In December, CMA CGM successfully bid $2.4 billion for thetroubled NOL shipping group, subject to anti-trust clearance fromthe European Union, China and the U.S., which it expects toobtain by the middle of this year. The French carrier will hope thatAPL’s financial performance does not deteriorate further before ithas an opportunity to address the situation, although prospects inall trades for this quarter at least are looking decidedly grim. Theacquisition of APL will cement CMA CGM’s third-ranked positionin the container line top 20 league table, behind Maersk Line andMSC, and with a combined capacity of 2.3 million TEUs wouldput the enlarged carrier comfortably ahead of the newly-merged

COSCOCS (COSCO and CSCL). CMA CGM intends to pull APLout of the G6 vessel sharing agreement, which requires a mini-mum six months’ notice.

Speaking in the U.S., where the Saade family had been cel-ebrating the inauguration of 18,000 TEU CMA CGM BenjaminFranklin at the Californian port of Long Beach, Vice ChairmanRodolphe Saade admitted that CMA CGM had had discussionswith other carriers on the formation of a new mega-alliance. Hetold The Wall Street Journal: “There are many rumours in themarket about who we are talking to, in our industry everybodytalks to everybody. We are discussing with the new China Ship-ping group, but we are also discussing with others.” Industryspeculation is that the “others” could be OOCL and possiblyEvergreen, with the prospect of current O3 alliance partnerUASC being obliged to seek another alliance.Reprinted courtesy of The Loadstar (www.theloadstar.co.uk).

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CSAV acquisition seems to have helped Hapag-Lloydturn 2014 losses into a profit in 2015BY MIKE WACKETT

‘Adapt and optimize’ the strategy for stormy financialwaters, says CMA CGM chiefBY MIKE WACKETT

CMA CGM joined the growing ranks of ocean carriers thatmay have sailed into the red in the final quarter of 2015 but,thanks to a good start, it managed to record a net profit of

$567 million for the full year. This compares with $584 millionachieved in 2014. Revenue declined by 6.4 per cent to $15.7 bil-lion, despite carrying up 6.3 per cent to 13 million TEUs, while itsaverage freight rate for the year slumped by 11.9 per cent to$1,206 per TEU. Of the 771,000 TEUs of extra containers loadedonto its ships, 535,000 TEUs came from its U.S. services, whichmitigated a 147,000 TEU reduction in Asia-Europe liftings. Its car-ryings were also boosted by a 266,000 TEU increase from itssubsidiaries – mostly relating to its acquisition of OPDR in July2015. “Our operating performance once again illustrates thestrength of our business model and our capacity to adapt,” said

CMA CGM Vice-Chairman Rodolphe Saade.This constant review of strategy was in evidence only last

week when the French carrier announced it would redeploy six18,000 TEU flagships to the transpacific trade from its Asia-NorthEurope FAL 1 service, where freight rates have come under intensepressure due to a combination of weak demand and an oversupplyof capacity.

Mr. Saade conceded that the beginning of this year had been“tough” and “marked by freight rates under pressure. We are there-fore strengthening our continuous efforts to adapt and optimise ourmaritime services as well as our cost reduction programme,” he said.

CMA CGM’s fleet capacity swelled by 14.8 per cent year-on-year to 1.9 million TEUs, which cemented its third-ranked carrierposition behind Maersk Line and MSC, ahead of the newly-merged

Hapag-Lloyd announced a preliminaryunaudited EBIT (earnings beforeinterest and tax) of just $20 million

for the final three months of 2015, suggest-ing the carrier suffered a net loss in thequarter. However, in a statement, the com-pany said it had “achieved its earningstarget for 2015”.

Like many of its peers, Hapag-Lloydstruggled in the final months of last year asfreight rates on its main east-west and north-south trade routes continued under intensepressure. Hapag-Lloyd’s unaudited accountsshow an EBIT for full-year 2015 of $407million, and the final net result will likelyrepresent a considerable improvement on2014, when it recorded a loss of $737 mil-lion.

Despite having fully incorporatedCSAV’s liner business last year, Hapag-Lloyd’s revenue was a disappointing $9.8billion, from just over $9 billionn prior to theintegration– further evidence of how thecarrier has been squeezed on freight rates,not least in its Latin America sector, whichafter digesting CSAV is now its biggest trad-ing region.

2015 volumes were up significantly, at7.4 million TEUs, compared with 5.9 mil-lion TEUs the year before, but its averagefreight rate fell to $1,225 per TEU from$1,427. But the carrier kept its averagefreight rate higher than that of Maersk Lineat $1,100 per TEU, and significantly abovethat of APL, which reported an average rate

for the year of $950 per TEU.In Hapag-Lloyd’s nine-month interim

report, Q3 EBIT was reported as $90 mil-lion, giving a modest net profit of $3.5million, so it could well have actually suf-fered a net loss in the fourth quarter. At thatpoint, in November, EBIT was recorded as$387 million for the nine months, showinga net profit of $176 million – the majority ofwhich had been achieved in the first half ofthe year.

Chief Executive Rolf Habben Jansensaid at the time that it expected to achieve$400 million in synergy savings from theintegration of CSAV’s container business –more than the $300 million originally esti-

mated. And Hapag-Lloyd has continued withits cost-cutting strategy, reducing head countfor the merged businesses to 9,500 fromaround 12,000. In December it also stoppedthe traditional forwarding agents’ commis-sion (FAC) to intermediaries in most of itsregions.

In November, Hapag-Lloyd raised $300million from a problematic IPO that saw thefloat price at the lowest end of the offer at€20 per share. It said at the time that the pro-ceeds would be invested in new vessels andcontainers. Hapag-Lloyd’s final 2015 groupaccounts will be published on 23 March.

Reprinted courtesy of The Loadstar(www.theloadstar.co.uk).

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Chinese carriers at 1.56 million TEUs. Ithas an orderbook of 24 vessels, totalling261,000 TEUs, including three 20,600TEU and six 14,000 TEU ultra-large ships,which still require financing.

The cost of bunkers and consumablesfell by 39 per cent on 2014, lopping amassive $1.37 billion off of expenditure,as the average price the carrier paid forfuel tumbled to $330 per tonne from$570 the year before. Charteringexpenses and slot purchases increased by15 per cent, compared with 2014, or$269 million to $2.1 billion, as CMACGM’s chartered-in fleet expanded by 16per cent to 1.29 million TEUs.

In December, CMA CGM had its $2.4billion offer for NOL accepted and, subjectto clearance by the regulatory authorities inChina, the EU and the U.S., the companysaid it was still “on target” to complete theacquisition by the middle of this year.

According to Alphaliner data, NOL’scontainer arm, APL, operates a fleet of 85

ships – 53 of which are owned – for acapacity of 531,696 TEUs. To finance theacquisition CMA CGM has agreed a $1.65billion loan from a syndicate of interna-

tional banks and has pledged $750 millionof its own cash.


Blow to express airlines as Amazon leases 20 767Fsand eyes ATSG share dealBY ALEX LENNANE

In what could be a blow to express air-lines, Amazon has signed an agreementwith Air Transport Services Group

(ATSG) for the lease of 20 767Fs for five toseven years – although the agreement tooperate the aircraft is for five years only.

Admitting that, as the market had spec-ulated for some time, the aviation group hasbeen working with Amazon since lastsummer, ATSG added in a statement that ithad agreed to offer Amazon warrants to buyup to 19.9 per cent of its common shares,over a five-year period, at $9.73 per share.

The deal could bode well for ATSG.Market sources have told The Loadstar thatAmazon would actually want up to 60

767Fs over the coming years. CurrentlyATSG has 32 767Fs via its airline ABX Airand four with Air Transport International. Ithas been operating five 767Fs for Amazonfrom its Wilmington, Ohio, hub.

The deal, agreed with Amazon Fulfill-ment Services, includes the lease of theaircraft from ATSG subsidiary Cargo AircraftManagement, their operation by the two air-lines and gateway and logistics servicesfrom ATSG’s LGSTX Services. “We’reexcited to supplement our delivery networkwith a great new provider, ATSG, by adding20 ‘planes to ensure air cargo capacity tosupport one- and two-day delivery for cus-tomers,” said Dave Clark, Amazon senior

Vice-President of worldwide operations andcustomer service.

The move will be a blow to other U.S.ACMI airlines, which were reportedlyjostling for position to offer Amazon aircargo services. However, ATSG, as theworld’s largest owner and operators of767Fs, was always going to be prime candi-date. “Since last summer, we have beenworking closely with Amazon to demon-strate that a dedicated, fully customised aircargo network can be a strong supplementto existing transportation and distributionresources,” said Joe Hete, President andCEO of ATSG. “We are excited to serveAmazon customers by providing additionalair cargo capacity and logistics support toensure great shipping speeds for cus-tomers.”

While a document revealed byBloomberg recently intimated that Amazonhad plans to cut out third-parties in itssupply chain, such as forwarders and theintegrators, research by Barclays suggeststhat the e-tailer might not want to get intoaircraft ownership and operations. Simpler,then, to buy a share in the world’s (current)largest operator of 767Fs – the aircraftwanted most by both Amazon and its poten-tial rivals, the express airlines. FedExcurrently operates 31 767s and has 30 onorder.


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Peace breaks out as new affinity grows between portsand unions on U.S. west coastBY GAVIN VAN MARLE

Carriers in dire straits as spot rates continue in freefallright across ocean container tradesBY MIKE WACKETT

Labour relations on the U.S. west coast appear to have entereda new era of cooperation between management and unions,according to speakers at the Transpacific Maritime (TPM) con-

ference in Long Beach.The considerable fury of shippers who blamed the International

Longshoremen and Warehouse Union (ILWU) for the crippling portcongestion that impeded much of the country’s container supplychains, has largely dissipated – particularly where unions have beenput in a position where they can explain themselves to shippers.

Chris Lyttle, Executive Director of Port of Oakland Authority,told delegates that the inclusion of Local 10 – the Oakland branch ofthe ILWU – in a port efficiency working group had had “a transfor-mative effect”. He said: “I put a lot of our problems last year downto a lack of education and understanding, and a lot of the time theunion wasn’t in the same room [as the other stakeholders in thesupply chain]. “Now we include the union in the port efficiencyworking group we have set up, and Local 10 is contributing in a verycollaborative way. Just a few months ago its President handed hisbusiness card to a range of BCOs [beneficial cargo owners] and said‘if you have a problem with your cargo, call me’.“Getting him in

front of the end customer is incredibly important, because it defusesthe tension and creates understanding,” Mr. Lyttle added.

David Arian, Vice-President of the Los Angeles board of har-bour commissioners, claimed there was a paradigm shift underwayin the role that Port Authorities play in the wider supply chain. “ThePort of Los Angeles began the transition with the appointment ofChief Executive Gene Seroka – he brought in the concept of chang-ing a Port from landlord to hybrid operator. “What we are nowasking ourselves is how can we help each terminal succeed. “Eachterminal has a business plan – they are different and need differenthelp to succeed,” he said, adding that Los Angeles Port Authorityhad also set up an efficiency committee.

“Now we are going from terminal to terminal and asking man-agement and labour to come together to improve efficiency, and wehave had a couple of terminals where turn-time has been reduced by21 minutes,” he said. “It is the role of the modern Port Authority tobe a third-party that brings all the stakeholders together with thesimple aim of getting the turn time [in Los Angeles] down tobetween 35 and 40 minutes,” he added.

Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)Ph

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Tumbling spot container freight rateson all shipping routes from Chinacaused the Shanghai Containerized

Freight Index (SCFI) to sink to another all-time low. The SCFI has now fallen by 60per cent over the past year, reflectingincreased weakness in every tradelane itcovers.

The biggest percentage loss was on

Asia to South America: a massive 25 percent drop in spot rates during the week,down to $472 per TEU after a recent rallypetered out.

Meanwhile, the two biggest trade-lanes, Asia-Europe and the transpacific, alsosuffered significant declines in rates. Asia-North Europe rates lost another 8.7 per centto slump to $211 per TEU – the lowest ever

recorded by the SCFI for the trade, and itsninth consecutive week of decline. Spotrates to Mediterranean destinations plunged14 per cent on the week to $203 per TEU.

Anecdotal reports from China suggestthat carriers this week have been toutingrates as low as $100 per TEU between Asiaand North Europe, as vessel utilisation slidbelow 70 per cent on some voyages. It fol-

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Port of Halifax anticipating larger cruise vessels, more passengers in 2016

The 2016 cruise season at Port of Hali-fax will begin on April 30, 2016 withthe arrival of the Veendam, a Holland

America Line vessel. “This is a wonderfulway to start our 2016 cruise season in Hali-fax,” said Cathy McGrail, Director of Cruiseand Corporate Communications for Port ofHalifax. “Holland America has been a

tremendous partner over the years, andVeendam is one of the vessels calling Hali-fax that is equipped to take on shore power.Starting off the season in this way is a goodrepresentation of the partnerships and inno-vations that have helped develop a strongcruise offering in Halifax.”

With 135 vessels expected during the

lows that the lines have been obliged toabandon all hope of obtaining planned gen-eral rate increases (GRIs) this month – butmost seem to have decided to try again toboost rates by announcing new GRIs for 1April.

However, this time, some carriers,including CMA CGM and MSC, appear tobe more realistic with their proposals, askingfor a more modest $500 per TEU increase,instead of the $1,000 hikes of past GRIs.

This week saw the CKYHE allianceannounce that it will halt one of its Asia-North Europe loops, and it is understood thatthe G6 alliance will permanently withdrawits Loop 6 service to North Europe, after its11 week suspension ends in mid-May.

The toxic mix of weak demand and toomuch capacity saw even market leadersMaersk Line and CMA CGM lose money inthe final quarter of 2015. London-based con-tainer derivatives broker FIS said: “Withrates on key east-west trades struggling, car-rier financials could take anotherhammering in Q1 2016, and place them onthe back foot for the remainder of the year.”On the transpacific tradelanes, spot ratescontinued to erode in the middle of newannual contract negotiations, falling 8.4 percent to the U.S. west coast, to $810 per40ft, and 5.2 per cent to the east coast, to$1,710 per 40 ft.

The pressure on the transpacific doesnot bode well for CMA CGM’s introductionof 18,000 TEU ships to the route, a decisionone analyst described this week as “mad-ness”.

Oslo-headquartered Xeneta, a cloud-based container intelligence platform, saidthat notwithstanding the rock-bottom spotrates, contracts that were being renewedwere being fixed at “significantly lower

levels” than for the previous year. ChiefExecutive Patrik Berglund told The Loadstartoday: “What is interesting is that the biggervolume shippers are pulling the prices downwith their new contract demands and thecarriers have to accept it, as the wholeindustry has this perception and are expect-ing the decline.”

Reprinted courtesy of The Loadstar(www.theloadstar.co.uk)

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2016 cruise season carrying approximately240,000 cruise guests plus crew, the port ispreparing for another busy year. This year,the passenger capacity onboard a singlevessel record in Halifax will be brokentwice. Norwegian Lines’ Breakaway isscheduled to call on June 29, 2016; with apassenger capacity of 4500 plus crew, thiswill be the highest number of cruise guestson a single vessel until the arrival ofAnthem of the Seas September 1, 2016,which has passenger capacity of 4,905 pluscrew.

2016 highlights will include eightinaugural calls, two visits of Queen Mary 2,three visits by Disney Magic. September 15is expected to be the busiest passenger daywith over 9,000 passengers plus crewexpected.

“The cruise sector is important toNova Scotia’s tourism economy,” saidMartha Stevens, Acting CEO, TourismNova Scotia. “Cruise passengers spendmoney on food, shopping, and excursions,and are introduced to some of the uniqueexperiences that make Nova Scotia anattractive vacation destination.”

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Atlantic Container Line signs new contract withCeres Halifax Inc.

Atlantic Container Line (ACL) has decided to maintain itstwice weekly call at Halifax with its new G4 RORO/Contain-erships. ACL will continue to serve the North American and

European markets at the Fairview Cove Container Terminal ofCeres Halifax Inc. ACL and Ceres have signed a new contract thatruns through 2022.

Andrew Abbott, President/CEO of Atlantic Container Linecommented, “We value our long-term working relationships withHalifax Port Authority (HPA) and Ceres. We looked long and hard atvarious schedule alternatives for our new ships. Some excluded Hal-ifax. But we just could not ignore the close cooperation and supportof HPA and Ceres that removed every obstacle to a long-term agree-ment. The quality improvements to the CN Rail service and theconsistent cooperation of our ILA colleagues were also influentialfactors in our decision. As a result of this, all the stakeholders of theport will benefit, as ACL volume via Halifax will eventually doubleas all of our new ships enter service. ACL looks forward to a longfuture in Halifax with our large, new, fuel efficient and environmen-tally friendly G4 vessels. The port of Halifax will now remain ourlargest port of call in North America, and our gateway for Canadaand the U.S. Midwest.”

“ACL has been a very important partner throughout the years,”said Calvin Whidden, President, Ceres Halifax Inc. “With the sign-ing of this new agreement, we will now focus on working togetherto grow cargo volume.”

“This is very positive news for all of the key players involved inreaching this new contract,” said Karen Oldfield, President andCEO, Halifax Port Authority. “We offer our congratulations to ACLand Ceres-Halifax, and would like to acknowledge the level of com-mitment shown by CN Rail throughout this process. We lookforward to continuing to welcome the next generation of ACL ves-sels.”

Atlantic Container Line has been continuously calling the port

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of Halifax since 1970 following the inaugural call of the ACL G1vessel Atlantic Star in 1969. In January of this year, the Port wel-comed the newest Atlantic Star which is the first of the five new G-4ACL CONRO vessels.

Could Canada get Alberta bitumen to Alaskatidewater? The Van Horne Institute proposes anAlberta to Alaska railway

Is it feasible to carry bitumen from Fort McMurray, Alberta, totidewater in Alaska and from there to world markets via a com-bination of rail and pipeline? A study released today by the Van

Horne Institute, based at the University of Calgary, suggests that itis. This study is published by the Van Horne Institute with a ProjectTeam including Shirocca Consulting, AECOM, Generating forSeven Generations (G7G), the University of Alaska (Fairbanks), andMichigan Tech Research Institute.

The proposed railway between Fort McMurray and Delta Junc-tion, Alaska is comprised of 2,440 km of single, standard gaugebi-directional heavy haul track. The track is upgradable to a doubletrack configuration that would add substantial capacity. The studyidentifies rolling stock equipment and manpower requirements forboth a 1.0 million barrel per day (MBPD) and 1.5 MBPD bitumenvolume.

The study recognizes that the proposed railway passes through,

or comes in close proximity to, a number of areas that are environ-mentally protected, support migratory and/or sensitive orendangered species, or are important for wildlife and biodiversity,especially along major river valleys. The Environmental Approvaland Permitting process will be extensive and complex and is definedin the study.

The study includes a detailed analysis of capital and operatingcost estimates, as well as a business case analysis. The capital costranges between $28 and $34 billion for 1.0 MBPD to 1.5MBPD. The defined route for the railway will create an opportunityto transport to North American and to world markets, mineralizationdeposits that to date, are locked in. The metallic mineral potentialwithin the project corridor is estimated to generate in place grossmetal values between $333 and $659 billion over 30 years of oper-ation.

Consultation and meaningful involvement and participation of

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Positive train control; when finally implementedwill make North American railways saferBY R. BRUCE STRIEGLER

On February 26 2012, VIA Rail passenger train No. 92 trav-elled east from Niagara Falls to Toronto, on track two of theCanadian National Oakville Subdivision. Beyond the stop at

Aldershot Station, the track switches were lined to route the trainfrom track two to track three. The last signal required the train toproceed at 15 mph, however VIA 92 entered the crossover at about67 mph, causing the locomotive and all five coaches to derail. Theoperating crew was killed; 44 passengers and the VIA service man-ager were injured. About 4,300 litres of diesel fuel spilled from thelocomotive fuel tank.

In the ensuing investigation, the Transportation Safety Board ofCanada (TSB) analysis focussed on more than ten critical factors,including “alternate forms of train control.” The reference is to a rel-atively new technology called positive train control (PTC). Thissystem works through a combination of wireless communicationsnetworks, global positioning systems, and onboard computers within-cab displays along with throttle-brake interfaces, and communica-tion units at switches and wayside detectors that allow trains tocommunicate with a centralized control centre.

Trains equipped with PTC report their position, speed andother relevant data to the control centre through a wireless data link.The control centre uses the data from the trains in its sector to alertconductors about track changes and issue movement and speedlimits, while maintaining a safe separation between trains based ontheir speed, size, weight and other variables. Besides slowing andstopping trains that are cruising too fast, positive train control couldalso be used to prevent collisions between trains (since the systemwould know where each train is), keep trains from rolling into workzones, and stop trains from cruising through track signals left in thewrong position. The TSB noted in its investigation reports that thetechnology, “has the potential to significantly reduce collisionsbetween trains.”

Developed in the 1980’s, PTC an expensive technologyto implement

The genesis of positive train control (PTC) technology datesback to the mid-eighties, when the Association of American Rail-roads and the Railway Association of Canada developed and partiallyimplemented an advanced train control system that promised inte-grated communications, commands and controls for railroadoperations, as well as the ability to keep trains separated by a safemargin. Since 2002, the U.S. National Transportation Safety Board(NTSB) has recommended the adoption of PTC as a rail safetysystem, and cited its lack as a contributing factor in 16 specific trainaccidents. Those accidents resulted in 37 fatalities, 637 injuries andmore than $72.5 million in damages to trains, property and the envi-ronment.

Railway operators south of the border continued to develop

First Nations is essential to the success of this project. Partner G7Gmade contact with all First Nations leadership and tribes directlyaffected by the project through information sharing and project pres-entation meetings.

Peter Wallis, President and CEO of the Van Horne Instituteobserved that, “This analysis presents an alternative routing for thetransportation of bitumen from Western Canada to world mar-kets. While the timing for the completion of this initiative includesfurther feasibility analysis, environmental approval and permitting

and construction at a significant cost, it is a nation- building proj-ect. Transportation is an enabler of any economy and this initiativewill unlock the petroleum and mineral potential of the north in bothCanada and the United States of America. We hope that govern-ments, First Nations and industry will take the time to consider allof the opportunities that this study identifies”.

The Alberta to Alaska Railway Prefeasibility Study and otherimportant documents can be found at the Institute’s website (van-horne.info/research-publications/alberta-alaska-railway).

similar automated train technologies independently, but it was notuntil the passing of the Rail Safety Improvement Act in October of2008 that PTC was required to be implemented on most U.S. rail-road networks by December 31, 2015. Like many Americanrailroads, both CN and CP found that meeting the congressionallymandated implementation date would be impossible, and facingfines of as much as US$25,000 a day, turned to Congress for anextension. On Sept. 9, 2015, CP President and Chief Operating Offi-cer Keith Creel wrote a letter to U.S. Sen. John Thune, member ofthe congressional transportation committee to address CP’s positionon extension of the positive train control mandate. “Despite our bestefforts, CP will not meet the Dec. 31, 2015, deadline for PTC to beoperational on many of our routes set by Congress as part of the RailSafety Improvement Act of 2008.” Adding their voice, the Associa-tion of American Railroads, of which CN and CP are members,asked Congress to delay the implementation deadline. Similarly,quoted in published reports, CN spokesperson Mark Hallman said,“The industry says it will not be in a position to implement the tech-nology before 2018, with a further two years of testing required toensure full interoperability.” The Association of American Railroadscontends that PTC systems will cost railroads over $13 billion toinstall and maintain over a 20-year period. For every dollar thesystem returns in safety-related benefits, it will set rail operators backby $20.

Mr. Hallman pointed out the Montreal-based company is plan-ning to spend $550-million to install the technology on 6,100kilometres of U.S. mainline and 1,000 locomotives, but much of itis being developed “from scratch.” Canadian Pacific Railway Ltd.estimates it will cost $328-million to outfit its U.S. network, two-thirds of which has already been spent. Hallman continued noting,“Safety is the industry’s top priority, but installing such a complex

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system of systems requires time to perfectthe required technology, for rigorous test-ing, for proper training of thousands ofemployees and for the collaborative effortsamong rail carriers necessary to enable thefully interoperable PTC system mandated.”Canadian Pacific and Canadian Nationalwill be installing almost 2,700 and justunder 6,000 kilometres, respectively.

While American railways, and thoseCanadian railways operating in the U.S. arelegally mandated to adopt PTC systems, nosuch legislation exists or is even on the tablein Canada.

Some Canadian politicians have calledfor legislation to mandate PTC systems.Canadian Sailings contacted TransportCanada to enquire whether or not a newgovernment may have different ideas aboutPTC. Transport Canada responded, saying,“Most urban rail transit systems in Canadahave some form of automated train control.This includes the ability to automaticallytrack movements and the locations oftrains. Transport Canada is closely monitor-ing the U.S. experience with PTC in orderto better understand the challenges ofimplementing this type of technology and isworking with industry to assess what typeof train control technologies could beapplied in Canada to the greatest benefit.”

North American railroads get anextension for implementation

Including the 2012 report, referencedat the beginning of this article, the TSB saidit conducted five different investigations inrecent years that found misinterpretation ofsignals caused or contributed to collisions orderailments. As a result of those investiga-tions, the TSB recommended Transport

Canada implement “fail-safe” train controls,such as positive train control, on high-speedrail corridors. “Additional defences thathave already been developed … wouldhave prevented this accident,” the TSB said.

Meanwhile, in October 2015, Con-gress passed the Surface TransportationExtension Act of 2015, which provided athree-year extension for installation of PTC.The new law also allowed up to two addi-tional years to finalize full implementationand testing of PTC provided the railroadsmeet specific benchmarks. Railroads willregularly report to the US Department ofTransportation on their progress. At thetime, the Association of American Railroadssaid that developing and implementing thesystem across a 96,500-kilometre rail net-work is an “unprecedented technical andoperational challenge,” adding that railwaycompanies have collectively spent $5-billioninstalling the on-board locomotive systems,track-side signals and related technology.

The technology is not-off-the shelf, andhas been developed from scratch. Engineer-ing experts note that PTC isn’t just aboutplugging in or turning on components.Rather it is a complex step-by-step process,both in terms of safety engineering andimplementation. The same engineers saythat field testing of PTC is essential forsafely deploying the technology and will bea critical focus for the rail industry. A Febru-ary 2016 report in Railway Age magazinepoints out that currently, rail operators arediscovering failure rates of up to 40 per centas they install and test PTC equipment inPTC labs and designated pilot territories.The technology will be overlay systems,meaning they will supplement existing train

safety checks and balances.

A good system, but not infallible While PTC may represent the best in

train safety as far as current technologyaffords, it is not flawless and, on its own,will not prevent all rail incidents. Informa-tion from the United States Department ofTransportation’s Federal Railroad Adminis-tration (FRA) indicates that PTC systemshave the ability to prevent train-to-train col-lisions, over-speed derailments, incursionsinto work zones and train movementthrough a misaligned or improperly linedswitch.

However, the technology is not able toprevent low-speed collisions from permis-sive block operations (where trains maycontinue on a line even though it is occu-pied, as long as it is slow enough to stopsafely); shoving accidents or bumping intosomething when a train is reversing; derail-ments caused by a mechanical failure in thetrain or track; or grade crossing and trackincursion collisions.

For many in the industry, the need forautomated train controls in Canada wasunderscored by the fatal Via Rail 2012 crashin Burlington, Ont. The TransportationSafety Board’s investigation concluded thecrew misinterpreted the signals and failed toslow the train in order to safely make acrossover to an adjacent track. A spokesper-son from Transport Action Canada, a publictransportation advocacy group in Ottawa,notes that, “Until an automated, physicaldefence system is in place as a fail-safeagainst operator mistakes, fatal derailmentslike the one in Burlington, although rare,remain a very real risk for those who workand ride on Canada’s rails.”

Oceanex Inc. requalifies as one ofCanada’s Best Managed Companies

Oceanex Inc. was a winner ofCanada’s Best Managed Companiesprogram in 2011 and requalified in

2015 to maintain its status as a Best Man-aged Gold Requalified company. The BestManaged program recognizes Canadian-owned and managed companies withrevenues over $10 million demonstratingstrategy, capability and commitment toachieve sustainable growth.

“Best Managed companies are strongin strategy, capability, commitment andfinancial performance. They are all greatCanadian business success stories,” saidPeter Brown, Partner, Deloitte and Co-Leader, Canada’s Best Managed Companiesprogram.

2015 winners of the Canada’s BestManaged Companies award, along withRequalified, Gold Standard, Gold Requali-fied winners and Platinum Club memberswill be honoured at the annual Canada’sBest Managed Companies gala in Torontoon April 12, 2016. On the same date, theBest Managed symposium will address lead-ing-edge business issues that are key to thesuccess of today’s business leaders.

“We are all very excited to be namedas a Gold Standard Member of Canada’sBest Managed Companies again this year”,said Oceanex Executive Chairman, CaptainSid Hynes. “At Oceanex we are very fortu-nate to have a team of qualified,experienced transportation specialists who

thrive on providing a consistent, reliableservice for our customers. This award is atestament to their commitment to excel-lence”.

Capt. Sid Hynes

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EDC: Export success in ChinaBy Peter G Hall, ViCe-PreSident and CHief eConomiSt

China-watchers – last time I looked, that was just about every-body – shuddered early this year. The Middle Kingdom’sstock markets were rocked on the first business day of 2016,

stoking Fed-fed fears of further turmoil. The worry hasn’t waned;there’s a full-blown Sino-scrutiny industry at play, dissecting everydetail of data in an effort to determine China’s staying power, or lackthereof. Canada cares, as China is now our number two tradingpartner. Is our dramatic diversification into this market over, onhold, or still a great opportunity?

Some context is necessary. Combatting the internal fallout ofa global Great Recession, China embarked on a dramatic stimulusprogram in 2008. Sluggish subsequent growth pushed China tomaintain and expand its stimulus over the past seven years, anenormous undertaking – but one that has left it with excesses,both real and financial. China now appears to be addressing thoseexcesses: there’s more scrutiny of financial institutions, and masslayoffs appear to be imminent. It’s more than just a bit unsettling,as the broader impacts have yet to be felt.

How will China fare? Much will really depend on how it dealswith a clash of poor demographic fundamentals, uncertain globalgrowth, and how it manages an economy that is inescapably moreopen and subject to the vagaries of world economic fluctuations.China’s management of its increasingly open currency is a very vis-ible test of its policy path.

As beneficiaries of China’s prosperity, Canadian exportershave a stake in the outcome. Prior to the New Millennium, Cana-dian merchandise exports to China made up less than 1 per centof total exports. That share increased steadily over the past 15years, growing almost five-fold at the peak in early 2013. However,since then, the share of exports to China slid below 4 per cent, notso much because of China, but thanks to the US economic recov-ery. Nascent concerns about Sino-softening are no doubt unsettlingto Canadians doing business there, or planning to sometime in thenear future. What are the prospects?

Recent data gives hope. Canadian exports surged into theNew Year, hard on the heels of a very strong December showing.The ‘January jump’ boosted many industries’ fortunes, but the geo-graphic sources of growth were concentrated. America wasdominant, but exports to China also fared well. In fact, the recentincrease adds to a steady upward movement that began in the

spring of 2015. China’s share of Canadian exports is back on therise, over 4 per cent again, and rising.

Which industries are benefiting? Unfortunately, our largestexports are unspectacular, and certain commodity exports are suf-fering. What’s holding things up is surprising performance of muchsmaller contributors. Canada is known for its auto exports, but notto China. But over the past 12 months, they have increased four-fold. Exports of foodstuffs have also been doing a roaring business.Processed meat exports are ballooning, more than doubling during2015 alone. Beef and pork are the big drivers of this growth. Grainshipments are showing a decent uptrend, and fishing, likely capi-talizing on a growing Canadian reputation in China, recently sawback-to-back increases that more than doubled export sales.

These movements are in small sectors, but they’re significantfor one key reason: they are feeding an area of growing demandwithin China that represents one of the planet’s greatest go-for-ward opportunities. China’s long expansion is creating anever-expanding class of wealthy consumers willing to pay premiumprices for premium product. No longer is China just a consumer ofcommodities that feed factories that export to the rest of the world.China’s neo-wealth is moving its consumption up the value chainand employing new, more efficient and more accessible sales chan-nels, turning the tables toward the world’s high value-added goodsand services. Canadians who see this movement are already capi-talizing on it.

The bottom line? Don’t write China off yet: it is still a hugesource of global demand, but those demands are shifting. Thank-fully for us, increased Chinese prosperity is creating demand forthings that we produce further up the value chain that used to beout of reach. Maybe time to revisit your China export strategy.

This commentary is presented for informational purposesonly. It is not intended to be a comprehensive or detailed state-ment on any subject and no representations or warranties,express or implied, are made as to its accuracy, timeliness or com-pleteness. Nothing in this commentary is intended to providefinancial, legal, accounting or tax advice nor should it be reliedupon. Neither EDC nor the author is liable whatsoever for anyloss or damage caused by, or resulting from, any use of or anyinaccuracies, errors or omissions in the information provided.

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Lake Carriers Association warns mild winter must notderail effort to build another heavy icebreaker

Logistec announces 2015 year-end results

Logistec Corporation announced its financial results for the fourthquarter and the year ended December 31, 2015. Consolidatedrevenue totalled $358.0 million in 2015, an increase of

$35.8 million or 11.1 per cent over 2014. Revenue was affected bythe increase in the U.S. dollar against the Canadian dollar. For the year,the positive impact amounted to $15.3 million.

Activity in the marine services segment was similar to that of2014, with a slight decrease in bulk activity, offset by an increase inbreak-bulk activity. The environmental services segment delivered agood performance in 2015, as revenue increased by $23.9 million or18.7 per cent over 2014 to reach $151.5 million. Revenue growthcame primarily from increased activity in Aqua-Pipe and from siteremediation.

In 2015, Logistec achieved a consolidated profit for the year of$32.9 million, of which $29.1 million was attributable to owners ofthe Company. This is lower than the 2014 consolidated profit of$34.5 million, of which $31.0 million was attributable to owners ofthe Company. This decline stemmed largely from additional cargo-handling costs due to flooding at our terminal in Virginia, a fire at ourterminal in Georgia, and the start-up of our new container terminal in

Montréal (QC). This was partially offset by greater profitability in ourenvironmental services segment.

During the fourth quarter of 2015, consolidated revenue totalled$92.4 million, up by $5.5 million over the same period of 2014. Thisincrease is explained by strong activity in the marine services segment.Profit attributable to owners of the Company amounted to $7.9 mil-lion.

OutlookMadeleine Paquin, President and CEO of Logistec Corporation

offered the following assessment of Logistec’s 2016 prospects: “Ourdevelopment plan is focused on strengthening and growing our foot-print of cargo-handling services in North America. Over the last fewyears, we have succeeded in growing organically by targeting very spe-cific growth markets, namely mining, biomass and port logistics.Unfortunately, with the significant drop in commodity prices, the land-scape for mining development has been negatively affected and weneed to moderate our expectations for significant growth. However,we still believe there will be opportunities, particularly in Québec, andwe will seize these opportunities as they arise.

In biomass, we are rebuilding the capacity damaged by the fire in

U.S.-flag vessel operators on the Great Lakes are concernedthat the mild winter of 2015/2016 will derail efforts to builda second heavy icebreaker. Lake Carriers’ Association (LCA)

expresses concern in its 2016 State of the Lakes report that the mildice season may lull Great Lakes shipping and those who regulate itinto a false sense of security regarding icebreaking resources. “We’lldo ourselves a great disservice if we breathe a sigh of relief, declarethe winters of 2013/2014 and 2014/2015 a 100-year occurrence,and say the U.S. and Canadian Coast Guards have enough icebreak-ing resources. They don’t.”

The Coast Guard Authorization Act of 2015 authorizesanother heavy icebreaker for the Lakes, but funds for the $200 mil-lion vessel have yet to be appropriated. The Association is confidentfunding will come. “The new icebreaker has lots of horsepowerbehind it. In the House, Representatives Candice Miller (R-MI),Louise Slaughter (D-NY) and Sean Duffy (R-WI) are laser-focused onthe issue. In the Senate, Senators Gary Peters (D-MI) and TammyBaldwin (D-WI) are leading the way on it.”

In addition to a second heavy icebreaker, the Association is call-ing for the U.S. Coast Guard to accelerate modernization of its aging140-foot-long icebreaking tugs by moving the work from its yard inBaltimore to Great Lakes shipyards. LCA’s State of the Lakes reportalso addresses last summer’s 20-day closure of the MacArthur Lockat Sault Ste. Marie, Michigan, calling it a “wake up call” that asecond Poe-sized lock is desperately needed. Again, there is forwardprogress to report. “The U.S. Army Corps of Engineers will producean Economic Reevaluation Report that will reassess the lock’s bene-fit/cost ratio. Michigan Governor Rick Snyder (R) called fortwinning the Poe Lock in his January 2016 State of the Stateaddress. Not long after that the Ohio House of Representatives voted93-0 to pass a resolution with the same goal. The momentum isbuilding.”

A Department of Homeland Security report on the need for asecond Poe-sized lock to connect Lake Superior to the lower GreatLakes and St. Lawrence Seaway issued on March 4 forecasts almost

11 million Americans would lose their jobs if the Poe Lock wasdown for 6 months and the nation suffer a $1.1 trillion decrease ineconomic activity.

LCA remains concerned that the government has yet to enacta uniform, federal standard for ballast water and urges passage of S.373, the Vessel Incidental Discharge Act that requires vessels enter-ing the Lakes from the oceans to treat their ballast and lakerscontinue to employ their time-tested best management practices.

While progress has been made on the dredging crisis, morethan 17 million cubic yards of sediment still clog the Great LakesNavigation System. LCA calls on Congress and the Administration to1) continue to increase annual funding for dredging as called for inthe Water Resources Reform and Development Act of 2014 so thatoutlays from the Harbor Maintenance Trust Fund (HMTF) equalreceipts no later than 2025; and 2) allocate 10 percent of HMTFoutlay to the Lakes each year.

The Association stresses that once again unfair trade in steel ishaving significant and negative impacts on Great Lakes shipping andits customers, and urges Washington to enact and enforce trade lawsthat protect America from predatory trade laws.

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ZIM reports results for 2015

ZIM Integrated Services’s fourth quarterof 2015 was characterized by a contin-ued deterioration of the market

environment and historically low freightrates. The average freight rate per TEU car-ried was $988 in the fourth quarter of 2015and $1,126 for the year, reflecting a 21 percent and 9 per cent decrease compared tothe respective periods last year. As a result ofsignificantly lower freight rates, total rev-enues in the quarter decreased 15 per centto $687 million, compared with $813 mil-lion in the same period last year. Revenuesfor the full year decreased 12 per cent to$2,991 million, compared with $3,409 mil-lion in the same period last year.

ZIM achieved an adjusted EBIT marginfor the year of 3.9 per cent and an adjustedEBITDA margin of 7.2 per cent, comparedto an adjusted EBIT margin of negative 0.3per cent and an adjusted EBITDA margin of3.4 per cent in 2014. For the year, netincome of $7 million was reported, com-pared to a net loss of $198 million for 2014.Operating cash flow of $173 million wasreported for 2015, compared to $121 mil-lion for 2014. ZIM carried 2.3 million TEUsin 2015, reflecting a 2 per cent decreasecompared to 2014.

For the quarter ended December 31,2015, ZIM produced a net loss of $28 mil-lion, compared to net loss of $7 million forthe fourth quarter of 2014. Operating cashflow was $17 million, compared to $43 mil-

lion for the fourth quarter of 2014.The Company’s improvement in mar-

gins in 2015 was achieved against abackdrop of challenging market conditions,highlighted by vessel overcapacity andextremely low freight rates. Global capacityincreased in 2015 by an historical amount of1.7 million TEUs, or about 8.5 per cent, andresulted in a sharp drop in freight rates,pushing the Shanghai Containerized FreightIndex (SCFI) to all-time lows. While the idlefleet reached a peak of about 8 per cent ofglobal capacity, market challenges remain asthe order book at the end of 2015 stood at4M TEUs, out of which 1.3M TEUs are

expected to be delivered during 2016. Rafi Danieli, the company’s President

and CEO, said: “The comprehensive struc-tural, operational and organizationalchanges we have implemented in recentyears enabled us to achieve operating mar-gins ranked among the top in the industry,despite continued overcapacity and freightrate deterioration. In the current marketenvironment, our asset-light business modelenables ZIM to benefit from highly flexibleand cost-efficient fleet management. Wecontinue to implement our business plan,focusing on select markets where the Com-pany has a competitive advantage.”

Georgia. We have also completed an expansion that will be coming onstream in the next quarter for a different customer. That will allow forsome volume expansion in 2016.

Our container business should also see some growth in 2016.Although the economic environment is very difficult, with GDPgrowth at very low levels, we should be able to strengthen our Cana-dian gateway with new U.S. cargoes while also extending ourgeographic reach through the hub-and-spoke model of our customer,Mediterranean Shipping Company, S.A. This allows them to competi-tively transload cargoes between North America and the world usingthe Montréal (QC) and Saint John (NB) gateways.

Our port logistics business in Montréal-Est (QC) is developingwell. We were able to offer transloading services within our new ware-house via rail/container/truck for the first time in 2015, and ourservices were well received by our customers. We expect continuedgrowth of this business in 2016. In Virginia, flooding severely affectedour business in 2015 and we are looking to diversify our customerbase and develop our services, based on the success and the growth ofPort of Virginia as an international container port in North America.

The difficult economic environment may also present acquisitionopportunities and we are actively reaching out to companies thatwould fit well with our development plan. We are seeking tostrengthen and expand our port network and to facilitate tradethrough market-driven cargo-handling opportunities in North Amer-ica.

We are also committed to developing our environmental servicessegment. Sanexen should have another good year in 2016. The orderbook is strong and its two main markets, traditional environmental

services and the rehabilitation of water mains, hold significant growthpotential. In Canada, we are well positioned to capitalize on the aque-duct infrastructure projects that are at the heart of the government’sstrategy. In the U.S., the recovery is tangible and underground infra-structure rehabilitation needs are enormous. Finally, after beingestablished for four years in France, our activities are seeing sustainedgrowth, particularly in regulated materials management.

Sanexen enjoys an enviable position in its main markets. To addto its service offering in 2016, we will open the first fully-enclosed con-taminated soils bioremediation centre in Canada. In addition, as ofMarch 8, 2016, the Company acquired a business for $5.6 million.This acquisition represents a vertical integration for the environmentalservices segment. In our Aqua-Pipe business, we expect to advanceour growth in the U.S. market. Furthermore, Ventia, our licensee inAustralia, will be performing its first installations in 2016. The Aus-tralian market represents a good potential due to new regulationsaffecting water mains made of asbestos cement. As is the case for ourmarine services business, we will continue to pursue growth opportu-nities, both internally and externally, in 2016.”

“Overall, we are committed and confident that we can continueto build our business based on the specialized services where we havedeveloped our expertise with a solid customer base. Despite the moredifficult economic environment, our service offerings, our geographicdiversity, and our ability to invest in growth opportunities should allowus to continue to increase our services in both the short and long term.Clearly, our success rests on the strength of our highly dynamic teamof experts who are customer oriented and consistently bring value toan expanding customer base,” concluded Madeleine Paquin.

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OPINION

Can we really afford delaying dealing with climatechange?BY THEO VAN DE KLETERSTEEG

If you are like me, you may have reacted to the numerous discus-sions about climate change during the past two decades withdegrees of skepticism and a relative lack of interest. After all,

with a global population of 7.4 billion people, what can any oneperson do, particularly when there is very little evidence that bigcorporations and governments are truly interested in environmentalstewardship. Or, what can a relatively small country like Canada,responsible for only 1.6 per cent of global GHG emissions, do toimpact the other 98.4 per cent of emissions?

I decided to “check things out”, and share my findings withreaders.

EnvironmentalismThroughout the decades, the nature

of environmentalism has changedfrom an initial focus on identifica-tion of workplace hazards, toidentification of food contami-nation hazards to hazardsintroduced into the soilsand air we breathe. Thiswas the era of RachelCarson whose 1962book Silent Springcaused citizens and gov-ernments to connect thehazards of uncontrolledindustrial practices withpremature death andincapacity. Nowadays,with industry havingbecome subject to muchtighter regulation, we hearlittle about industrial pollutionin North America, although ithas by no means “gone away”, andduring the past two decades or so, thefocus has shifted to greenhouse gas emis-sions.

What are greenhouse gases and whyshould we care?

Greenhouse gases (GHGs) are gases that persist in the atmos-phere and which absorb and emit radiation within the thermalinfrared range, which is the cause of the greenhouse effect. Thegreenhouse effect describes the earth’s increasing inability to “shed”heat generated through human activities on earth as well as solarradiation, because of a build-up of “greenhouse gases” which act likea blanket around the earth. The primary greenhouse gases are watervapor, carbon dioxide, methane, nitrous oxide, and ozone. Withoutgreenhouse gases, scientists have determined the average tempera-ture of the earth’s surface would be about 15°C colder than thepresent average of 14°C.

Human activities since the beginning of the Industrial Revolu-tion have produced a 40 per cent increase in the atmosphericconcentration of carbon dioxide, from 280 parts per million (ppm) in1750 to 400 ppm in 2015. This increase has occurred mainly from

combustion of carbon-based fuels, principally coal, oil, and naturalgas, along with deforestation and soil erosion. It has been estimatedthat if greenhouse gas emissions continue at the present rate, theearth’s surface temperature could exceed historical values as early as2047, with potentially harmful effects on ecosystems, biodiversityand the livelihoods of people worldwide. Scientists have told us thatCanada’s rate of warming is actually twice the global rate. Thus, thealmost universal objective of limiting global warming to 2 degrees C.would mean that Canada’s environmental temperature would rise by3 to 4 degrees C. Some scientists are of the opinion that we have

squandered the past decades in rhetoric, and it’s toolate to do anything about the dire consequences

of our present way of life. However, fortu-nately this is not (yet) a widely shared

sentiment among scientists. Itappears there is still time…..

The big pictureIt is important to note

that the greenhouse impactof greenhouse gases iscumulative. Every pass-ing day we emit moreand more, and the emis-sions of every monthare greater than thoseof the precedingmonth. Our quest toconsume more andmore of everything, andour government’s obses-sion with economic

growth at any cost aremaking it very difficult to see

how we can avoid fallingvictim to the creation of a world

that may not be able to sustainhuman life through our own refusal to

act.According to scientists, we must never

exceed cumulative emissions of more than 3,200 giga-tonnes of CO2, if we wish to prevent global warming from exceeding2 degrees C. Historically, however, we have already accumulated2,000 gigatonnes into the atmosphere so, according to available sci-entific evidence, we have only another 1,000 gigatonnes or so to gobefore we must STOP CO2 emissions altogether, unless we wish tobecome subject to unmanageable impacts of climate change, whichwill include rising sea levels, more violent weather, shifting weatherpatterns, elevated surface temperatures, etc., all of which will makelife on earth considerably more difficult.

At present, our global population generates about 3 gigatonnesof CO2 per MONTH. So, at our current rate of CO2 accumulation, itwill take us about 30 years to hit the wall. However, despite all thetalk about reductions of CO2 output, such emissions are actuallyclimbing, not falling. How much time do we really have to go fromour present destructive ways to a situation that is stable, and will notget worse?

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Canada’s recordIn 2013 (the latest year for which data are available), Canada

produced 726 megatonnes of CO2 equivalent GHGs, up from 613megatonnes produced in 1990, according to data provided by Envi-ronment Canada. Emissions peaked in 2007 (761 megatonnes)before the financial crisis of 2008/09 reduced economic activity and,therefore, carbon equivalent emissions.

Environment Canada has compiled a breakdown of Canada’sGHG emissions that indicates that the oil and gas industry producessome 25 per cent of total emissions, followed closely by the trans-portation industry (23 per cent), industrial, commercial andresidential housing (12 per cent), electricity generation (12 per cent),general industry, including mining and refining (11 per cent), agricul-ture (10 per cent), and other industries (7 per cent).

Emissions generated in Ontario and Quebec were lower in2013, as compared to 1990 and as compared to 2005. InSaskatchewan, Alberta and British Columbia they were higher. As thetop emitter, Alberta produced approximately 37 per cent of totalGHG emissions in Canada in 2013, while the five top emittingprovinces (Alberta, Ontario, Quebec, Saskatchewan and BritishColumbia) were responsible for 91 per cent of Canada’s total GHGemissions in 2013. Ontario was the only province whose CO2 equiv-alent emissions declined significantly since 1990 and 2005, primarilybecause of the closure of its coal-fired electricity generating plants.

On a per capita basis, Canadian GHG emissions per persondecreased to 20.7 tonnes in 2013, as compared to 22.1 tonnes in1990.

In 2011, Canada was responsible for emitting 1.6 per cent ofglobal GHG emissions. China was the world’s biggest source of GHGemissions (24.1 per cent), and the world’s most rapidly growingsource. The United States emits about 15 per cent of global output.

According to a report by World Resources Institute, Canada is byfar the heaviest emitter of GHGs on a per capita basis, followed by theUnited States (about 20 per cent less) and the Russian Federation(about 35 per cent less).

The “doomsday” clockBased on the above scenario that appears to be the consensus

scientific scenario, and based on current levels of emissions of about3 gigatonnes of CO2 equivalent GHGs, it appears that 2045 is theyear of maximum permissible CO2 accumulations and, at that timeglobal CO2 emissions must STOP. Is this a realistic scenario? No, ofcourse not. Despite all the rhetoric at home and internationally, globalemissions show no signs of abating, and probably will continue toincrease for many years to come as nations are positioning themselvesfor the time when serious negotiations are becoming a higher priority,just like warring nations are eager to intensify their destructiveactions just prior to settling the terms of a cease-fire.

All this means that by the time we do get serious about GHGemissions, there will be much more evidence of the potential destruc-tion to be caused by looming climate change, which will at somepoint cause recalcitrants to capitulate. Because more time will havebeen wasted in talking about the problem rather than taking action,we are likely to see panic among governments of people that have themost to lose, namely those living in the “developed” world, and weshould expect governments of “developing” nations to delay gettingonboard until the very last moment. In the panic that I expect,tremendous change will be forced on us, at extremely great expense.Many industries that exist today will be forced out of business. Justlike the digital “revolution” of some fifteen years ago caused tremen-dous change, the climate change revolution that is upon us will causedrastic changes to the way we live, the way we travel, what we con-sume, etc. Any businessperson who does not take the inevitability ofclimate-induced change into account in the evaluation of long-termbusiness plans stands to pay dearly for his or her lack of foresight.

At this stage, while the vast majority of scientists agree thathumanity will face dire consequences of no action, a significant

minority of North Americans, some 40 per cent, continue to be indenial, and believe that all the talk about climate change is a hoax.Most believe its impact will be negligible, and all we need to do is toban plastic grocery bags, or make an effort to use public transporta-tion. Government officials would like to believe that we will be ableto deal with the problem by paying a few cents more at the pump.The fact is that very few people actually realize that if we truly wantto prevent global warming of more than 2 degrees C., the changesthat need to be carried out during the next 25 years represent noth-ing short of an unprecedented industrial and social revolution. Withpublic attitudes ranging from being in denial to believing that we canmake the problem go away by paying another 10 cents per liter forgasoline, we are better prepared for dealing with massive earthquakeshitting all of our cities simultaneously than we are for dealing with cli-mate change. Frankly, we don’t have a clue of what’s coming.

Of course, we must realize that once we have reached cumula-tive emissions of 3,200 gigatonnes, the world will not stop. We willcontinue to live, and we will continue to emit. However, by that timepeople will realize that everything they do contributes to a worsetomorrow, as a result of which they must find ways to live while onlyemitting a tiny fraction of present-day emissions. It will be the biggestchallenge mankind has ever faced.

What could 2040 look like?Since the production of energy and transportation presently

account for 80 per cent of global GHG emissions, we should expectthe biggest changes to occur in those industries. And, with relativelyminor exceptions, those industries rely on fossil fuels. Since industriesof the future will rely on electricity, automobiles operating on fossilfuels will ultimately be banned, as will fossil fuel-fired power plants.Transport trucks will gradually begin to operate on LNG, and will ulti-mately be replaced by trucks propelled by electrically-poweredengines. Trains will become the transportation mode of choice forlong-distance moves. Regrettably, we would see a huge rise in theinstalled base of nuclear power plants worldwide. Production andtransformation of oil and gas would be drastically reduced, maintain-ing roles to produce feedstocks for other industries. Solar andwind-powered energy production would experience acceleratedgrowth. It is inconceivable that a world on a carbon-restricted dietwould continue to allow air transportation to grow without bounds.Perhaps ocean liner service would make a comeback. Our homes willbecome a lot smaller, and much more energy-efficient. Future vaca-tions will be closer to home, which is also where more of our foodswill come from. Tsunamis, hurricanes and tornadoes will wreakhavoc with the insurance industry, and will ultimately mean that weneed to build much stronger and durable structures, which will bevastly more expensive. Financial institutions will see financing oppor-tunities decline as a greater number of industries will struggle as itwill become more difficult to realize on distressed industrial, commer-

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cial and residential property. Unemployment will likely rise, and ourstandard of living will likely decline, as the increasing cost of every-thing will eliminate the production of low value-added products. Inaddition, government services will likely need to be curtailed as theeconomy will no longer be able to generate the tax revenues that arenecessary to repay debts incurred in the past, and to provide a highlevel of current services.

Although the anticipated picture of Canada in 2040 is not apretty one, we do have the power to influence it positively. Forexample, rather than spending massive amounts on “infrastructure”that may have dubious economic benefits, or constructing infrastruc-ture that private enterprise (through PPPs) would be happy toconstruct and generate streams of cash flow from, the governmentmight contract with industry for the early development and deliveryof critical technologies to enable the new fossil fuel-constrainedeconomy that will be coming our way. For example, we needimproved battery technologies and we need conversion of our com-mercial and industrial transportation fleet from diesel to LNG orfrom diesel to some other form of energy (hydrogen?) Early work onsuch alternative technologies should enable us to develop exportabletechnologies, thus mitigating the negative impacts of reducedexports of commodities.

Canada’s current commitmentCanada is currently committed to reducing annual GHG emis-

sions to 525 megatonnes by 2030. While it should be well possibleto achieve this objective, one wonders whether putting the popula-tion on a 15-year diet of minimal GHG reductions accurately reflectsthe nature of the problem. The inherent message of such a minimal-ist objective is that the problem is a minor one that will be no morethan an inconvenience to fix. Based on the scope of the science wehave in front of us, it is, in my opinion, ethically wrong to pretendthat this is just a minor problem. Instead, dealing with this problemrequires a complete overhaul of our thinking about the economy andour way of life. Not dealing with the problem until many years fromnow will cause panic and far greater upheaval and disruption by2030 – we know the nature of the job to be done – we should geton with it sooner, rather than later.

What about the economy?As it looks today, dealing realistically with the enormous chal-

lenges posed by looming climate change will involve challenges ofthe sort we have not had to deal with since World War II, andincludes serious economic challenges. On top of economic chal-lenges arising from Canada’s poor record of productivity growth,Canada will have a relative disadvantage converting its high carbon-based economy to a low carbon-based economy, if only becauseCanada is a sparsely-populated country with long distances betweeneconomic centres, and must air condition its homes and businessesin the summer, and heat them during the winter months.

It is impossible to predict the level of disruption that mustoccur, and it’s impossible to predict whether, at the end of the day,Canada will be materially better off or worse off – much will dependon the timely availability of new technologies to help facilitate the

migration from our current dependency on fossil fuels to an econ-omy that can sustain itself with only minimal fossil fuel-based inputs.Electric and hydrogen-based transportation technologies dopresently exist, but have not yet reached cost and performance stan-dards that will allow widespread adoption.

This is where we need to goIn consideration of the unimaginable scope of the problem, and

the relatively narrow window of opportunity to deal with the prob-lem, I suggest there is no time to be lost. Although it appears to beeasier to focus on industry to find solutions, I suggest that focusing onthe consumer would be far more productive because it is essential forthe diehard non-believers to be convinced of the necessity to act, andto start acting fast. Consumers must ultimately abandon their gaso-line-powered vehicles, so it is imperative for government to establishregulations for the phase-out of such automobiles. In the meantime,the cost of gasoline should be raised substantially. In addition, govern-ments should increase taxation of residential electricity and homeheating fuels, to get consumers used to the idea that future homesmust be smaller and more energy-efficient. Any additional taxesraised should be channeled toward alternative fuels technologies andtechnologies to increase energy efficiency.

A last thoughtOur governments often talk about “Canada’s leading role in the

world”. Whether or not we actually do play a leading role in theworld is a subject of debate. However, our PM certainly aspires to it,as was recently evident when Canada submitted its application to beappointed a temporary member of the United Nations SecurityCouncil.

Current Canadian “leadership” in terms of being the countrywith the highest per capita GHG emissions is nothing to brag about.We have a chance of correcting our past neglect of environmentalissues, and become a true global leader in addressing the most chal-lenging problem of our times. If one of the world’s worstenvironmental offenders can become a torchbearer for environmen-tal stewardship, it will undoubtedly help us in our standing in theinternational community.

ConclusionThe one thing that I will gladly predict is that the longer we

wait getting serious about climate change, the more difficult it willbe to implement the draconian measures that may then be unavoid-able, and the greater the cost will be to the economy. Also, waitingwill cause us to forgo opportunities to develop new technologies thatcould find export markets, in addition to domestic markets. WithCanada being an international laggard in innovation and productiv-ity, we need to wonder if we can afford to discard opportunities todevelop new technologies that could help us in future years. It seemsto me that, with impending negative changes to industries that havepropelled Canada’s economy for decades, the sooner we find alter-natives to sustain our economy, the better off we’ll all be. We owe itto the next generations!

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EVENTSLISTED

FREEContact FRANCE NORMANDEAU [email protected]

UPCOMING EVENTS

April 14 CANADIAN INTERNATIONAL FREIGHT FORWARDERSASSOCIATION (CIFFA) WESTERN REGIONSpring ThawThe Four Seasons, VancouverContact: (416) 234-5100 ext: 232, Nick Lutz [email protected]

April 28 CIFFA CENTRAL REGIONGala DinnerMississauga Convention Centre, Mississauga, OntarioContact: (416)234-5100 ext: 232, Nick Lutz [email protected]

May 12TRAFFIC CLUB OF MONTREAL18th Annual Lobster & Crab PartyAlexandra Dock, Iberville Terminal, Port of MontrealContact: 514-874-1207, Richard Parent [email protected]

May 18-20PORT SECUREMapping the Future of Sustainable ShippingWestin Harbour Castle Hotel, Toronto, OntarioContact: 902.425.3980 [email protected]

May 23-26BREAKBULK EUROPE 2016Antwerp Expo, Antwerp, BelgiumContact: 973 220 4827, Joanna [email protected]/events/breakbulk-europe/breakbulk-europe-2016/

May 30-June 1GREENTECH 2016Mapping the Future of Sustainable ShippingHilton Québec, Quebec City, QuebecContact: 418. 649-6004, Manon [email protected]/greentech/

June 16 CIFFA EASTERN REGION 67th Annual General Meeting & Gala DinnerPlaza Volare, MontrealContact: (416)234-5100 ext: 232, Nick Lutz [email protected]

June 23 CIFFA CENTRAL REGIONBoat CruiseObsession III, Toronto Harbor, TorontoContact: (416) 234-5100 ext: 232, Nick Lutz [email protected]

July 7 CIFFA WESTERN REGIONGolf TournamentMayfair Lakes GCC, RichmondContact: (416) 234-5100 ext: 232, Nick Lutz [email protected]

September 15 CIFFA CENTRAL REGIONGolf TournamentCardinal RedCrest GCC, NewmarketContact: (416) 234-5100 ext: 232, Nick Lutz [email protected]

Canadian Sailings is not responsible for errors. Please verify with event organizers for possible changes or cancellations.

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