The shipping industry should adopt Rodney Dangerfield’s famous line: “I get no respect!” Even Hollywood seems to have a grudge against the grandfather of modern transportation. In the 1987 hit comedy “Planes, trains and automobiles” marine travel was glaringly absent, and when a boat does make it into a movie, it either hits an iceberg (Titanic) or gets eaten by a shark (Jaws). Of course I’m exaggerating, but there is some merit in my thinking.
Rod Jones, president and CEO of Canadian Steamship Lines (CSL) was in Hamilton recently and he admitted the Canadian shipping industry “lacked the glamour and glitz sought by media.” To address its public relations issue, a bi-national communications program called “Marine Delivers” was recently launched with funding from US and Canadian shipping operators on the Great Lakes-St. Lawrence Seaway.
Glamour and glitz aside, Great Lakes shipping is big business, especially for the Golden Horseshoe region. The Great Lakes Seaway system accounts for $34 billion of economic activity and generates 227,000 jobs for both Canada and the US, according to consulting firm Martin Associates. Ontario alone supplies $9.6 billion (28 percent) of this total, and has over 28,000 direct shipping jobs with an average salary of $48,400 (Canadian dollars).
Much of Ontario’s shipping activity occurs in the Golden Horseshoe area. Shipping is a key competitive advantage for our region. The Great Lakes water highway provides a cheap mode of transportation for much of the raw goods used in our manufacturing oriented economy. In fact, it’s estimated the Great Lakes Seaway system provides companies with $3.6 billion (USD) in annual transportation cost savings versus the next least expensive land alternative. Ships called bulk carriers move most of the iron ore, coal and limestone used in steel production. Other bulk materials like salt and aggregates used in construction are transported mostly by ships. Despite its natural advantage, the shipping industry today faces several head winds. Many customers are still recovering from the recent recession.
Low water levels in the Great Lakes system is forcing many ships to reduce their loads (which increases costs), and competition from the railroads is heating up. However, there are signs the winds are shifting in favour of Canadian shipping. The high Canadian dollar has reduced the relative cost of upgrading Canadian fleets. More importantly, a 25 percent duty on cargo vessels purchased outside of Canada was recently lifted. In response, over $1 billion worth of new Canadian ships are scheduled to arrive in the Great Lakes water system over the next two years. This duty has historically prevented Canadian ship operators from upgrading their fleets for decades. According to Mr. Jones of CSL, most ships operating on the Great Lakes system are around 50 years old. An added bonus of new ships is that they improve on an already impressive environmental record.
No industrial mode of transportation is emissions free, but ships emit significantly less greenhouse gases per cargo tonne than trains or trucks. The new ships coming soon will be even more fuel efficient and reduce emissions like Nitrogen Oxides by 86% and Sulphur Oxides by 99%. It may not be glitzy or glamorous, but shipping is green, growing and an important industry in our region. And that is worth more than just a little respect.
Article by: Paul Carvalho
Paul Carvalho is President, Chief Economist and Wealth Advisor with Reeves Private Wealth. He has spent 15 years in finance with a global custodian bank, a major investment firm and a Canadian Chartered Bank.