With marine traffic into Essar expected to increase in the coming years, KPMG is recommending that the City of Sault Ste. Marie get moving on securing government infrastructure funding to have the project shovel-ready within two to three years.
That's music to ears of the city's transportation and infrastructure committee in its endorsement of the report which will go before city council, Feb. 4.
The creation of an expanded harbour with Seaway draft on Essar's extensive brownfield property has been identified by the city as a high priority item.
“The expanded regional harbour is both 'can do' and 'must do,'” said a report submitted to city council by the committee's chairman Don Mitchell.
The committee wants council to move immediately from the study stage to the implementation phase by starting “advanced discussions” with Essar, talking with potential port users and notifying key government departments and area First Nations.
Oscar Poloni of KPMG in Sudbury, who prepared the report after a year of study, would not agree to an interview with Northern Ontario Business.
A regional harbour complex would involve new docks, material handling equipment upgrades, road and rail improvements, and blasting and dredging of a notorious shoal area in the upper St. Mary's River to widen an approach channel into Essar Steel.
Sault Ste. Marie has port facilities but it is privately owned by Essar.
Those docks handle about 5.5 million tonnes of cargo annually, most of it inbound raw material used in steelmaking. Tenaris Algoma Tubes, a global manufacturer of seamless tubes for the oil and gas industry, also has access to the facilities.
KPMG reports there is a high probability that cargo volumes will increase by 30 per cent in the “near future” to up to 7.2 million tonnes.
With an eye on boosting steel production, Essar expects marine traffic will increase 29 per cent, while Tenaris expects to increase its volume by 22 per cent.
In the next couple of years, Essar will be shifting its iron ore supply from mines in northern Michigan to the company's own mine and steel mill now being built on the Mesabi Range in northern Minnesota. Iron ore will be shipped across Lake Superior through Duluth, Minn to the Sault steel works.
An improved port would allow Tenaris to handle more tube rounds, increase production and possibly set up Sault Ste. Marie as a distribution point for moving product to customers in Western Canada and the U.S.
But the report said Essar's two dock facilities are in poor shape, plagued by either inadequate infrastructure or shallow draft.
The Sault has dabbled with various port plans for decades, including in the late 2000s, when a team of consultants, including KPMG, scoped out the city's entire transportation scene as part of the 2007 multi-modal study.
At that time, the conclusion drawn was that the Sault had limited marine potential since geography placed it “too far from the action” to attract cargo to support a larger port.
This time, KPMG claims there is more business to be had.
The movement of slag material, a steelmaking byproduct, could increase by 13 per cent, and there is entirely new potential to ship out aggregate, and receive and store road salt.
KPMG said the longer term prospects for more freight through the Sault could be as high as 200 per cent.
The operational and management scenario being floated by KPMG is for two ports.
One would operate for Essar's exclusive use with another managed by a not-for-profit as a public port.
The report recommends creating a public-private framework to finance, build and operate a harbour complex.
Essar senior management has reviewed the report and is supporting it. Both federal MP Bryan Hayes and provincial MPP David Orazietti are on board.
The Building Canada Fund is identified in the report is a possible funding source.
But KPMG recommends moving fast on the project.
“Although there appears to be good preliminary support at senior levels,” said the committee report, “government funding programs are not a sure thing – applications will be reviewed on a merit-based system and there is good competition for limited government money.”