A consultant's report warns that the clock is ticking for Sault Ste. Marie to get moving on an expanded public-private port facility.
With marine traffic into Essar Steel Algoma expected to increase in the coming years, KPMG is recommending that the city get moving on securing government funding to have the project shovel-ready within two to three years.
After more than a year of study, KPMG's market and business analysis placed a $121-million price tag for a “regional harbour” complex on Essar property to serve marine traffic for both the steelmaker and outside shippers.
City council endorsed the report and approved moving to the next steps which involve contacting possible port users, key government departments, area First Nations, and negotiating a land transfer or lease with Essar to an undetermined port management organization.
The Sault is listed as the fourth busiest Canadian port on the Great Lakes in terms of tonnage moved.
“And it will increase greatly,” said Don Mitchell, chairman of the city's transportation infrastructure committee, who's excited by the job creation projections of between 600 and 1,800.
An expanded harbour with modern dock facilties and adequate Seaway draft on Essar's property has been identified by the city as a high-priority item.
The operational and management scenario being floated by KPMG is for two ports.
One would operate for Essar's exclusive use and the other as a public port. But it's being billed as a single harbour complex for government funding purposes, said Mitchell.
“My hope is that we can say by late fall next year or early spring 2015, we're into the shovel in the ground aspect.”
Essar has multiple docks to handle inbound iron ore, coal, limestone, coke, scrap steel and tube blanks for Tenaris, and outbound finished steel products.
But the docks are in rough shape, plagued by either shallow draft or poor infrastructure.
The proposed complex would involve dock and material handling equipment upgrades, road and rail improvements, and dredging a notorious shoal area in the St. Mary's River to deepen an approach channel into Essar to accommodate larger ships.
The Sault has dabbled with port studies for decades, the last time being in 2007.
At that time, consultants concluded the Sault had limited marine potential since geography placed it “too far from the action” to attract cargo to support a larger port.
Now KPMG reports both Essar and its neighbour, Tenaris Algoma Tubes, are in growth mode and there's more business out there.
The port handles about 5 million tonnes of cargo annually. KPMG projects those volumes will increase by 30 per cent in the “near future” to 7.2 million tonnes.
Essar's marine traffic will increase 29 per cent, with Tenaris up by 22 per cent.
Essar plans to boost steel production and is building its own iron ore mine on the Mesabi Range in northern Minnesota. Starting in 2017, iron ore pellets will be shipped across Lake Superior to the Sault's furnaces.
The report said an improved harbour would allow Tenaris to handle more cargo, increase seamless pipe production, and possibly set up the city as a distribution point to ship product to its oil and gas customers in Western Canada and the U.S.
Better facilities would also allow two slag companies operating on Essar property to increase shipments by 13 per cent. And there is entirely new potential to ship out aggregate, and receive and store road salt.
Longer term prospects are as high as 200 per cent if the Sault taps into Vale's nickel and copper concentrate traffic moving in and out of Sudbury, or if Cliffs Natural Resources chooses the Sault to handle overseas shipment of Ring of Fire chromite concentrate.
But KPMG issues a dire warning that if port expansion doesn't take place, Tenaris and other shippers could be displaced from using the waterfront because of Essar's growth plans.
“If we don't do a complete renovation of the docks, we're jeopardizing Essar Steel from any growth as well,” said Mitchell, who has a letter of intent from Essar indicating it favours a larger port plan.
“We support the findings of the KPMG business analysis,” said Essar spokeswoman Brenda Stenta in an email, “and agree with their recommendation that it is time to move to implementation.
“There is a growing need for port access in our community and we recognize that an expanded harbour facility will significantly enhance the region's ability to attract industry and related economic development.”
To make this go, Mitchell acknowledges that federal MP Bryan Hayes and provincial MPP David Orazietti will have to work some funding magic.
The Building Canada Fund and the Gateways and Border Crossings Fund are identified as likely sources.
“We know we have very senior support for this project from the federal government and we know we have David's support,” said Mitchell. “With the Growth Plan for Northern Ontario, this is the type of thing the province likes to see.”
But KPMG recommends moving fast on the project since government funding programs have a limited shelf life, the applications are reviewed on a merit-based system, and there's always competition for public infrastructure money.
