By Michael Lynch
World markets for Canada's grain will have to shift if the 10 remaining terminal elevators in Thunder Bay hope to recover business lost to ports on the West Coast, industry experts say.
The short-term outlook is gloomy, but emerging grain markets in North Africa and the Middle East hold some promise for increased shipments through the Port of Thunder Bay.
"Thunder Bay's share (of grain shipments) is a function of markets," says Nick Fox, vice-president of operations for James Richardson International Ltd.. Fox says the sale of Canadian grain has moved in the past decade from the former USSR to Asian countries that make shipping grain west more economical.
James Richardson International owns and operates a grain terminal in Thunder Bay. At peak levels its terminal handles approximately 2 million tonnes during a shipping season.
"We've seen it fall below 1.2 million tonnes," Fox says.
He says productivity is not a problem at the terminals in Thunder Bay. The terminal elevators and the United Steelworkers of America, the union representing grain handlers, have worked closely on a number of issues.
"We're trying to be part of the solution, not part of the problem," says Herb Daniher, staff representative for the union. He says the union has provided "contract flexibility to ensure efficiencies and opportunities to service customers."
Daniher predicts further rationalization and consolidation of terminal elevators, but says to survive they "have to continue to provide a high degree of specialized service."
Grain shipments to Thunder Bay terminals plummeted to a 33-year low in 2001 with just 6,484,351 tonnes moving through the port. This contrasts with a peak performance in 1983 when 17, 679, 719 tonnes were shipped. Annual totals between 14 million to 16 million tonnes were considered routine.
Forecasts for the coming shipping season are gloomy because of continued drought conditions on the prairies, says Jim Pietryk, a Canada Wheat Board (CWB) spokesperson.
Ships carrying grain from Thunder Bay move through the St. Lawrence Seaway, which continues to be a nemesis for grain shippers because of expensive charges.
Greg Arason, CWB president, predicts a future for grain shipments through the seaway.
"We're expecting real growth in markets where customers prefer to take delivery of grain at eastern Canadian ports," Arason said in a February speech at the annual conference of the Canadian Shipowners Association and the U.S. Lake Carriers Association.
Arason stressed the CWB recognizes the importance of the long-term viability of the seaway.
"We know that to continue to be an innovative world leader in marketing grain, we need to be able to ship grain out of the seaway, as well as the West Coast.
"Loss of the seaway would mean a tremendous loss of shipping capacity and corresponding loss in the ability to efficiently move our export grains, especially if market conditions or weather triggered a return to larger export volumes," Arason said.
He also told conference delegates that the seaway means competition for the West Coast ports, as well as for rail movement to Quebec ports. "Competition is key to the development of the commercialized grain handling and the transportation system we want to see," Arason said.
It has become increasingly difficult to maintain grain shipments through the Port of Thunder Bay, says Dennis Johnson, port authority CEO and harbour master.
"We used to operate in a near monopoly, but today lots of people are chasing the same nut," Johnson says.
Grain is now being cleaned on the Prairies, which allows the railways to bypass Thunder Bay and move their cargo to Quebec ports. Railway companies want to encourage less handling and move grain in 25- to 100- car lots.
"There are a lot of railway inefficiencies in Thunder Bay, because we have 10 terminals, which means a lot more handling of railway cars," Johnson says.
He says government assistance to the Port of Churchill is an example of things beyond the control of the local terminal elevators.
"In recent years the federal and Manitoba governments have poured between $45 million to $50 million into the port."
They have financed sampling and weighing facilities, a new tug and a new dock at Churchill, Johnson says.
Omnitrax, an American company, was given the harbour, the elevator and the rail line into Churchill for $1.
"Churchill and Thunder Bay are no longer on a level playing field because our operators have to pay for any improvements out of their own pockets," Johnson says.
With government assistance, Churchill has taken 300,000 tons of grain out of Thunder Bay, Johnson says.
He is also concerned about the amount of taxes being paid by the owners of terminal elevators in Thunder Bay. He says the city should not rely on future receipts of $10 million from the operations of 10 elevator terminals.
"My advice is that the city should either support a meaningful reduction in taxes or prepare for significant reductions in tax revenue resulting from further terminal closures," Johnson says.
To emphasize his point on taxes, Johnson says Cargill Ltd. built a brand new high-efficiency facility in Duluth where it pays $160,000 US in taxes compared to its facility in Thunder Bay where it pays more than $1 million in taxes.
Johnson says there is some good news for the Port of Thunder Bay. Coal shipments increased substantially last year from 622,269 tonnes in 2000 to 1,642,820 tonnes in 2001 and are not expected to drop. Also, its cargo facility, Keefer Terminal, is absolutely full, Johnson says.
