St. Lawrence Seaway facing uncharted waters over Europe, domestic shipping

St. Lawrence Seaway CEO Terence Bowles, right, makes a comment Tuesday, July 28, 2016 during the St. Lawrence Seaway Management Corporation AGM in Cornwall, Ont. Uncertainly over the European economy with the forthcoming exit of the UK, plus a challenged domestic shipping industry and leading to uncertainty in the upcoming year. (Newswatch Group/Bill Kingston)

CORNWALL, Ont. – The head of the St. Lawrence Seaway says the upcoming season will be questionable given the political developments in Europe and an already tough domestic shipping year.

“As you know, we continue to see a lot of volatility,” CEO Terence Bowles told the St. Lawrence Seaway Management Corporation’s AGM last week.

“Now we’ve got the Brexit (British referendum to leave the European Union) that’s just come on. Something we didn’t expect but nonetheless, affects our European customers which are very important to the seaway, so we need to see where that is going,” President Terence Bowles told the senior staff and stakeholders.

Bowles said the year started a little bit slow but he’s hopeful the U.S. economy and other economies will continue to improve. “But definitely depends a lot on the state of those economies.”

In an interview with Cornwall Newswatch, Bowles said Europe is a big market in terms of carriers bringing material to North America.

“What happens in Europe for us is very important and the Europeans have been coming out of quite a bad period , very little growth. Now they’re getting up to two per cent growth. We were starting to be optimistic but with what’s happened now (Brexit), I don’t know more than anybody else but what’s going to happen,” he said.”There’s certainly more uncertainty, when there’s uncertainly, definitely not good for business.”

“Will that slow down things in Europe, I certainly hope not,” the CEO said. “We’re going to keep a close eye on it.”

Bowles said domestic shipping is being challenged this year. “Our domestic shipping is having a very hard year this year. The CSLs and the Algomas et cetera. Ocean shipping is doing quite well but 80 per cent of our business is domestic. Overall it’s the economy, so the economy has to improve – Canada, U.S., Europe are the big key ones for us,” he said.

Cargo down

The seaway finished the 2015 navigation season with a little over 36 million tons of cargo moved through the waterway.

That’s a drop compared to the nearly 40 million tons that was shipped in 2014-15. The volume drop is primarily due to fewer coal shipments.

“That was down some nine per cent versus the year and it certainly reflects the very difficult economic conditions that prevail over the year,” Bowles said.

But the so-called “grain boom” continued with volumes well-above the five year average.

“We would remember that grain was at record levels the previous year so even though we had a very good result it was slightly lower but all in all a very good result on grain,” Bowles remarked.

The CEO also spoke of “very sweeping changes” in the iron ore and steel industry and with China increasing steel volumes has hurt and put “stress” on the domestic industry.

Bowles said the seaway has made “significant inroads” on modernizing the locks with hands-free mooring systems, in order to keep their costs down and make the seaway more competitive.

The modernization also led to reductions in staff – mostly through attrition and retirement.

The seaway cut 19 full-time equivalent positions, not entirely through the mooring project but other areas of the corporation.

The bottom line

Seaway revenue was down nearly eight per cent to $71.9 million (compared to $77.9 million in the previous year).

Easing the strain the on bottom line was the fact that operating expenses were also down four per cent to $63.1 million (compared $65.8 million in the previous fiscal year).

The seaway had a larger operating deficit of $107.5 million ($91.8 million last year).

But a transfer from the federal government (through the Capital Fund Trust) of $130.5 million, leaving an actual surplus of $23.1 million.