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May 13, 2019 • Canadian Sailings • 5

may 13, 2019CONTENTS

The contents of this publication are protected by copyright laws and may not be reproduced, in whole or in part, without the written permission of the publisher.

53 Vancouver port dispute with container terminal tenantover capacity expansion

56 CN and CP announce first quarter 2019 results57 The Game of Shipping58 PSA to enter U.S. port sector with agreement to

purchase Penn Terminals, and expands presence inCanada by agreeing to purchase Halterm

59 Shock for container lines as contract rates start to fallagain

59 Carriers hit by rising charter rates 60 Older, fuel-guzzling box ships bound for scrapyards as

IMO 2020 looms61 Mandatory shaft power reduction on all ships may be

the way to hit IMO emissions target62 Installing scrubbers for IMO 2020 could cost carriers

200 TEUs per voyage62 A year on, ONE now ‘better equipped’ to deliver on its

pre-launch promises63 DSV wins the battle to take over Panalpina in

$4.72 billion deal64 Synergies and growing logistics venture help OOCL

make a $65 million turnaround65 Warning to shippers: more transshipment likely after

IMO 202071 Panalpina expands perishables footprint in Latin

America with CargoMaster buy72 Shippers increasingly unhappy with the performance

of shipping lines - but airline satisfaction grows

REGULAR FEATURES

76 Career Opportunity84 Upcoming Industry Events84 Index of Advertisers

7 Verifying cold-chain integrity among blockchain’spromises

73 What are the top ten risks to supply chains this year?74 Maersk launches online customs clearance service for

ocean customers75 FreightHub investors secure $30 million in fresh funds76 Amazon denies online platform is out to undercut road

freight market77 FedEx introduces its own robot solution78 China-Europe rail services a real success story79 Tracks not all running smoothly for North American

railroads in Q180 Exclusive interview: Jeff Rubin – what happens when oil,

globalization and environment collide?81 New packaging for lithium-ion batteries means safer

transport – but not by air, yet82 LNG, the forgotten fuel, makes its case as the ‘greenest’

alternative to oil82 ZIM Integrated Shipping Services’ new call to \Port of

Prince Rupert84 Damen launches two road ferries for BC Ferries85 CN maximizing the use of rail into Port of Prince Rupert,

and reports record grain shipments in April85 Furncan and Cross Marine have joined forces

27 Westport modernization project

29 Sustainable thinking guides port actions

33 Hamilton port welcomes TFI International

33 Hamilton container terminal grows with newservices

34 Energy and telecommunication innovation at thePort of Hamilton

35 P&H expanding milling operations in Hamilton

37 The Arctic Ocean Basin – is it really Putin’splayground?

40 Canada’s Arctic Policy—the search continues

42 Canada and China: two nations claiming sovereigntyover disputed ocean space

44 Does Canada have a strategic plan to enhance itsfleet of icebreakers?

46 Duke Snider – Canadian Arctic elder recognized byFinland

47 Proceedings of the Arctic Shipping Summit

50 Paul Pathy on the ups and downs of business, and thefrustration and loss to the economy of operatingwithout sufficient icebreaker support

11 Brand new container ships enhance Halifax reefer trade

14 Railways bolster cold chain segments

18 U.S. perishables exporters eye a better crop, but tradebarriers may give them the pip

20 Africa perishables – can Canadian exporters learn fromthe trade on another continent?

All editorial contents for the above Port of Hamiltonsection were provided by Hamilton Port Authority.

Arctic shipping


Temperature-controlledcargo Temperature-controlled

cargo

Verifying cold-chain integrity among blockchain’s promisesBY KEITH NORBURY

Blockchain, the technology behind cryptocurrencies likeBitcoin, has the potential to revolutionize the transportationof refrigerated and temperature-controlled cargos. Its prom-ises include verifying that temperatures remain at prescribedlevels throughout the cold chain, and tracking perishablesfrom harvest to consumption, thus ensuring sustainability.And, as with the transport of other cargos, blockchain alsopromises efficiency in settling disputes, processing insuranceclaims, and paying invoices.

“Very early days”“There are people testing the waters, particularly around

some of the retailers doing some proof of concepts onblockchain to pay vendors, and transportation providers toensure they’ve kept things at temperature,” said ElizabethBaker, a senior manager in supply chain, consulting strategyand operations for Deloitte Canada. “But it’s very earlydays.”

Those scattered proof-of-concept tests include a 22.5-mile truck shipment of frozen food in Florida last fall. Othertransportation modes are also experimenting withblockchain. Computing giant IBM is collaborating withocean carrier A.P. Moller-Maersk on a blockchain platformcalled TradeLens that includes Canada Border ServicesAgency among its partners. This March, Microsoft reportedon its website that it has partnered with Cargo CommunityNetwork “to introduce the world’s first blockchain-based air

cargo billing, costing and reconciliation system.” (The sys-tem was launched at the 13th annual International AirTransport Association World Cargo Symposium in Singa-pore.) Several railways, including Canadian National, havejoined the Blockchain in Transportation Alliance, an organ-ization of nearly 500 members in more than 25 countries,notes the alliance website.

“We’re really just in the research stage right now withit,” Kerwin Belle, CN’s commercial manager for the coldsupply chain, said in an interview. The railway has assem-bled a team in Brampton, Ont., to look at different systemsand technologies “to support the staff in their day to dayoperations,” he added.

CN’s ReeferTrak system already enables real-time tem-perature visibility inside its 53-foot CargoCool containers,a spokesman told Canadian Sailings last year. “I think thata lot of what the R&D team is doing is trying to understandhow blockchain could help benefit us in being able to havethat information readily available,” Mr. Belle said. For ex-ample, it might enable assessment of a product in transit,as it arrives at a customer’s dock, or even looking at thehistory of the product’s movement. “We’re doing it today,”he said of temperature monitoring. “Can this help us do itbetter?”

Canadian Pacific Railway, meanwhile, appears in no hurryto jump on the blockchain bandwagon. “Blockchain is still


Temperature-controlledcargo

in its infancy,” Jonathan Wahba, CP’sVice-President of intermodal salesand marketing, said by email. “CPwould need to see all participants inthe supply chain aligned behindblockchain before instituting it forTempPro services.” (TempPro is atrademarked service for perishableproducts that CP launched in early2018.)

“supply chain traceability”Deloitte has its own blockchain

group and in November 2017 pub-lished a white paper, subtitled “UsingBlockchain & Internet-of-Things sup-ply chain traceability.” The papereven provides a succinct explanationof what blockchain is and how itworks: “Technically, a blockchain is adigital, distributed transaction ledgerthat is stored and maintained on mul-tiple systems belonging to multipleentities sharing identical information.This creates a web that shares the re-sponsibility of storing, maintaining,and, more importantly, validating theinformation present on theblockchain.”

Ms. Baker was a presenter at theCold Chain Summit held in conjunc-tion with the Cargo Logistics Canada

Conference this February in Vancou-ver. She spoke about how “Internet ofThings (IoT) solutions are connectingdigital and physical worlds in innova-tive ways — with breakthrough busi-ness results.” IoT is related toblockchain because it provides thesensors that deliver the information tothe blockchain to do its work.

“It was more focused on theblockchain and how the distributedledger platform can be used to con-nect the Internet of Things across dif-ferent users,” Ms. Baker said of herpresentation. That included a discus-sion of the sensors used to collect thedata stored in the blockchain and howthose sensors are becoming muchmore affordable. “It’s easy to attachthem to trailers, tractors, containers,and monitor temperature through-out,” Ms. Baker said. She evenbrought a few sensors, about the sizeof her hand, to the summit. They com-municate using cellphone towers butcan also be set up for wifi or bluetooth“depending on what the need is.”

So far, she hasn’t seen blockchainapplied specifically to cold chains.However, it is starting to be used inother supply chains, such as tracking

ELIZABETH BAKER

diamonds, she said. That’s to ensurethe diamonds are sourced ethnicallyand aren’t so-called blood diamonds.Another promising area forblockchain is tracking pharmaceuti-cals, which do often require refriger-ation or rigorous temperature control.“I think that the big piece is thatthere’s potential to improve supplychain transparency and traceability,and reduce costs,” Ms. Baker said.“Because if you are getting data that’sflowing from system to system, fromthe different players of the ecosystemautomatically, then you have fewerpeople entering data (or) looking fordata. It makes analysis easier becauseyou’re actually analyzing data as theyflow through the system, and makingdecisions in real time.”

One promise of blockchain for re-frigerated supply chains is that “youcan have it so that your system auto-matically pays invoices where thetemperature was controlled through-out,” Ms. Baker said. “The systemflags where temperature was an issue,and then you have someone looks atthose elements.”

reefer truck testsblockchain

In October 2018, a Florida com-



cargo

pany, Arel Trucking, employedblockchain in a 22.5-mile shipment offrozen food from Medley, Fla., to Sun-rise, Fla. Another Florida company,dexFreight, developed the decentral-ized logistics platform that enabled a“smart contract” to release fundsthrough Bitcoin upon delivery. Thatthe cargo was frozen foods was inci-dental to the test. This particularproof of concept didn’t monitor anyattributes of the cargo itself, saiddexFreight CEO and co-founder RajatRajbhandari. But it could have.

“We could have monitored thetemperature or the humidity or what-ever the customers needed,” Mr. Ra-jbhandari said. That informationwould then have been sent to theblockchain, where those measure-ments would be recorded in such away that none of the parties coulddispute their veracity.

“It was not about the distance orthe content or the size of the pallet,”Mr. Rajbhandari said. “It was moreabout understanding the workflowand where we can improve our plat-form in terms of how it will interactwith the users on the ground.” Hesaid dexFreight is in talks with a com-pany that performs remote cold chainmonitoring to test how to integrate itssystem with dexFreight’s smart con-tracts. However, those discussionshaven’t yet borne fruit. Nor has thecompany done any further tests sincethe one in October, which Mr. Rajb-handari said was primarily about cali-brating the platform. “We have othertests planned but it’ll be mostly fulltruckloads,” he said. His company’s

scribed a smart contract as “a contractthat triggers either a payment or someother asset transfer.” For example, thecontract could specify that a shipmentbe picked up during a specific timewindow, delivered during another win-dow, and that payment would be is-sued by a specific date. “All thatwould be coded in the smart contract.Then when the smart contract receivesa proof of delivery, it will automaticallytrigger that payment to the carrier,”Mr. Rajbhandari said.

An affiliate of Ontario-based truck-ing company Polaris Transport Groupis also getting into blockchain in part-nership with IBM, which had used itsuse case to build a distributed ledger,said Dave Brajkovich, chief technologyofficer for Polaris and a spinoff firmcalled North Star Digital Solutions Inc.“We’re running POCs, or proof of con-cepts, before we launch anything new(into) production,” Mr. Brajkovich said.

Despite its cool-sounding name,however, Polaris has no reefer units inits fleet of about 135 trailers. It doesn’tdo refrigerated transport. “However,we do have connections with manypartners that can manage that,” Bra-jkovich said. While the company hassome warehousing with refrigerationcapabilities, Polaris primarily engagesin less-than-truckload shipping, mostlydry goods and occasionally hazardousmaterials. It also does third-party lo-gistics. About three-quarters of itsbusiness is in the U.S. “But we’regoing into other verticals as well, uti-lizing technology such as machinelearning, AI (artificial intelligence), ro-botic process automation (RPAs) andof course Blockchain, or distributedledger,” Mr. Brajkovich said.

shared in the cloudHe prefers the term “distributed

ledger” to distinguish the technologyfrom the blockchains associated withcryptocurrencies. Basically, the NorthStar blockchain utilizes tools like En-terprise Resource Planning systems(ERPs) to share information in thecloud. “So we have distributedledgers that have smart contracts be-tween two parties, three parties,” Mr.Brajkovich said. “Whatever parties arejoining within that distributed ledger,

platform is an application that sitsatop a smart contract blockchain ap-plication from Argentina-based RSKLabs, which in turn sits atop of Bitcoin.

layer 2 solution oVer bitcoin“The Bitcoin blockchain itself does

not store the smart contract. It’s theother company. So we call that a layer2 solution over Bitcoin,” Mr. Rajbhan-dari said, adding later, “We use RSK’sblockchain to send our transactionsand smart contracts.”

In theory, dexFreight could be usedfor other modes of transport, he said.“But if you are talking about oceancarrier or air carrier, documentationsand stuff like that are pretty complexcompared to full truckload.” He de-

RAJAT RAJBHANDARI



the smart contract portion of it is basi-cally handshaking to do the transac-tions in the cloud.” The idea is “tomanage all of our shipments from cra-dle to grave, or from order to cash,throughout the distributed ledger,” hesaid.

Running the data through applica-tion programming interfaces, or APIs,which connect to the distributedledger, will mitigate any human errorpossibilities, he said. It will also en-able “interface visibility” for any part-ners North Star allows to access thesystem. Coupled with that, North Starwill align IoT devices to do suchthings as monitoring trailer capacity,as well as safety features like brakes,lights, and tires. “Again, not monitor-ing temperature, although we could,”he said, adding later, “Let’s say we diddecide at one stage to go into refrig-eration, we could simply expand thattechnology and those APIs.” For ex-ample, IoT sensors could send data tothe distributed ledger “and give backreal-time values of temperature-con-trolled requirements that could po-tentially be hazardous,” Mr.Brajkovich said. “Or if at some pointit falls below levels of acceptance, youcould intercept that data before it ac-tually reaches the destination, and al-ready have a plan to either dispose ofgoods or isolate them from a contain-

ment perspective.”

“farm to fork” trackingIt is even possible to track goods

from the time of their production tofinal delivery — an example of whichis called “farm to fork,” which is alsothe thrust of IBM’s Food Trustblockchain system.

In 2016, a U.K. company, Provence,ran a pilot project in Indonesia inwhich tuna fishers registered each fishthey caught on a blockchain-basedapp as they soon they landed it, ac-cording to Global Trade Review. Thesystem, because of blockchain’s invul-nerability to tampering or counterfeit-ing, verified that the fish were caughtin a legal and sustainable way. Morerecently, Bumble Bee Seafoods isusing blockchain in the same way, For-tune magazine reported this March.“Mislabeling and fraud are rampantproblems in the seafood industry,” thearticle noted.

Walmart and Sam’s Club, mean-while sent a letter last fall to their sup-pliers of leafy greens asking them touse Walmart’s block chain technologyall the way back to the farm. That ac-tion followed a large outbreak of E.coli in romaine lettuce earlier in 2018.Walmart expects all the suppliers tohave the systems in place by this fall.“First and foremost, the big driver ofblockchain is traceability all the wayback, and understanding where it wasmanufactured and where and how ittravelled through the supply chain,”Mr. Brajkovich said.

TradeLens, the blockchain collabo-ration of A.P. Moeller-Maersk andIBM, processes more than 10 millionevents every week, according to theTradeLens website. Its “ecosystem” ofmore than 100 organizations — suchas ports, carriers, terminal operators,freight forwarders — includes Port ofHalifax and Agility Logistics. CanadaBorder Services Agency announced inOctober that it has agreed to pilotTradeLens. While CBSA declined aninterview request, spokesperson Jay-den Robertson did answer emailedquestions.

cbsa testing tradelensCBSA expects to begin testing the

platform this spring, Mr. Robertsonsaid. “The pilot project will allowCBSA to determine what role, if any,the TradeLens platform could play inits business processes,” he said. Spe-cific desired outcomes would be “im-proved data quality and security,transaction transparency, and in-creased availability of information,”he added.

Asked what special challengescold chain cargos pose for CBSA of-ficers and how blockchain might ad-dress those challenges, Mr.Roberston said, “CBSA strives toprocess and facilitate legitimatetrade in a timely fashion while ensur-ing inadmissible and high risk goodsremain out of Canada. The manage-ment of refrigerated or otherwiseperishable shipments is one of thechallenges of logistics. Blockchainmay help make information avail-able earlier and in a more organizedmanner, for instance, if all relateddocuments were to be provided onthe same platform (declarations,permit, certificates, etc.). The use ofblockchain by cargo handlers couldhelp ensure the integrity of the coldchain, although it would be depend-ent on all trade chain members par-ticipating and providing accurateinformation to all downstream part-ners.”

In a news release announcingCBSA’s participation in the TradeLenspilot, CBSA president John Ossowskisaid that the system might result in“a faster and more reliable nationalsupply chain, which could positivelyimpact Canada’s economic output.”Asked how TradeLens would improvethose supply chains, Mr. Robertsonnoted, “As the technology theoreti-cally allows managed access to theledger, its distribution, and its en-cryption, a platform based onblockchain technology, like the oneused for this pilot, is expected to adda level of security, from a holistic per-spective (i.e., taking into account allof the players in the trade chain con-tinuum). Transactions on the ledgerare also unalterable.”

DAVE BRAJKOVICH



cargo

Brand new container ships enhance Halifax reefer tradeBY KEITH NORBURY

Tropical Shipping expects to debut a second brand-new container ship on its Halifax run by this July to trans-port fresh and frozen foods and other products to theCaribbean. “It may even be earlier, but we’re going pub-lic with saying early July,” said Gordon Cole, the com-pany’s Assistant Vice-President for Canada, Hispaniola,and the Virgin Islands.

The maiden voyage of Tropic Lissette will come aboutsix months after a sister ship, Tropic Hope, made its in-augural call at the Port of Halifax this January. The ships,capable of carrying the equivalent of 1,145 standard 20-foot shipping containers, are among six new vesselsTropical Shipping is adding to its fleet. “I would say itwas fantastic,” Mr. Cole said of the arrival of the TropicHope. “It was the first Tropical-owned vessel that we’vehad into the Canadian service.” Mr. Cole added that itwas also “pretty special” to have the vessel christenedin Halifax. “Godmother” Lori Nadeau, a longtime Tropi-cal employee, performed the christening honours.

500 brand-new cansTropic Hope didn’t bring in any cargo on its initial voy-

age to Halifax. However, it did arrive with 500 brand-new40-foot containers, including reefers. “That’s one of

things that I kind of joked about a little bit is that we’llnever see that many empty containers on her again,” Mr.Cole said.

The containers — each twice the size of a standard 20-foot equivalent unit, or TEU, took up almost all the ca-pacity of the 1,145 TEU vessel, which also has 260 reeferpoints, according to the company website. The two newships are products of a US$150 million contract that Trop-ical Shipping signed with China’s Guangzhou WenchongShipyard Co. Ltd. in 2016 to build six new Carib class ves-sels, according to a press release posted on the Face-book page of Port St. Maarten in the Caribbean.

Tropic Lissette is named for the wife of long-time for-mer Tropical Shipping CEO Rick Murrell, who now worksfor Saltchuk, Tropical’s parent company, Mr. Cole said.Lissette will replace a chartered vessel of a similar capac-ity, Bomar Rebecca, on the Halifax run, which Tropical in-troduced in 2017. Tropical had originally planned to useanother of the new ships, Tropic Island, on the Halifaxschedule. The first was initially expected to begin servicelast September and the second in November. “We’vebuilt four of these ships (so far) and it’s been a jugglingact of which ship is going where,” Mr. Cole said.

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Tropic Hope, the first of two new 1,145-TEU container ships on Tropical Shipping’s Halifax run, docks atHalterm’s container terminal.



cargo

Tropical Shipping has one sailing a week of out of Hal-ifax. So the two ships are each on two-week rotationsthat take them to Tropical’s main port in West PalmBeach, Florida, and then to Puerto Rico, St. Thomas onthe U.S. Virgin Islands, and St. Maarten, Mr. Cole ex-plained.

serVing 30 caribbean portsTropical serves 30 destinations in the Caribbean.

Much of the cargo is transloaded at West Palm Beach forsuch locales as the Bahamas, Grand Cayman Island,Turks and Caicos, Trinidad, and Guyana. About the onlymajor Caribbean islands Tropical doesn’t serve are Cubaand Jamaica.

“It’s pretty well everything that can go inside a con-tainer,” Mr. Cole said of the cargos Tropical ships carry.“There’s a lot of frozen goods. There’s a lot of fresh prod-uct for the reefers. There’s building materials, and evensome personal household goods as well too, and gro-ceries.”

Most of the cargos go south from Halifax, with verylittle going north from the Caribbean. Exceptions are or-ganic bananas from the Dominican Republic, as well asmangos and melons. “There’s different items but verylimited as compared to the exports,” Mr. Cole said.

In total, Tropical employs about 1,000 people. Theyinclude its own crews on the new ships, unlike on thechartered vessels, which hire their own crews. About twodozen Tropical employees are based in Canada, mostlyin Saint John, N.B., where the company still has its headoffice. A few sales people are based in Montreal andToronto.

In 2017, Tropical moved its Canadian port operationsto Halifax. The move has been “everything that wethought it would be,” Mr. Cole said, citing operationalefficiencies and connectivity with other carriers, includingCanadian National Railway.

halterm strengthens capabilitiesTropical’s Halifax ships dock at the Halterm container

terminal, which has more than 140 longshore workers,noted a news release from Halifax Port Authority in Jan-uary about Tropic Hope’s inaugural visit. Halterm“strengthened its basic workforce, operational capabili-ties and its handling capacity to meet its commitmentsto Tropical Shipping around the carrier’s delivery of thelarger capacity vessels,” the release quoted Kim Holter-mand, Halterm’s Managing Director and CEO, whocalled the occasion “a landmark day in our service toTropical Shipping.”

Port Authority spokesperson Lane Farguson said that“we get excited anytime any of our customers can up-grade their vessels or add new infrastructure because itgenerally means that their business is doing well and thatthere is the potential for growth.” Mr. Farguson saidreefer cargo is significant for the entire Halifax region.

The economic spinoff from each export container ofseafood is worth almost $74,000, nearly triple that of anaverage export container, he said.

“This shows the value of the seafood industry in NovaScotia, and the importance of having an internationalgateway so those producers can get their product to in-ternational markets,” Mr. Farguson said.

Halterm’s South End Container Terminal has 615reefer outlets, while the Ceres terminal at Fairview Covehas 500 reefer outlets. In 2018, Halifax handled 54,281TEUs of reefer cargo, just below the record 56,660 TEUsof reefer cargo in 2017.

reefer cargo ranks highly“There is a wide range of refrigerated cargo moving

through our international gateway,” Mr. Farguson said.“We see fish and seafood coming from Northern Europe,frozen shrimp from Asia, wines and beverages fromsouthern Europe and the Mediterranean, and specialtyfruits and vegetable products moving from Europe andNorth Africa, with a good portion of it moving into inlandmarkets like Montreal and Toronto via CN’s intermodaltemperature-controlled cargo service.”

Blueberries and frozen french fries are other signifi-cant reefer commodities. Mr. Farguson could not offerspecifics but said that in 2018 frozen vegetables were thefourth largest export commodity and seafood was thefifth largest, with Latin America and the Caribbean mak-ing up 13 per cent of containerized cargo activity. WhileHalifax doesn’t break out specific categories, Mr. Fargu-son said, “the Caribbean is a major destination for reefercargo, as is Europe.”

Regarding the latter, Mr. Farguson said that tradeagreements like Canada-European Union Comprehen-sive Economic and Trade Agreement, a.k.a. CETA, thatwent into effect in 2017 “are good for Canadian im-porters and exporters because they open new marketsand create opportunities for growth.”

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Tropical Hope’s godmother, Lori Nadeau, alongtime employee of Tropical Shipping, christensTropic Hope on its inaugural visit to Halifax.



Railways bolster cold chain segments BY KEITH NORBURY

Canada’s two major railways are embarking on somecool endeavours to build their refrigerated and tempera-ture-controlled cargo business. For instance, the larger ofthe two, Canadian National Railway, recently wrapped upthe acquisition of a major trucking company that special-izes in refrigerated cargo. Meanwhile, Canadian PacificRailway, recently brought into service 423 new 53-foot re-frigerated containers and another 363 heated 53-foot con-tainers.

CN finalized in late March its deal to purchase Win-nipeg-based TransX Group of Companies. When the dealwas announced last October, CN President JJ Ruest saidin a news release that the “strategic acquisition” wouldallow the railway to “deepen its supply chain focus” andstrengthen its intermodal business “notably the special-ized, fast-growing refrigerated segment.”

A month into the deal being formalized, the two com-panies, which are continuing to operate independently, arestill in the early stages of their new relationship, said Ker-win Belle, commercial manager for CN’s cold supply chain.“So there isn’t too much to say there on the short termfront,” Mr. Belle said in a phone interview. “Long-term ob-

viously we feel it’ll be very beneficial to just learn from eachother how we conduct business in the cold supply chainsegment.”

now part of the familyTransX, which has been a long-time partner and cus-

tomer of CN, is now like part of family, he said. “We really

Canadian Pacific Railway hadadded 423 53-foot SlimLinereefers to its TempPro fleet.

CN recently acquired Winnipeg-based TransX Group of Companies, which has a large fleet of trucks, trailers, and containers.



want to go through with them andsee what core competencies theyhave and vice versa,” Mr. Belleadded. “They know our organizationfairly well, but from the customerside of it. So now they’ll get a chanceto understand more what our oper-ating procedures are like and whereour strengths are and where some ofour opportunities to learn are. Thelist is long. It will certainly take sometime but everybody on both sides isvery excited about what the futureholds.”

Founded in 1963 by Louie Tolaini,TransX now has 3,000 employees,1,500 trucks, 4,000 trailers, 1,000 in-termodal containers, 12 North Amer-ican terminals, and 72,000 monthlyshipments, according to its website.The company’s equipment includesrefrigerated and heated 53-foot con-tainers. Its truck tractors are mostlyFreightliners and Mac chassis with anaverage age of 1.4 years. AmongTransX services are “stuffing and de-stuffing for marine container move-ments” and “polarization and pickand sort services for both dry andtemperature-sensitive freight,” thecompany website notes.

temppro acquires newequipment

If Canadian Pacific has any plansto acquire a trucking company of itsown, it isn’t letting on. “CP is not ina position to comment on a com-

petitor’s strategy,” Jonathan Wahba,CP Vice-President of sales and mar-keting for intermodal, said by emailwhen asked to comment on CN’sTransX deal or if CP is also lookingat a similar purchase. Mr. Wahba hadmuch more to say about other areasof CP’s cold chain strategy, though,such as the 2018 purchase of the 53-foot SlimLine reefers and the heatedcontainers. “These additional unitswere important components of ouroverall capital spend on domesticintermodal to support the continuedgrowth of this business,” Mr. Wahbasaid.

CP also announced the purchaseof 41 new gensets in 2018 to re-place existing ones in its fleet. Thosenew gensets are all now in service.Gensets are purpose-built 40-footcontainers that house a pair of largegenerators that can each power upto 17 ocean-going containers, noteda 2017 CP news release. Together,the new containers and gensets aremanifestations of CP’s TempProbrand, which “encompasses CP’sentire product offering for perish-able, protective services, whetherthat’s shipments requiring heat inthe winter months or specific tem-perature settings year-round,” Mr.Wahba said.

The new gensets “support inter-national import traffic requiring tem-perature protection to move

inland,” Mr. Wahba added. Theyalso expand CP’s equipment offer-ings for domestic shipments. “Forexample, heavy, dense freight maynot require the full space availablein our SlimLine fleet,” Mr. Wahbabexplained. Instead, a 40-foot refrig-erated marine container can behooked up to new genset in the do-mestic service.

A SlimLine container, meanwhile,has “a smaller-than-standard me-chanical operations unit,” whichfrees up enough space for two addi-tional pallet positions — 30 com-pared with 28 previously. SlimLineunits also use R-452A refrigerant,which has a smaller carbon footprintthan its predecessor, R-404A.

CP now has 1,500 53-footheated containers, having added400 more since 2018. It also has 900refrigerated containers. Growthareas that those containers supportinclude chocolate/confectionary andbeverages/juices, Mr. Wahba said.

“CP is in the process of equip-ping its entire 53-foot refrigeratedand SlimLine fleet with 24/7 real-

JONATHAN WAHBA

Canadian Pacific Railway recently added 41 new gensets to its fleet.



time tracking telematics,” Mr. Wahba said. “This technol-ogy tracks the container’s location via GPS, plus fuel lev-els and engine statistics via a cellular signal. Anymechanical issues with the refrigeration unit will triggeran alarm to CP’s TempPro team so it can be serviced im-mediately.”

CP’s 2018 fourth-quarter earnings report doesn’tmake any mention of TempPro volumes. However, itnotes that intermodal revenues increased 13 per centover 2017 to $1.538 billion, or 21.5 per cent of totalfreight revenues. “CP continues to see strong demandfor temperature-sensitive service in the food/groceryspace, and we expect that to continue,” Mr. Wahba said.

an important segmentCN has a program similar to TempPro, called Cargo-

Cool. And it added 500 40-foot EcoTherm super-insu-lated containers — that share many of the sameattributes as CP’s SlimLine containers — to its fleet a fewyears ago. CN also has 820 53-foot refrigerated contain-ers in its fleet, Mr. Belle said. The railway added 100 newreefers in 2018, according to its annual report.

CN’s 2018 annual report doesn’t break out CargoCoolrevenues. However, its intermodal revenues increasedeight percent in 2018 to $3.5 billion or 25.5 per cent of

$13.5 billion total freight revenues. Mr. Belle said Cool-Cargo is a fast-growing revenue segment of intermodal.“It’s definitely a segment that’s very important for CN,”said Mr. Belle, citing the TransX acquisition as an exam-ple.

“I think just in general for intermodal, whatever seg-ment you want to talk about, temperature controlled ordry, truck capacity is really the driving factor,” Mr. Bellesaid.

That capacity itself is constrained by an aging driverpopulation, rising fuel costs, and new requirements forelectronic logs that also limit drivers’ hours of service. “Ifyou’re going to talk about going into business and buy-ing reefers you probably need deep pockets to do that,to have the latest technology to protect the cargo, tomake sure you can run in markets where there are morestringent emissions and regulatory affairs that you’regoing to have to deal with,” Mr. Belle said.

Despite those challenges, Mr. Belle sees CN inter-modal business poised to grow in 2019. “We have beenable to grow the cold supply chain since we heavily in-vested in it on the international side roughly around2011, and now the domestic side roughly around 2013,”Mr. Belle said. CargoCool has been a big contributor to

CN expects its CargoCool business to keep increasing.



cargo

the growth, not only on the international side but in CN’srelationship with port operators.

Much of the segment’s growth comes from over-the-road transport but also from tighter regulations and prac-tices that have resulted in cargos now being shippedwith temperature control that previously didn’t requireit. “We think there’s a lot of opportunity here that’s stillsitting in front of us,” Mr. Belle said. “We’re just scratch-ing the surface at this point.” Examples include over-the-counter medications like cough syrup and ointments,which were found to be breaking down without con-trolled temperatures. “They don’t want them getting toocold in the winter and they certainly don’t want themgetting too hot during the summer months,” Mr. Bellesaid.

Aside from medicines, cosmetics, and other perish-able items like meat, seafood and vegetables, a new-comer to CargoCool is craft beer. “Traditionally it wouldgo with heat in winter and nothing in the summer. Nowthey would like to keep the same temperature all yearround, which requires a reefer,” Mr. Belle said. “So againthat’s great news for someone like CN who’s continuouslyinvesting in the temp-control segment.”

key differencesMr. Belle concluded by saying that CN is proud to

connect people with goods and commodities around theworld, such as the variety of foods now found in ethnicfoods aisles of supermarkets — products that requiretemperature control during transit. “To be able to bringall those commodities together and bring them into onespot where those from abroad living here can accessthem, we think it’s a great thing,” Mr. Belle said. “It’s onlysomething that’s going to continue to grow.”

One key difference between CN and CP is that CNalso utilizes clip-on gensets whereas CP doesn’t see theneed for them. CP also maintains that its recent gensetacquisition allows it to have the most departures fromCanada’s two largest ports — which are Vancouver andMontreal.

However, CN is the only one of the two that has serviceto Halifax, which is “incredibly important” to that port’sreefer-handling ability, Port of Halifax spokesperson LaneFarguson said. Over 60 per cent of Halifax’s containercargo is rail-based, coming from and going to Ontario,Quebec, and the U.S. Midwest, he said. “It’s important tohave all three working together – ship, shore, rail – to main-tain the integrity of the cargo and ensure there is capacityfor future growth,” Mr. Farguson said.



U.S. perishables exporters eye a better crop, but trade barriers may give them the pipBY IAN PUTZGER

Eager to put a disappointing 2018 harvest behindthem, U.S. produce shippers are preparing for a strongcrop this year – but it is as yet unclear who will buy it.After California’s peach harvest kicked off, hopes arehigh for a strong season for stone fruit grown in thestate. Peach and nectarine volumes are expected to riseabove average and apricots are going strong, whileplums should see a medium-sized crop this year.

Blueberries are also poised for a much–improved har-vest. The California Blueberry Commission predicts it willnot only exceed last year’s output, but be above averageannual volumes – California will produce 30 per centmore blueberries this year than in 2018, which translatesinto a 10-15 per cent gain over average results.

Weather conditions have been good for a strong har-vest, noted Chris Connell, Senior Vice-President NorthAmerica of Commodity Forwarders, a subsidiary of

Kuehne + Nagel. The winter was colder and rain fell atthe right time to benefit a strong crop, he said.

Growers are desperate for a better season. Last year’scherry crop in California amounted to a paltry three millioncases, a steep drop from the 9.7 million harvested in 2017,while the cherry crop in Washington state was down fourmillion cases on its 2017 level of over 24 million.

“Last year the cherry crop was awful,” said ShawnMcWhorter, President for the Americas at Nippon CargoAirlines (NCA). Perishables make up 50–60 per cent ofthe carrier’s business on the west coast. Mr. Connell saidCalifornia’s cherry crop was very unpredictable, so he isnot celebrating yet. Moreover, there are question marksover the destination of those cherry shipments. “Supplyis looking more robust. Now there’s more concern aboutglobal demand,” he said.

Inevitably, the biggest question mark is over the Chi-



cargo

nese market, which has shown a vo-racious appetite for cherries andother perishables in recent years,but the trade confrontation with theU.S. remains a daunting barrier, Mr.Connell noted. Talks between thetwo governments in recent monthshave fuelled hopes of a resolution ofthe conflict, but the atmosphere re-mains brittle. On May 1 the WhiteHouse signalled it was getting impa-tient with the failure to come to anagreement so far, and acting Chiefof Staff Mick Mulvaney said the talkswould not go on forever, indicatingthat the U.S. was prepared to endnegotiations if no deal was reachedsoon.

The confrontation has hit U.S.perishables exporters hard, fromsoybean farmers to lobster fisheries.Mr. Connell said his company, whichhas a branch in Boston, witnessedfirst-hand the migration of lobstertraffic up the North American eastcoast to Canada. Halifax StanfieldInternational Airport clocked up 8.5per cent growth, fuelled by lobsterexports, which accounted for nearlyone-third of the airport’s through-put. And freighter flights to Asiahave increased steadily.

NCA slots some of its Asia-boundflights from the U.S. through Ed-

monton instead of Anchorage as atech stop to pick up chilled Cana-dian beef and pork. The local airportauthority has been promoting thislink to shippers in western Canada,Mr. McWhorter reported.

Brendan Harnett, Chairman andCEO of Flying Fresh Air Freight,Canada’s largest perishables for-warder, said live crab shipmentsfrom Vancouver to China declinedlast year, as much of this cargo orig-inates in north-west U.S. He seessome difference in preferences forlobster between U.S. and Chineseconsumers. While the latter preferlarge animals, which work better in adinner situation where food isshared, North Americans are okaywith smaller lobsters, especiallywhen served in conjunction withsteak, he said.

If China’s tariff on U.S. lobsters,which went up 25 per cent last year,were to be removed, Mr. Harnett ex-pects U.S. lobster firms to make ag-gressive attempts to recover lostmarkets. But Mr. Connell does notanticipate a sudden shift. Moreover,Canadian exporters will manage toretain some of their gains, he reck-ons. By the same token, there was

no wholesale shift to Canadiansources last year. Some U.S. ex-porters have maintained businesswith China by reducing FOB (free onboard) prices, Mr. Connell said.

Regardless of how the trade dis-pute unfolds, there are some ques-tions over China’s demand forperishables. Vietnam’s perishablesexports to China dropped 14.7 percent in the first quarter of this year.China takes about 74 per cent of itsneighbour’s fruit and vegetable ex-ports.

China is not the only marketwhere U.S. exporters face trade bar-riers. In retaliation over U.S. tariffs onsteel and aluminium, India raisedtariffs on U.S. walnuts from 30 to 100per cent last year.

However, if the U.S. and China docome to an agreement, air cargocarriers stand to see a surge in de-mand for lift to move cherries andseafood. “If tariffs are off, peoplemay look to charter,” Mr. Connellsaid. “There were charters to Chinafrom the Pacific north-west lastyear.”

Reprinted courtesy of The Loadstar(www.theloadstar.co.uk)

Photo:

Ameri

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ines




Rapid population growth, fast-de-veloping economies and a boomingglobal market for fresh flowers, fruitsand vegetables has made Africa a veryattractive proposition for perishablelogistics players. The African marketcould top 10 per cent growth this year,according to some estimates, but ac-cess to sufficient transport capacity isstill the key export challenge for localgrowers. Additionally, all African ex-porters must grapple with the uniquelogistics challenges posed by produceseasonality, says Yvonne Otieno,Nairobi-based agripreneur and direc-tor at Miyonga Fresh Greens. “Thereare seasons when the orders are reallylow, and then seasons when the vol-umes required are double or triple thenormal amount,” she says. “Thismakes planning difficult and freightprices often increase five-fold.” Estab-

lished in 2015, Miyonga grows and ex-ports fresh fruits and vegetables to Eu-rope and the Middle East, includingpassion fruit, avocados, pineapples,French beans, peas and herbs.

“All our shipments to the EU are byair due to the distance, however forMiddle Eastern countries we can shipby sea due to the shorter transit pe-riod,” explains Otieno. “But Europeremains the main destination for prod-ucts from Kenya with huge imports offlowers, vegetables and fruits.” “Airfreight costs are high, while if we sendby sea, the possibility of claims pres-ents a higher risk. That’s one of thereasons we have begun producingdried food and food powder. The shelflife is much longer, and it can beshipped by sea at much lower cost,”she says. To do this, Miyonga turnssurplus fruit into dried fruits and fruit

africa perishables – can Canadian exporters learn fromthe trade on another continent?BY SAM WHELAN

YVONNE OTIENO



cargo

powder.

Additional cold chain challenges liefurther up the farm-to-fork supplychain. Otieno says that while mostKenyan exporters have cold storagefacilities, a large percentage of grow-ers are small-hold farmers who do nothave the financial resources to investin modern cold rooms at the farm orin reefer containers for transport to ex-port to packaging facilities in Nairobi.“To address this, we have seen a num-ber of innovative solutions meant tohelp maintain cold chain from thefarm-gate level and these are gainingtraction, including the use of charcoalcoolers.”

surging demandDespite the logistical headaches,

an interesting development forKenyan exporters like Miyonga is thesurging demand in Asia. Otieno saysthe Asian market presents some goodpossibilities for Kenyan produce, andthat Miyonga is seeing increased en-quiries for avocados and coffee. How-ever, she cautioned that it may be tooearly to tell if the demand sustains inthe long-term.

“For us it’s very simple,” says Den-nis Verkooy, Senior Vice-President andglobal head of perishables, air logistics

at Kuehne + Nagel. “If you look acrossAfrica as a continent, there are a billionpeople, and by 2050 there will be 2billion people, so the fastest popula-tion growth will be in Africa. “You seeclearly in countries like Kenya, Tanza-nia, Namibia and South Africa, for ex-ample, that their economies aremoving fast.”

K+N acquired Kenyan perishablesspecialist Trillvane in 2017, one of thecountry’s largest air cargo players. Tril-lvane has a strong customer base inthe UK, helping large supermarketssuch as ASDA and Tesco keep the gro-cery isles stocked. Verkooy says the“very successful” takeover of Trillvane,together with the purchase of U.S. firmCommodity Forwarders Inc (CFI),helped K+N to significant growth inperishable air freight volumes last year.In 2018, the forwarder also purchasedPanatlantic Logistics Ecuador, anotherperishables specialist. In Africa, flow-ers make up the majority of K+N’s per-ishables business with a 70 per centshare, followed by 20 per cent fruitand vegetables and 10 per cent fish.

The continent represents 16 percent of its total global perishables vol-ume, and Verkooy says the Switzer-land-based forwarding giant is opento further acquisitions. For example, inSouth Africa, which Verkooy describesas an interesting market, K+N has arelatively small presence, but plans togrow organically and “keep the door

open” for an acquisition. The com-pany recently invested in coolers atboth Cape Town and Johannesburgairports; key commodities in the coun-try are fruits and flowers, with somecross-business from Kenyan customerswho also have farms there.

cooling offAfter the highs of 2017 and 2018,

with the global air freight market ex-pected to cool off a little this year,Verkooy says this would create an“easier year” for perishables, with re-gards to maintaining capacity. He ex-plains: “Historically, if you look at thelast 20 years you can clearly see per-ishables is quite a steady product forthe airlines, we don’t have the big hic-cups you get with dry cargo or othercommodities when it comes to therates, they’re more stable. “What wealso see is that when there is a lot ofdemand, these products suffer a bit.Airlines can choose whether to fly fishfor fifty cents or pharma for two dol-lars. So then you run into situationswhere you need more capacity.”

Verkooy notes a cooler market is“good news” for KN FreshChain, sincethe benefits of the 3PL’s preferred car-rier programme come into play. For in-stance, the forwarder can put morevolume with its preferred airlineswhere it has space agreements andpreferential rates, compared with ad-hoc volumes with carriers outside theprogram.

DENNIS VERKOOY




Pairing northbound and south-bound cargo lies at the heart of fellowSwiss forwarding multinationalPanalpina’s global end-to-end strategyfor perishables, and has resulted in the3PL acquiring no less than eight com-panies specializing in the vertical since2015. According to Quint Wilken,global head of air freight, perishables,Panalpina focuses on buying compa-nies with strong inbound freight, aswell as exports. “It’s very important be-cause it gives us the end-to-end; insome markets the inbound business iseven more important because youcontrol the customer from that side,but you are also able to control busi-ness on the origin side too.” This al-lows the 3PL to offer a one-stopsolution to customers who import frommultiple countries, adds Colin Wells,Panalpina’s global head of perish-ables, including transparency on track-and- trace and cold chainmanagement. Last year Panalpinacontinued its acquisition spree withthe purchase of Skyservices in SouthAfrica. Wilken describes it as a strate-gic move that provides “the key to theSouth African market, which is used lo-gistically as a hub from the continentto other parts of the world”. Prior toSkyservices, Panalpina acquiredKenyan forwarders Airflo and Air Con-nection. Panalpina moves someKenyan produce to South Africa, ex-plains Wells, since it is less seasonalthere and there are periods when it’seasier to access capacity.

Kenya’s prospects for 2019 appearto be picking up again following theextreme weather of heavy rain experi-enced just after Valentine’s Day lastyear. Wells says this suppressed flowervolumes, but now the market is backon track.

Another big challenge for theKenyan flower sector in 2018 was theswitch by airlines from actual weight tovolumetric-based charges. The switchadded “huge” costs for growers andreceivers, according to Panalpina’sWells, who described Kenya as a “lastbastion” for the practice – otherflower- growing countries, such asColombia, made the switch years ago.

skidded cargoTo help mitigate the impact on cus-

tomers, Panalpina invested heavily inan extension to its facility at Nairobiairport, which opened in November.There, Wells says they have been en-couraging the use of standardizedboxes for skidded cargo, as the previ-ous lack of uniformity meant boxescould contain 20 per cent air. “The re-ality is that fresh air costs money tosend, and the only way you can effec-tively do skidded cargo is where youhave uniformity of box size. So, wehave reduced the exposure to boththe grower and receiver by maximizingpayloads,” he adds. Skidded cargoalso allows for a better blend offreight, according to Wells, meaningthe forwarder can fill some of the vol-umetric space with denser product,normally vegetables.

Eric Mauroux, global head of per-ishables at Air France-KLM MartinairCargo (AF-KLM), describes the switchto volumetric weight as bringing backeconomic reality. “We were dealingwith around 500 different types ofboxes in the flower trade,” says Mau-roux. “This lack of standardization re-sults in a waste of air freight capacity,which is vital because in the peak sea-son all the actors say they need morespace, but 10 per cent of the aircraft iswasted without standardization.” Tenpercent capacity wastage is a bignumber, considering the dominanceof flower exports out of Africa. Mau-roux says 70 per cent of Africa’s aircargo exports are perishables, withflowers making up 37 per cent com-pared with 40 per cent for all fruits andvegetables. With the flower categoryand better space utilization a top pri-ority for the airline, AF-KLM teamedup with Schiphol Airport and RoyalFloraHolland to create the Flowerbox,achieving a 15 per cent increase inweight on airline pallets by reducingspace between boxes. In addition,Roos Bakker, Director of business de-velopment at Schiphol, says that theventure has been busy creating an in-formation- sharing platform that allowsplayers in the chain to link criticalflower data to air waybill data. “Flowershipment data such as number ofboxes, flower type, and number of

perishables in general, and specificallyflowers, are very important to Schipholand to Holland, with the category ac-counting for about 25 per cent of all airfreight imports.

A key goal within HFA is to prolongthe vase life of flowers. To this end, AF-KLM teamed up with Netherlands- andKenya-based supply chain manage-ment specialist FlowerWatch to de-velop the ‘degree hour’: an innovativeKPI that allows the carrier to enhanceits cold chain monitoring capabilities.Mauroux explains: “We multiply thenumber of hours it takes to carry theflowers with the temperature the ship-ment has been exposed to. If a ship-

flowers and stems in each box, islinked to air waybill numbers by theportal, which then generates a uniqueGLN code that gives all users accessto all the data in one place,” she ex-plains. “In successful pilots on jour-neys from Nairobi to the RoyalFloraHolland auction in Aalsmeer,Netherlands, shipments of flowers re-mained traceable, in real-time and onshipment level, throughout the jour-ney, including both product and ship-ment information.” Bakker notes

ERIC MAUROUX



cargo

ment is exposed to 10 degrees whenit should be between 0-2 degrees, butonly for five minutes, then maybe thisis not good – but it’s not that bad ei-ther. However, if it’s exposed for threehours, then you have a problem.” Headds: “We don’t all measure the samething - exporters might measure tem-perature inside the box, ground han-dlers could be measuring the pallet,and we could be measuring the tem-perature inside the cold room, for ex-ample.” He says ramp handling, inparticular, needs to be improved, andthat AF- KLM is looking at deployingreefer trucks at both Charles de Gaulle(CDG) and Schiphol.

Panalpina’s Wells agrees cold chainground handling is a global issue re-quiring attention and investment. Furthermore, he says, there is “un-doubtedly” a need for IATA to intro-duce a certification programme in linewith the CEIV standards for pharma-ceutical cargo. “There’s still a highwastage of products post-harvest.We’re working with companies tomonitor temperature at cargo han-dling sheds, because many of thesereceiving facilities don’t have cold stor-ages.”

Cold chain standards are also a toppriority for K+N. The company isrolling out an internal certification pro-

gramme across its entire KNFreshChain network of 78 stationsworldwide, with the process alreadycompleted in London, Amsterdamand Madrid. K+N’s Verkooy describesthe programme as providing globalstandardization for customers,whereby every certified facility offersthe same standards and proceduresno matter its location, a ‘Starbucks-like’ concept. “It’s going to take all of2019 and some of 2020 to completethis certification process across thewhole network, but once it’s done Ifirmly believe we’ll take a big step for-ward, and it makes us a bit unique be-cause I’m not aware of anybody elsewho has this.”

At AF-KLM, keeping the highestcold chain standards is paramountconsidering the size of what Maurouxdescribes as the carrier’s “fresh” busi-ness. Fresh represents 16 per cent ofall air cargo globally, he notes, makingit the biggest vertical in the industry.At 25 per cent, fresh is an even biggershare at the French-Dutch airline. “Thissector is very dynamic and growing, itrequires a lot of attention as far as con-trolling the cold chain, because at theend of the day if we want the growthto continue, we always need to en-hance the customer experience.“Looking ahead it’s growing more rap-idly than the overall air freight market,which is at 2-4 per cent per year, butthe fresh business is 6-8 per cent peryear. So, it’s growing very fast and thisis a trend that’s going to be there formany years to come,” Mauroux says.

He notes Africa represents about 18per cent of total fresh air cargo exportsworldwide, compared with 26 per centfrom Latin America. Again, AF-KLMhas a larger share, with Africa repre-senting one-third of its total fresh busi-ness. Aside from Kenya, Maurouxhighlights the neighbouring countriesin East Africa as also being very active,especially Burundi and Uganda. AF-KLM has a partnership with Kenya Air-ways to serve these countries with afeeder network to Nairobi. “SouthAfrica is a very interesting place to be,as well as neighbouring countries likeNamibia, especially on the fruits andvegetables side, but also on fish whichis growing very quickly out of CapeTown,” he adds. In West Africa, hesays Senegal and Mauritania are alsoperforming well with fish exports;while for the Ivory Coast and Ghana,the carrier exports “huge flows” ofpre-cut fruits for the ready-to-eat fruitsalads found on supermarket shelvesin Europe.

To help mitigate the north-southimbalance between imports and ex-ports – a mix Mauroux describes as “abit fragile at times” – the carrier hascircular flights bringing in foodstuffs toAfrican markets where there are largeexpat communities or a military pres-ence.

The capacity challenge for Africanperishables is exacerbated by the rel-atively low value of the produce, com-pared with other value-added cargosuch as pharma. Mauroux explains thatthis makes transport costs a much

COLIN WELLS




branded western produce, so if thatfigure just increases marginally, the im-pact on the volumes going to Chinawould be quite substantial.”

The surging demand in Asia is al-ready impacting African cargo flows.For example, Wells says that withKenya sending more product toChina, Uganda is benefiting as a resultby replacing some of the lost supplypreviously exported to Europe.Panalpina’s Wilken (above) explains:“In the up and coming Asia marketpeople are willing to pay a premiumcompared with the old markets in Eu-rope. We often use cherries from Chileas an example – that’s also going tohappen now in Africa whereby it hassome premium products from Kenya,South Africa, Egypt and Morocco.These sellers are starting to look forpremium markets and want to get abetter yield for their product, and sothen the likes of Uganda and Zim-babwe will potentially fill the gaps.”However, Wilken again brings up theimportance of logistics costs, notingthat if southbound traffic and availablecapacity doesn’t improve, then it willbe difficult for Africa to compete withLatin America where transport costsare much lower.

upbeat on africaOn the whole, though, the two

Panalpina executives are rather up-beat on Africa. Wells says Zimbabweand Uganda are leading the charge interms of volume growth, while in themore established South African mar-ket it is blueberries and avocados thatare really taking off. He says: “It reallyis a great time for Africa; it’s taken awhile, but it’s being recognized as apremium place for produce and flow-ers.

“We believe there will be over 10per cent growth this year as an indus-try. With air cargo, there’s a risk thatwhen there’s no capacity, the productcould migrate to ocean, but overall wesee good growth, and as long as peo-ple keep on eating, it’s going in theright direction for sure.”

While air cargo worries that it maylose to sea freight, it already carriesjust a tiny fraction of the total: some 90

per cent of Africa’s exports travel byship. According to Anne-Sophie Zer-lang Karlsen, Maersk Line’s head ofglobal reefer solutions, the main reefercommodities exported from Africaoriginate in South Africa, where citrus,avocados and grapes dominate. “Weare further seeing growth in commodi-ties like mangos and lychees,” saysKarlsen. “In general, these are moresensitive commodities, and there issome air freight ex-Africa. However,due to the price, as well as the overallwide selection of shipping services, byfar most of the commodities are ex-ported by sea. “Technology like con-trolled atmosphere is enabling this,combined with better visibility into thesupply chain through products like re-mote container management, whichfurther enables more and more ex-porters to sell their fruit in foreign mar-kets.”

outperformingKarlsen says global reefer markets

grew by 6.3 per cent in 2018, and thatAfrican markets slightly out-performedthe global average, mainly due to therise in Asian imports from South Africa.“The Asian import markets from Africacontinue to be the strongest-growing,which is the same for Africa as well asfor any other reefer trade globally. Thisis driven by the increase in population,as well as an increasing demand formore kinds of produce and availabilityof all produce across seasons.”

Inland logistics is a big challengeacross Africa, notes Karlsen, increasingthe turn-time of reefer equipment andtherefore the need for greater capitalexpenditure from the shipping indus-try. And like airlines, container carriersmust also grapple with trade imbal-ances. “Africa is overall a highly unbal-anced continent for the reefer trades,where we have some fish importsmainly in West Africa, and then thelarge exports focused on South andEast Africa. “This is a challenge, butnot too different from how Oceania orLatin America functions. It requires alot of planning for the shipping lines toensure that equipment is positionedas needed.”


higher share of the overall cost of thefinal product.

yields flatAs a result, he says, while yields for

general cargo have increased consid-erably, by about 6 per cent over thepast couple of years, the same cannotbe said for perishables, where theyield hasn’t increased at all, or evenslightly decreased.

While 67 per cent of African freshexports go to Europe, and 28 per centto the Middle East and South-eastAsia, Mauroux sees an uptick in flowsto China, with a particularly strong in-terest in flowers. However, similarly toOtieno of Miyonga Fresh Greens, hedoesn’t necessarily see this as a long-term trend. “I believe on a medium-term basis those flows will beprovided by local production,” he ex-plains. On the other hand, Panalpina’sWells says China is growing at an ex-ponential rate in terms of the appetitefor flowers and Kenyan produce ingeneral. “We’re seeing year-on-yeardouble-digit growth in what we’resending to China,” he notes. “Report-edly only 1 per cent of the middleclass in China is currently buying

ANNE-SOPHIE ZERLANG KARLSEN

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In 2018, Transport Minister Marc Garneau announcedan investment of $17.7 million in the Port of Hamilton fromthe National Trade Corridors Fund (NTCF). The Federal in-vestment will be matched by the Hamilton Port Authorityin support of the port’s $40+ million Westport Moderniza-tion Project.

Westport is a 115-acre area located at the west end ofthe Port of Hamilton. Among the oldest industrial employ-ment areas in the City of Hamilton, the port’s land holdingsspanning piers 10-15 were assembled piece-by-piece overmany decades. The result is a collection of uses that arenot space optimized, with insufficient modal connections.

The Westport Modernization Project will transformWestport into a multi-modal transportation hub. The proj-ect will see port lands used more efficiently, and reconfig-ured to create new employment land developmentparcels. New transportation infrastructure will improve ef-ficiency and fluidity for port users. Perimeter areas will addlandscaping to improve the port-city interface.

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Primary project investments began in 2019. The projectwill be completed by December 2020.

As the largest port in Ontario, the Port of Hamilton isthe primary marine gateway to the Greater Toronto-Hamil-ton Area (GTHA) and is critical infrastructure for key On-tario industries.

The Westport Modernization Project will help improvetransportation capacity and fluidity in southern Ontario.This investment recognizes what a critical trade gatewaythe Great Lakes are, in serving Canada’s most populatedarea, and the country’s industrial heartland.

The Port of Hamilton is the largest Canadian port on the Great Lakes. With numerousSeaway-depth berths, shippers through the Port of Hamilton have access to shipping destinations in the Great Lakes and around the globe.

Handling, transloading and storage of a wide range of commodities:

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why not find out more?Call 1.800.263.2131 or visit HamiltonPort.ca

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Minister Garneau at the NTCF funding announcment

Aerial view of Pier 15

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PORT OF HAMILTON

Hamilton Port Authority has re-leased its second annual sustainabilityreport. The report reflects HPA’s com-mitment to transparency and exploreswhat the port does, how it interactswith its community and how decisionsare made to support social, environ-mental and economic sustainability.

HIGHLIGHTS:ENVIRONMENTAL SUSTAINABILITY

As a founding member of theGreen Marine Program, HPA contin-ues to use the program’s rigorousframework to help reduce its environ-mental footprint.

In 2018 HPA undertook a numberof initiatives to protect and enhanceair quality, including investing over$500,000 to pave and reduce dust onport properties.

In 2018 HPA continued build-ing the pollinator corridor acrossport lands with a second pollina-tor garden, located on the north-west side of HPA headquarters. 12Hive boxes were installed at anew bee yard adjacent to Sher-man Inlet on the Port’s Pier 15, inpartnership with urban beekeep-ing company Humble Bee.

SUSTaINaBLE THINKING GUIDES PORT aCTIONS

its history and its role in the localeconomy.

HPA continued its commitment tocharitable investing, with more than$268,000 in cash & in-kind donationsfor local not-for-profit organizations in2018.

This year HPA partnered with Mis-sion to Seafarers Southern Ontarioon a new initiative to help seafarersvisiting the Port of Hamilton and HPAport tenants combat the effects ofcritical incident stress. The Seafarer’sCritical Incident Stress Program isfirst program of its kind and offersimmediate support after a traumaticincident to help mitigate thedevelop ment of post-traumaticstress disorder.

FINANCIAL & ECONOMICSUSTAINABILITY

Financial sustainability at the Portof Hamilton allows for reinvestment innew port infrastructure, proactive

CAREERS AT THE PORTWith funding from the Ontario Centre for Workforce Innovation (OCWI),City School by Mohawk explored employment demand at Hamilton’s Port,in partnership with HPA and Workforce Planning Hamilton. From this re-search emerged a new initiative, a free ‘try college’ course for local resi-dents, called Careers at the Port. This non-credit course offers studentsworkplace readiness skills, awareness of careers at the port, educationalpathways, information about the skilled trades, and soft skill development.

Pier 15 hive boxes

SOCIAL & COMMUNITYSUSTAINABILITY

HPA participated in a several com-munity events and festivals as well ashosted tours and open houses tohelp build awareness about the port,


WE KNOW WHAT POWERS YOU.Sterling Fuels provides a full range

of fuels and ExxonMobil lubricants,

all of which meet the strictest industry

standards. Just like the service we offer,

whether by water, land or truck.

WINDSOR | SARNIA | HAMILTON | HALIFAX STERLINGFUELS.CA

3665 Russell St. Windsor, Ontario N9C 1E9 Tel: 519 253 4694 Email: [email protected]


PORT OF HAMILTON

WE KNOW WHAT POWERS YOU.Sterling Fuels provides a full range

of fuels and ExxonMobil lubricants,

all of which meet the strictest industry

standards. Just like the service we offer,

whether by water, land or truck.

WINDSOR | SARNIA | HAMILTON | HALIFAX STERLINGFUELS.CA

3665 Russell St. Windsor, Ontario N9C 1E9 Tel: 519 253 4694 Email: [email protected]

stewardship of the land and water, and positive eco-nomic impacts within the community.

In 2018, $11.4 million was invested into new infra-structure and ongoing maintenance at the port. Theseinvestments are critical to the long-term viability of theport as part of the regional transportation network.

The port of Hamilton supports the local and regionaleconomy, employing more than 2,100 people at approx-imately 130 tenant companies. The port is one of the sin-gle largest tax contributors to the City of Hamilton,paying more than $6 million in city property taxes annu-ally.

HPA works closely with local economic developmentpartners, including the City of Hamilton’s Economic De-velopment division and the Hamilton International Air-port to attract new business to the city, in shared prioritysectors such as agri-food, advanced manufacturing,aerospace, and goods movement.

32 • Canadian Sailings •May 13, 2019 mcasphalt.com

PAVING THE WAYON THE H20 HWY.McAsphalt Marine Transportation Limited (MMTL) specializes in providing marine transportation that goes the extra mile.

We pride ourselves in o�ering our customers the safest, most environmentally friendly and e�cient means of transportation “on time, every time”.

Operating two Articulated

Tug/Barge (ATB) units, the

“Everlast/Norman McLeod”

and the “Leo A. McArthur/

John J. Carrick”, on the Great

Lakes, St. Lawrence Seaway

and Eastern Seaboard.

MMTLAd2017.indd 1 2017-06-15 11:12 AM


PORT OF HAMILTON

Hamilton Port Authority is pleasedto welcome TFI International as itsnewest port partner. A leader in theNorth American transportation indus-try, TFI recently acquired long-timeport tenant Toronto Tank Lines (TTL).

Founded in 1993, TTL specializesin the transportation and storage offood grade liquids, industrial chemi-cals, specialty oils and waxes. TTL willoperate as a standalone business unit

within TFI. TTL operates storage facil-ities at the Port of Hamilton’s Pier 26,as well as a fleet of 75 tank trailersand 45 tractor units. At its port facility,TTL can handle, store, and transloadcommodities from marine vessel- torailcar- to truck. TTL’s specializedtransportation services are integral toseveral local supply chains, includingagri-food, an industry that makes a$6.3 billion impact within the Golden

HamILTON PORT WELCOmES TFI INTERNaTIONaL

mcasphalt.com

PAVING THE WAYON THE H20 HWY.McAsphalt Marine Transportation Limited (MMTL) specializes in providing marine transportation that goes the extra mile.

We pride ourselves in o�ering our customers the safest, mostenvironmentally friendly and e�cient means of transportation “on time, every time”.

Operating two Articulated

Tug/Barge (ATB) units, the

“Everlast/Norman McLeod”

and the “Leo A. McArthur/

John J. Carrick”, on the Great

Lakes, St. Lawrence Seaway

and Eastern Seaboard.

MMTLAd2017.indd 1 2017-06-15 11:12 AM

HamILTONCONTaINERTERmINaLGROWS WITH NEWSERVICES

The Hamilton Container Terminal (HCT) opened for business in 2018,filling a critical need in the Greater Toronto-Hamilton Area transportationnetwork. Since then, HCT has been steadily growing its business, addingnew customers, partners and services.

Horseshoe economy.

“We are delighted to have TorontoTank Lines join the TFI Internationalgroup of companies,” stated AlainBédard, Chairman, President andChief Executive Officer of TFI Interna-tional. “TTL’s strategic location inHamilton Harbour along with its best-in-class transportation, transloading,tank storage and wash rack assets willsynergistically fit into our family oftank companies across North Americaas we seek to accelerate its growth.”

“The Hamilton Port Authority isthrilled to welcome TFI Internationalto the Port of Hamilton. We believethis acquisition is an important step inthe evolution of Toronto Tank Lines’business, with the new parent com-pany bringing a range of financial andoperational resources, and comple-mentary business lines,” said IanHamilton, President & CEO, HamiltonPort Authority. “We also see thismove in part as a reflection of Hamil-ton’s value proposition as a port, withthe right location, multimodal infra-structure and service orientation to at-tract industry leaders.


PORT OF HAMILTONLocated at Pier 15, the new termi-

nal has been improving deliverytimes and streamlining truck trafficwithin the GTHA, reducing the needto travel to Brampton or other de-pots to pick up or drop off contain-ers. “This new facility has been agame changer for customersthroughout the western Toronto,Hamilton and Niagara regions, whoare saving logistics time andmoney,” said Amandeep Kaloti,President of Hamilton Container Ter-minal.

Based on its early success, HCThas expanded the range of services

offered. These include drayage,container inspection, maintenanceand repair. A new weigh scale wasinstalled in the summer of 2018, anda new rail siding will be introducedas part of the port’s Westport Mod-ernization project, providing bettermodal choice for terminal users.

HCT has also established rela-tionships with major shipping linesand container leasing companiesthat set the stage for more handlingand storage of loaded containers.“HCT can offer a very cost competi-tive alternative in the region forloaded container storage, including

special equipment.”

One area where HCT sees a greatdeal of opportunity is in flexi-bagservices, which is a valuable compli-ment to the Hamilton region’s grow-ing agri-food and food processingsector. Flexi-bagging involves spe-cially-designed bags that are loadeddirectly at the production facility,and fitted for containers. This ac-commodates smaller volumes thanother methods of liquid bulk trans-port, and will open export opportu-nities for local producers of productslike wine, food oils, or specialtygrains.

ENERGy aND TELECOmmUNICaTION INNOVaTION aT THE PORT OF HamILTON

Port tenant Collective Arts Brew-ing is a craft brewery that aims to fusethe creativity of craft beer with the in-spired talents of emerging artists andmusicians. As Collective Arts’ reputa-

tion and sales continue to rise, theneed for mission-critical energy andtelecommunication services are es-sential to meet the demands of a rap-idly growing business.

The Hamilton-based HCE groupof companies stepped up to meetthis challenge. HCE Energy has beenproviding District Energy solutionsthat include power, heating and cool-ing services to commercial and gov-ernment properties in the downtowncore of Hamilton since 2002.

In 2017, HCE Telecom completedits first fibre optic build within theHamilton Port, providing Internetand voice services to Collective Arts.In 2018, HCE Energy completed itsnewest District Energy initiative lo-cated at Pier 10 which is a 2megawatt (MW) combined heat andpower system. This system providesboth electricity to the grid, with theresulting heat from this process usedto supply hot water and steam forheating which can be utilized bynearby Port tenants.

Collective Arts was the first com-pany to utilize this heating capacity topower their expanding brewery. Byusing steam supplied by HCE Energy,Collective Arts was able to avoidmaking a large capital investmentinto a new boiler system and insteadfocuses on continuing to grow itsbrand at home and abroad.

2 MW combined heat powersystem at Pier 10

PORT OF HAMILTON


PORT OF HAMILTON

Parrish & Heimbecker Limited (P&H)has announced it is expanding itsHamilton flour mill and grain terminal,bringing increased capacity, capabili-ties and facilities to producers.

The Hamilton grain terminal expan-sion will continue to increase the com-pany’s ability to connect Ontarioproducers with global grain marketingopportunities. Work is already under-way to have the P&H Hamilton site alsobecome the home of an expandedflour mill, which will make P&H the sin-gle largest user of Ontario wheat.

“Canadian producers are knownfor growing top quality crops and weare dedicated to not only helpingthem continue to maintain excellencein crop quality through our crop inputsdivision but also providing producerswith access to worldwide marketsthrough our grain handling, process-ing and marketing capabilities,” saidJohn Heimbecker, President of GrainDivision and Executive Vice President,Parrish & Heimbecker, Limited. “Weare dedicated to continuing to makestrategic investments to bring globalopportunities to the Canadian farmgate and look forward to continuingto maintain first class partnerships

P&H ExPaNDING mILLING OPERaTIONS IN HamILTON

with agricultural producers acrossCanada.”

The existing P&H Hamilton flourmill, which came online in 2017, wasthe first new flour mill to be built in On-tario in 75 years. This mill significantly

increased the company’s capability toreceive and process locally-grown On-tario wheat. The new expansion of theHamilton flour mill will effectively dou-ble its capacity and is scheduled tocome online in 2020.


The arctic Ocean Basin – is it really Putin’s playground?BY K. JOSEPH SPEARS

During the long running Cold War, the Arctic OceanBasin had strategic military significance: The airspace waspotentially important for overflights of strategic bombersand later, intercontinental ballistic missiles - the oceanspace for subsurface operations of submarines of theUnited States and her allies, and the Soviet Union.

After the fall of the Berlin Wall in 1989, and the breakupof the Soviet Union, the strategic significance of the ArcticOcean Basin diminished. The Arctic was an afterthought inthe thinking of most defense planners for decades. How-ever, with melting sea-ice and a fast warming Arctic, thereis now greater interest in the region because of its greateraccessibility, and the importance of the region to both Rus-sia and near-Arctic states such as China.

Canada has very limited sustained military capability inthe region, but has embarked on the design and construc-tion of Arctic Offshore Patrol Ships (AOPS) for the RoyalCanadian Navy. These six vessels, known as the Dewolfeclass, are scheduled to be completed by 2024. The De-Wolfes have limited icebreaking capability and cannot beconsidered icebreakers. They cannot operate in the Arcticon a year round basis, and their fuel base at Nanasvik hasnot yet been completed. One could argue that the lack ofyear-round Arctic operability demonstrates that Canadahas not taken the interest in this semi-enclosed sea by

other nations seriously, and that, for the most part, the Arc-tic is an afterthought.

The United States has re-awakened to the strategic im-portance of the region and need for icebreaking capability.The United States Coast Guard (USCG) understands its im-portance, and the pressing need for surface assets: TheU.S. is down to one 43-year old Polar icebreaker, PolarStar. Both the U.S. Defense Department and USCG havereleased updated strategic policies to guide how they op-erate in the Arctic. Earlier this month, the USCG Comman-dant released an Arctic Strategic Outlook that charts acourse for Arctic operations.

America has limited icebreaking capability, but doeshave a robust subsurface submarine capability which it hasmaintained in a vigorous way with classified underwaterpatrols and Arctic exercises. In 2018, NATO navies and theU.S. Sixth Fleet held a major naval exercise off Norway inthe approaches to the Arctic Ocean and the Northern SeaRoute. Dubbed Trident Juncture, the excercise was thelargest NATO naval exercise since the end of the Cold War,and involved more than 50,000 service members and civil-ians, 250 aircraft, 70 ships, and 10,000 vehicles.

It is important to note that the Arctic Council, a multi-lateral organization of Arctic and near-Arctic states, doesnot address security and defense concerns in the region.

Arctic shipping


Arctic shippingThere is no specific multilateral forumfor defense and security betweenRussia and near-Arctic states such asChina, which one could argue is amajor shortcoming of this organiza-tion. The Arctic Ocean Basin regionfalls under the purview of NATOwhich has remained strangely silenton Arctic issues, but has recentlyawoken to the strategic importanceof the region. Russia clearly has sov-ereignty over its part of the Arcticland and sea territory, but must beguided by the rules established bythe United Nations Law of the SeaConvention and cannot bring en-hanced claims to its ocean space.There is cooperation in the Arctic be-tween Russia and other Arctic coastalstates on non-military issues such assearch and rescue, pollution responseand the implementation of Interna-tional Maritime Organization (IMO)Polar Code rules that apply to com-mercial shipping in polar waters.

At a joint U.S. Naval War CollegeRoyal Norwegian Navy Symposiumon Arctic and Cyber Security inBergen, Norway, on April 10, 2019,Admiral James G. Foggo III, USNNaval Forces Europe-Africa, andcommander, Allied Joint Force Com-mand Naples, Italy, summed up theNATO and United States view veryclearly: “It’s nobody’s lake,” saidFoggo, referring to the Arctic region.“The Arctic is an international do-main, and that is why we are inter-ested in keeping it free and open.”

Foggo noted comments fromRussian officials’ requiring nations togive Russia 45-day advance noticebefore transiting the Northern Searoute or risk possible attack from Rus-sia. The admiral said this goes againstinternational laws and norms, and hasthe potential to increase tensions inthe region. “The United States is anArctic nation and has enduring secu-rity interest in the Arctic region,” hesaid. “We seek an Arctic region thatis stable and free of conflict.”

In the North American context,NORAD (North American AerospaceDefense Command), a unique jointCanada - U.S. defense arrangement,governs the Arctic region. NORAD isa defense arrangement between

Canada also maintains its own de-fense capabilities in its Arctic oceanspace, and enacted territorial seabaselines around the Arctic Archipel-ago. Although not internationally rec-ognized, Canada has claimed thesewaters as internal waters, akin to itsland territory. Issues that arise in theSouth China Sea with respect to free-dom of navigation also arise in Cana-dian Arctic waters which are notinternationally recognized, and it re-mains to be seen how these baselineswill be tested with respect to the rightof transit passage through the North-west Passage.

In addition to its obvious militaryinterests, Russia’s interests in the Arc-tic are tied to its economic develop-ment. Russia has invested heavily inthe development of hydrocarbons inits Arctic region and has broughtthose on stream as oilfields in theCaspian Sea mature. Furthermore,Russia has expanded and enhancedits military bases in and along itsNorthern Sea Route which it is ac-tively promoting as an internationaltrade route. Russia has modernized itnavy and revitalized seven of its for-mer Soviet bases in the region. Thishas raised concerns with respect tothe application of international rules-based approaches to navigation be-cause they may be interpreted asinterference in the right of freedom ofnavigation. Russia’s major new invest-ments in the build-up of Arctic militaryand commercial capabilities, coupledwith increasing resource extractionfrom the region has caused some todub the Arctic as “Putin’s play-ground”.

Russian resource developmenthas utilized Chinese and other for-

Canada and the United Stateswhereby each shares the obligationto protect each other. NORAD assetsin the Arctic include both active andpassive radar and listening posts toidentify incoming missiles and aircraft(and even Santa Claus). NORAD hasrecently been expanded to includesurface marine activities as well.

The United States has deployed F-22 and F-35 fighters and has an ex-tensive anti-missile defense at FortGreely in Alaska. These air defenseassets are controlled by NORAD andUS NORTHCOM. Russia regularlytests NORAD defense by flying long-range aircraft near Air Defense Iden-tification Zones (ADIZ) that extendoutside Canada and America’s territo-rial sea. Russia has stepped up theseflights in recent years, while Canadaextended it ADIZ to cover all of itsArctic archipelago in May of 2018.

ADMIRAL JAMES G. FOGGO III


eign investment to develop its Arctic energy resources.For example, in the Yamal natural gas field, Russian ice-breaking LNG gas carriers are being used to move theLNG to Chinese markets along the Northern Sea Routewithout icebreaker support. This highlights the fact that“Arctic issues are both geo-political and geo-economic”to use the comments of Professor Rob Hubert of the Uni-versity of Calgary’s Centre for Strategic and Security Stud-ies and longtime Arctic watcher. Dr. Hubert indicated ina recent interview that some Arctic issues have an inter-national political context which has not been adequatelyconsidered, and cannot be ignored when examining Arc-tic development.

It remains to be seen whether the Arctic Ocean Basinis indeed Putin’s playground. Clearly, though, Russia haslots of icebreaking capacity and a military that can moveand operate freely in the region, as seen by recent exer-cises, and its capability cannot be ignored. Although thishas potentially threatening military consequences, in theevent of a major search and rescue incident, the interna-tional community would benefit from Russia’s greatly en-hanced capabilities because Russian assets would beutilized under the international Arctic Search and RescueAgreement that was put in place under the auspices of

the Arctic Council, which stresses international coopera-tion.

It is clear that military as well as resource developmentconsiderations will grow in importance in the region, andthat commercial shipping will increase in a changing Arctic.It is also evident that Mr. Putin cannot be ignored. How-ever, in the Arctic, like other playgrounds, rules need to befollowed. A balancing of strategic capability and dialogueare needed to keep the region free of conflict. At the re-cent conference in Norway, Admiral Foggo summed upAmerica’s approach to Arctic issues as follows: “The U.S.Navy is committed to freedom of navigation in the Arcticand oceans around the world. The U.S. will work togetherwith allies and partner nations to ensure our home-nationsare protected, and will work cooperatively to address chal-lenges as they arise. The U.S. 6th Fleet routinely operatesin the Arctic to sustain our joint military advantages glob-ally and regionally.”

Joe Spears, Managing Director of Horseshoe Bay Ma-rine, is a longtime Russian Arctic watcher who was awokento issues by Professor Terrance Armstrong Director of theScott Polar Institute, Cambridge University while a studentlooking at Arctic Shipping in 1985. Joe can be reached [email protected]


Arctic shippingCanada’s arctic Policy—the search continuesBY JOE SPEARS

In an April 2016 article, BreakingBread and the Ice in Washington, Iexamined Canada’s evolving Arcticpolicy under the then new and shinyTrudeau government. The Joint ArcticStatement communique was unveiledwith great fanfare at the ObamaWhite House in Washington, DC.Four years into the Trudeau mandate,the world has seen many changes,the Arctic is warming twice as fast asthe rest of the planet, and we are stillawaiting a Canadian Arctic policy. It isclearly not a priority.

A Canadian Arctic policy hasproven to be more elusive than thesearch for Sir John Franklin’s shipsHMS Terror and HMS Erebus. How-ever, at long last, Canada’s new Arcticpolicy will be released in June, andwill guide the federal governmentinto 2030. It will be named Arctic andNorthern Policy and will supercedethe 2009 Northern Strategy docu-ment and the 2010 Statement onCanada’s Arctic Foreign Policy, bothcreated by Stephen Harper’s Conser-vative government. The federal Min-

and indigenous knowledge; protect-ing the environment, conserving Arc-tic biodiversity; and the Arctic in aglobal context. Two more were sub-sequently added: national securityand reconciliation.

Canada has so far ignored thestrong interest that both Russia andChina are displaying in developingand expanding commercial shippinginfrastructure, and oil and gas explo-ration and extraction. Moreover, Rus-sia is building out robust militarybases in the North, and is investingheavily in enhanced military capability.

How the new policy will differ fromthe existing Northern Strategy policyremains to be seen. The former PrimeMinister’s strategy was the develop-ment of natural resources and protec-tion of Canada’s sovereignty as keycomponents of an Arctic strategy,which rested on four pillars:

• Exercising our Arctic sovereignty,

• Protecting our environmental her-itage,

• Promoting social and economic de-velopment,

• Improving and devolving Northerngovernance.

ister responsible for the Arctic, Minis-ter of Minister of Intergovernmentaland Northern Affairs and InternalTrade, Dominic Leblanc, has taken amedical leave of absence, whichmight impact the release date.

The original six themes took inArctic infrastructure; Arctic peopleand communities; sustainable and di-versified economies; Arctic science


This policy was part of the underlying foundation for thedevelopment of the Royal Canadian Navy’s Arctic OffshorePatrol Ships (AOPS known as the DeWolfe Class of war-ships) that are presently being built by the Irving shipyardin Halifax. AOPS naval vessels are being constructed tocommercial and not warship standards: these vessels havelimited armaments, and are not icebreakers.

The recent Canadian Defence policy review that tookplace produced a 113-page document in 2017, Strong Se-cure Engaged, which set out a blueprint for Canada’s De-fence policy for the next ten years. Strong Secure Engagedsaid this with respect to an undefinable threat: “Climatechange, combined with advancements in technology, isleading to an increasingly accessible Arctic.”

In the past, international activities and force projectionby other countries were thwarted by the impenetrablepresence of multi-year ice in the Arctic. However, today,with multi-year ice waning, the Arctic is easier to transitthan as it used to be. The policy review recognizes thatthere needs to be sustained funding to fund critical infra-structure as international shipping increases through theNorthwest Passage, and capabilities to protect our sover-eignty and security. The review made specific reference tothe Arctic. It moved away from specifically referencing sov-ereignty to more functional terms such as monitoring andsurveillance. The policy acknowledges NATO is paying in-creasing attention to Russia’s ability to “project force” fromthe Arctic and says Canada will be ready to “deter and de-fend,” should the need arise. However, with Canada’s mil-itary capabilities seriously degraded, particularly in theArctic, it is a mystery how such actions would actually beconducted.

The premier of the Northwest Territories, Bob McLeod,wants Canada to triple its icebreaker fleet within five yearsand triple its Arctic deepwater port capacity within 10years. “I think that you see other Arctic countries becomingsignificant players in the Arctic and we need to be sure thatCanada and the North is ready for when that happens,”McLeod said.

Canada needs to develop its critical Arctic marine infra-structure, especially if we take the position that the watersof the Northwest Passage are Canadian internal waters.We need the ability to manage the marine activities andstrengthen our relationship with other countries, and inparticular our best friend and neighbour, the United Stateswhich has similar interests in the Arctic. We need increasedhydrographic coverage, marine salvage, aids to navigation,as well as icebreaker and marine vessel support.

The United States Coast Guard issued an Arctic Strate-gic Outlook in April 2019. An Arctic policy for Canadaneeds to consider international military developments, aswell as future resource development. International ship-ping will undoubtedly increase in Arctic waters, whetherwe like it or not, and we need to be prepared to supportlegitimate international commercial activity. We need tostart the process of putting the necessary shipping infra-structure in place. Beyond that, an Arctic policy must befollowed by significant action.

Joe Spears of the Horseshoe Bay Marine Group is along shipping governance and a longstanding interest ininternational Arctic shipping and the need for ocean andshipping governance and has assisted Canada both alegal and policy capacity. Joe can be reached [email protected]


Arctic shippingCanada and China: two nations claiming sovereignty over disputed ocean spaceBY K. JOSEPH SPEARS

What is old is new again. United States Secretary ofState Mike Pompeo at the recent ministers meeting at theArctic Council in Helsinki, Finland, talked about Canada’sclaim to the Northwest Passage, and stated: “We recog-nize that Russia is not the only nation making illegitimateclaims. The U.S. has a long-contested feud with Canadaover sovereign claims through the Northwest Passage.”

Freedom of navigation is a cornerstone of the globaleconomy. The 90,000 commercial vessels engaged in in-ternational commercial shipping are the conveyor belt ofglobalization. Our modern global economy rests on stableocean commons which allow for the free movement ofgoods. In Canada’s Arctic, the status of the waters in theArctic Archipelago have been the subject of a great dealof debate in years past. In 1985, Canada enacted territorialsea baselines around the Arctic Archipelago enclosingthese waters as internal waters. If recognized internation-ally, they would be treated like land territory under inter-national law, which would allow Canada to have completeregulatory control over these waters. As it is, no othercountry has recognized Canada’s claim, permitting Canadato exercise de facto sovereignty over these waters.

The waters subject to Canada’s baselines, if recognized

internationally, would not be subject to the right of eitherinnocent passage or transit passage, as those terms aredefined under the United Nations Law of the Sea Conven-tion. If Canada’s claims were recognized, there would beno right for international vessels to enter these waters with-out Canada’s consent. Under the Law of the Sea conven-tion, the ice covered water provision of article 234 allowsa coastal state take special measures to protect the marineenvironment because of the risk posed by sea-ice.

Transit passage is a concept of the Law of the Sea,which allows a vessel or aircraft the freedom of navigationor overflight solely for the purpose of continuous and ex-peditious transit of a strait between one part of the highseas or exclusive economic zone, and another. The legalstatus of a section of the Northwest Passage is disputed:Canada considers it to be part of its internal waters, fullyunder Canadian jurisdiction according to the United Na-tions Law of the Sea Convention. The United States andother nations consider them to be an international strait,which means that foreign vessels have a right of “transitpassage”. In such a régime, Canada would have the rightto enact fishing and environmental regulation, and fiscaland smuggling laws, and laws intended for the safety of


shipping, but not the right to closethe passage.

Recently in Norway, senior USNNaval Officer, Admiral James G.Foggo III had this to say about free-dom of navigation in a global contextand with specific reference to the Arc-tic and the actions of Russia along theNorthern Sea Route: “The U.S. Navyis committed to freedom of naviga-tion in the Arctic and oceans aroundthe world.”

When China’s research icebreakerthe Xue Long (“Snow Dragon”) tran-sited Canadian waters in 2017 with aCanadian ice navigator on board, thevoyage was touted as a scientific re-search cruise. China has recently de-veloped a handbook for navigation inthe Northwest Passage. At the time,official Chinese media stated: “Bei-jing used a scientific icebreaker voy-age through Canada’s NorthwestPassage to test the viability of sailingChinese cargo ships through the en-vironmentally fragile route that linksthe Atlantic and Pacific oceans.”

Xinhua News Agency, often usedto deliver messages on behalf of theChinese state, lauded the completionof the first-ever Chinese voyagethrough the Arctic waterway, sayingthe Snow Dragon icebreaker “accu-mulated a wealth of experience forChinese ships going through theNorthwest Passage in the future. Itopened up a new sea lane for China,”the news agency said. “From Shang-hai to New York, the traditional routethat passes through the PanamaCanal is 10,500 nautical miles, whilethe route that passes through theNorthwest Passage is 8,600 nauticalmiles, which saves 7 days of time.”

Because Canada claims the North-west Passage as internal waters,Canada demands that foreign vesselsask permission before sailing throughthe Northwest Passage. Foreign Af-fairs Minister Chrystia Freeland statedto the Globe and Mail at the time“Canada granted its approval on thebasis that China was conducting sci-entific research”. A team of Canadianscientists was also on board, as wellas a Canadian ice navigator.

In the context of the South China

Sea, China has taken small uninhab-ited rocks and sand bars to constructmuch larger artificial islands, followedby claiming a territorial sea aroundthose that islands to preclude vesselsfrom other nations from transitingthese waters which have historicallybeen international waters with no re-striction under the United NationsLaw of the Sea convention. Manyhave called the navigation restrictionsa wall of sand.

Canada needs the capability to un-dertake ocean governance and ship-ping management, which includessearch and rescue operations, and

salvage capabilities. For example, inthe case of the grounded vesselAkademik loffe in the late summer of2018, a lack of Canadian capabilitywith respect to rescue and salvageleft the vessel dealing with the situa-tion reliant on its own resources, withno accompanying salvage and/orsearch and rescue response vesselstanding by. A small amount of fuelspilled when the ship grounded, ac-cording to the Transportation SafetyBoard, and the vessel sustained“major hull damage”, TSB said.

As the Premier of the NorthwestTerritories mentioned, Canada’sneeds to consider the internationalimplications of what it is doing in theArctic, especially as it relates to inter-national shipping. Presently Canadafocuses on destination shipping re-supplying local communities, andsupporting natural resource develop-

risk. Coupled with increasing marinetourism and resource exploitationsuch as fisheries in the region, bothdomestic and international in transitshipping will increase in the comingdecades. Any Canadian Arctic policyand/or strategy must reflect the in-creasing roles that Canada will beasked to play to keep shipping lanesopen for international commerce,with all of the required support func-tions that must protect commerce,property, lives and the environment.

Joe Spears has examined theSouth China Sea with the late Prof.Ian Townsend Gault of Dalhousie LawSchool and UBC’s Asian Legal StudiesCentre and assisted in Canada withrespect to international legal workwith the team of international legalscholars with respect to the Arctic Ar-chipelago. Joe can be reached [email protected].

ments in the regions. However,Canada has international obligationsin the Arctic, which are not being met.These obligations consist of the abil-ity as a coastal state to provide criticalmarine infrastructure, proper marinecharts, aids to navigation, marinecommunications, search and rescue,marine pollution response to name afew. In the Arctic, a robust marine re-sponse requires icebreakers and airassets on a sustained basis.

As we start seeing greater volumesof sea ice melt, we get closer andcloser to increased commercial ship-ping activity, with increased marine


Arctic shippingDoes Canada have a strategic plan to enhance its fleet of icebreakers?BY K. JOSEPH SPEARS

Since Canada is an Arctic nation, there is a strong require-ment for icebreaker capability in our Arctic waters. The Cana-dian Coast Guard, operating within Fisheries and OceansCanada, is tasked with providing the necessary icebreakersin support of its own mandate and other government oper-ations (search and rescue, hydrographic work and resupply,to name just a few). These are hard-working ships, with ex-perienced crews who often work in hostile environments. In-terestingly, former CBC National news anchor PeterMansbridge, a former Churchill, Manitoba resident, de-scribed his time aboard Canadian Coast Guard heavy ice-breaker’s CCGS Louis St. Laurent in the Northwest Passageas among his most cherished moments in broadcasting. Yet,Canada’s icebreakers are old, with the average age of Cana-dian icebreakers being just shy of 40 years, which adverselyimpacts their operational readiness and reliability.

Our icebreaker fleet sees double duty icebreaking alongthe St. Lawrence River and Atlantic Coast in the wintertimeand operating in the Canadian Arctic during the summermonths. Various reports and studies have indicated there isa strong need for more and more reliable icebreaking capa-bility. What intentions does our Canadian Coast Guard haveto supplement and enhance Canada’s icebreaking fleet?

The need for a strategic plan became obvious followinga recent incident where Canada dodged a bullet. On themorning August 24, 2018, the Russian-flagged and ownedice-strengthened oceanographic vessel Akademik Ioffegrounded on an uncharted rock in the west coast of the Gulfof Boothia in Canada’s Arctic waters. With 106 passengersand 24 crew, it remain grounded for over 11 hours accordingto a witness statement, held in place by its thrusters undergood weather conditions and no ice. The vessel subse-quently floated free and proceeded to an anchored positionsouth of Pearson Island in the central Arctic, where she hasremained until the passengers were successfully removedfrom the vessel by a nearby cruise ship on the morning ofAugust 25, before Coast Guard vessels arrived on the scene,and were taken to the closest community, Kugaaruk, andflown by chartered aircraft to southern Canada. Canada’sJRCC Trenton, responsible for search and rescue in the cen-tral Arctic, tasked two RCAF C-130 aircraft from Trenton, On-tario and Winnipeg and as well as two RCAF Cormoranthelicopters from the east coast to the incident. It took overnine hours for the first C-130 to arrive on scene. JRCC Tren-ton also tasked two Canadian Coast Guard icebreakers to as-sist in this SAR incident, CCGS Amundsen and CCGS PierreRadisson. Canada had dodged a bullet with respect to amajor marine incident in the Arctic and luckily all of the pas-sengers escaped harm.

Given heavy ice conditions, the icebreakers were not able

to stand by the casualty and essentially the Russian-ownedvessel was on its own. Had there been more damage and/ordownflooding this would a created a serious marine re-sponse problem. It was pure luck that the sister vessel to theRussian oceanographic ship was close by. Given that vesselscan freely transit throughout the Arctic, we are going to seemore and more incidents of this type as vessels enter intowaters that have been uncharted. It’s important to realize thatonly ten per cent of the Arctic is chartered to modern stan-dards.

United States Coast Guard has recognized this issue andthe challenges with an aging fleet and limited resources. TheU.S. has only one heavy icebreaker, USCGS Polar Star, thatis 43 years old, but still performs service in the Arctic andAntarctic. In April 2019, the Commandant of the U.S. CoastGuard, Admiral Karl Schwartz, released an Arctic StrategicOutlook on https://www.uscg.mil/Arctic/ to guide UnitedStates Coast Guard into the future. It is worth examining thisuseful document that takes into account the increasing in-ternational interests in the Arctic. The challenges faced byCanada are the same.

The preamble to the USCG Arctic Strategic Outlookstates:

“As the Nation’s primary maritime presence in the polarregions, the Coast Guard advances our national intereststhrough a unique blend of polar operational capability, reg-ulatory authority, and international leadership across the fullspectrum of maritime governance. The Coast Guard will con-tinue to work with our allies and partners on the mutual goalof ensuring a safe, secure, and cooperative Arctic, even asour aspiring near-peer competitors maneuver for strategicadvantage in the area. However, competition need not lead


to conflict. The Coast Guard thrives in situations that requirenuanced responses to complex issues. Our persistent pres-ence–on the water, in communities, or in international fo-rums–absolutely equals influence.

This Arctic Strategic Outlook reaffirms our commitmentto American leadership in the region through partnership,unity of effort, and continuous innovation. This document es-tablishes three lines of effort crucial to achieving long-termsuccess: (1) Enhance capability to operate effectively in a dy-namic Arctic domain, (2) Strengthen the rules-based order,and (3) Innovate and adapt to promote resilience and pros-perity.

We understand the significant investment required to se-cure the Arctic, and we appreciate and embrace the trust theAmerican people have placed in the U.S. Coast Guard. Wewill remain vigilant in protecting our national interests in thepolar regions to forestall the unchecked influence of com-petitors.”

Canada has recently bought three anchor handling tugsupply vessels for conversion by Chantier Davie of Levis,Quebec, to medium-duty interim icebreakers at a cost of 600million dollars. The heavy icebreaker CCGS John Diefen-baker being built by Seaspan Shipyards under the NationalShipbuilding Strategy is likely not going to be available be-

fore 2030. There are many different ways to address thecoming period when Canada will not have sufficient ice-breaking capability. Rather than purchasing ships on an adhoc political basis, we need to develop a strategy to dealwith the various operational requirements that the Arctic im-poses on Canada. It is important to understand that theUnited States Coast Guard is both a law enforcement agencyand vessel operator, while in Canada these duties are splitbetween a number of federal agencies that do not normallywork together, such as the Canadian Coast Guard, TransportCanada, Environment and Climate Change Canada, NationalDefence, Royal Canadian Mounted Police, and Canada Bor-der Security Agency, to name just a few. We cannot affordanother grounding with a vessel left on its own. The UnitedStates Coast Guard’sArctic Strategic Outlook provides guid-ance for Canada to develop its own policy. Canada needs toidentify the long term Arctic issues and challenges beforebeing forced to make snap decisions to improve operationalreadiness resulting from lack of planning and foresight.

Joe Spears is the Vice President of Viking InternationalReponse and has a long background in marine response onall of Canada’s coasts. He helped prepare the Arctic shippingassessment for Canada submission to the Arctic Council. Hecan be reached at [email protected]


Arctic shippingDuke Snider – Canadian arctic elder recognized by FinlandBY JOE SPEARS and MONICA AHLROOS

The Finns know a thing or twoabout icebreakers, having con-structed Arctic-capable icebreakersfor well over 150 years even for theRussians, and it is not every day thatthey award medals for ice navigationto Canadians. In April 2018 at theCanadian Embassy in Finland, David(“Duke”) Snider, FNI, MM, Presidentof Martech Polar Consulting Ltd.based in Victoria, British Columbia re-ceived the Canada-Finland medalmetal recognizing his outstandingcontributions for fostering good rela-tions via arctic operations and naviga-tion. Martech Polar was recognizedby International Transport News Mar-itime & Shipping Awards 2018 as“Best Global Ice Pilotage and Navi-gation Specialists” and by CV Maga-zine’s Canadian Business Awards2019 as “Best Polar Ice Navigationand Pilotage Specialists”

Duke and Rear Admiral (Retired)Nigel Greenwood provided ice navi-gator services for the MSV Nordicawhen it transited from Vancouver toFinland through the Northwest Pas-sage in July 2017. It set a record asthe earliest passage of the season.The voyage took place during Fin-land’s 100th anniversary, with a pas-senger list of a hundred arcticresearchers and journalists celebrat-ing the founding of Finland. DuringCanada’s Chairmanship of the ArcticCouncil, this was a momentous eventwith a Canadian ice navigator onboard, along with a Canadian CoastGuard observer. See canadiansail-ings.ca/finland-breaking-ice-and-leading-international-scientific-cooperation-in-the-arctic.

Ten individuals were honoured fortheir efforts in advancing Canada-Finland relationships. Duke was ex-tremely honoured to be included inthat group, having worked with theembassy and others in Finland on anumber of projects, including plan-ning and sailing as Ice Navigator on-board Finnish ships that conductedNorthwest Passage voyages in 2015,

and 2017 noted above, as well as anumber of joint Canadian/FinnishArctic and ice shipping projects, andcontributed to projects related to oilpollution response in ice coveredwaters.

Capt. Snider is a former naval offi-cer, Canadian Coast Guard Command-ing Officer, Marine Superintendent,Master Mariner and the past-Presidentof the world-renowned Nautical Insti-tute based in London, a leading voicefor international vessel operations. Heis also a graduate of the Memorial Uni-versity of Newfoundland, with a BMSin Shipping Management. Duke isbeen involved in developing ground-breaking navigational standards for IceNavigators and developing the curricu-lum as part of the ongoing work of In-ternational Maritime Organization’sdevelopment of the InternationalCode for Ships Operating in Polar Wa-ters (Polar Code). The Polar Code is an

international regime adopted by Inter-national Maritime Organization (IMO)in 2014, and sets out regulations forshipping in the Polar regions, princi-pally relating to Ice navigation and shipdesign.

Duke’s development work resultedin the founding of The Nautical Insti-tute launching the Ice NavigatorTraining Accreditation and Certifica-tion program in July 2017. The Insti-tute published the new SecondEdition of Polar Ship Operations thismonth, including new chapters andupdates within the book.

Canada is lucky to have dedicatedMaster Mariners and Ice navigatorssuch as Duke setting the bar high forinternational arctic shipping opera-tions and training of future genera-tions of ice navigators. Duke is trulyan Arctic Elder. Nice to see the recog-nition of a lifetime of excellence atsea.

Tero Vauraste, Chair Arctic Economic Council; Ambassador AndréeCooligan; Duke Snider; and Seppo Vihersaari, Trade CommissionerCanadian Embassy


Proceedings of the arctic Shipping Summit held in montrealBY BRIAN DUNN

Coordinating the aims of the vari-ous stakeholders in Arctic develop-ment is a daunting task which needsto be clarified, while competition willlikely be centred around sovereigntyissues such as the disputed limits ofthe Continental shelf and economicissues. The remarks were made byMike Emerson, Director, MarineTransportation Systems, UnitedStates Coast Guard (USCG) duringthe 14th Arctic Shipping Summit inFebruary in Montreal. Global ship-ping, especially in the Arctic, is not onthe U.S.’ radar and there needs to bea business case made, such as a re-turn on investment, to attract Ameri-can investment in the region, headded.

U.S. interest in the Arctic is basedon sovereignty, safety, national secu-rity and stewardship. “If we want toadd ships to the region, we need tomake a case for a deepwater port.We have to show it’s worth the trou-ble. How to build icebreakers and es-corts is something we can learn fromRussia and China. China is handingout money (through its Belt and RoadInitiative), but there will be a cost as-sociated with it.” USCG expects toannounce the awarding of a $350 mil-lion contract for three Polar SecurityCutters by June to replace currentPolar Class vessels with delivery ofthe first three of six planned vesselsin 2023.

In addition to the five Arcticcoastal states (Norway, Denmark,Russia, the U.S. and Canada), thereare other actors in the region likeChina that must play a part in searchand rescue (SAR) initiatives if theywant to be part of the region’s eco-nomic development, suggestedThomas Winkler, Denmark’s Ambas-sador to Canada. Denmark has fourmajor strategic objectives for the re-gion, namely a peaceful, secure andsafe Arctic, self-sustaining growth and

development, respecting the Arctic’svulnerable climate, environment andnature and close cooperation with itsinternational partners. “These arechallenges beyond the scope of theArctic Council. Do we currently coor-dinate infrastructure investments to-gether? No. Those have to be drivenby business and the various statesand the key role of business is topressure states through such meansas the Arctic Economic Council,” saidMr. Winkler.

Any Arctic development must in-clude indigenous communitiesthrough the Inuit Circumpolar Coun-cil, representing the 160,000 Inuitpeople living in Alaska, Canada,Greenland, and Russia, said IvanaKubat, Director of Research and De-velopment, National Research Coun-cil Canada. A network of fibre opticinfrastructure is being installed inGreenland that could be extended tothe Canadian Arctic where internetconnection are poor or non-existent,she suggested, while noting Canadais losing experienced captains oper-ating in the Arctic due to retirement.

Asked if there are any discussionsamong member states about not de-veloping the Arctic, Mr. Winklerpointed out that Russia is dependenton Arctic oil and gas exploration, butneeds new infrastructure to carry itout. An LNG port is currently underconstruction at the Port of Sabetta innorthwest Siberia on the Yamalpeninsula which holds Russia’s largestnatural gas reserves. And he won-dered if the Chinese and Koreanswould move in if the moratorium onArctic fishing was relaxed.

A new Arctic Region to be built inpartnership with indigenous andnorthern partners was announced onOct. 24, 2018, by the Department ofFisheries and Oceans Canada-Cana-dian Coast Guard. It aims to provideeconomic opportunities for northern-

THOMAS WINKLER

MIKE EMERSON


Arctic shipping

ers by reducing employment barriersand filling positions locally, amongother objectives. The partnership in-cludes the Inuit Marine MonitoringProgram that will collect data on ves-sel activities in Arctic coastal areasduring the shipping season by pur-chasing AIS data from existing re-sources in remote locations.

As part of the $1.5 billion OceansProtection Plan announced in 2016, aCommunity Boats Program will be es-tablished in the region to support theCoast Guard Auxiliary, a SAR organi-zation of over 4,000 volunteers and1,100 vessels from coast to coast tocoast. Other projects include pilot ini-tiatives to improve service delivery inthe Arctic, advance northern low im-pact shipping corridors, developmentof joint incident response plans withnorthern partners and ongoing re-cruitment for positions in the Arctic.

To operate successfully in a hostileenvironment such as the Arctic, spe-cial consideration must be given forinsurance purposes to determinewhether a vessel is ice-classed or re-quires extra coverage by P&I Clubs orH&M (hull and machinery) underwrit-ers. “Ship operators must ensure thevessel complies with and pre-ap-proved by P&I coverage,” saidCharles Anderson, Senior Vice-Presi-

dent, Skuld. While P&I covers world-wide trading, trading through theArctic poses a “risk alteration” andmust be approved by the Club. Addi-tional H&M coverage must also be inplace before starting an Arctic voy-age, added Mr. Anderson. Potentialimpact on coverage includes a ves-sel’s classification and certification,drilling and specialist operations andknowingly sending an unseaworthyvessel to sea.

Ice build-up from atmosphericconditions and sea spray is the mostchallenging aspect of arctic opera-tions which changes the centre ofgravity and could potentially capsizea ship, according to Rune Engebø,Project Engineer, Polarkonsult, a Nor-wegian designer of vessels anddrilling rigs operating in the Arctic. Interms of equipment, ice can blockventilation outlets, fire dampers andpressure relief valves and damagebearings and rubber hoses. As for thework environment, operations can beimpeded by heavy gloves and cloth-ing, slippery surfaces and falling iceas well as seasonal affective disorderdue to long polar nights.

Communications can also be im-pacted from icing on antennas thatcan cause signal degradation, whilethe Inmarsat global satellite system is

unreliable above the 80th parallel, Mr.Engebø, noted.

IMO Polar Code Phase 2 aims tomitigate risks by taking a more struc-tural approach to ice operations interms of design, construction, opera-tional, training and SAR require-ments. It applies to all SOLAS shipsand new ships as of January 1, 2017.

To mitigate icing conditions, a ves-sel can be winterized through activeand passive protection, Mr. Engebøpointed out. Active protection in-cludes keeping de-icing equipmenton all the time along with heat andsteam radiation. Passive protectioninvolves non-skid safety coating andcovering or shielding exposed areas.“You still need manual labour withmallets to break ice buildup,” addedMr. Engebø. “Operational measuresinclude additional reserves of fueland food, a safe haven onboard andsufficient medical supplies.”

SAR operations in the Arctic willlikely increase as ice-free days will in-crease from the current 70 days to125 days by 2050, according to Dim-itrios Dalaklis, Associate Professor,World Maritime University, Malmö,Sweden. This will open the region toincreased Arctic tourism, but cruiseships like the 1,000 passenger CrystalSerenity will be replaced by ice-capa-

RUNE ENGEBO DIMITRIOS DALAKLISIVANA KUBAT


ble yachts accommodating 100-200passengers.

“While this puts less pressure onNorth American SAR services fromplaces like Trenton and Juneau, it isfar below where SAR should be. Bycomparison, Russia has dedicated$30 million to establish 10 northernSAR outposts. It is also the only coun-try that has nuclear-powered ice-breakers that operate on very lengthyrefuelling cycles. The National Ship-building Strategy should aim to rem-edy the lack of resources in Canada’snorth.”

Some type of Canada-U.S. cooper-ation is needed in the Northwest Pas-sage similar to that on the St.Lawrence Seaway, according to JohnHigginbotham, Head of Arctic Pro-gram, Carleton University. “Betweenthe Yukon and Northwest Territories,we should develop our own shippingchannel as Russia increases its pres-ence in the area. There are lots of op-portunities to do more.”

As part of Transportation 2030, astrategic initiative on the future oftransportation in Canada, there areplans to build world class marine cor-ridors that are competitive, safe, andenvironmentally sustainable to en-hance the northern transportation in-frastructure. This will be done withterritorial governments and commu-nities to address their basic trans-portation infrastructure needs andadapt it a changing environment,noted Mr. Higginbotham.

Ice melt information is extremelyimportant for Arctic shipping andunder Polar Code chapter 11, voyage

planning must take into account thepotential dangers of the presence ofice, said Keld Qvistgaard, Head of IceServices, Danish Meteorological Insti-tute. Chapter 11 also stipulates acaptain planning a route throughpolar waters must consider current in-formation on the extent and type ofice and icebergs along the intendedroute, as well as statistical informationon ice and temperatures from previ-ous years. A checklist before depar-ture for Arctic waters must take intoaccount whether the vessel is winter-ized and has operational limitations.Is the crew trained for winter opera-tions and is the captain relying onstandard ice services or tailored iceservices? “Will the future role of anice analyst be driven by user need,

technology, cost savings or by regu-lations,” Mr. Qvistgaard asked.

Satellite information is the mostimportant tool to collect ice data andCanada plans to launch three moresatellites in May for ice coverage,noted Tom Zagon, Physical ScientistSpecialist, Canadian Ice Service.“Does less ice mean fewer problems?No, because there’s an increase inicebergs. And in 2011, there was zeroice in the Northwest Passage, but icewas up significantly in 2018 whichcompletely threw off cruise shipschedules. Ice charts go back to 1968which can be studied to get an ideaof ice conditions on a certain dateover the years. There is less ice now,but we have had variability through-out the years.”

KELD QVISTGAARD TOM ZAGON


Arctic shippingPaul Pathy on the ups and downs of business, and the frustration and loss to the economy of operating without sufficient icebreaker supportBY BRIAN DUNN

As it celebrates its 75th anniversarythis year, Fednav is showing its appre-ciation for the support it has receivedfrom the Montreal business commu-nity, by naming its two new LakersFederal Montreal and Federal St. Lau-rent. It’s the first time Fednav hasnamed a vessel after a city. FederalMontreal will be delivered at the endof August and Federal St. Laurent isexpected to arrive at the end of June.The 35,000-tonne Lakers are beingbuilt by Oshima Shipbuilding in Japanwith six holds, four cranes and on-board ballast water system.

“It’s a small token of our apprecia-tion for our home city,” Fednav Presi-dent and CEO Paul Pathy said duringa presentation to a luncheon meetingon May 8 organized by the Conseildes Relations Internationales de Mon-tréal.

As part of its year-end results for2018, Port of Montreal noted dry bulkshipments (Fednav`s main business)were down 16.1 per cent from 2017,while container and liquid bulk vol-umes were both up. Mr. Pathy said inan interview following his presenta-tion the port’s dry bulk declinedoesn’t reflect Fednav`s own results.“The last year was a good one for us,especially in the Great Lakes and St.Lawrence Seaway and the openingseason of this year has been strong.But the reality is that there is a lot ofuncertainty in the global environment,tariffs and trade wars and growth con-cerns around the world make peoplenervous and nervous people ship less.

“Every variable creates another rip-ple so initially it was to our benefit,because when the U.S. sanctions(went into effect) on China, the U.S.stopped shipping soybeans to China,so we actually started shipping Cana-dian soybeans to China, which wenever do. Plus, when the U.S. doesn’t

ship soybeans to China, someoneelse has to, and in this case it wasBrazil. So Brazil sells all its soybeansto China, and now the U.S. has to sellits soybeans to Brazil which creates anextra (shipping) leg, so that was toour benefit.

But now what’s happened is Chinais not buying any Canadian canolawhich traditionally moves from thewest coast. Now Fednav has to com-pete with ships coming from thewest. “A year ago, you would neverhave said we would lose business toa Panamax carrying canola off thewest coast through Panama to Eu-rope. But we’re actually losing busi-ness to European and North Africancustomers off the west coast which istotally a new thing for us. So all thisuncertainty ((Huawei controversy, tar-iffs and trade wars) alters the flow of

trade and you have to adapt.”

As for the steel and aluminum tar-iffs imposed by the U.S. on Canada,the results were negative last yeardue to the high prices of metals andthe booming U.S. economy, resultingin a record year for the Seaway, Mr.Pathy noted. “But this year I’m hear-ing rumblings in the market thatthings are starting to bite and thatcertain suppliers are starting to stopbuying from overseas. So I suspectyou might see some impact thisyear.”

Frustrated with the lack of move-ment in Canada’s newbuild ice-breaker program, Fednav proposedto the federal government over twoyears ago it would handle the designand construction of three icebreakersin Norway’s Havyard shipyard thatcould be delivered in two years.

Photo:

Sylvi

e-An

n Paré

PAUL PATHY


Under the proposal, Fednav would fi-nance the construction of the vessels,and lease them to the CanadianCoast Guard for 15 years. Each ice-breaker would cost around $240 mil-lion or about half the cost of buildingthem in Canada, according to Mr.Pathy. So far, no word from Ottawa.

“It’s unfortunate for Canada andthe users of the St. Lawrence Seawayand river, because ice is not beingbroken. There is a massive hole in ice-breaking capability and they’re tryingto plug it with a political solution thatis highly wasteful of taxpayer dollars.”A National Shipbuilding Strategy wasintroduced in 2010 and still no ice-breakers have been delivered, notedMr. Pathy. He pointed out that thePolar-class icebreaker CCGS John G.Diefenbaker is supposed to join thefleet in 2021-22. The estimated costof the vessel was $720 million when itwas due to be delivered in 2017. Theprice tag jumped to $1.3 billion in the2013 federal budget. Constructionhas still not begun. “By the time it isdelivered 20 years late, it will be outof date. It’s absurd. You could havehad it in two years from Japan ornorthern Europe at probably a thirdor a quarter of the cost.”

The lack of icebreaking capacityresults in delays of port deliveries. Atone point this spring, there were 13ships prevented from docking due toice jams in the St. Lawrence River,said Mr. Pathy. “The system is ineffi-cient, and trade is fluid. So if you’rethinking of shipping to Montreal, youmight be concerned about spendingten days in an ice jam. So then youmight consider going to another portlike Halifax or Norfolk, which affectsthe competitiveness of our city andour country, because we can’t de-liver.”

And when it comes to patrollingthe Arctic and to assert our sover-eignty, neither Canada nor the U.S.has the requisite capabilities. “Weneed icebreakers to protect our sov-ereignty in the Arctic which we arenot doing. And when we do, we aredoing it in an efficient way.”

Turning to its own operations in

the Arctic, Fednav manages the portoperations of Baffinland’s Mary Riveriron ore mine on northern Baffin Is-land which expects to deliver six mil-lion tonnes of ore this year, up fromfive million tonnes last year.

Fednav also is involved with othernorthern mining operations includingVale’s nickel mine in Voisey’s Bay,Labrador, Glencore’s Raglan nickelmine in Nunavik and the CanadianRoyalties copper and nickel mine inVal d’Or, QC.

“We’re running three Arctic ice-breakers, of note, MV Arctic which isa Canadian-built icebreaker gettingon in years, is being replaced. Wehave a state-of-the-art icebreaker

being ordered in Japan which will bea sister ship to the other two whichwill be delivered in 2020.”

During his luncheon presentation,Mr. Pathy explained the challenges ofrunning a shipping company with achart showing shipping rates of$10,000 a day in 2000, peaking at$70,000 a day before the 2008 reces-sion and dropping back to around$10,000 today. “When things aregood, everyone wants to be in ship-ping. But when you’re losing $40,000a day (when rates were at $3,000 aday in 2016), it becomes uncomfort-able. But I believe in the future ofshipping in growing organically andwe’ll try to be the best we can as wewait for the return to higher rates.”

PAUL PATHY


CONFERENCENOVEMBER 12-14Hilton Toronto Airport Hotel & Suites

2019

SAVE THE DATENovember 12-14, 2019

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CELEBRATINGOUR 15TH YEARCONFERENCE HIGHLIGHTS

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Vancouver port dispute with container terminal tenantover capacity expansionBY R. BRUCE STRIEGLER

Volumes of containers handled at theport of Vancouver’s terminals have grownsubstantially through past decades, increas-ing at an average rate of ten percentannually since 1995. Projections of growthup to the year 2040 are now predicted atabout 8.0 million TEUs (or 20-foot-equiva-lent units), and to give some perspective, in2018 Vancouver handled 3.4 millionTEU’s. The port is deeply engaged in capac-ity expansion, either directly or incooperation with private terminal opera-tors, and it points to projects alreadyapproved or somewhere in the approvalpipeline, designed to reduce the potentialcapacity jams. Capacity improvements areat the heart of an unpleasant row which hasdeveloped between the Port Authority andone of its larger tenants, GCT TerminalsCanada.

Given the concerns around lack offuture capacity and coupled with a severeshortage of industrial land in the Vancouverarea, planners have turned their attentionsouth of the city centre. Deltaport, about 38kms from Vancouver’s downtown, built in1970, is an integral part of VancouverFraser Port Authority’s operations. The sitewas constructed at the end of a long cause-way constructed over a shallow bank in theStrait of Georgia. Originally created as a 20-hectare (49-acre) pod of reclaimed land fora major coal terminal, it is now four timesthat size. The site holds Westshore Termi-nals, Canada’s largest coal terminal and thecontainer terminal GCT Deltaport. Consid-ered Canada’s flagship container terminal, athird berth was added in 2010, doubling itscapacity and making it the first semi-auto-mated facility in the country with astate-of-the-art terminal and 1,100 metrecontiguous berth. Also located on this man-made incursion into the strait is the siteVancouver Fraser Port Authority hasselected for its proposed Roberts Bank Ter-minal 2. (RB2)

Duncan Wilson, the Port Authority’sVice-President Environment, Communityand Government Affairs says, “We’ve beenworking on the Terminal 2 project since2003, and this version of the project, forthe last six or seven years. We’re alreadywell into the environmental assessmentprocess and we’re just about to start panelhearings.” He adds that Terminal 2 is theonly west coast container capacity projectof this magnitude that can be completed intime for when the anticipated demand in

CONFERENCENOVEMBER 12-14Hilton Toronto Airport Hotel & Suites

2019

SAVE THE DATENovember 12-14, 2019

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CELEBRATINGOUR 15TH YEARCONFERENCE HIGHLIGHTS

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capacity will present itself. With container-ships becoming increasingly larger, the PortAuthority anticipates that a new terminalwill not increase ship calls, but that cargowill increase by approximately 33 per cent.The Port Authority argues that with Termi-nal 2, the number of container shipsdocking in Vancouver’s inner harbour orother Fraser River terminals will actually bereduced.

roberts bank terminal 2 nowsubject to additional scrutiny

Last August’s Federal Court of Appealjudgement halting construction on theTrans Mountain Pipeline expansion hadconsequences that rippled through to otherprojects, including Port of Vancouver’s RB2Terminal. That judgement was based partlyon what was deemed a failure by thenational energy regulator to include theenvironmental impacts of marine vessels inits study of the project. The court also ruledthat Ottawa had failed in its duty to consultadequately with local Aboriginal communi-ties. The ramifications of those decisions arenow beginning to be felt on other marinetransportation projects. The impact on theRoberts Bank Terminal 2 project arrivedthrough a March 8 letter from Federal Envi-ronment Minister McKenna, directing theChair of the panel reviewing the RobertsBank project to update the terms of refer-

ence to include impacts from marine ship-ping. These orders caused several FirstNation communities and one private-sectorfirm to call on regulators to delay thosehearings.

the problem and the disputeThe dispute between the port and

GCT centers around GCT’s application toconstruct an expansion to its existing Delta-port terminal at Roberts Bank, which wouldsee 138 acres added to Deltaport’s existingfootprint. It is noteworthy that The PortAuthority acts as both regulator and land-lord to GCT at its Deltaport terminal, buthas also invested heavily in years of pre-pro-ject work on its own proposal for theRoberts Bank site, Terminal 2.

The Port’s position is that in view ofthe negative disposition by environmentalauthorities of a 2005 application by GCT tobuild a much smaller expansion, “on thevery same intertidal habitat which wasspecifically protected”, there is little likeli-hood that the much larger recentlyproposed project would eventually beapproved. Although it left the door open toa future review of its decision, the Portmade it clear that its distinct preference is toproceed with its ongoing activities sur-rounding RB2, and that it will not considerincremental capacity additions until aftercompletion of RB2.


The alternative to Roberts Bank Termi-nal 2 that was pitched to the Port Authorityby GCT outlined how it would meet futurecapacity needs. “Given its track record ofviable and responsible expansion, GCT pro-poses to further expand capacity at GCTDeltaport through an additional two millionTEUs. We’ll do this by moving forwardwith the GCT Deltaport Expansion, FourthBerth Project (DP4).”

In rejecting the GCT proposal, Van-couver Fraser Port Authority said itsTerminal 2 project was more likely to meetthe deadlines of a still significant environ-mental approval process. As well, Terminal2 is scheduled to come online somewherebetween 2025 and 2028, precisely as thedemand is expected to be needed. Therejection triggered GCT to file for a judicialreview of the decision in federal court,saying regulators should be compelled toconsider both proposed projects. GCT’sCEO Doren Grossman pointed out thatGCT has been a tenant of the port for manydecades.

Grossman also warns the move couldstifle investment from other private sectorplayers, pointing out that GCT is backed bythree national institutional investors.“We’re a Canadian company, primarilyowned by Canadian investors, investingCanadian pension money. We’ve spokenwith all relevant federal Ministers directlyand indirectly with respect to our con-cerns.”

environmental concerns and marketcompetition offered as reasons forrejection

When Grossman was asked why hethought the Port Authority had taken theactions it did, he replied, “They say quiteclearly in their letter that it’s being rejectedbecause Fisheries and Oceans Canada areprohibiting further land reclamation inland

from Deltaport, due to environmental sen-sitivity.” Mr. Grossman said that with thataction, GCT was left with no option but tofile for the judicial review. Apparently, thePort Authority’s letter references the origi-nal plans GCT presented in 2003, andGrossman notes, “that letter is based oninformation that is 16 years old, and isbased on a project that is completely differ-ent from the project we’re talking abouthere.”

The rejection letter from the PortAuthority continues, noting that expandingthe existing Deltaport would mean one ter-minal operator would control a significantmajority of the market for container termi-nal services. “Healthy competition isnecessary to ensure users continue to payreasonable rates for reliable service. For thisreason, Vancouver Fraser Port Authority iscommitted to fostering an appropriate levelof competition within the Port of Vancou-ver.” Mr. Grossman’s rejoinder to that, wasto comment, “Firstly, it’s not in their juris-diction to opine on competition, that’scompletely outside their authority. If theywere opining and they didn’t have a com-peting project, that would one thing, butthe fact they have a competing project,they’re essentially saying, we don’t supportcompetition, we have a project, we denyyou the right to have a project, and we’rethe regulator, so that’s it.”

environmental concerns higher thanusual at roberts bank location

GCT also notes the proposal respondsto the change in type and volume of tradeof containerized goods shipped throughCanada’s west coast. The project would beconstructed in an intertidal and subtidalmarine water area on the south side of theexisting facility, contiguous to the currentoperations. “In comparison to other poten-tial development options at Roberts Bank,

the location of the proposed Project, accord-ing to preliminary reviews and engagementwith local stakeholders, contributes to asmaller adverse environmental affect,” thecompany stated. The submission goes on toraise several questions including the cumu-lative impacts resulting in the constructionand operation of T2, as well as the enforce-ability of the proponent’s environmentalmitigations.

Some of the environmental concernshave already made their way to the top ofthe pile, such as the exchange from Envi-ronment and Climate Change Canada tothe Canadian Environment AssessmentAgency, describing the predicted impact ofRoberts Bank Terminal 2 on hundreds ofthousands of sandpipers as “potentially highin magnitude, permanent, irreversible, and,continuous.” The concerns centre on thebiofilm that the sandpipers consume on thetidal flats at Roberts Bank during theirspring migration. The biofilm is a thin,sticky coating secreted predominantly bydiatoms to prevent them from being sweptaway with the tides. A total of 23 species ofwildlife listed under the federal Species atRisk Act, or by the Committee on the Statusof Endangered Wildlife in Canada, areknown to exist within the project area andrelated marine-shipping area.

The Port Authority’s Duncan Wilsonresponds, “From our perspective, our sci-ence and research on this topic says that theproject will not adversely impact biofilm. Infact, we think it may increase it. There isapproximately seven times as much biofilmat Roberts Bank as there are sandpipers whoneed it.” He adds that the challenge theyare dealing with is that Canadian WildlifeService has not provided any science toback up it allegations, “We want to under-stand the science behind its allegations.”

looking for resolution to thedilemma of terminal 2 or deltaport4?

Vancouver has now moved into thetop-50 global container port list and hasambitions of moving further up that list.The management at Vancouver Fraser PortAuthority understands that a capacitycrunch is looming. Competition forTranspacific goods movement is increasingfrom ports like Seattle-Tacoma, Los Angeles-Long Beach, as well as ports along theContinent’s Gulf Coast and the easternseaboard. Vancouver’s multibillion-dollarbet on how best to provide that capacity isriding on Terminal 2, with a price tagbetween $2 billion and $3 billion. It’s a bitof a roll of the dice for the Port Authority,but it would fund the land reclamationrequired to build the new terminal.

The Port’s sales pitch projects robusttranspacific container cargo growth for B.C.ports over the next 20 years. Its low-end


forecast has 6.7 million TEUs being handled annually; the high endwould raise that total to 9.7 million.

GCT, the major container terminal tenant at Roberts Bank, ispushing its own DP4 Terminal as an alternative to Terminal 2.Deltaport Berth 4 would add roughly two million TEUs to theannual capacity of 2.4 million TEUs at GCT’s Roberts Bank terminal.Its price tag, according to GCT President and CEO Doron Gross-man, is around $1 billion. Grossman said the terminal’s capacityincrease would be added incrementally to meet market demandrather than in Terminal 2’s single large capacity expansion. Headded that it would dovetail with other container cargo capacityexpansion projects underway or planned for B.C. ports, includingGCT’s $160 million upgrade of its Vanterm Terminal in Vancouver,its recently completed $300 million rail densification project at GCTDeltaport and DP World Ltd.’s $350 million expansion of the Portof Vancouver’s Centerm container terminal, which is scheduled tobegin in the summer.

both proposals would go through same lengthyenvironmental processes

Deltaport Berth 4 faces the same environmental and infrastruc-ture scrutiny that Terminal 2 has been navigating for the past sixyears, and the port has said that any Deltaport expansion wouldrequire years of planning and environmental work to get to the fed-eral review stage. That, the port says, would “make it very difficultfor GCT to meet demand that is just a few years away.” GCT main-tains that Terminal 2, originally proposed in 2003, is “nowoutmoded” and “no longer viable given changes in a number ofmarket factors.” GCT’s Berth 4 expansion pitch maintains thatincreased consolidation in the ocean carrier sector and larger shipsare making intraport terminal competition less relevant. It arguesthat Deltaport 4 is therefore the most competitive and economicallyviable near-term option for the Port to increase its container-han-dling capability.

Mr. Grossman notes, “At the end of the day, what we aresaying is that we have a staged capacity investment in Deltaport thatis funded by private capital, with an operator that is well respectedand compliant with environmental stewardship and all of that stuff,and it is a project that is of meaningful importance, and somebodyneeds to decide whether this project has a greater urgency to getdone than the Terminal 2 project.” He added that Deltaport Berth 4would not preclude the eventual addition of Terminal 2.

Quoted in a recent interview with Business In Vancouver, Mr.Grossman says, “The way we think about this is pretty simple. Cen-term is going forward with its expansion. We are thrilled with that.It will be a beautiful thing. We have a new 25-year lease with thePort of Vancouver for Vanterm. We are going ahead with our Phase1 expansion over there. Prince Rupert has the opportunity toexpand again. We have another Phase 2 expansion here at Vanterm.Deltaport Berth 4 expansion comes after that. You then have noopportunity to expand further – there is no more land at Deltaport.That’s a perfect time for Terminal 2.”

In March 2018, Transport Canada launched a review of thecountry’s Port Authority system. The review could changeCanada’s port landlord-tenant relationships and how they are man-aged. In the meantime, the competing goals for the two projectshave set up what could become a major landlord-tenant dispute,against a background of the negative effects of an continuingCanada-U.S. trade frictions, the unresolved China-U.S. trade dis-pute, increasing China-Canada disputes resulting in significantlosses of agricultural export volumes, a slowing global economy,regionalization of manufacturing and other factors which could sig-nificantly reroute goods movement on major shipping trade loops.In the meantime, the Port is proceeding with the scheduled envi-ronmental review panel meeting for the Terminal 2 project on May14 in spite of protests and requests from some stakeholders for adelay. GCT Terminals Canada continues to prepare for a JudicialReview, date yet unspecified.


CN and CP announce first quarter 2019 results

Both of Canada’s major railways felt the effects of a poorweather and cold temperatures, and produced similar financialresults. As is evident from the table, net income as a percentageof revenues tumbled dramatically from 34 per cent in the firstquarter of 2016 to 21 per cent in 2018 at CP, but recovered to24.6 per cent in the first quarter of 2019. At CN, net income asa percentage of revenues dropped from 26.7 per cent in 2016 to23.2 per cent in 2018, and further declined to 22.2 per cent inQ1 of 2019. Both carriers eased up on their share repurchasingactivities. Stock repurchases increase earnings per share num-bers, as earnings are divided by a reduced number of outstandingshares.

Whereas at CP rail freight revenues rose 6.2 per cent duringthe quarter, they jumped by 11.3 per cent at CN. CN managedto increase revenue tonne miles by 3 per cent, and increase railfreight revenues per RTM (by 7.8 per cent). At CP, revenue

Results for the three months ended March 31 (in millions of C$$)

CN2019

CN2018

CN2017

CN2016

CP2019

CP2018

CP2017

CP2016

Revenues $3,544 $3,194 $3,206 $2,964 $ 1,767 $ 1,662 $ 1,603 $ 1,591 Less: operating expenses $2,464 $2,164 $1,903 $1,747 $ 1,224 $ 1,122 $932 $938 Operating income $1,080 $1,030 $1,303 $1,217 $543 $540 $671 $653 Other expenses and (income) $49 $39 $ 120 $ 118 -$30 $ 70 $ 92 -$57 Net income before income taxes $1,031 $ 991 $1,183 $1,099 $573 $470 $579 $710 Less: income taxes $ 245 $ 250 $ 299 $ 307 $139 $122 $148 $170 Net income $ 786 $ 741 $ 884 $ 792 $434 $348 $431 $540 Net income as % of revenues 22.18 23.20 27.57 26.72 24.56 20.94 26.89 33.94Comprehensive income $ 685 $ 910 $ 885 $ 634 $450 $384 $461 $536Cashflow from operations $997 $755 $1,256 $1,065 $413 $397 $311 $218Dividends paid $389 $336 $313 $293 $91 $82 $73 $54Net additions to property $703 $425 $396 $469 $230 $245 $227 $218Issuance of debt minus debt repayments $779 $855 -$10 $566 $392 -$5 -$5 -$11Purchase of company common shares $419 $615 $499 $512 $207 $298 $0 $0"Free cash flow" -$95 -$6 $547 $303 $104 $78 $11 -$54

Fully diluted net income per share $ 1.08 $ 1.00 $ 1.16 $ 1.00 $3.09 $2.40 $2.93 $3.51 Gross margin 30.47% 32.25% 40.64% 41.06% 30.73% 32.49% 41.86% 41.04%"Operating ratio" 69.53% 67.75% 59.36% 58.94% 69.27% 67.51% 58.14% 58.96%

tonne miles rose by 6 per cent, and freight revenues per RTMwere up by 7.2 per cent. While CN squeezed $2,407 of revenueout of each carload (up 11.1 per cent over Q1 of 2018), CP man-aged to collect $2,716 out of each carload, up 8.5 per cent overQ1 of 2018. Given their relative product mixes and relativeyields, CP’s net income as a percentage of revenues topped thatof CN.

At both carriers, the operating ratio (defined as operatingexpenses as a percentage of revenues) took a hit, rising from 58-59 per cent in each of 2016 and 2017 to just over 69 per centin 2019. Put another way, gross margins declined from around41 per cent in 2016 to around 30.5 per cent today, at both car-riers. All in all, the first quarter of 2019 could perhaps bedescribed as a “steady as she goes” quarter, with good numberscompared to Q1, 2018, but numbers that are uninspiring com-pared to same-quarter results of the past few years.

CN’s brightest spot was petroleum and chemicals, whichgenerated a 20 per cent increase in RTMs, and a 30 per centincrease in revenues.

CN’s average number of employees rose from 24,467 in Q1of 2018 to 26,024 during the period. Terminal dwell timedecreased significantly from 9.9 hours to 8.7. Given that duringthe quarter, CN had 6.4 per cent more employees than a yearearlier, gross tonne miles per employee dropped 3.6 per cent.

For CP, the bright spot was energy, chemicals and plastics,which generated a 19 per cent increase in RTMs, and a 22.5 percent increase in revenues.

CP’s average number of employees rose from 12,173 duringQ1 of 2018 to 12,844. Gross tonne miles per employee fell by4.4 per cent.


t Global Freight Forwardingt Charteringt Sea - Air - Landt Worldwide Networkt Heavy - OOG - Project -

Breakbulk - Containerized

Guy Tombs Limited • Since 1921

Montreal, Canada • 514-866-2071 • www.guytombs.com

The Game of ShippingBY GUY M. TOMBS

“An old military adage has it that amateurs concern them-selves with tactics, but professionals worry about logistics.” Sosays Richard Fidler in his excellent book Ghost Empire. Readingthis recently cheered me, as I am in logistics. But I quickly hadthe less comfortable thought that clever tactics frequently over-whelm elaborately thought-out logistics. The game we are all inof course demands of us both knowledge and wit.

On a trip to India several months ago it came home to methat to understand the new rules of this shipping game we mustwalk away from parochial thinking and embrace new ideas thatmay be unfamiliar to us. We must re-imagine our world. I had notbeen to Hyderabad, Bangalore, Chennai, Mumbai or Delhi before– and I must go back to take in these and other landscapes.

The global shipping world is full of irrepressible, imaginative,and talented women and men of so many cultures. Despite ourdiversity, we seem to all live similar experiences. We all need tokeep our sense of humour in the face of often bizarre problemsrelated to shipping documentation and contracts and the move-ment of cargoes. We all face deadlines and fierce competitors. Weall live in worlds where random, chance encounters can occur —a walk at lunch can lead to a good booking in the afternoon. Anunexpected LinkedIn ping can lead to a phone call and a newopportunity. This is happening worldwide.

We are living with risks which are new to us – we are con-trolling cargoes ever further from home through evermorecomplex networks that are trying to manage massive traffic flowsover enormous IT systems. The confidence that we bring to thisgame every day has to be based on our enjoyment of what we do.That enjoyment funds our confidence and enables us to workthrough the inevitable vicissitudes that shipping cargoes as acareer entails.

The Game of Shipping is multi-dimensional. We receive amandate from our clients to play the game on their behalf. Butthey are also players with us. It is important to keep broadeningthe parameters of how we envision the situations that we enterinto, so that we are not blindsided, and so that we see threats oropportunities early on.

The confidence that our clients place in us is based on theirsense of the high probability of a successful outcome when theyaward this traffic to our firm. That is a key rule in the way theyplay the game. Our choice of vendors is also based on this basicrule, which we apply. This way of working is now a fact globally

– in all cultures. We have more options and more informationthan we used to have.

We are all pressed to perform, to show strong moral fibre,and to have a lot of stamina for the hours involved. Now thesimple bookings no longer come to us – they are increasinglyautomated – we get the unautomated work that demandsdetailed spoken or written conversations with our client and ship-ping partners, where our experience is more important – whereour judgement of probabilities is valued.

The massive wave of these changes has already passed overus, and more and larger waves are coming, moving with buildingmomentum. Teams of like-minded and well-motivated people arethe only resources we have to develop positive outcomes in thisclimate. We must not see ourselves as wave observers – we actu-ally must in some measure become wave creators ourselves,using the power of our collective imaginations.

When I said that tactics sometimes outwit a professionalapproach, I was thinking back to a project bid situation, manyyears ago, when I became convinced that the winner of the bidhad actually not researched its costs all – they simply bid whatthey figured was an unbeatable price. They won. Those werewinning tactics that time. To win big in the Game of Shipping youhave to both impact the client, understanding how pricing, termsand conditions will bring their business your way, and know yourvendors, setting up tight controls and discipline in your relation-ship with them. On award, you must retain the confidence ofyour client by exceeding expectations, thereby assuaging anyfears they may have made a mistake in giving this work to you.Each client will have a different perception of the risks andrewards of engaging with you, based on your reputation, hearsay,market intelligence and personal knowledge. Many clients seethe market as a level playing-field, where they have a lot of choiceand where there is little to really distinguish amongst the biddingcompanies in terms of professionalism. I am sometimes astoundedby what decision-makers think of as key risk factors when award-ing large contracts, factors that I find picayune, and make littlesense to me. But this only goes to show how essential it is tounderstand your client well. At other times I find the reasoning ofclients for their big decisions, when I learn of it, often wise andquite profound.

Mehmed II breached the walls of Constantinople in 1453and so, at last, after over a millennium, came to an end the ‘GhostEmpire’ of the Byzantines – because Mehmed had far superiorlogistics. Superior logistics is more than ideas – but it still beginswith ideas. What new winning ideas can we bring to the Gameof Shipping?

Guy M. Tombs, is President of Guy Tombs Limited, a Montréalinternational freight forwarder and shipbroker, founded in 1921


also served by intermodal operators Nor-folk Southern and CSX.

PSA’s acquisition of Halterm will addan east coast port to its inland facility atAshcroft, which serves as a rail hub forcargo coming through the west coastports of Vancouver and Prince Rupert.

Macquarie drew up a shortlist ofpotential buyers for Halterm, which,according to a Journal of Commercereport, included a joint bid from CN Railand CMA CGM.

The deal follows the sale of Mac-quarie’s interest in the Polish port ofGdansk in March, also to PSA. The finan-cial details of both deals have remainedundisclosed.

In an unrelated development, Singa-pore sovereign wealth fund GICconfirmed last week it had acquired a 10per cent stake in MSC’s terminal operat-ing subsidiary, Terminal Investments Ltd(TIL), from port investment firm GlobalInfrastructure Partners (GIP). Ang EngSeng, GIC Chief Investment Officer ofinfrastructure, said: “We are pleased toinvest in TIL, given its strong businessalignment with its majority shareholder,MSC, and attractive growth potentialfrom its pipeline of both existing and newterminals.” This was accompanied byMSC upping its own stake in TIL to 60per cent, after shares from GIP and otherinvestors. MSC added that GIP “remainsa significant shareholder”.


PSA to enter U.S. port sector with agreement topurchase Penn Terminals, and expands presence inCanada by agreeing to purchase HaltermBY GAVIN VAN MARLE

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operator with a 32 ha site and has anannual container capacity of 425,000TEUs. It can also handle 200,000 tonnesof breakbulk cargo a year. Its docks are

Singapore box operator PSA has con-firmed reports it is set to enter the U.S.port market and expand its presence inCanada. It has agreed to acquire Philadel-phia operator Penn Terminals and Halifaxbox facility Halterm from investment fundMacquarie.

“PSA International has finalized anagreement to acquire Halterm ContainerTerminal in the port of Halifax, Canada,and Penn Terminals in Pennsylvania,U.S., from Macquarie Infrastructure Part-ners, a fund managed by MacquarieInfrastructure and Real Assets. “Thistransaction is in the process of securingregulatory approvals from the respectiveU.S. and Canadian authorities,” a PSAspokesperson told The Loadstar. Onceregulatory approval is granted, the acqui-sition will mark PSA’s entry into the U.S.market.

Penn Terminals is a multipurpose


Shock for container lines as contract rates start to fall againBY MIKE WACKETT

In a significant setback for carriershoping to improve profitability, oceanfreight benchmarking platform Xenetareported that long-term container contractrates had fallen by an average of 4.2 percent in April. Oslo-based Xeneta, whichtracks crowd-sourced data from over 110million contracted container rates,recorded a 4.8 per cent decrease in con-tract rates between Asia and NorthEurope and a 3.4 per cent reduction intranspacific headhaul contracts. Thedecline followed “steady increases”achieved by container lines in the previ-ous two months of Xeneta’s XSI PublicIndices report. “This is a real turn ofevents,” said Chief Executive PatrikBerglund.

“The past two months have seen theindustry halt a long-term rates decline andachieve some much needed respite, withrate rises of 2.5 per cent in February anda more modest 0.5 per cent in March. “Inthat context, a 4.2 per cent fall comes asa slight shock to the system and will havemany in the industry reassessing theshort- to medium-term forecasts for theirbusiness.”

Indeed, carriers appear to haveenjoyed a reasonable first quarter, Coscoposted a $102 million net profit and theindications are that Hapag-Lloyd will alsobe in the black when it reports its Q1numbers, so the trading outlook from theGerman line will be particularly interest-ing to hear.

In the past month, container spotrates have come under pressure on boththe Asia-Europe and transpacific trades,shedding around 30 per cent and 20 per

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cent respectively since the beginning ofthe year, and this will have had a big influ-ence on the negotiations between carriersand BCOs for mid- and long-term contractrates. The bellwether Shanghai Container-ized Freight Index (SCFI) had not beenpublished at the time of writing today, buttaking a poll of other spot indices, the cur-rent market rate for Asia-North Europe isaround $700 per TEU, with $725 perTEU achievable for Mediterranean ports.Elsewhere, transpacific spot rates arereported “stable” at approximately$1,600 per 40ft for Asia to the U.S. westcoast and $2,700 to east coast ports.

The softening of spot rates on theroute has been attributed to the front-load-ing of cargo in the final weeks of 2018 inorder to avoid a hike in import tariffs on araft Chinese goods. Nevertheless, thereare signs that carriers may have had somesuccess in hiking new annual contractrates, effective 1 May. According to areport from Alphaliner, transpacific carriers

are said to have achieved gains of “some30 per cent” from Asia to the U.S. westcoast, as well as driving through floatingBAF surcharges in anticipation of thelooming fuel cost increases resulting fromthe IMO 2020 sulphur emissions cap.

George Griffiths, editor of GlobalContainer Freight Market at S&P GlobalPlatts, said: “There are still questions as towhen these come into force in themarket, with the lion’s share due to kickin at the start of Q4, but some BCOs havenegotiated other start dates, althoughmost will be in place by 1 January.

Meanwhile, Maersk has announcedit will increase all transpacific headhaulcontract rates due to expire on 1 June by$600 per 40ft. It warned that if it did notreceive a written acceptance from cus-tomers, “shipments tendered shall becharged at a higher tariff rate until Maerskis able to obtain your written agreement”.


Carriers hit by rising charter rates as shipowners cashin on demand for tonnageBY MIKE WACKETT

A substantial spike in daily hire rates for post-panamax con-tainerships will hurt ocean carriers with the highest percentage ofchartered-in tonnage. Moreover, the weaker carriers are findingthemselves at the mercy of containership owners that are onceagain able to dictate terms, adding further pressure to their P&Laccounts. According to Greek containership owner Costamare,rates for six to 12–month charters on vessels larger than 6,800TEU have soared by more than 30 this year.

During its earnings call, Costamare, which operates a fleet of71 containerships from 1,078 to 14,424 TEUs, said the largervessels continued to benefit from strong fundamentals of “lowsupply and strong demand. The number of idle ships has fallenacross all vessel segments as liner companies launch new serv-ices,” explained Chief Financial Officer Gregory Zikos.

Indeed, according to Alphaliner’s latest survey, the idle con-tainership fleet has declined to only 108 vessels for 321,337

TEUs, representing just 1.4 per cent ofthe global cellular fleet. “Overall demandfor tonnage is expected to remain high,and this should push down the size of theidle fleet further in the coming weeks,”said the consultant.

Specifically, in the VLCS sector of7,500-11,000 TEUs, it added: “The avail-ability of tonnage remains very limited,with zero vessels open ‘spot’ and onlytwo ships of 8,000-8,500 TEUs comingopen in the next four weeks.”

Evidencing the improvement in thecharter market during the first quarter,Costamare said it had fixed or extendedcharters on ten vessels in Q1, all com-manding increased daily hire rates.Notably, Costamare has fixed the 2017-built 11,010 TEU Cape Tainaro with Zimfor 10-12 months at a daily rate of$39,500, compared with the previous fix-ture at $28,250.

Evergreen, Costamare’s biggest clientcontributing 31 per cent of its $2.2 billioncontracted revenue, has chartered the2010-built 8,531 TEU Navarina for a 12-month period with options at a daily rateof $21,900, versus the $17,400 rate of itsprevious fixture.

And even in the smaller sizes, Costa-mare has been able to push rates upsignificantly. Japanese carrier ONE hasagreed to extend the charter of the 2001-built 5,576 TEU Ensenada for a furthersix months at a rate of $14,250, whichmeans the struggling merged line willhave to find an extra $5,100 per day.

When charter rates spike, it is thecarriers with the highest percentage ofchartered-in tonnage that are the most

exposed. Maersk Line charters-in 43 percent, by capacity, of its 4.1 million TEUoperating fleet, whereas number two–ranked MSC has some 69 per cent of its3.4 million TEU capacity on charter.

The highest exposed are Yang Ming,with 72 per cent of its fleet by capacity oncharter, and HMM ,which charters-in 71per cent The lowest reliance on the char-ter market in the top ten containercarriers is Hapag-Lloyd, which has just 38per cent of its 1.7 million TEUs of capacityon time charters.

Interestingly, Costamare said it hadinstalled scrubbers on three 9,403 TEUand two 8,827 TEU vessels on long-termcharter to MSC, with the respective dailyrates of $43,000 and $42,000“increased” by an undisclosed amount

and the charters all extended for a furtherthree years.

Assuming that charter rates continueto climb on the fundamentals of tightsupply and strong demand, containershipowners can look forward to a win-win ofincreased asset values for their tonnage togo with the higher daily rates.

Elsewhere, the fast-expanding ownerof 70 feeder ships, Oslo-headquarteredMPC Container Ships, has secured a $40million three-year revolving credit facility,which its Chief Executive, ConstantinBaack, said would give the company“additional financial strength…in antici-pation of improved market conditions.”


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Older, fuel-guzzling box ships bound for scrapyards asIMO 2020 loomsBY MIKE WACKETT

With IMO 2020 low-sulphur fuel regulations looming, con-tainership owners are keen to offload as many older fuel-guzzlingvessels as possible, with the current high scrapping rates provid-ing added incentive. According to London-headquarteredshipbroker Braemar ACM, twelve vessels with a capacity of36,000 TEUs have been sold for demolition in the past fewweeks, taking the year-to-date number to thirty, for 52,000 TEUs.This compares with just 48 vessels for 88,000 TEUs sent tobreakers’ yards last year.

Braemar ACM reports on three recent demolition sales inthe container sector: 4,992 TEU 2004-built Piraeus, sold ‘as is’ inSingapore at $445/Ldt; 2,020 TEU 1991-built MSC Pylos, soldfor $450/Ldt; and 1989-built 1,800 TEU Oriental Mutiara, soldfor $468/Ldt, for delivery to Bangladesh.

The sale of 15-year-old Piraeus is indicative of the overcapac-ity still prevalent in the panamax sector. Indeed, in its last idle

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tonnage report, Alphaliner said therewere around 40 panamax vessels lookingfor employment, and the situation“remains worrying for owners”.

Panamax vessels had a temporaryreprieve last year as strong demand dou-bled daily hire rates to around $10,000,but rates have since fallen back to around$8,500 and, with the large number ofships on the spot market chasing cargo,look likely to fall further. “Some ownershave started addressing the oversupplyissue by scrapping tonnage,” said the con-sultant.

While containership owners are setto receive a charter market boost from theforthcoming IMO 2020 regulations, assome incumbent vessels are taken out ofservice for up to 40 days for the installa-tion of scrubbers and will thus require

temporary cover, it is generally in thelarger sectors that carriers will be seekingreplacements.

Speaking during the Seaspan 2018earnings call, the boxship owner’s chiefcommercial and technical officer, PeterCurtis, said it was the 6,000 TEU-plussizes where availability was becomingtight, with carriers looking to fix ships for12 months or more to cover scrubberinstallation this year and next.

Meanwhile, in terms of new orextensions of charters for panamax sizes,ocean carriers are tasking their brokerswith finding the most economical ships onthe market. One broker told The Loadstarlast week he had a number of enquiries infrom shipping lines for panamaxes for thethird quarter of the year for two-to-three-month charters with options, but that

there was little interest in longer-termcharters. “What they are saying is that theships are suitable until you get near toIMO 2020, then they are not interestedunless they are either miserly on fuel con-sumption or have scrubbers fitted,” hesaid.

But for the owners of older panamaxvessels this is not an option, given thecirca $5 million cost of fitting a scrubbersystem and the length of time required torecover the capital expense by way ofincreased daily hire rates.

According to vesselsvalue.com data,prior to its demolition sale, Piraeus had amarket value of $9.14 million and anidentical scrap value.


Mandatory shaft power reduction on all ships may bethe way to hit IMO emissions targetBY ALEXANDER WHITEMAN

Japan’s International MaritimeOrganization (IMO) delegation is set tocall for a mandatory shaft power reduc-tion on all ships to help meet itscommitment to cut shipping emissionsby 40 per cent by 2030. A proposal, seenby The Loadstar but not yet made public,entails retro-fitting engine power limita-tion (EPL) systems on all non-EEDI3-certified vessels. “[It is] a simple devicewhich can easily limit engine power byadjusting a fuel index limiter on theship’s engine control system,” it said.“Therefore, EPL can be utilized as one ofthe effective measures to improve energyefficiency of ships in the short term.”Furthermore, it noted, EPLs werealready “widely used” in vessels as apractical measure to improve energy effi-ciency. However, vessels would need tobe dry-docked and out of operation forsome time, while the system was fitted.

Container lines are liable to objectto such a policy, having already hit backat French calls for mandatory speedlimits, with carriers favouring industry-led efforts to combat emissions.

And self-regulation has faced itsown criticism. The Loadstar understandsa pending report from CE Delft claimsleaving reductions to industry alonewould “at best” see a cut of just 2 percent by 2030. One source told The Load-star: “Of course, if you ask a manager ata shipping firm if they like the Frenchproposals for speed limits, they’d say no.But they may well have no idea what the

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choice of policies actually is, or whethera harsher policy will come into force ifthey fail to support a softer one.” Thesource pointed to Japan’s option as a casein point, noting that, by comparison,“France’s proposal doesn’t seem so bad”.

France and Japan are not alone insubmitting proposals to the UN organisa-tion on how best to regulate shippingactivities to meet its 2030 commitments.The Danish government has lodged callsfor the introduction of operational effi-ciency metrics, as opposed to speedreductions. One environmental sourcesaid this would “play into Maersk’shands” as it already had the most effi-cient ships, the benefit of which wouldbe lost through speed reduction meas-ures.

What cannot be overlooked is that,at IMO’s pending Marine EnvironmentProtection Committee (MEPC 74) meet-ing in May, one proposal will be adopted.As it stands, the options are limited, andour source suggested that with this inmind, speed limits may start to look “themost attractive” option. “They’re theonly things that can meet the 40 per centreduction in carbon intensity by 2030goal the IMO has signed up to,” said thesource. “It is possible, though, that wemay see these three substantive propos-als getting mashed together in some formto keep everyone happy.”



Installing scrubbers for IMO 2020 could cost carriers200 TEUs per voyageBY MIKE WACKETT

Scrubbers installed on ultra-largelarge container vessels (ULCVs) couldtake up “at least 200 TEUs of containerslots, according to Alphaliner. The con-sultant estimated this loss on Evergreen’sG-Class 20,150 TEU newbuild, EverGovern, under construction at in Japan,compared with an already delivered sistervessel. Alphaliner said it appeared that thescrubber housing on the newbuild wouldbe six or seven containers wide andoccupy a 40ft container bay. “Quite anotable negative effect upon the ship’scontainer capacity,” it said.

This permanent sacrifice of revenuewill be another factor ocean carriers willneed to take into consideration whendeciding on their strategy to comply withIMO 2020.

An unknown factor in the calcula-tion is the actual difference in pricebetween the current heavy fuel oil (HFO)mainly consumed by the world’s maritimefleet, and the maximum 0.5 peer cent sul-phur content LSFO (low-sulphur fuel oil)allowable by the IMO from 1 Januarynext year. Although the bunker industrydoes not expect to publish forward pricingfor LSFO until the third quarter this year,the expectation is that the ‘spread’ will bein the region of $200 per tonne.

Given that a ULCV will burn around200 tonnes a day while at sea, on thatbasis the price of retrofitting a scrubber toexisting fleet, along with the six-weekcost of taking the vessel out of service,could be recovered in less than two years.

However, at the TPM Conference inLong Beach in March there was a consid-erable divergence of opinion by analystsof what the increase in price of LSFO willbe compared to HFO, with some suggest-

ing that the gap might be as low as $50per tonne.

One speaker argued that as themajority of demand post-IMO 2020 willbe for LSFO – only around 5 per cent ofthe global container fleet is expected tohave scrubbers fitted by the start of theregulations – the price of the compliantfuel would naturally fall over time, andthat in contrast the niche requirement forHFO could actually make it more expen-sive.

What was of more concern to carri-ers that The Loadstar spoke to at TPMwas whether the bunker industry couldmeet the immediate demand for theswitch to LSFO in the months before the1 January 2020 start date. Indeed, therewas much talk of an “IMO scramble” atthe conference. “We will have to startbunkering our ships with LSFO sometimein Q4,” said one operations director of acarrier, “but before we bunker with the

low-sulphur fuel we will have to spendsome time in port cleaning the tanks andpipes or the new fuel will be contami-nated,” he warned.

Meanwhile, other than for newbuildULCVs, the LNG retrofit option seems tobe a non-starter – even before the bunker-ing restrictions are factored in. At abreakfast briefing during TPM, Hapag-Lloyd’s Chief Executive, Rolf HabbenJansen told The Loadstar that a “ballparkfigure” for the trial retro-fitting of one ofits ‘LNG-ready’ 15,000 TEU vessels,inherited from its merger with UASC, was$25 million.

According to vesselsvalue.com, thecurrent value of the four-year-old, 14,993TEU Sajir, the ex-UASC ship whichHapag-Lloyd is fitting out with LNG tanks,is $80 million.


A year on, ONE now ‘better equipped’ to deliver on itspre-launch promisesBY MIKE WACKETT

ONE [Ocean Network Express] is officially one year old, butits Japanese owners, K Line, MOL and NYK, have had little to cel-ebrate since the chaotic launch of the merged network last April.However, ONE now said it was now “better equipped” to deliveron its pre-launch promises, thanks to its “stabilization” and “refor-mation” strategy. And the most recent statistics released by thecarrier, showing utilization levels on the two major tradelanes,

appear to confirm that carryings at least are now on a par with theload factors achieved by the three companies before the merger.ONE achieved an average load factor on its headhaul transpacificservice of 93 per cent in February, while there was an impressive98 per cent utilization of slots on the Asia-Europe route.

MOL, a 31 per cent shareholder in the carrier and celebrat-ing its own 135th anniversary, said confidently: “We are expecting


ONE to recover from its teething prob-lems and return to profitability.” MOL,along with NYK, a 38 per cent share-holder, and K Line, with 31 per cent, havebeen badly hit financially, not only fromthe losses at ONE, but also from the ter-mination of charters on vessels that weresurplus to the requirements of the newlyformed carrier. And the Japanese trio suf-fered dents to their proud reputations ofclose customer contact with keyaccounts, as their sales and marketing andcustomer service departments were frag-mented.

The announcement in October of a$3 billion investment to propel themerged entity to become the sixth-rankedglobal container line, with a combinedfleet of 1.5 million TEUs, was not onlysupposed to herald a $1.1 billion annualsynergy cost saving, but also return thelacklustre container sectors of the Japan-

ese groups to sustained profitability.But Chief Executive Jeremy Nixon

revealed to investors in November thatONE was heading for a $600 million lossin its first fiscal year ending March 31,2019. He blamed “teething problems”,the root cause being that ONE had“underestimated the initial launchresource requirement” of the mergedoperation. Simply put, there were notenough people transferred from the legacycompanies to cope with bookings andsales enquiries, resulting in even loyalJapanese exporters becoming so frustratedthat they were obliged to book cargo withrival carriers in order to maintain theirsupply chains.

Headhaul liftings for ONE on thetranspacific plunged to just 70 per cent ofits available capacity last April, whileheadhaul Asia-Europe carryings slumpedto a dismal 58 per cent. After several

more significantly below-budget monthsfor liftings, ONE recovered to an averageof 90 per cent utilization levels on boththe main tradelanes in the second quarterand, by Q3, was hitting average headhaulload factors of 95 per cent for the transpa-cific and 92 per cent for Asia-Europe.

Mr. Nixon admitted that the botchedlaunch would cost the carrier around$400 million from the bottom line in thefirst year, and that although a recoveryhad begun, he said that there was stillmuch work to do to regain the support ofthe Japanese lines’ traditional customerbase. As ONE begins its second year ofoperation, it said that, by “strengtheningits core capabilities in all aspects of thebusiness, it is now better equipped toaddress the “diversified needs of its cus-tomers and the demands of the industry”.


Denmark’s DSV and Switzerland’sPanalpina announced they had “agreedto join forces”, in a deal that valuesPanalpina at about Sfr4.7 billion ($4.72billion), excluding debt considerations.It is effectively a takeover of the latter bythe former, where significant cost sav-ings will be targeted. This is the largestdeal in the transport and logistics indus-try since Japan Post acquired Toll Groupfour years ago for $5.1 billion – and nowToll could be the next takeover saga,given that its owner might be ready topart ways with the Australian companyif the right offer emerges.

If the Exchange Offer is successful,DSV and Panalpina will become one ofthe world’s largest transport and logisticscompanies with a combined pro formarevenue of approximately nearly $18 bil-lion at prevailing exchange rates, and acombined workforce of more than60,000 employees. Key to the successfulDSV takeover of Panalpina – which isdefensive, given broader trends in theair and ocean freight trades – was thebacking of the target’s controlling share-holder, the Ernst Göhner Foundation,which owned a 45.9 per cent stake inthe Swiss 3PL. At completion, the Ernst

DSV wins the battle to take over Panalpina in $4.72 billion dealBY ALESSANDRO PASETTI

Göhner Foundation is expected tobecome the largest shareholder of DSVholding approximately 11 per cent. Acandidate proposed by the foundationwill be elected to DSV’s Board of Direc-tors.

“The Board of Directors ofPanalpina recommends that Panalpinashareholders accept the public exchangeoffer,” Panalpina said. After talks thathave dragged since mid-January, theoffer, it said, received the support ofshareholders “representing 69.9 percent of the registered shares ofPanalpina, who have irrevocably agreedto tender their shares. This includesPanalpina’s largest shareholder, ErnstGöhner Foundation, and Cevian andArtisan.”

It took almost three months andthree offers to carry the deal over thefinishing line, and DSV will offer 2.375DSV shares (with a nominal value ofDkr1 per share) for one Panalpina share(the “exchange ratio”). DSV is paying amassive ~ 43 per cent premium againstPanalpina’s unaffected share price ofSfr137 (15 January 2019, the day beforeDSV’s initial proposal was published).

The transaction is expected to be“EPS [earnings per share] accretive inyear two, and it is DSV’s aspiration to liftthe operating margin of the combinedentity towards DSV’s existing level”.


The combined entity – to be known as “DSV Panalpina A/S” –will challenge DHL Global Forwarding, Freight (DGFF) forsecond place in ocean freight by total volumes, trailing behindmarket leader Kuehne + Nagel, while it will take on Kuehene+ Nagel for second place in air freight – both sit behind DGFF,the global air freight leader by tonnes.

The Chairman of Panalpina’s Board, Peter Ulber, said inthe course of past weeks: “Panalpina’s Board of Directors andmanagement have been exploring different strategic initiatives,and held discussions with DSV about a potential combination.The Directors’ assessment is that the updated proposal of DSVis very attractive. It is recognizing the quality of Panalpina’s

employees, the company’s strong position as one of the world’sleading providers of supply chain solutions, and its special com-petencies and know-how in air and ocean freight.”

Meanwhile Kurt Larsen, DSV’s Chairman, noted “a combi-nation of DSV and Panalpina further strengthens our position asa leading global freight forwarding company. Together, we canpresent a strong global network and enhanced service offeringto our clients, further solidifying our competitive edge in theindustry. It’s a great match on all parameters. Panalpina is agreat company and we’re very excited by this possibility to joinforces and to welcome Panalpina’s talented staff”.

Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)

Cosco-controlled OOCL has joined the ranks of shippinglines looking to vertically integrate logistics operations into theircore container transport activities. The Hong Kong-headquarteredshipping line – of which last year Chinese carrier Cosco bought a75 per cent stake, but has since been largely run as an independ-ent entity – posted 2018 annual results, reporting a 2017 net lossof $10 million transformed into a $55 million net profit. Its carry-ings last year increased by 6.3 per cent up on 2017 and reached6.7 million TEUs, with growth on its main east-west deepseatrades – the transpacific and Asia-Europe – growing by 8.9 and14.5 per cent respectively.

The carrier said it had seen some $400 million in synergysavings, since Cosco became its majority owner, “in a number ofareas, including fleet and network planning, procurement, con-tainer management, IT, commercial co-ordination and marineoperations”.

However, it was also keen to emphasis the achievements ofits OOCL Logistics division, in much the same way that peerssuch as Maersk and CMA CGM have in recent months. “Thisgrowing part of the group provides new business opportunitiesand diversification, as well as consistent profitability throughexcellence in customer service, as well as reliability and advancedtechnological solutions,” it said. OOCL said: “The company willdesign and launch more end-to-end services and products, accel-

Synergies and growing logistics venture help OOCL make a $65 million turnaroundBY GAVIN VAN MARLE

erate the development of extended services and endeavour toenhance the capacity in the one-stop transportation services.

“In respect of railway transportation, the company willinclude more countries in Central and Eastern Europe into theservice scope of the China-European Sea-rail Express, focus onintegrated logistics solutions, develop more end-to-end customersand complement the advantages of OOCL Logistics, accomplishthe design, construction and management of end-to-end servicechannels and solve the ‘last mile’ problem.”

Liner industry analyst Alphaliner noted that OOCL’s returnto profitability was accompanied by an adjustment “to excludethe earnings from its Long Beach Container Terminal, which hasbeen reclassified as a discontinued operation pending its sale”.OOCL said this should be completed in the next few months.

“2018 saw a strong performance from our terminal in LongBeach. The second phase of the terminal has now been opera-tional for a year, and all those carefully planned designs using thelatest technology and the most environmentally friendly tech-niques have been proven to bear fruit. It is public knowledge thatwe are required to sell our interest in the Long Beach terminal,and we expect to be able to do this within the coming months,”it said.



Warning to shippers: more transshipment likely after IMO 2020BY MIKE WACKETT

Analysts predict that the impact ofIMO 2020 will mean slower ships andmore transshipment. This would be a fur-ther blow to shippers who also faceadditional costs to compensate carriers forusing cleaner fuel from 1 January. Shippersmay dislike surcharges, but they univer-sally hate transshipment, as it introducesanother level of risk to the supply chain.

Ocean carriers face a challengingperiod when they need to obtain accept-ance from their customers to adopt theirfuel surcharge mechanisms in preparationfor the introduction of the IMO’s 2020 0.5per cent sulphur cap on the maritimesector.

Drewry warns that if there is a failureto pass on a higher than historical average50 per cent success rate for fuel increases,then the substantial extra cost of low-sul-phur fuel “could be ruinous for somelines, many of which are still operatingwith highly distressed balance sheets”. Ifthey fail to recover full costs, Drewry said,“carriers will inevitably seek to mitigatethe anticipated higher operatingexpenses” by introducing further meas-ures to conserve the more-expensive fuel.“One potential side-effect from the newregulations could be greater slow-steam-ing and use of transshipment,” saidDrewry.

“The logic being that, as ships’ sailingspeed is reduced and round voyages areextended, carriers will drop ports from

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rotations to ensure that transit times tokey points remain competitive,” said theconsultant. It noted: “Fewer direct portcalls will induce greater need for trans-shipment and feeder operations.”

Shippers are not fans of transship-ment, which can add significant delay tothe arrival of goods and, in some circum-stances, containers can be discharged atdestination at a different terminal.

Lars Jensen, CEO of SeaIntelligenceConsulting, reiterated that shipperswanted “real time transparency on theircargo whereabouts”, which could, hesaid, be clouded by transshipment. More-over, transshipment disguises the reallevel of delay to the already poor reliabilitystatistics of ocean carriers, given that themeasure for a vessel’s schedule integrity is

from port to port without the insight oftransshipment delays to the cargo.

During last year’s peak season severalshippers and forwarders The Loadstarspoke to complained bitterly about trans-shipment delays. “We get notificationsfrom our Chinese agent that the shipmenthas taken place, then a week or so laterthat it has been transshipped somewherein Asia and awaiting a new loader,” saidone irate forwarder. He added that severaltimes there had been no notification at allof the transshipment, “our containers dis-appeared into a black hole” he raged, “ourclients are screaming at us and it is oftendays before we can tell them the newarrival date.”



Seaspan gains $227 million charter penalty windfallfrom Ocean Network ExpressBY MIKE WACKETT

More detail is emerging on the signif-icant indirect costs incurred by Japan’s KLine, MOL and NYK when they mergedtheir container businesses into OceanNetwork Express (ONE) last year. Non-operating containership owner SeaspanCorporation said today it had received apenalty contract payment of $227 millionfrom a ONE equity owner – which wouldeither be K Line or MOL, as NYK does nothave any ships on charter from Seaspan.The payment related to the early termina-tion of the charter parties of seven vesselswhich were no longer required by thenew entity.

It was a win-win for Seaspan, whichsaid that after finishing the charters on 31March and being compensated, it hadsuccessfully fixed all seven ships to othercustomers, reflecting the current strengthof the containership charter market. Thisis in contrast to the hit Seaspan took fromthe bankruptcy of Hanjin Shipping in2016, when it lost out on charter partyarrears owed by the South Korean carrierand was additionally hobbled by theencumbrance of arrested ships.

Prior to the ONE merger last April,the Japanese carriers operated competingservices on several tradelanes, often alsodeploying individual dedicated feeders tomeet the specific requirements of theirVIP customers, such as Nissan, Toyotaand Honda. It followed that in the mergedorganization, the competing serviceswere consolidated, resulting in a surplusof ships that remained on the books of thelegacy companies.

The pledge to investors in K Line,

MOL and NYK of $1 billion in annual costsavings from the merger, clearly did nottake into account the charter party hang-over liability. And notwithstandingbooking their share of the $586 millionfirst-year loss by ONE due to a chaoticstart, the lines have also been obliged tomake provision in their accounts for char-ter party penalties relating to the return toowners of surplus containerships.

NYK which recorded a massive $400million loss for its fiscal year ended March31, said it had underestimated thesecosts. It said there were “higher-than-expected one-time costs required toterminate the container shipping busi-ness”, which included severancepayments to agents and penalties incurredon the early return of surplus container-ships.

Meanwhile, like other containershipowners, Seaspan, which has a fleet of 112

vessels, many on long-term fixed rate hireto ocean carriers, delivered a very satisfac-tory first-quarter performance. Charterparty revenue increased by 27 per cent,compared with the same quarter of 2018,to $285 million, while net earningssoared to $267 million from $50 million ayear ago, largely due to the windfall char-ter party termination payment.

With the benefit of a further $250million investment during the quarterfrom 36 per cent equity owner FairfaxFinancial Holdings, Seaspan repaid wo fur-ther tranches of secured loans during theperiod, releasing ten more ships frommortgage security. Seaspan now has 37unencumbered vessels and said it wouldcontinue its strategy of “strengthening thebalance sheet through deleveraging”.


More profitable second half helped Hapag-Lloyd stayin the blackBY MIKE WACKETT

Hapag-Lloyd’s net profit came in at $54 million last year afterthe carrier recovered well from a loss-making first six months,which in June obliged it to issue a profit warning. Chief ExecutiveRolf Habben Jansen said the transport group was “satisfied withthe financial results”.

In terms of its 3.8 per cent ROIC (return on invested capital),the Hamburg-based liner trumped its bigger peers, CMA CGMand Maersk, in 2018. They reported disappointing ROICs in their

accounts, of 2.6 per cent and 1.6 per cent respectively, for theyear.

“The market environment in 2018 was certainly not easy,”said Mr. Habben Jansen during an earnings call presentation. Buthe added that in the second half of the year, bunker prices hadeased at the same time demand was strengthening, resulting inimproved rates. He said 2019 had started well, with “good uti-lization” levels being achieved on its vessels across its network,


and he had “no reason to believe any dif-ferent” from its growth forecast of 3-4 percent for the year, which is above Maersk’s1-3 per cent guidance. “Yes, we see spotrates sliding at the moment, but that isnormal for the time of year,” he said. “Westill see over the quarter reasonablevolume growth and a reasonable recoveryfrom the Chinese New Year,” he added.

“While our business is and willremain cyclical, market conditions havegradually improved for liner shippingcompanies over the last few years. Ourobjectives are clear – improve earnings,further reduce our debt and create morevalue for our customers and for our share-holders as we strive to be number one forquality.”

Contracted rates from Asia to Europehave generally seen “mid to double-digit”increases, claimed Mr. Habben Jansen,but he admitted that “not a lot had beenclosed” so far on the transpacific, whichhe expected would be agreed in the nextsix-to-eight weeks. Most of the new con-tracts signed so far have either includedHapag-Lloyd’s MFR (marine fuel recovery)formulae or “a comparable customer-ownbunker surcharge mechanism” said Mr.Habben Jansen who reiterated that thefuel surcharge would be separate on allcontracts, including 90-day short-termagreements. “We need to get our moneyback on the short-term business as well,”he said. A particular target for operationalsavings is the restitution of empty contain-

ers, which last year cost the carrier over$1 billion. “Nobody pays us for that,” hesaid.

Hapag-Lloyd said in its Strategy 2023report that “strict customer orientation”was its new focus, and claimed that “sizeis not the game anymore”. “We firmlybelieve that our customers are prepared topay for added value and that our industryneeds to change,” it stated. Nevertheless,its trial of offering of premium faster tran-sits on selected routes does not seem tohave gained traction with shippers – Mr.Habben Jansen conceded that he did notanticipate that express services would rep-resent a “huge chunk of our overallbusiness”. Hapag-Lloyd has no plans tofollow in the footsteps of Maersk and

CMA CGM in their integrated one-stopshop supply chain management aspira-tions. Mr. Habben Jansen told TheLoadstar that his ambitions for the carrierwere for it to be a “pure liner”, and to “dothat job well”.

However, the carrier has embracedthe digital developments of the industry,with 350,000 TEUs having been bookedvia its online Quick Quotes applicationlast year, representing around 7 per centof its total volume. It now has a run rateof 14-15,000 TEUs a week.

Hapag-Lloyd’s guidance is for an EBITresult this year of €500-€900 million, com-pared with the €443 million of this year.


Robust performance from DP World, with newacquisitions ready to make their markBY GAVIN VAN MARLE

DP World reported a 4.2 per centincrease in 2018 revenue, to $5.65 billionacross its global terminals. The Dubai-headquartered terminal operator reportedan adjusted EBITDA of $2.8 billion, givingit an equity margin of 49 per cent.

Total throughput on an equity-adjusted basis was 36.8 million TEUs, andgross throughput of 71.4 million TEUs.The group said total capital expenditurefor the year were $908 million, wellbelow its guidance of $1.4 billion at thebeginning of the year .

However, this may not include thecompany’s numerous acquisitions duringthe year: Denmark’s feeder and shortseashipping line, Unifeeder; UK-continentalEurope ferry operator P&O Ferries; India’sContinental Warehousing Corporation;and Cosmos Agencia Marítima, in Peru.


DP World group Chairman and Chief Executive SultanAhmed Bin Sulayem said: “This robust performance has beendelivered in an uncertain trade environment, once again high-lighting the resilience of our portfolio. “We have made goodprogress in delivering on our strategy of strengthening our portfo-lio to become a global solution provider and trade enabler, withapproximately $2.5 billion of acquisitions announced in the year.

“These offer strong growth opportunities and enhance DPWorld’s presence in the global supply chain, as we continue todiversify our revenue base and look at opportunities to connectdirectly with the owners of cargo and aggregators of demand.“Going forward, we aim to integrate our new acquisitions anddrive synergies across the portfolio, with the objective of remov-

ing inefficiencies in global trade, improving the quality of ourearnings and driving returns,” he explained.

The company has forecast 2019 capex of up to $1.4 billion,“with investment planned mainly in the UAE, Posorja (Ecuador),Berbera (Somaliland), Dakar (Senegal) and Sokhna (Egypt)”. Mr.Bin Sulayem added: “[The] current year has started with tradingin line with expectations, and while the near-term outlookremains uncertain, with the trade war and geopolitical head-winds, we expect our portfolio to remain resilient and seeincreased contributions from our recent acquisitions and invest-ments.”


$586 million loss hits ONE’s parent carriers, only MOL manages to stay in the black BY MIKE WACKETT

Japanese merged carrier Ocean Network Express (ONE)recorded a net loss of $586 million in its first year of operation.However, it said it expected to move into the black in its secondyear.

ONE, formed from the container businesses of K Line, MOLand NYK, was supposed to produce synergistic returns for its par-ents. Instead it has dragged down the P&L accounts of the trio.NYK, which holds a 38 per cent equity stake in ONE, posted amassive group loss of ¥44.5 billion ($400 million) for the year,prompting the replacement of Tadaaki Naito as President. Thecompany said it resolved a change of its Chairman, President andrepresentative Directors. The new President will be Hitoshi Naga-sawa, currently Executive Vice-President.

And, like its compatriots, NYK also underestimated the costof ending its legacy liner business. It said it suffered “higher thanexpected one-time costs required to terminate the container ship-ping business”, which included severance payments to agents andpenalties incurred on returning surplus containerships to ownersearlier than the charter party expiry dates.

K Line recorded a loss of ¥11 billion ($99 million) for theyear, citing red ink incurred from its 31 per cent stake in ONE asthe primary reason.

Only MOL, which also has a 31 per cent holding in ONE,managed to stay in the black for the year, achieving a positiveresult of ¥27 billion ($240 million), mainly attributable to goodperformances from its dry bulk and energy transport businesses.But the carrier noted the business performance from ONE hadresulted “in a significant deficit” from the sector.

The botched launch of ONE on April 1 of last year resultedin a significant loss of business and an estimated $400 millionimpact on the bottom line. Chief Executive Jeremy Nixonexplained to investors in November that management had“underestimated the initial launch resource requirement”, caus-ing chaos on operations desks throughout the new organisationand obliging loyal Japanese trading house customers to book theircontainers with other carriers.

On the key Asia-Europe and transpacific tradelanes, it tookONE several months to regain customer confidence and thusrestore load factors to acceptable levels. For the full-year utiliza-tion levels recovered to 87 per cent and 88 per cent, respectivelyfor the Asia-U.S. and Asia-Europe headhaul routes, havingplunged below 70 per cent in the first quarter.

Turnover in the first 12 months was $10.9 billion, but ONE

is seeking to improve its revenue in year two by 17 per cent to$12.7 billion and is targeting a profit of $85 million. ONE is moreoptimistic about growth than some of its peers and is projecting a4 per cent increase in demand. “Profit is expected to graduallyrecover throughout H1, with improved lifting,” said ONE, addingit expected that liftings would be restored to the pre-integrationlevels of the three carriers during the period. It said, however,that in the first three months of the calendar year, and the carrier’sQ4, trade had been “relatively weak” eastbound between Asiaand the U.S. “due in part to a backlash downturn from the earlierrush demand ahead of additional U.S. tariffs on China”. In regardto the Asia to Europe tradelane it said that although long-termcontracts had improved, soft demand following the Chinese NewYear had resulted in a decline in spot rates.

ONE said that its action plan for profit improvement was to“establish an organization that can tolerate market volatility”advancing the carrier from a period of “stabilization” to a second-ary stage of “reformation”. The four parts of its 2019 action planare: cargo portfolio optimization; product rationalization; anorganization restructure and an increase in the targeted $1 billioncost saving synergies from the merger to 96 per cent this year,from the 82 per cent achieved in the first year.



Low freight rates and high bunker costssaw Zim sail into the red in 2018BY GAVIN VAN MARLE

Israeli container shipping line Zim posted a net loss for 2018of $119.9 million, despite a 9.2 per cent increase in revenue to$3.2 billion, a four-year high. Zim said depressed freight rates inthe first half and high bunker costs were the primary causes,while a second-half rally in rates was not enough to keep the lineout of the red.

In 2017, the company recorded a net profit of $11.4 million,on revenue of $3 billion, while 2018’s loss included a $38 millionimpairment charge “with respect to vessels classified as held-for-sale”. It said: “Since the fourth quarter of 2017, and until thesecond quarter of 2018, freight rates decreased while bunkerprices, as well as charter rates, increased, negatively affecting theindustry as a whole. “In the second half of 2018, freight ratesstarted to recover, while bunker prices remained highly volatile,though overall decreased.”

The company appears to be pinning its hopes for a recovery

this year on its burgeoning relationship with 2M partners Maerskand MSC. In September it began cooperating with 2M on Asia-U.S. east coast services, followed by a further agreement inJanuary to cooperate on Asia-U.S. west coast transpacific routesand Asia-Mediterranean services.

Eli Glickman, Zim President and Chief Executive, said: “Theagreement enables Zim to offer a better product and service port-folio to our customers, and cope with the volatile freight rates andfuel prices. We were able to achieve improved cost efficiencies,while significantly increasing the transported volumes. At thesame time, we continue to put our customer service at the centre,introducing new services and investing in innovative digital solu-tions.”

Last year the line carried 2.9 million TEUs, a 10.8 per centincrease over the 2.6 million TEUs carried in 2017.


UPS Chief determined to stay positive, despitedeclining profits in Q1BY ALEXANDER WHITEMAN

A marginal upturn in rev-enue failed to compensate forwhat has been a difficult firstquarter for UPS, ending with a17 per cent drop in net income.Despite this, the company had apositive tone during its investorcall, turning to adjusted figuresto find a glimmer of hope. Andone analyst noted that, while theresults were “broadly mixed”,the company had weathered thecompetitive storm it had faced inrecent years – although thefuture is more uncertain as techgiants step into the arena.Turnover during the first threemonths was up less than 1 percent, to $17.1 billion, generating$1.1 billion in profit, down from$1.3 billion a year ago; the com-pany citing the weather as onecause.

Using its adjusted numbers,group profits were down morethan 10 per cent on the sameperiod last year, but divisionallythe adjusted results offered someoptimism. Chief ExecutiveDavid Abney focused on the fact

that the period saw the company move for-ward with its transformation process. “Thefirst quarter marked a good start to the year

and generated solid performance across ourbusiness,” said Mr. Abney. “Our transforma-tion initiatives are enhancing revenue quality


and creating network efficiencies that will increase our long-termearnings power. We are on a path to take advantage of growthopportunities and enhance our future performance.”

Chief Sales and Solutions Officer Kate Gutmann toldinvestors the B2C division had performed well, but focused onthe success of UPS B2B activities during the period. These, shesaid, had been helped by the company’s product “resonating”with the healthcare industry, allowing it to further “strengthen itsmarket-leading position”. However, it was not enough to offsetdeclines in non-adjusted numbers across all three divisions –Domestic, International, and Supply Chain, with Internationalfaring worst.

And looking at the adjusted performance, both Internationaland Supply Chain saw healthy growth, with operating profit up 3per cent and 24 per cent, respectively. “They generated excellent

operating profit this quarter, with strong contributions fromCoyote and the rest of our Forwarding unit,” said Mr. Abney. “Wecontinue to execute our asset-light strategies, while providing ourcustomers with the high-quality service they expect.”

Domestically, he said, the company was facing an “unknown”with the U.S. economy, as it had been giving “mixed signals”, butmay succeed as there had been “solid” consumer spending.

While he did not comment on the international sector, heagain sounded upbeat about future prospects, noting a “positive”trend in domestic operations. “We are bending the cost curve inour U.S. domestic segment as highly automated hubs come online,producing improved productivity benefits,” he said. “Theseimprovements contributed to the segment’s performance in thequarter and will continue to gain momentum going forward.”


COSCO Shipping Holdings hasposted a net profit of Rmb687 million($102 million) for the first three monthsof the year. This follows the Chinesestate-owned container liner and terminalgroup’s $251 million positive return lastyear, which, said Alphaliner, included$230 million of subsidies from the Chi-nese government.

COSCO, which acquired OOCL in a$6.3 billionn deal last July, is the firstmajor container line to report Q1 earn-ings, and its results suggest it could havebeen a positive quarter for the industry.Maersk, the world’s biggest container line,will publish its Q1 results on 24 May.

Thanks mainly to the incorporationof the OOCL container business, theShanghai and Hong Kong-listed group’srevenue soared 60 per cent year-on-yearto Rmb35.1 billion.

However, the company has adoptednew accounting standards and its balancesheet doesn’t look comparable to anyothers in the industry – according to TheLoadstar’s Alessandro Pasetti, “its first-quarter numbers mean nothing – or veryclose to nothing”.

COSCO’s liftings reached 5.89 mil-lion TEUs, representing an increase of 43per cent, the biggest jump coming in theintra-Asia and Australasia region, up 71per cent to 1.84 million TEUs. On Asia-Europe, liftings were up 56 per cent to1.14 million TEUs and the transpacificroute was ahead by 52 per cent to 1.1million TEUs. Breaking the numbersdown between Cosco and OOCL, theformer handled 4.28 million TEUs whileHong Kong-based OOCL saw its volumeincrease by a modest 1.6 per cent to 1.61

COSCO Q1 profits up; a good indicator that ‘we are over the worst’BY MIKE WACKETT

million TEUs. However, in a separately released

operational report OOCL said turnoverincreased 5.9 per cent, with average rev-enue per TEU up by 4.2 per cent on thesame period of 2018. And in its quarterlyearnings report, Cosco was keen to stressthat it would continue with its strategy ofpromoting OOCL as a separate brand. Itadded that it would “put more efforts onthe end-to-end product development andcontinues to promote the construction ofsea-rail intermodal network to furtherenhance the capacity of the end-to-endlogistics solution”.

As at the end of March, Cosco’scombined fleet stood at 478 ships, with atotal capacity of 2.77 million TEUs, rank-ing it third in the ocean carrier leaguetable behind Maersk Line and MSC, andjust ahead of Ocean Alliance partnerCMA CGM. Cosco will receive a furthernine ULCVs of 19,200-21,200 TEUcapacity, by the end of June and, withnew ULCVs being delivered to Ever-green, it has prompted the OceanAlliance to launch an extra seventh Asia-

North Europe loop this month. However, soft demand following

Chinese New Year and a 36 per centslump in spot rates since January hasobliged CMA CGM, Cosco and Ever-green to blank four headhaul sailingsearly in May.

The impact of these void sailings andthe cancelling of three voyages by THEAlliance appears to have succeeded instabilizing the rates on the Asia-NorthEurope tradelane, supporting 1 May FAKincreases, according to Friday’s ShanghaiContainerized Freight Index (SCFI).

The Asia-North Europe componentof the SCFI put on 12.4 per cent to $717per TEU, reversing the losses of the previ-ous three weeks, and one carrier sourcetold The Loadstar last week his salesteam had made “some progress” with itsFAK increase. “Hopefully we are over theworst,” he said, “and now all we need isa strong peak season to cement thegains.”



Ocean freight the star performer in Q1 as K+N starts2019 in bullish moodBY ALEXANDER WHITEMAN

Kuehne + Nagel has carried its momentum from 2018 intothe new year, with first-quarter results showing continuinggrowth in revenue and profitability. While the company appearedpleased with the results, one analyst described them as “uninspir-ing” – although adding that, considering market conditions, theywere “good”.

Revenues for the period climbed 7.7 per cent to Sfr5.2 bil-lion ($5.1 billion), generating a little over Sfr242 million in profit(as EBITt), up 2.5 per cent on last year. Pleased Chief ExecutiveDetlef Trefzger said: “Kuehne + Nagel got off to a good start in2019; once again, we increased our net turnover, gross profit andEBIT. “However, we find ourselves in an environment in whichglobal economic growth is noticeably slowing.”

Its ocean freight division made the strongest gains, with a6.2 per cent increase in volumes, led by a double-digit increase inAsian exports to both North America and Europe. But K+N alsooversaw good cost-efficiencies in the sector. In total, it handledsome 1.46 million TEUs, 70,000 more than during the first threemonths of 2018, even with a 2-3 per cent dip in volumes movingfrom North America and Europe to Asia. “We have seen veryrobust volume growth, resulting in our highest-ever first-quartervolumes, coming amid an overall market dip of 1-2 per cent,” saidMr. Trefzger. “This has in part been down to us leveraging ourbusiness with SME shippers, and has seen us maintain ournumber-one status in the global sea freight market.” Furthermore,Mr. Trefzger said, the new solution had already gained traction inthe business, helping to increase profit per TEU by 7 per cent.

The success at sea was not reflected in the skies, however,with air freight volumes dropping 3.1 per cent to 409,000 tonnes,although K+N noted this matched the declining global market.“In a declining market, our volumes declined just as we had seenin the last quarter of 2018 – in which we recorded a 4 per centdownturn,” said Mr. Trefzger. “We can report solid growth inNorth American exports to Europe, and also the successful inte-gration of Quick International Courier, which is a niche playeroffering high margins.” He also noted “strong operation improve-ments” in the overland division, which increased turnover 6 percent on last year. And in North America it won “significant new

business”, even as the region struggles with driver shortages anda seeming migration of shippers from road to rail.

The company said: “Kuehne + Nagel is further developing itscompetencies in overland, with digital platforms and by expand-ing the European pharma trailer fleet. Operating EBIT increasedconsiderably, taking into account that the prior-year periodincluded a positive one-off effect of Sfr6 million.”

Its contract logistics revenue also climbed, 6.3 per cent,amid an ongoing restructuring, although it noted that EBIT wasdown compared with last year. The restructuring appears to be aroot and branch change, with investments pouring in across thedivision. “We are making investments all over, investments intechnology and really reshaping the contract portfolio,” said Mr.Trefzger. “Our idea is that we are making a holistic change to thebusiness, really reshaping it, and these efforts should bringresults.”


Panalpina expands perishables footprint in LatinAmerica with CargoMaster buyBY ALEX LENNANE

Undeterred by serious M&A activity with DSV, which beganin January, Panalpina has agreed to acquire Colombia’s Cargo-Master and its Ecuadorian subsidary, Laseair. The air freightflower and fruit specialists export to the U.S., Europe and Asiaand claim to be among the largest of their Latin America peers.

The acquisition will boost Panalpina’s business in theregion, making it, claimed Chief Executive Stefan Karlen, the“undisputed perishables market leader in Colombia and LatinAmerica”. He added: “We are adding significant volumes and

know-how to our already impressive perishables footprint inLatin America, which will allow us to further deepen our well-established relationships with the airlines and producers in theregion.

“As we continue to expand the perishables business in thispart of the world, we also see great development opportunities forour charter network with its gateway in Huntsville, Alabama.”

At a time when Panalpina is expecting to lose staff followingits agreement with DSV, it has now taken on 134 employees in


Colombia and 32 in Ecuador. But it is also likely to boost its airfreight business in what appears to be a challenging year for themode. Kuehne + Nagel’s results reveal that its fourth-quarter pur-chase of Quick International Courier (QIC) is “already bearingfruit”. “K+N anticipated the fall in air volumes – which wasmeaningful in the first quarter – and the need to protect yields(gross profit/tonne), which it achieved also thanks to its QICinvestment.”

Meanwhile, in addition to shoring up its air freight business,which saw declines in its first-quarter results, Panalpina is also

cementing its leading position in perishables – an interest itshares with K+N. As Felipe Sanchez, founder, Chief Executiveand majority shareholder of CargoMaster, said: “By goingtogether with Panalpina with its strong heritage in Latin Amer-ica, we have the opportunity to become part of an even biggersuccess story in the perishables industry.” The parties did not todisclose any financial details of the deal, but The Loadstar finan-cial columnist Alessandro Pasetti estimates the deal is worthbetween $50 and $95 million, including net debt.


Shippers and forwarders are increasingly dissatisfied with theperformance of shipping lines, according to a new survey. This isin direct contrast to air freight, where 16 per cent of shipperswere “very happy”with their transport provider, against 6 percent of box line customers.

Lack of clarity on container line charges, transit times andreliability scored the lowest on the satisfaction survey, carried outby Drewry and the European Shippers’ Council.

Overall, ocean carrier customer satisfaction dropped 0.1points since last year’s survey, with an average score of 3.1, on ascale of 1 (very dissatisfied) to 5 (very satisfied). Prices and sur-charges, transit times, and reliability of booking/cargo shipped asbooked fared least well, with points of between 2.8 and 3.

Carrier financial stability scored best, and was improvedfrom 2017, along with accurate documentation and availability ofcontainers, which all received scores of between 3.2 and 3.4.

Overall, only 4 per cent of customers were “very dissatis-fied” with carrier service, but only 6 per cent were “very

satisfied”. Drewry and the ESC said the survey showed the lines

needed to improve their price transparency. “It is very clear thatclarity of prices and surcharges has become a key topic for ship-pers and forwarders – particularly medium-sized ones,” saidPhilip Damas, head of the logistics practice at Drewry. “Startingfrom the 2018 emergency fuel surcharges, and continuing withthe current uncertainty over post-IMO 2020 fuel surcharges, weexpect the conversation between carriers and shippers to remainongoing in 2019.

“In the short term, carriers ought to be more transparent intheir new BAF matrices and formulae and need to address theircustomers’ growing needs for predictability and visibility of car-rier performance in the long run if they want to reach good levelsof customer satisfaction,”

ESC, which last month published a position paper on theBlock Liner Exemption, said the results supported its position.“More transparency is needed from maritime carriers,” said Jordi

Shippers increasingly unhappy with the performanceof shipping lines - but airline satisfaction growsBY ALEX LENNANE


Espin, ESC maritime transport policy manager. “Service levels,performance targets, market improvements, and price structuringshould be set with a focus on clarity and an open observationanalysis.”

In its paper, ESC noted that while “clear underperformancehas been evidenced, it cannot be fully quantified nor properlyremedied because the objectives of the consortia, in terms of effi-ciency, have never been made public and are not transparent tothe other stakeholders, in particular, the carriers’ customers. “Theabsence of a dialogue is raising the frustrations and is negativelyimpacting on the economy on all sides,” it continued.

IATA has also carried out a shipper satisfaction survey, in Feb-

ruary, on air freight. While the association does not appear tohave published it, it released some of the results at its WorldCargo Symposium event in Singapore last month. Some 16 percent of shippers were “very happy” with the service provided byair carriers, while only 8 per cent were “very unhappy” – someof which referred to the capacity crisis at the end of 2017. Inter-estingly, more than half, 52 per cent, said they could seethemselves using more air freight in the future, suggesting thatthe modal shift of recent years has halted somewhat. And, surpris-ingly, 69 per cent thought air freight was equal to, or morecompetitive than, other modes of transport.


What are the top ten risks to supply chains this year?BY ALEX LENNANE

The top ten supply chain risks this year include raw materialshortages, safety recalls, climate change and containership fires –alongside more obvious concerns, such as trade wars and theeconomy. A report on supply chain resilience, published thismorning by DHL, examines the biggest risks and where supplychains are most vulnerable. Top concern is that trade wars willlead to restructured supply chains: Harley Davidson’s decision tomove manufacturing from the U.S. to Brazil and Thailand is citedas an example.

DHL’s Resilience360 authors said they “expect this trend toaccelerate in 2019”. But, perhaps more interestingly, growingdemand and shorter supply of raw materials is the second biggestthreat, with the production of many materials still “highly global-ized”, while companies are increasingly looking to local orregional manufacturing strategies.

DHL suggests key materials are highly vulnerable to demandspikes or production bottlenecks and notes current shortages of


some polyamides, due to the low supplyof a chemical required – made in only fiveplaces in the world – while cobalt, a com-ponent in lithium-ion batteries, could alsosee shortages, “an area of growing con-cern over the longer term”. The reportsays: “Companies in the automotive, tex-tile, electronics and packaging industriesmay be forced to switch to other prod-ucts, at least temporarily, although thismay not always be possible.”

Recalls over compliance and safetyissues come high up the list too. Pharma-ceutical recalls by the U.S. FDA almostdoubled between 2017 and 2018; manu-facturers are sourcing more ingredientsfrom developing countries, which havediffering standards of oversight.

Climate change – and its remedy,tougher environmental regulations –come in at numbers four and five. Thisyear could be the warmest on record,with El Niño also expected to form in thefirst few months. A hotter atmospherecontributes to droughts, intense rainfall,tropical storms and fires, although thedirect impact on supply chains is hard topredict. Last year saw rivers in Europe fallto such low levels that inland shippingwas disrupted.

To mitigate this, and improve airquality, regulators are putting evertougher restrictions on companies. IMO2020 is one obvious area, but in Asia,high smog levels have caused temporaryfactory closures, and regional emissionsare under scrutiny.

Economic uncertainty and industrialunrest may be the next highest threats,fairly standard risks in most years.

Containership fires have been a defi-nite problem already this year and,despite efforts by box lines, could con-tinue to threaten supply chains.

The final two threats highlighted inthe report are border problems anddrones: migrant movement in westernEurope and the U.S. have led to borderclosures or congestion, while Brexit could

lead to major congestion in the UK andEurope. “While border closures at ports ofentry will remain extremely rare,Resilience360 anticipates an increase inthe frequency of these high-impact eventsin 2019,” notes the report.

Aviation disruption from drones, aproblem that has increased significantly,notably in the UK, is one which can beregulated. The report cited near-misses inseveral countries, and a further sevencountries which have imposed strict regu-lations or bans.

Interestingly, cyber attacks are not

listed in the top 10, despite being a majorproblem in 2018. “In 2018,Resilience360 recorded a total of 65cyber attacks that directly impactedsupply chain assets, with November expe-riencing the highest number of incidentsat 20,” notes the report. Other issues lastyear not in this year’s list include high fuelprices, port congestion and theft. DHL’sreport goes on to break down the risksregionally.


Source: D

HLSo

urce: D

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Maersk launches online customs clearance service for ocean customersAlex Len

BY ALEX LENNANENANE

Maersk has taken another step towards becoming an inte-grated company by offering digital customs clearance for oceancustomers. Its new online shipping management platform is avail-able in seven European countries and will be rolled outworldwide by the end of the year. It gives customers full compli-ance with local customs rules online, with pricing displayed for all

import and export declarations. “It saves our customers time,money and headaches, reducing the number of intermediariesthey deal with from three or four to just one, as well as paper-work,” said Vincent Clerc, Chief Commercial Officer of APMøller-Maersk. “Time saved they can then devote to grow theirbusinesses.”


The platform will cover all types ofcargo for all Maersk brands – presumablyincluding Damco. Maersk took overDamco’s customs house brokerage armwhen it shifted its strategy to offer more ofa one-stop shop to its customers via theshipping line.

Maersk, which says freight for-warders make up 40-45 per cent of itsbusiness, is said to be setting up 4PL-styleoperations in Asia. But at TPM in LongBeach in March, Chief Executive SorenSkou said forwarders had nothing to fearfrom Maersk’s new business model –unless a forwarder only provides a book-ing service, he added. “A freightforwarder can book with any carrier, butwhen you deal with us you get a one-stopshop,” he said.

In February, Maersk acquired Vande-grift, a U.S.-based customs house broker, akey component in its new strategy to pro-vide end-to-end solutions to customers.Mr. Skou added that the current focus ofMaersk’ acquisitions at the moment wason supply chain management, “helpingcustomers manage their purchase ordersat the point of origin; that’s an interestingarea”, he explained.

“It is perfect to book our service

request only with one online platformwithout contacting further operationaldepartments,” said Robert Weber fromthe shipping department of manufacturerNeenah Gessner. “We welcome the possi-bility to have all customs house brokeragedocuments uploaded on the internet plat-form (quick plus easy handling). Would begood to have one invoice handling in the

future, but okay for now. The customshouse broker service provided by the rele-vant departments is excellent.”

The product has so far been launchedin Germany, France, Denmark, theNetherlands, Poland, the UK and Spain.


FreightHub investors secure $30 million in fresh funds – Maersk joins inBY GAVIN VAN MARLE

German digital freight forwardingstart-up FreightHub has secured $30 mil-lion in a series B capital raising round thatsaw Maersk join its investors. AP Møller-Maersk’s corporate venture arm, MaerskGrowth, and logistics venture capital fundRider Global joined Northzone, GlobalFounders Capital, Cherry Ventures andLondon-based investment firm Unbound,which also ploughed fresh funds into thecompany. FreightHub said it would usethe proceeds for tech development and toexpand its presence in Asia.

Founder and Chief Executive FerryHeilemann explained: “Our recentgrowth trajectory has confirmed thepotential that our digital solutions canrealize for both our customers andFreightHub’s internal processes. “WithMaersk Growth, we have a new investorthat offers extensive strategic insight andallows for mutual collaboration opportuni-ties.”

Jeppe Høier, partner at MaerskGrowth, added: “FreightHub is a well-runcompany with a promising technology in


the digital freight forwarder segment. This makes it a great fitwith Maersk Growth’s investment strategy, which aims to exploreand mature promising technologies with a potential to improvesupply chain management and customer experience. We believein cooperation and learning experiences across the digital ecosys-tem of our industry and look forward to accompanyingFreightHub in further developing as digital freight forwarder, andbelieve our cooperation can help both companies build on theircapabilities and offerings to the benefit of existing and new cus-tomers in the SME segment.”

Last year, FreightHub invested heavily in solutions for digitalcollaboration among customers, partners and suppliers andexpanded the interface functions for its system integration capa-bilities. Chief Technology Officer Erik Muttersbach said: “Whatsets us apart in particular is the combination of experienced logis-tics experts, data-driven and therefore robust processes, as well as

state-of-the-art technology.”“So as to open up further control and optimization options

for our customers on their way to a data-based supply chain, wewill continue to invest heavily in the development of new fea-tures, such as complete planning and control of orders at productlevel.”

It also obtained an IATA licence for air freight services lastyear, thus expanding its service portfolio, as well as opening itsfirst Asian office in Hong Kong and acquiring a sea freight for-warder specialising in Asian imports. “The aim is to expand ournetwork and provide a broader range of complex logistics serv-ices. A stronger presence in Asia will allow us to handle theprocesses on site independently and thus enable us to offer ourcustomers a seamless end-to-end process,” said Chief OperatingOfficer Michael Ardelt.


Amazon has denied it plans to undercut the road freightmarket with its new digital freight brokerage platform. Launcheddays ago, the platform sets Amazon against companies such asCH Robinson, which saw its shares suffer following analysis thatthe e-commerce giant was going to undercut the market.

Amazon denies online platform is out to undercut road freight marketBY ALEX LENNANE

According to FreightWaves, Amazon’s live trial of its broker-age undercut prices by 26-33 per cent. However, Amazon’ssenior PR Manager for Transportation told The Loadstar: “Thisservice, intended to better utilize our freight network, has beenaround in various forms for quite some time. The analysis sug-gesting dramatic undercutting of pricing is false.” However,Freightwaves said it stood by its analysis that Amazon is under-cutting the market. It noted: “Amazon is under pressure tore-accelerate its top line revenue, which has slowed fromupward of 30 per cent annually three years ago to less than 15per cent projected for this year. “Amazon cannot allow truckingcapacity to constrain its growth and is entering freight brokerageto lock that capacity up. From a cursory review of four lanes inAmazon Freight’s current offering, it’s clear that Amazon is nottrying to realize fat gross margins on its brokerage. Instead, it ismassively undercutting market prices.”

But as The Loadstar noted earlier, Amazon appears to betrying to make friends rather than enemies, in the transportmarket at least. In its earnings call, Amazon management said:“We‘re going to need definitely continued support of our exter-nal transportation partners.” Which could explain why it hasbeen so keen to try to stop this analysis from gaining much trac-tion.


EXPORT COORDINATOR, FREIGHT FORWARDING

Our export team at our downtown Montreal head office iscurrently looking for an Export Coordinator to work mainlyin ocean freight within local markets. The incumbent is re-sponsible for negotiating and quoting rates and relatedcostings for submission to the client, initiating bookings (re-questing and confirming) for mainly ocean export. Thisrole requires the treatment of all documentation to the ex-tent required by clients, and the processing of invoices forservices rendered.

The person we are looking to hire will have the followingqualifications:

• Bilingual: French and English, spoken and written• Minimum of 3 years’ experience with a freight forwarder• Project Cargo experience (an asset)

Send us your c.v. and cover letter to [email protected]


FedEx introduces its own robot solution for last-mile deliveriesBY IAN PUTZGER in Toronto & GAVIN VAN MARLE

FedEx launched its new cutting-edgerobotic last-mile delivery solution – theFedEx SameDay Bot. It said it was collab-orating with AutoZone, Lowe’s, PizzaHut, Target, Walgreens and Walmart “tohelp assess retailers’ autonomous deliveryneeds”, given that according to some esti-mates, up to “60 per cent of merchants’customers live within three miles of astore, demonstrating the opportunity foron-demand, hyper-local delivery”. TheFedEx bot is being developed in collabora-tion with DEKA Development & ResearchCorp and its founder Dean Kamen, whoinvented the Segway and the iBot per-sonal mobility device. “The bot hascapabilities that make it unlike otherautonomous vehicles,” Mr. Kamen said.

“We built upon the power base of theiBot, an advanced, FDA-approved, mobil-ity device for the disabled with more than10 million hours of reliable, real-worldoperation. By leveraging this base in anadditional application, we hope the iBotwill become even more accessible tothose who need it for their own mobility.”

The FedEx bot is designed to travelon pavements and along roadsides, safelydelivering smaller shipments to cus-tomers’ homes and businesses, and FedExplans to test it this summer in select mar-kets, including its corporate home ofMemphis.

John Mulligan, Chief Operating Offi-cer of Target, said: “We continue to investin new technologies and capabilities thatmake Target the easiest place to shop.We’re excited to be collaborating withFedEx to explore how autonomous robotscould enhance delivery services andmore.” Meanwhile, e-commerce playersare also increasingly turning to robots tosolve the dilemma of high costs on thefinal mile. Amazon is running trials with asmall fleet of delivery robots, whileanother leading player is preparing a pilotproject on the campus of George MasonUniversity in Fairfax, Virginia.

However, the final-mile sector is alsolittered with casualties and failed experi-ments: DP-DHL sold its Allyouneed Freshonline marketplace in September, aban-doning an effort that saw a triple-digitmillion euro spend on marketing; Foodorapulled out of France, Italy, the Nether-lands and Australia; and Deliveroocurtailed its activities in Germany.

In North America, Walmart’s partner-ships with Uber and Lyft to cover the last

mile to consumers had to be abandoned.The final mile hits carriers’ bottom line –the Crowdsourced Delivery Report fromBusiness Insider Intelligence notes thatlast-mile delivery accounts for 53 per centof overall shipping costs. This is exacer-bated by consumers’ expectation of freedelivery within relatively short windows,while worsening traffic congestion drivesup urban delivery costs.

Texas’s Department of Transportationfound costs for trucking firms related tocongestion in six major urban areas in thestate rose from $1 billion in 2013 to $6.3billion three years later. Walmart was oneof the firms that looked to crowdsourcedelivery models to rein in delivery costs.However, neither the programme, underwhich its own employees deliveredparcels on their way home after work, norpartnerships with Uber and Lyft havebeen successful.

Amazon management believes robotsare the key to bringing down costs on thefinal leg. Since late January it has beentrying out its own delivery robot, dubbedScout, in Snohomish County, close toSeattle. The units are the size of a smallcooler and equipped with six wheels.They move at a walking pace and duringthe trial phase are accompanied byhumans.

Robots are rolling out for deliveryelsewhere too. Starship Technologies, aproducer of delivery robots, is currentlypreparing for a pilot programme to deliverfood at the George Mason University in

Maryland, serving a campus of about40,000 students. The pilot is conductedin partnership with food service providerSodexo. Starship envisages its robots oper-ating around local hubs, which can befixed locations like storefronts or ware-houses or trucks that carry multiplerobots. It is no coincidence that one of thelead investors in the San Francisco-basedcompany is Germany’s Mercedes-Benz.Last year Starship ran trials that involvedMercedes Sprinter vans serving as mobilehubs for up to eight of its robots.

However, Starship and Mercedes-Benz are set to face competition from theautomotive industry. At the ConsumerTechnology Association’s CES trade showin January, Continental, an automotivesupplier, showcased its concept of four-legged delivery robots called robodogs,which are carried to the destination areaon board an autonomous vehicle calledCubE (Continental Urban Mobility Expe-rience). The company boldly predicts thatautomated deliveries could grow toaccount for as much as 80 per cent of allB2C deliveries.

Predictions of that kind failed to con-vince DHL, which buried its ‘PostBOT’robot, capable of carrying loads of up to150 kg including postmen. According toDP-DHL Chief Frank Appel, the technol-ogy may work well, but the units are tooexpensive.



China-Europe rail services a real success story as exports rocketBY ALEXANDER WHITEMAN

China’s Belt and Road initiative (BRI) may have faced recentstrong criticism from the EU, but that has not dented the growthin its exports to Europe. Chinese officials have claimed a 106 percent increase in the value of cargo travelling by rail from China toEurope, equating to some $33 billion.

Xiao Weiming, from the office of the leading group for pro-moting the BRI, told Xinhua that 14,691 trips have been made byChina-Europe freight trains since 2011. Operator United Trans-port And Logistics Company Eurasian Rail Alliance (UTLC ERA)recorded a 54 per cent (62,622 TEU) upturn in volumes betweenChina and Europe.

While the bulk is exports from China (35,536 TEUs, up 69per cent), imports from Europe have been closing the gap, record-ing a 44 per cent increase to more than 27,000 TEUs in Q1.

Russian-Kazakh-Belarussian-owned UTLC ERA has furtheredits links between the two regions, having announced cooperationagreements with two European partners. Its President, AlexeyGrom, said: “I am perfectly confident the agreements signed withour partners will contribute to the active growth of the transittransportation market, enabling UTLC ERA to strengthen its lead-ing positions in cargo shipments on Europe-China-Europeroutes.”

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entered an agreement with Slovakia’s public rail company, ZSSKCargo, to facilitate IT collaboration on container shipments fromChina, to include route scheduling and an analysis of potentialcustomer bases between Slovakia and China. “This is the firsttime we have fixed in writing the intention to build a direct tran-sit transportation technology process,” said Mr. Grom. “We willbe solely responsible for the 1520 gauge, whereas ZSSK Cargowill be in charge of the 1435 gauge. That is how we will be ableto offer our customers the end product – a comprehensive ship-ping service solution.”

UTLC ERA has also announced a deal to assist LithuanianRailways with its postal container traffic from China to Lithuania,providing containers loaded with postal items at Dostyk andAltynkol stations, operated by Kazakhstan Railways. LithuanianRailways would then take over handling at Kena near Belarus,delivering packages to the warehouses of Lietuvos Pastas, Lithua-nia’s public postal service.

Despite the BRI’s growth, a report from EU high representa-tive for foreign affairs and security Federica Mogherini slammedChina’s handling of the trillion-dollar project, describing Beijing asboth a partner and a strategic competitor. Those words may havelittle impact on the BRI’s momentum, with the project now boast-ing the involvement of more than 120 countries. Its developmentwas enshrined in the Chinese Communist Party’s constitution in2017, but cracks have begun to show. According to the AsianDevelopment Bank, a $26 trillion investment shortfall betweennow and 2030 looks likely, while at home the Chinese haveexpressed concerns over a litany of faults. Prospect points to crit-icism of wasted funds, vanity projects, and misguided investment,and even president Xi Jinping has been hit over claims of “hubris”surrounding the project.



Tracks not all running smoothly for North Americanrailroads in Q1BY ALEXANDER WHITEMAN

North American railroads saw mixedfortunes in the first three months of theyear – but for two, the view down the lineis less hazy. Union Pacific (UP) recorded a3 per cent upturn in revenues for its inter-modal product, Premium, in the firstquarter, generating a little over $1.55 bil-lion. Volumes were up 2 per cent year onyear, largely thanks to a double-digitbounce in international business, whiledomestic volumes were down 5 per cent.During an investors’ call, Executive VP formarketing and sales Kenny Rocker said heexpected the growth in international busi-ness to “normalize” to seasonal levels andwas cautious about the domestic outlook.“For Premium, domestic intermodal vol-umes could be impacted by a softer truckmarket, which may limit the opportuni-ties for over-to-road truck conversion,”she added. “However, longer-term funda-mentals still provide a bullish outlook forover-the-road conversions.”

Canadian Pacific (CP) also recorded asimilar upturn in first-quarter revenues,up 4 per cent to C$380 million despite a2 per cent dip in volumes – and, similarly,driven by strong growth in internationalbusiness. Executive Vice-President formarketing and sales John Brooke said CPhad been helped by reduced congestion atVancouver, and added: “This momentumhas carried into the second quarter withintermodal volumes up 15 per cent todate. “So, despite the operating chal-lenges, the CP team worked tirelessly inVancouver with customers and terminalsto drive down dwell time at the port.”

Meanwhile, for Kansas City South-ern (KCS), the first three months of theyear will be a quarter to forget, withdeclines in revenues and volumes.Turnover plummeted 12 per cent com-pared to Q1 of 2017, from $91 million to$80 million, with a volume drop of 9 percent. Chief marketing officer Mike Natzsaid the drop in volume was primarilydown to teacher protests in Michigan,which saw rail staff unable to work asschools were closed, and automotiveplant shutdowns earlier in the year. How-ever, Mr. Natz added, “on the plus side”KCS’ intermodal cross-border franchisevolumes were up 5 per cent, driven bytruck-to-rail conversions. Chief OperatingOfficer Jeff Songer told investors the com-pany was looking to alter the make-up ofits fleet. “We believe we have significant

opportunity increasing the size of ourintermodal trains and are targeting a 10per cent increase in the total combinedlength of these trains,” he said. “As weidentify additional opportunities for trainconsolidation, we will modify our tar-geted train length accordingly.”

U.S. rail operator CSX’s intermodaldivision may have closed 2018 on the up,but this year has begun with “leaves onthe line”. Its first-quarter earnings state-ment reveals a 5 per cent dip in revenue($428 million) and volumes, and pointsthe finger of blame at the “rationaliza-tion” of its domestic network. ChiefExecutive James Foote told investors:“Despite international growth, inter-modal declined due to the additional lanerationalizations implemented followingpeak season. Intermodal revenues areexpected to remain muted, as we workour way through the impact of these lanerationalisations.”

However, Mr. Foote remained“clearly pleased” with the progress in

turning around the division. He notedthat having removed about 8 per cent ofservices, the 5 per cent drop in Q1 meantCSX was “sort of ahead by 3 per cent”,and added that the team was not yet “sat-isfied”.

“This is a long game – these changesare going to take place over the next sev-eral quarters and years,” he continued.“And we hope that the profitability ofthat segment will continue to increaseover time.” The 8 per cent reduction incapacity was carried out in two instal-ments, the bulk in October and a secondcut in January. Mr. Foote stressed that itwas “important to rectify reliabilityissues” across CSX’s North American rail-road operations, and said the measuresunder way would achieve this. “Whetheryou’re a plastics shipper or a steel shipper,you’re not going to use the railroad if it’snot reliable,” he said.



Exclusive interview: Jeff Rubin – what happens whenoil, globalization and environment collide? BY RUSSELL WOOD

what’s been the role of oil and the oil price in the ageof globalization?

“It’s been nothing short of critical. Globalization is all aboutseparating where goods are made and where they are sold, osten-sibly to take advantage of the huge disparities in wage costs aroundthe world. But as markets become separated further and furtheraway from their supply chains, transport costs become increasinglyimportant. And no matter how goods are transported around theworld, whether by truck, rail, ship or plane, we are basically burn-ing the same fuel, oil. So the price of oil is paramount. In a worldof high double digit oil prices, distance suddenly costs money andour world becomes a whole lot smaller. “All of a sudden, freightrates get warped out of kilter. Particularly with the back-and-forthmovements of inputs and intermediate goods that are common-place in today’s global supply chains. Every stop along thosefar-flung supply chains gets more expensive to move cargoes to, asoil prices climb higher. In that way they act like a tariff by restrain-ing global trade. At a minimum they force those supply chains tobe located closer to their end markets.”

you famously predicted the oil price hikes that led tothe global financial crisis (gfc).

“What is the relationship between oil price and global reces-sions like the GFC, and why is this so poorly understood? Therelationship between oil price shocks and global recessions wasonce very well understood. It was hard not to understand theirlinkage since every major price shock led to devastating reces-sions beginning with the two OPEC shocks during the 1970s.Not only did they siphon off massive amounts of income from oil-consuming countries, but their inflationary impact evokedcrippling increases in interest rates from central banks around theworld. In other words, when oil prices are cheap, so too is thecost of borrowing money. But when oil prices spike so do borrow-ing rates and that impacts everyone in the economy regardless ofhow much oil they consume. You’re absolutely right about thatrelationship getting lost in most accounts of the devastating 2008world recession and the global financial crisis that ensued. While

the fraudulent lending and securitization practices associatedwith the sub-prime mortgage market is seen as the culprit, whatpricked the sub-prime mortgage bubble was actually inflation,namely the inflationary impact of the sudden rise in oil prices totriple digit levels. It was the price pressures from soaring oil pricesthat prompted the Federal Reserve Board to hike rates, whichpricked that financial bubble.”

your work has shown that there is an almost inbuilt“failure-mode” within modern oil demand and supplyprice cycles. can you describe how this works andwhere we’re at in the current cycle?

“Well, the conflict between supply and demand is predicatedon their different responses to price. The supply curve is of courseupward sloping, while the demand curve is downward sloping.While that is true for almost all goods, it’s particularly problematicfor oil, given the ongoing depletion of conventional supply. Itmakes supply increasingly dependent on new non-conventionalsources of oil that require expensive new technologies to extract –whether that’s oil found in shale formations, deep water oil, or thebitumen trapped in oil sands. As we become more dependent onthose supply sources we also become more dependent on higheroil prices that are needed to commercially justify their extraction.At the same time the demand for oil is quite price sensitive, partic-ularly as a motor fuel. Hence the higher the price, the less peopledrive, or they switch to more fuel-efficient vehicles, like electric orhybrid ones. So there is an obvious tension between the kind ofprices needed to replace depleting conventional supply and theresilience of demand at those prices. In the past, high oil priceshave always proved to be their own worst enemy since the surgesin prices have all led to, or at least been connected to global reces-sions dating back to the first two OPEC oil shocks. And then ofcourse, oil prices tumble as demand collapses, only to begin a newcycle as lower prices resuscitate demand.”

“So where are we now, in that never-ending cycle of risingprices bringing new sources of supply, only to ultimately kill thedemand for them? Oil seems to have settled in a range of about$60 a barrel, which makes some supply like the heavy oil fromCanadian oil sands no longer viable. Even more so for costlyArctic drilling which is dead in the water at today’s oil prices…But if you look at where new supply is coming from, it’s flowingfrom shale formations in the United States like the prolific Per-mian Basin. The United States is now the largest oil producer inthe world, pumping out 12 million barrels per day. Soaring Amer-ican production has more than offset all the supply reductionsthat OPEC and Russia have made to support higher world oilprices. That supply dynamic has left oil prices in their currentsweet spot. By sweet spot, I mean high enough to sustain furthergrowth in at least shale production (which for the most part needsoil prices north of $40 a barrel), but not high enough to eitherchoke off its global demand or generate inflationary pressures thatelicit a growth killing interest rate response from central bankers.How long can prices remain in this Goldilocks zone? For as longas U.S. shale production can continue to more than compensatefor declining production of conventional oil fields like Ghawar, inSaudi Arabia. If at some point U.S. shale production can’t keepgrowing, prices will rise again, and fast, as depletion of conven-tional supply gets the upper hand. Alternatively, if fracking goes


global, then shale formations all around the world will soon beadding to global supply just as the Permian or the Bakken in theUnited States have. That would be a good news story for globaloil consumers but bad news story for oil-based global carbon emis-sions. Most estimates suggest that if the world is to achieve theemission reduction targets pledged by countries at COP21,(which would hold the average increase in global temperatureto less than 2 degrees), oil consumption will have to fall any-where from 25 to 40 per cent from current levels within twodecades. That required reduction in oil usage is less likely if oilprices stay at about $60 a barrel.

the latest ipcc report paints a very dire picture for theenvironment, it also singles out shipping and aviationfor special mention. as rising oil prices, faltering globaldemand and environmental crises all collide, how doyou see this playing out?

“While shipping and aviation deservedly get special mention,the biggest reason global GHG emissions are once again on therise is the healthy demand for coal, particularly in Asia. That bothreflects strong ongoing growth in power demand in the region aswell as special factors like the closure of nuclear power plants inJapan and their power replacement with coal and LNG. “It’s note-worthy that in contrast to Asia, coal-fired emissions have,ironically, fallen in the United States…But coal’s real nemesis in

the U.S. is not the environmental initiatives of the past Obamaadministration, but rather the astounding success that frackinghas had in accessing previously inaccessible natural gas trapped inAmerican shale formations. As natural gas prices have plungedwith the onslaught of new supply, over 200 coal-fired power gen-erating stations have been closed in the United States over the lastdecade – a trend that is continuing unabated during the TrumpAdministration. Until we see a breakthrough in energy storagetechnology that would allow renewables like wind and solar toserve as base load power, fracking is the only viable commercialalternative to coal. That poses an inconvenient choice for manyenvironmentalists. Of course, the price of carbon emissions canhave the same impact on transport costs as the price of oil itself.For example $100-a-ton price on carbon emissions poses as mucha threat to fossil fuel consumption as triple digit oil prices are toglobal oil consumption.”

Jeff Rubin was CIBC global Chief Economist for some 20 years,a leading authority on oil, and much sought-after keynote speaker.He has developed and published ground-breaking insights on thelesser known aspects of oil in globalization and the modern econ-omy, been rated as a top economist throughout his career, and is anaward-winning author. Jeff can be reached on twitter @JeffRubin.Russell Wood is a senior columnist for Loadstar Premium.


New packaging for lithium-ion batteries means safertransport – but not by air, yetBY ALEX LENNANE

The automotive industry will be able to transport lithium-ionbatteries in a safer and more sustainable way following the launchof new re-usable packaging. Developed by Chep, with originalequipment manufacturers (OEMs), the packaging will help pre-vent fires, one of the biggest problems in the transport oflithium-ion batteries. However, the new solution is not economi-cally suited to the small volumes of batteries permitted to becarried by air, instead it’s designed for larger quantities which canbe transported by road or rail.

Lithium-ion batteries need to be still during transit, and Chepis working with manufacturers to create an insert which wouldprevent the battery from moving within its packaging. “Withinthis we would also look at fire/heat-suppressive material thatwould mitigate any potential problem,” said a spokesperson forChep’s automotive team, noting that all shipped batteries mustnot be more than 30 per cent charged. Chep added that it wasworking to prevent accidental activation and to “prevent anyshort circuit or activation of the device during transit”.

One of the biggest problems is misdeclared or counterfeitbatteries that have not been tested according to UN rules. But,given that Chep packaging would only be used by original batterymanufacturers, it would not mitigate against counterfeits whichgot into the supply chain. The spokesperson said that the newpackaging “could potentially be used for air transport”.

However, she added: “I would avoid shipping via thismethod due to the maximum gross weight allowance of 35 kg perpackage for cargo and only 5 kg per package for passenger flight.It means we are restricted dramatically and it would not be a cost-efficient mode of shipping. For both road and sea, we are allowedto ship up to 400 kg per package. Anything over 400 kg requiresa different container.”

Last month, the U.S. Pipeline and Hazardous MaterialsSafety Administration issued an interim final rule for airlines, lim-iting the shipment of lithium ion cells or batteries to one packageper consignment, prohibiting their shipment on passenger air-craft, and requiring the state of charge not to be more than 30 percent. The industry can submit comments on the interim rulesbefore May 6.

The majority of dangerous goods are shipped in ‘one-waypackaging’. The new solution is re-usable and returnable, makingit economically efficient as well as sustainable, said Chep.



LNG is the most environmentally friendly, readily available fuelfor shipping today – and in the foreseeable future, according to anew study. With IMO’s 0.5% sulphur cap regulations coming intoforce next January, along with its target of halving C02 emissionsfrom shipping by 2050, decisions need to be taken on alternativefuels. An independent study, commissioned by the not-for-profit col-laborative industry foundation SEA/LNG, its Chairman, PeterKeller, said the study aimed to prove the efficiency of LNG at this“challenging time for shipowners, operators and regulators”.

Mr. Keller, also Executive Vice-President of U.S. flag line Tote,the first to operate LNG-fuelled containerships, said there had been“a significant amount of investment in LNG bunkering capabilitiesaround the world”, a lack of which had in the past deterred mostcarriers from ordering LNG-fuelled vessels.

CMA CGM is the first, and so far only, global carrier to opt forLNG-fuelled ULCVS, with its order last year for nine 22,000 TEUships to be delivered next year.

Mr. Keller conceded it was not viable to retrofit ships to run onLNG. “Conversions are difficult,” he said, given the size of the tanksrequired and the complexity of the work.

Indeed, Hapag-Lloyd’s chairman, Rolf Habben Jansen, told TheLoadstar recently that a ballpark figure for retrofitting one of its 17

so-called LNG-ready ULCVs, inherited from its merger with UASC,was $25 million – at least four times the cost of installing a scrubbersystem. He said only one of the 15,000 TEU ships was being retro-fitted to run on LNG, as a trial, and he did not expect this to berolled out to the sister vessels.

The Well-to-Wake study (a well-established approach for assess-ing the life-cycle analysis of fuels used in ships) was undertaken byconsultant thinkstep. Using testing and data in cooperation withengine manufacturers, it found that the use of LNG as a marine fuelshowed GHG reductions of up to 21 per cent, compared with cur-rent oil-based fuels for two-stroke slow-speed engines. Theseaccount for about 70 per cent of the power units used in shipping.

Mr. Keller admitted that LNG was not a final answer to cuttingemissions from shipping, but “it is the only alternative fuel that isavailable now”. Maersk said recently it had invested some $1 billionin research and development on alternative fuels, which it said wasbeing driven by its customers, the carrier having seen a 30 per centincrease in tenders stipulating the use of sustainable fuel. Otheroptions being researched include bio-diesel and ammonia (hydro-gen), solar and wind power.


ZIM Integrated Shipping Services’ new call to Port of Prince Rupert

CN, Prince Rupert Port Authority and DP World PrinceRupert have announced a new weekly marine carrier service at theFairview Container Terminal.

ZIM Integrated Shipping Services (ZIM) partnered with 2MAlliance and has added Prince Rupert as one of its destinations.With a global reach to over 100 countries, the new ZIM servicemade its inaugural call at the Port of Prince Rupert on March 27,2019 with the arrival of ZIM containers on the Maersk Altairvessel.

“Prince Rupert Port Authority is proud to welcome ZIM. Theaddition of ZIM to the Port further validates its advantages ofspeed, reliability and reach. With CN’s capacity improvements inwestern Canada and DP World’s expansion of Fairview ContainerTerminal to accommodate 1.8 million TEUs by 2022, the Port cancontinue to grow to meet the demand for trade through Canada’s

leading-edge gateway,” said Shaun Stevenson, the Port’s President& CEO.

“We are excited to welcome our long time customer ZIM toPrince Rupert,” said Keith Reardon, Senior Vice-President, Con-sumer Product Supply Chain Growth at CN. “With this call ZIM,as a new partner to the 2M Alliance with Maersk and MSC, willbenefit from the shortest route from Asia to reach Canadian andU.S. markets. Along with DP World and the Port, we look forwardto growing our service together with ZIM.”

Prince Rupert is the closest major North American port to Asiawith direct access to CN’s Class 1 continental rail network. Sinceits conversion from a breakbulk handling operation, Fairview Con-tainer Terminal has anchored an efficient trade lane providingextensive reach into both central Canada and the US Midwest.With 500,000 TEUs of terminal capacity added by DP World in2017 and plans for further expansion to a total of 1.8 million TEUSof intermodal capacity by 2022, the Port is well positioned to con-tinue its remarkable pace of growth.

“We are pleased to welcome ZIM to DP World PrinceRupert”, said Maksim Mihic, General Manager of DP World(Canada) Inc. “This highlights the growing demand for Fairviewcontainer terminal’s reliable and cost-effective services.”

“We are very glad to add Prince Rupert to our growing portfo-lio, as part of our renewed Asia-Pacific North West services, inaddition to our other Pacific North West (PNW) gateways. Ourstrategic cooperation with the 2M Alliance allows us to offer ourcustomers the premium solutions and the unique advantages thenew Prince Rupert call can provide,” said Nissim Yochai, ZIM Exec-utive Vice-President, Pacific Trade.

LNG, the forgotten fuel, makes its case as the‘greenest’ alternative to oilBY MIKE WACKETT


MARCELLAROCHECHENGDIRECTORLNGDIVISION,BCFERRIES. 1962 - 2019

JOYCE ABRAHAMSONAPRIL 7, 1956 – MARCH 30, 2019

Joyce Abrahamson Littlehale of Hillsdale, NJ, passed from thisworld on March 30 after a courageous battle with cancer and arare autoimmune disease just days short of her 63rd birthday. Shespent her final days at home surrounded by cherished family andfriends. She leaves her husband, Allan Littlehale, three adult chil-dren, Brian, David and Amanda, her mother Lucille, her brothersHarry and Tom and an untold number of family, friends and pro-fessional associates around the country.

A 1974 graduate of Park Ridge High School, Park Ridge, NJ, Joycewent on to complete a BA degree in Marketing at Ryder College in1978. She began her professional career as a Marketing Managerwith Hapag-Lloyd America in New York City during a period ofbooming international trade. She left to open a New York City office

of a San Francisco advertisingagency and, in 1989, createdand launched her own com-pany, the Abrahamson Group,providing advertising, market-ing and public relations ser-vices to the international cargoshipping market from her of-fice in Hillsdale. Her clients in-cluded global steamship lines,agencies and logistics companies. Very well-known and respectedin the international transportation industry, Joyce was one of thefirst women to own and operate a service company in that maledominated industry.

O B I T U A R I E S

Every once and a while, the departure of a colleague, friend, familymember in our community affects us in a strong way. The recentpassing of Marcel LaRoche on the morning of March 23rd, 2019covered all those categories for me. Marcel was my brother, bestfriend and colleague in the Marine Industry. Marcel passed quietlyat home with his family after an enormous fight against a very ag-gressive cancer. Marcel leaves behind a wife: Natasha, a son: Sam,two daughters: Karina Faye and Mischa, and two grandchildren.Also, one brother (Me), a half-brother: Francois and several niecesand nephews.Marcelwasborn inMontreal,oneof twosonsofanavalofficer.Hisfather soon moved the family to Halifax and Marcel often spenttime at sea accompanying his father and brother on severalraces that the navy entered yachts/schooners into participation.This certainly inspired him to continue his education and careerto focus on the Marine industry. Marcel’s family finally settledin Quebec City, where he completed his secondary education.In high school and college Marcel excelled in several sports, in-cluding his favorite, football.Aftergraduation fromHighSchool,he enteredMarine Engineering studies with the Canadian CoastGuardat their college inCapeBreton,NovaScotia.Marcel remainsin the college’s records as one of the youngest engineers toachieve his fourth-class license.Marcel went on to sail for the Canadian Coast Guard on several ves-sels and participated in several key projects for the CCG, such asthe commission of the icebreaker CCGS Des Groseilliers and a largerefit project involving several vessels and shipyards. He also par-ticipated in notable voyages to the arctic not only to break ice butalso in gatheringdata.After his departure from the Coast Guard, Marcel pursued his ca-reer at sea, sailing both internationally for an array of companiesand domestically for Algoma and Upper Lakes Shipping. Marcelwent on to achieve a Chief Engineers license. In these years he

gained valuable experience and also gained an increased interestin safety and environmental issues faced by the industry. Marcelleft his career at sea to work for class societies, most notablyLloyds Registry, where he had substantial success in both makingthe industry a safer place, but also in the development of key futurecodes and programs. Marcel participated in the formation of suchdocuments as the IMO Polar Code, and organizations such asGreen Marine. The environment soon became a priority as well ashow solutions could be applied while still promoting increased sus-tainability for the stakeholders. Marcel has given several talks andlectures, always happy to share his knowledge and experience withothers and to assist with education programs.In 2014, he became the Director of the LNG Division, Engineeringfor British Columbia Ferries Inc, overseeing the conversion and new-build construction of LNG ferries for the company, and then theirsubsequent entry into the industry. He offered and applied revolu-tionary new ideas that have most certainly changed our industry forthe better in relation to our Marine and Air environment. Marcel wasinstrumental in raising and changing public awareness about theapplication of Liquified Natural Gas as a viable source of propulsionin our industry, coming at a time that we are quite actively searchingfor solutions for carbon emissions, oil pollution, etc. Marcel was atop representative at the SGMF (Society for Gas as a Marine Fuel)and played a key role in developing and modifying important legis-lation regarding LNG propulsion and fuelling.This was a “work of the heart” for Marcel and he remained very ac-tive in his role throughout a large segment of his fight with cancer.Marcel fought with all his mind and heart, for family, life, and lovewith a passion rarely seen in our society. He will be missed in thisworld but waiting for us in the next with one of his infectioussmiles.Rest in Peace BrotherCapt. Georges LaRoche


Algoma Central Corporation reports results for the yearended December 31, 2018

Algoma Central Corporationnnounced that for the year endedDecember 31, 2018, revenues increasedby 12 per cent.

Consolidated revenues increased to$508.2 million as a result of improvedrates in the Domestic Dry-Bulk andOcean Self-Unloaders segments, andincreased customer demand in the Prod-uct Tankers segment. Net earningsdeclined to $50.9 million from $58.8million in 2017. However, net earningsfrom continuing operations, whichexcludes income from discontinued realestate operations in 2017, increasedfrom $35 million to $50.9 million. Earn-ings in 2018 include a gain of $10.2million related to the cancellation offour shipbuilding contracts. In Decem-ber of 2018 the Company received a fullrefund, including interest, for one of thecancelled contracts and early in 2019,instalments on the remaining three con-tracts were refunded with interest.

The company added three newEquinox Class vessels to operations in

2018, namely Algoma Niagara, AlgomaSault and Algoma Innovator. Addition-ally, Algoma Buffalo and AlgomaCompass were acquired from AmericanSteamship Company late in 2017; bothvessels began operations at the start ofthe 2018 navigation season.

Algoma Tankers Limited (“ATL”)purchased a 2008-built product tankerwhich became the seventh tanker in theATL fleet. The vessel was re-named theAlgonorth and began operations at theend of December.

Global Short Sea Shipping segmentrevenues increased 24 per cent com-pared to 2017. The Company has a 50per cent interest in three joint venturesand revenue from the Global Short SeaShipping segment is not included in theconsolidated revenue figure.

During the year, NovaAlgoma ShortSea Carriers (“NASC”) and Peter DöhleSchiffahrts-KG, announced the creationof DNA Shipping, a commercial agree-ment to pursue consolidation andgrowth within the multi-purpose project

vessel (MPP) and 13,500 to 15,000mini-grabber dry-bulk markets. In addi-tion, another new joint venture,NovaAlgoma Bulk Holdings (“NABH”),was created. NABH has interests in fourdeep-sea bulkers operating internation-ally and is managed out of Lugano,Switzerland.

Subsequent to year end, Algomaentered into an agreement to acquirethree vessels from Oldendorff CarriersGMBH & Co. which operate in the CLSIPool and entered into an agreement toacquire a 2010-built product tanker.

“Fiscal 2018 was an exciting year atAlgoma,” said Gregg Ruhl, Algoma Cen-tral’s President and CEO. “Despite somechallenges, we achieved a number ofthings which will advance us towardsthe strategic goals we set in 2015. Oursuccess and growth would not havebeen possible without the hard workand dedication of the Algoma team andour loyal customers” added Mr. Ruhl.

Damen launches two road ferries for BC Ferries

In the space of just a few weeks, two81-metre road ferries for BC Ferries havebeen launched at Damen Shipyards Galatiand are now being fitted ahead of enteringservice next year. Once operational, theywill be capable of carrying up to 300 pas-sengers and crew, and 47 vehicles.

The ferries were built to Damen’sRoad Ferry 8117E3 design and the orderwas secured following an extensive,multi-phased, international tenderprocess. BC Ferries is currently undertak-ing a fleet renewal. The twin DamenRoad Ferry 8117E3 will serve the North-

ern Gulf Islands off the coast of Vancou-ver, replacing vessels that are now overfifty years old.

In his speech at the launch, whichwas delivered partly in Romanian, PaulCatsburg, Director of the vessel replace-ment programme at BC Ferries, said,“This class of vessels is very important forBC Ferries as it represents our newestvessel type, introducing a state-of-the-art,diesel-electric, hybrid propulsion system.The ships’ hybrid design is important fortwo main reasons; firstly to improve envi-ronmental stewardship and secondly toreduce operating costs by evolving to fullelectric propulsion.”

Damen is working to a fixed-pricedcontract that provides BC Ferries withsubstantial guarantees related to deliverydates, performance criteria, cost certaintyand quality construction. Building twoidentical vessels will also deliver capitaland operating cost savings and additionalefficiencies. After-sales warranty supportwill be provided by Point Hope Shipyardsin Victoria, British Columbia in an agree-ment with Damen.


CN maximizing the use of rail into Port of PrinceRupert, and reports record grain shipments in April

The first train of thermal coal from Coalspur’s Vista Mine inHinton, Alberta has shipped to Ridley Terminals. CN is also deliv-ering the first unit train of propane from Alberta for export via thenew AltaGas Ridley Island Propane Export Terminal.

“I’m very proud to announce the start of these new exportsupply chains to Asia,” said JJ Ruest, CN’s President and CEO.“Our objective is to help create export supply chains that getnational resources to the best markets for our customers. Theseprojects support jobs and increase Canada’s role as an interna-tional energy provider into Asia. As these new projects and ourrecord grain movements for the month of April demonstrate, ourcapital investments are strengthening our existing network andexpanding our capacity to move more western Canadian naturalresources to market safely and efficiently.”

In the month of April, CN’s total tonnage of grain moved outof Western Canada was an all-time record 2.72 Million MetricTons (MMT) compared to the three-year average of 2.23 MMT.“With 21.1 MMT moved in the first nine months of the crop year,our results are 8.2 per cent, or 1.6 MMT ahead of the three-yearaverage,” declared Allen Foster, CN’s VP Bulk, based in Calgary.

The AltaGas Ridley Island Propane Export Terminal benefitsfrom excellent railway service and a marine jetty with deep-wateraccess to the Pacific Ocean. The facility has been receivingpropane since mid-April and will provide access to more attrac-tively priced markets in Asia for the propane derived from thenatural gas industry based in British Columbia and Alberta. CNand AltaGas have been working closely with local communitiesand stakeholders in the Prince Rupert area, setting the foundationfor a successful project.

“CN is a valued and strategic partner who plays a critical rolein the success of our Ridley Island Propane Export Terminal,”explained James Shelford, Senior VP, Commercial for AltaGas.“Ensuring the safe and reliable delivery of propane to our facilityis an integral component of our integrated asset platform that isdesigned to provide maximum value to our customers.”

The brand new Vista Mining Complex is a low-cost world-class surface mine operation expected to employ in excess of 350

people full-time. With committed rail and terminal capacity, theproject is focused on the serving the growing demand for thermalcoal in the Asian markets. Coalspur has targeted initial annualproduction of upwards of 7 million tonnes, with plans to grow.

“In January 2017, The Cline Group made the decision tobuild the Vista Mine complex which was a greenfield mining proj-ect located just outside of Hinton, AB,” explained Mike Snelling,Senior VP, Western Operations, Coalspur. “After less than 23months, we’ve loaded our first unit train for export. This amazingaccomplishment was made possible in part thanks to our partner-ship with CN who’s commitment and expertise in running a safeand efficient railroad has given us the required confidence tomove forward on our long-term strategy for the Vista Mine tobuild an operation which will be an industry leader in safety, pro-ductivity, and operating costs.”

Furncan and Cross Marinehave joined forces

Marine shipping agencies Cross Marine Inc. and FurncanMarine Ltd., both of Montreal, have consolidated their longstand-ing business relationships as of April 1 by combining theirrespective expertise, experience, and resources. Both agencieswill continue to function as before, under their own names, andthere are no changes in contact information.

Cross Marine Inc. was founded in 1991 by Capt. JanKroskowski, and specializes in representing cruise lines acrossCanada.

Under the direction of President and CEO Andrew Chodos,Furncan Marine, founded in 1976, through its long establishedoffices in Saint John NB and Halifax NS, has been operating asagents in the Maritimes, with expertise in cruise ships, tankers,breakbulk, container carriers and bulk carriers.


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CARGO NAVIGATORS [email protected]............................................. 78

CN cn.ca................................................................................................. IFC

CP cpr.ca.................................................................................................IBC

GILLSHIP NAVIGATION gillship.ca...................................................... 31

GROUPE DESGAGNÉS desgagnes.com ................................................39

GUY TOMBS guytombs.com ................................................................. 57

HALTERM halterm.com.......................................................................... 13

HAMILTON PORT AUTHORITY hamiltonport.ca ................................. 26

HUNT REFRIGERATION huntrefrigeration.com................................. OBC

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FREEContact FRANCE NORMANDEAU [email protected]

UPCOMING EVENTS

HWY H2O hwyh20.com ......................................................................... 28

MARITIME EMPLOYERS ASSOCIATION mea.ca .............................. 35

MARTECH POLAR martechpolar.com ................................................... 45

MCASPHALT INDUSTRIES mcasphalt.com ........................................ 32

MSC (CANADA) msc.com ....................................................................... 3

OCEAN NETWORK EXPRESS one-line.com...........................................6

PROTOS SHIPPING protos.ca .............................................................. 65

SEABOARD MARINE seaboardmarine.com ..........................................55

STERLING FUELS LIMITED sterlingfuels.ca ........................................30

STOGER CHARTERING ................................................................ 64

VALPORT valport.ca ................................................................................36

WEIGHIT weighit.com......................................................................... OBC

ZIM zim.com .......................................................................................... 58

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May 13, 2019 - Canadian Sailings

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