8 MARINE TRANSPORTATION

INDUSTRY STRUCTURE

Canada's marine industry includes a fleet of Canadian- flag operators that provide domestic and transborder shipping services. International trades are served largely by foreign-flag operators that call at Canada's major ports.

DOMESTIC SERVICES

Canada's merchant fleet handles most domestic shipments of bulk materials on the Great Lakes and along Canada's coastline. This fleet is made up of self-propelled vessels of at least 1,000 gross tonnes ¹ flying the Canadian flag. At 2003 year-end, it included 181 vessels and almost 2.3 million gross tonnes.

Although declining, dry bulk carriers remain the backbone of the Canadian merchant fleet, accounting for 47 per cent of tonnage and 33 per cent of vessels in 2003. The dry bulk fleet was made up of 60 vessels in 2003, composed of straight-deck bulkers dedicated mainly to grain transportation and self-unloading vessels carrying various bulk commodities. By comparison, the number of tankers decreased from 39 in 1983 to 23 in 2003, while their capacity share increased from 10 to 24 per cent of total gross tonnage, due to the addition of larger units. In the last 10 years, the capacity of general cargo vessels also increased (from four to 12 per cent of total gross tonnage).

An extensive fleet of tugs and barges was also in operation at the domestic and international level. In 2003, the Canadian Transportation Agency estimated that the Canadian fleet of tugs and barges included 328 tugs (131,000 gross tonnes) and 1,203 barges and scows (almost 1.2 million gross tonnes).

Table 8-13 shows the transport capacity of the Canadian-registered fleet by type of vessel in 1983, 1993 and 2003.

Note: Self-propelled vessels of 1,000 gross tons and over, including government-owned ferries.

Source: Canadian Transportation Agency and Transport Canada

EASTERN CANADA

Freight services in eastern Canada, including the Arctic, are provided by a fleet of dry bulk vessels (straight- deck and self-unloaders), tankers, general cargo and other vessels. The three largest operators in the Great Lakes-St. Lawrence region are Algoma Central Corporation, Upper Lakes Group and Canada Steamship Lines.

While there were no acquisitions or mergers among Great Lakes ship operators in 2003, Algoma Central Corporation and Upper Lakes Group Inc. entered into a memorandum of understanding to increase the scope of their Seaway Marine Transport partnership. The new arrangements are expected to increase efficiency by integrating the operations, purchasing, accounting and administrative functions of the respective fleets, in addition to the joint marketing functions already performed by Seaway Marine Transport.

WESTERN CANADA

Domestic marine cargo services on the West Coast are provided by a large tug and barge fleet. Most operators are involved mainly in the domestic trades but some also trade internationally between Canadian and U.S. ports.

Several of the largest tug and barge operations are controlled by the Washington Marine Group. These include Seaspan International Ltd., the largest Canadian tug and barge operator on the West Coast; Cates Tugs; Norsk; and Kingcome Navigation Company, formerly owned by MacMillan Bloedel. The second-ranked tugboat company in British Columbia is Rivtow Marine Ltd.

NORTHERN CANADA

In the Western Arctic, the principal marine operator for the Mackenzie River Watershed, (including the Mackenzie River and Great Slave Lake), the Arctic coast and islands, and Alaska is Northern Transportation Company Limited (NTCL). NTCL's principle concerns are bulk petroleum products and dry cargo for communities, defence installations and gas exploration sites across the North. Prior to the 2003 season, it also provided tug and barge operations from the Port of Churchill to communities in what is now the Kivalliq region of Nunavut.

In the Eastern Arctic, responsibility for the Arctic Sealift, for dry cargo and bulk fuel, now rests with the Government of Nunavut. For many years, this was organized by the Canadian Coast Guard. For the 2003 season, the Nunavut government awarded dry cargo sealift contracts for the Kivalliq and Baffin regions to two Inuit-owned companies. Nunavut Sealink and Supply Inc. (NSSI), a partnership between Transport Desgagnes and Arctic Cooperatives Ltd., served the seven Kivalliq region communities, plus four Baffin communities. Nunavut Eastern Arctic Shipping (NEAS) served the other 10 Baffin communities. The cargo was shipped from Montreal.

Although the Sealift contract is with the Government of Nunavut, the contract stipulates that any person or company can also use the service and enjoy the same rates and services.

The Woodward Group was awarded the contract to deliver bulk fuel to Nunavut communities. One tanker will be carrying fuel from Montreal to the region while a smaller tanker will deliver fuel to communities in the Kivalliq region from a marine tank farm at Churchill.

In addition to the Arctic Sealift for Nunavut communities, resupply services to the Nunavik Region are managed by the Quebec Ministry of Transportation, while the James and Hudson Bay Cree are served out of Mooseney (cargo originates in the Toronto region). Moosonee Shipping has also established a service for private cargo re-supply from Churchill to the Kivalliq region.

Mining operations in the Arctic regions also have vessels calling with supplies inbound and carrying zinc and lead concentrates to world markets outbound.

INTERNATIONAL SERVICES

International marine freight transport is made up of bulk shipping and liner shipping.

Bulk shipping is marine freight carried as single cargoes and in large volume. Examples of Canadian bulk cargoes include coal, iron ore and potash.

The bulk freight industry is made up of time charters (term contracts) and "spot" or "tramp" carriers that operate on the basis of short-term contracts for a specified number of voyages or days or for a given quantity of cargo. This industry operates in a competitive market. Most of Canada's international bulk trade is carried under time charter arrangements on foreign-flagged ships.

The international liner trade refers to high-value containerized cargo. This trade is dominated by large fleets of specialized container vessels operating on major trade routes around the world. Most of the Canadian- controlled international fleet operates under foreign flags and employs foreign officers and crews. Shipping lines calling at Canadian ports may provide conference or non- conference liner services. Ocean carriers (i.e. individual lines) providing liner services on a common trade route will often form a shipping conference and adhere to rates and/or conditions of service under a conference agreement. Such practices are exempted from certain provisions of the Competition Act by the Shipping Conferences Exemption Act (SCEA).

By offering rates and services comparable with those of conference operators, independent shipping lines (also called non-conference carriers) contribute to a competitive international shipping industry. Shipping lines sometimes choose to be a conference member on certain routes and an independent operator on others.

SERVICES AVAILABLE TO CANADIAN SHIPPERS

In 2003, the Canadian Transportation Agency had 15 shipping conference agreements on file. Conferences are no longer required to file their tariffs with the Agency.

Five of the conferences operate between Eastern Canada, Northern Europe and the Mediterranean. Some of the major lines serving Canada as conference members are Atlantic Container Line, Canada Maritime Ltd., Hapag-Lloyd Container Line, P&O Nedlloyd, MITSUI O.S.K. Lines and Orient Overseas Container Lines.

Table 8-14 lists the 15 Conference Agreements.

TABLE 8-14: SHIPPING CONFERENCES SERVING CANADA IN 2003

1. Canadian Continental Eastbound Freight Conference (E)
2. Canada-United Kingdom Freight Conference (E)
3. Continental Canadian Westbound Freight Conference (E)
4. Australia-Canada Container Line Association (E & W)
5. Mediterranean Canadian Freight Conference (E)
6. Canada/Australia-New Zealand Association Carriers (CANZAC) (E & W)
7. New Zealand-Canada Container Lines Association (E & W)
8. Canada Transpacific Stabilization Agreement (E & W)
9. Mediterranean North Pacific Coast Freight Conference (Canada) (W)
10. Canada/Australia-New Zealand Discussion Agreement (E & W)
11. Canada North Atlantic Westbound Freight Conference (E)
12. Canada Westbound Transpacific Stabilization Agreement (E)
13. Joint Mediterranean Canada Service Agreement (E)
14. Canadian Pacific/Latin American Freight Service (W)
15. Columbus/Maruba Working Agreement (W)

Notes: E = East Coast; W = West Coast

Source: Canadian Transportation Agency

Competition between conference and non-conference carriers benefits shippers, as does competition within conferences through the independent action provision contained in the SCEA. This provision allows individual conference lines to offer a rate, or services, different from those found in the conference tariff. Under the 2002 SCEA, the period by which an individual conference member must notify its other conference members of its intention to take independent action on rates and other service items was reduced from 15 days to five days.

In addition, the 2002 SCEA allows an individual conference line to sign service contracts with shippers without disclosing the contract terms and conditions to the conference. It also allows a conference and a shipper to negotiate and sign confidential, conference-wide service contracts. These contracts must, however, be filed with the Canadian Transportation Agency in order to comply with the SCEA.

In 2003, the Canadian Transportation Agency accepted filings for 25 service contracts, ² 26 fewer than in 2002. The contracts applied to both inbound and outbound traffic and to origins and destinations on both the east and west coasts of Canada.

¹ Gross tonnage is the capacity in cubic feet of the spaces within the hull and of the enclosed spaces above the deck of a vessel, divided by 100. Thus 100 cubic feet of capacity is equivalent to one gross ton. However, capacity of a cargo carrying ship can also be expressed as deadweight in tonnes (1000 kg) required to immerse the hull at a particular draught (usually the maximum summer draught). Back to text

² Service contracts are pro-competitive provisions designed to maintain Canadian conference legislation in balance with Canada's major trading partners and support the recent trend toward a greater reliance on the marketplace. Back to text

Major Events in 2003

Infrastructure

Industry Structure

Passenger Transportation

Freight Transportation