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Marine Atlantic Inc. (MAI), a federal Crown corporation, operates the constitutionally guaranteed ferry link between North Sydney, Nova Scotia, and Port-aux-Basques, Newfoundland, and the seasonal alternative between North Sydney, Nova Scotia, and Argentia, Newfoundland. Coastal Transport Ltd. operates the ferry service between Black's Harbour, New Brunswick, and North Head, Grand Manan, under contract with the Province of New Brunswick. Since October 1, 1995 it has also operated a ferry service between the islands of Grand Manan and White Head. Northern Cruiser Ltd. (NCL) operates a passenger/vehicle ferry service between Blanc Sablon, Quebec, and St. Barbe, Newfoundland, from May to January, under contract with the Province of Newfoundland. Northumberland Ferries Ltd. (NFL) provides seasonal ferry transportation (May 1 to December 20) between Caribou, Nova Scotia, and Wood Islands, Prince Edward Island, under contract with the federal government. The MV Holiday Island, a Marine Atlantic Inc. vessel, which became surplus upon the opening of the Confederation Bridge, began operating as part of this service in June 1997 to replace the aging Prince Nova and Prince Edward. Deployment of this vessel improves NFL's carrying capacity and efficiency. Bay Ferries Limited was awarded a five-year contract with the federal government to provide yearly passenger and vehicle ferry service between Saint John, New Brunswick, and Digby, Nova Scotia, and seasonal service between Yarmouth, Nova Scotia, and Bar Harbor, Maine, effective April 1, 1997. A federal subsidy will be provided to Bay Ferries for the first three years of its five-year operating contract, after which it is expected that service will continue without further federal involvement. Gestion C.T.M.A. enr. (C.T.M.A.) provides federally subsidized passenger/vehicle ferry service between Cap-aux-Meules, Magdalen Islands, Quebec, and Souris, Prince Edward Island, during the ice-free period from early April until late January. In July 1997, the federal government purchased the Irish vessel MV Isle of Inishturk (renamed under Canadian flag MV Madeleine), to replace the aging MV Lucy Maud Montgomery. Use of this newly acquired vessel increased C.T.M.A.'s carrying capacity from 300 passengers and 90 auto-equivalent units (as provided by the Lucy Maud Montgomery) to 1,000 passengers and 250 auto-equivalent units, reducing the number of sailings required during the shoulder season. C.T.M.A. also provides a passenger and cargo ferry service from Cap-aux-Meules to Montreal from April to December, and from Cap-aux-Meules to Matane during the winter, under contract with the Province of Quebec. In 1997, the Province of Newfoundland reached an agreement with the federal government to assume responsibility for ferry services to and along the coast of Labrador. Newfoundland and Labrador's Department of Works, Services and Transportation now provides all of the intra-provincial and coastal ferry services. Quebec's transportation ministry subsidizes la Société des traversiers du Québec (STQ), which operates a total of eight ferry routes on the St. Lawrence River, five of which operate year-round. Private organizations manage three of the eight ferry routes on behalf of STQ. La Traverse Rivière-du-Loup/Saint-Siméon Ltée also operates a one-vessel passenger-and-vehicle service on the St. Lawrence River. The Quebec Ministry of Transportation subsidizes three regular passenger and freight lines, four private ferry operations, and a water taxi. It also owns three small ships that are operated by local groups. In addition, the Ministry is responsible for the adjudication of contracts for transporting supplies to native communities in Northern Quebec. The Ontario Ministry of Transportation owns and operates four ferry services and supports six municipal ferry services. Negotiations are currently under way to have the government transfer ferries that meet primarily local traffic needs or that link local roads, where a suitable municipal recipient exists. Transition plans are under way and the transfer of full authority to the municipalities will take effect following approval of the enabling legislation, some time in 1998. Ferries that will no longer receive provincial funding include the two serving Howe Island, and those that serve Amherst, Wolfe, Simcoe, MacKenzie, Pelee and Toronto islands. The province will retain responsibility for the Glenora ferry, which is a link for a provincial highway, and the Abitibi ferry, which serves a sparsely populated area. The Owen Sound Transportation Company (OSTC) provides transportation services on Lake Huron between Tobermory and South Baymouth on Manitoulin Island, from early May until mid-October. OSTC also manages transportation services on Lake Erie between Leamington/Kingsville and Pelee Island, Ontario, and Sandusky, Ohio, from April through December, on behalf of the Ontario Ministry of Transportation. The Manitoba Department of Highways and Transportation operates seven passenger and vehicle ferries, three motor vessels and four cable ferries. The British Columbia government receives a federal grant for the provision
of ferry services in coastal waters. British Columbia Ferry Corporation
(BC Ferries), a provincial Crown corporation, is the largest ferry operation
in North America, with a fleet of The Ministry of Transportation and Highways is responsible for 17 freshwater ferry routes in British Columbia. In 1996, the Adams Lake ferry service was converted from a tug and barge operation to a cable ferry. This permitted an extension in the hours of service and a reduction in operating costs. |
In accordance with the National Marine Policy announced in December 1995, the federal government is looking at ways to reduce operating costs and increase efficiency through new vessel management and procurement practices, commercial operation of vessels, and the streamlining of ferry services. The federal objective is to focus on safety and security, constitutional obligations and isolated community services.
Effective April 1, 1997, federally supported ferry services in Atlantic Canada are limited to those provided by Marine Atlantic Inc., a federal Crown corporation, and to three private-sector operators - Northumberland Ferries Limited, Bay Ferries Limited, and C.T.M.A. Traversier ltée. Federal assistance for ferry services in Western Canada in the form of a grant will continue to be provided to the Province of British Columbia.
Historically, Canadian flag vessels have carried less than one per cent of international marine traffic other than in transborder trade with the United States. Thus Canadian shippers rely on foreign-based carriers for most international marine movements.
Bulk commodities figure prominently in Canada's international trade, particularly for exports. Most bulk shippers charter vessels as needed to meet their shipping requirements. Either the buyer or seller of the commodity may be responsible for making the transportation arrangements, depending on the terms of sale. The charter rates for bulk carriers are set in the open market, which is global and intensely competitive.
The "spot" or "tramp" market is made up of short-term contracts covering a certain number of voyages or days, or a given quantity of cargo. Spot prices are set in open markets and exchanges, and depend on supply-and-demand factors that include vessel size, equipment, trade route and timeliness of the service requirements.
Time charters can cover longer periods (e.g., five years), enabling shippers to secure regular and predictable transportation rates during the period of the contract. Vessels are sometimes even built to the specific requirements of a given shipper in connection with a pre-arranged long-term charter. However, contracts covering only one year are common when prices are volatile. Details of the arrangements are usually strictly confidential.
Liner services are offered according to published schedules and on specific trade routes with fixed itineraries. Liner carriers generally handle containerized and/or break-bulk cargos, such as electronic equipment, frozen foods or manufactured goods, which are traditionally of higher value. Break-bulk refers to cargo that is bagged, palletized or otherwise packaged and does not move in a container. Forest products and automobiles both fall into this category. The lines that carry containers, break-bulk and general cargo are the "common carriers" in international marine transportation.
The international liner trade is dominated by large fleets of specialized container ships operating on major routes. A large proportion of the world fleet is controlled by Pacific Rim and Western European interests.
Ocean carriers providing liner services on a common trade route often elect to form a conference and collectively agree on rates and/or conditions of service. Conferences have been in existence on major routes for well over a century and are shielded from the competition laws in Canada by the Shipping Conferences Exemption Act, 1987.
Shipping lines that do not operate within the confines of a shipping conference are referred to as "independents" or "non-conference operators". These carriers also provide liner services but are not required to file a tariff with the Canadian Transportation Agency. While nearly all of the tonnage moved by conference carriers is containerized, that of independent lines includes a larger share of general/break-bulk cargos. The ranks of the independent liner operators today include many large, well-established firms such as Evergreen Lines and China Ocean Shipping Company that can match conference operators in terms of vessel size, operating frequency and extensive route networks.
Lines that are conference members on one route are not necessarily conference members on all of the routes or points served. Also, where a conference agreement applies only to Canadian cargo, shipping lines that solicit cargo from US-based shippers (such as North Atlantic operators calling at Montreal) could carry non-conference cargo on the same vessels that operate in the conference service.
Nineteen tariff-filing shipping conferences, shown in Table 9-1, served Canada in mid-1997, down from 20 in 1996. The Asia North America Eastbound Rate Agreement, one of the major conferences on the Canada-Far East trade circuit, was dissolved effective November 1, 1996. Of the 19 conferences, five covered services to and from both Canadian coasts, 12 to and from the East Coast only, and two to and from the West Coast only.
A new liner service partnership involving Maersk Line, Sea-Land Service Inc. and P&O Nedlloyd Ltd. began operations between the Port of Montreal and Northern European ports in 1997. With this increased competition at the Port of Montreal, the Competition Bureau requested a stay of proceedings from the Competition Tribunal on the 1995 acquisition of Cast North America Inc. by Canadian Pacific Ltd. (CP Containers Ltd.). The Competition Bureau determined that the merger either prevented or lessened, or would likely result in preventing or lessening of competition in the liner trade between the Port of Montreal and Northern Europe, and asked the Competition Tribunal to review and overturn the acquisition. The Bureau has until March 31, 1998, to ask the Tribunal to restart the proceedings, otherwise the case will be closed.
During 1997, Canadian Pacific Ltd. (CP Ships), in separate transactions, purchased both the US-based Lykes Bros. Steamship Co., which was operating under bankruptcy protection, and Contship Containerlines Ltd., headquartered in Ipswich, England. Lykes Bros. gives CP Ships additional routings, connecting ports in the US, Mexico, Northern Europe, the Mediterranean and Africa. Contship extends the trade lanes covered by CP Ships to include South America, Australia and India. These two acquisitions, along with the earlier acquisition of Cast North America, strengthens CP Ships' position as one of the world's major container liner operators.
In 1997, Deltaport, the Port of Vancouver's new multi-million dollar state-of-the-art container facility, began operations, doubling the port's container capacity. The facility can handle the largest container vessels currently in service and is capable of transferring containers to double-stack rail cars for immediate dispatch to Central Canada and the US Midwest. With the opening of Deltaport, some shipping companies are bringing larger vessels and increasing their sailing schedules to the port.
For the first time in over two decades a luxury cruise ship sailed the Great Lakes. The 420-passenger M/S Columbus was custom-designed for cruising in the Great Lakes by its owner Hapag Lloyd.
Foreign-based companies provide the vast majority of extended cruise operations calling at ports on both Canada's East and West coasts. There are two basic categories of extended cruises - the "luxury cruise" and the "pocket cruise", distinguished by vessel capacity of more or less than 150 passengers.
The Port of Vancouver is the home port for most of the luxury cruise ships offering Alaska cruises, serving as the principal point of passenger embarkation and disembarkation. Alaska is the third largest cruise market in the world, after the Caribbean and Europe. Vancouver has benefited from the provisions of the US Passenger Vessel Act, which prohibit foreign-flag vessels from carrying passengers between US ports (i.e., embarking passengers at one US port and disembarking them at another). Vancouver is also an en-route stop on various other cruises, such as round-trip Alaskan cruises out of San Francisco and Los Angeles. The Vancouver cruise market is also linked with cruise operations in Victoria and other B.C. ports.
In Eastern Canada, the New Atlantic Frontier Cruise Association, a coalition of Atlantic seaboard ports including Halifax, New York, Boston, Portland, Montreal, Quebec City and St-Pierre, is working to attract major cruise ship lines to the region. Luxury cruise ships regularly travel along the Eastern Seaboard and up the St. Lawrence to Montreal. They also sail out of New York northward to Halifax and Saint John. Pocket cruises travel the St. Lawrence between Montreal or Quebec City and Kingston or Rochester, or along the Erie Canal and Hudson River to Warren, New York.
The cruise industry is heavily dependent on efficient airlines and motor coach connections. It generates pre- and post-cruise travel on rail and motor coach tours.
There are also a multitude of lock, harbour and river cruises, as well as excursions such as those for whale-watching - all offered by local operators on Canadian vessels. Whale-watching cruises continued to be very popular among European clients.
Canadian maritime trade traffic has three main components - domestic, transborder trade with the US and international (overseas). In 1996, these movements amounted to 308.9 million tonnes. Domestic trade accounted for 48.8 million tonnes, while transborder trade between Canada and the US totaled 88.5 million tonnes. Domestic trade represented a decline from the 50.4 million tonnes moved in 1995, while transborder traffic continued its upward trend. Overseas trade reached 171.6 million tonnes. Table 9-2 illustrates Canada's marine traffic flows by sector.
Domestic cargo shipped from one Canadian port to another is handled twice by the port system - loading and unloading. In 1996, Canadian ports handled domestic cargo amounting to 97.7 million tonnes, a three per cent decrease compared with 1995. In fact, domestic cargo has been decreasing since its peak in 1988, when ports handled 139.9 million tonnes. This decline has come partly from a change in the direction of Canada's international trade. In the 1980s, many commodities, such as grain, were carried as domestic cargo via the St. Lawrence Seaway system and then transferred at Canada's eastern ports for shipment overseas. Currently, however, these commodities are being carried increasingly by rail to Canada's western ports for shipment overseas. Table 9-3 shows domestic marine traffic flow by region.
The bulk of domestic traffic is concentrated in the St. Lawrence- Great Lakes area. Its ports handled 58.2 million tonnes (loadings and unloadings) in 1996, the equivalent of 59.6 per cent of the total domestic tonnes. The Pacific region ranked second, handling 28.9 million domestic tonnes, a 30 per cent share of the total.
The main commodities handled, include: iron ore (14.1 million tonnes in 1996, a two per cent increase over 1995); pulpwood and chips (13.4 million tonnes, down eight per cent from 1995); fuel oil and gasoline (13.1 million tonnes, down 14 per cent from 1995); wheat (9.7 million tonnes, down 14 per cent from 1995); and stone/limestone (9.3 million tonnes, up 23 per cent from 1995).
Preliminary data for domestic tonnes handled over the first three quarters of 1997 indicate a two per cent decrease over the same period in 1996, (respectively, 67.1 million tonnes and 68.4 million tonnes).
Because 1997 figures were not available for all ferry service operators, 1996 figures were used. British Columbia Ferry Corporation, by far the largest operator in Canada, carried approximately 22.2 million passengers and 8.1 million vehicles. British Columbia's Ministry of Transportation and Highways carried 5.2 million passengers and 2.9 million vehicles. Société des traversiers du Québec carried 5.3 million passengers and 1.8 million vehicles, while Marine Atlantic carried about 2.7 million passengers and 1.3 million vehicles in 1996. The remaining Canadian Ferry Operators Association members accounted for 4.3 million passengers and 1.9 million vehicles crossings.
In 1996, international cargo movements totaled 260.1 million tonnes, a less than one per cent increase compared with 1995. Of total international tonnes handled in Canadian ports, 67 per cent are export-oriented (including intransit and re-export traffic).
According to international trade data, the value of the Canadian international marine trade in 1996 was approximately $83 billion (excluding shipments via US ports), with exports valued at $44 billion and imports at nearly $39 billion. Canada's main deep-sea trading partners - Japan, China, South Korea, the United Kingdom and other Western European nations - together represent over 60 per cent of total Canadian international marine trade in 1996.
Table 9-4 shows the value of Canada's international marine trade in 1996.
Canada's marine trade with the US experienced a steady growth of 32 per cent from 1991 to 1996, fueled by both exports and imports. In 1996, transborder trade reached a peak of 88.5 million tonnes, a four per cent increase compared to 1995.
Preliminary data for the first three quarters of 1997 indicate that this rising trend is continuing, with transborder tonnage increasing by seven per cent to 65.6 million tonnes from 61.5 over the same period in 1996. Exports (loadings to US destinations) lead this trend with a ten per cent increase to 40.6 million tonnes from 36.8 million tonnes.
Marine trade with the US was valued at $9.4 billion in 1996, driven by exports of $7 billion. This value, however, represented only three per cent of total Canada-US trade. The bulk of the trade was handled by surface transport modes, such as trucking with 68 per cent of the total, and rail with 17 per cent.
Exports
In 1996, loadings to the US jumped to 52.4 million tonnes, a five per cent increase compared with 1995. Dry and liquid bulk commodities were the main products loaded for US destinations. They included petroleum products (fuel oil, gasoline and crude petroleum, totaling 13.0 million tonnes); iron ore (11.3 million tonnes); gypsum (5.5 million tonnes); stone/limestone (4.6 million tonnes); and salt and cement (3.5 and 3.2 million tonnes, respectively). Figure 9-3 shows Canada's maritime trade with the US from 1986 to 1996.
There were two main flow corridors in 1996: the "Canadian Atlantic to the US Atlantic" route with 19.5 million tonnes or 37 per cent of total loadings to the US, and the "Canadian Great Lakes to US Great Lakes" route, with 10.5 million tonnes. Table 9-5 details traffic flows from Canada to the US in 1996.
Imports
On the import side, unloadings from the US registered a slight increase of two per cent, from 35.3 million tonnes in 1995 to 36.1 million tonnes in 1996. Commodities unloaded at Canadian ports coming from US destinations included coal (11.6 million tonnes), iron ore (6.3 million tonnes), petroleum products (3.8 million tonnes), grain, including wheat, corn, and soybeans (3.5 million tonnes) and stone/limestone (3.5 million tonnes). Over 75 per cent of total marine imports came from the US Great Lakes area. Table 9-6 shows the traffic flow from the US to Canada in 1996.
In 1996, the total Canadian marine trade with overseas countries (excluding Canada-US trade) amounted to 171.6 million tonnes, down two per cent from the 1995 peak of 174.6 million tonnes. This trade has been strongly export-oriented with the loading share oscillating between 71 per cent and 79 per cent over the last 10 years. Around 60 per cent of total loadings to overseas countries were loaded at Canadian West Coast ports; however, over 90 per cent of overseas imports were unloaded at Canada's eastern ports.
Preliminary data for the first three quarters of 1997 shows an 11 per cent increase (from 124.1 to 138.4 million tonnes) in tonnes handled in the Canada/overseas marine trade over the same period in 1996. Both loadings and unloadings of overseas commodities at Canadian ports also registered a growth for the first three quarters in 1997. Loadings grew nine per cent (from 88.2 to 96.5 million tonnes) and unloadings by 17 per cent (from 35.9 to 41.9 million tonnes) over the same period.
In 1996, the Canadian marine trade with overseas countries (excluding Canada-US trade) was valued at approximately $74 billion (Canadian dollars), with exports estimated at $38 billion and imports at $36 billion. Marine transport was the dominant mode of transport for shipping overseas freight, followed by air. Figure 9-4 illustrates Canada's maritime trade with the overseas market from 1986 to 1996.
Exports
In 1996, Canadian marine loadings for overseas countries accounted for 121.9 million tonnes, down by four per cent compared with 126.6 million tonnes in 1995. Major commodities shipped overseas included coal (33.5 million tonnes), iron ore (18.5 million tonnes), wheat (16.3 million tonnes) and other grains (7.3 million tonnes). Other important shipments included forest products such as wood pulp (6.0 million tonnes); lumber (4.5 million tonnes); sulphur (5.1 million tonnes); and potash (5.0 million tonnes). Only eight per cent of this trade was containerized.
Over 60 per cent of Canadian loadings for overseas destinations came from the western ports in 1996, while the St. Lawrence- Great Lakes Canadian ports handled most of the eastern share. The direction of trade was highly polarized with the Western ports dominating the Asia and Oceania trade route, while the Eastern ports handled a high proportion of tonnage shipped on the European trade route. Table 9-7 shows Canada's marine traffic to overseas markets in 1996.
Imports
In 1996, marine unloadings at Canadian ports from overseas destinations reached 49.7 million tonnes, an almost four per cent increase over 1995 (47.9 million tonnes). Crude petroleum (25.4 million tonnes) dominated, accounting for 51 per cent of all tonnage unloaded from overseas countries. Other overseas commodities unloaded included alumina/bauxite (5.1 million tonnes); gasoline/fuel oil (2.4 million tonnes); iron and steel products (2.1 million tonnes); iron ore (1.5 million tonnes); and phosphate (1.1 million tonnes). Approximately 13.5 per cent of this trade was containerized.
Over 90 per cent of overseas shipments were unloaded at Canadian Eastern ports. The Canadian Atlantic ports handled 46 per cent (22.8 million tonnes) of total overseas unloadings and the St. Lawrence-Great Lakes ports took a 45 per cent share (22.5 million tonnes). The Europe and the Middle East-Africa regions were the principal origins of overseas cargo. Table 9-8 shows Canada's marine traffic from overseas markets in 1996.
The 1997 season marked the fifteenth consecutive year of growth for Alaska cruises, with a 17 per cent increase over 1996 traffic levels for the Port of Vancouver. The Vancouver-Alaska market now ranks as the third most popular cruise region in the world, behind the Caribbean and Europe. Table 9-9 summarizes cruise traffic for major Canadian ports.
The Canadian Passenger Vessel Association estimated traffic at over 6.5 million passenger trips in 1996 on the vessels of its members. To that figure must be added the 909 thousand passengers carried in 1996 by members of the Association des Croisières-Excursions du Québec and the estimated 1.8 million passengers of non-member companies of associations.
In Canadian waters, the competition for transporting cargo and passengers can take place between Canadian ships, as delimited by the Coasting Trade Act. The legislation provides for the temporary importation of foreign and non-duty-paid Canadian flag vessels in domestic operations in specified circumstances and eliminates the uncertainties associated with the operation of cruise ships in Canadian waters.
Over the past 10 years, applications for entry to the coasting trade have numbered between 57 and 122 annually. In 1997, 106 applications were received for temporary coasting trade licences, down from 111 in 1996. Of these, 87 were approved, contingent upon there not being a suitable Canadian flag vessel available. Of licences approved, 21 were for tankers, 17 for barges, 12 for tugs, 14 for passenger ships and 23 for various other types of vessels. US flag vessels accounted for over half of the temporary licences, with 46 out of the total 87. The second most common flag of carriage was the Bahamas with 10, followed by non-duty-paid Canadian flag vessels with eight.
Total domestic trade carried on vessels granted temporary entry to the coasting trade has historically been less than two per cent per year. In 1996, foreign flag vessels were recorded as carrying 2.2 per cent of total domestic trade, up from 1.87 per cent in 1995.
Competition in international marine transport services takes place between conference and non-conference carriers. But within conferences, the Independent Action provision within the Shipping Conferences Exemption Act (SCEA) permits competition between lines' members of a conference.
Shipping conference rates paid by shippers can be the object of a "service contract", a confidential agreement permitted by the SCEA. Service contracts, however, must be filed to comply with the Act.
In 1997, the Canadian Transportation Agency accepted filings for 181
service contracts from 10 shipping conferences.
On the other hand, in 1996, the Agency had accepted filings for 140 service
contracts from eight shipping conferences, down from the 175 contracts filed
in 1995. The great majority of services contracts are conference-wide and
remain in effect for one year.
The market power of conferences has been declining in recent years. Independent operators offer strong competition on most routes served by conference carriers. Table 9-10 provides a breakdown by conference/non-conference market shares for the period 1994 - 1996.
The flow of containerized and other cargo across the Canada-US border has grown steadily in recent years. All cargo crossing the border moves at non-conference rates, even if carried by conference operators. Thus Canadian containerized cargos routed through US ports move at non-conference rates. Canadian ports such as Montreal and Halifax also handle substantial volumes of US origin or destination cargos. At least half of the container traffic through the Port of Montreal is estimated to be from the US.
The Statistics Canada data in Table 9-10 does not distinguish between US and Canadian cargos. The conference share of imports and exports is significantly overstated in this table, assuming that a substantial volume of the US traffic is carried on conference vessels. Also, if the Canadian liner traffic handled at US ports were added to the non-conference share, the conference proportion of total traffic would be further reduced.
Table 9-11 provides a breakdown by market areas served and gives a more accurate picture of conference/non-conference competition. The data indicate that conferences serving Canada have the largest market share on the routes to and from Europe. Once again, Statistics Canada data have been used and the US and Canadian traffic that is transshipped is not accounted for, thus inflating the conference traffic shares. Conference lines operating on the North Atlantic and calling at the Port of Montreal draw heavily on the US Midwest for their cargo base.
Conferences also have a significant market share of the trade to and from Asia, although not as large as the independent operators' share. On north-south routes, such as those to Africa, Oceania, and Central and South America, conference operators no longer call directly at Canadian ports, but instead move cargos through US ports. The lower volumes on these routes no longer justify the extra sailing time to Canadian ports.
In recent years, government ferry operators' price increases averaged 5.3 per cent a year, whereas the volume of their activity, despite some fluctuations, remained constant. Their revenues grew by about six per cent over the period 1992 - 1995. (Table 9-12).
Between 1987 and 1994, the coastal activities of Canada's shipping industry were in decline. Output rebounded in 1995 by 15 per cent. The transborder and overseas activity of Canadian carriers, after dropping 19 per cent in 1992, has exhibited an upward trend since then. Much of the growth came from overseas activities.
The Canadian shipping industry is the only freight transport activity for which nominal price increases have been observed. Yet, the freight rate increases have averaged 1.7 per cent a year since 1992, less than the 2.7 per cent annual growth in the economy over the same period.
As previously indicated, most marine services used by Canadian shippers in world markets are provided by foreign shipping lines. Two broad types of services are provided: liner (mostly container services by conference carriers) and bulk services. Freight rates of dry bulk carriers had been volatile but showing a downward trend. In 1997, dry bulk carriers' rates were at 62 per cent of their 1991 level.
Tanker rates have been going up since 1993, although it was not until 1996 that they surpassed their 1991 levels. They continued to increase in 1997. In spite of strong demand, container shipping services are affected by rampant excess capacity and rates are faltering. After the first three quarters of 1997, rates on North Atlantic and Pacific routes, (based on average westbound and eastbound to/from the US), were around 30 per cent lower than 1991 rates (Figure 9-5).
The Canadian marine transport industry comprises carriers domiciled in Canada, including for-hire, private and government carriers. The for-hire sector, which accounts for about 75 per cent of total industry revenues, is selected for the financial performance analysis of the industry. It should be noted that CP Ships, because its vessels are registered in foreign countries and do not carry the Canadian flag, is excluded from the financial summary of the Canadian marine industry.
In 1995, Canadian-domiciled for-hire marine carriers reported total revenues of $2.2 billion, of which about 68 per cent was from freight, four per cent from passenger transportation, 21 per cent from chartering services, and seven per cent from other revenue sources, such as subsidies and services incidental to water transportation. Figure 9-6 shows the breakdown of operating revenues of Canada's for-hire marine carriers in 1995.
In terms of total freight revenues, about 38 per cent are from domestic services and 62 per cent from international shipping.
Total revenues of Canadian for-hire marine carriers increased significantly in 1995, by an average of 13.5 per cent. Revenue growth was relatively strong in domestic freight transportation (up by 19 per cent), international freight services (12 per cent) and chartering services (21 per cent). Coastal shipping on the Atlantic side showed a 38 per cent increase in revenues, while there were only modest increases on the Pacific Coast, averaging about 1.4 per cent. Inland water transportation revenues and international freight revenues increased by seven per cent and four per cent, respectively. Overall industry revenue growth dropped due to a 14 per cent decline in other revenues.
Marine is the least labour intensive sector within transportation: its labour costs represented in 1995 about 20 per cent of its operating revenues.Note 1 The reason for this phenomenon is the trend toward using vessels chartered complete with their own crew and fuel. Such chartered activities account for 27 per cent of industry revenues.
From 1991 to 1995, labour productivity increased by 12 per cent. Some of these gains can be attributed to an increasing reliance on chartered vessels, which provided a substitute to internal labour. Unit labour costs have decreased by five per cent over the same period.
Fuel costs fell from 11 per cent of operating revenues in 1990 to nine per cent in 1995, due to some fuel efficiency gains. Among other operating costs, government fees represented an important cost category, with a share of seven per cent of operating revenues in 1995. Table 9-13 outlines the shipping industry cost indicators from 1992 to 1995.
From 1991 to 1995, the shipping industry recorded the weakest productivity performance of all transport modes, its 1995 productivity slightly below its 1991 level. In the same period, total productivity of the transport sector grew by 11 per cent. Unit costs climbed ten per cent in marine transport, while they declined by five per cent for all modes.
Table 9-14 presents a summary of the financial performance of the for-hire marine transport sector from 1993 to 1995.
The profitability of Canadian marine transport was modest in 1995, with an average operating margin 5.4 per cent of operating revenues, compared with 4.7 per cent in 1994. Strong revenue growth was somewhat offset by increases in operating expense.
Total net investment in the for-hire marine transportation industry has not changed much since 1993. This indicates that the industry's annual capital investments merely offset depreciation and retirements of old assets. A shift to chartering rather than owning vessels may explain the relatively lower levels of capital expenditures in the marine industry as compared with other modes.
Long-term debt has been the single largest source of financing for capital assets in the marine industry, representing, on average, 60 per cent of total capital. Other sources of funds include equity, deferred taxes and other liabilities. The equity share in total capital (18 per cent), is relatively low because marine transportation often represents one of many business segments in a diversified corporation or a conglomerate, in which case, divisional equity funds are represented by retained earnings or reinvested capital. Deferred income taxes is also one of the important sources of capital funds in the marine industry, representing about 22 per cent of total capital.
NOTE
1 The relative importance of each factor input in the cost structure should be calculated in terms of total costs. But total costs include not only all operating costs, but also an allocation for the cost of capital. Measuring the cost of capital is a complex exercise and not all the information needed to measure it was available. Therefore total operating revenues were used in this report as a proxy for total costs under the assumption that net income is equivalent to the cost of capital.
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