Vol.36 No.1 JUL‑SEP 2007

J U L Y- S E P T E M B E R 2 0 0 7 Record iron ore prices.Duluth looks back and ahead.Modal shift study . Increasing maritime security V O L U M E 3 6 N U M B E R 1 G LGREAT LAKER The Interlake Steamship Company Interlake Corporate Center 4199 Kinross Lakes Parkway Richfield, Ohio 44286 Telephone: (330) 659-1400 FAX: (330) 659-1445 ISO Certified E-mail: sales@interlake-steamship.com Precious Cargo? WE CAN HANDLE IT! At Interlake Steamship we treat each and every shipment as if it were priceless. Whether it’s coal, grain, taconite pellets or limestone we know how important that cargo is to our customers… and to their customers. And, we know how important it is that it be delivered in a timely manner with the utmost care. With self-unloading vessel capacities ranging from 17,000 to 68,000 tons, you can trust Interlake Steamship with all your dry bulk cargo needs on the Great Lakes. Call Interlake Steamship – where all cargo is precious cargo. GREAT LAKES/SEAWAY REVIEW July-September, 2007 1 A R T I C L E S J U LY- S E P T E M B E R 2 0 0 7 The international transportation magazine of Midcontinent North America GREAT LAKES/SEAWAY REVIEW GREAT LAKER 221 Water Street Boyne City, Michigan 49712 USA (800) 491-1760 FAX: (866) 906-3392 harbor@harborhouse.com www.greatlakes-seawayreview.com www.greatlaker.com A searchable editorial archive is available at www.greatlakes-seawayreview.com Iron Ore prices are forecast to remain at current high levels. Page 6. Duluth Seaway Port Authority celebrates a milestone as it turns 50. Page 48. First self-unloader Hennepin found in Lake Michigan. Page 76. Commodities RECORD PRICES, STRONG DEMAND . . . . . . . . . . . . . . . . . . . . . . . 6 Factors suggest iron ore prices will remain at current high plateau. Technology GAINING PERSPECTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Technology puts 3-D imaging on the bridge. Intermodal Transportation WATER TRANSPORTATION BENEFITS . . . . . . . 16 Modal shift case studies track transportation patterns. Security ASSESSING THE RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Security initiatives progress internationally, within the system. Security INCREASING MARITIME SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Transportation Worker Identification Credential being refined. The Environment CLIMATE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Navigating global warming in the Great Lakes region. Interview A REMARKABLE LIFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Donald C. Hannah has been successful by seizing opportunities to fill a need. Great Lakes Organizations A NEW VISION . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Great Lakes Commission releases its strategic plan. Port Profile: Duluth 50 YEARS STRONG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Duluth Seaway Port Authority looks back and ahead for its best years yet. Training & Recruitment TRAINING GREAT LAKES MARINERS . . . . . . . . . . . 60 Schools invest for the future. Great Lakes Education TEACHING TEACHERS . . . . . . . . . . . . . . . . . . . . . . . . 63 Great Lakes maritime education program extends beyond the classroom. Dredging CLEARING OUT THE BACKLOG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Corps’ five-year dredging plan could clear critical shipping routes. Ballast Water Management A MAJOR STEP . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Great Ships Initiative dedicates ballast water treatment test facility. D E P A R T M E N T S Dateline: Great Lakes/St. Lawrence Seaway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Guest Editorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Naval Architecture & Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 The Lake Carriers’ Association Viewpoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 The Administrator’s Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Regional Shipyard Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Shipwrecks THE HENNEPIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 World’s first self-unloader located in Lake Michigan’s depths. Great Lakes People EMIL PAGEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 “I’m not old…I’m a classic.” Marine Photography SPLIT ROCK LIGHTHOUSE . . . . . . . . . . . . . . . . . . . . . . . 82 Crews WHAT’S ON THE MENU? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Maritime Heritage BE CAPTAIN FOR A DAY, A WEEK . . . . . . . . . . . . . . . . . . . .88 Sail through Port Huron’s maritime heritage. Meet the Crew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Meet the Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 On the Radar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Laker Lighthouse News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Laker Library Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 G LGREAT LAKER 2 www.greatlakes-seawayreview.com P U B L I S H E D F O R 3 7 Y E A R S Business and Editorial Office 221 Water Street Boyne City, Michigan 49712 USA (231) 582-2814 (800) 491-1760 FAX: (866) 906-3392 harbor@harborhouse.com www.greatlakes-seawayreview.com www.greatlaker.com EDITORIAL AND BUSINESS STAFF Jacques LesStrang Publisher Emeritus Michelle Cortright Publisher Janenne Irene Pung Editor Rebecca Harris Art Director Lisa Liebgott Production Manager Tina Burch Business Manager David L. Knight Editorial Consultant Roger LeLievre Great Laker Editor Virginia Forrand Circulation Manager ADVERTISING DEPARTMENT Kathy Booth Account Manager James Fish Director of Sales William W. Wellman Senior Account Manager EDITORIAL ADVISORY BOARD John D. Baker, President, Great Lakes District Council, International Longshoremen’s Association; Gary L. Failor, Executive Director, Cleveland-Cuyahoga Co. Port Authority; James H. Hartung, President, Toledo-Lucas Co. Port Authority; Davis Helberg, Executive Director, Seaway Port Authority of Duluth – Retired; Anthony G. Ianello, Executive Director, Illinois International Port District; John Jamian, President, Seaway Great Lakes Trade Association; Peter Kakela, Ph.D., Professor, Department of Community, Agriculture, Recreation and Resource Studies, Michigan State University; Donald N. Morrison, President, Canadian Shipowners Assn.; Rep. James L. Oberstar, Member of Congress, Chair, House Transportation & Infrastructure Committee; John J. Peacock, Executive Vice-President, Fednav Limited; George Ryan, President, Lake Carriers’ Association – Retired; Daniel L. Smith, National Vice President-Great Lakes, American Maritime Officers; Rep. Bart Stupak, Member of Con gress, Energy & Commerce Committee; James H.I. Weakley, President, Lake Carriers’ Association, James K. Welsch, Jr., President & CEO, American Steamship Company. SUBSCRIPTIONS -(800) 491-1760 or www.greatlakes-seawayreview.com Published quarterly. One year $30.00; two years $50.00; three years $70.00. Foreign: One year $45.00; two years $65.00; three years $95.00. Payable in U.S. funds. Back issues available. Article reprints are also available. Reprints produced by others not authorized. ISSN 0037-0487 SRDS Classifications: 84, 115C, 148 Great Lakes/Seaway Review and Great Laker are published quarterly in March, June, September and December. Postmaster: Send address changes to Great Lakes/ Seaway Review, Great Laker, 221 Water Street, Boyne City, MI 49712 USA. © 2007 Harbor House Publishers, Inc., Boyne City, Michigan. All rights reserved. No article or portion of same may be reproduced without written permission of publisher. JULY-SEPTEMBER, 2007 THE INTERNATIONAL TRANSPORTATION MAGAZINE O F M I D C O N T I N E N T N O R T H A M E R I C A VOLUME 36 NUMBER 1 Great Lakes/Seaway Review Cover: Duluth’s working waterfront. Photo by Jerry Bielicki. Great Laker Cover: Split Rock Light. Photo by Gary Martin. Combining the economy of Great Lakes shipping with flexibility for cargoes not suitable for traditional self-unloaders, the tug barge PERE MARQUETTE 41 offers a level of dependable service that translates into outstanding value. Let us help you evaluate how our new articulated tug barge system can benefit your company. Self-loading/unloading: hydraulic crane with grapple, clamshell or magnet; conveyor loading places material approximately 80′ from side of ship Stone, logs, pig iron, scrap metal, coils, slabs and over-dimensional pieces Conveyor unload materials up to 15 inch Articulated tug barge coupler technology U.S.- flag Great Lakes service PERE MARQUETTE SHIPPING COMPANY 701 Maritime Drive P.O. Box 708 Ludington, MI 49431 (231) 845-7846 Fax (231) 843-4558 www.pmship.com INTO YOUR IS OUR BUSINESS BARGING BUSINESS Call for information on available property or current services (414) 286-8131, bnowak@port.mil.wi.us. • Two major railroads: Union Pacific Railroad Canadian Pacific Railway • Direct Interstate Highway • Seaway-depth berths for ocean vessels • Barge service to Illinois and Mississippi Rivers • Site & Terminal development for: Manufacturing Facilities Warehousing & Distribution Service Centers Material/Cargo Handling OFFERING: 2323 S. Lincoln Mem. Dr. Milwaukee, WI 53207 www.milwaukee.gov/port WHERE YOU ARE ALWAYS WELL CONNECTED GREAT LAKES/SEAWAY REVIEW July-September, 2007 3 G R E A T L A K E S / S T . L A W R E N C E S E A W A Y Great Lakes short sea program in the works In July, Michigan Democrat Senator Debbie Stabenow introduced the Great Lakes Short Sea Shipping Enhancement Act of 2007, aimed primarily at eliminating the repetitive harbor maintenance tax imposed on containers every time they enter a separate port. Her bill follows initiatives already launched in the House of Representatives by Minnesota Democrat James Oberstar. Stabenow’s bill only exempts containers from the commercial and harbor maintenance taxes and specifically excludes bulk cargoes. . McAsphalt Marine expands black oil fleet for Great Lakes Building on the success of sister vessels McAsphalt 401 and Norman McLeod, McAsphalt Marine Transportation Limited (MMTL) is constructing a new tug-barge combination that will launch next year. This addition will complement the company’s fleet plying the Great Lakes/St. Lawrence Seaway. Presently under construction by Seabridge Marine of Vancouver at the Penglai Bohai shipyard in China, the hot asphalt carrier replicates the design of Norman McLeod. Maxing out at 11,000 metric tons and incorporating the latest state-of-the-art marine technology for heating and cargo handling, the barge will be guided by a new pusher tug designed by Robert Allen. The tug will incorporate the latest in navigation, steering and control systems. The acquisition represents a capital investment in excess of C$30 million by MMTL, a partnership of McAsphalt Industries Limited and Upper Lakes Group, Inc., and will help modernize the company’s shipping transportation throughout the Great Lakes and Eastern Seaboard. The barge is to be named the John J Carrick in memory of the co-founder of the McAsphalt Group of Companies. The name of the new pusher tug has yet to be announced. . WRDA gets green light from Congress The House and Senate conference committee forwarded the 2007 Water Resources Development Act August 1. Within the completed bill, $342 million is earmarked for building a new Poe-sized lock at Sault Ste. Marie. Shepherded by Rep. James Oberstar (D-Minn.), Chairman of the House Transportation and Infrastructure Committee, the authorization was seven years in the making and passed with overwhelming majority. He said he expected Congress would quickly override the veto that has been threatened by the president. The funding also targets dredging throughout the Great Lakes. The U.S. Army Corps of Engineers would get $126.9 million for operations and maintenance work to step up navigational dredging, which include a backlog estimated at $200 million. “There is urgent, pent-up demand to address the nation’s water resources needs,” Oberstar said. “Divide the cost by the number of years that have passed since we last passed this critical legislation and the cost is understandable.” The bill also includes about $800,000 to complete the U.S.-Canadian Great Lakes Navigation System Study. Even if a final bill becomes law, the funds will need to be appropriated. . DATELINE This computerized rendering provided by the U.S. Army Corps of Engineers shows what the Soo Locks will look like upon completion of the new, large lock, which will replace the Sabin and Davis Locks. Aluminerie Alouette recognized Aluminerie Alouette Inc. has received the 2006 St. Lawrence Award from the St. Lawrence Economic Development Council (SODES). Aluminerie Alouette, North America’s largest aluminum smelter, was cited for its short sea shipping initiative to move aluminum ingots from its plant in Sept-Îles to a distribution center in Trois-Rivières. The company more than doubled its aluminum production to more than 550,000 metric tons in 2006 when it brought the new Sept-Îles facility online. With the increase, the company reassessed its means of transport and initiated its short sea shipping strategy in conjunction with McKeil Marine Ltd. and Logistec Stevedoring Inc. The Alouette Spirit barge now transports close to half of the aluminum the company produces annually. . Bi-national trade mission to depart in October Plans are being firmed up for the October 12-20 Trade Mission to Rio de Janeiro and Sao Paula, Brazil. The Saint Lawrence Seaway Development Corporation and the St. Lawrence Seaway Management Corporation will host industry representatives during the third excursion to Brazil. Prior missions occurred in 1991 and 1995. Trade missions are held at least annually to offer new business development, with the October trip expected to provide opportunities for delegates to explore the trading potential for new cargoes, such as fuel-based alcohols like methanol and ethanol. Brazil’s role as the world’s largest supplier of iron ore, steel slabs, pig iron, steel coils and sugar suggests that it will be a growing partner in trade for the U.S. and Canada. The country currently ranks third for overall tonnage in the system, representing about one million tons of cargo annually. . Ed Margosian honored for 50 years of service Letters of congratulations from Secretary of Transportation Mary Peters and President George W. Bush were presented to Ed Margosian, Chief Financial Officer of the Saint Lawrence Seaway Development Corporation’s (SLSDC) operations office in Massena, New York. “I appreciate your hard work and dedication to serving your fellow citizens. Our nation is deeply indebted to the men and women who devote their lives to public service,” President Bush said. Margosian served in the military for two years and has worked at SLSDC’s operations headquarters for 48 years. “Your inspirational role as the Seaway Corporation’s Chief Financial Officer, overseeing a staff that has delivered a remarkable string of 43 consecutive clean audits, attests tangibly to the finest tradition of excellence in government service,” Peters said. . Ed Margosian 4 www.greatlakes-seawayreview.com D A T E L I N E Milwaukee approves lease for biodiesel refinery A 24 million gallon per year biodiesel refinery could be built at the Port of Milwaukee. The Board of Harbor Commissioners has approved a new lease on city-owned Jones Island. North American Biodiesel plans to construct the plant to produce and blend biodiesel locally to eliminate the transportation costs of bringing biodiesel from more out-of-state plants. Construction is expected to begin this fall. The new start-up business intends to use the existing terminal infrastructure at the port to store and distribute the biodiesel. . BigLift Shipping expands fleet BigLift Shipping, currently operating 13 heavy-lift vessels with a maximum lifting capacity of 1,400 metric tons, is extending its fleet in numbers of vessels and in lifting capacity. The main characteristics of the newbuilds are: 154.8 meters in length, 26.5 meter beam, 9.5 scantling draft and 18,680 deadweight. The vessels will be equipped with two heavylift mast cranes, resulting in a combined lifting capacity of 1,800 metric tons. The newbuilds will have 1A Finnish Ice class and be able to carry various dry cargo, project cargoes and heavy lifts. The vessels will be delivered in late 2009 and early 2010. . Bi-national organization changes name The Chamber of Maritime Commerce has changed its name to the Chamber of Marine Commerce. The organization also has a new logo, but continues to represent the interests of its 180 members by addressing governmentrelated matters affecting marine transportation. Its advocacy extends to both the federal and provincial levels of government and, when appropriate, to U.S. federal and state governments and agencies. . Toledo shipping iron ore to China The Port of Toledo is transshipping at least five loads of iron ore pellets to China this season. The Lake Superior taconite is delivered to the port’s general cargo center by self-unloading lakers or tub-barge units. It is then loaded onto Seaway-sized ships for transport down the St. Lawrence River where it lands in Quebec for transshipment to ocean-going vessels. Once in China, the taconite is used to produce steel. . U.S.-flag carrier totals corrected Total dry-bulk cargo carriage on the Great Lakes for a five-year average, from 2001-2005, was 103,441,769 million tons. Annual totals for 2004, 2005 and 2006 were 111,115,354, 107,660,449 and 109,731,754, respectively. . Ethanol plant planned for Toledo port property The Toledo-Lucas County Port Authority has approved construction of an ethanol plant on the Maumee River. The plant will be the first ethanol plant with direct access to the Great Lakes. The port authority owns the 120-acre site on the Maumee River and has consented to let Midwest Terminals of Toledo International sublease up to 30 acres to Buckeye Biopower, which will build the plant. Groundbreaking is expected by year’s end. When completed, the $240 million plant will produce ethanol from corn and the grain milo. The plant is expected to employ 40 to 50 people full-time and generate about $363,000 annually for the port authority based on projected gross revenues generated from an exclusive grain handling and storage agreement between Midwest and Buckeye Biopower. . GREAT LAKES/SEAWAY REVIEW July-September, 2007 5 D A T E L I N E Commissioner appointed to Cleveland board Richard M. Knoth has been named to the Cleveland- Cuyahoga County Port Authority Board of Directors. Knoth replaces Monte Ahuja, CEO of Transtar Industries, Inc. Knoth is partner at Baker Hostetler, practicing in the areas of complex commercial litigation, unfair business practices and intellectual property law. He is often called upon to represent companies undergoing governmental investigations in many areas, including advertising, trade practices, antitrust and corporate governance. . Great Ships Initiative launches website The Great Ships Initiative has launched a public website. Regular updates on the initiative’s research and services may be found at www.greatshipsinitiative.org. . Cleveland-Cliffs plant lands in Michigan Cleveland-Cliffs is partnering with Kobe Steel Ltd. to construct a commercial-scale nugget plant at the Empire Mine in Palmer, Michigan, with expectations of producing 500,000 tons of iron nuggets per year by 2010. The new plant extends the life of the Empire Mine, where iron ore reserves would have been exhausted by 2010. The plant would use Kobe’s iron-making technology to produce nuggets containing more than 96 percent iron. Currently, Empire Mine produces iron ore pellets, which contain about 65 percent iron, that are used as a feed in blast furnaces to produce steel. Using the Kobe process, the iron ore would bypass the blast furnace and provide a consistent source of high-quality domestic metallic feed in nugget form. These iron nuggets would be used as a raw material for North America’s mini-mill market. Mini-mills use electric arc furnaces to melt pig iron or recycled steel products to produce new steel, according to Cleveland-Cliffs. . Algoma purchases new vessel Algoma Central Corporation, through Algoma Tankers Limited, has entered into an agreement with MedMarine Group to purchase a double-hulled petroleum tanker under construction at the Eregli Shipyard in Turkey. The vessel replaces the single-hulled Algonova, which was sold in January and will operate in the Seaway and Atlantic Canada regions. Delivery of the ship is scheduled for February 2008 at a cost of about C$42 million. . REGIONAL CALENDAR AUGUST 25-30 Association of Canadian Port Authorities 49th Annual Conference and General Meeting, Fairmont Queen Elizabeth Hotel Montreal, Quebec OCTOBER 1-2 Great Lakes Commission 2007 Annual Meeting Chicago, Illinois, Tim Eder, (734) 971-9135 or teder@glc.org 12-20 Seaway Trade Mission, Brazil, Rebecca McGill, (202) 366-0091 or rebecca.mcgill@sls.dot.gov NOVEMBER 7-8 Hwy H2O Conference, Toronto, Ontario Jennie Richardson, (905) 641-1932, ext. 5438 www.hwyh2o.com DECEMBER 7 Grunt Club Annual Dinner, Hotel Bonaventure Montreal, Quebec, D. McGuire, (514) 393-9864 FEBRUARY 2008 20-21 Admiral’s Dinner/Marine Community Day Cleveland, Ohio, (800) 491-1760 Richard M. Knoth Liebherr Nenzing Crane Co. 11801 N.W. 100th Road, Suite 17 Medley, FL 33178 Tel: +1-305-889-0176 Fax: +1-305-889-0655 www.liebherr.com Liebherr Nenzing Crane Co. 7075 Bennington Street Houston, TX 77028 Tel: +1-713-636-4000 Fax: +1-713-636-4051 www.liebherr.com 6 www.greatlakes-seawayreview.com ics would have supply quickly expanding in response to elevated demand. There is not a shortage of iron in the earth’s crust, but there is a truly limited number of highly- concentrated deposits that can be considered mineable ore reserves. These are being controlled by fewer producers who are gaining more influence over the market as demand skyrockets. Despite the best efforts of many economists to use the classic model of supply and demand, their results may not be the best descriptors of what the future holds for iron ore markets. World iron ore prices are negotiated on an annual basis. The Brazilian and Australian ore producers are the giants and have taken the lead in negotiating prices for the past two decades. There are two major markets—Europe and Asia. Brazil has generally led selling to the European steelmakers and Australia has generally led with the Asian customers. On the buying end, German, French, British and occasionally Italian steelmakers settle first in Europe whereas Japanese steelmakers have long been the key mills to settle the Asian price. This year, however, BaoSteel of China took the lead to settle first and set the overall world price. The European and Asian prices have always been similar regardless of which is settled first. Once a settlement is reached, all of the other producers seem to fall in line and it holds throughout the year. The fiscal year for the European market runs from January 1 to December 31, whereas the Asian market runs from April 1 through May 31. Negotiations usually begin around the first of December with first settlements being reached as early as December 7 in 1983 and 1984, but going as late as May 29 in 2002. They often run into late January or February (see table 1). The main point about the world iron ore price is that once it is set between one mining company and one steelmaker, it closely establishes the pattern for all of the rest of the producers and buyers for the year. There has been some “violation” of this “set” price in recent years by Indian iron ore sellers, but not much. Therefore, the pricing procedure for the seaborne iron ore trade does not fit into the economists’ classic supply and demand models. There are practical factors that have infiltrated this industry and they can only be seen by direct observation of events, not by the rosy glasses of microeconomic theory. Those observations have identified six factors that together make pricing of iron ore in the world markets unique. Factor 1: Reasonable Prices. The current iron ore prices are actually in line with inflation. When iron ore pellet prices of today are compared to prices that are adjusted for inflation, using the U.S. producer price index (PPI) for all commodities, they present a different pattern. Starting with the 1975 world pellet price, FOBTubarao, Brazil, the inflation-adjusted prices climb rather steadily and reach a match with the current 2007 posted price (see graph 3). In the end, the inflation-adjusted prices not only reach a match with current pellet prices, but for 30 years, from 1975- 2005, the inflation-adjusted prices run C O M M O D I T I E S BY PETER J. KAKELA, PH.D. LISA A. SZYMECKO, PH.D. CANDIDATE Department of Community, Agriculture, Recreation and Resources Studies Michigan State University For the past two or more years, the theme for iron ore has been boom times with more growth ahead. It continues today. Prices remain at record levels and demand is strong. New capacity is being added, but not fast enough to depress the record high-prices. The rapid run-up of world export prices for iron ore from 2003 to 2005 is expected to persist for another six to 10 years, or more. At least seven key factors suggest iron ore prices will remain near their current high plateau. Iron ore prices are at record high levels. After 25 years of little or no change in world iron ore prices, the last five years have been like a volcanic eruption for prices. Pellet prices have risen 149 percent since 2002 and fines have climbed 185 percent in the same five years (see graph 1). Prices for many other commodities have also risen sharply. Copper prices jumped 180 percent in the last two years. Coal prices have doubled since 2003. Steel scrap prices have gone from about $125 per ton in June 2005 to $298 per ton in March 2007, for an almost 140 percent increase in less than two years (see graph 2). Iron ore pricing, however, may be unique among these rapidly increasing commodity prices. Classic microeconom- Record prices, strong demand Factors suggest iron ore prices will remain at current high plateau Commodity Price Increases Since 2003 Graph 1 Graph 2 Graph 3 GREAT LAKES/SEAWAY REVIEW July-September, 2007 7 the Big Three producers capturing about 75 percent of seaborne trade. These three are also expanding their existing capacity more than other mining companies. By the end of 2007, the Big Three collectively expect to increase capacity by about 75 million metric tons. By 2010, they will have added a total of 175 to 200 million new tons of capacity. These three are the leaders in negotiating the world price. In contrast, the fourth largest iron ore producer—Arcelor Mittal Steel Company— is first and foremost a steel company, the world’s largest steel company. Arcelor Mittal holds approximately 50 million metric tons of iron ore capacity scattered around the world. It has announced a goal of expanding the iron ore holding to approximately 80 million tons by 2010. Arcelor Mittal, however, uses almost all, if not all, of its ore in its own blast furnaces and steelmaking facilities. Therefore, Arcelor Mittal has little influence on setting the world price of iron ore. Cleveland-Cliffs Inc. is the fifth largest iron ore producer with management control over about 40 million tons of capacity and complete ownership control over approximately 30 million of those tons. Most of Cliffs’ holdings feed the insular North American steel market and they too higher than the actual prices for iron ore. The gap between adjusted and actual prices that existed over this 30-year period represents millions of dollars that the iron ore industry did not receive for its product. This forgone money is cash that could have been invested in developing new technologies and capital improvements at the mines. Most of the primary technology at pellet plants today was invented in the 1940s and 1950s, and built in the 1960s and 1970s. Since then, the industry has been starved for inventive investment and development dollars. Factor 2: Concentrated Industry. The world iron ore industry has become concentrated. The three biggest producers control approximately 75 percent of the seaborne (or export) market. Brazil’s Cia Vale do Rio Doce (CVRD) is the largest producer with approximately 265 million metric tons of capacity in 2006. The two major Australian mining companies are close behind. Rio Tinto holds approximately 150 million metric tons of capacity and BHP Billiton had 110 million tons in 2006. This totals 525 million metric tons of capacity. Almost all of the production from these “Big Three” mines is exported in seaborne trade. Total seaborne trade in 2006 was approximately 675 million metric tons, with have almost no influence on setting the world iron ore prices. With just three producers controlling three-quarters of the supply, they have the ability to regulate production volumes to maintain prices. Despite the illegality that monopoly and oligopoly structures pose for American or European companies, there are other examples of synchronized suppliers and buyers. The Organization of Petroleum Exporting Countries (OPEC) is a coordinating group of oil suppliers that formally attempts to regulate crude oil production volumes. In Japan, there is a government-sanctioned consortium of steelmakers purchasing organization that openly coordinates and negotiates raw material buying, including the purchase of iron ore. The concentration of producers in the iron ore industry is much greater than the concentration of steelmakers in the world. Arcelor Mittal’s recent growth to become the world’s largest steelmaker involved Mittal Steel, then the largest, buying the second largest steelmaker, Arcelor, in 2006 to create one super company. Arcelor Mittal now controls approximately 122 million net tons of steelmaking capacity in 50 different countries. However, this represents only about 11 percent of the world’s steelmaking capacity. C O M M O D I T I E S World Iron Ore Price Settlement Dates EUROPEAN MARKET Year Date Settled % Change Days Into (y-o-y) New Year 1981 Feb. 14, 1981 6.1 45 1982 Feb. 5, 1982 15.7 36 1983 Mar. 8, 1983 -11.2 67 1984 Dec. 7, 1983 -8.5 -24 1985 Dec. 7, 1984 0.0 -24 1986 Dec. 3, 1985 -1.1 -28 1987 Mar. 5, 1987 -9.3 64 1988 Dec. 24, 1987 8.6 -7 1989 Dec. 19, 1988 13.0 -12 1990 Jan. 17, 1990 16.0 17 1991 Jan. 31, 1991 8.0 31 1992 Dec. 17, 1991 -4.9 -14 1993 Dec. 22, 1992 -13.5 -9 1994 Feb. 8, 1994 9.5 39 1995 Dec. 20, 1994 5.6 -11 1996 Jan. 29, 1996 6.0 29 1997 Jan. 29, 1997 -1.9 29 1998 Jan. 22, 1998 2.8 22 1999 Feb. 18, 1999 -11.0 49 2000 Feb. 27, 2000 5.4 58 2001 Mar. 20, 2001 4.3 79 2002 May 29, 2002 -2.4 149 2003 May 16, 2003 9.0 136 2004 Jan. 13, 2004 18.6 13 2005 Mar. 3, 2005 71.5 62 2006 May 15, 2006 19.0 135 2007 Dec. 28, 2006 9.5 -3 Avg. since 2000 78.6 Overall Avg. (1981) 34.3 Table 1 ASIAN MARKET Date Settled % Change Days Into First Iron Ore Asia-EU (y-o-y) New Year Co. to Settle Feb. 26, 1981 7.5 57 CVG 12 Mar. 6, 1982 17.2 65 CVRD 29 Mar. 28, 1983 -11.4 87 IOC 20 Jan. 20, 1984 -11.6 20 QCM 44 Jan. 31, 1985 0.0 31 IOC-QCM 55 Feb. 14, 1986 -1.9 45 IOC-QCM 73 38.8 Avg. (6) Feb. 20, 1987 -5.0 51 BHP -13 Dec. 22, 1987 -4.0 -9 Hamersley -2 Dec. 14, 1988 13.0 -17 Hamersley -5 Jan. 24, 1990 16.0 24 CVRD 7 Jan. 30, 1991 7.9 30 Hamersley -1 Dec. 17, 1991 -4.9 -14 Hamersley 0 Jan. 13, 1993 -11.0 13 SNIM 22 Feb. 8, 1994 -9.5 39 Hamersley 0 Dec. 20, 1994 5.6 -11 BHP 0 Jan. 26, 1996 6.0 26 BHP -4 Jan. 21, 1997 1.1 21 BHP -8 Jan. 21, 1998 2.8 21 BHP -1 Feb. 16, 1999 -11.0 47 Hamersley -2 Feb. 29, 2000 4.4 60 SNIM 2 Mar. 26, 2001 4.3 85 CVRD 6 May 31, 2002 -2.4 151 CVRD 2 May 21, 2003 9.0 141 CVRD 5 Jan. 14, 2004 18.6 14 CVRD 1 Feb. 22, 2005 71.5 53 CVRD -9 May 17, 2006 19.0 137 CVRD 2 Dec. 21, 2006 9.5 -10 CVRD -7 -0.24 Avg. (21) Avg. since 2000 78.9 0.3 Overall Avg. 42.3 8.2 Iron ore prices are at record high levels. After 25 years of little or no change in world iron ore prices, the last five years have been like a volcanic eruption for prices. Graph 4 A-Mittal Nippon POSCO JFE Boa Tata-C Anben US Steel Nucor T-K Severstal Gerdau C-M 41 Companies Upper Lakes Group Inc. proudly celebrates 75 years of commitment to marine trade and transportation. From its inception in 1932 as a fledgling fleet of three vessels servicing Toronto Elevator, it has developed into a fully integrated marine transportation company. Through Seaway Marine Transport it is now a partner in the largest fleet on the Great Lakes. Our expanded range of services include ship building and repair, marine fueling, tanker services, grain trading, elevator operations and property holdings. Upper Lakes would like to thank our customers and our employees for their support over the past 75 years and as we look to the future together, we remain committed to offering our customers innovative and effective solutions to their transportation needs. AA TTrraaddiittiioonn ooff IInnnnoovvaattiioonn ric tons of new iron ore capacity. In addition, there are several other largegrowth countries that are low on the developmental curve, including Brazil, Russia, India and Southeast Asia, collectively called the BRICS. Together, they will push demand of steel higher. It is estimated that growth and development in Brazil, Russia, India and Southeast Asia collectively will add another 180 to 200 million net tons of steel demand over the next five to seven years. This growth could require 250 million tons or more of new iron ore capacity. Together, China and the other BRICS The next largest steelmaker is Nippon Steel of Japan with just 31 million net tons of capacity. Then comes the South Korean steel maker POSCO with 30 million tons of capacity and JFE Steel of Japan with 27 million tons of capacity. These four steelmakers control only 18.8 percent of the world’s 1,120 million tons capacity (see graph 4). Therefore, there is low concentration of ownership in steelmaking, but a high concentration for the export oriented iron ore mining companies. This high concentration of export capacity by the Big Three iron ore producers does not generate price manipulation, but could allow it. Factor 3: Low on Development Curve. Iron ore prices could stay at or near the high plateau because of the so-called steel intensity, or development curve, the relationship of wealth and modernization to the rate of steel consumption. When countries are poor, in dollars per person per year for instance, steel consumption is low. As countries’ gross domestic product (GDP) increases, there usually is an increase in demand for steel, especially to build roads, bridges, buildings and other infrastructure. Later, as GDP rises further, there is a shift to more consumer goods using steel to make automobiles, refrigerators and other appliances. Eventually, with even higher GDP per person, steel consumption tends to drop off slightly as roads and bridges have already been built and only require maintenance. Also, many large consumer products have been purchased and are slower to be replaced. China, with the largest population in the world, is rather low on the development curve. As China continues to develop its infrastructure and move further into the purchase of consumer goods, it will require significantly more steel (see graphs 5 and 6). It is estimated that China could increase its steel appetite by about 120 million or more net tons in the next five to seven years. This could require about 170 million met- Burns Harbor depicts changes in steel shipping About 11,000 tons of Indiana-made steel headed for Spain aboard the Julietta on June 11. The ship was loaded at the Port of Indiana-Burns Harbor with hot-rolled steel coils from Mittal Steel in East Chicago and is the first export shipment of steel through the port since 2005. The shipment was destined for Pasajes, Spain. Federal Marine Terminals, the port’s general cargo stevedore, loaded the vessel. “Historically, the majority of steel moving through the port is imported from European countries,” said Ian Hirt, General Manager of Federal Marine Terminals, “but changing market conditions and a weak U.S. dollar can trigger export opportunities. There is a possibility for more export shipments this year.” Since the port also has year-round access to the inland river system, it does ship out some steel by barge which can eventually be exported to world markets after it is transloaded to oceangoing vessels in or around New Orleans. Burns Harbor generally handles more ocean-going cargo than any other U.S. Great Lakes port and about 15 percent of all U.S. steel trade with Europe. In 2006, it set a record with $584 million in steel shipments, up 57 percent from 2005. Sharing boundaries with two of the largest steel mills in the country, this port handles a wide range of steel-related cargoes. . C O M M O D I T I E S There is not a shortage of iron in the earth’s crust, but there is a truly limited number of highly-concentrated deposits that can be considered mineable ore reserves. These are being controlled by fewer producers who are gaining more influence over the market as demand skyrockets. Graph 5 Graph 6 rope are plentiful because these economies are mature on the developmental curve, but even here scrap is declining. China and the other BRICS, however, are well behind in the scrap-generation cycle. The Chinese are embedding more steel in infrastructure that they are reclaiming. Their consumer products have not yet reached a balance between recycling and new purchases either, so these too are not providing much scrap. This means iron ore must not only fill the basic need for top-quality ore based steel production, but also fill the gap that scrap may have occupied. Factor 5: Weak U.S. Dollar. Iron ore in the world market is priced in U.S. dollars. The ore is quoted in U.S. cents per metric ton iron unit dry. The iron units are the percentages of iron in the ore. Good ores are 64 percent or 65 percent iron (Fe). Most of the rest of the ore contains oxygen, silica and other trace elements. But it is the iron (Fe) percentage that makes up the “iron units.” These iron units are multiplied by the quoted price to get the final ore price. For example, the current 2007 price quoted for CVRD blast furnace pellets to Arcelor Mittal FOB-Tubarao, Brazil, is 117.96 U.S. cents/DMTU. This price is then multiplied by the iron units contained in the pellets, at say 65 percent, to give a final price of: 117.96 cents (x) .65= U.S. $76.67 per metric ton of pellets. The U.S. dollar has been declining in the world currency markets. With iron ore priced in U.S. dollars on the world market, the declining U.S. dollar is bringing the price of ore down. The U.S. dollar versus the Canadian dollar, for example, went from $1.16 Canadian to $1.10 Canadian from February 21 to May 14. Over the same time period, the U.S. dollar dropped from 0.7611 Euros to 0.7383 Euros. Longer term, the U.S. dollar has declined much more significantly. Factor 6: Iron ore’s role in steel pricing. Iron ore makes up a relatively small part of the total price of finished steel. Despite the recent and rapid price increases for iron ore during the 2003 to 2005 period, iron ore has never reached as high as 20 percent of the cost of steel (using hotrolled band export prices versus CVRD pellet prices FOB-Tubarao). Long term, iron ore makes up about 12 percent of the cost of finished hot-rolled band steel. Since 1994, the percentage has dropped to as low as 6.5 percent of the price of hot-rolled band and has risen to as high as 19.0 percent. Iron ore prices, however, actually tend to be lower when steel prices are higher, whereas iron ore tends to make up a higher percentage of the cost of steel when steel prices are lower (see graphs 7 and 8). The trend suggests that iron ore prices are somewhat less volatile than steel prices. In the end, however, iron ore is a relatively cheap part of making steel and thus the steelmakers are not expected to apply undo pressure to bring iron ore prices back down to there pre-2003 rock bottom level. Factor 7: Global Steel Demand Increasing. In addition to the factors influencing iron ore directly, global steel demand is expected to continue growing. Steel demand as measured by world steel shipments once again broke record levels in 2006, rising 10 percent and exceeded one billion metric tons for the second straight year. Demand is expected to rise another 5 percent this year. The 2005 increase was 9 percent, 2004 increase 7 percent, 2003 increase 7 percent and 2002 increase another 6 percent. Global steel demand has grown every year except one since 1931. Global steel shipments, given the above growth rates, are expected to reach 1.20 billion metric tons in 2007 and 1.40 billion in 2010. Steel is predicted to have long-term growth in demand and solid profitability for at least the short-term (see graph 9). The one caveat to sustained prices for world iron ore would be the rapid growth are expected to increase demand by about 300 to 320 million tons of steelmaking capacity in the next five to seven years. This expansion could require up to 420 million tons of additional iron ore capacity by 2014 or before. As a result, growth in world steel consumption is expected to keep demand for iron ore growing rapidly and often pushing capacity to its limit. New capacity will have difficulty coming online fast enough to meet this huge growing demand. Delays in construction of new capacity are already beginning to occur. Iron ore production is expected to stay at or near capacity levels through 2015. Factor 4: Scarce Scrap. The fourth factor that will help to keep iron ore prices higher rather than lower is the scarcity of scrap iron and steel. Current scrap prices in the U.S. are at a modern-day high of nearly $300 per long ton. Scrap prices are volatile, but for the last four years they have tended to be well above prices for the previous decade by almost 100 percent. Scrap is the main competitor for iron ore. Iron and steel scrap can be sorted and re-melted to make low to medium to good quality steels. About half of the steel made in the U.S. today is derived from scrap. The other half made is from virgin iron ore. Steel made from these virgin iron ores can produce the top quality steels. The scrap supplies in the U.S. and Eu- The main point about the world iron ore price is that once it is set between one mining company and one steelmaker, it closely establishes the pattern for all of the rest of the producers and buyers for the year. C O M M O D I T I E S Graph 7 Graph 8 Graph 9 12 www.greatlakes-seawayreview.com acquiring the technology to upgrade their ore. Second, it may also be difficult to recruit many new miners, especially those with advanced iron ore mining skills. If small operations continue to prevail, there will be difficulty in securing capital and infrastructure to support them. Chinese iron ore production will continue to increase, but not fast enough to bring down the current world prices. One recalls an old saying that goes, “you can’t fall off the floor.” Iron ore prices have jumped up off the floor, but they are not likely to lie back down again. The current prices are: • In line with inflation now • Coming from a far more concentrated industry that can discipline output levels • Feeding steel appetites that are large and have vast developmental needs ahead • Competing with scarce, high-price scrap • Are priced in a currency that is shrinking in value • Make up a relatively small part of the end product cost • Fundamental to continued growth of global steel output. With an increasing demand for steel, iron ore prices on the world market will remain relatively high by previous standards. World iron ore prices for pellets are expected to stay in the $75.40 per metric ton to $85.15 per ton range between now and 2015, with an average of $79.91 per metric ton (see graph 10). Even with this forecast of pellets retaining much of the current, seemingly high price, if one adjusts for anticipated future inflation, the price comes down. On an inflation adjusted basis, the price of pellets in 2015 could be approximately $65.00 per metric ton. Even at this, prices will be about twice what they were for the two decades before 2002. This inflow of cash should help the iron ore industry invest into the development of new technologies. . of domestic iron ore production from China. If Chinese mines increase output significantly over the next five to seven years, they could constrict imports and cause a drop in world prices. This seems unlikely, however. The vast majority of China’s iron ore deposits are low grade hematite ores. They average between 30 percent and 35 percent iron in ore. Hematite ores tend to be hard to upgrade so they are often blended heavily with high-grade ores to provide good productivity from blast furnaces. In China, the high grade ore would be imported. Also, China’s domestic iron ore producers are mostly small operators. Current production comes from an estimated 5,000 and 6,000 individual mines, with output of 100,000 tons per year or less. As a result, the idea of increasing China’s domestic production faces a compound problem which will stifle a rapid increase of China’s iron ore output. First, the existing small mines may have a difficult time C O M M O D I T I E S Graph 10 2201 Pinnacle Parkway • Twinsburg, OH 44087 330-963-6310 • FAX 330-963-6325 www.omnithruster.com GREAT LAKES/SEAWAY REVIEW July-September, 2007 13 This screen shows CSL’s Nanticoke at Quebec City. The container ship OOCL Montreal is shown as an AIS target. A 3-D model of Quebec City is loaded in the background. The Indiana Harbor, American Steamship Company, is shown approaching the lock at Sault Ste. Marie. The water is transparent to visualize the mathematical model of the bathymetry (underwater view). Captain John Bentum, Master of CSL’s Halifax, is one of the company’s officers navigating in 3-D this summer. He’s shown on the bridge with Indusol’s 3-D Navigator system. T E C H N O L O G Y The next wave of navigation technology is about to change the way mariners view the Great Lakes/St. Lawrence Seaway—quite literally—and all users of the waterway stand to benefit. Robbert van Eijle is president of Indusol Industrial Control, developers of 3DNavigator, a high performance, real time marine navigation software. It displays chart information in the traditional way, in a perspective view, in an elevated view from above and behind the ship and in a bathymetrical or underwater view. The underwater view in particular has caught the attention of Great Lakes stakeholders. “The system allows us to optimize the use of the water column,” said van Eijle (pronounced van “yle”). “It allows us to squeeze the maximum use out of what is there because we need to be able to use all the water we have available. This information benefits stakeholders from a safety perspective, from an environmental perspective and from a commercial perspective.” Gaining perspective Technology puts 3-D imaging on the bridge the stern) as the ship’s speed increases. • S-57 chart data, with the latest and most accurate charts provided in Canada by the Canadian Hydrographic Service (CHS) and in the U.S. by the National Oceanic & Atmospheric Administration (NOAA). • Current water levels received via Automated Information Systems (AIS) from shore stations. Data collection, processing. Extensive data was collected over 24 months via multi-beam surveys of the Seaway and connecting rivers and channels by the CHS, the van Eijle. “With a high-resolution chart, you have 50 contour lines between five and 10 meters with a precision of 10 centimeters (four inches) so you can precisely calculate the under-keel clearance and if your vessel draft will allow for safe passage.” The system also processes dynamic water levels, with the depth of the charts changing according to latest water level data transmitted by AIS. “With the technology we have and the data we’ve collected, we can prove that every user of the St. Lawrence Seaway can travel safely, at the mandated speed limit, Robbert van Eijle, President of Indusol Industrial Control and creator of 3DNavigator. Based in Ste-Ursule, Quebec, (near Trois-Rivières), van Eijle’s Indusol created 3D-Navigator to provide a view of underwater topography using data fed into its graphic rendering engine and viewed via Electronic Chart Display and Information System on a ship’s bridge. Unlike electronic charts, however, the 3D-Navigator system allows mariners to have an intuitive and natural perception of the vessel’s environment— for example, having objects appear smaller as distance increases. An officer can see everything in real time from the bridge, from above or behind the vessel and underneath. The system works by processing the information it receives, including: • The vessel’s draft at the beginning of a voyage. • The speed of the vessel, showing changes in squat (downward pressure at U.S. Army Corps of Engineers (USACE) and the St. Lawrence Seaway Management Corporation (SLSMC) and converted to S-57 charts. The entire process of loading and unloading charts and high-resolution insets in the charts is automated by 3DNavigator. The computers needed to crunch all the information and to constantly update the 3-D view in advance of the ship’s progress are equipped with an Intel Quad processor, two gigs of memory, open GL video drivers and a screen resolution of 1,600 by 1,200 on a marine approved 23-inch LCD monitor. That power is needed to render the S-57 high-resolution charts with precision to four inches. “With a traditional chart you might have five- and 10-meter contour lines with a precision of one meter (three feet),” explained HEAD OFFICE Plac Rodla 8, 70-419 Szczecin, Poland tel. (+48 91) 359 43 33, 359 40 81 fax (+48 91) 359 42 88 email: pzmmanagement@polsteam.com.pl www.polsteam.com.pl GREAT LAKES/SEAWAY REVIEW July-September, 2007 15 of technology, 3-D navigation adds another tool to the bridge that will prove to be invaluable. “The captain’s knowledge and experience is No. 1 and the machine comes after,” Kukulak said. “However, with this system, an officer can plan where he wants to go, when he wants to get there and the safest passage over the body of water he is on. And if there is any deviation from that course, the graphics on the machine will turn red and warn him of the danger.” The inspiration for 3D-Navigator came from van Eijle himself, who developed his first navigation system for sailboats in 1985. By 1993, he was working as a consultant on his second electronic navigation system, by then for commercial vessels. At the time, affordable computers were not powerful enough to handle 3-D technology. He began developing 3D-Navigator in 2000. With water levels becoming a growing concern on the Great Lakes/Seaway, 3DNavigator may end up being a necessity for carriers looking to eke out every available inch the waterway has to offer. “Even if the water drops to 25 feet, carriers can use it to their advantage,” van Eijle said. “Besides, the technology is not about at 26 feet 9 inches. That’s three inches more than the Seaway’s current maximum draft of 26 feet 6 inches, which translates into as much as 300 extra tons carried for some ships,” said van Eijle. “With the equipment installed on board and minimal infrastructure changes, vessels can transit at 27 feet. We’re talking significant environmental and commercial benefits. The water is there already, we just want to optimize its use.” With all their power and complexity, the computers and 3D-Navigator software provide a streamlined interface and easy access to navigators. By simply moving the cursor on screen, the navigating officer can change views, depending on the situation, and gain a perspective of the situation he wouldn’t otherwise have. “All AIS targets appear on screen as 3-D objects (a laker looks like a laker, a tanker a tanker), each scaled to its proper dimensions and color-coded according to the threat they pose to the navigator’s vessel,” said van Eijle. “I have always believed that a picture is better than a schematic, and when I began interviewing pilots for my research, I heard a consistent comment: they wanted to see on screen what they saw through the window on the bridge. The system gives them the view they are looking for.” CSL to use new software. At least one major stakeholder has decided to use the system. Canada Steamship Lines (CSL), a division of the CSL Group, has green-lighted the installation of 3D-Navigator fleetwide, with full roll out expected by the end of the summer. CSL played an active role testing the system on board its ships for the past two years and recovering data. “We have recommended to the Seaway [SLSMC] that we go to 26 feet 9 inches right away based on the data that was collected by the Seaway themselves,” said Kirk Jones, Director, Marketing and Transportation Services at CSL. “We now know we can navigate safely at that draft even without 3D-Navigator, so can all users of the waterway. In fact, with the system installed onboard we can go to 27 feet. However, all we’re asking from the Seaway right now is that they make use of the data that’s before them and increase the draft by three inches. It’s as much for their benefit as it for ours as they could maximize tonnage per trip through the Seaway for all users.” CSL is prepared to share its draft data with industry stakeholders, already having offered it to the Seaway, both the American and Canadian sides, the U.S. and Canadian Coast Guards, the USACE and NOAA. “We’re really talking about the greater good of the industry here,” Jones said. “We have enough negatives that we have to overcome on a daily basis, from bad weather to traffic, that we need to make more positives. This is a positive for everyone.” The new technology is a positive for those who benefit from it directly: ship navigators. According to Victor Kukulak, a veteran mate who is working with Indusol installing 3D-Navigator across the CSL fleet, the system represents the future of navigation. “It’s beyond amazing what this system can do,” Kukulak said. “When we use highresolution charts, we can see objects like rocks and larger obstructions underwater. It will be very useful for us because we carry huge amounts of cargo and the extra draft is important especially for our Seaway max ships.” A tool for the captain. The system also calculates the Rate of Turn (ROT) of a vessel, based on the speed it is traveling, and automatically recommends a different ROT if the speed differs from the one intended. Kukulak said that while the skills of the navigator will always supersede the power attaining a number. It’s about identifying safe passage, which is crucial whether we have high water levels or low. “Shipping is still the most efficient, economical and environmentally friendly way of moving cargo,” van Eijle said. “The more cargo moved on the water, the fewer trucks we’ll see on the road. In a sense, I was lucky when I started developing 3D-Navigator because I had the opportunity to design a system that enhances the built-in advantages of marine transportation. I knew this was a tool the industry would embrace because it fits its profile.” Jim McRae . A traditional view of the CSL Tadoussac entering the Rock Cut, a man-made channel near Sault Ste. Marie. The dynamic squat calculations show unsafe water as red. Draft: 27 feet, 10.5 inches. Left to right: At 2.5 knots, a small amount of unsafe water is shown behind the vessel. At 4 knots, more unsafe water is shown on both sides behind the vessel. At 5 knots, unsafe water appears in front and behind the vessel. It is clear the vessel must slow down to proceed. This shows the simulated conning view of the Nanticoke entering the St. Lambert Lock at Montreal. T E C H N O L O G Y 16 www.greatlakes-seawayreview.com The Great Lakes and St. Lawrence River, more than any other factor, have transformed the North American mid-continent into the economic powerhouse that it is today, providing millions of Americans and Canadians with jobs and a high quality of life. The water connection fueled early settlement and industrial growth. As interior markets became established, railroads and long-haul trucking complemented waterborne movements in the transportation mix. The mid-continent became one of the earliest pioneers of multimodalism. System vessels were initially carriers of people, proving basic transportation. Now, except for a recent surge of interest in overnight cruise travel and cross-lake ferries, commercial water transportation is primarily a freight activity. Vessels handle mostly bulk commodities to support the region’s core industries. Waterborne commerce in higher value, general cargoes, once dispersed among many Great Lakes/St. Lawrence ports, has been largely funneled to strategic load centers, a trend that has affected North American ocean port ranges as well. But while some once-bustling commercial ports in the system may be mere shadows of their cargo-handling heyday, I N T E R M O D A L T R A N S P O R T A T I O N Water transportation benefits Modal shift case studies track transportation patterns Salt from Goderich, Ontario to Milwaukee, Wis. Annual Tonnage: 597,000 net tons Marine: • Distance 470 miles • Annual roundtrips 24 • Tonnage per trip 24,875 tons (25,000 ton capacity, consistent with density of salt) • Total distance 11,280 one-way vessel miles • Westward movements on the lakes, such as salt, represent backhaul; thus, only one-way movements are considered for fuel use and emission calculations Rail: • 530 miles via Canadian National, Union Pacific, and Class II carriers • 844 trains/year • — Unit trains not practical • 706.5 tons per train (707 ton capacity) • 7,101-ton C-6 hopper cars • 895,700 roundtrip train miles Truck: • 511 miles • 24,875 trucks/year • 24 tons per truck • 10% Empty return rate (backhaul is grain to Western Ontario) • 13,982,238 roundtrip truck miles (one-way plus 10% empty return) The following is a summary of a modal shift study commissioned by the Great Lakes Commission and executed by Limno-Tech, Inc. to develop updated case studies related to commodity movement via Great Lakes waters and alternative means of transport. The study follows, and updates, a 1993 report entitled, “Great Lakes and St. Lawrence River Commerce: Safety, Energy and Environmental Implications of Modal Shifts,” which assessed the comparative energy usage, emissions and safety risk of commercial navigation on the Great Lakes/St. Lawrence Seaway compared to alternative surface transportation modes. These revised case studies track commodity patterns and take into account changes in technologies and commodity movement since 1993. MARINE RAIL TRUCK Fuel Use (U.S. gal) One-Way 8,199 892 100 Annual 196,767 1,506,714 2,741,615 Emissions CO HC NOx CO HC NOx CO HC NOx One-Way (lb) 466 157 3,434 26 19 75 8.8 2.9 47 Annual (net tons) 5.6 1.9 41 22 16 63 120 40 642 Potential 0.001 fatalities 2.68 train accidents 27.4 accidents Accidents (annual) 0.003 injuries 3.23 highway-rail incidents 0.06 collisions/groundings GREAT LAKES/SEAWAY REVIEW July-September, 2007 17 many others continue to grow, reinvest in their facilities and identify new markets. In recent years, total tonnage through the 150 system ports and terminals has averaged around 180 million metric tons annually. Manufactured/ processed cargoes constitute a small percentage of the tonnage, and in a few places such as Montreal, containers are a principal business. Marine transport is an important part of the binational, regional economy. Around 44,000 U.S. and 17,000 Canadian jobs are directly dependent on cargo movements and hundreds of thousands of jobs, many in the higher paying manufacturing sector, are tied to the maritime system. The region’s transportation system operates in a dynamic environment. Its infrastructure allows goods and people to move among areas of economic importance, matching demand with supply. Circumstances change and new transportation arrangements come into play. Public policy with respect to transportation has also undergone changes responding to historical and political developments. However, the vital connection between an efficient transportation system and a prosperous economy remains. Transportation of goods in modern industrial societies is reliant on all modes. Multimodalism is based on the principle that each mode has unique characteristics conveying advantages for the movement of particular commodities. Intermodal operations build on this principle by recognizing that freight transportation is a blend of cost and service factors. Optimal routings often involve a combination of modes with each movement tailored to its set of unique requirements. Public policy and mode comparisons. Government, at all levels, has a significant role in the

Maritime Editorial