By Leo Ryan, AJOT
Ocean shipping lines calling at the Port of Montreal are grappling with an unwelcome logistics challenge this spring as water levels on the St. Lawrence River have dropped to their lowest level in many years. The response of some carriers to the predicament has aroused concern among Canadian freight forwarders and shippers.
One container line, Hapag Lloyd, is “investigating alternative routings” while another, France’s CMA CGM, has announced an unprecedented Emergency Low Water Surcharge on transAtlantic eastbound trade from Canada.
The situation has potentially serious commercial implications for the Port of Montreal, the second biggest gateway on the East Coast after New York/New Jersey for purely North Atlantic container cargo, if any carriers, even provisionally, choose to bypass Montreal.
In addition, carriers heading further inland via the St. Lawrence Seaway to Canadian and US Great Lakes ports require, depending on their size, to operate at a maximum permissible draft of 26’-3” from 26’-6”.
Normally, authorities would release water reserves through dams on the waterway to let more water into the St. Lawrence, but this has not been possible since there has been a significant lack of winter snow and spring rain throughout the whole St. Lawrence-Great Lakes region.
Current water levels on the St. Lawrence are about three feet lower than at the same time last year. Moreover, weather forecasts suggest that water levels could continue to fall this summer unless there is substantial rainfall. The chart datum, or mean lower water level, of the Port of Montreal is just over 37 feet.
In mid-May, CMA CGM decided to impose, effective June 1, an Emergency Low Water Surcharge on all eastbound containers loading at Montreal on St. Lawrence shipments to all destinations. The French carrier slot charters on a weekly Maersk Line service out of Montreal.
“This is the wackiest thing I have ever seen,” said Paul Coorsh, Montreal branch manager for Synergex Logistics Corporation. ”In recent years, there have been fuel and currency adjustment surcharges by carriers, but it’s the first time a steamship line is actually charging for low water.”
In its notice to customers, CMA CGM (Canada) Inc. said surcharges of US$40 and US$80 will apply to respectively 20-ft and 40-ft containers.
The surcharges have been clearly aimed at offsetting lower revenues with vessels unable to load at full capacity.
Bob Ballantyne, president of the Canadian Industrial Transportation Association (CITA), Canada’s largest shipper lobby group, declared: “The shipper community is surprised at this arbitrary action by CMA CGM.”
“CITA is the designated shipper representative under the Shipping Conferences Exemption Act and will be looking at the options for shippers under this law,” Ballantyne said, adding: “We would hope that CMA CGM, as a first step, would be willing to meet with shipper groups to discuss this unilateral action.”
As a result of the recession, notably in 2009, global shipping lines have been cutting vessel capacity on various trade routes, including the Atlantic.
On the other hand, as points out Kevin Doherty, president of Montreal Gateway Terminals Partnership, “a phenomenon we have noticed is that the boxes are heavier.”
“It’s a commercial decision by CMA CGM in a difficult global shipping environment,” said forwarder Chris Gillespie, president of Gillespie-Munro Inc. “It remains to be seen whether other carriers will pick up and do the same.”
In its notice to customers on May 14, Hapag-Lloyd, a major customer of the Port of Montreal, adopted a more traditional approach on the low St. Lawrence water issue. The carrier announced it was currently revising vessel capacities accordingly as well as “investigating alternative routings” on transAtlantic services.
Meanwhile, Jean-Paul Lejeune, spokesman for the Port of Montreal reported that container throughput was up 12.3% in tonnage terms in the first four months of this year. “Cost is just one