Bulk Shipper Raises Concern As It Buys Out Competition

Company owns 31 of 41 carriers plying the Great Lakes

By , Staff writer of The Christian Science Monitor

A TORONTO-based company has just acquired three-quarters of all the ``bulk carrier'' cargo ships on the Great Lakes and is waiting to hear from Canadian regulators whether the deal will fly.

Given the industry's declining fortunes, many were surprised when Seaway Bulk Carriers announced March 31 the purchase of 15 bulk carriers from three competitors. If approved by Canada's Bureau of Competition, the move may prove astute since Seaway will own 31 of 41 bulk carriers currently operating on the Great Lakes. The rest are owned separately by individual operators.

``Bulk carriers'' are the lowly, often rusty, slightly gawky-looking, snub-nosed ships that play an essential role in the United States and Canadian economies because they feed grain, coal, and ore to industries along the shores of the Great Lakes and St. Lawrence Seaway.

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The undisputed high point for the huge (more than two football fields long) but humble bulk carriers came when pop singer Gordon Lightfoot immortalized their role in a song about the Nov. 10, 1975 ``Wreck of the Edmond Fitzgerald.''

But the fact is that something more mundane has been sinking the profitability of these ships: a decades-long decline in overall bulk shipping on the Great Lakes and recent shifts in markets for grain. No new bulk carrier has been built in seven years, and the average age of the ships is 30 years, one analyst says.

Some say the sudden consolidation could allow Seaway, a joint venture between Upper Lakes Shipping Ltd. and Algoma Central Corporation, to control prices on iron ore and grain shipping from the Atlantic Ocean to Lake Superior.

Still, many of the biggest customers are only mildly worried. ``Monopolies are always a concern, but there are also other competitive elements that come into play,'' says Paul Earl, manager of corporate affairs for United Grain Growers Ltd., a huge Winnipeg, Manitoba-based agricultural cooperative that ships millions of tons of grain across the lakes.

One reason Mr. Earl is not more concerned about Seaway's new semi-monopoly is that his cooperative can ship grain south by rail to the US if lakes shipping rates get too high. The cooperative might even ship grain to Vancouver, British Columbia, and on to Europe if rates get too high, he says.

While conceding that ``there had to be some restructuring to keep the seaway viable,'' Earl says his cooperative is looking west to the Pacific basin for growth markets. That means shipping grain west by rail to Vancouver and from there to Asia by ship.

About five years ago, the West coast surpassed the East coast in the volume of grain movement, Earl says. While 60 to 70 percent of the 30 million tons or so of grain shipped annually once went east, that level has fallen to 40 percent.

Allan Donaldson, vice chairman of Upper Lakes Shipping, the company that owns Seaway with Algoma Central Corporation, says given the number of ships, there is a 25 percent bulk carrier overcapacity on the lakes. He bemoans government ``subsidization'' of grain shipment by rail.

The failing credit worthiness of Russia has also cut deeply into grain headed east, Mr. Donaldson says. Where grain and ore shipments today are about 11 million to 12 million tons annually, the volume was more than double that in the 1970s, he says.

Given that fact, why would anybody buy more shipping capacity?

``I can tell you that Canadian ship owners as a group have lost money and the `bulkers' are the worst part of it,'' Donaldson says. ``But we think there's a long-term market for a number of vessels. There will still be a need to move grain and ore east along the St. Lawrence Seaway - we hope to fill that need.''

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