The Boats of Summer
Chris Windeyer charts the courses of the “Big Three” companies behind the North’s annual sealift
Every summer, dozens of ships fan out across the Arctic with pallets laden with everything from toilet paper to beer to backhoes. The ships deliver cargo to everyone from newlywed teachers doing a tour of duty in Grise Fiord to mining companies exploring Nunavut’s Kivalliq region – a strange cross between a diesel-fumed industrial operation and Christmas. People who have been waiting months for their new truck get to drive it away. Store shelves are once again stuffed full of pop. Construction materials for badly-needed housing projects arrive, and work can finally get started.
It’s a massive logistical operation. Orders must be transported to ports by rail or truck, crated and stuffed on board. Each ship’s call has to be scheduled and that schedule has to be kept. This is the giant dance most often called sealift, though it sometimes goes by other names in the world of bureaucratic legalese: marine resupply, dry-cargo resupply, and so on.
While the business of supplying the people and governments of the Arctic has remained relatively stable over the years, sealift operators aren’t without their own year-to-year challenges: Fuel costs can (and do) spike, the ebb and flow of the mineral exploration business can reward or punish operators, and even legacy pension issues can come back to haunt.
We called around to the sealift’s “Big Three” to see what activity is generating business, what new gear will be making its debut this year – and what’s coming around the corner for each company.
For Northern Transportation Company Ltd., the granddaddy of Northern shippers, 2010 was a nadir, with the company staggering under a string of problems including the loss of a lucrative contract with the Government of Nunavut, a money-losing route between Richmond, B.C. and the Western Arctic, and delivery problems out of Churchill that rankled customers in the Kivalliq region.
Throw in the company’s recent renegotiation of its pension fund to spread payments out over 10 years instead of five, and NTCL found itself facing whispers about its long-term viability. They’re rumours that Bill Duffy, NTCL’s president, angrily rejects. He won’t deny the problems of 2010, but says that 2011 marked a turnaround of $5 million in revenue for the company and, perhaps more importantly, NTCL “delivered everything on time” last season.
Privately held by Norterra Inc., the corporate behemoth co-owned by the birthright organizations of the Inuvialuit and Nunavut Inuit, NTCL doesn’t release financial figures. But Duffy, who took over the helm in September 2010, says visions of his company’s impending doom are exaggerated. “I can tell you with great confidence that it’s financial position is substantially better than it was two years ago,” he says.
As a 77-year old former Crown corporation (NTCL was owned by the federal government from 1949 to 1985), the company accumulated a large pension obligation that came under strain, like may other pension plans, during the market collapse of 2008. NTCL reached a deal with the Union of Canadian Transportation Employees in June to preserve the pension fund’s solvency. As of this writing, the deal is awaiting approval by the federal finance minister.
NTCL, which now carries a peak-season staff of around 175, has certainly consolidated. It pulled out of Churchill in the wake of the 2010 debacle, which saw shipments to the west coast of Hudson Bay arriving, in some cases, weeks late. As for the Richmond route, it was a victim, in part, of a decision by Newmont Mining Corp. to first take it slow on its Hope Bay gold project near Cambridge Bay, then to mothball the project entirely.
“In order to make that a profitable route, you basically had to have a tandem-tow [two tugs pulling one barge] with a large volume of cargo,” Duffy says. “That volume couldn’t be guaranteed and we needed an anchor tenant. At the time we thought that was going to be Newmont.”
So it’s back to familiar routes for NTCL, serving the Mackenzie Valley, Inuvialuit Settlement Region and Kitikmeot out of its hub in Hay River, where it brings in dry goods mostly by road and fuel mostly via the CN rail connection to Edmonton. From there, the infrastructure gets decidedly more rustic and often consists of a beach to unload barges from.
Like most businesses that operate in the Arctic, NTCL would like to see the federal government invest more in marine infrastructure and fund more gathering of hydrographic data (large swaths of the Canadian Arctic seabed are woefully under-mapped). Then again, Duffy says, “We’ve adapted to no infrastructure.”
Nunavut Sealink and Supply Inc., the Montreal-based team-up between Desgagnés Transarctik Inc. and Winnipeg’s Arctic Co-operatives Ltd., enjoys a virtual lock on all of Nunavut, with the exception of the territory’s biggest community.
The 2011 sealift contract with the Government of Nunavut sees NSSI delivering government cargo for every community except Iqaluit, serving the Baffin and Kitikmeot regions out of Montreal and the Kivalliq region out of Churchill. “The contract with the Government of Nunavut is a big chunk and it steers everything around,” says Waguih Rayes, Desgagnés’ general manager. Even without guaranteed government cargo bound for Iqaluit, NSSI still has enough demand to warrant three calls there this year. “It’s a very solid client base in Iqaluit” that consists of businesses, individuals and the federal government, Rayes says.
NSSI added two new ships in 2010 to bring its fleet size to seven. The new vessels, the MV Sedna and MV Zelada, are each equipped with two 180-tonne cranes that Rayes says dramatically increase NSSI’s unloading efficiency, allowing the company to slash rates. “It means simply that we can deploy bigger transfer barges [to move cargo from ship to shore],” Rayes says. “The first things you put in the water are the tug and the barge. If you have bigger tugs and bigger barges, you can increase the performance of your delivery at the destination. It’s not only faster, but more importantly, safer.” The newer engines are also more fuel efficient. Like every other transportation business, NSSI constantly worries about the impact of rising fuel prices.
The new ships also give NSSI the ability to handle the kinds of massive heavy equipment that will be heading North in greater volumes should mining in the region take off as hoped in the coming years. NSSI and its sister company, Taqramut Transport, already deliver to Xstrata’s Raglan nickel mine in Quebec.
Rayes says more mining traffic is actually good news for community cargo, because it ensures that scheduled sailings will be full. “Ships are like airplanes,” he says. “If you have a plane that is travelling with more than half its seats empty, of course you will be losing money. So when the ships are full, you have stability of price.”
The biggest challenge in Nunavut, Rayes says, remains infrastructure. He believes Iqaluit needs a proper deepwater port. Plans are on the books for one, but at $60 million-plus, there’s no money to build it. By contrast, Nunavut’s smaller communities simply need modest improvements to make unloading vessels easier. Transport Quebec has built a system of landing areas for barges in the communities of Nunavik. They’re equipped with breakwaters, laydown areas and road access. It’s a system Nunavut should emulate, Rayes says. “It was designed to serve not only the sealift companies, but people who need access to the water for traditional activities.”
It’s been a year of change for NEAS Inc. The company scored a major win in April when its subsidiary, Nunavut Eastern Arctic Shipping, won the Nunavut government’s contract to provide sealift service to Iqaluit, meaning all government-related cargo will arrive in Frobisher Bay this summer on NEAS ships. “It’s a significant increase in cargo volume and we will be calling on Iqaluit more than ever,” says Suzanne Paquin, NEAS’s president and CEO. The company plans a record six calls in the Nunavut capital this year. Of the company’s 150 staff, some 10 to 12 per cent are Inuk, Paquin says. All NEAS cargo comes out of the port at Valleyfield, just west of Montreal.
NEAS endured a flurry of corporate changes starting last September, when Qikiqtaaluk Corporation, the business arm of Baffin Island’s Qikiqtani Inuit Association, ditched its stake in NEAS and bought into rival NSSI. But NEAS quickly added two new shareholders, Merkosak Construction of Pond Inlet and Savik Enterprises of Igloolik, both of which offer local “shore-to-door” delivery of NEAS cargo. Alongside Iqaluit’s E71707 Inc., which does business as Tukimut, the new shareholder arrangement means the Nunavut wing of NEAS is majority Inuit-owned. (NEAS Inc., the parent company, is a joint venture between Makivik Corp., the birthright corporation of the Inuit of Nunavik, and Transport Nanuk, itself a joint venture between Logistec Corp. and the North West Company. Everyone got that?)
As if there weren’t enough companies named NEAS around, the company launched Nunavik Eastern Arctic Shipping, majority-held by Makivik, to serve the Inuit communities of Quebec’s northern coast. NEAS already serves Nunavik, but the coming of Quebec’s Plan Nord, the Charest government’s ambitious but controversial proposal to open up Northern Quebec to development, while spending billions on housing, infrastructure and education, figures to dramatically increase the amount of cargo headed to Nunavik. “We are increasing our focus on Plan Nord, to be ready for it, by having this company created,” says Paquin. But Plan Nord could also draw more competition: Rail carrier CN is mulling a $5-billion railway connecting the region’s mineral deposits with points south.
In some ways, Paquin says, Nunavik is an easier place to do business than Nunavut, because the Quebec government has put money into basic marine infrastructure for communities. In Nunavut, despite numerous studies and proposals for new docks – including a $28,000 study of a port in Rankin Inlet – sealift is still mainly a matter of landing barges on beaches. “What we see a lot are these unfunded plans and reports on infrastructure in the future in Nunavut. Every community needs to be looked at individually and infrastructure needs to be developed.”