Welcome 2011, now behave !

Indeed another years has popped its head up. Welcome 2011! Welcome indeed, and hopefully you are better than that last year.

I was just re reading my 2010 outlook post I had made about one year ago, in preparation for this outlook or my musing of the future, and although I was pretty general last year, it turns out I wasn’t off the mark too badly. I am feeling a bit out of the “maritime mindset” coming off the holiday season, but the Christmas Lights are now stowed and its time to get back to work. So here goes my observations for your consideration and comments.

So what happened last year? Well for one things, we in the maritime sector were busier then the year before. The economy in general has recovered some steam in the maritime sector, no skyrocketing performance, but an improvement, in the later half of 2010, in particular. I was expecting more of a steady climb out, especially towards the end of the year, but I am not so sure we are still climbing with determination. The US economic engine is still sputtering, so this remains a heavy burden on trade, especially in Canada, and a red flag for shipping.

From my personal observations, the port of Montreal and Quebec were tremendously busy, with a great deal of cargo and passenger traffic. Berths were very busy, in particular tanker traffic seemed extremely busy. The Port of Montreal reported a sharp increase in the first half of 2010 of about 10% over the same period the year before, and I am sure those figures will be up even more at the end of the year. The Seaway was also up, in particular grain cargoes, but overall 17% rise year over year.

Over in Vancouver, fresh numbers indicate a nearly 16% increase in all traffic over the previous year with inbound boxes up, and outbound dry bulk up significantly. Passenger traffic out of Vancouver though took a beating, down 35%. With Alaskan bound ships being home based out of Seattle instead of Vancouver, the rest of BC Ports are increasing in passenger traffic at Vancouver’s expense.

The big stories of 2010 might be Seaspan acquiring its former competitor Rivtow (all assets from the non ship berthing duties) from SMIT Marine Canada. The Olympics in Vancouver sure caused allot of hubub in the harbour, and brings a bit of closure to a construction frenzy, requiring a great deal of raw materials. The Canadian Navy was richly celebrated this year, well at least in pomp and circumstance, across Canada. The service has been around for one hundred years, although much of its future sits on uncomfortable chairs.

The Canadian government (GOC) gave ship owners a giant gift in lifting import duties on foreign built ships. They also made some significant changes to the Coasting Trade Act, in hopes of clarifying the process. The changes are said to make it easier for foreign operators to work in Canadian waters – in particular this benefits the offshore oil and gas business in Eastern Canada. Which of course will probably not involve hiring Canadians. The GOC also went on a silly spending spree under the auspice of Economic Action plan, pumping millions and millions of dollars on “ready to go” ships projects to patch up yet again, the ageing red and white fleet. Old ships with shinny paint, except now there is a need to pay those bills, and here we go again with belt tightening for the coming years.

In the arctic, business has apparently been booming. Although venerable NTCL is floundering under what appears to be poor management. Other east coast based operators are picking up the slack without missing a beat. Things were tempered with two major groundings in the arctic, which grabbed national headlines highlighting vulnerabilities in the regions.

Another big story for the region is the federal approval of the Mackenzie Pipeline. The project, 30 years in the approval stage, is expected to cost over $16 billion – the largest capital project in Canada. Obviously the arctic marine industry is in a major position to take advantage of those development dollars – assuming there is some strong enough financial backers to actually undertake the project.

Over in the west coast, forestry is still in a slump. This important industrial sector heavily serviced by marine assets, remains in a decade long downturn. There is talk of the industry picking up, perhaps for the companies who sell raw logs, but for the guy on the tug, not too many of these guys are seeing any benefits. The raw logs are just being shipped on deep sea ships, right from the cut site, to be processed in Asia. With construction down across North America, aggregate is also down. So no real good news there. I was reading a story that a tug company was doing dive charters to keep their head above water. Pretty sad.

The bright spot on the west coast is those processed logs, along with everything else, coming back on box ships as consumer products, which is fueling a serious growth of harbour tugs. Big local player Seaspan is going head to head with worldwide powerhouse SMIT, in BC waters. Seaspan adding 5 new powerful ship berthing tugs to their fleet, while SMIT solidified its dominant position in BC’s north and continued to refine its fleet in Vancouver. Meanwhile over at BC Ferries, traffic was down about 2% year over year, and they don’t expect any growth any time soon. I have heard from several people that they also have a hiring freeze as well.

Oil continues to dominate the maritime environment on the east coast with a forecast of oil production from Canada doubling by 2020, which can only mean further offshore opportunities for seafarers, unfortunately with the changing of the Coasting Trade Act, this opportunities may be far and few between. And of course the impacts of the Deepwater Horizon have yet to fully materialize. Fishing is a major industry there, but I am not very familiar with its outlook or issues.

Deepwater Horizon, well if that is not the biggest maritime story of last year I don’t what else it could be. This in my view is a major event which will have tremendous impact on a variety of aspect concerning the offshore oil market. The impacts will probably focus the industry; probably reduce the amount of projects; probably improve lives and safety of seafarers.

What holds for engineers in particular and seafarers in general for 2011; more of the same. We’ve been running on lean rations for a long time now. There is not much that can be cut, but the accountants will keep trying. Training is so rarely given to Canadian seafarers by their employers, that I dont think will change. Jobs afloat have been few and far between with a caution bunch hanging on to their positions. If growth continues, there is likely some good times ahead for us, as retirement is claiming more and more seafarers. The lack of young engineers being able to progress through the ranks is still a very real problem that has not been focused on by employers and shipowners, who have done even less, if that was possible, to attract new talent. This will quickly lead to an interesting and certainly diverse workforce in the very near future.

With these pressures mounting against their traditional operations, shipowners are likely to turn to foreign going assets to supply the Canadian market. Clearly this strategy will be detrimental to the already struggling Canadian mariner, in particular the much needed “young blood”. But then again these guys have been shunned for many years, and those willing to pursue a maritime career past these roadblocks, do it in spite of Canadian operators, and in the international market.

Perhaps ship operators will turn to foreign assets, but regardless the shortage of competent and experienced officers is not a problem isolated to Canada. This is a major problem for shipping all over and there will be no quick solution, especially when the “good time” were here, they did nothing more than pay lip service to the problem. Now, after two years of belt tightening, you can be sure the situation is not any better.

In Manila this year, the new STCW requirements were agreed to and will usher in another round of of needed standards improvement. In North America where working hours routinely surpass 14 hrs days, this will have some pretty major impacts.

All these observation in my mind point to an interesting year. late 2008 and 2009 was a disaster, 2010 was better. 2011 I expect will be similar to 2010 with a modest growth, probably shy of pre meltdown levels. Asia continues to dominate in the production of goods wanted in Europe and North America, gobbling up resources from around the world. All this is made possible by shipping, and shipping is made possible by seafarers, so it should be a good year.

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