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A tug boat in the Port of Montreal on June 17, 2021.

Christinne Muschi/The Globe and Mail

Falling water levels on the St. Lawrence River has prompted marine shipping companies to impose special fees on cargo, adding to the pain of Canadian companies already being hit by record transportation costs amid supply chain chaos.

Shipping lines apply the surcharges occasionally when water is low because the situation forces them to lighten their vessels’ loads. Fewer containers on each ship means they make less money with each shipment, and they try to counter that with a fee.

Germany-based Hapag-Lloyd AG, Switzerland-based Mediterranean Shipping Co. SA (MSC) and France’s CMA CGM SA are among the transporters applying low-water surcharges, which took effect this week. All three carriers posted advanced notices on their websites advising of the changes.

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“If the demand [for transport] was not there then it’s a different question but the demand is there” so the surcharge applies, said Wolfgang Schoch, Hapag’s managing director for Canada. “Demand is outstripping the supply everywhere. For Hapag-Lloyd, all the ships we have are on the water somewhere in the world and it’s still not enough. It’s an extreme situation.”

Each reduction of 10 centimetres of water in the St. Lawrence channel represents about 3,000 metric tonnes that have to be removed from a freighter, Mr. Schoch said. “This year is especially low.”

Unrelenting demand from cash-flush consumers for goods has collided with labour shortages and pandemic safety protocols to generate an unprecedented slowdown of cargo in ports and on highways that is testing the global economy and its distribution networks. Shipping costs are soaring to record levels and importers and exporters are scrambling to secure container space, plan for delays and figure out how to deal with rising expenses.

The low-water surcharges are nothing new. For some big importers, such as the Societé des alcools du Québec (SAQ) liquor monopoly, low-water fees are part of existing long-term contracts. For others, however, they come on top of other larger charges hitting companies in recent weeks amid the global crunch in shipping capacity. One executive of a major Canadian retailer said he prays for rain, expressing the frustration felt by a wide swath of businesses.

“Absolutely it has a big impact,” said Rainer Bollhorn, senior partner at Gibson Canadian & Global, an independent shipbroker based in Pointe Claire, Que. “If you’re a [big retailer] or an industrial company trying to move product and freight rates go up … you’re not happy about that.”

Hapag said it will apply a US$150 charge for every 20-foot container on two routes inbound to Montreal and warned it could increase that amount further. MSC said it will charge an extra US$150 for every 20-foot container and US$200 for every 40-foot container on routes to Montreal from Northern Europe and five other points of origin. CMA said it would increase its existing low-water fees to US$150 and US$300 on 20-foot and 40-foot container shipments, respectively, from all origins except five located in Asia.

Water levels have been decreasing strongly for several weeks on the St. Lawrence and surrounding areas in part because of a lack of spring rain. The Great Lakes feed the St. Lawrence. Lake Ontario, the main source of water to the river, has seen its driest conditions since 1966 over the past 12 months, according to the International Lake Ontario-St.Lawrence River Board.

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The board, overseen by a U.S.-Canadian agency known as the International Joint Commission (IJC), controls the flow of water from Lake Ontario to the St. Lawrence, which passes through the Moses-Saunders dam near Cornwall, Ont. It tries to balance the interests of stakeholders using the system.

“There’s low probability that we’re going to see much higher [water] levels for the rest of the summer” for Lake Ontario, said Frank Seglenieks, the Canadian secretary of the board. “That’s going to result in these lower water levels downstream.”

The Canadian Coast Guard transmits information on forecast water levels at different spots of the St. Lawrence to shipping companies twice a week. It’s then up to the carriers themselves to adjust their loads to avoid running aground. The latest Coast Guard bulletin for the channel shows expected minimum water levels at Montreal running between five and 20 centimetres below the levels indicated on nautical charts – known as chart datum – from now until July 12.

Shipping companies have to adhere to those forecasts of future water levels in the channel at the moment they load their vessels for the multiday trip. If a ship captain who adheres to the forecast finds the water levels below the forecasts en route, Canadian port and shipping authorities can send a request to the IJC board to let more water into the river short-term at Cornwall.

Such requests are not routine and are typically granted, said Jean François Belzile, harbour master and director of marine operations for the Port of Montreal. Over the past several decades, the trend line for water levels on the Great Lakes and St. Lawrence has generally been rising, he said.

The St. Lawrence is one of the world’s largest inland waterways and its main shipping channel is open all year with a depth of 11.3 metres. Goods unloaded from Europe at the Port of Montreal include things such as French wine, Italian furniture and marble.

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Although it hasn’t been hit by low-water fees specifically, the SAQ’s liquor business has not escaped the turmoil. The SAQ’s freight forwarders have raised their freight rates three times since March on products from Europe and New Zealand, forcing the corporation to hike prices on hundreds of products. Another round of freight charge increases could occur in the coming months, the SAQ has said.

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