The 60th shipping season on the Great Lakes-St. Lawrence Seaway launched on Thursday amid fears that an escalating trade war could dampen the flow of goods and resources on the world’s water routes.
The recent U.S. imposition of import tariffs of 25 per cent on steel and 10 per cent on aluminum from China, Japan and other countries has thrown into question the steel and ore trade on the waterway that links the North American industrial and agriculture heartland with global ports. The United States said Canada is among the countries exempt from the tariffs, depending on the outcome of North American free-trade agreement talks.
China responded by leveling tariffs on US$3-billion worth of U.S. goods and threatened to escalate the trade war.
Algoma Central Corp.’s newest vessel, the Niagara, will kick off the year as the first ship through the Welland Canal that connects lakes Ontario and Erie. The Niagara will sail to Toledo, Ohio, for a load of steel-making coal and return to AcelorMittal Dofasco’s plant in Hamilton.
Terence Bowles, chief executive officer of the St. Lawrence Seaway Management Corp., said a buoyant economy will help the Seaway build on a strong season last year, when cargo volumes rose by 9 per cent, driven by a 29-per-cent rebound in iron-ore shipments to markets including China and Japan.
“We, like everybody else, are hearing about the protectionist measures that are out there,” he said by phone. “The Seaway is a bellwether for the economy, so if those measures start to hurt the economy, it’s going to dampen our optimism. That’s the only cloud on the horizon.”
Mining products, including coal, iron ore and salt, comprise 40 per cent of the Seaway’s cargo each year. Wheat, corn and other field crops destined for overseas markets account for a similar amount. Steel and iron are the highest-value products that move on the water, according to Seaway data.
“The biggest issue right now is steel,” Mr. Bowles said, noting the U.S. imports about 30 per cent of its steel. Much of this arrives on U.S. shores from Europe via the Seaway, he said. “That’s a product we handle and it would be of most concern.”
Tony Robinson, general manager for purchasing for ArcelorMittal Dofasco, said about a quarter of the plant’s 4.5 million tonnes of steel is shipped to the United States for autos and construction material. A 25-per-cent tariff on this trade would be “very, very significant,” he said.
Gregg Ruhl, chief operating officer of Algoma Central, the largest ship owner on the Seaway with 20 bulkers, six tankers and two cement carriers, said half of Algoma’s trade on the Seaway crosses the border.
But he said the effect of a U.S. tariff on Asian steel is unclear. “We’d like to think it won’t hurt us significantly. You could argue there’s a possibility it could help Canada as ... Canadian steel becomes more in demand in the U.S.”
Alternatively, the tariffs could pose a “minor negative” if a rebound in U.S. steel making commands more Great Lakes iron ore and reduces shipments heading up the St. Lawrence to overseas buyers, Mr. Ruhl said. “Over all, we’re not concerned as long as Canada and the U.S. keep trading freely and fairly back and forth.”
Basil Karatzas, of New York-based consultancy Karatzas Marine Advisors & Co., said the effects of the metal tariffs imposed is limited, given the small amount of steel the United States imports from China.
“China has been very careful not to rock the boat. They do not seem to be gung-ho to escalate it,” Mr. Karatzas said. He added that an escalating trade war would be most felt by the container shipping lines that bring consumer goods to coastal ports.
Lars Jensen of Denmark’s SeaIntelligence Consulting said it is too soon to say whether the protectionist wave will spread, and what effect the new tariffs will have.
“I think I’m not as pessimistic as a lot of commentators. There’s no need to go into panic mode,” Mr. Jensen said from Copenhagen. “Longer term, there is no doubt tariffs have a negative impact. There will simply be less trade because we will be less wealthy. It’s as simple as that. Shorter term, the effect is not as clear cut.”
Much of the threats of a trade war could simply be “political bluster” to satisfy voters “while not doing something that is stupid in economic terms,” Mr. Jensen said. “Usually, my approach would be that is how we would see states act. My blunt opinion is also that ‘usual’ may or may not apply to the current U.S. President. I am not quite as convinced as to that guy’s rationality.”
Eric Atkins