Marine Delivers Magazine 2023

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FROM THE PUBLISHER MARINE SHIPPING HAS CONTINUOUSLY SHOWCASED ITS RESILIENCY AND RELIABILITY

milestones are being celebrated, other goals such as achieving the first-ever Ontario Marine Strategy are also well on their way to being attained by year-end.

The 2023 issue of Marine Delivers Magazine highlights the ways in which Chamber of Marine Commerce members, industry partners, and government are all playing vital roles in achieving shared goals. Together, we are maintaining and improving environmental sustainability, strengthening our supply chains, and cultivating economic momentum.

our industry’s environmental footprint. Exciting advancements and opportunities for U.S. ports are being spearheaded by Adam Tindall-Schlicht, Administrator of the Great Lakes St. Lawrence Seaway Development Corporation (GLS) (pages 24 to 27). Port-led infrastructure investment and cargo diversification are just two of the many policy topics being led by the 11th Administrator.

As we navigate the 2023 shipping season, it is important to recognize that while still recovering from the uncertainty and adversity of the COVID-19 pandemic, marine shipping has continuously showcased its resiliency and reliability over the past three years.

Just six months into the year, 2023 has proven to be a year of industry optimism. With many initiatives having already been achieved, such as funding in the Canadian government’s Budget 2023 for a Green Shipping Corridor Program and Transportation Supply Chain Office, and the development of Canada’s foreign Reciprocal Arrangement Program that is helping to address labour shortages, the near future of marine shipping looks buoyant. While these significant

On the economic front, the CMC is thrilled to have worked closely on developing the 2023 Martin Maritime Economic Study, a major research project that links tonnage statistics to job creation, GDP contributions, and other economic benefits (pages 11 to 12). The study was released earlier this month and emphasizes how the marine shipping industry continues to show up as the heartbeat of our economy.

The environmental sustainability of marine shipping remains at the forefront of our minds, proving to be more crucial than ever before as we’ve been struck with extreme weather conditions in recent months. We have detailed the importance and necessity of establishing a Green Shipping Corridor (pages 14 to 18), which would lead to the accelerated achievement of reaching net-zero carbon emissions industry-wide, further reducing

In a CMC member spotlight piece, an exclusive interview is had with Ian Hamilton, President and CEO of the Hamilton-Oshawa Port Authority (pages 21 to 23). Hamilton explores initiatives and opportunities related to supply chain capacity, environmental sustainability, infrastructure investments, and more!

Finally, as labour shortages remain a challenge to the strong momentum of our industry, the Canadian Marine Careers Foundation (CMCF) outlines new initiatives being put into place to recruit the next wave of marine workers (pages 29 to 33).

Join us in reading about the programs, policies and collaborations that are generating excitement and optimism for the future of marine shipping. Enjoy! n

BRUCE R. BURROWS, PRESIDENT AND CEO CHAMBER OF MARINE COMMERCE

THE ENVIRONMENTAL SUSTAINABILITY OF MARINE SHIPPING REMAINS AT THE FOREFRONT OF OUR MINDS, PROVING TO BE MORE CRUCIAL THAN EVER BEFORE AS WE’VE BEEN STRUCK WITH EXTREME WEATHER CONDITIONS IN RECENT MONTHS.

MARTIN STUDY: MARINE SHIPPING IS THE RESILIENT HEARTBEAT OF OUR ECONOMY

Acomprehensive independent study has clearly shown that marine shipping on the Great Lakes-St. Lawrence River Waterway is playing a central role in driving key aspects of the North American economy. The recently released study was made possible through collaboration among the Chamber of Marine Commerce, the American Great Lakes Ports Association, the Lake Carriers’ Association, the Great Lakes St. Lawrence Seaway Development Corporation, the St. Lawrence Seaway Management Corporation, the Shipping Federation of Canada, and Transport Canada (Transportation and Economic Analysis Group), all of which served as members of the project steering committee and provided confidential data, guidance and oversight for this study. Together, they engaged Martin Associates to prepare this study - an internationally recognized leading economic and transportation consulting firm that has conducted more than 1,500 economic and planning studies for nearly every port in the United States and Canada, as well as ports in China, Europe, South America and the Caribbean. Through the analysis of 2022 activity, the Martin Associates study has shown how marine shipping is strengthening supply chains, supporting hundreds of thousands of well-paying jobs, generating billions in tax revenue, and stimulating GDP (Gross Domestic Product).

STRENGTHENING SUPPLY CHAINS

The Martin Study showed that cargo moved on the Great Lakes-St. Lawrence River Waterway in 2022 totaled 252.1 million metric tons, valued at $157.2 billion CDN. These huge and valuable volumes of cargo positively affect every aspect of life for Canadians. Key commodities moved include the iron ore used in steel production and manufacturing of electric vehicles; the grain and sugar used for dozens of dietary staples, including bread and pasta; and the building products that enable the construction of new houses, condos, apartments and office towers.

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SUPPORTING WELL-PAYING JOBS

The study revealed that marine shipping supported 356,858 jobs. To put that in perspective, that’s more than twice the population of the province of Prince Edward Island. In terms of wages, the industry generated a total of $30.2 billion CDN in total personal wage and salary income, and local consumption expenditures for regional residents of the U.S. and Canada.

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GENERATING TAX REVENUE

The study showed that a total of $12.8 billion CDN in direct, induced, and indirect federal, state/provincial and local tax revenue was generated by maritime activity at the marine terminals located on the Great Lakes-St. Lawrence River Waterway. To give a sense of scale, that amount is 170 % of the total transportation budget for the Province of Ontario –almost double what an entire province spends on transportation infrastructure.

STIMULATING GDP

The study revealed that marine cargo and vessel activity generated $66.1 billion CDN in economic activity in Canada and the U.S. in 2022. That’s more than the gross domestic product (GDP) of many small countries, and a clear indication of the contributions made by the industry towards the overall strength of the North American economy.

“Despite the diverse challenges presented in 2022, including global supply chain disruption, intense geo-political conflicts, and ongoing post-pandemic recovery, marine shipping clearly remained the resilient heartbeat of the North American economy,” noted Bruce Burrows, President and CEO of the Chamber of Marine Commerce. “The volumes of information gathered and analyzed through this unique and broad-based project confirm that our industry is powering the success of diverse and vital industries including mining, agriculture, and construction. We can take great pride in knowing we do that as “the green mode,” moving more cargo with less carbon emissions than the other modes, and with a commitment to become even greener in the years to come.”

Recent studies additional to the Martin Associates project have underlined that marine shipping is the most efficient way

of moving large quantities of cargo, with one vessel capable of moving the same volume as nearly 1,000 transport trucks.

“You have 10,000 truck trips between Toledo and southern Ontario alone,” says Ian Hamilton, CEO of the Hamilton Oshawa Port Authority (HOPA).

Hamilton says, based on data compiled by the McMaster Institute for Transportation & Logistics, 13 million kilometres (8.07 million miles) of truck trips between southern Ontario and common destinations could be converted to marine transport.

Burrows notes the potential to use marine to slow global warming is significant. “If marine shipping were prioritized as the means for moving cargo throughout North America, our ability to meet 2050 net zero goals would become far more certain,” says Burrows. “Clearly, our industry is the ideal partner to both governments and businesses as they seek to reduce carbon emissions, improve supply chain efficiency and reliability, reduce costs, and improve global competitiveness.”

Opportunities to explore such partnerships abound. The most recent Canadian federal budget included $27.2 million over five years to establish a Transportation Supply Chain Office. The intent is to have this office work with

industry and provincial governments to respond to disruptions and enhance coordination to improve the supply chain’s overall capacity, efficiency, and reliability.The budget also included $165.4 million over seven years (delivered through Transport Canada) to establish a Green Shipping Corridor Program. The program sets a strong foundation upon which the marine shipping industry can make even larger investments in Canadian research and development necessary to advance the use of alternative fuels and new technologies to further enhance marine shipping’s leadership as “the green mode” of transport.

“We live in a time of great change, and great challenge,” notes Burrows. “People want our economy to remain strong throughout the green transition. They want road traffic and pollution reduced. They want supply chains to become stronger by becoming more resilient and more efficient. They want new job opportunities. They want North America to set the standard for other jurisdictions to follow with respect to sustainability and best practice. In all these respects, marine shipping is showing a strong track record and a commitment to do even more, so when it comes to the ambitions of our governments, businesses, and citizens, we can confidently say Marine Delivers.” n

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INITIAL GREEN SHIPPING CORRIDOR NETWORK DISCUSSIONS

CHART COURSE FOR FUTURE COLLABORATION

BY JULIE GEDEON

Initial discussions towards establishing a binational Green Shipping Corridor Network (GSCN) within the St. Lawrence and Great Lakes region indicate a genuine willingness by maritime stakeholders to work towards decarbonization, but opinions still vary on the best ways to proceed, the elements to prioritize, and the resources that will be required. “The Canadian and U.S. governments committed at the COP27 Climate Change Summit last November to facilitate the development of this network and later called on both Seaway authorities to begin these discussions,” Terence Bowles, the President and CEO of the St. Lawrence Seaway Management Corporation (SLSMC), shares. “This forum was an opportunity to identify voluntary collaboration efforts and implementation strategies for

decarbonization of marine shipping.” Nearly 100 representatives from government agencies, maritime industry organizations, as well as individual ports and ship owners attended the initial Collaborative Forum co-hosted by the U.S. Great Lakes St. Lawrence Seaway Development Corporation (GLS) and Canada’s SLSMC on April 4th at a hotel near Chicago’s O’Hare International Airport. “I think we’re off to a good start with many of those involved already working hard at decarbonizing maritime operations, so we’re definitely not starting from scratch here,” Bowles says. “There was a lot of good information exchanged.”

High level support

Administrator Adam Tindall-Schlicht at the GLS likewise welcomed the receptiveness to the Forum’s approach

of open and collaborative panel discussions. “One of the most significant takeaways in terms of feedback was that the way to realize this network – given the international conversations at both COP26 and COP27 and since then –is recognition that unlike other green shipping corridors being developed around the world this clearly has to be a network,” he says. “Ours must be a multi-faceted approach towards achieving broad-based decarbonization of the Great Lakes Seaway System.”

Tindall-Schlicht adds that the international momentum behind the development of green shipping corridors at the highest levels of government is reflected in the billions of dollars being allocated by the U.S. Inflation Reduction Act and the Bipartisan Infrastructure Act, as well as recent announcements of initial funding by the Canadian government.

Photo Credit: Algoma Central Corporation. 2018.

Photo Credit: Algoma Central Corporation

“U.S. Transportation Secretary Pete Buttigieg reiterated at the latest G7 meetings the belief that green shipping corridors are both key to reducing maritime emissions and to creating a rare generational economic opportunity by transitioning industry with paired government financing and support,” he adds.

Bruce Burrows, the President and CEO of the Chamber of Marine Commerce (CMC), was among those glad to see discussions get under way. “We came away with the establishment of a couple of working groups and a lot to consider in preparation for when we meet again,” he notes.

Showcase opportunity

Burrows regards the GSCN as an ideal opportunity to showcase what the marine mode – or what he notes is “the green mode” when compared to rail and trucking – is progressively doing to decarbonize transportation as ship owners, port authorities and terminal operators work towards a net zero carbon goal. “I see this network as being a series of more cleanly powered routes that are often interconnected, but we still have to formally establish where it extends and what exactly constitutes a part of it.”

The CMC welcomed the Canadian government’s establishment of a Green Shipping Corridor Program in the federal spring budget with $165.4 million to be delivered by Transport Canada over the next seven years. “It’s a good starting point for the large investments that will be essential to research and develop the cleaner energy sources required to transition to full decarbonization,” Burrows says. “The investment tax credits announced for producers of clean hydrogen, along with other clean technologies such as carbon capture, are also good news, and we look forward to seeing how fuel producers and ports might be able to use them to advance the corridor’s decarbonization.”

In keeping with the pursuit of decarbonization, the CMC has welcomed the suggestion by Gregg Ruhl, Algoma Central Corporation’s President and CEO, at the Forum in Chicago to take five years to examine future energy options, while focusing on the immediate extensive use of biofuels and/or other currently available renewables.

Route analyses

Mathieu St-Pierre, the President and CEO of the St. Lawrence Economic Development Council (SODES), says

the current binational governmental directives could be interpreted in various ways, and it’s imperative to analyse data to determine the ideal routes in tandem with their respective best energy sources and logical connections within the network.

“We have a unique opportunity here to decarbonize maritime trade along with a lot of the overall transportation sector with ports already being a gateway for vessels, railcars and trucks,” St-Pierre says. “But we have to identify the best opportunities to decarbonize within this corridor to ensure there’s the sufficient reliable long-term customer base to merit the large investments required.” SODES has been working since last year with Innovation Maritime on a report about maritime transportation that could help to identify the best routes. “We have to look at whether the stops we make today are the ones that make the most sense going forward,” St-Pierre emphasizes. “And the answer is probably no, based on evolving trade patterns and the realities of cleaner energy sources that might lead to certain ports serving a much greater role as new fuel stops rather than cargo points.”

St-Pierre says there’s also a need by the key stakeholders to fill information gaps about current and potentially future best routes along the way. “For instance, we might have the overall data on vessels travelling between Montreal and Thunder Bay, but lack details about stops along the way,” he explains. “We need to look closely at the ideal transits to support with new infrastructure based on expert data analyses and the input of fuel producers regarding available supplies, logistics and storage potential.”

Making sure that everyone is behind the decisions ultimately made, including the cleaner energy suppliers, is crucial, according to St-Pierre, who adds that the shipping industry must also undertake to be as efficient as possible to minimize the required amount of fuel in the first place.

Left to right: Adam Tindall-Schlicht, Aaron Annable and Terence BowlesFinal day of first ever GSCN meetings.

He also notes that it’s ultimately shippers who decide how everything is transported. “That’s why it’s so important to collect and clearly present the data on the corridor’s decarbonization going forward,” he says. “We need to establish a solid baseline and subsequently relate progress.”

Benchmarking credibility

Green Marine’s President David Bolduc says the voluntary environmental certification program might be able to help in terms of providing a clear framework for the corridor’s ultimately agreed-upon criteria. “It’s certainly been our program’s mission over the past 15 years to minimize the maritime industry’s environmental footprint with many of our industry members already measurably reducing their air emissions,” he says. “Green Marine can offer the credibility we’ve established from our experience in developing the criteria to measure and transparently relate this kind of environmental progress.”

Bolduc notes that many of the key stakeholders from both sides of the border already belong to Green Marine which originated with ship owners, ports and terminals in the St. Lawrence and Great Lakes corridor to address pressing environmental issues that included polluting air emissions. “We can also help to arrange the expertise from more than 100 Green Marine supporters involved in the scientific research community, NGOs and government agencies who are concerned with these matters.”

He commends the GLS and SLSMC for organizing a good start to the discussions and says it’ll be interesting to see where things go next. “One of the many unique features of the Great Lakes market structure is its reliance on privately owned ports and terminal operators whose representatives should be invited to future meetings,” he notes. “We also have to reach out to fuel suppliers who aren’t usually a part of our shipping community’s discussions.”

Definitive goals

The first major task in Bolduc’s view is to reach consensus on a definitive goal for the network’s decarbonization. “Then let’s talk next about how we want to measure its progressive achievement so that we can properly funnel the related government funding and other required investments for this major transition,” he adds. “And I think we have to move as quickly as possible on this front because we’re hearing about new corridors and projects for them every other week nowadays.”

Bolduc recommends looking at how decarbonization is being approached in other inland waterways, such as the Rhine which also runs through various jurisdictions

Port of Montreal

with a series of locks and draught limitations. The Central Commission for the Navigation of the Rhine has been tasked with identifying the greener technologies best for achieving a 35% carbon reduction by 2035 (compared to a 2015 baseline) and to largely eliminate emissions by 2050.

Canada Steamship Lines is among those hoping for precise definitions and objectives for the GSCN sooner rather than later. “We would like to see a green shipping region distinct from a port-to-port corridor, as this would better suit the unique nature of operating on the Great Lakes and St. Lawrence,” says Emily Pointon, the CSL Group’s Global ESG Director. “Determining what this will look in practice will be the next challenge.” Based on the company’s successful biofuel trials, CSL envisions the St. Lawrence and Great Lakes as a region where biofuels could quickly become a commercially viable solution if initially supported with specific incentives and infrastructure investments.

“When calculating emissions from biofuel on a lifecycle basis, results immediately show the carbon emission reduction benefits of this drop-in fuel,” Pointon notes. “While research and development continue on future fuels such as hydrogen, biofuels provide a proven and practical green alternative to support the decarbonization of the marine industry.”

Commercial viability

Pointon immediately adds that at least initial support is required to make biofuels, which are nearly double the cost of fossil fuels, competitively feasible. She notes that Canadian ship owners already find themselves at a disadvantage in terms of tax and carbon credits, along with equivalent subsidies for biofuels amounting to approximately $1.50 per litre in the United States compared to only 50 cents in Canada.

“Canada needs to provide biofuels at a level that is cost competitive with the United States,” Pointon emphasizes. “Every day we’re seeing production increase in the U.S. and Canada slowly falling behind.”

Ad hoc approvals for still unregulated biofuels on a yearly basis also make it uncertain for suppliers to invest in stockpiles that might ensure ample supply and possibly reduce costs through the economies of scale.

The CSL Group is currently researching the feasibility of using battery-operated vessels for some repeated journeys. “Shortsea shipping routes lend themselves to battery solutions if shore infrastructure and renewable electricity is available to support the operations,” Pointon says.

Possible AI applications

At Global Spatial Technology Solutions (GSTS), Chief Executive Officer Richard Kolacz says the means to oversee, coordinate and track all of the corridor’s traffic to maximize energy efficiencies and record emission reductions, no matter the energy source used, already exists. GSTS created OCIANA TM for the international green shipping corridors being established to achieve decarbonization, such as the one pledged between the Port of Antwerp and Montreal Port Authority (MPA) in November 2021.

“The Port of Montreal and CSL participated in our very first demonstration of the platform for ocean corridors,” says Richard Kolacz. “It’s a platform that we could definitely adapt for the St. Lawrence and Great Lakes network as well.”

For the last five years, CSL has been pioneering biofuel testing in the Canadian maritime industry and publicly sharing the success of its trials. Ship owners have taken notice and started to show a keen interest by actively exploring and conducting their own tests with the drop-in fuel.

“We know we can’t do this alone,” Pointon emphasizes. “We need ports, ship owners, fuel providers and the various levels of government to all come together in support of viable solutions to decarbonize our industry or it won’t happen.”

Like others, Pointon anticipates that several alternative energy sources might progressively be used in future.

In March, the MPA and GSTS announced the launch of this new initiative that applies artificial intelligence to analyse satellite and other data to specifically measure and reduce the carbon footprint of vessels using the Port of Montreal. The online platform has been providing real-time data on the route, speed and position of vessels heading to the port with the data analysed to estimate and coordinate ship arrivals to coincide with berth availability.

OCIANA’sTM subscription-based service is currently being rolled out worldwide to provide ship captains, port officials, charterers, navigational pilots and terminal operators with the real-time information to dynamically manage corridor vessels in a similar fashion.

“It’s like Google Maps or air traffic control

“A FLEET AVERAGING APPROACH TO DECARBONIZATION IS ALSO NEEDED, SIMILAR TO THE ONE TAKEN TO MEET THE CANADIAN REGULATIONS FOR SULPHUR REDUCTION IN MARINE FUELS, SO THAT WE CAN MAKE INVESTMENT DECISIONS THAT BENEFIT OUR NEWER VESSELS FOR A LONGER PERIOD.”

“It’s like Google Maps or air traffic control for maritime transportation with OCIANA already managing real-time information for 200,000 vessels worldwide every few seconds,” Kolacz says.

Subscribers can log into the web-based system to find out the information relevant to their part of a transit whether it’s a ship’s captain wanting to know when pilotage will be available, or areas to avoid because of shallower waters or the presence of whales. Shippers can obtain updates regarding cargo arrivals. Operating under the Canadian Remote Sensing Act, the service provides anonymized information to the people authorized to receive it.

“Just like Google Maps tells you when there’s traffic but doesn’t give you vehicle license plates, we provide decision-related information to those with a need to know,” Kolacz explains.

Kolacz says the platform has been developed and verified in conjunction with ports, shipping lines, terminal operators, the Canadian Coast Guard, the Royal Canadian Navy, and the Canadian Border Services Agency.

The primary goal is to save energy, regardless of fuel type, by avoiding delays of any sort. “Going forward, we can inform vessels where new refueling or electric charging stations are available,” Kolacz adds. “As new

datasets become available, we can also create additional energy savings by monitoring and analysing the way that railways and trucks handle cargo.” Kolacz says GSTS is currently in some preliminary discussions with stakeholders in the St. Lawrence and Great Lakes to determine how OCIANA can address the region’s uniqueness. **

A summary of the initial Collaborative Forum is available online with an invitation to anyone interested in attending future meetings to contact the GLS or SLSMC: https://www.seaway. dot.gov/GSCNForum n

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CONVERSATION WITH

IAN HAMILTON

BY LEO RYAN

Canada’s biggest port entity on the Great Lakes, the Hamilton-Oshawa Port Authority has recently embarked on a number of initiatives to strengthen its competitive position and address the challenges of the 21st century. In an exclusive interview, Ian Hamilton, President and CEO, expressed his views on a wide range of subjects – including the urgency of exploiting greater marine transportation on the Great Lakes to support supply chain capacity and significantly reduce highway pollution, the prospects of a binational green shipping corridor and certain regulatory barriers that must be addressed.

Four years after the ports of Hamilton and Oshawa merged and also integrated assets in the Niagara region, what are the positive outcomes that have flowed from this major consolidation? Has it basically strengthened the overall structural strategy and competitiveness of Canada’s biggest port complex on the Great Lakes?

Indeed, four years ago, we created a vision of building and leading an integrated port network on the Great Lakes to support supply chain capacity. The first step in this process was in 2019 when the Hamilton Port Authority and the Oshawa Port Authority amalgamated to ensure long-term sustainability of port operations and strengthen the Canadian supply chain. It was a transformational process, illustrating the synergies that could come out of that vision and changing our brand such that we truly became a ‘port network’.

We are seeing positive results. By providing smaller ports with access to resources, we’re able to help them achieve their potential. Multiple locations and competitive

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PRESIDENT AND CEO, HAMILTONOSHAWA PORT AUTHORITY (HOPA)

environments create a strong value proposition in the market. We work hard to ensure we provide efficient gateways for cargo, create capacity where needed, and reduce greenhouse gas emissions and road congestion.

Many analysts consider that marine transportation on the Great Lakes is well positioned to respond to a ‘perfect storm’ of factors in southern Ontario supply chains and that its greater use could help resolve a myriad of current issues, including pollution caused by highway congestion, shortage of truck drivers, and climate change disruptions. Your thoughts?

I couldn’t agree more. There is a large amount of capacity available on the HWY H2O, whereas there is limited capacity with truck and rail. Marine offers a more sustainable solution for long-distance transportation of goods. Greenhouse gas emissions associated with marine transportation are overall far lower than that of rail or truck. Additionally, each vessel has the potential to carry the equivalent of over 900 truckloads, reducing road congestion, fuel consumption and addressing issues around driver shortages.

It is clear to us that our supply chains are vulnerable. By developing more marine services for cargo currently moving by ground transportation, we create new capacity and redundancy in the system. For the first time, industry, logistics companies and government are aligned and see the value of creating a robust and sustainable supply chain.

To do it successfully, we need to make the right investments and re-engineer supply chains in a way that will make Canada prosperous for generations to come.

Green shipping has in the past several years become a dominant preoccupation of the global marine industry. How does HOPA view the launching of recent stakeholder discussions for creating a bi-national green shipping corridor?

I love the idea of a bi-national green shipping corridor. The greatest improvement we can make to our supply chain from an environmental and reliability standpoint is to better utilize marine transportation.

Today, vessels are more efficient and using better fuels to reduce their environmental impact. We are seeing operators move towards cleanerburning fuels such as low-sulphur fuels and alternative fuels such as biofuel and hydrogen.

The main advantage would be in reducing the amount of ground transportation, particularly trucks, by utilizing marine transportation. Ideally, we create a modal balance by utilizing both trucks and marine in a complementary way.

HOPA has through the years taken a series of initiatives underlining its priority as a steward of the environment and promoter of environmental sustainability and biodiversity. This past April you

announced a plan to acquire green hydrogen from the large Atura Power Niagara Hydrogen Centre, slated to be operational in 2024. Can you discuss how this is part of an overall strategy?

We are committed to making a difference when it relates to the sustainability of our operations. We view this in three different ways: the direct emissions we create; the type of energy we use and how sustainable it is; and lastly, working with industry to help them make operational changes that align with a port-wide mission to be positive environmental stewards of our land, air and water.

We are delighted to be able to work with shipping lines to support transition to new fuels, including accommodating fueling depots. When vessels are inport, we’re improving access to a green source of shore power. We are elated about the partnership with Atura Power and we are working closely with them and our partners to determine our role in the potential storage and distribution of hydrogen to transportation users.

Developing marine-served industrial spaces has emerged as a very important focus of HOPA’s commercial strategy, as recently illustrated by a big lease signed with Max Archer North America. In this connection, what are the benefits foreseen from the Thorold Multimodal Hub undertaking that has been described as a game-changer?

In both situations, our goal is to build capacity. This will allow us to increase the volume of material we can handle through the marine mode. We are working with partners to build these spaces to expand capacity and provide better access to marine.

We have been able to assemble the Thorold Multimodal Hub, a distinctive property spanning 470 acres with direct access to marine and rail transportation. The robust industrial buildings strengthen our supply chain capacity.

The 2022 shipping season saw more than 10 million metric tons of cargo transiting through the ports of Hamilton and Oshawa, with agri-food accounting for nearly one third of total volume that also comprises finished steel, breakbulk, liquid and dry bulk. What are the advantages that HOPA offers to facilitate agri-food exports? Has the war in Ukraine had an impact on any segment?

We’ve continued to invest, in partnership with our tenants, in building the material handling capacity both in Hamilton and Oshawa. In the last decade, HOPA and its partners have invested close to $400 million in infrastructure in the agriculture sector alone. The investments we’re making in upstream services tells a story about the raw material arriving in-port. We add value by being able to process it locally - reducing costs and emissions and improving the sustainability of our supply chain.

The earthquake in Turkey and the invasion of Ukraine will continue to have a direct impact on the supply and demand for food, fertilizers, and structural steel. As a result, Canadian grain producers experienced additional pressure, but thanks to investments, the supply chains are resilient. Canadian farmers have played a crucial role in meeting global supply deficit by delivering high-quality grain products.

HOPA last year completed major maintenance dredging at Oshawa and kicked off several capital improvements. How much capital expenditure in infrastructure projects is programmed for 2023?

We’re kicking off our $35 million capital improvement plan in Oshawa. This will improve the capacity to handle agricultural products produced by Durham region farmers. In addition, over the next five years, we anticipate spending $40 million annually in capital expenditures.

How would you rate the present approaches of the federal and Ontario governments in supporting the marine industry?

We applaud the Provincial government for its efforts in developing a maritime strategy and acknowledging the significant role maritime can play in establishing a robust and sustainable supply chain. We look forward to working with the Ministry of Transportation (MTO) as it shapes the policy and plan its implementation.

We also appreciate the investments made by the Federal government through the National Trade Corridors Fund (NTCF) and eagerly anticipate working with them in the development of programs around environment and sustainability to enable marine to effectively support these initiatives. We’re looking forward to a new infrastructure program or programs that support the greening of supply chains.

HOPA has expressed concern that on the regulatory front barriers still exist to efficiently develop its multimodal hubs for container operations. In particular this reportedly applies to a prolonged delay in accreditation from the Canada Border Services Agency for receiving bonded import containers.

In our fast-paced world, one of the challenges is keeping regulations aligned with policy. While we understand the resource constraints faced by the Canadian Border Services Agency, it is essential to find a solution that enables us to leverage all the advantages that marine transportation has to offer. In Ontario, that means the sufferance facilities to support growing and diversifying marine services on the Great Lakes. n

Photo credit: HOPA Ports

GREAT LAKES/SEAWAY TRADE OUTLOOK BIG OPPORTUNITIES EMERGING IN US AMID RISING DIVERSIFICATION AND INFRASTRUCTURE SPENDING

BY LEO RYAN

Since being appointed by President Biden last November as the 11th Administrator of the Great Lakes St. Lawrence Seaway Development Corporation (GLS), Adam Tindall-Schlicht has not wasted any time in bolstering the visibility and future of the binational waterway. With great zeal, he has mustered his communications and entrepreneurial skills to support cargo diversification through opportunities in the growing niche wind energy and container sectors. Simultaneously, he has presented the continental corridor internationally as an effective, green solution for shippers beleaguered by supply chain issues.

Worthy of note: this Administrator of the Great Lakes St. Lawrence Seaway Development Corporation is the first in history who is a former chief executive of a Great Lakes port. As he related to Marine Delivers, “It has been exciting for me, because I am a former employee of the Seaway. After serving as director of Port Milwaukee for the previous four and a half years, I was excited to return to where my love of Great Lakes shipping began in a new capacity.”

Thus upon this return, he rapidly demonstrated his prior experience and hands on approach by embarking on a series of whirlwind visits to such ports as Cleveland, Ashtabula, Conneaut, Montreal, Muskegon, Green Bay, Detroit, Duluth and Burns Harbor. These visits took him as well to the Eisenhower Lock in Massena, NY and to the St. Lambert lock near Montreal upon the opening of the 2023 navigation Seaway season in late March.

In addition to refamiliarizing himself with key sections of the waterway, he led a Seaway Trade delegation in May to the Transport Logistics Conference in Munich – regarded as the world’s leading trade fair for mobility, IT and supply chain management. “This trip,” he recalled, “provided the opportunity for the GLS, along with a delegation of U.S. Great Lakes/Seaway stakeholders, to increase awareness of the System as an efficient maritime supply chain - one that provides shippers and freight forwarders in the hinterlands of Germany with a direct route to the agricultural and manufacturing centers in the heartland of North America.”

“Expanding partnerships through key trade lanes, including with the ports of Antwerp, Amsterdam, Bilbao, Genoa, Niedersachsen, and others, is an immediate strategy. The mission was incredibly productive and highlighted new and renewed opportunities for connecting with European exporters in the container, wind energy, and bulk markets.”

On his major overall priorities, TindallSchlicht declares: “My goals as administrator are to utilize the Seaway’s full capacity, support port-led infrastructure investment, diversify cargoes within the System, expand Seaway services through infrastructure renewal, and promote sustainability within the Great Lakes supply chain.”He stresses: “The Seaway System should be viewed by the world the way those of us closest to it see it: as a world-class, sustainable waterway for cargo, domestically and internationally. We are setting up the Seaway for a more resilient future, and for me, resiliency is about economic resiliency, social resiliency, and certainly environmental resiliency.”

SUBSTANTIAL GOVERNMENT FUNDING INITIATIVES

Turning to recent developments in government funding initiatives, TindallSchlicht noted that “with the support of the U.S. Congress, President Biden has made historic levels of port and infrastructure funding available, through the Bipartisan Infrastructure Law (BIL).”

“For maritime, the BIL invests more than US$17 billion in port infrastructure and waterways with the primary aim of addressing needed repairs and maintenance backlogs, reducing congestion to strengthen our supply chains, remove bottlenecks to expedite commerce, cutting emissions near ports by boosting electrification, and investing in other low-carbon technologies to reduce environmental impacts on neighboring communities. This funding will help Great Lakes ports adapt to customer demand and climate change going forward.”

Similarly, Tindall-Schlicht is heartened by the fourth round of funding granted

by the Department of Transport through the Port Infrastructure Development Program. “Approximately eight % of all the PIDP funding has gone to ports on the Great Lakes, including Milwaukee, Duluth, Cleveland and Detroit, to prepare U.S. Great Lakes for new types of cargo and to improve supply chain efficiencies to support customers worldwide.”

For its part, the FY2023 workplan of the U.S. Army Corps of Engineers includes funding of nearly US$300 million for current construction of a new lock at Sault Ste. Marie, Michigan, whose total cost will exceed $3 billion. The workplan also includes several hundred million dollars in funding for various Great Lakes operations and maintenance projects from dredging of channels to reconstruction of breakwaters and jetties.

Speaking to enhancements undertaken by ports, communications officer of Port

Milwaukee, Jonathan Fera noted,”Port Milwaukee has continued to reinvest in its aging infrastructure on an annual basis, including new rail and upgraded roads. This work is funded by capital dollars that the Port receives as a City of Milwaukee municipal government department.”

Port Milwaukee, which received the Robert L. Lewis Award from the GLS for its exceptional growth (28%) of international cargo in 2022, has been implementing since 2020 a longterm, multi-million dollar Capital Asset Renewal Plan (CARP) which comprehensively addresses deficiencies in multimodal infrastructure.

”Port Milwaukee has continued to reinvest in its aging infrastructure on an annual basis, including through new rail and upgraded roads. This work is

Adam Tindall-Schlicht, 11th Administrator of the Great Lakes St. Lawrence Seaway Development Corporation (GLS)

Photo credit: Port of Cleveland

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funded by capital dollars that the Port receives as a City of Milwaukee municipal government department.”

Fera says Port Milwaukee will continue to seek federal funding through the Port Infrastructure Development Program (PIDP) to boost economic development efforts and reinvest in infrastructure. Meanwhile, in coordination with The Delong Co. Inc., a US$31 million agricultural export facility with substantial PIDP funding was completed and inaugurated this month.

“Overall, Ports of Indiana-Burns Harbor is currently constructing or pursuing development of $77 million in expansion projects at its three ports under the federal grant programs,” indicates port spokesperson Alicia Thomas. This includes the construction for the FASTLANE Project (now 40% complete) which aims to enhance the port’s infrastructure and improve its efficiency via a new bulk transload facility, rail storage, and a new dock.

At the Duluth Seaway Port Authority, communications and marketing director Jayson Hron points out that a current project under construction includes a 56,000 square foot railserved warehouse expansion at the Clure Public Marine Terminal and 850 linear feet of dock wall reconstruction at Berths 10 and 11 of the terminal. The $20.3 million project includes $10.5 million from the Maritime Administration’s Port Infrastructure Development Program (funded by the Federal FY2019 Appropriations Act) and $9.7 million from the state of Minnesota’s Port Development Assistance Program. The warehouse expansion construction is ahead of schedule and expected to be complete by the end of July 2023. The dock wall reconstruction is anticipated to begin early spring 2024.

In addition to the projects already mentioned, the Duluth Seaway Port Authority also applied for 2023 Maritime Administration Port Infrastructure Development Program grant funds to: acquire a 200-ton hybrid-electric mobile harbor crane with the capability of converting to 100% electric; and demolish older grain elevators on the Duluth Lake Port dock that were acquired in 2019, and prepare the site as a laydown area to be incorporated into Clure Terminal operations. “We are seeking $31.2 million in PIDP grant funds for the $39.1 million project. If funded, we anticipate construction would begin in June 2025,” Hron said.

At the Port of Cleveland, David Gutheil, chief commercial officer, reports: “The Port of Cleveland has been very successful in recent years with both state and federal grant awards, which have been used, and will be used in the future, for infrastructure projects. At our general cargo terminal, we completed a twoyear project in May which rebuilt and modernized three of our most used docks and berths. Also included in the project was the introduction of a below ground system to filter and clean stormwater before it is introduced back into Lake Erie. We have just started the design and planning phase of our next large project at the same terminal. This project will modernize our largest warehouse and introduce systems that will set up this warehouse as the electric hub of our port for the eventual transition from diesel to electric cargo-handling equipment.”

“AS WE CAN SEE, CMC MEMBERS IN THE US ARE UNDERTAKING AMBITIOUS INFRASTRUCTURE PROJECTS WITH FEDERAL SUPPORT.“ NOTED BRUCE BURROWS, PRESIDENT AND CEO OF THE CHAMBER OF MARINE COMMERCE. “AS THE CMC FOCUSES ON BI-NATIONAL HARMONY OF APPROACH, WE WILL BE FOCUSED ON ENSURING THE CANADIAN GOVERNMENT APPLIES A COMMENSURATE LEVEL OF PROGRAM SUPPORT FOR BOTH PORT INFRASTRUCTURE AND GREEN SHIPOWNER INITIATIVES GOING FORWARD.”

CONTAINER HORIZONS

On the container front, three U.S. Great Lakes ports are today strongly focusing on capturing the boxes that have long been moving in and out of coastal ports on ocean containerships and relayed inland by rail or truck. They are the Port of Cleveland, the Port of Duluth-Superior, and the Port of Monroe.

The Port of Cleveland, in partnership with Dutch multi-purpose carrier

Spliethoff, launched in 2014 the first container liner service to the Great Lakes since the 1980s.

This past May, the Port of DuluthSuperior, welcomed the first call of a new Antwerp-Duluth monthly liner service. The UAL Fortitude carried containers filled with super-sacked minerals, power generator pieces, and a large tractor from Germany.

The Duluth Cargo Connect crew completed the cargo discharge in a single day and went to work loading the vessel with outbound export cargo that included containerized goods and machinery destined for Europe.

“Not only does this new service provide an efficient, consistent import-export option between Antwerp and Duluth, it also significantly reduces carbon emissions and land-based congestion, so this is also a win from an environmental standpoint,” commented Deb DeLuca, executive director of the Duluth Seaway Port Authority. “It expands the viability of the Great Lakes-St. Lawrence Seaway System as a routing alternative for moving cargoes into and out of the Upper Midwest and far beyond.”

The Port of Monroe has accessed city, state and federal funding to upgrade infrastructures to successfully handle increasing volumes of project and wind energy cargoes. The latest funding, announced in April by Michigan

Governor Gretchen Whitmer, is being allocated to the construction of a container terminal and cargo-scanning facility.

AMBITIOUS PROJECTS

“We are seeing so many exciting examples of tremendous investment and innovation being undertaken by members of the Chamber of Marine Commerce to ensure the marine mode remains the front runner among transit options when it comes to reliability, efficiency, and sustainability,” noted Bruce Burrows, President and CEO of the Chamber of Marine Commerce. “I commend them for their efforts, and look forward to the ways the projects undertaken by our members will position our industry for success in the years to come.” n

Photo Credit: Brad Cavanagh

Photo Credit: Port of Monroe

Photo Credit: Great Lakes St. Lawrence Seaway Development Corporation (GLS)

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TAKING ACTION TO REDUCE CANADA’S MARINE LABOUR SHORTAGE

BY LEO RYAN

43% OF THE MARINE WORKFORCE WILL BE RETIRING OVER THE NEXT DECADE.

Photo Credit: Algoma Central Corporation

Recently-hired 4th engineer Igor Budak on the Algoma Guardian

Reflecting a worldwide seafarer shortage trend that has accelerated, crew scheduling has become a challenging juggling act for many operators in Canada’s marine shipping industry. The magnitude of the problem was underscored by the latest Transport Canada survey, which estimated that 43% of the marine workforce will be retiring over the next decade, including 52% of engineering officers and 47% of deck officers. All told, there will be a need to hire roughly 19,000 new workers – representing nearly 70% of the current workforce. Things also remain difficult in filling shoreside positions throughout Canada. And all this is happening in times of global upheaval in key economic sectors that are undergoing massive structural change. To meet this situation head on, special actions are being taken on a variety of fronts, with an dedicated organization founded by the Chamber of Marine Commerce (CMC) and three government departments in 2019 unifying industry efforts to build a diverse, inclusive, and future ready workforce for the Canadian marine industry.

THE CANADIAN MARINE CAREERS FOUNDATION

The Canadian Marine Careers Foundation (CMCF) is headed by Executive Director Julia Fields. The chief focal point: bilingual Imagine Marine career awareness activities and educational outreach projects.

“The Canadian Marine Careers Foundation has made tremendous progress over the last five months on its new strategic plan, which was launched in January,” reports Fields. “First of all, we have nearly doubled the number of members, sponsors and partners we are working with to 40 organizations across Canada, including federal government departments, labour, education and training, vessel operators, ports and terminals, marine services and suppliers, associations and youth organizations.”

The CMCF top executive adds: “We have expanded our content, our ad campaigns, and projects to be aimed at young Canadians and second career seekers in Atlantic Canada, Ontario, Quebec and the West Coast. We’ve launched a national Jobs Board for the marine sector and we’ve partnered with the Royal Canadian Navy and other government departments to develop a series of exciting career events in the Great Lakes-St. Lawrence region this coming autumn – more details to come closer to the time!”

The CMCF has a compelling offer to make to young people deciding on a career – at present, entry-level seafarers such as deckhands can immediately count on earning $60,000 a year, and captains and senior officers can draw salaries in the six-digits. The key is building awareness.

EDUCATIONAL OUTREACH

To that end, the CMCF recently completed a first-of-its-kind educational marine content package, sponsored by the CMC. This comprehensive set of resource materials included interactive and visually appealing brochures, a poster, a digital quiz, a video, and a digital infographic designed to ignite curiosity about choosing marine based on various career motivators and the different paths available, including directto-job, university/college, and trades. “This package,” explains Fields, “will be sent to our members to use as well as promoted by the CMCF at events and through outreach to employmentfocused organizations and schools in our Canada-wide database. Our team has also been building relationships with the YMCA, school boards and provincial career counsellor and principal associations to create opportunities for ship and shore tours, informationsharing and presentations.”

CMCF is also partnering with organizations that already have builtin networks of thousands of students, educators and parents across Canada. For example, the CMCF is working

with CMC, the St. Lawrence Seaway Management Corporation, Canada Steamship Lines and Ocean School (a learning platform hosted by the National Film Board and Dalhousie University) on a project that uses powerful storytelling to advance environmental awareness and Great Lakes-St. Lawrence shipping literacy for Grades 5 through 12.

“The project explains the technology and engineering behind the Seaway locks system and the role the Great LakesSeaway system plays in our everyday lives,” shares Fields. “The package, including a virtual reality/360o tour of a CSL vessel at work and interviews with crew members and a naval architect, will be available this autumn and will provide an unparalleled opportunity for students to experience the realities of life on the water.”

In partnership with Canadian Geographic and seven sponsoring organizations, the foundation plans to launch its first Marine Month in Canada in October for grades 5-8. This celebration of all things marine in Canada — from ports, cargo ships, tugs, ferries and pilots to shipyards and government agencies — is to open students’ minds to the importance of the marine sector, and encourage participants to see themselves as valuable contributors to the marine story. Students will have the opportunity to interact with marine professionals across Canada, learn about cutting-edge technologies, and gain insight into the numerous careers available.

Fields indicates that her conversations with stakeholders have shown that the same challenges exist nationwide: labour shortages, an older workforce heading for retirement, a lack of awareness of marine careers, barriers to training and funding, and the need for more tools and strategies to improve diversity, equity and inclusion. “Working together through the foundation maximizes our resources, eliminates duplication and amplifies our reach, message and programming.”

A POTENTIAL SECONDCAREER OPTION

Should marine be promoted exclusively as a first career choice? Here Fields suggests “there are many opportunities to engage with second career seekers who have lost their jobs during the pandemic or are in industries that may be downsizing due to cyclical, technological or structural transformations. For example, a restaurant chef that has lost his or her job coming to work as a Chief Cook on a Coast Guard vessel.” Moreover, continues Fields, the marine sector has a big range of positions on ship and on shore – where skills can be transferable and where job-seekers could take on-the-job training or short courses to switch careers.

Drawing lessons from a recent CMCF national youth survey, Fields says : The biggest takeaway is that 40% of young Canadians have “never heard of a marine career.” And those who had, could only name a few types of jobs. “The good news is that many of the things they are looking for in a career — great pay, advancement, fulfilling work – we have in spades. The Canadian marine sector has a lot to be proud of in terms of environmental stewardship, advanced technology, community engagement – we just need to get out there and tell our story.”

GOVERNMENT COLLABORATION HELPS MEET IMMEDIATE NEEDS

Complementing the diverse work of the CMCF, the Government of Canada has taken action in response to CMC advocacy to provide some immediate help with attracting talent from the world stage. Just recently, Transport Canada expanded its bilateral agreements to allow certified seafarers from more countries to work onboard Canadian vessels. Georgia, the Philippines and the United Kingdom have joined Australia, France, Norway and Ukraine as participants in Canada’s Reciprocal Arrangement Program. In addition, Transport Canada has made it easier for Royal Canadian Navy veterans to pursue a career in the merchant marine. But there are still gaps aplenty and Canadian ship operators have, in some cases, been calling mariners out of retirement as a short-term measure. As well, in May of 2023, the Minister of Immigration, Refugees and Citizenship announced the launch of category-based selection for Canada’s economic immigration management system, “Express Entry.” Categorybased selection will allow Canada to issue invitations to apply to prospective permanent residents with specific skills, training or language ability, including marine careers.

INSIGHTS FROM SHIPPING LINE EXECUTIVES

Commenting on today’s labour experiences by shipping lines, Hannah Bowlby, Manager of corporate communications at Algoma Central Corporation, states: “There continues to be a shortage of qualified marine workers in Canada, but the arrival of Ukrainian seafarers has given us an opportunity to bring certified, highly skilled, and experienced seafarers into the Algoma team. Since Transport Canada made the pivotal decision to recognize the competency of Ukrainian seafarers training and certifications, and most recently seafarers from the Philippines, we have since offered employment to 15 Ukrainians.”

Bowlby acknowledged that, like other carriers, recruiting and retaining captains who have local knowledge and hold pilotage certification within the Great Lakes and Laurentian pilotage areas has been proving “the most difficult.” Otherwise, Algoma is “working diligently in recruiting the next generation of seafarers. We are promoting the industry to create awareness surrounding the opportunities available at Algoma, providing training reimbursement and programs to encourage and foster career growth, and advocating for assistance from all levels of government to invest in marine training institutions and provide incentives to marine students.”

Photo Credit: Comité sectoriel de main d’oeuvre de l’industrie maritime (CSMOIM)

THERE WILL BE A NEED TO HIRE ROUGHLY 19,000 NEW WORKERS.

Stéphanie Aubourg, Chief Human Resources Officer at CSL and Chair of the CMCF, concurs. “We need to generate curiosity about the maritime industry to expand our reach and engage the public. Both the private and public sectors within the industry must make significant investments in the Imagine Marine program. We need to help parents and young adults understand that pursuing a career in the maritime industry is not “within reach”, it also offers excellent working conditions, including competitive salaries, attractive benefits, and flexible schedules.”

She agrees that one of most pressing issues pertains to the limited pool of captains and chief officers with Great Lakes Port Authority Certification or relevant experience in the Great Lakes region. The availability of skilled individuals in this specific area is extremely limited. Unfortunately, tapping into the international workforce is hindered due to the lack of local experience required to operate in the lakes.

Aubourg emphasizes the crucial role of Immigration Canada in addressing the shortage of seafarers. “There should be an direct entry Visa for foreign seafarers. This measure would simplify the immigration process for foreign seafarers, enabling their swift entry into the country to help alleviate the labour shortage. Governments can further expedite immigration procedures by

recognizing the value of foreign talent and the vital contribution they can make to the marine industry. By doing so, they can tap into a global pool of seafarers who are willing and capable of contributing their skills and expertise.”

For his part, Colin MacNeil, Coordinator of Marine Strategy at Georgian College, raises a related issue affecting international students. “International students can come in, can complete our program, but at the end there is no licence until they become a permanent resident – and that process can take several years. It would help if Transport Canada and Immigration Canada were to work together to allow Canadian-trained international students to obtain the Canadian certificate of competency upon graduation from a Canadian school.”

“Important work has taken place to ensure the future human resource needs of our industry will be met, and the CMC, CMCF, and other partners will continue to advocate and undertake ambitious initiatives to keep marine shipping ahead of the curve with respect to sourcing talent,” noted Bruce Burrows, President and CEO of the Chamber of Marine Commerce. “Given the attractive careers we offer, the green and innovative mindset of our forward-thinking industry, and the overall importance of marine shipping to economic success, I am confident our members will be ideally positioned for success in a world that is hungry for talent.” n

HOW CMCF VIEWS EMERGING ONTARIO MARINE STRATEGY

The Canadian Marine Careers Foundation sees the Ontario Marine Strategy currently under development by the provincial government as an opportunity to:

• Support the Canadian Marine Careers Foundation to increase awareness of marine career opportunities, expand educational outreach and improve labour market data for the marine sector.

• Invest in Ontario-based training institutions to upgrade equipment and modernize program delivery.

• Ensure Ontario’s employment and skills development programs address the needs of marine industry stakeholders.

• Support workforce diversity initiatives to attract and retain workforce candidates from underrepresented groups.

Photo Credit: Georgian College

WHERE’S THE RECESSION?

It’s Just Too Soon

Financial markets have been signalling the risk of a downturn, most vividly through an inverted yield curve which has a long and respected history of accurately foreshadowing downturns. Looking at the 10-year minus fed funds curve, inversion first occurs, on average, just over 14 months before the start of recession (with a range of 8-to-20 months) dating back to the late 1960s. Given that the curve first inverted in November 2022, that would place the crosshairs of recession somewhere around the end of the year—later than many initially expected.

well above pre-COVID norms, or even past late-cycle norms. In Canada, there was roughly one vacant job available for every unemployed person before rate hikes began, an unprecedented level of tightness. That said, there are signs that momentum on this front is ebbing, perhaps reflecting early impacts of monetary tightening. But, there is still a long way to go before the Fed and BoC start creating slack in the labour market.

The conventional wisdom for much of the past year has been that the North American economy has punched a oneway ticket to recession. But heading into the summer, growth on both sides of the border is holding up well, and expectations for a downturn continue to get pushed out. This is impressive resilience for two economies that have been subject to the most aggressive and abrupt tightening cycle since the 1980s. Let’s look at some of the reasons why, and where we might go from here.

It’s also well known that monetary policy acts with ‘long and variable lags’, and it’s possible that rate hikes—which were at their most aggressive last summer—haven’t worked fully through the system yet. Our own modelling of the Canadian economy largely agrees with that broad view. That is, the incremental impact of higher short-term interest rates is largest in the subsequent few quarters, but the cumulative impact doesn’t max out until about 18 months down the road. That’s consistent with some sectors (i.e., housing) cracking early, but the full impact on the economy not being felt until late this year.

There Are Big Buffers in Place

Policymakers have a lot of excess demand to cut through before getting to the economy’s bone, and the labour market is a good example. Job vacancy rates in both Canada and the U.S. surged to unprecedented highs last year. After some pullback recently, vacancy rates today remain

Households also accumulated significant savings through the pandemic, the result of steady job markets across most sectors, limited spending on travel and services, and fiscal transfers that ran well in excess of lost disposable income. The result is that household savings in excess of the pre-COVID baseline topped 10% of GDP, with much of that finding its way into a cache of deposits.

Policy Might Not Be Tight Enough

Central banks are finding that returning inflation to target is proving to be a challenge after some quick early gains. Core inflation trends in North America have certainly cooled, from 3-month annualized run rates in the 6%-to-8% range this time a year ago, but they are now collectively settling around 4%. And, it hardly matters what measure of core one looks at—ex-food & energy, trim or even the stripped down Fed-favourite ‘supercore’. At the same time, housing markets caught a bid in the spring, and if the most rate-sensitive sector of the economy is gaining momentum, maybe that’s telling. Fiscal policy also remains incrementally stimulative and inflationary.

ROBERT KAVCIC DIRECTOR AND SENIOR ECONOMIST BMO CAPITAL MARKETS

If 2% inflation is the goal, but evidence continues to show that 4% is the reality, the economy either needs more time for past rate hikes to work, or policy simply isn’t tight enough. Indeed, if underlying core inflation is now trending around 4% (somewhat higher in the U.S.), real policy rates have now moved back into positive territory, but not by a wide margin with the BoC at 5% and the Fed at 5%-to-5.25%. That is now around the slightly positive real rates seen at the tail end of the preCOVID cycle, but that was arguably an era of disinflationary pressure and suppressed post-GFC rates that no longer exists. Cycles prior to that one (e.g., late-1990s and mid-2000s) saw

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real rates move into the 2%-to-4% range before the economy ultimately rolled over. That’s certainly not to say that we need to see another 200 bps of tightening, but real rates might need to drift up somewhat further through a combination of more disinflation, and incrementally more tightening.

Key Takeaway

Monetary policy tightening takes time to work, and it is working… gradually. Keep in mind that this tightening cycle started from an exceptionally stimulative level, and the economy may have some extra buffers built in. That said, real policy rates have now

crept into positive territory, which is a critical checkpoint, but it’s entirely possible that policy just hasn’t become quite tight enough, for long enough, yet. We saw the Bank of Canada give a nod in this direction when it raised rates again in June and July; and we suspect both the BoC and Fed will have to hold these restrictive rates into 2024. For the economy, this is still a lot of tightening to swallow, and the risk of a downturn remains in place—for around the turn of the year. n

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