Investing in Laker Vessels
Equinox class lake vessels - the next generation of Great Lakes bulk carriers
In February 2011, the CWB announced the purchase of two ships to move grain from Thunder Bay to ocean ports. The ships, known as "lakers", are currently under construction and will be operational in 2013.
This investment will enable the CWB to recoup a portion of the multi-million-dollar cost of moving grain to ports in Eastern Canada. The CWB will also earn revenues from use of the vessels by other grain handlers and for other commodities. This value-added investment is expected to have significant net benefits for farmers doing business with the CWB.
Questions and answers
Q. How much do the lakers cost and how are they being paid for?
A. The investment in these two vessels totals $65 million to be paid from CWB general revenues.
Q. What effect does Bill C-18 have on this project?
A. Bill C-18 does not affect the status of the lakers as a strategic asset for the CWB, but it may affect financing of the project going forward. Any changes to financial arrangements will be made in consultation with the federal government.
Q. Who is building the lakers? Where?
A. The vessels are being built by the CWB's partners in this project, Ontario-based Algoma Central Corporation. Algoma owns Canada's largest domestic fleet of vessels operating on the Great Lakes-St. Lawrence Waterway. Construction of the lakers is taking place at Nantong Mingde Heavy Industries in Jiangsu province, China.
Q. Why is this happening now?
A. The Great Lakes fleet is old and needs renewal. In 2010, the Government of Canada made the renewal of the Canadian domestic fleet economically feasible by removing a 25-per-cent tariff on imported ships. The removal of this tariff, combined with a strong Canadian dollar, created an opportune time for this investment.
Q. Are these new lakers different from the ones that are currently operating on the Great Lakes?
A. These two vessels are in the Equinox class, and are regarded as the next generation of Great Lakes bulk carriers. They can each haul up to 30 000 tonnes, roughly 5 000 tonnes more than the average laker today. They will be able to carry more cargo, sail faster, consume less fuel, and be more environmentally friendly.
Q. How do you know you're going to sell enough grain in an open market to make the lakers profitable?
A. The CWB plans to make extensive use of the new lakers but their revenue-generating potential does not depend on the CWB handling the same volumes of grain as it has in the past. The new lakers will be an attractive option for other grain handlers as well as the CWB. They will also be used to carry goods such as iron ore and coal. In general, the ships will carry grain eastward out of Thunder Bay, and carry iron ore from seaports back into the Great Lakes. This will maximize the revenue potential of the ships.
Q. Is the east coast going to continue to be an important route for shipping farmers' grain?
A. East coast ports primarily serve Europe, Africa and Latin America. Our projections show substantially increased demand from these regions in coming years.
Q. Will only farmers who ship from the east coast pay for the boats and benefit from the lakers?
A. The long-term revenue from the vessels will flow into general revenues, benefitting all farmers who do business with the CWB.
Q. How does the CWB expect to be able to operate ships? What do you know about operating large lake vessels?
A. The ships will be part of a pool of ships operated by our partner in this project, Algoma Central Corporation.
Q. Can the CWB own assets like this?
A. Yes, under Bill C-18 as well as the former Canadian Wheat Board Act, the CWB can legally own assets such as the lakers.
Q. How long will these boats provide a revenue stream?
A. We are projecting a lifespan of 25 years for these vessels. Keep in mind, however, that almost every boat currently serving the Great Lakes is now older than 25 years.