Anyone visiting the waterfront and beach areas of Vancouver can’t help but notice that there always seem to be large bulk carrier ships riding at anchor. At times there can be up to 20 ships waiting mainly for grains and oilseeds. Those waiting ships look fairly harmless and just seem to have become of the shorefront scenery. But there is more to the story and a recent fuel spill by one of the waiting ships has brought a new dimension to those seemingly harmless vessels. One factor is that those ships are almost all waiting for grain, only occasionally are they waiting for commodities like potash, lumber, sulphur. Much to the chagrin of fearmongering green lobby groups, almost never are there oil tankers waiting to take on product from the pipeline terminal. It all causes one to ponder why ships are always waiting for grain, particularly since this problem has gone on for decades and decades. Industry apologists plead that shipping grain is a complex logistical problem that involves many players. In the end only one thing is for sure – grain growers pay dearly for shipping delays and waiting ships.
When ships are chartered, loading and delivery dates are part of the contract. When loading gets delayed shippers are charged “demurrage” which is a per day penalty charged by ship owners to encourage shippers to avoid loading delays. The threat of demurrage seems to work for the efficient shipping of other export commodities. Part of that has to do with the nature of the product and the fact that there is usually one owner of the product from production to shipping. Grain and oilseeds are produced by thousands of growers and then bought, handled, sold and shipped by myriad companies and brokers. In the days of the Canadian Wheat Board, that agency was able to enforce some semblance of order and logistical control. But even that was limited as waiting grain ships were quite common during the 60 year reign of the board. Industry observers agree that the situation has gotten worse as the private grain trader has been going through a learning curve since the demise of the board.
The grain shipping system does have unique problems in gathering and handling different grains and oilseeds for shipping to ocean terminals. But one would have hoped that most of that would have been resolved over the 120 years of shipping grain to the west coast. Shippers claim that weather and railway logistics are a huge factor in delays, fair enough, but potash, lumber, oil and other shippers to the coast don’t seem as affected by those same delays – why is that. Observers state that grain companies often sell grain that they only assume they can buy and assemble at tidewater on a certain date. When they can’t deliver, ships have to wait. Be that as it may, what seems to be a perverse incentive is that any subsequent demurrage costs will be paid by grain growers by means of lower prices for their product. In the past the wheat board automatically paid the demurrage and eventually passed that cost on to growers through lower final settlements. Shippers of other commodities don’t usually have an option to pass on the cost of demurrage so they have a real incentive to avoid any shipping delays. Without some direct financial pain for grain companies and shippers there does not seem to be much hope for a significant change in the way grain is going to be shipped out of the west coast.
Its been stated that grain shipments through Vancouver have increased significantly over the past ten years using essentially the same facilities, that’s good news, but it would seem it has its limits. The obvious answer is more storage and handling facilities, but that requires significant investment. Perhaps grain handlers should consider opening new terminals at the Roberts Bank loading facility to avoid the congestion. But I digress.
An interesting side note to the delay issue is that significant delays occur because of rain days. It seems ship owners won’t allow grain loading in the rain because of concern that the addition of that moisture will cause the grain to spoil in shipment and that they would be liable for any losses. Surely after shipping grain through Vancouver (one of the rainiest cities in the world) for over 100 years, some sort of covered loading system would have been invented to allow for continuous loading even on rain days. It boggles the mind.