Shipping costs

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Shipping material from remote Arctic locations has to be scheduled and completed in a manner that respects the annual ice formation. There are a variety of ship types that can be used, and each has a different cost per tonne based on concentrate, route distance, and port charges. There are shipping companies that have specialized in Arctic shipping such as FEDNAV and NEAS, each with their own prices for shipping each tonne of material. In addition to contracting a company to perform shipping requirements, Canada’s naval laws must be considered. In particular, how liability is distributed between the ship captain, shipping company, and mine owners.

Contents

Types of ships

There are six classes of vessels used to transport ore. Handy vessels used within Canada can access almost every industrial port in the world, and have capacities of 30,000 to 45,000 tonnes. The Panamax and New Panamax vessels were designed to be as large as possible while still being able to pass through the Panama Canal. With the upcoming completion of the Panama Canal expansion, expected in 2016, the New Panamax vessels will be able to pass through (Canal De Panamá , 2015). The Panamax ships have a capacity of 80,000 tonnes, and the New Panamax ships will have a larger capacity (Boleneus & Whiteside, 2015).

The three largest ship types are the Cape vessels, Suezmax, and the ValeMAXs. Cape vessels can hold up to 200,000 tonnes of material and are mainly used to haul coal. While they are extremely cost efficient, there are a limited number of ports they can use. The Suezmax is designed to the dimensions of the Suex Canal, which has a draught of 20.1m, beam of 77.5m, and a height of 68m (Boleneus & Whiteside, 2015). The ValeMAXs, commissioned and operated by Vale, are the largest operating ships with a capacity of 400,000 tonnes (Martin, 2014).

General shipping costs

Due to the unique nature of each operation, shipping costs will be different for each product and destination. The following factors influence shipping costs: ship size, shipment size, charter type, availability of shipping space, port capabilities, container or bulk storage, special circumstances, port charges, route, distance, and automatic identification service (AIS) (Boleneus & Whiteside, 2015). AIS is a tracking system that makes use of a ship’s VHF radio. When shipping bulk dry metallic materials from Canada’s East coast to international destinations, the cost per tonne is dependent on the ship and the destination, in nautical miles. These values are summarized in Table 1.

Table 1: Shipping costs from Canada's East Coast (FEDNAV, 2016)
Destination Nautical Miles US$/tonne Vessel Type
Bahrain 8,330 13.5 Cape
China 12,870 11.75-29.80 Cape
France 2,370 6.80-8.00 Cape
France 2,370 7 Panamax
Germany 3,360 6.35 Cape
Germany 3,360 7.95-9.50 Panamax
Japan 13,590 14.9 Cape
Netherlands 3,380 4.30-9.45 Cape
Saudi Arabia 5,750 10.5 Cape
South Korea 12,060 12.88 Cape
Turkey 4,970 5.25-8.45 Cape
UK 2,300 7.25 Cape

FEDNAV shipping company

Overview

FEDNAV is the largest Canadian dry bulk shipping company that ships materials worldwide. FEDNAV is based out of Montreal, Quebec but has offices in four continents worldwide. (FEDNAV, 2016)

Figure 1: Map of FEDNAV offices worldwide (FEDNAV, 2016)

Figure 1: Map of FEDNAV offices worldwide (FEDNAV, 2016)

FEDNAV has been operating for 70 years and now has the largest fleet of ice-class bulk carriers. FEDNAV ships grain, alumina, industrial minerals, fertilizers, sugar, steel and other dry bulks. (FEDNAV, 2016)

Fleet

FEDNAV has nearly 100 bulk carriers currently operating. The carriers travel largely through the Canadian Great Lakes and St. Lawrence Seaway system. FEDNAV moves approximately 25 million tonnes of bulk material worldwide each year (FEDNAV, 2016). FEDNAV owns three of the most powerful ice breaking carriers listed in Table 2.

Table 2: FEDNAV ice breaking carriers (FEDNAV, 2016)
Vessel Tonnage Capacity
MV Arctic 28,400
MV Umiak I 31,500
MV Nunavik 31,500

Arctic operations

FEDNAV is a key player in many major Canadian arctic shipping projects. The company ships 2 million tonnes each year from remote mines in the arctic. FEDNAV was the first shipping company to ship year round in the arctic (FEDNAV, 2016).

Shipping costs

As of 2014 the Vale iron ore mine, Voisey’s Bay, ships their pellets and concentrate via FEDNAV shipping company. In 2015 the unit freight costs per tonne of iron ore were between US $16.4/tonne to US $16.8/tonne (Vale, 2015). The freight costs are included in the costs of goods sold (Vale, 2015). A large factor in freight shipping costs is the price of fuel oil (bunker oil) for the ship. The recent decreases in the cost of oil has also decreased the shipping costs of ore.

Voiseys Bay Shipping Costs.png

Figure 2: Voisey's Bay shipping costs by quarter (Vale, 2015)

NEAS shipping company

Nunavut Eastern Arctic Shipping Inc. (NEAS) is a colossal marine transportation company that operates in Canada’s Eastern and Western Arctic. They operate over 40 ports in this area and provide a reliable link between Canada’s Arctic and the rest of the world. They are headquartered in Iqaluit and are majority owned by local Inuit (Nunavut Eastern Arctic Shipping, 2013).

Fleet

NEAS uses 5 different vessels for transportation of goods in the arctic. The capacity of these vessels is summarized in (Nunavut Eastern Arctic Shipping, 2013).

Table 3: NEAS Shipping Fleet (Nunavut Eastern Arctic Shipping, 2013)
Vessel Tonnage Capacity (Deadweight)
MV Mitiq 12324 MT
MV Umivut 9587 MT
MV Avataq 9587 MT
MV Qamutik 12754 MT
MV Erasmusgracht 12324 MT

Canadian Arctic shipping acts and regulations

The following acts and regulations govern the operation of shipping vessels in Canada’s Arctic waters:

  • Arctic Waters Pollution Prevention Act (AWPPA) (Transport Canada, 2012)
  • Arctic Shipping Pollution Prevention Regulations (ASPPR) (Canadian Coast Gaurd, 2013)
  • Arctic Waters Pollution Prevention Regulations (AWPPR) (Transport Canada, 2012)
  • Bill C-14: The Canadian Shipping Act, 2001 (CSA) (Johansen, 2011)
  • Marine Liability Act (MLA) (Minister of Justice, 2001)
  • Marine Transportation Security Act (MTSA) (Minister of Justice, 1994)

Arctic waters pollution prevention act

The AWPPA states, “no person or ship shall deposit or permit the deposit of waste of any type in the Arctic waters” (Transport Canada, 2012). This act refers to coastal waters north of latitude 60˚N. The Act consists of the Arctic Shipping Pollution Prevention Regulations and the Arctic Waters Pollution Prevention Regulations.

Arctic shipping pollution prevention regulations

The ASPPR mandates the vessel construction, operation, and certificates required for shipping in the Arctic. It is applicable for vessels with a total weight of 100 tons or more. There are four classes of ships, from CAC1 being a ship that is unrestricted in all zones to CAC4, which is a ship that cannot break through first year ice (Transport Canada, 1995). The governed waters are split into 16 zones, shown in Figure 3. Each zone has different requirements regarding ship construction and safe transportation dates (Canadian Coast Gaurd, 2013). Depending on the historic ice conditions, there are date ranges in which the area cannot be used. Additionally, each vessel is required to have an Ice Navigator onboard. The Ice Navigator must be qualified to act as a vessel Master, and in the past have served as a Master for at least 50 days, with 30 of them being in Arctic waters with ice conditions that could require the aid of an ice breaker (Canadian Coast Gaurd, 2013).

Arctic Shipping Zones.jpg

Figure 3: Shipping Safety Control Zones (Canadian Coast Gaurd, 2013)

Arctic waters pollution prevention regulations

The AWPPR regulates the deposit of both domestic and industrial waste in Arctic waters (Transport Canada, 2012). Anyone can deposit industrial waste if it is approved by the Oil and Gas Production and Conservation Act, the Territorial Lands Act or the Public Lands Grants Act. Any material deposited that is not allowed by these Acts must be reported to a pollution prevention officer in Whitehorse or Yellowknife. The maximum liability of ship operators is dependent on the product that was spilled or deposited, and is reduced based on the efforts, and monetary expenses incurred, by the owner or operator of the vessel (Minister of Justice, 2016).

The Canadian shipping act

This Act governs all waters in Canada, and is considered one of the oldest Acts in Canadian history that is still in effect, as it originated as the British Merchant Shipping Act of 1894. The legislation is intended to encompass all marine transportation requirements for both Canadian and foreign vessels. There are no specific laws regarding the Arctic, as these are covered in the AWPPA. The CSA ranges from registration and licensing to accidents and casualties, and apply to both commercial and pleasure vessels (Johansen, 2011).

Marine liability act

The MLA is in place to determine who is liable, to what extent, and any actions to follow in the case of a marine accident. This Act prevails over the AWPPA in the case of any inconsistencies or discrepancies (Minister of Justice, 2001). Depending on the severity and cause of the accident, mine owners, ship captains, and shipping companies can all be held liable.

Marine transportation security act

The MTSA is in place to ensure the safety and security of vessels and marine facilities in Canada. It has been in place since 1994, and applies to all vessels except for those owned and operated by the Minister of National Defense, and military vessels belonging to foreign nations (Minister of Justice, 1994).

Conclusion

In summary, the process of shipping concentrate from Arctic regions can be done as long as the correct process is followed. It is essential to contract to a company with excellent safety and operating procedures, as liability in the case of an accident can be transferred to the mine owner. Additionally, the shipping schedule needs to be approved by the local community in order to foster positive relationships. Either a reduced or eliminated shipping schedule will need to be adopted in the winter due to the ice conditions. The general price of US $16.8/tonne was found for concentrates being shipped from the Arctic to Canada’s East Coast (Vale, 2015). Shipping prices for international destinations are dependent on the distance and ship type.

Works Cited

Boleneus, D., & Whiteside, T. C. (2015). Section TR: Transportation. In Mining Cost Service (Vol. 2, pp. TR1-TR12). Leinart, Jennifer B.

Canadian Coast Gaurd. (2013). Ice Navigation in Canadian Waters . Fisheries and Oceans Canada, Canadian Coast Guard.

Canal De Panamá . (2015). Panama Canal Expansion. Retrieved from Canacl de Panamá: http://micanaldepanama.com/expansion/

FEDNAV. (2016, February). About Us. Retrieved February 2016, from http://www.fednav.com/en/about-us

Johansen, D. (2011). BILL C-14: THE CANADA SHIPPING ACT, 2001 . Bill C-14, Ministry of Transportation.

Martin, J. M. (2014). Valemax. Vale.

Minister of Justice. (2016). Arctic Waters Pollution Prevention Regulations. C.R.C., c. 354.

Minister of Justice. (2001). Marine Liability Act. Government of Canada.

Minister of Justice. (1994). Marine Transportation Security Act. Government of Canada.

Nunavut Eastern Arctic Shipping. (2013). NEAS. Retrieved from http://www.neas.ca/index.cfm

Transport Canada. (2012, July 19). Arctic Waters Pollution Prevention Act (AWPPA) . Retrieved from Government of Canada: https://www.tc.gc.ca/eng/marinesafety/debs-arctic-acts-regulations-awppa-494.htm

Transport Canada. (1995). EQUIVALENT STANDARDS FOR THE CONSTRUCTION OF ARCTIC CLASS SHIPS. TP 12260, Government of Canada.

Vale. (2015, September). Retrieved Febraury 2016, from Vale's Performance in 3Q15: http://www.vale.com/EN/investors/information-market/quarterly-results/QuarterlyResultsDocs/vale_IFRs_USD_3t15i.pdf

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