Weakness in the North American steel and automotive industries has curtailed Great Lakes shipments of iron ore, metallurgical coal and imported steel.
The reduced traffic is felt throughout the Great Lakes.It has hit the Lake Superior iron ore loading ports of Duluth, Minn., and Superior, Wis.; the Lake Michigan iron-ore discharge ports of Burns International Harbor, Ind., and Indiana Harbor; and the Lake Erie steel importing ports of Detroit and Cleveland.
But despite the fall-off in steel-related cargoes, Great Lakes shipping executives emphasize that the impact of the current recession pales in
comparison with the devastation wreaked by the 1982 recession.
"By and large, most Great Lakes ports are tied to the automotive industry, so we've been affected by the recession," said Adm. Anthony Fugaro, director of the Port of Cleveland. "But it's nothing like it was in the early 1980s."
Indeed, thanks mostly to a 67 percent rebound in Canadian grain traffic, shipments through the St. Lawrence Seaway are running about par with last year. The Seaway connects the Great Lakes with the St. Lawrence River and Atlantic Ocean.
A few Great Lakes ports, such as Duluth and Cleveland, are even with or slightly ahead of last year's totals.
Nonetheless, the impact of the recession - primarily as a result of the decline in automotive and steel production - is clearly evidenced in the Great Lakes.
Iron ore shipments are off 12.4 percent, coal shipments are down 12.6 percent and steel imports are down 17 percent, according to figures compiled by the Lake Carriers Association and the St. Lawrence Seaway Development Corp. Those figures compare 1991 with 1990 for periods starting in mid-March, when the Lakes shipping season began, through June 30 for iron ore and coal, and through July 14 for steel.
A spokesman for the Lake Carriers Association, a Cleveland-based trade group representing U.S.-flag shipping companies that haul goods between ports on the Lakes, said he sees no sign of a turnaround in Great Lakes cargo volumes. Great Lakes shipping usually lags the general economy in entering and recovering from a recession, he said.
"There's always a time lag. We're the last to go in and the last to go out," he said.
Iron ore shipments from Minnesota and Canada feed steel mills on the lower Great Lakes. In turn, these mills supply automotive and appliance plants in the Midwest.
Since the beginning of the recession in the fourth quarter of 1990, annualized U.S. automobile production has dropped from around 6.8 million vehicles a year to about 5.5 million.
At the same time, U.S. steel industry utilization rates dropped from around 85 percent to around 70 percent.
"Autos were hit hard in the last recession and they were hit hard again this time," noted Robert Schnorbus, an economist at the Federal Reserve Bank of Chicago. "That had an immediate impact on the steel industry."
The drop in steel production led directly to a decline in iron ore demand
from steel mills. In addition, metallurgical coal shipments - chiefly shipments across the Great Lakes to Canadian steel mills - weakened as Canadian steel production fell as well.
Furthermore, cutbacks in automobile production, together with a general decline in manufacturing in the region, reduced demand for imported steel in the Great Lakes.
"We can see the recession in steel imports, which are down," said Ken Szallai, director of the Port of Milwaukee, Wis. "More ships are coming in, but they're carrying fewer tons."
In the inter-Lakes trade, which has been hit harder by the recession than international shipping through the Seaway, 10 ships have been laid-up in response to the drop in cargo volumes. The U.S.-flag Great Lakes fleet now is operating at 88 percent of capacity, compared with 97 percent at the same time last year.
Despite the problems brought on by the recession, there are bright spots in the Great Lakes shipping industry: namely, a big increase in steel exports and a revival of Great Lakes coal exports.
Through July 14, steel and iron exports through the Seaway were up 113 percent, to 825,000 tons. Indeed, with the big increase in steel exports, overall steel shipments through the Seaway actually are running ahead of last year.
Propelled by the low dollar and the improved competitiveness of U.S. steel
mills, U.S. steel exports through the Seaway have risen from zero in the late 1980s. This year, low domestic steel prices have added further impetus to the push by U.S. steelmakers to sell overseas.
Recently, Nerco Coal Co. signed a deal to export low-sulfur Western coal
from the Port of Superior to Europe, the first such deal out of the Lakes in years. Some analysts predict that combined domestic and international shipments of Western coal on the Lakes will double in the next several years.
Although the recession is hurting the Great Lakes maritime industry, the pain is mild compared with the recession of 1982.
This time, a leaner, more competitive steel industry has maintained reasonable operating levels and a steep drop in production by the Big Three automakers has been partially offset by healthier production rates at the foreign automobile plants that have located in the Midwest in recent years.
Of course, it's possible the recession will worsen and Great Lakes cargo volumes will deteriorate further. Nonetheless, most economists believe the U.S. economy is beginning to grow again, albeit at a slow pace.
"Automobile sales have been improving, which I think gives notice that the recovery is on the way," said Mr. Schnorbus. "But I don't see sales returning to 1987-88 levels anytime soon."