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The elusive Newfoundland backhaul

ST. JOHN'S, Nfld. - Headhaul rates into Newfoundland might be on the rise, but is stiff competition pushing backhaul rates off the Continental Shelf? In April, marine shipper Oceanex slashed its backh...

ST. JOHN’S, Nfld. –Headhaul rates into Newfoundland might be on the rise, but is stiff competition pushing backhaul rates off the Continental Shelf? In April, marine shipper Oceanex slashed its backhaul reefer rate for fish from Corner Brook and St. John’s to Halifax by 41%.

“We could do it for free if we wanted,” says Oceanex executive chairman Captain Sydney Hynes. “A part of our growth strategy is backhaul and we will be as aggressive as it takes to get up the volume on ships.”

The bald fact is, says Gordon Peddle, president of D. D. Transport in Mount Pearl, Newfoundland and chair of the Atlantic Provinces Trucking Association, “You are paying big money to get things in and very little to take things off the island. It is hardly worth taking things off the island.”

D. D. Transport has learned how to fill trucks on the backhaul but, says Peddle, “The creativity in taking goods off-island is pretty limited.”

Little tricks, like double-and triple-stacking flatbeds, takes some of the sting out of the $450- $500 one-way ride to the mainland.

Three or four years ago business, trucking and manufacturers in the province got together to lobby the federal government to take on more of the cost of Marine Atlantic and stop passing on the costs to Newfoundland, but that exercise was for naught, says Peddle.

“There is no solution to the backhaul problem in Newfoundland if we have a cost inhibitor in the ferry,” he says.

One thing is for sure, Peddle adds:”There is not enough margin to start up a new (trucking) business and try to take goods off-island. There are a lot of carriers competing for the same bone. Right now is probably the worst that anyone has seen it.”

A lot of the candidates for backhauls are seasonal, like the fish business Captain Hynes is steaming after. “One of the biggest advantages we offer fish processors is source loading. But if you truck it you have to transfer it to a container at port.”

He notes that the cost of fuel to run reefers is no joke, something Oceanex does with electricity on the docks and ships.

Some export possibilities have disappeared, for instance, Abitibi- Consolidated’s Stephenville paper mill closed in October 2005 and the Lafarge Gypsum Canada plant in Corner Brook closed a year ago. Lumber volumes have dropped because of the decline in the US housing market, says Peddle, but in any case, he shrugs, “Even before that there wasn’t enough outbound to match inbound. In the dry van business there is not a whole lot to ship off of Newfoundland. There is a fair amount of paper from Corner Brook and Grand Falls, but the other industries are insignificant.”

The Newfoundland and Labrador division of the Canadian Manufacturers and Exporters (CME) is trying to find creative ways to coordinate outbound shipping.

“We have tried to find ways to work together to fill a truck. Take three companies in three different places. The practicality of trying to consolidate three shipments is really tough,” explains CME vice-president, Bill Stirling.

“We are working to have a network of firms, to have a body whose job is to match what is to be moved with the trucks,” he says. “I’d be happy to see six to 10 firms at first who can work together to see it operate. It has been such a tough nut to crack, because it pushes some people out of their comfort zone. Trucking companies say they are interested in working with our members to try to find creative solutions, but it falls down where the rubber hits the road.”

Incidentally, Stirling comments, “If drivers are able to cover off their ferry and fuel costs on backhauls, they are almost willing to take the goods at cost.”

That helps manufacturers on the Rock compete with mainland businesses, and perhaps is the best that surviving trucking companies can hope for.

Captain Hynes says that Oceanex works with most major Atlantic provinces carriers, hopping their Newfoundland-bound freight obligations cross the Cabot Strait.

“It is not the trucking company’s responsibility, if he has a national account, to get the freight to Newfoundland. He doesn’t have to worry about backhauls. We have great relationships with trucking companies. We are not all down here killing each other,” says Hynes.

Peddle acknowledges, “Oceanex is increasing its (inbound) rates dramatically, and it is allowing us to raise our rates. I think we reached the bottom in rates last year, after seeing the rates starting to soften in 2005 and 2006, 2007 was brutal. A field day for buyers. Two-thousand-and-eight has to be a better year. There is a lot of pressure on inbound rates that will make up for the backhaul shortfalls.”

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