Nfld. & Labrador

Marine Atlantic 'not a viable alternative' to Oceanex, says freight association

An association representing some of the biggest shippers in Canada is warning that shortages of food and vital chemicals could result if Oceanex continues to reduce its services to St. John's.

Advocacy group warns of food and chemical shortages if Oceanex slashes services again

Instead of delivering containers of freight to St. John's, the Oceanex Avalon is now sitting idle at the Port of Montreal, and the company has laid off 60 of its roughly 430 employees. Dozens of contract employees have also been sent home or had their hours of work significantly reduced. (Oceanex Inc.)

An association representing some of the biggest shippers in Canada is warning that shortages of food, merchandise and vital chemicals for things like water purification could result if Oceanex Inc. continues to reduce its services to St. John's.

What's more, the Freight Management Association of Canada says Crown-owned Marine Atlantic "would not be a viable alternative" to the carrier.

The FMA expressed its sobering views in a letter late last month to federal Transport Minister Marc Garneau, after Oceanex decided to reduce the number of weekly sailings into St. John's from three to two.

CBC News has obtained a copy of that letter, which reads, in part: "FMA is requesting that you and your officials at Transport Canada closely monitor the situation during this major disruption to the Canadian economy, and ensure that the government takes appropriate action in a timely manner to maintain the vital Oceanex services to Newfoundland."

There are no indications Oceanex is poised to make deeper cuts, though sources have told CBC News that the idling of one of the company's three ships could last well into next year, much longer than the original layup plan of three months.

Oceanex executive chairman Sid Hynes declined an interview request, so it's unknown if the company, which is known to be saddled with a heavy debt load, can continue to operate a two-vessel service.

Sources say the vessels — Oceanex Connaigra and the Oceanex Sanderling — are operating at between 70 and 85 per cent capacity.

One of the biggest indicators of trouble is the number of vehicles being shipped by Oceanex, which a source says has dropped from roughly 750 per month to just 200. However, vehicles represent just 10 per cent of Oceanex business, according to a transportation insider.

The FMA is an Ottawa-based advocacy association for 70-plus companies involved in Canadian industry, including familiar names like Home Depot Canada, Loblaw Companies Limited and Canadian Tire Corp.

Oceanex's ships unload containers at its facility on the St. John's waterfront. File photo. (Bruce Tilley/CBC)

Members purchase $3 billion in freight services annually from the road, rail, marine and air sectors.

Oceanex is not a member of the freight association, and the FMA wrote its letter to Garneau after hearing concerns from some of its members with operations in Newfoundland and Labrador, said FMA president Bob Ballantyne.

"The purpose [of our letter] was to flag this as something for the government to keep an eye on," Ballantyne told CBC.

Ottawa says no to request for financial help

Neither Garneau nor his officials had responded to the letter as of Monday morning, said Ballantyne.

The company has long operated three large containers ships, with twice-weekly sailings from Montreal to St. John's, and a weekly trip from Halifax to St. John's, delivering everything from food and vehicles to farm products and building supplies.

The company has some 1,500 customers, mostly on the Avalon Peninsula, including retail giants like Costco and Walmart.

But last month, with freight volumes plummeting by what the company pegged at 35 per cent because of the COVID-19 pandemic, the company decided to tie up the Oceanex Avalon in Montreal and lay off dozens of employees, which means the Montreal-St. John's service has been cut in half.

Ottawa rejected the company's request for $2 million in weekly subsides to maintain the three sailings. 

Oceanex, a private, St. John's-based company, delivers roughly 75 per cent of the freight destined for eastern Newfoundland, so the decision to cut services raised concerns about the stability of the supply chain to the province during a public health emergency.

Marine Atlantic and the trucking industry offered assurances they were prepared to fill any gap in service, but the FMA is concerned about any scenario that involves a greater reliance on Marine Atlantic ferries between North Sydney and Port aux Basques.

Halifax and Montreal are major freight hubs in eastern Canada, which means freight would have to be trucked to North Sydney, ferried to Port aux Basques, and then trucked hundreds of kilometres across the island to the Avalon Peninsula, where roughly half the province's population is located.

That would add "significant costs" and increase the delivery time for freight, said Ballantyne.

FMA members are also worried that Marine Atlantic would not have the capacity to handle such an increase in freight volumes, especially in the summer months when passenger traffic is at its peak.

CBC has requested comment from Transport Minister Marc Garneau.

Read more from CBC Newfoundland and Labrador

ABOUT THE AUTHOR

Terry Roberts is a reporter with CBC Newfoundland and Labrador, and is based in St. John’s. He previously worked for The Telegram, The Compass and The Northern Pen newspapers during a career that began in 1991. He can be reached by email at: Terry.Roberts@cbc.ca.

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