Ocean Shipping in the Great Lakes: An Analysis of Industry Transportation Cost Savings

Abstract

This study examines the role of ocean shipping on the Great Lakes-St. Lawrence Seaway System in light of the diminished importance of opening the Lakes to ocean vessels and their position as the largest freshwater body in the world and a major tourist attraction and element in quality of life for the region. The value is important to measure as new investments in the Seaway are starting to be required, and awareness is growing of previously unexpected environmental impacts, such as the introduction of invasive species from ocean-going vessels, which have led to calls for moratoria on ocean shipping. The Seaway extends 1,300 miles from Montreal to Duluth. The Great Lakes represent some 95 percent of fresh water in the U.S. The methodology involved a literature review and examination of several earlier studies, followed by interviews with carriers, stevedores, ports, ocean brokers, ocean rate services, grain and steel shipper/receivers, and related government organizations. The aim is to estimate the transportation productivity benefits of ocean vessel shipping compared to using other modes. A number of costs had to be quantified along the supply chain to carry out the comparison. A detailed cost analysis was conducted for three major commodity movements that account for 70 percent of the shipping into and out of the Lakes. A less detailed weighted average estimate was done for the remaining 30 percent. The 12.3 million metric tons moved on ocean vessels is 6.8 percent of the total on the Great Lakes-Seaway System. Volumes are much lower than at the peak in 1978 and appear to be falling still. The cost savings to shippers who use ocean vessels is compared to costs imposed by mitigating invasive species, social, and environmental costs of maintaining the current share of ocean shipping, as well as social and environmental costs of shifting the freight to other modes.