Transportation Requirements for Economic Sector Development in Northern Ontario (Client Project Ref: OSS_00278537)
Draft Final Report
Prepared for: Ministry of Transportation Ontario
Prepared by: CPCS
CPCS Ref: 12038 October 29, 2013
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario
Acknowledgements
CPCS wishes to acknowledge the guidance and direction provided by the Ministry of Transport (MTO) and other Province of Ontario departments in preparing this Report. In particular, MTO provided critical support in engaging stakeholders as part of the consultation process, and data provided by the Ministry of Northern Development and Mines (MNDM), Ministry of Economic Development Trade and Employment (MEDTE), Ministry of Natural Resources (MNR), Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA), Ministry of Energy and Ministry of Tourism, Culture and Sport (MTCS) have helped inform the analysis. The CPCS team also appreciates the significant time and input of the more than 117 stakeholders consulted across Northern Ontario, whose input was critical in understanding sector markets, transportation systems and supply chain requirements. The team also gives thanks to LPS Avia Consulting for their contributions to the air sector component of the research. Lastly, CPCS wishes to thank the following experts for their invaluable research, stakeholder engagement and support in undertaking this study: George Kamstra, Martin Litchfield, David MacLachlan, Rob Robertson and Stan Sudol.
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario
Table of Contents Executive Summary ...... i
1 Introduction ...... 1-1 1.1 Project Context: Growth Plan for Northern Ontario, 2011 ...... 1-2 1.2 Study Purpose ...... 1-4 1.3 Study Methodology ...... 1-5 1.4 Limitations ...... 1-6
2 Northern Ontario: Regional Context ...... 2-1 2.1 Overview Purpose ...... 2-2 2.2 Geographic Scope ...... 2-2 2.3 Economy ...... 2-5 2.4 Economic Influences ...... 2-6
3 Transportation Systems in Northern Ontario ...... 3-1 3.1 Multimodal Transportation System ...... 3-2 3.2 Unique Features of Northern Ontario’s Transportation System ...... 3-20
4 Mining Sector ...... 4-1 Regional Context & Outlook ...... 4-3 4.1 Sector Profile ...... 4-3 4.2 Sector Developments and Trends ...... 4-14 4.3 Regional Competitiveness ...... 4-19 4.4 Outlook ...... 4-21 Mining Sector Transportation Overview...... 4-23 4.5 Mining Sector Supply Chain Overview ...... 4-23 4.6 Northern Ontario Supply Chain Mapping ...... 4-33 4.7 Transportation Needs Identified by Stakeholders ...... 4-51
5 Forestry Sector ...... 5-1 Regional Context & Outlook ...... 5-3 5.1 Sector Profile ...... 5-3 5.2 Sector Developments and Trends ...... 5-11 5.3 Regional Competitiveness ...... 5-18 5.4 Outlook ...... 5-19 Forestry Sector Transportation Overview ...... 5-21 5.5 Forestry Sector Supply Chain Overview ...... 5-21 5.6 Northern Ontario Supply Chain Mapping ...... 5-25 5.7 Transportation Needs Identified by Stakeholders ...... 5-36
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario
6 Agriculture and Aquaculture Sectors ...... 6-1 Regional Context & Outlook ...... 6-3 6.1 Sector Profile ...... 6-3 6.2 Sector Developments and Trends ...... 6-14 6.3 Regional Competitiveness ...... 6-19 6.4 Outlook ...... 6-20 Agriculture Sector Transportation Overview ...... 6-22 6.5 Agriculture Sector Supply Chain Overview ...... 6-22 6.6 Northern Ontario Supply Chain Mapping ...... 6-30 6.7 Transportation Needs Identified by Stakeholders ...... 6-39
7 Manufacturing Sector ...... 7-1 Regional Context & Outlook ...... 7-3 7.1 Sector Profile ...... 7-3 7.2 Sector Developments and Trends ...... 7-9 7.3 Regional Competitiveness ...... 7-13 7.4 Outlook ...... 7-13 Manufacturing Sector Transportation Overview...... 7-15 7.5 Manufacturing Sector Supply Chain Overview ...... 7-15 7.6 Northern Ontario Supply Chain Mapping ...... 7-21 7.7 Transportation Needs Identified by Stakeholders ...... 7-33
8 Tourism Sector ...... 8-1 Regional Context & Outlook ...... 8-3 8.1 Sector Profile ...... 8-3 8.2 Sector Developments and Trends ...... 8-11 8.3 Regional Competitiveness ...... 8-19 8.4 Outlook ...... 8-20 Tourism Sector Transportation Overview ...... 8-22 8.5 How Tourists Use the Transportation System ...... 8-22 8.6 Transportation Needs Identified by Stakeholders ...... 8-36
9 Conclusions ...... 9-1
Appendix A: Literature Review Appendix B: Stakeholders Consulted Appendix C: NAICS Codes Included in Study Appendix D: Truck Traffic Forecasting Methodology Appendix E: Transportation System Use By Mode and Sector Appendix F: Summary of Findings by Sector and Mode Appendix G: Interview Questionnaire - Sample
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario
Acronyms
BSE Bovine Spongiform Encephalopathy (mad cow disease) CARBS Canada, Australia, Russia, Brazil, South Africa CBSA Canada Border Services Agency CFIA Canadian Food Inspection Agency CGC Canadian Grain Commission CN Rail Canadian National Railway CP Rail Canadian Pacific Railway CRIBE Centre for Research & Innovation in the Bio-Economy CSL Canada Steamship Lines CVS (MTO) Commercial Vehicle Survey DFO The Dairy Farmers of Ontario DUI Driving Under the Influence ESFL Enhanced Sustainable Forestry Licence EU European Union FAA Federal Aviation Authority FIT Feed-In Tariff FMP Forest Management Plan FOB Free on Board FPAC Forest Products Association of Canada’s GDP Gross Domestic Product GIS Geographic Information Systems GPS Global Positioning System GTA Greater Toronto Area HCRY Huron Central Railway IFM Intensive Forest Management kWh Kilowatt per hour LFMC Local Forest Management Corporations LFS (Statistics Canada) Labour Force Survey LNG Liquefied Natural Gas LTL Less Than Truckload MDF Medium-Density Fibre MEDI Ministry of Economic Development and Innovation MNDM Ministry of Northern Development and Mines MNR Ministry of Natural Resources MOI Ministry of Infrastructure MTCS Ministry of Tourism Culture and Sport
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario
MTO Ministry of Transportation Ontario MU (Forest) Management Unit MW Megawatts NAICS North American Industry Classification System NAN Nishnawbe Aski Nation NOHFC Northern Ontario Heritage Fund Corporation OMAFRA Ontario Ministry of Agriculture Food and Rural Affairs ONR Ontario Northland Railway ONTC Ontario Northland Transportation Commission OSB Oriented Strand Board OSSGA Ontario Stone Sand and Gravel Association OSTC Owen Sound Transportation Company OTMPC Ontario Tourism Marketing Partnership Corporation OVR Ottawa Valley Railway PGMs Platinum Group Metals QC Quebec RFP Request for Proposal RTO12 Regional Tourism Organization 12 RTO13 Regional Tourism Organization 13 (Tourism Northern Ontario) RTOs Regional Tourism Organizations RV Recreation Vehicle SAROS State of the Aggregate Resource in Ontario Study SFL Sustainable Forest Licence SWOT Strengths Weaknesses Opportunities Threats TLC Total Landed Cost TODS Tourism Oriented Directional Signage TREIM Tourism Regional Economic Impact Model TTC Toronto Transit Commission U.S. United States of America
DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
Executive Summary Study Background
The Northern Growth Plan (NGP) calls for integrated, long-term transportation planning to maintain and enhance the North’s transportation infrastructure and to improve connectivity among the various modes of travel. As part of the release of the NGP, the government announced its commitment to develop a multimodal transportation strategy for Northern Ontario as an implementation initiative of the NGP.
The Northern Ontario Multimodal Transportation Strategy is intended to strengthen the transportation system in the north by focusing on key Growth Plan themes of economic growth, improved connectivity and quality of life.
The present study, Transportation Requirements for Economic Development in Northern Ontario(Study), is a key analytical component that will inform the noted Strategy. It covers the economic outlook and transportation requirements of five key economic sectors in Northern Ontario: mining, forestry, manufacturing, agriculture and aquaculture, and tourism.
Northern Ontario: Economic Context
Northern Ontario is a large geographic region with a small population base. Though it makes up almost 90% of Ontario’s land mass, its population of over 800,000 inhabitants represents only 6% of the provincial total. Five major urban centres – North Bay, Thunder Bay, Timmins, Sault Ste. Marie and Sudbury – account for over half of the population of Northern Ontario.
The five focus sectors for this Study are influenced by a number of common economic factors, albeit to different degrees. The five most significant of these are:
• A population base which is experiencing limited growth, and a shrinking labour force
• The strengthening value of the Canadian dollar which reduces the cost of imports but affects the competitiveness of Northern Ontario’s exports, including tourism
• The importance of highly cyclical resource-based industries (metals mining and forestry) to the region’s economy
• Increasing oil and energy costs over the past 20years has a had a major impact on heavy industries such as mining, forestry and heavy manufacturing
• Transportation costs typically represent a larger share of the cost of many goods produced in Northern Ontario for a number of reasons, including distances between
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
source, production sites and markets (e.g. forest products), and the often high volume/weight of product relative to the product’s value (e.g. aggregate).
Northern Ontario: Transportation Context
Northern Ontario’s transportation network includes:
• An extensive network of roads, including: 11,000 kilometres of highways (67% of the provincial highway system); 4,400 km of local roads; 30,000 km of forest access roads; and 3,000 km of winter roads to 31 remote northern First Nations communities
• Multiple ports located along the north shores of Lake Superior and Lake Huron, as well as access to international markets through the Great Lakes and St. Lawrence Seaway system
• Over 7,000 km of transcontinental rail line on two Class I railways (CN and CP), and three regional railways: Ontario Northland, Huron Central Railway and Ottawa Valley Railway
• 68 public airports, including 1 international airport, 38 municipal airports (including 11 regional airports), and 29 remote airports in the Far North.
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
Figure ES-1: Northern Ontario Multimodal Transportation System
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
The Northern Ontario transportation network has a number of unique features, which in turn affect the supply chains used by the five study sectors. These include:
• The road, rail and marine transportation networksare used extensively by transport vehicles passing through Northern Ontario destined to areas beyond the region (i.e. transit traffic)
• There are relatively few four-lane highways across the region, and limited passing lanes along corridors in central and western parts of Northern Ontario
• A large number of empty trucks ply the highway network–nearly 50% of trucks moving to and/or from the region are empty.
Sector Profiles and Transportation Needs Identified by Stakeholders
Mining Sector Profile
In 2011, Northern Ontario’s mining production was valued at approximately $7.5 billion for metallic minerals and $640 million for non- metallic minerals (of which $453 million was from diamond mining). Three base metals account for more than 99% of metallic minerals mined in terms of volume: copper (56%), nickel (24%) and zinc (19%). Gold is an extremely important commodity for the region, accounting for only 0.01% of production by volume, but 33% by value. In addition to mining production values, over $1 billion was spent on exploration activities in Northern Ontario in 2011. Overall, the mining of metallic minerals in Ontario is in an expansionary phase, with more than 10 major mining projects expected to begin producing within the next five to seven years, including the major new discoveries in the James Bay Lowland “Ring of Fire” area.
Non-metallic minerals mined in the North consist primarily of aggregate – including sand, stone and gravel – which isused in local construction and infrastructure projects. Aggregate production in the study region was almost 24 million tonnes in 2011.
The supply chain for metals mining involves shipment of inputs to mine sites required to facilitate extraction of ore, followed by movement of outputs of ore from mine site to a concentrator/mill, and then to a smelter and refinery for further processing.
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
In the case of base metals (copper, nickel, zinc), the road, rail and marine modes are used to move ore and concentrates between producing and processing facilities, which are often located a significant distance from the mine site (with the exception of Sudbury, location of two smelters and one refinery). In the case of gold, most smelting takes place at or very near the mine site and road and air are the primary transportation modes used. The air mode is used for the movement of employees and cargo for remote mine sites.
Aggregates are primarily moved by truck to job sites typically located within 100 km of the originating quarry or pit. Important moves of aggregate (equivalent to approximately 12% of Northern Ontario production) also move by the marine mode. The railway mode is not used, with the exception of for the movement of railway ballast.
Mining Sector Transportation Needs
Consultations indicated the following transportation needs for economic development in the mining sector: • Construction of infrastructure to connect the Ring of Fire to the rest of Ontario
• Review options to relieve congestion and pressure from heavy vehicle traffic on Sudbury streets
• Review economic and business case for construction of all-season roads to replace some winter roads
• Monitor traffic levels on Secondary Road 652 between the large Detour Lake Gold project and Cochrane to assess appropriate maintenance levels
• Monitor traffic on Highway 105 between Red Lake and Vermillion Bay to assess infrastructure improvement requirements to accommodate major growth in gold mining (three new projects) in Red Lake
• Upgrade of select airport infrastructure to accommodate mining expansion, particularly around the Ring of Fire
• Implement programs to address the shortage of truck drivers in the region
Forestry Sector Profile The forestry sector has been a critical part of Northern Ontario’s economic development, with a significant number of communities relying heavily on this sector for employment. The value of the industry in Ontario as a
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
whole was $12 billion in 2009, consisting of wood pulp and paper ($7.2 billion), sawmill and wood product manufacturing ($3 billion), and value-added furniture and other manufacturing ($1.8 billion).
The sector can be broken down into three basic sub-sectors:Lumber, manufactured wood products (oriented strandboardor OSB, veneer, plywood), pulp and paper, and “alternative” forestry products including biomass and bioenergy (a growing market).
The forestry sector has witnessed a decline over the past 10 years, but is in a phase of recovery. In particular, low demand for Northern Ontario lumber and manufactured wood products due to a crash in the U.S. housing market appears to be improving. While the traditional pulp and paper industry is expected to face ongoing challenges due to a movement towards digital media, some parts of the forestry industry are diversifying into new value- added niche markets such as biofuels, bioenergy and alternative textiles.
The supply chain for the forestry sector involves movement of inputs to forest harvesting sites (Management Units) including seedlings, equipment and employees, followed by forest product outputs to forest resource processing facilities (sawmills, OSB mills, pulp mills, biomass, etc.) for processing prior to shipment to customers.
All inputs to Management Units and forest product outputs from Management Units to processing facilities move by truck. The outputs from forest resource processing facilities move by a combination of road and rail, depending on customer needs. The marine mode is no longer used to any great extent to move forestry products, although recent pulp shipments from the port of Thunder Bay are a positive sign for the future use of marine transportation to ship Northern Ontario forest products.
Forestry Sector Transportation Needs
Consultations indicated the following transportation requirements for economic development in the forestry sector: • Review economic and business case for selective construction of all-season roads on select corridors to replace winter roads
• Additional passing lanes and/or four-laning on key roads
• Maintain existing funding for Road Access Program
• Implement programs to address shortage of truck drivers across the region
• Consider reviewing weight restrictions duringspring thaw
• Support shippers in addressing rail service issues
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
Agriculture and Aquaculture Sector Profile The agriculture sector in Northern Ontario consists of more than 2,500 farms which generated over $190 million in revenues in 2010. Just over half of these farms were focused on hay farming and cattle farming, with dairy farming being the most significant product in value terms, generating almost 35% of all agricultural revenues in the region in 2010.
Field crops (including oats, canola, hay, wheat, etc.), account for about 10% of agricultural output by value, with growth in recent years of higher-value “cash crops” such as canola and oats, particularly in the New Liskeard area. Many of the region’s producers are experimenting with new crops and new farming techniques to increase crop yield and to take advantage of changing climate conditions. Aquaculture activity is clustered around the North Channel of Lake Huron, near Manitoulin Island and Parry Sound.
The supply chains used by each agriculture sub-sector are very distinct, but all rely almost exclusively on trucks. There are limited movements of inputs by rail to wholesale facilities, as well as some limited movements of Northern Ontario grain by rail outside of the region.1
Inputs such as seeds, animal feed and farm equipment used by smaller-scale operators are typically sourced from local agriculture co-operative wholesalers, by truck. Fruit, vegetables and hay produced in Northern Ontario are largely consumed locally within the region and moved by truck from farm to consumer (or farmers market). Under the supply management system in the dairy sector, raw milk is transported by truck to regulated dairy processing facilities, and then moved by truck to stores for sale. A limited number of feedlots in Northern Ontario means that most of the cattle raised in the area move to Southern Ontario as calves or yearlings rather than being consumed locally. Few grain processing facilities also means that any grain not consumed locally as animal feed is transported by truck to processing facilities in Southern Ontario and Quebec.
Agriculture and Aquaculture Sector Transportation Needs
Consultations indicated the following transportation requirements for economic development in the agriculture sector: • Support investment in rail infrastructure for grain shippers
• Additional passing lanes / four-laningon select roads
• Review trucking regulations to gauge impact on small-scale farmers
1 Very large volumes of export grain are moved by rail from the Prairies to the Port of Thunder Bay for onward vessel shipment, though these shipments neither originate, nor are they destined in Northern Ontario.
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
General ManufacturingProfile The manufacturing sector in Northern Ontario consists of a wide range of companies manufacturing products for regional and international clients, as well as companies supplying parts and providing custom repair and support services to clients throughout the region.
Consultations suggest that upwards of 80% of all manufacturing activities in the region are linked directly and indirectly to the mining and forestry sectors. Non-resource- based companies also include a number of large independent companies that contribute significantly to their respective local economies (e.g. Bombardier Transportation, TenarisAlgoma Tubes, Essar Steel Algoma).
The supply chain and generators of traffic for these varied manufacturers are highly diverse and distinct across suppliers. The road mode is most used, but rail is also important. The marine mode is used primarily by large steel-related industries in Sault Ste. Marie. Some common supply chain features beyond these factors include the following:
• Resource-sector manufacturing: These companies typically work through a hub-and-spoke supply chain system. Inputs arrive by truck or rail to one of the primary hub cities in Northern Ontario and are then either supplied directly as inputs to resource sector companies (e.g. with limited to no value-added processing), or are used as inputs by regional manufacturing companies to produce a final product that is then shipped to clients across Northern Ontario (the spokes) or internationally. • Independent (non-resource) manufacturing: The supply chain for independent manufacturing companies is more unique and distinct across companies when compared to resource-based manufacturers. Common aspects affecting manufacturing supply chains include: i) A move towards just-in-time manufacturing, whereby items are produced to meet demand rather than being created in surplus or in advance of a need; and ii) A move towards intermodal containerization, which facilitates shipment of products across multiple modes, and increased efficiencies. Manufacturing Sector Transportation Needs
Consultations indicated the following transportation requirements for economic development in the manufacturing sector: • Investment in harbour expansion in Sault Ste. Marie
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
• Review options for support to established intermodal facility in Northern Ontario
• Additional passing lanes / four-laning on key roads
• Improvements at Sudbury Airport to better accommodate cargo
• Implement programs to address shortage of truck drivers across the region
• Review Procedures for Oversize Vehicle Permits
Tourism Sector Profile In 2010, 7.9 million people visited Northern Ontario, spending a total of $1.4 billion. The majority of tourists to the region were from Ontario, accounting for 77% of visitors in 2010. The remaining visitors originated from the U.S. (14%), elsewhere in Canada (7%) and overseas (1%).
The sector has suffered an overall decline in the past five years due to a number of factors, notably: the strengthening of the Canadian dollar, higher fuel prices, tighter border security, and a general economic slowdown worldwide.
Positive signs for the industry include establishment of 13 Regional Tourism Organizations (RTOs) that are expected to improve and better coordinate tourism products in the region, including coordination of marketing, product development, workforce and industry training and investment attraction (Tourism Northern Ontario (RTO 13) covers most of the area under study for this study).In addition, the recent investment by large cities in Northern Ontario to upgrade their urban tourism and leisure facilities, as well as increased airline services to these hubs, is a positive sign for tourism growth. Niche markets for motorcycle and Great Lakes cruising are also promising.
The tourism sector in Northern Ontario is predominantly a “rubber tire” market, with the vast majority of tourists travelling to and within the region by personal vehicles. There are no inner or inter-city passenger rail services in Northern Ontario, and currently only one passenger rail service reaches Northern Ontario from outside the region (VIA Rail’s service between Toronto and Vancouver stops in Sudbury). However, day-trip tourism trains are popular and also used to access some of the hunting and fishing lodges located in remote areas. The Great Lakes cruising industry is small but growing slowly, with key ports including Little Current, Thunder Bay, Parry Sound, Sault Ste. Marie and Red Rock. An increase in airline carriers serving
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DRAFT FINAL REPORT |Transportation Requirements for Economic Sector Development in Northern Ontario EXECUTIVE SUMMARY
Northern Ontario hub cities has improved competition and lowered fares, although inter-city air services within Northern Ontario are still very costly.
Tourism Sector Transportation Needs The journey is often part of the tourism experience in Northern Ontario. Consultations suggest that the most critical transportation-related investments to improve the tourism experience are:
• Investment in new and improved rest stops
• Additional passing lanes and/or four-laning on key roads
• Improved signage and way-finding tools
• Review regulatory requirements and provide ongoing support to Great Lakes tourism
• Review potential for security upgrades to entice new international airline services
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
Introduction 1
Key Highlights
• The Growth Plan for Northern Ontario, 2011 is a strategic framework that will guide decision- making and investment planning in Northern Ontario over the next 25 years.
• To help realize the objectives of the Growth Plan, the Ministry of Transportation (MTO) is developing a Northern Ontario Multimodal Transportation Strategy which will identify the long term directions for transportation infrastructure and services for air, rail, marine and highways in Northern Ontario.
• This present study – Transportation Requirements for Economic Sector Development in Northern Ontario – is focused on assessing the transportation requirements economic development in five key sectors in Northern Ontario:
- Mining and mining supply
- Forestry and value-added forestry-related industries
- Agriculture and aquaculture
- Tourism
- General Manufacturing • The study results will help inform the development of the Northern Ontario Multimodal Transportation Strategy.
• The study methodology was based on extensive literature review and consultation industry stakeholders and partners across Northern Ontario. Over one hundred stakeholders were consulted across all study sectors, as well as transportation infrastructure owners and operators serving the region.
• The findings and transportation needs identified throughout the report reflect the views of these regional stakeholders.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
1.1 Project Context: Growth Plan for Northern Ontario, 2011 The Ontario Ministry of Northern Development and Mines (MNDM) and the Ministry of The Growth Plan for Northern Ontario is in part an economic development plan, Growth Plan for Infrastructure (MOI) prepared the an infrastructure investment plan, a Northern Ontario, 2011 (“Growth Plan”). This labour market plan, and a land-use plan; Growth Plan, developed pursuant to the Places to it recognizes the interconnected Grow Act, 2005, is a strategic framework that will contributions of people, communities, guide decision-making and investment planning in infrastructure and the environment to a successful and sustainable economy Northern Ontario over the next 25 years. The Growth Plan was developed in partnership with Source: Growth Plan for Northern northerners and represents a shared vision of the Ontario, 2011 Government of Ontario and northern communities.
Using the strategic framework and policy directions in the Growth Plan, the Ministry of Transportation (MTO) with help from MNDM, and the Northern Ontario Heritage Fund Corporation (NOHFC) is developing a Northern Ontario Multimodal Transportation Strategy. This 25 year strategy will identify long term directions for transportation infrastructure and services and will guide integrated planning for people and goods for air, rail, marine and highways in Northern Ontario. In line with the framework and policies in the Growth Plan, the Northern Ontario Multimodal Transportation Strategy will seek to strengthen Northern Ontario by:
• Identifying transportation requirements for economic sector development
• Providing technical analysis to assist in the development of a coordinated infrastructure investment plan
• Connecting communities
• Directing infrastructure investments towards key transportation corridors
• Making maximum use of existing infrastructure The Northern Ontario Multimodal Transportation Strategy will be developed through consultation and three study components:
Part 1: Transportation Requirements for Economic Sector Development in Northern Ontario (this study). This component looks at the transportation needs for five sectors: mining, forestry, manufacturing, agriculture and aquaculture, and tourism.
Part 2: Commercial Vehicle and Passenger Vehicle Surveys in Northern Ontario. This study component will provide information on passenger and commercial vehicle travel
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
characteristics to support long-range transportation planning. These surveys identify patterns of movement of people and commodities throughout the Northern Ontario highway network.1
Part 3: Northern Ontario Multimodal Transportation Study. This Study will provide a long-term (25 year) plan for the safe and efficient movement of people and goods to support the Growth Plan. Components of this work plan include: policy overview, study area profile, existing and future transportation profile, natural environment profile and trends, study area outlooks and future trends, identification of transportation issues, problems and opportunities, options, analysis and recommendations. The final product of this exercise will be the Northern Ontario Multimodal Transportation Strategy.
The figure below presents the relationship between the three study components and the final Strategy.
Figure 1-1: Components Informing Transportation Strategy
Source: Ministry of Transportation of Ontario
1 Information from these surveys has been used within this study component as well.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
1.1.1 Study Sectors and Transportation Requirements The Growth Plan identifies eleven Existing and Emerging Priority Economic Sectors, as follows2:
• Advanced • Forestry and value- • Tourism manufacturing added forestry-related • Transportation, aviation industries • Agriculture, aquaculture and aerospace and food processing • Health sciences • Water Technologies and • Arts, culture and • Minerals sector and services creative industries mining supply and services • Digital economy • Renewable energy and services Five of the eleven growth sectors have a significant transportation need, where access to transportation services plays a critical role in the success of the sector. Understanding the transportation requirements of these five sectors therefore provides important information to undertake the transportation planning process for Northern Ontario. These five sectors are the focus of this study, as follows:
• Mining and mining supply
• Forestry and value-added forestry-related industries
• Agriculture and aquaculture
• Tourism
• General Manufacturing
1.2 Study Purpose The outcomes of this study will inform the above-referenced Northern Ontario Multimodal Transportation Strategy. Specifically, this study purpose is threefold:
• To gain insight into the local, provincial, national and global competitive market place and the economic significance of the five study sectors in Northern Ontario, as well as their future prospects in the North;
2 Growth Plan for Northern Ontario, 2011. Page 9.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
• To gain insight into how these five study sectors and related industries operate in relation to the transportation system; and,
• To gain insight into the future transportation requirements of the five study sectors and related industries in Northern Ontario. These issues are all addressed in this report.
1.3 Study Methodology This report is based on a review of existing literature, data and extensive consultation with industry. The full list of literature reviewed is noted in Appendix A.
The consultation exercise was carried out using the following steps:
• Development of a preliminary stakeholder consultation list by CPCS in consultation with MTO and partner ministries. Input was then requested from several other organizations and agencies, including study partner organizations such as the provincial Ministry of Tourism, Culture and Sport (MTCS), Ministry of Natural Resources (MNR), Ministry of Economic Development, Trade and Employment (MEDTE), Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), as well as relevant industry associations. Advice was also sought from representatives of First Nation and Métis organizations.
• Introductory letters signed by Assistant Deputy Ministers from both MTO and MNDM were sent to each stakeholder (PDF letters sent by email).
• Follow-up by CPCS team members was carried out by email, with provision of a specific questionnaire, and subsequently by phone to discuss the questionnaire.
• CPCS consolidated stakeholder input, which was used to inform the economic outlook for each sector as well as to inform analysis on supply chain and transportation systems. The figure below summarizes the response rate to the consultation process. CPCS contacted 180 companies, and successfully consulted with 117 companies (65%). A full list of stakeholders consulted is provided in Appendix B.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
Figure 1-2: Consultation Results
Sector Stakeholders Non-Responsive or Consultation Contacted Declined 3 Completed
Agriculture & Aquaculture 34 11 23 Forestry 31 14 17 Manufacturing 23 7 16 Mining 40 17 23 Tourism 30 12 18 Cross-Sector* 22 2 20 Total 180 63 117 *Cross-sector stakeholder consultations relate to those organizations that do not have a sector focus and/or that may serve multiple sectors. Examples of cross-sector stakeholders include providers of transportations services, including railways, trucking companies, marine-facility operators, municipalities and economic development agencies.
1.4 Limitations Readers of this report should be aware of the following limitations:
Secondary Sources of Literature and Data: This Report leverages existing literature and data to the extent possible and meaningful for this project. The information is referenced wherever possible, though CPCS does not warrant the accuracy of information from third party-sources. It is also important to note that detailed production and economic statistics on each sector were not available in a consistent and comparable format across sectors for the specific Northern Ontario region (other than total number of businesses by NAICS4 industry code). Comparisons of production and economic statistics across sectors should therefore be made with caution as the sources and methodology of calculation may not be identical.
Consultation with Stakeholders: The analysis in this report relies to a significant extent on input from external stakeholders, obtained through an extensive consultation process. While every attempt was made to ensure that those consulted represented a reliable sample, certain stakeholders declined to participate in the study. Further, many stakeholders requested that their input not be directly attributed (no direct quotes). Accordingly, most references to consultation results do not include the name of the company or individual that provided related input.
3 After initial contact by phone or email, CPCS Team members followed up with every stakeholder by email and a minimum of three times by phone before abandoning any consultation request. 4 Statistics Canada “North American Industry Classification System”.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 1 | Introduction
Placing Sector Outlook in Context: The short, medium and long term economic outlooks for each of the five key sectors in this report were developed on the basis of secondary research and consultations with industry. A number of caveats are necessary, as follows:
• Predicting the medium and long term outlook of industries in Northern Ontario is very difficult. With respect to each sector and sub-sector, a number of factors will influence the competitiveness and growth of industries, including but not limited to the cost of energy, exchange rates, global commodities prices and global geopolitical and economic stability more generally.
• The economic outlooks for each sector attempt to provide a representative range of growth projections. The experience and economic outlook will naturally differ by company or organization.
• Few companies plan and forecast their operations beyond a few years into the future. Our estimates of future growth are therefore based on our “best guess” given the long range nature of this study (25 years). Placing Traffic Growth Forecasts in Context: The traffic growth forecasts included herein for roads sector analysis are based on the MTO Commercial Vehicle Survey data and forecasts developed by MTO, based on extensive and complex supply chain models in a North American freight movement context. The full methodology is included at Appendix D. It was beyond the scope of this study to attempt to adjust the traffic forecasts developed by MTO; where relevant, CPCS has commented on the forecasts indicating where we feel they are optimistic or pessimistic, by sector, based on our research and consultation.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 2 | Northern Ontario Context
2 Northern Ontario: Regional Context
Key Highlights
This chapter illustrates a number of the demographic and economic factors which influence some or all of the study sectors, including:
• A population growing more slowly relative to the rest of Ontario, with the exception of a growing, young Aboriginal population
• A workforce which is aging more rapidly than the labour force across Ontario as a whole
• The high value of the Canadian dollar, which increases the cost of inputs and reduces the competitiveness of the region’s outputs
• Rising energy, oil and gas prices which influence production and transportation costs across all of the study sectors
• A warming climate which is reducing the viability of winter roads and also affecting the water levels on the Great Lakes
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2.1 Overview Purpose The objective of this overview chapter is to present a summary of relevant geographic, demographic and economic factors in Northern Ontario that are common to all study sectors. The findings in this chapter are referenced throughout the individual sector chapters, as relevant.
2.2 Geographic Scope For the purposes of this study, the geographic area of “Northern Ontario” is defined in Ontario Regulation 416/05 Growth Plan Areas pursuant to the Places to Grow Act, 2005. It is the area highlighted in the lighter shade in Figure 2-1. The study area includes Algoma, Cochrane, Kenora, Manitoulin, Nipissing, Parry Sound, Rainy River, Sudbury, Thunder Bay and Timiskaming.
Northern Ontario also encompasses lands to which First Nation and Métis people have established or asserted Aboriginal or treaty rights. A First Nation Treaty Map of Ontario is presented at Figure 2-2.
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Figure 2-1: Northern Ontario Study Area (lighter shade in map)
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Figure 2-2: Treaty Map of Ontario
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2.3 Economy
2.3.1 Labour Force by Sector The economy of Northern Ontario draws on a number of goods and services producing areas and industries. Employment in Northern Ontario today is approximately the same as in 2001, with about 360,000 people employed.1 Employment by sector in Northern Ontario can be seen in Figure 2-3, below. The labour figures should be taken in context of the relative economic output of each industry. Indeed, wages in the resources and goods producing sector, for example, far outpace most service sector jobs. Thus the economic footprint of each industry can be larger or smaller than its relative importance in employment.
Figure 2-3: Labour Force by Sector in Northern Ontario, 2011
Source: CPCS Analysis of Statistics Canada, Labour Force Survey, 2011. Mining refers to metals (e.g. gold, nickel, etc), whereas quarrying refers to non-metals (e.g. aggregates)
1 Statistics Canada, Labour Force Survey, 2011.
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2.4 Economic Influences
2.4.1 Demographic Factors Northern Ontario is home to over 800,000 people. This population includes nearly half of the Aboriginal population in Ontario including on- and off-reserve residents. It also includes approximately 140,000 Francophone people.2 In general, the population of Northern Ontario has been declining, in absolute terms and relative to Ontario as a whole. In the past decade, while the population of Northern Ontario declined by 2.1% to just over 800,000 in 2011, the province as a whole grew by 12.4%, adding roughly 1.5 million people. This is illustrated in Figure 2-4 below.
Figure 2-4: Population of Ontario (left axis) and Northern Ontario (right axis)
14 850
13.5 825 13 Millions (Ontario) 12.5 800 12
11.5 775 Thousands (Northern Ontario Only) Ontario (Northern Thousands 11
10.5 750 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ontario Northern Ontario Only
Source: CPCS Analysis from Statistics Canada, Labour Force Survey, 2011 Recent projections by the Ontario Ministry of Finance indicate that the population of Northern Ontario is projected to be relatively stable over the next 25 years, with a 0.8% increase overall from 803,900 in 2011 to 810,300 by 2036 (6,500 people). Ontario’s Aboriginal population is the fastest growing segment of the Northern Ontario population. In contrast to
2 Government of Ontario, Growth Plan for Northern Ontario 2011.
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Northern Ontario, most of the areas around the Greater Toronto Area (GTA) are expected to see population growth greater than 15% over the same timeframe. 3
The workforce in Northern Ontario is also aging more rapidly than across Ontario as a whole. This has resulted in labour shortages affecting all of the economic sectors reviewed as part of this study. By 2036 the Government of Ontario predicts that 30% of the population of Northern Ontario will be over the age of 65, as compared to 17% in 2011. Meanwhile, the working-age population will have shrunk from 68% to 56% (see figure below).4 This suggests that access to labour – a key requirement for economic growth – may become increasingly scarce. On a more positive note, although the average age of the population is expected to increase, there is strong potential to engage the relatively young and growing Aboriginal population more broadly in employment across all of the study sectors.
Figure 2-5: Population Pyramid of Northern Ontario, 2011 and 2036
Source: CPCS Analysis from Ontario Ministry of Finance “Ontario Population Projections Update: 2011 - 2036: Ontario and its 49 Census Divisions", Spring 2012.
3 Ontario Ministry of Finance, Ontario Population Projections Update: 2011-2036: Ontario and its 49 Census Divisions, Spring 2012. 4 Statistics Canada estimates, 2011, and Ontario Ministry of Finance, Ontario Population Projections Update: 2011-2036: Ontario and its 49 Census Divisions, Spring 2012.
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2.4.2 Canadian Dollar Exchange Rate The Canadian dollar has increased considerably in value against the U.S. dollar over the past 10 years (see Figure 2-6). While this means the import of production inputs is relatively cheaper, the competitiveness of Ontario’s exports can suffer. The strength of the Canadian dollar is thought to be one of the leading reasons for a decline in tourism in Northern Ontario over the past five years, along with the economic recession. A strong Canadian dollar also affects the competitiveness of Ontario’s manufacturing exports.
Figure 2-6: Historical Exchange Rate, Canadian $ / US $, 1996 – 2012
Source: CPCS Analysis of data from www.oanda.com
2.4.3 Oil and Energy Price Increases The price of oil has increased more than threefold in the past decade, from an average of approximately US$30/barrel in 2000 to an average of $94/barrel in 2012.5 Increases in the price of oil have a significant impact on Northern Ontario’s economy through a range of channels, including having a direct impact on inflation as consumers pay more for gasoline, heating oil and transportation. High oil prices also have an impact on the strength of the Canadian dollar, as Canada is the sixth-largest producer of crude oil in the world and a net
5 U.S. Energy Information Administration (with information from Reuters), Crude Oil, WTI Cushing, Oklahoma. www.eia.gov
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exporter of the commodity. Higher oil prices and a related high Canada–U.S. dollar exchange rate impair the competitiveness of many Ontario businesses.6 Derivative products of oil (gasoline, diesel, Bunker C) are integral to the transportation of products and people to, from and through Northern Ontario in road vehicles, on trucks, airplanes, trains and ships. Diesel is the primary fuel used by trucks and trains, as well as to fuel major equipment in the mining and forestry sectors. Gasoline is typically used in smaller and personal vehicles. The price of diesel and gasoline have climbed more or less steadily (in- line with changes in the price of oil) for the past 12 years, contributing to increasing transportation costs as well as increasing the costs of operating heavy machinery and generating power through the use of diesel generators (discussed further below). The increase in diesel prices is presented in the figure below. Prices of diesel (and gasoline) in Northern Ontario are typically slightly higher than in Ontario as a whole.
Figure 2-7: Ontario Diesel Prices, 1990 – 2011
130
120
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100
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70
60
50
Diesel Price, Canadian Cents per Cents Price, Diesel Litre Canadian 40 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Ontario Average Northern Ontario Average
Source: CPCS Analysis of Ontario Ministry of Energy Data, www.energy.gov.on.ca/en/fuel-prices
Energy Prices The price of energy affects all of Ontario’s residents, but particularly heavy industry such as mining, forestry and heavy manufacturing. Energy prices have risen over the past thirty years, with a peak in 2005 (Figure 2-8 and Figure 2-9).
The two figures below present indices for two categories of electricity sales for non-residential customers for the past 20 years: usage below 5,000 kW (e.g. light manufacturing industries)
6 Ontario Budget Paper Series, “Strong Action for Ontario”, 2012.
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and usage above 5,000 kW (major mining operations / heavy industry). The figures highlight that electricity prices have increased considerably for much the past 30 years, with Ontario prices typically increasing more than the national average and provincial neighbours for most of the past 10 years (the provinces of Quebec and Manitoba both benefit from significant hydro-electric power generation). Since the peak in prices in 2005, prices have gone down overall. In the case of large users (> 5,000 kW), industrial electricity prices have actually been on a downward trend since 2005, and are only slightly above 1990s levels.
Figure 2-8: Index of Electricity Selling Price for Non-Residential Customers < 5,000 kW (2009=100)
Source: CPCS Analysis of Statistics Canada, CANSIM Table 329-0073. Electric power selling price indexes (non-residential), monthly (index, 2009=100). Data measures the price movements of sales of electricity by distributors to commercial and non-residential users. Data is not adjusted for inflation. Consumer Price Index (CPI) inflation over this period was 125%.
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Figure 2-9: Index of Electricity Selling Price for Non-Residential Customers >5,000 kW (2009=100)
200
180
160
140
120
100
80
Price Index , 2009 = = , 100 2009 Index Price 60
40
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0
Canada QC ON MB
Source: CPCS Analysis of Statistics Canada, CANSIM Table 329-0073. Electric power selling price indexes (non-residential), monthly (index, 2009=100). Data measures the price movements of sales of electricity by distributors to commercial and non-residential users. Data is not adjusted for inflation. Consumer Price Index (CPI) inflation over this period was 125%. Energy costs are even higher for communities and companies that are not connected to the provincial grid and must use on-site generators, typically fuelled by diesel. In addition to the high cost of diesel burned to generate power, the diesel must be transported to communities, which is also costly.
Oil and Energy Outlook Future oil prices are difficult to predict, given the complex relationship between the key three drivers of oil prices: aggregate demand for goods, precautionary demand for oil, and supply of oil, each of which is affected by other factors.7
Overall, however, there does appear to be a general industry consensus that energy and oil prices will tend towards an increase over the next 25 years. While there is no absolute shortage of energy available today, several factors are expected to keep demand relatively higher than supply (putting upward pressures on pricing). First, population growth globally is expected to increase, keeping demand for oil high (even taking into account continued growth in alternative green-energy technology). Second, sources of new oil and gas supply are more challenging and costly to access, and as the quality of reserves deteriorates, production is
7 Jaromir Benew, Chauvet M., Kamenik O. et al. International Monetary Fund Working Paper (WP/12/109). The Future of Oil: Geology vs. Technology, May 2012.
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shifting to more complex and costly sources of supply (e.g. oil sands, deepwater).8 Third, geopolitical instability in the Middle East, where much global oil is extracted, will likely continue to lead to concerns about supply. Finally, environmental concerns around burning of fossil fuels is leading to increased refining costs to create products with less damaging effects on the environment.
There is a growing interest in renewable energy projects in Northern Ontario, which have the potential to support economic viability and provide community benefits, as well as directly supplying energy to industrial projects. Some projects already under development include the Lower Mattagami waterpower redevelopment project (under construction), as well as the potential for the development of over 35 new smaller scale waterpower facilities in Northern Ontario in the next five years (now in various stages of environmental assessment).9 There are also two new wind farms proposed for Crown land north of Sault Ste. Marie and south of North Bay. The direct inputs and outputs of these renewable energy projects will generate additional transportation flows. Similar to mining and forestry, these projects often take place in remote areas and will benefit from improvements in transportation infrastructure.
2.4.4 Climate Change There is a strong consensus among the international scientific community that impacts of climate change are manifesting themselves in various ways across the globe. Changes in weather are expected to become more extreme, with longer periods of little or no rain, hotter temperatures, higher winds and heavier rains. Overall, the Northern Ontario climate is expected to experience warmer temperatures and lower rainfall, with the Far North experiencing the largest changes from current climate conditions. Climate change will create new opportunities and challenges in Northern Ontario. Warmer temperatures will reduce the length that critical winter roads can stay open, cutting off links to remote communities and some mining and forestry camps in Northern Ontario. This may present an opportunity for the construction of all season roads which would improve access to remote regions. Climate change is also expected to further lower water levels on the Great Lakes, increasing the costs of water transportation, while also increasing the potential for a longer ice-free season on Hudson’s Bay.
8 McKinsey Global Institute, “Resource Revolution: Meeting the world’s energy, materials, food and water needs”, November 2011. 9 AECOM, “Economic Impact of Waterpower Projects on Crown Lands in Ontario”, prepared for the Ontario Ministry of Natural Resources. April 2012.
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3Transportation Systems in Northern Ontario
Key Highlights
• Northern Ontario’s transportation network includes:
- Nearly 11,000 km of highways, 4,400 km of local roads, 30,000 km of forest access roads, and 3,000 km of winter roads
- Four road border crossing points with the U.S., Sault Ste. Marie, Fort Frances, Rainy River and Pigeon River
- Marine connections to Southern Ontario, Eastern Canada and the rest of the world through the Great Lakes St. Lawrence Seaway System, including multiple bulk handling ports
- 7,000 km of transcontinental Class I Railway lines (CP Rail and CN Rail), and three regional railways (Ontario Northland Railway, Huron Central Railway and Ottawa Valley Railway)
- 68 public airports • The transportation system includes a number of unique features:
- The vast majority of the highway network in Northern Ontario is two lanes (one lane in each direction). The only sections of road in Northern Ontario which are four-laned are located around Sudbury, between North Bay and Toronto, and on Highway 400/69 between Southern Ontario to just north of Parry Sound.
- The transportation network is used extensively by carriers passing through Northern Ontario, with transit truck, rail and marine traffic par surpassing traffic generated by the study sectors
- A large number of empty trucks ply the highway network.
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3.1 Multimodal Transportation System This chapter provides an overview of the transportation infrastructure and systems The federal, provincial and municipal governments, in used by shippers and stakeholders across addition to the private sector, play important roles in Northern Ontario, as well as a summary of funding, building and maintaining transport some of the transportation-related factors infrastructure in Northern Ontario, though their relative importance differs by sector. Each of these which affect all study sectors. stakeholder groups have and will continue to have an important role in the provision of transportation The transportation system consists of infrastructure and services to meet the requirements ports, airports, road and rail networks, as and opportunities of Northern Ontario’s economy. This presented in Figure 3-1. should be reflected in the region’s transportation planning process. 3.1.1 Road Transportation Northern Ontario has an extensive network of roads, including 11,000 kilometres of highways, 4,400 km of local roads, 30,000 km of forest access roads and 3,000 km of winter roads to 31 remote northern First Nation communities.
Highway Network Highways 11, 17 and 400/69 are the three primary highways serving Northern Ontario.
• Highway 11 traverses the southern part of Northwest Ontario from Minnesota State Highway 72 at the west end (Rainy River) through to Thunder Bay, where it then traverses the northern part of Northeastern Ontario, passing through Hearst, Kapuskasing, Cochrane, New Liskeard, down to North Bay and Southern Ontario.
• Highway 17 is the primary route of the Trans-Canada highway through Ontario, beginning at the Manitoba border west of Kenora. It traverses the northern part of Northwest Ontario until Thunder Bay. Around Thunder Bay, Highway 11 and Highway 17 are co- located between Shabaqua Corners and Nipigon. Highway 17 then proceeds south along Lake Superior to Sault Ste. Marie and Sudbury, and eastwards to Southeast Ontario.
• Highway 400/69 is the busiest highway in the region, connecting Sudbury and Toronto, and passing through Parry Sound and French River. Figure 3-1 and subsequent maps throughout the report show road numbers for three categories of roads designed to carry large volumes of traffic in Ontario: freeway, arterial and collector roads. 1
1 Freeways are fully controlled access roads limited to through traffic, with access through interchanges, and designed for speeds of 100 to 120 km/h. Arterial roads are intended to move large volumes of traffic at medium (urban arterial) to high (rural arterial) speeds, of between 80 – 100 km/h. The primary distinction with Freeways is that Arterial roads do not have full control of access. Collector roads serve as links between Arterial and smaller local roads, with design speeds between 60 and 100 km/h.
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Figure 3-1: Northern Ontario Transportation System
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Road-Based Border Crossings There are four road-based international border crossings between Canada and the U.S. within Northern Ontario, as follows2:
• The Sault Ste. Marie / Sault Ste. Marie border crossing connects Highway 17 to the busy U.S. Interstate 75 (I75) over the tolled International Bridge. It is the busiest crossing in Northern Ontario, catering to 1.5 million international travellers in 2012.
• The Fort Frances/International Falls border crossing is served by a privately owned and tolled International Bridge across Rainy River. The bridge connects Highway 11 with U.S. Route 53/71. The crossing operates 24 hours and a day and is heavily used by local residents, tourists, trucks and commercial vehicles. In 2012, nearly 900,000 international travellers passed through this border crossing.
• The Pigeon River / Grand Portage border crossing is the closest U.S. crossing to Thunder Bay and is served by the Pigeon River International Bridge crossing Pigeon River. The crossing connects Ontario provincial Highway 61 to Minnesota State highway 61. It is the prime connection between Highway 11 and highway 17 to Minnesota. In 2012, 587,000 international travellers used the border crossing.
• The Rainy River/Baudette border crossing is served by the two-lane International Bridge located over Rainy River, and connects Highway 11 to Minnesota State Highway 72. It is primarily used by private vehicles with little commercial traffic. Just over 300,000 travellers crossed at this border point in 2012.
Figures 3-2, 3-3- and 3-4 further break down Northern Ontario’s highway system. Two points are worth noting from these maps:
• The vast majority of the highway network in Northern Ontario is two lanes (one lane in each direction). The only sections of road in Northern Ontario which are four-laned are located around Sudbury, east of Sault Ste. Marie, Hwy 11/17 from Thunder Bay to Birch Beach, between North Bay and Toronto, and on Highway 400/69 between Southern Ontario to just north of Parry Sound. Additional four-laning is ongoing for the remaining highway 400/69 up to Sudbury – less than 100 km – with completion due in 2017.
• There are relatively few passing lanes on much the remaining highway network, with the exception of two corridors in Northeastern Ontario: Highway 17 between Sault Ste. Marie and Wawa, and Highway 11 between North Bay and New Liskeard.
2 Traveller numbers from: Statistics Canada. Table 427-0001 - Number of international travellers entering or returning to Canada, by type of transport, monthly (persons). (accessed July 30, 2013)
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These points are relevant as the challenges associated with a lack of passing lanes and few four-laned highways came up in virtually all consultations and are discussed in greater detail in the study sector chapters.
The most recent Northern Highway Program plans (2011-2015) include the following four- laning projects in Northern Ontario3:
• 32 km of new four-laning on Highway 11 between Sundridge and Burk’s Falls Bypass which opened in 2012 and resulted in four-laning of Highway 11 from North Bay to Toronto
• 49 km of four-laning on two sections of Highway 11/17 between Thunder Bay and Nipigon (completion 2016)
• 15 km of four-lane highway between the Manitoba border and Kenora (planning ongoing)
• Finish four-laning of Highway 69/400 up to Sudbury (100 km remain with construction ongoing).
3 Source: Government of Ontario, Northern Highways Program 2011 to 2015. Note: The responsibility for establishing and managing the annual budget for Ontario’s Northern Highways Program lies with the Ministry of Northern Development and Mines. This Ministry works jointly with the MTO to identify program priorities. MTO is responsible for delivering the construction program and maintaining the highway system.
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Figure 3-2: Passing Lanes on Northern Ontario Highways: Southern Ontario to Sault Ste. Marie
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Figure 3-3: Passing Lanes on Northern Ontario Highways: Sault Ste. Marie to Thunder Bay
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Figure 3-4: Passing Lanes on Northern Ontario Highways: Thunder Bay to Kenora
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Forest Access Roads There are over 30,000 km of forest access roads in Northern Ontario. These are accessible to the public, although used primarily by the forestry industry. They are used to a lesser extent by other sectors to provide access to mineral resources, for recreational access for northern residents and tourists, and to facilitate the province’s resource management activities.4 The access road system is constructed and maintained by the forestry industry, with financial contributions from the Ministry of Natural Resources “Road Access Funding Program”, of up to $75 million per year. This program is described in detail in Chapter 5 (Forestry Sector).
In many cases, roads built by the forest industry subsequently revert to the Crown (Ministry of Natural Resources, MNR) following the completion of forest operations. Additionally, the Ministry of Natural Resources authorizes other non-forestry roads on Crown Lands, including roads and trails built to support mining operations. The role of the Ministry of Natural Resources as the authority for such Crown Land roads is important in terms of future transportation planning. If and when additional roads are planned for construction on Crown Land, any transportation strategy needs to address/plan for this situation (e.g. a long-term management plan or decommissioning plan) prior to road construction to ensure that the Crown is not left to manage additional roads that may no longer be required after resource extraction has been depleted or is no longer economically viable.
Winter Roads Over 3,000 km of winter roads – temporary roads created out of snow and ice in the province’s Far North – connect 31 remote First Nation communities to various permanent highway and railway systems. These roads are also used by the mining industry and, to a lesser extent, the forestry industry to reach remote mines and forest harvesting sites. The road system is jointly funded on an annual basis by the Province of Ontario and the Government of Canada.
From around mid-January until the spring thaw (usually late March), these roads make it easier and less costly for people to travel and bring in supplies. In 2012-13, the province of Ontario contributed $4.75M to construct and maintain the winter roads. As noted in Chapter 2, the warming climate in Northern Ontario is expected to shorten the season for winter roads; this presents opportunities for the construction of all-season roads, although building all-weather roads is much more expensive.
4 Northern Ontario Highways Strategy, August 2005
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3.1.2 Marine Transportation
Great Lakes St. Lawrence Seaway System Northern Ontario is connected by water to Southern Ontario, Eastern Canada and the rest of the world through the Great Lakes St. Lawrence Seaway System. The Seaway is comprised of the St. Lawrence River, the St. Lawrence Seaway and the Great Lakes, which together are a 3,700-km marine transportation system that runs between Canada and the United States. A series of 15 locks connects the Great Lakes and the St. Lawrence River; 13 of these locks are managed by the Canadian St. Lawrence Seaway Management Corporation; the two other locks are managed by the U.S. Saint Lawrence Seaway Development Corporation.
Using the Seaway, marine traffic to, from or via Northern Ontario can either be moved to/from transhipment ports east of the Seaway (via specially designed “Lakers”), or to/from international markets directly (via ocean-going “Salties”). A typical ship designed to use the Seaway can carry about 25,000-30,000 tonnes and is 222 metres long and 23 metres wide.5 The term Seawaymax is also commonly used to refer to this type of ship.
Most laker vessels travel between ports on the Seaway system, while most ocean-going vessels typically only travel between Seaway Lock 8 at the Welland Canal and the Atlantic Ocean, carrying freight to and from Europe and the Middle East. Freight shipped on the Great Lakes and Seaway System consists primarily of bulk cargo (over 95%) including iron ore, grain and coal. There are currently no intermodal container services on the Great Lakes.
One of the limitations of the Seaway system is seasonality; the Seaway is closed from the end of December to the middle/end of March, with an average operating window of 282 days per year. Shipments going in and out of the Seaway and Great Lakes must be transported by other modes outside of this timing window, or stockpiled in a storage facility until the Seaway is re-opened.
The figure below shows the ports in the Great Lakes St. Lawrence Seaway System, highlighting the top twenty ports in terms of tonnage handled.
Laker vessel (CSL Pineglen), carrying grain from Thunder Bay, transiting the Seaway locks at Beauharnois, near Montreal. Source: CPCS
5 Rodrigue, J-P et al (2012), The Geography of Transportation Systems (Chapter 7), Hofstra University, Department of Global Studies & Geography, http://people.hofstra.edu.geotrans
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Figure 3-5: Great Lakes St. Lawrence Seaway System
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The four busiest ports in Northern Ontario are Thunder Bay, Sault St. Marie, Meldrum Bay and Whitefish. The latter two are located on Manitoulin Island.
• Thunder Bay is at the head of the Great Lakes-St. Lawrence Seaway System, and is one of the largest grain-handling ports in the world. Its primary traffic is the loading of western grain which arrives by rail for onward movement by vessels for export overseas. The port is served by both CN and CP. The majority of grain is transhipped at ports along the St. Lawrence River from laker vessels to ocean-going vessels, although some ocean-going vessels travel directly from Thunder Bay to international markets. In smaller volumes, the port also handles other bulk goods, such as coal, chemicals and cement, as well as some large equipment moving into Western Canada by rail (e.g. wind turbines). More recently, the Port also started handling wood pulp. The Keefer Terminal (at the port) recently acquired a $3 million crane which is 60 metres tall and capable of lifting more than 100 metric tonnes, including containers, pipes, steel products and a variety of shipping cargo. The port hosts the former CP intermodal facility, which is now closed but could be re- opened and revamped if cargo volumes warranted.
• Sault Ste. Marie is host to a private port facility owned by Essar Steel Algoma which handles large volumes of coal, iron ore, steel and other products, most of which are associated with the company’s steel production. Essar Steel Algoma has priority access to the port, with the other major user of the port being Tenaris Algoma Tubes (manufacturer of steel tubes), and to a much lesser extent some aggregate and road salt suppliers. A recent harbour expansion market study completed for the Corporate of Sault Ste. Marie concluded that the Essar Steel Algoma harbour facility requires major improvements (rehabilitated dock facilities, more storage areas, deeper water depths) to meet anticipated growth in demand for marine transportation. The study suggests an infrastructure investment of approximately $116 million is needed to support the needs of both Essar Steel Algoma and other port users, with funding likely to be required from the public and private sector.6
• Meldrum Bay and Whitefish are both important aggregate-loading ports, shipping bulk products to other ports across the Great Lakes. The figure below shows the volumes handled by these four key ports.
6 KPMG, “Regional Harbor Expansion Market and Business Analysis: Final Report”, January 3, 2013.
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Figure 3-6: Volume of Tonnage Handled, 2010
Source: Statistics Canada, Shipping in Canada Database A number of other smaller public and private ports handling bulk products (primarily aggregate, less than 250,000 tonnes/year each) in the region include Spragge, Little Current, Badgeley Island, Parry Sound, Marathon, Bruce Mines, Thessalon and Heron Bay.
Marine Service Providers
The major marine service providers to ports in Northern Ontario are domestic carriers Canadian Steamship Lines (CSL) and Algoma. CSL owns and operates a fleet of 19 Canadian flag vessels (11 self-unloaders and eight bulk carriers) that trade on the Great Lakes St. Lawrence Seaway system.7 Algoma operates a fleet including 19 self-unloading dry-bulk carriers, nine gearless dry bulk carriers and seven product tankers.8
Similarly, two major companies operate ocean-going vessels from the Lakes – FedNav and Canfornav. FedNav is involved in transporting bulk cargo and break bulk cargo worldwide and operates a fleet of 23 ships. Canfornav handles a variety of cargoes such as grain, fertilizers, minerals, steel, sugar, metals and copper or zinc concentrates with a fleet of 27,000 to 37,000 deadweight tonne bulk ships.
7 http://www.csl.ca/ 8 http://www.algonet.com/The-Corporation/
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3.1.3 Rail Transportation
Railway Network Northern Ontario's rail network consists of 7,000 km of transcontinental rail line on two Class I railways, CN and CP; one regional railway, Ontario Northland Railway (ONR); and two short- line railways, Huron Central Railway (HCRY) and the Ottawa Valley Railway (OVR). Rail is often the most, if not only, economic way to haul high-volume, low-value bulk products over long land distances.
CN and CP
CN and CP are Canada’s two major Class I railways, and both transit across Northern Ontario, from Western Canada extending eastwards as far as Halifax (CN) and Montreal (CP), with services into the U.S. as well. In Northern Ontario, CN’s mainline takes the more northern route from the GTA to Manitoba westward through Ona and Longlac Junction. The CN tracks cross the U.S. border at Sault Ste. Marie, Fort Frances and Rainy River. The CP mainline follows a more southerly route along the North Shore of Lake Superior, with no border crossings with the U.S. in Northern Ontario. Together CN and CP carry the largest share of traffic in the region and own the majority of rail infrastructure.
Much of the Northern Ontario network is composed of single track lines, which have sidings placed at regular intervals where a train can pull off the mainline to make way for another train that it is meeting or passing.9 Our consultations with both CN and CP indicated there are no constraints to existing capacity in Northern Ontario in terms of existing tracks. Both railways have invested in longer sidings in Northern Ontario in recent years in order to accommodate the increasingly longer trains passing through Northern Ontario. For example, CN’s longer sidings program is creating sidings of 12,000 to 10,000 feet from sidings that were previously 6,000 to 7,000 feet.10
Ontario Northland Railway (ONR) The ONR is owned and operated by the Ontario Northland Transportation Commission (ONTC), an Agency of the Province of Ontario. The ONTC’s operations encompass more than 1,100 km of railway track, including freight and passenger services into the Far North as well as bus and telecom services to a number of communities and the operation of refurbishment facilities.
9 Research and Traffic Group, in association with CPCS Transcom, “Multimodal Freight and Passenger Traffic Flows and Infrastructure Study; Ontario-Quebec Continental Gateway and Trade Corridor: Phase 1 Rail Mode Report”. September 2009 10 CN Press Release. “CN invests in more extended siding in Northern Ontario to improve system velocity, productivity”. July 19, 2011.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Rail freight services are available from North Bay upwards to Timmins, Cochrane, Calstock and Moosonee, as well as a short branchline to Rouyn-Noranda, Quebec. ONTC is primarily engaged in providing rail freight services for the transportation of mineral and forest products, chemicals, petroleum and other products to and from Northeastern Ontario and Northwestern Quebec. The railway exchanges with both CN and OVR (on CP track) in North Bay, with CN in Hearst, and with CN in Rouyn-Noranda, Quebec. The company operates one passenger service, from Cochrane to Moosonee (primarily used by local residents). The Northlander passenger service between Toronto and Cochrane has been discontinued.
The 2013 Ontario Budget stated that the government continues to transform the ONTC. As part of transformation efforts, multiple options are being examined, including restructuring, alternative service delivery, new partnerships, and finding new owners for ONTC business lines.
Huron Central Railway (HCRY) The HCRY is a 278-km short-line freight railroad that connects Sault Ste. Marie with CN and CP Rail through interchanges at Sudbury. Commodities transported include pulp and paper products, forest products, chemicals, petroleum products, steel and scrap. The HCRY was acquired by Genesee & Wyoming, a major U.S. short line railway operator, in 1997.11
Ottawa Valley Railway (OVR) The OVR operates on 240 km of track between Sudbury and Temiscaming, QC. It interchanges with CN and ONTC in North Bay and CP in Sudbury and Cartier. The OVR moves commodities including forest products and chemicals.12 Its primary client is the large Tembec pulp and forest products operation in Temiscaming.
3.1.4 Intermodal Transport Intermodal transport refers to the movement of intermodal containers across different transport modes. Containers are used primarily for long-distance shipping which involves rail or movements by sea, with “first-mile” and “last-mile” movements handled by truck. There are a number of benefits to using containers for shipping inputs and outputs. Containers are built to a standardized dimension, with 20 and 40 foot containers being the most common for international marine containers and 53 foot for intermodal “domestic” containers. They can be loaded and unloaded across a number of modes of transport without being opened or compromised. Containerisation – a phenomenon which has grown significantly in the past 50 years for international shipping – reduces the cost of trade and increases speed as there is less product handling involved across the supply chain.
11 http://www.gwrr.com/operations/railroads/north_america/huron_central_railway 12 http://www.railamerica.com/RailServices/OVR.aspx
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
There are currently no intermodal container facilities in Northern Ontario (CP closed its intermodal facility in Thunder Bay in 2006). The nearest intermodal container facilities are in Toronto and Winnipeg. This means that any inputs arriving in containers by port or rail into Canada with products for use in Northern Ontario must either be unloaded at an intermodal terminal with contents re-stuffed into a domestic truck trailer to Northern Ontario, or must travel on a truck Forty-foot container being moved by gantry crane from a truck to a port storage container chassis to Northern Ontario yard. Source: istock (rather than by rail). The same is true for exports: producers in Northern Ontario wishing to use containers to ship exports beyond Ontario/Canada by rail or vessel must truck the containers to an intermodal facility in Toronto or Winnipeg before they can be moved by rail or vessel to final destination. Alternatively, they can rail or truck bulk materials to the nearest port or intermodal facility, to be stuffed and shipped onwards. Based on our consultations, neither CN Rail nor CP Rail has any plans to re-establish intermodal facilities in Northern Ontario in the future, although both companies noted in consultations that they are open to the idea if commercially viable volumes become available for shipping. Given that railways across Canada have generally been consolidating intermodal operations into fewer, larger facilities, the likelihood of new intermodal facilities/services in Northern Ontario is not evident. The text box below summarizes the factors which affect the viability of container shipments in general.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Intermodal Rail Transport: Commercial Viability Factors
Most CN and CP trains pass through Northern Ontario without stopping. Long-distance trains are typically very long and run on tight schedules, often moving over 120 railcars over thousands of kilometres (e.g. from Vancouver to Toronto) with few stops. To justify an additional stop, volumes must be high since it delays the train, translating into poorer service for transcontinental clients and, more critically, poorer asset utilisation as a few locomotives and hundreds of railcars and containers remain idled for a few hours.
Often, proponents of improved rail intermodal service point to existing bulk-rail transportation as an example to justify the viability of smaller-scale operation. However, rail container services are in many ways different to bulk transportation. In particular, rail car and loading equipment ownership and responsibility are very different.
In the case of bulk products, most large shippers own the specialised railcars which will be moved in a train consist (e.g. grain hopper). The railcars are filled on the shipper’s premise, using loading equipment provided by the shipper. The cars are then picked up by a small train, to be consolidated at a terminal facility and included in long-distance trains.
By comparison, intermodal equipment is generally railway owned. Railcars, containers and loading equipment such as reach stackers are all railway owned (or owned by shipping lines for marine containers). Shippers interested in container services are generally not ready to invest to acquire such equipment. Instead, they rely on the railway’s capacity to create economies of scale and better asset utilisation via an intermodal terminal. In short, unlike the bulk business where shippers generally take significant asset risks, the competitiveness of the intermodal sector requires the risk to be shifted mostly to the railway.
With the cost of maintaining and operating an intermodal terminal borne by the railway, and volumes being limited, opening a new container terminal in Northern Ontario is very challenging.
There are no marine vessels providing regular container services on the Great Lakes (nor have there ever been, with the exception of failed pilot projects such as the Port of Hamilton- Port of Montreal Sea 3 service). The barriers to entry are high for a number of reasons. Any marine shipping company considering carrying containers would need to be guaranteed enough traffic volume to make it worthwhile to purchase or lease a vessel capable of plying the waterways of the region. The vessel specifications for moving through the St. Lawrence Seaway are technically different from most container ships. Furthermore, most of the ports along the Great Lakes are not currently equipped to handle containers13 (gantry cranes) and so additional investment in equipment would be required for movements of containers between vessel, rail, truck, etc.
13 With the exception of Thunder Bay which has a gantry crane.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Overall, the development of new intermodal facilities and related services is largely a commercial decision and depends to a large extent on private interest, based in turn on high potential volumes of traffic.
3.1.5 Air Transportation
Airport Network There are 68 public airports in Northern Ontario. These can be broken down as follows:
• One international airport at Thunder Bay which is owned by the federal government and operated by an airport authority.
• 29 remote airports which are owned and operated by the province, of which 27 serve First Nation communities and are an essential link for supplies and health-related transportation (only one of these 27 communities has all-weather road access to the rest of Ontario).
• 38 municipal airports which are owned and operated by municipalities, private owners and commissions, authorities and boards. Of these airports, 11 can be classified as regional airports: Red Lake, Kenora, Fort Frances, Dryden, Sioux Lookout, Moosonee, Kapuskasing, Timmins, Sault Ste. Marie, Sudbury and North Bay. Thunder Bay is the busiest airport in the region, and the third busiest passenger airport in Ontario. Timmins used to be the leading cargo airport, supplying freight to the Far North (and even as far as Greenland), but today Thunder Bay is the busiest cargo airport in Northern Ontario. North Bay’s Jack Garland airport has strong cargo potential, with a 10,000 ft. runway allowing aircraft of any size to take off and land fully loaded. However, it does not have much regular cargo traffic; we understand this is partly because of the good road network nearby which is typically preferred by shippers for cost reasons.14
The airports in Northern Ontario provide a critical link for shipping supplies to remote First Nation communities across the region, as well as for the mining sector.
Passenger numbers and cargo volumes by airport are not publicly available. Figure 3-7 illustrates total aircraft movement for primary airports in Northern Ontario (all airports for which statistics are available from Statistics Canada).
14 http://www.sse.gov.on.ca/medt/investinontario/en/Pages/north_facts_transportation.aspx
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Figure 3-7: Annual Aircraft Movements, 2011
Source: CPCS Analysis of Statistics Canada data. CANSIM Tables 401-0037, 401-0007 and 401-0030.
Airline Carriers in Northern Ontario The airline industry catering to Northern Ontario can be broken into first, second and third- tier carriers. First-tier carriers include national and international carriers like WestJet and Air Canada. Second-tier carriers include smaller carriers such as Air Canada’s Jazz, Porter and WestJet’s new Encore services. Third-tier carriers are focused on regional and local traffic to and within Northern Ontario (and Northern Canada in general), and include Bearskin Airlines, Wasaya Airlines and Air Creebec. These third-tier carriers play a critical role in bringing cargo to more remote airports in the region, including for mining projects, and transporting passengers to and from remote airports.
One of the aviation trends for movements to remote airports is towards the use of combination planes (combi aircraft) which can be adjusted to carry only passengers, only freight or a mixture of the two. These aircraft are far more adaptable and flexible to meet market needs than regular planes.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
3.2 Unique Features of Northern Ontario’s Transportation System
3.2.1 Significant Commercial Traffic Transits Through Northern Ontario The focus of this study is on transportation requirements for freight movement with origins and/or destination in Northern Ontario. However, it is also critical to place this “local” traffic within the context of an infrastructure network used heavily by traffic transiting through Northern Ontario (i.e. moving through but having neither origin nor destination in the region). Indeed, on major trunk highways and Class I railways, commercial vehicle traffic and rail traffic passing through Northern Ontario is significant and, in most corridors, larger in volume than local traffic moving to, from or within Northern Ontario.
Road Sector Flow-Through
Figure 3-8 illustrates the relative scale of “local” versus flow-through truck traffic in Northern Ontario, using MTO Commercial Vehicle Survey data for 2011. The orange, light blue and dark blue lines (combined) show all of the commercial truck traffic with an origin, destination or both in Northern Ontario (“local” traffic). The outermost yellow line shows the volume of trucks that are simply transiting through Northern Ontario.
Across most of the highway network, flow-through traffic is larger than traffic destined to, from or within Northern Ontario. For example, as can be seen from the inset on the figure below, of the 527 trucks passing through a point west of Hearst, 392 trucks are transiting through, with the remaining 135 trucks associated with traffic with an origin, destination or both in Northern Ontario.
This is important because any improvements to the road network which benefit the industries of Northern Ontario will invariably have benefits for traffic passing through Northern Ontario (and for industries outside of the region).
It is also interesting to see that the commercial vehicle traffic generated by the study sectors15 (light blue line) account for the majority of commercial vehicle traffic on the road which is “local”. This is illustrated by the fact that along most corridors, the dark blue line which illustrates other local (non-study sector) commercial vehicle traffic is relatively small compared to the light blue line.
15 Excluding tourism which is not captured in commercial freight vehicles.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Figure 3-8: Truck Flows, All Sectors, Local and Flow Through Traffic, 2011
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Rail Sector Flow-Through
The same pattern is evident when looking at rail flows – indeed, in the case of the rail sector, even more traffic transits through Northern Ontario than is generated by or destined to the region (with the exception of the three regional and local railways).
The figure below shows the approximate level of traffic volumes moving on the rail network for traffic with an origin, destination or both in Northern Ontario (green lines) and flow- through traffic (orange lines). The map is illustrative only, based on CPCS estimates, as specific data on rail freight volumes which stop and start in Northern Ontario is not publicly available. The “local” traffic (green lines) is based on volumes received in confidential consultations as part of this study. The flow-through traffic is based on CPCS estimates from the best available data.16
Even with these rough estimates, the message is very clear (and was also clear from our consultations with CP and CN): the traffic generated in or destined to Northern Ontario by rail is very small compared to traffic transiting through Northern Ontario.
16 The flow-through flows are based on Statistics Canada (CANSIM Table 404-0021) and consist of traffic volumes moving from west of Ontario to east of Ontario and vice versa, plus traffic moving from western points to Southern Ontario and vice versa, less traffic we know originated or was destined to Northern Ontario from the west. We estimated that of all flow through traffic, 55% travels on CN Rail and 45% on CP Rail.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Figure 3-9: Estimates of Rail Flows, Regional and Transit Traffic, Northern Ontario
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
3.2.2 Empties Account for Considerable Traffic Volumes The commercial traffic using Northern Ontario’s road network includes a significant number of empty trucks moving between points within the region and beyond. The figure below illustrates the flow of daily empty truck trips on Northern Ontario’s road network: an average of 3,424 trips per day across the full network. This represents approximately 46% of all daily truck traffic.17 It is not unusual for empties to make up a large proportion of total traffic18, for reasons discussed below.
Of the 3,424 daily truck trips moving empty, just over 60% are movements of empty trucks within Northern Ontario. This reflects a number of factors related to the transportation requirements of Northern Ontario’s resource-driven economy:
• In the forestry, mining and some agriculture sub-sectors, specialized vehicles designed to carry specific products are often used for moving bulk commodities from the site of primary origin to value-added facilities within the region. This would represent “headhaul” traffic, including: moving ore from a mine to a concentrator, moving lumber from a forest site to a sawmill, or moving raw milk from a dairy farm to a dairy processing facility. There would be no matching “backhaul” cargo for such moves in the specialized vehicles. As a result, the truck would need to go back to the source of origin empty (or to another location to pick up raw materials).
• In the manufacturing sector it is more common to use truck and trailer transport vehicles which can carry a range of general cargo, and such vehicles are more flexible in terms of moving different types of cargo in multiple directions. However, a large percentage of manufacturing industries in Northern Ontario cater to the mining and forestry sectors in Northern Ontario. These companies bring general cargo, equipment and supplies to mining and forestry sites, but there is limited backhaul requiring a truck and trailer so the vehicle must move empty. In the case of the remaining empty truck movements, 529 (15%) are destined to Northern Ontario from outside of the region and 811 (24%) are moving from Northern Ontario to other regions. The dominant flow is between Northern Ontario and Southern Ontario, with more empty trucks returning south than heading north.
17 The total number of commercial vehicle daily truck trips with a start, end or both in Northern Ontario in 2011 was 7,390. 18 According to CPCS analysis of 2006-7 Commercial Vehicle Survey data, empties accounted for 37% of traffic on Quebec roads. Source: CPCS (to be published in 2013), Étude multimodale du transport des marchandises au Québec en appui aux plans territoriaux de mobilité durable, Chapter 3.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 3 | Transportation Systems in Northern Ontario
Figure 3-10: Daily Truck Traffic, Empty Vehicles19
19 The statistics also include a very small number of empty containers.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
4 Miningn Sector
Key Highlights
Economic Outlook The mining industry includes three important sectors: metallic‐mineral mining (base metals and precious metals), non‐metallic mineral mining (diamonds and aggregate), and mining service and supply companies, largely based out of Sudbury.
The metallic minerals sector is in a period of expansion, with base metals in high demand for industrial development across the globe, particularly in Asia. The discovery of chromite deposits in the Ring of Fire is the most important mining discovery in Ontario in a generation,, and brings many opportunities and challenges, including requirements for significant infrastructure investment.
Aggregate is used extensively for local and regional road, infrastructure and other construction projects. Demand for aggregate is expected to remain steady in the foreseeable future, in line with population growth and requirements for new infrastructure to support the mining sector.
Current Use of the Transportation System Road and rail are the primary modes used to move inputs and outputs to and from base metal mines. Road and air are the primary transport modes used for movement inputs and outputs to and from gold mines.
The air mode is used primarily in the early stages of mines development, and throughout the entire life cycle of most mines in remote, northern areas. Personnel are also often flown in to more remote sites.
Although the majority of aggregate moves by road in Northern Ontario (typically under 100 km), the marine mode is also important for moving aggregates to and from Northern Ontario.
Priority Transportation Needs Identified by Stakeholders
Construction of infrastructure to connect the Ring of Fire to the rest of Ontario
Selective construction of all‐season roads to replace winter roads
Monitor traffic levels to assess improvements to highway 652 between the Detour Lake Gold project and Cochrane
Monitor traffic on Highway 105 between Red Lake and Vermillion Bay to assess infrastructure improvement requirements to accommodate major growth in gold mining (three new projects) in Red Lake
Upgrading of select airport infrastructure to accommodate mining expansion, particularly around the Ring of Fire
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Contents 4 Mining Sector ...... 4‐1 Regional Context & Outlook ...... 4‐3 4.1 Sector Profile ...... 4‐3 4.2 Sector Developments and Trends ...... 4‐14 4.3 Regional Competitiveness ...... 4‐19 4.4 Outlook ...... 4‐21 Mining Sector Transportation Overview ...... 4‐23 4.5 Mining Sector Supply Chain Overview ...... 4‐23 4.6 Northern Ontario Supply Chain Mapping ...... 4‐33 4.7 Transportation Needs Identified by Stakeholders ...... 4‐51
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Regional Context & Outlook
4.1 Sector Profile
4.1.1 Overview The mining sector has been an essential part of Northern Ontario’s economic development, with mining industries playing a major role in the settlement of the province’s northern regions. In 2011, Ontario’s mineral production was valued at $10.7 billion, of which 70% in metallic minerals (all from Northern Ontario) and 30% from non‐metallic minerals.1 Over $1 billion was spent on new mine exploration in the same year, more than any other province in Canada.
4.1.2 Sector Markets For the purposes of this study, we have broken down the mining sector into three sector markets as follows:
Metallic mineral mining, including the mining of base metals (copper, nickel, zinc, platinum group metals, iron ore, etc.) and precious metals (gold, silver, etc.)
Non‐metallic mineral mining, including the mining of diamonds and the extraction of aggregates from pits and quarries
Mining supply and service companies, that largely support metallic mineral mine exploration, development and production. Each sector market is described below.
Metallic Minerals Mining Ontario’s metallic minerals mining sector, the largest in Canada, has a long history, with gold, silver, iron ore and base metal mining industries dominating production and helping to establish Toronto as a major global centre of mining sector financing.
The figure below presents the volume and value of metallic mineral production Ontario in 2011, all of which originate from mines in Northern Ontario. From a volume perspective, key metals mined in Ontario are: copper, nickel and zinc. From a value perspective, gold generates the most value (gold mining generates low volumes, but the value per ounce is very high).
1 Ministry of Northern Development and Mines, Production Facts, 2012.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐1: Ontario Mineral Production, 2011
Commodity Ontario Production (tonnes) Ontario Value ($m) Copper 207,445 1,887 Nickel 90,552 2,172 Zinc 71,414 161 Cobalt 1,053 43 Silver 147 168 Gold 51 2,446 Platinum Group 18 625 Selenium 16 2.1 Tellurium 4 1.6 Total 370,699 7,506 Source: CPCS Analysis from Ontario Statistics from: Ontario Ministry of Northern Development and Mines. Presentation “Ontario Production Facts – 2012”. Figure 4‐2 shows the production volumes at each of Ontario’s 30 metallic minerals mines for 2011, including 14 gold mines, 15 base metal mines and one platinum group metals (PGM) mine.
Figure 4‐2: Northern Ontario Metallic Mineral Production (Annual Production, 2011) Company Mine Name Region Commodity Production Unit of Volume2 Volume Barrick Gold Hemlo (William and Marathon Gold 227,487 Ounces David Bell Mines) Brigus Gold Corp Black Fox Timmins / Gold 67,249 Ounces Kirkland Lake First Nickel Lockerby Sudbury Base Metals n/a 3 Goldcorp ‐ Porcupine Gold Dome Timmins / Gold 67,366 Ounces Mines Kirkland Lake Hoyle Pond Timmins Gold 133,605 Ounces Goldcorp Inc Musselwhite Musselwhite Gold 242,600 Ounces Red Lake Gold Red Lake Gold 622,000 Ounces KGHM Levack Sudbury Base Metals 21,002 Tonnes McCreedy West Sudbury Base Metals 20,765 Tonnes Podolsky Mine Sudbury Base Metals 11,256 Tonnes (closing 2013) Kirkland Lake Gold Inc Macassa Kirkland Lake Gold 81,860 Ounces
2 Volumes show the final output of refines metal, after smelting and refining. 3 Volumes not available for 2011
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Company Mine Name Region Commodity Production Unit of Volume2 Volume Lake Shore Gold Corp Timmins Timmins Gold 86,565 Ounces Liberty Mines Inc McWatters Timmins Nickel 1,4894 Tonnes North American Palladium Lac des Iles North of PGM 146,000 Ounces Ltd. Thunder Bay Palladium 150,000 Platinum Prophecy Platinum Shakespeare Sudbury Base Metals 166,913 Tonnes Richmont Mines Inc Island Gold Wawa Gold 49,443 Ounces St Andrew Goldfields Hislop Kirkland Lake Gold 20,184 Ounces St Andrew Goldfields Holloway / Holt Kirkland Lake Gold 53,838 Ounces Wesdome Gold Mines Ltd Eagle River Wawa Gold 28,200 Ounces Vale Copper Cliff North Sudbury Across five mines: Creighton Sudbury 81,588 tonnes nickel 90,290 tonnes copper Garson Sudbury 2,678 tonnes cobalt McCreedy East / Sudbury 182,000 ounces gold Coleman 248,000 ounces palladium, Stobie Sudbury 174,000 ounces platinum 2.5 million ounces silver Xstrata plc Nickel Rim South Sudbury Across two mines: Fraser Sudbury 15,000 tonnes nickel 24,000 tonnes copper 250 tonnes cobalt Kidd Creek Timmins 42,322 tonnes copper 71,497 tonnes zinc Source: Ontario Mining & Exploration Directory 2012. Figure 4‐3 shows the location of the 30 mines described above. Base metal mining is concentrated in the Sudbury area, with gold mining concentrated in areas around Red Lake, Timmins, Kirkland Lake and Marathon (Hemlo). The figure also shows the location of the 22 relatively mature mine development projects that are expected to begin production within the next five years or so (by 2017/18), and the 20,467 active mining claims in Northern Ontario, representing 98% of all active mining claims in the province. Approximately 600 of these claims are considered to be very active. All information is as of December 2012.
4 Liberty Mines data is from 2010.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐3: Key Metallic Minerals Mining Areas of Northern Ontario (as of December 2012)
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Metallic mineral mining is a significant driver of employment and job creation. A recent University of Toronto study estimated the direct employment impact of $1 billion of mining output is 2,421 jobs, with another 2,000 created indirectly.5 The Ministry of Northern Development and Mines estimates the total Ontario mining employment to be 27,271, of which Northern Ontario employment accounts for 17,374 (64%).6 The majority of firms operate out of Greater Sudbury, and to a lesser extent, North Bay, Timmins and Thunder Bay.7 The local impact of mining for these communities is significant; for example, Sudbury’s two largest private sector employers are Vale and Xstrata.
Demand for Metallic Minerals Ontario’s metals mining industry is highly integrated with the global economy.
Base metals are used for industrial production purposes worldwide. Copper is a key input in the production of piping, wiring and electronics, and construction and building materials; nickel is used for making stainless steel and other corrosion‐resistant alloys, among other products; and zinc is used in the production of brass and the galvanization of ferrous metals to prevent corrosion. A 2009 Ontario Mining Association report suggests that 80% of Ontario’s metallic mineral outputs are exported beyond Canada: 38% to the U.S., 26% to Europe, 3% to China and 13% to the rest of the world8. The demand for base metal mining products is directly linked to industrial demand, In the next 25 years, as which in turn is driven by population growth and economic many minerals and metals will be consumed globally development worldwide. China’s tremendous economic and as in all of history to date. population growth has had a particularly strong impact on base – Mining Association of metal demand – China now consumes approximately 30% of Canada, 2012 the world’s base metals, compared to 5% in the 1980s.9
Globally determined commodity prices influence the capacity utilization rate of mines and whether new exploration and development projects are pursued. In this respect, mining activities are extremely vulnerable to cyclical swings in the prices of minerals and metals. Figure 4‐4 shows a price index for zinc, nickel and copper concentrates, highlighting the cyclical nature of global prices for Ontario’s three key base metals.
5 Peter Dungan and Steve Murphy, “Mining: Dynamic and Dependable for Ontario’s Future”, University of Toronto. Final Report submitted to the Ontario Mining Association, December 2012. (Figures are from Table 15). 6 Figures provided directly by Ministry of Northern Development and Mines for this Study. 7 Doyletech Corporation, Northern Ontario Mining Supply and Services Study, April 2010. Prepared for the Ontario North Economic Development Corporation. 8 Ontario Mining Association. “Ontario Mining: A Made‐in‐Ontario Success Story, Economic Contribution Study”, March 2009. 9Presentation by the Mining Association of Canada. The Canadian and Global Mining Scene: Contributions, Opportunities, Issues, May 2012, Kamloops.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐4: Raw Materials Price Indices for Copper, Nickel and Zinc Concentrates, 1981‐2013 (2002 = 100)
600
500 100)
= 400 (2002
Index 300 Price
200 Materials
Raw
100
0 04 05 02 01 02 99 98 99 96 95 96 93 92 93 90 89 90 87 13 86 87 11 84 10 11 83 84 08 81 07 08 81 05 03 00 97 94 91 88 12 85 09 82 06 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr
Copper concentrates Nickel concentrates Zinc concentrates
Source: CPCS Analysis from Statistics Canada, CANSIM Table 330‐0007: Raw Materials Price Index Northern Ontario’s most valuable metallic mineral – gold – is used in the manufacturing of electronics and other products, and is also prized for its inherent and decorative value. Gold’s value is primarily driven by the role it plays as an alternative to monetary assets, particularly in times of economic crisis or slowdown. Governments, institutions and individuals purchase and hold gold reserves effectively as a buffer to hedge against economic turmoil in financial markets. For example, the recent (2007/8) financial crisis, ongoing economic difficulties in Europe, and concerns around the rebounding of the U.S. economy (including quantitative easing policies), have all contributed to extremely high demand for gold. With current demand exceeding supply, gold is currently sold on the spot market.
Gold exploration and mining activities (as with other mining commodities) are directly linked to the market price for gold. The figure below shows the price index for gold and alloys in their primary form. The price of gold has experienced a 10‐fold increase in the last six years, following a relatively stable price range for the prior 25 years. Prices have increased more than six‐fold from about US$250 per ounce in 2001 to over US$1,700 per ounce in October 2012.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐5: Gold and Alloys Primary Form Price Index, 1980‐2013 (2002 = 100)
400
350
300
250 100)
=
(2002
200 Index
150 Price
100
50
0 05 02 02 03 04 99 99 00 01 96 96 97 98 93 93 94 95 90 90 91 92 87 87 88 89 84 84 85 86 81 81 82 83 11 11 12 13 08 08 09 10 05 06 07 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr
Gold and alloys in primary form
Source: CPCS Analysis of Statistics Canada, CANSIM Table 330‐0007: Raw Materials Price Index
Non‐Metallic Mineral Mining The primary non‐metallic minerals produced in Northern Ontario are aggregate, diamonds and sulphuric acid.
Aggregates
Aggregate mining is the extraction of sand, gravel, and crushed stone and other materials from the earth.10 Extraction of unconsolidated material like sand, gravel and clay takes place in a pit, while extraction of consolidated material like bedrock – that requires blasting or mechanical separation – takes place in a quarry. Underground extraction of aggregate is regulated by the Mining Act. Surface aggregate extraction on Crown Land is regulated under the Aggregate Resources Act, while surface extraction on private land is only regulated if it takes place in specific “designated” areas noted in the Aggregate Resources Act regulations. Designated areas include all of Southern and Central Ontario, extending just north of Sault Ste. Marie, Sudbury and North Bay, and areas around Thunder Bay and Wawa.
10 The term aggregate includes gravel, sand, clay, earth, shale, stone, limestone, dolostone, sandstone, marble, granite and other rock (rock excludes metallic ores, andalusite, asbestos, barite, coal, diamond, graphite, gypsum, kaolin, kyanite, lepidolite, magnesite, mica, nepheline syenite, petalite, phosphate rock, salt, sillimanite, spodumene, talc or wollastonite).
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In 2011, 24 million tonnes of aggregate was produced from Aggregate Permit, Licence and Wayside Permit holders in Northern Ontario, consisting mostly of sand, stone and gravel.11 The map overleaf illustrates the volumes of aggregate production by Single‐Tier Municipality (Licence and Wayside Permit Production) and by MNR Administration District (Aggregate Permit production). The categories cover the following:
A Licence is required for aggregate extraction on private land in designated areas under the Aggregate Resources Act regulations.
A Wayside Permit is issued for aggregate extraction on private land in designated areas where the aggregate is to be used by a public authority such as MTO or a municipality for temporary road construction or road maintenance projects.
An Aggregate Permit is required for aggregate extraction on Crown Land or where the Crown owns the aggregate, and all extraction of land under natural water bodies. These volumes exclude production from aggregate pits and quarries that are not designated under the Aggregate Resources Act, and underground extraction of aggregate which is regulated by the Mining Act.
11 The Ontario Aggregate Resources Corporation, “Preliminary Mineral Aggregates In Ontario Statistical Update 2011”.
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Figure 4‐6: Aggregate Production in Northern Ontario, 2011
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Aggregates play an important role in establishing and maintaining transportation infrastructure across Northern Ontario, as well as in the construction industry more generally. High quality aggregate is a key ingredient in the production of ready‐mix concrete, manufactured concrete products (block, brick, pre‐cast etc.), asphalt pavements and sub‐ surface fill. Customers are from all sectors of the construction and building industry, including provincial governments, residential and commercial construction, mining and power generation sectors, hydro dam construction, renewable energy projects, etc.
Demand for aggregate is cyclical, fluctuating with changes in the economy and associated spending on road, industrial, residential and commercial construction and development projects. In times of economic growth, demand will increase due to construction of new homes and access infrastructure to real estate development and mining projects. In times of slower growth, demand may be slower but still relatively stable due to municipal, provincial or federal construction projects, sometimes promoted as part of public sector “stimulus” investments in economic downturns. Over 50% of all aggregate produced in Ontario is sold to public authorities for the construction and maintenance of public infrastructure such as roads, bridges, etc.12
Overall, aggregate consumed in Ontario mainly comes from new (over 90%) and recycled (less than 10%) aggregates produced locally.13 The use of recycled aggregate products is growing, although, primary aggregate is still expected to be the dominant form used across Ontario for the next 15 years, with recycled aggregate expected to accounting for just over 8.1% in 2030.14
Diamonds
All of Ontario’s diamonds are produced from the DeBeers Victor Mine near Attawapiskat in Northeastern Ontario, with a production volume of 797,134 carats and value of $453 million in 2011. Advanced work is underway at two other properties in the Far North.
Demand for natural diamonds is driven by two main categories: for use in fine jewellery and to a much lesser degree, for industrial applications.15 Because diamond gemstones are a
12 The Ontario Aggregate Resources Corporation, Statistical Update, 2011 www.toarc.com/pdfs/Stats_2011_Prelim.pdf 13 Recycled materials have played an increasing role in Ontario, at about seven percent of supply between 1997 to 2007, up from about four percent in the early 1990s. Their use is expected to gradually increase over the next 20 years. Source: Ministry of Natural Resources, State of the Aggregate Resource in Ontario Study (SAROS), Consolidated Report, February 2010. 14 Altus Group, “State of the Aggregate Resources Study – Paper 1 – Aggregate Consumption and Demand”, December 2009. Prepared for the Ministry of Natural Resources. 15 Demand for diamonds for industrial uses far outpaces demand for the jewellery sector by volume; however, industrial diamond demand is primarily met by synthetic (non‐natural, laboratory developed) diamonds, most of which are produced in China.
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luxury good and not a commodity, the global diamond jewellery market moves in parallel with the broader market for luxury goods and jewellery. The U.S. dominates consumption of diamond jewellery (approximately 40% by value in 2010), but demand from Asia (China and India) has been growing fast and is expected to gain more importance.
Sulphuric Acid
Sulphuric acid is a by‐product primarily from smelting activities of base metal ores, which takes place at the two smelters in Sudbury.
Sulphuric acid is one of the most widely used chemicals in the world, with many producers and significant competition worldwide. It is also used in petroleum refining to remove impurities from gasoline and other refinery products. To the extent that global environmental regulations continue to require increasing capture of sulphur dioxide (SO2) emissions from the burning of fossil fuels, the demand for sulphuric acid will continue to grow. The supply of sulphuric acid is subject to a smelter operator’s ability to economically source key raw materials, ores and concentrates, which in turn depends on market prices for base metals and production cost factors.
Mining Service and Supply Companies The mining supply and service industry is well established in Northern Ontario. Services provided include mine planning, construction, exploration, research, communications, environmental science, mine equipment repair, maintenance and rebuild, and development of mining technologies. The goods being supplied include everything from construction equipment to drills, pumps, pipes, tubing and other equipment, as well as high‐tech equipment and software.
The Northern Ontario mining service and supply market is primarily domestic. Sales within Canada account for 81% of product sales as follows: 62% to Northern Ontario; 7% elsewhere in Ontario; 12% elsewhere in Canada. Of the 19% that is exported outside of the country: 5% goes to the U.S.; 8% outside of North America and 6% is unspecified.16 While many of the companies provide customized local services, major internationally known companies like Sandvik and Atlas Copco also operate in the area and supply a vast array of more standardized equipment and services regularly used in underground and open pit mining. Atlas Copco and a few other multinational corporations have established Sudbury as their Canadian mining service centre.
A recent study indicated that the total value of the mining supply and services sector in Northern Ontario is $5.6 billion, generated by approximately 500 companies employing about
16Doyletech Corporation. Northern Ontario Mining Supply and Services Study, Executive Summary Presentation. Prepared for the Ontario North Economic Development Corporation, April 2010.
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23,000 people. Mining service and supply companies are concentrated in Sudbury, North Bay, Timmins and Thunder Bay.17 The approximate breakdown for sales and employment across the sector is presented below.
Figure 4‐7: Breakdown of Mining Service and Supply Sector in Northern Ontario Employment Value (Billions $)
North Bay North Bay 2,990 0.77 13% 14%
Timmins 0.59 Timmins 10% 4,600 Sudbury 20% 3.94 70% Thunder Bay 0.35 Sudbury 6% 13,800 60% Thunder Bay 1,610 7%
Source: CPCS Analysis from Doyletech Corporation. Northern Ontario Mining Supply and Services Study, Executive Summary Presentation. Prepared for the Ontario North Economic Development Corporation, April 2010. As can be seen from the figure above, Sudbury is the heart of the mining service and supply sector, serving as an innovation cluster for the region. It is also home to a concentration of mining education and research organizations, including the public‐private Centre for Excellence in Mining Innovation, the Canadian Mining Industry Research Organization, the Northern Centre for Advanced Technology and Mining, and Laurentian University’s School of Mining and its eight mining research centres.18
4.2 Sector Developments and Trends In this section, we describe the current trends and future developments which are expected to impact growth in the mining sector.
Metallic Minerals Mining Is in Expansionary Phase As noted in Figure 4‐3 more than 20 mine development projects are at a mature stage of development and expected to begin production within the next five years or so. Two of the most significant developments in volume terms are projects in the Ring of Fire (see text box below) and Detour Gold’s Detour Lake property in northeastern Ontario. The Detour Lake gold
17 Ibid. 18 Canadian Chamber of Commerce, “Mining Capital: How Canada has Transformed Its Resource Endowment into a Global Competitive Advantage”, January 2013.
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mine began production in February 2013, and is expected to be one the largest gold mines in Canada, with a 21‐year mine life and annual average gold production of 657,000 ounces (equivalent to about 35% of Ontario’s gold production in 2011).19 Detour Lake is investing $1.45 billion in the mine.
Ring of Fire: Overview
The “Ring of Fire” is the common term used to describe a remote 3,200 square‐km area where several new mineral discoveries have been made, the most significant of which is world‐class chromite deposits. Chromite is one of the most important industrial metals worldwide and there is no substitute for its unique properties that are used in the production of stainless steels, aircraft engines and super alloys with military applications. Other mineral deposits in the Ring of Fire include nickel, copper, PGMs, gold and vanadium, which is also used in stainless steel production and batteries.
Currently, 23 companies hold claims in the Ring of Fire belt, with two companies being at a significantly more advanced developmental stage than any others: Cliffs Natural Resources (Cliffs) owns a 100% share in the “Black Thor” chromite deposit (among others) and expects to start production in 2016. Production is expected to be 2.3 million tonnes per year for the anticipated mine life of 30 years. Noront Resources owns the Eagle’s Nest Property nickel deposit and also expects to begin production in late 2016. Production volumes are much lower, at 150,000 tonnes per year over the life of the mine (approximately 11 years). The Cliffs and Noront sites are less than 10 km apart.
There has also been interest in recent years to exploit iron ore mining properties, primarily in Northwestern Ontario. Exploration projects include Rockex Mining Corporation’s potential iron mine south of Pickle Lake and Canada Iron Inc.’s exploration on the Lake St. Joseph Iron Ore property located about 50km west of Thunder Bay. The most advanced project is the Bending Lake Iron Group Limited’s property in Bending Lake (approximately 38km west of Ignace) which is expected to go into production in 2016 and have a mine life of 35 years.20
North American Palladium is also planning an expansion around its existing Lac des Isles platinum group metals mine.
If all of these projects go ahead, significant additional transportation flows will be generated (as discussed in section 4.6.2 Future Commodity Flows).
Investment in Sudbury Shows Commitment to Growth Sudbury has been a vertically integrated mining hub for decades, with mines, concentrators, smelters and a refinery all located in the area, serving the local and international mining
19 News release: Detour Gold Announces Updated Open Pit Mine Production Plan for Its Detour Lake Gold Project in Ontario, September 4, 2012. www.detourgold.com 20 Bahram, Dr. D. et al, Mining in Northwestern Ontario: Opportunities and Challenges. Report commissioned by Ambassador’s Northwest. September 27, 2012.
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industries. Ongoing and significant private sector investments in the Sudbury Basin suggest that this will continue to be the case for many years to come. To name a few:
Cliffs Natural Resources announced its intention to build a $1.8 billion chromite smelter near Capreol (30km north of Sudbury).
Vale is spending $1 billion for pollution controls at its smelter to further reduce sulphur dioxide emissions, in addition to $760 million to construct its Totten Mine, as well as exploration on the Victor‐Capre deposit. In total, Vale has committed to spending $1.5 billion on its Sudbury Basin operations in the next half‐decade or so.
KGHM International (formerly Quadra/FNX) is spending $750 million to bring its Victoria Mine into production.
Xstrata Nickel is spending over $100 million on the Fraser Morgan deposit, which will extend the mine life of the Fraser Complex by five years to 2025, as well as initiating a significant emissions reduction program in its Sudbury operations. All of these major investments in Sudbury are a positive sign that the mining industry is committed to development in the area.
Labour Supply Shortages Affect Growth Opportunities Mining requires a large and varied range of skilled and unskilled workers including mine workers and managers, engineers, electricians, geologists, millwrights, heavy equipment operators and truck drivers. Our consultations indicate that there are significant challenges in the mining sector, and other sectors, in the sourcing of skilled labour in Northern Ontario, particularly when economic growth is strong locally and internationally and demand for Ontario’s resources is high.
The particular labour supply challenges are threefold:21
There is a tight labour market, with demand outstripping supply, particularly for positions requiring advanced training, trade certifications and/or higher levels of education.
The industry faces a highly mobile labour force whereby trained technicians and labourers are able and increasingly willing to move to mining sector jobs elsewhere in Canada or internationally. To a certain extent, the mining industry is also competing with other sectors such as forestry and advanced manufacturing to attract skilled workers.
21 Bahram, Dr. D. et al, Mining in Northwestern Ontario: Opportunities and Challenges. Report commissioned by Ambassador’s Northwest. September 27, 2012. http://www.thunderbayventures.com/upload/documents/mining‐in‐northwestern‐ontario.pdf
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As noted in Chapter 2, the labour force in Northern Ontario is shrinking in absolute numbers, and aging, with new workers required to replace the baby boomer generation. The Aboriginal population in Northern Ontario is small, but growing faster than any other segment of the local population. There are strong opportunities to work with the growing, young population and attract them to the resources sector, including through provision of training opportunities for high‐skilled positions.
Legislative Challenges Associated with Exploration of New Mines Our consultations with industry highlighted a number of public policy and legislative areas that currently cause concern to investors in the metallic minerals industry.
Far North Act: The Far North Act, 2010 (the Act) came into force on January 31, 2011. Under the Act, First Nation and Ontario partners work together to develop community based land use plans which identify what areas are to be protected and those that are open for economic development. The Act requires that a community‐based land use plan be in place prior to most development, such as the opening of a mine and constructing or expanding all‐weather transportation, unless an exemption or exception applies. Some development activities can continue without a community‐based land use plan. This includes prospecting, mineral claim staking and exploration, and developments authorized before the Far North Act came into force. To date, the Ministry of Natural Resources has been able to fund all communities that have come forward with an agreed upon work plan. However, stakeholders raised concerns that mineral development could be limited in the Far North for new projects because some First Nation communities are not currently able or willing to complete the land use plans.
Ontario Mining Act Modernization: The Ontario Mining Act outlines the rules and regulations that apply to mining in Ontario.22 The Act was revised in 200923 and some stakeholders fear that resulting changes may create onerous red tape and other regulations, and make the province less attractive to the mineral exploration community. One example includes new proposed “Exploration Plans and Permits” processes which are expected to require more extensive consultation and time prior to approvals for exploration. A number of related issues are currently being discussed by the MNDM and affected stakeholders, including prospectors and exploration companies.
Consultation with First Nation Communities: Much of Northern Ontario’s mine exploration, development, production and associated infrastructure expansion activities (e.g. road networks, power lines) occurs on lands to which First Nation and Métis people
22 Ministry of Northern Development and Mines website: http://www.mndm.gov.on.ca/en/mines‐and‐ minerals/mining‐act 23 Bill 173 – An Act to Amend the Mining Act – was passed in 2009, resulting in the new Mining Amendment Act, 2009, which amends the Ontario Mining Act.
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have established or asserted Aboriginal or treaty rights. The Government has a duty to consult Aboriginal communities when it has knowledge, real or constructive, of an existing or asserted Aboriginal or Treaty right and contemplates conduct that may adversely impact that right (for example, when resource development takes place). The legal responsibility to fulfilling the duty to consult lies with the Crown which, in this situation, is the Ontario Government. In outlining a framework for the duty to consult, the Supreme Court has stated that the Crown may delegate procedural aspects of consultation to a third party. This third party in Northern Ontario is often an industry proponent. Industry and investors alike expressed frustration about the process of delegation and what they see as a lack of clear direction from the Ontario Crown on appropriate consultation. While there are many success stories between mineral exploration companies and First Nation communities, some misunderstandings around consultation‐related processes have generated significant unfavorable media coverage. The primary challenge identified by investors today is uncertainty created by a lack of clarity on what constitutes an appropriate forum and what substantive engagement and meaningful consultation process – including whom to consult within each community – are required in order to meet the duty to consult.
Ontario Northland Transformation The province has committed to the transformation of the Ontario Northland Railway. As part of the transformation efforts, multiple options are being examined, including restructuring, alternative service delivery, new partnerships, and finding new owners for ONTC business lines. There are concerns regarding changes following the transformation – particularly Xstrata Copper, Xstrata Zinc and Norfalco – regarding the uncertainty around the outcomes and potential changes in rates and service levels following divestment. The ONTC is used by these and other companies to move base metal concentrates, matte and sulphuric acid between facilities in the region and beyond (notably, copper concentrate to the Horne Smelter in Rouyn‐Noranda, QC and zinc concentrate to the CEZ refinery in Valleyfield, QC). Materials are also being shipped on the ONTC through Northern Ontario from other regions. For example, one project being studied by Xstrata in Western Canada has the potential to ship 200,000 tonnes of concentrate to the Horne Smelter in Rouyn‐Noranda, using the Ontario Northland Railway as the final connection.
In the mining sector, movement of low‐value, high‐volume commodities such as concentrates means that freight transportation cost is critical to the overall delivered product cost. The concerns noted by shippers include the possibility that service levels will decrease and that shipping costs will increase, pushing them beyond the boundaries of commercially viable operations. In such industries, trucking is not a viable alternative given the large volumes involved and the typically long distances that are covered.
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Shortening Season for Winter Roads Winter roads are a key transportation route to supply remote mines and First Nation communities in the Far North. As the opening times of winter roads become shorter due to climate change, the window of opportunity to supply key goods such as diesel fuel and heavy equipment will narrow. Production costs will increase exponentially if alternatives need to be used for movement of freight (more air mode transport and/or construction of all‐season roads).
Local Opposition to Aggregate Pit and Quarry Development The Province of Ontario is mandated to ensure that aggregate resources are protected for long‐term use, and has for the past 40 years declared a provincial interest in maintaining a “close to market” supply policy, whereby aggregate pits and quarries should be located close to job sites. The primary reasons are to minimize transportation costs and related negative externalities including greenhouse gas emissions and fossil fuel consumption, wear and tear on roads, etc.24 From a supply perspective, however, there is often significant resistance to the development of pits and quarries by local community members. There is strong competition from different stakeholders for land use and land use conflicts in the more densely populated areas of the province. There is also sometimes local opposition regarding environmental effects of new and expanded pits and quarries, including noise, dust, etc.
4.3 Regional Competitiveness The following SWOT analysis succinctly outlines the current state and future outlook for the mining sector in Northern Ontario.
Figure 4‐8: Mining Sector SWOT Analysis Strengths Weaknesses
Ontario has abundant mining resources Production costs at some operations in Ontario are relatively and is considered a safe, secure place to high compared to less developed economies (Russia, China, invest, especially in comparison to Indonesia) due to higher labour costs, transportation costs alternative locations (South Africa, (remote sites / limited access / no infrastructure) and higher Indonesia, Russia). energy prices. Sudbury Basin area has a well‐established Northern Ontario’s mining supply and service sector consists of and growing mining industry and support many small firms. While some export internationally, many activities, and remains extremely well‐ have face relatively low productivity (compared to large‐size positioned to serve mining demand. companies) and little experience in exporting outside of Ontario’s mining supply and services Canada. Smaller companies are somewhat less able to develop sector is very well‐ established and has necessary “just‐in‐time” innovations and supply chains.
24 Ministry of Natural Resources, State of the Aggregate Resource in Ontario Study, Consolidated Report, February 2010.
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Strengths Weaknesses
experienced companies producing a wide For exports, mining supply companies in Northern Ontario face range of products and services, with high relatively higher transportation costs in comparison to environmental and safety standards. The suppliers that are better linked to international markets from a largest cluster of Northern Ontario transport infrastructure perspective; so, even if production hardrock mining supply and service costs are competitive, the added transportation costs from companies is located in Sudbury. Northern Ontario to market makes products less competitive. Ontario is still attracting significant investment in exploration as indicated by attaining $1 billion in spending in 2011.
Opportunities Threats
Major urbanization and growth of middle Current shortage of experienced tradesmen (mining service classes worldwide – especially in Brazil, and supply), skilled labourers (above and below‐ground Russia, India and China (BRIC) countries – mining), truckers, etc. is likely to be exacerbated by retirement is expected to keep demand for Ontario’s of baby boomers in the next decade. metal mining products high in short, If the Canadian dollar remains strong it will continue to make medium and long term. Ontario’s mining output and mining supply and service Exploration activities and investment are companies’ products less competitive with alternatives. on the rise in Ontario, which will In most cases, current mineral deposits have lower grades than ultimately lead to opportunities for in previous decades, so more effort and investment are needed producing mines in future. to extract them from the ground. Once road (or other) infrastructure is A strong environmental movement, promoting mineral established to serve Ring of Fire development consistent with goals of sustainable communities operations, it will serve as a catalyst for and ecological health, also support the exclusion of large areas other investors in mine development and from possible mining development. production. Uncertainty surrounding outcomes of ONTC transformation Growth in mining opportunities presents and how this might affect rail rates and service levels. opportunities for First Nation Changes to Ontario Mining Act and associated modernization communities in terms of connections to programs may result in decrease in exploration activities, power sources, road infrastructure, especially if commodity prices fall. training and job opportunities. Lack of clarity around responsibilities and appropriate Ontario’s mining supply and service sector framework for duty to consult may continue to delay or will continue to benefit from home‐grown significantly reduce mining exploration and development. local growth expected in the mining Investment may increase when clarity is provided to address sector, with potential to capitalize on the the issues. province’s strong mining brand to develop Impact of climate change on shortening the length of winter its export marketing platform. The sector road season will increase production costs. has potential to expand its reach to global Northern Ontario’s mining supply and services sector is markets. vulnerable to competition from larger, lower‐cost and/or more Growing Aboriginal youth demographic sophisticated companies with known supply chain and associated increase in employment management capability, stronger economies of scale and potential better access to financing.
Source: CPCS Research and Analysis, including from Doyletech Corporation, Northern Ontario Mining Supply and Services Study, April 2010.
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4.4 Outlook A summary of the outlook for the mining sector is below.
Metallic Minerals Mining
The outlook for Ontario’s metallic mineral sector is very strong in the short, medium and long term, although there will always be cycles of highs and lows.
Demand for Ontario’s base metals is expected to remain high over the coming decades. Up to three billion more middle‐class consumers will emerge globally in the next 20 to 30 years, driving up demand for all of Ontario’s primary metals, many of which are needed for finished metals and stainless steel used in industrial production (e.g. cars, housing, electricity, appliances, general infrastructure).25 A recent Conference Board of Canada report suggests Northern Ontario’s metals mining GDP will more than double from $791 million in 2011 to $1.8 billion by 2020 (all in 2002 dollar terms).26
Consultations also indicate that the demand for gold is high. The economic driver of gold mining is the price of gold and, given the shortfall of supply versus demand worldwide, mining companies in Northern Ontario anticipate the price to remain strong going forward, with Ontario continuing to be a premier destination for attracting investment capital. Recent large acquisitions of Ontario gold properties indicate that Ontario is still viewed as a good place to invest.
With the establishment of a chromite processing facility (currently planned for Capreol, near Sudbury), Ontario’s production capacity could rival that of the top three global producers, namely South Africa, Kazakhstan and India, making it one of the most important sources of chromium in the world.
Aggregate Mining The outlook for aggregate mining in Northern Ontario is expected to remain steady, with growth in production linked primarily to population change. As noted in Chapter 2, the population of Northern Ontario is projected to be relatively stable over the next 25 years, with only a 0.8% increase overall from 803,900 in 2011 to 810,300 by 2036 (6,500 people). A 2009 report suggests that aggregate production in Northern Ontario will experience a slight decrease in average annual production in Northern Ontario over the next 25 years from about 27.5 million between 2005 ‐ 2009 to 24.3 million tonnes by
25Kharas, Homi. The Emerging Middle Class in Developing Countries, OECD Development Centre Working Paper No. 285, January 2010. The paper defined “middle class” as having daily per capita spending of US$10 to US$100 billion in purchasing power parity terms. 26 Conference Board of Canada, “The Future of Mining in Canada’s North”, January 2013.
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2025‐2029 (a decrease of 11% in total).27 However, we believe with the strong growth in infrastructure which will be required for new mining projects (especially the Ring of Fire), growth will at the very least be flat or slightly positive.
Mining Supply and Service Companies With global demand for minerals continually increasing, the local companies that provide services and goods to mining companies are likely to continue to see steady growth into the future.
Overall Outlook The figure below summarizes the short, medium and long‐term outlook for each of Northern Ontario’s key mining sectors, based directly on our consultations with industry and supported by external research where warranted. Although the outlook for mining appears strong and positive generally, as can be seen from the figure below, it is extremely difficult to forecast the longer term outlook for each sector in the mining sector – particularly for metals mining. Virtually all of the companies consulted were reluctant to provide predictions beyond the short term, and even within the short term, opinions varied considerably. The figure below therefore presents a range of outlooks, where applicable.
Figure 4‐9: Growth Outlook for Northern Ontario Mining Sub‐Sectors
Sub‐Sector Short Term Medium Term Long Term (2012‐2016) (2017‐2026) (2027‐2036) Base metals (copper, nickel, Moderate to High Unknown Unknown zinc) Gold Moderate to High Positive Positive Aggregate Limited to Moderate Limited to Moderate Moderate Mining Supply & Service Moderate to High Moderate Unknown Ring of Fire region High Positive Unknown
27 Altus Group, State of the Aggregate Resource in Ontario Study (SAROS), Paper 1‐ Aggregate Consumption and Demand (Table A.6), December 18, 2009.
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Mining Sector Transportation Overview
4.5 Mining Sector Supply Chain Overview
4.5.1 What Inputs and Outputs Generate Transportation Flows?
Metallic Minerals Supply Chain The supply chain for metallic minerals is relatively straightforward, with five core steps that are more or less similar across metals, as follows28:
Large volumes of inputs (fuel, equipment, supplies and consumables) are transported to a mine site to facilitate extraction of ore and ongoing operations
Ore is mined on site and then transported to a concentrator/mill
Ore is transformed into a concentrate which is transported to a smelter
At a smelter, concentrate is transformed into a matte product, which is then transported to a refinery for final processing into a refined (pure) metal product for sale to market. Smelting activities also produce some by‐products that may be sold directly to market (e.g. sulphuric acid, liquid SO2) or to other processors for onward refining and value extraction. The volumes of product moving between each step decrease significantly along the supply chain; the ore grade (concentration of metal within mined rock) affects the ratio of volumes, but typically less that 5% of the rock first mined on mine site will remain in the refined metal output from a refinery (the percentage varies considerably across individual mines and commodities).
The graphic below illustrates these key steps, as well as the key inputs and outputs that generate transportation flows along each step of the metals mining supply chain.
28 There are some exceptions to this supply chain. For example, not all ore is processed into matte form.
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Figure 4‐10: Metals Mining Sector Supply Chain
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The transportation requirements for key supply chain movements in Northern Ontario are summarised below. Transportation Requirements for Mine Development and Operations New mines are sometimes developed in remote locations some distance away from existing road and rail infrastructure. When this is the case, during the exploration phase, air or winter access by snowmobile are the only viable modes to reach exploration sites. Ground‐based exploration usually follows after a prospective ore body has been indicated through some form of remote sensing, often culminating in low‐level aerial surveys. The first ground personnel arrive by airplanes equipped with floats or skis, and land on the nearest water body. Helicopters will also be used in support of local exploration activities at the site. As the ore site is developed, larger, crude airstrips are bulldozed allowing larger wheel‐equipped aircraft to deliver heavy construction equipment and materials to the site.29
Once a mine site has been deemed worthy of development, road access is always the preferred minimum transportation requirement for sourcing further exploration inputs and mine construction inputs, such as major machinery and equipment. New rail construction is typically not warranted during the mine development phase as construction phase freight volumes are usually not large or regular enough to warrant a rail service. In Northern Ontario, the vast majority of inputs required for operation and production at operating mines are transported to the mine site by truck, with little to no movement by rail. Fuel (diesel) to power machinery, vehicles and diesel generators (as required) is typically transported to mine site from the GTA by truck in Northern Ontario, or in more limited instances by rail. However the airlifting of fuel is also frequently undertaken to remote communities in Northern Ontario, as well as to remote mine sites in many northern Canadian locations. Explosives primarily arrive from outside of Ontario by truck. Construction and maintenance equipment and general goods are typically supplied by local industry suppliers, some of whom will have sourced these outside of the region. General supplies to support site operations are typically consolidated in the Sudbury or Timmins area for transport by truck to each mine site (in the case of base metals). In general for inputs, rail is used in limited instances in the case of base metal mines in the Timmins and Sudbury area where a rail connection is already established. Overall, however, the infrastructure at railheads at mine sites is designed to move ores out, rather than receiving different types of products.
Transportation Requirements for Mine Operations (ore to concentrate) Base metal ore is typically moved from a mine site directly to a nearby concentrator by a short road or rail spur. Larger companies and operations will invest in a rail link connecting their mines to concentrators. Smaller companies with lower volumes may use an existing rail link or
29 It should be noted that aircraft up to the size of the Lockheed Hercules, Boeing 727 and Boeing 737 cargo jets can be operated onto ice strips in mid‐winter.
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trucks to access concentrators. Although volumes are large and heavy, the distance between a mine and a concentrator is typically short (<100 km) so constructing a rail line is not essential for commercial viability. Base metal mill complexes bring in complimentary inputs through a combination of rail and truck services, depending on whether rail access is available. Where rail access is available, chemicals and bulk products are typically transported by rail. Even when a mill site is rail accessible, it is not often equipped to handle multiple forms of freight, given its core purpose is the movement of ores (in) and concentrates (out). Overall, Mining equipment moving ore inside open pit mine. Source: istock truck is used for most inputs, including for fuel and for irregular deliveries, such as machinery, equipment, supplies, grinding media, etc. In Northern Ontario, ore mined from the base metal mines in the Sudbury and Timmins area is processed primarily at the major concentrator facilities in the area, notably: Xstrata’s Strathcona Mill in Levack (near Sudbury), Xstrata’s Kidd Creek Mine Concentrator (near Timmins), and Vale’s Clarabelle Mill, part of the Copper Cliff Complex in Sudbury. These facilities process ore from their respective company’s mines as well as ore from other junior mining companies in the area. For example, nickel from Prophecy Platinum’s (formerly Ursa Major Minerals Inc) Shakespeare mine is processed at Xstrata’s Strathcona Mill.30
In contrast to base metals, gold mines typically involve far more value‐added activities taking place at the mine site. This includes construction of the mine, mill and value‐added processing activities. The output of most gold mine sites is small volumes of high‐value gold bars in the 90‐92% gold range, which are either driven or flown to one of three refineries for final refining into pure gold: the Royal Canadian Mint facilities in Ottawa or Winnipeg, or the Johnson Matthey facility in Brampton. There are no major bulk outputs warranting a rail service, and constructing a new rail service is typically not required.
30 http://www.prophecyplat.com/project_shakespeare.php
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Movement of Metallic Mineral Outputs by Marine Mode
Very few base metal (and no gold) outputs originating in Northern Ontario currently move by marine mode. The rail mode is preferred for shipping over long distances, in large part due to the fact that most base metal activity occurs around Sudbury where there is easily accessible rail access and no immediate deep water port access. In addition, the Seaway is closed for 3 months of the year, making it much less attractive for year‐round operations.
It may be premature to fully discount the use of vessels to service some sites in the Ring of Fire region, but this is not the option currently envisaged by Cliffs Natural Resources. In general, there are a number of barriers to movement of ore and concentrates to international markets through James Bay / Hudson Bay. First, there is a relatively short ice‐free season to ship to international markets by vessel (2 – 4 months). Although global warming is lengthening this season, an all‐season option is typically preferred by shippers. The season could possibly be lengthened by using ice‐class vessels, but this is a very costly option, especially for very large bulk vessels. Second, water levels in James Bay are quite low and may not be able to accommodate the large vessels typically associated with movement of high‐volume, low‐ value products such as unprocessed ore. Third, there is currently limited transportation infrastructure to move products from mine sites to port facilities and no port facilities in the Far North which could handle larger vessels. Churchill (in Manitoba) is the only deepwater port in the Canadian Arctic, and is not able to handle the larger iron ore vessels used by major producers worldwide. Land transportation (by rail) to arctic ports is also challenged by warming climates.
Transportation for Smelting and Refining Activities (concentrate to matte and refined product) Smelters and refineries are extremely costly and capital‐intensive facilities to build, operate and maintain, with a very long lifespan (notably long in contrast to typical mine life). Given these factors, both types of facility are built in areas strategically located close to multiple rich mining deposits (e.g. Sudbury); close to the final market for refined product; and/or near transportation hubs. Concentrates are regularly shipped internationally over very long distances to reach smelter facilities, with the exception of gold mining (as noted above). The supply chain for mineral concentrates usually involves the shipment of daily concentrate production from mills to consuming smelters. Mines typically do not have large capacities to store their concentrates and hence the operation of regular and efficient rail service is critical to the operation of every mine. Trucking is not economical (too costly) unless the volumes are very small and the smelter or refinery is nearby. It is also less safe due to the large number of trucks which would need to ply the roads in order to carry the same volumes of concentrate as compared to rail.
There are also seasonal constraints to the use of trucks to transport concentrates in winter (zinc, copper, nickel, etc.) as the residual moisture in concentrates will cause the concentrate to freeze, and that can pose significant problems for the unloading/dumping of trucks. Railcars, on the other hand, are traditionally placed in thaw sheds upon delivery to smelters, where the concentrate is thawed in the railcar prior to unloading. These huge sheds hold dozens of railcars at a time. They are heated to 140 degrees Fahrenheit, and the railcars will sit there for between 24 hours and five days at a time until they thaw. The option of using trucks is
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therefore not commercially viable in winter as truck owners would not likely be willing to allow their assets to sit idle while the product thaws.
The base metal smelters and refinery facilities in Northern Ontario are described below. We provide the information to illustrate the complexity of the movement of mining concentrates and mattes on a regional and international scale.
Vale’s Copper Cliff Complex in Sudbury includes a smelter and refinery. The smelter processes nickel/copper concentrates from the company’s nearby Clarabelle Mill (connected by slurry pipeline), as well as concentrates from a number of other mining companies active in the region and elsewhere in Canada. For example, Vale ships in concentrate from its operations in Voisey’s Bay, Labrador. The matte is processed at the company’s nearby smelter.
Xstrata Nickel’s Sudbury Smelter (in Falconbridge) smelts nickel‐copper concentrates received from three primary sources: Xstrata Nickel’s operations in Sudbury (received by truck from local sources), Xstrata’s Raglan operations in remote Northern Quebec (received through a combination of marine and rail)31, and Xstrata Nickel Australasia, in Perth, Australia (received through combination of marine, rail and truck). The smelter also processes concentrates from a number of smaller mining companies in the region (received by truck). Matte from the smelter is sent by rail to port facilities in Quebec City, then shipped overseas to Nikkelverk in Norway for refining into pure metals.32
Xstrata also owns the Horne copper smelter across the provincial border in Rouyn‐ Noranda, Quebec. This facility processes copper concentrate from Xstrata’s Kidd Creek copper‐zinc‐silver deposit in Timmins, as well as some copper concentrate from Vale’s Sudbury operations and Xstrata Nickel’s Strathcona Mill in Sudbury, in addition to copper and precious metal bearing materials from many other North American producers. The 99.1% copper anode (output) is shipped to Xstrata Copper’s Canadian Copper Refinery in Montreal for final refining by rail (using CN and also smaller volumes by truck).33
Zinc concentrates from Xstrata’s Kidd Creek mine/mill are transported to its partially owned‐CEZ zinc smelter and refinery facility in Salaberry‐de‐Valleyfield, Quebec (near Montreal). This movement is done by rail (using Ontario Northland and other railways).
Transportation Requirements for Labour Traditionally employees have arrived primarily by road to mine sites, or in the case of very remote sites, by air. For example, Musselwhite Mine (about 480 km north of Thunder Bay)
31 http://www.xstratanickel.com/EN/Operations/Pages/Raglan.aspx 32 www.xstratanickelsudbury.ca 33 www.xstratacopper.com
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flies its employees in and out of the mine site, from Thunder Bay, Pickle Lake, Sioux Lookout, and a range of small communities via air charter and a private aircraft it owns. There has been a major trend over the last 10 years for large mining and energy companies to increasingly fly personnel into mine sites directly from southern points of Canada (e.g. Xstrata operates two B737s from Montreal, Toronto and Quebec City to its Raglan mine in Northern Quebec). This is attractive to labour as it allows workers to live in larger cities and towns and commute to work in the remote sites. It also typically attracts a larger pool of highly skilled labour. It is attractive to companies because by constructing more capable mine aerodromes, either gravel or asphalt‐surfaced, companies dramatically lower seat‐kilometer transportation costs and reduce the travel time penalties they incur with a large labour force. The Ring of Fire mine sites are expected to be fly in/fly out operations for personnel in perpetuity. For non‐remote mine sites, concentrators, smelting or refining facilities located closer to communities, employees use their own personal vehicles to get to work. This is the case for the majority of base metal mines located in the Timmins and Sudbury areas.
Non‐Metallic Minerals Supply Chain Aggregate
The majority of aggregate (about 90%) moves by road in heavy transport trucks from pits and quarries to ready mix plants or job sites, typically located within 100 km distance. About 10% of regional production is loaded on marine vessels from ports in the region for movement beyond the region via the Great Lakes. Some aggregate products (half a million tonnes in 2010) were unloaded at ports in Northern Ontario in 2010, primarily consisting of input products for regional concrete ready Truck Unloading Grading. Source: istock.com mix plants and for local construction including limestone, hydraulic cements, and silica sands and quartz.34 The key ports handling aggregate are located in Sault Ste. Marie, Thunder Bay, Spragge, Little Current, Whitefish River, Marathon, Badgeley Island and Meldrum Bay. Aggregates are also moved in small volumes by barge on the river systems in the Arctic and also on Hudson’s Bay and James Bay. Our consultations did not indicate any port capacity issues in Northern Ontario related to the handling of aggregate.
34 Ports information is derived from the Statistics Canada “Shipping in Canada” Database for 2010.
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The only aggregate moves being done by rail mode at this time are limited moves of cement to ready mix plants in Northern Ontario from outside of the region, and small volumes of aggregate used by railways as ballast35 as part of track maintenance.
Consultations with the Ontario Stone Sand and Gravel Association and additional research support the finding that it does not currently make economic sense to increase the distances over which aggregates are hauled by road. A significant shift to increased use of the rail and marine mode is problematic for a number of reasons (see text box below). Given the very strong market forces encouraging close‐to‐market supply, it seems unlikely that any significant shift away from short‐haul trucking of aggregates or any significant increase in movement by marine mode will take place in the next 20 to 30 years.
35 Rail ballast consists of the rock and gravel upon which railway sleepers and ties are laid to make track. This is used in construction of any new railway line and must also be replaced periodically along existing tracks.
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Aggregate Transportation – Potential for Longer Distance Hauls?
A report prepared for the Ministry of Natural Resources in December 2009 evaluated the feasibility of longer distance transportation approaches to supply aggregate to the Greater Toronto Area – an area which represents approximately one‐third of Ontario’s aggregate demand. The analysis confirmed there would be significant negative economic, environmental and social implications of shifting away from the close to market policy, as follows:
Delivery cost to move aggregate over longer distances would more than double compared to existing close to market scenarios. Scenarios calculated the transportation cost per tonne for long‐haul trucking from North Bay to GTA as four times as expensive; marine transportation from Manitoulin Island to a job site in the GTA (including supplemental rail from dock to GTA) would be three times as expensive; and rail from North Bay twice as expensive.
Additional greenhouse gases would be emitted due to the long distance transportation hauling requirements (and associated burning of diesel). Although railcars and vessels present lower GHG intensities per km than trucks, the overall efficiencies of scenarios using these transport modes are decreased due to the necessity of additional truck transport at both ends of the transport supply chain.
Social impacts of aggregate extraction would increase. At the extraction site, there would likely be lower social impacts as sites would be more remote and further away from communities. However, due to the long distances travelled, social impacts would be higher overall because of the number of people affected along transportation routes.
An added complication of the marine option is the reality that the Seaway is closed for about 3 months over the winter, preventing shipments of aggregate from Northern Ontario to the GTA. Despite the decline in aggregate demand over winter months, a considerable stockpile of aggregates would need to be accumulated at destination ports over the shipping season. The challenge then becomes identifying adequate storage space. Storage space is often limited at construction job sites, so stockpiles would likely be needed at receiving ports. The Port of Toronto has capacity issues which would need to be overcome for this to be a feasible option.
Source: CPCS Consultation with the Ontario Stone Sand and Gravel Association, and Report: MHBC Planning, “State of the Aggregate Resource in Ontario Study: Future Aggregate Availability & Alternatives Analysis”, December 2009. Prepared for the Ministry of Natural Resources.
In the aggregate sector, all employees use the road network to travel to work.
Diamonds Given the very high value and low volume inputs and outputs from diamond mines, a combination of air and road modes is used for freight. The DeBeers Victor mine near Attawapiskat is very remote, with land connections limited to a winter road; airplanes are therefore used for the majority of inputs and outputs. Fly in/fly out charters are used with connections from nearby First Nation communities or smaller towns that are used as staging sites.
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Sulphuric Acid One of the by‐products of the base metal smelting process is sulphur dioxide (SO2), which is cooled, cleaned, compressed and converted to liquid sulphuric acid and liquid SO2 for sale to market. Sulphuric acid is considered a “dangerous product” under the federal Transportation of Dangerous Goods Act, 1992, and carriers must comply with specific safety and security procedures set out in the associated regulations. The vast majority of sulphuric acid moving from Northern Ontario’s two smelters in Sudbury (Vale and Xstrata Nickel) and the nearby smelter in Rouyn‐Noranda, Quebec (Xstrata Copper), moves by rail and the remainder moves by road. The supply chain for sulphuric acid is straightforward insofar as sulphuric acid is shipped directly from the manufacturing producer (smelter) to the consumer; this is often done over very long distances, with 85% of production from Northern Ontario and Quebec delivered to consumers in the U.S. with average length of haul greater than 1,500 km.
Mining Service and Supply Sector Supply Chain We cover the supply chain of the mining service and supply sector in the manufacturing chapter (Chapter 7), as the supply chain components are very comparable. Furthermore, from the freight flow data available there is no way to distinguish manufacturing and machinery supplies which are destined exclusively to the mining sector, as opposed to those destined for other sectors (forestry, general manufacturing, etc.).
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4.6 Northern Ontario Supply Chain Mapping
4.6.1 Current Commodity Flows In this section we illustrate current traffic (freight) flows associated with the mining sector along the transportation network in Northern Ontario by mining sector stakeholders. Figure 4‐11 (map) below illustrates the key flows of traffic in the mining sector in Northern Ontario.
Road traffic flows are based on MTO Commercial Vehicle Survey daily truck trips for 2011, with trucks carrying the following commodities:36
Metals: base metals and articles of base metal; and aluminum, alumina and bauxite.
Minerals: cement and non‐metallic mineral products; iron ore and concentrates; and minerals, ores and concentrates. Rail flows are based on 2011 data received through consultations for movements which originate, end or both begin and end in Northern Ontario. Information was received directly from CN, CP, OVR, ONTC and Huron Central Railway. The thickness of the rail traffic represents approximate tonnage only, as exact volumes are considered confidential by rail companies. The rail volumes have been presented such that they are comparable from a visual perspective to flows moving by truck.
The marine (port) volumes are based on annual volumes from the 201037 Statistics Canada “Shipping in Canada” database, for the following commodities: minerals, coal and non‐ agglomerated bituminous coal (loaded only)38, silica sands and quartz sand for construction use, other limestone including powdered chalk, other gravel and crushed stone, dolomite, hydraulic cements, and slag, ash and residues.
Air cargo volumes are not illustrated in the figure, as air cargo traffic statistics are not captured by government regulators at smaller airports, and cargo reported by major carriers at the larger airports includes a broad variety of commodities and routings, some pertinent to mining, and many unrelated to mining. Small air carriers are very reluctant to provide accurate cargo movement statistics as their market is local, vulnerable and very competitive. In general, cargo is typically transported by road as close as possible to the airport nearest to the mine site and then flown to mine sites where necessary.
36 Based on MTO Commercial Vehicle Survey Categories for 2011. 37 At the time of preparing the Draft Final Report (autumn 2012), ports statistics from Shipping in Canada for 2011 were not available. 38 The unloaded coal and non‐agglomerated bituminous coal at ports in Northern Ontario is concentrated in Sault Ste. Marie and is associated with the manufacturing of steel. Such volumes are therefore included in the Manufacturing Sector chapter 7.
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Figure 4‐11: Transportation Flows, Mining Sector
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The key points to note from the flow map above are the following:
Marine Flows Significant mining‐related commodities are moved by marine mode. Key flows are as follows, by port:
Thunder Bay: Over 1 million tonnes of coal is loaded at Thunder Bay. This is transported by rail to the port from the prairies and loaded on vessels from Thunder Bay to destinations outside of Northern Ontario. Technically, this is a product simply flowing through Northern Ontario.
Meldrum Bay on Manitoulin is an important aggregate port, loading 3.3 million tonnes of minerals, gravel, stone and limestone on vessels to areas outside Northern Ontario. Lafarge has a large operation in Meldrum Bay.
Whitefish River and Spragge are each home to a Lafarge slag and blending plant, likely accounting for the majority of volumes being loaded and unloaded.
Just over half a million tonnes of aggregate products are handled through the port of Sault Ste. Marie, where Lafarge also has a ready mix plant.
There are a number of ports where smaller volumes of primarily aggregate are handled – Badgeley Island, Little Current, Marathon and Parry Sound.
There are a number of smaller, private ports located across the Great Lakes serving private aggregate companies, although volumes are relatively small. Notable facilities (volumes unknown) include a port serving Ontario Trap Rock near Bruce Mines, a port in Thessalon serving the Maple Ridge Aggregate facilities just west of Thessalon, and a Lafarge cement terminal at Heron Bay.
Rail Flows Significant volumes of mining (metals) are moved by rail across Northern Ontario, particularly in the corridor between Timmins, North Bay, Sudbury and Southern Ontario. The flows include concentrates and mattes moving to and from the smelters and refineries in and beyond the region.
Road flows Sudbury and Timmins have the largest concentration of mines. However, from a transportation perspective the largest flows of truck volumes are around the Sudbury area. This can partly be explained by the fact that gold mines (largely located outside of Sudbury) are more self‐contained than base metal mines, with more processing activities taking place at the individual mine site; in contrast, base metal mining (concentrated around
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Sudbury) typically involves more movement of intermediate products between mine sites, concentrators, and – as applicable – smelters. An inset map of Sudbury is presented below.
Commodity flow volumes (truck traffic) are heaviest around the Sudbury area, and between Sudbury and Southern Ontario, and North Bay and Southern Ontario.
There are significant flows (in the order of 40 trucks daily) on the corridor between Sault Ste. Marie and Sudbury. This is likely associated with the transportation of metals from the steel manufacturing industry in the region.
While some products move to and from the U.S., notably via the Sault Ste. Marie and Pigeon River border crossings, these are dwarfed by flows along the busiest corridor between Sudbury / North Bay and Southern Ontario.
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Figure 4‐12: Transportation Flows, Mining Sector, Sudbury Area (Inset of Figure 4‐11)
Origin and Destination of Truck Traffic The graphic below shows the origins and destinations of the 624 daily mining sector truck trips that take place in Northern Ontario.
Nearly half (297) of all trips take place within Northern Ontario. Of the 119 daily trucks which originate from Northern Ontario, 64% are destined to Southern Ontario and 15% to Central U.S. (primarily Michigan). Of the 207 daily truck trips destined to Northern Ontario, over half originate from Southern Ontario.
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Figure 4‐13: Origin and Destination of Daily Mining Truck Traffic in Northern Ontario (excludes flow‐through traffic)
700 Origin of Products Destined to Northern Ontario
10% Atlantic Provinces 600 Central Canada Central USA 17% North East USA Quebec 207 52% 500 1% South East USA Southern Ontario 14% Western Canada Western USA 6% 400
1% 0% 0% 300 Destination Outside of Northern Ontario
297 8% Atlantic Provinces Central Canada 15% 200 Central USA North East USA 2% Quebec South East USA
Daily Truck Trips with Start and/or End in Northern Ontario with and/or End Start Trips Daily Truck 8% Southern Ontario 100 64% Western Canada 2% 119 Western USA
0
Originating in Northern Ontario Within Northern Ontario Destined to Northern Ontario
More detailed breakdowns of the volumes of truck traffic by commodity and by region, are presented in Figure 4‐14 and Figure 4‐15. These figures illustrate what commodities are moving along the primary corridors to and from Northern Ontario.
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Figure 4‐14: Daily Truck Trips Destined to Northern Ontario, by Origin of Commodity, Mining Sector Region / Commodity Aluminium, Base metals Cement and Iron ore and Minerals, ores alumina, and articles non‐metallic concentrates and bauxite of base mineral concentrates metal products Central Canada 7 4 1 9 Central U.S. 2 12 16 2 3 Northeast U.S. 3 Quebec 11 2 2 13 Southeast U.S. 2 2 3 5 Southern Ontario 4 38 40 26 Western Canada 1 Western U.S. 0.2 Sub‐total by Commodity 8 74 65 5 56 Commodity as % of Total 4% 36% 31% 2% 27% Traffic
Figure 4‐15: Daily Truck Trips Originated in Northern Ontario, by Destination of Commodity, Mining Sector Region / Commodity Base metals and Cement and non‐ Iron ore and Minerals, ores articles of base metallic mineral concentrates and concentrates metal products Atlantic Provinces 0.5 Central Canada 2 0.2 2 4 Central U.S. 16 0.4 1 Northeast U.S. 2 0.6 Quebec 7 0.2 3 Southeast U.S. 2 0.5 Southern Ontario 39 13 4 20 Western Canada 0.3 Western U.S. 1 Sub‐Total by Commodity 70 15 6 29 Commodity as % of Total 58% 13% 5% 24% Traffic
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4.6.2 Future Commodity Flows In this section we discuss the future use of the transportation network for the mining sector. We look at a snapshot in 2026, based on the projected outlook of the mining sector in Northern Ontario.39
Before illustrating the changes in traffic volumes on the transportation network, we first discuss three sets of supplementary information which affect future use of the system: anticipated industry changes (including Ring of Fire), specific impacts on the air sector, and the drivers of forecast estimates for truck traffic flows.
Anticipated Industry Changes The base and precious metals mining sector is in a period of expansion in Northern Ontario, with nearly two dozen mine development projects in advanced stages of development and expected to begin production in the next five years or so. Some of these projects are not expected to have any significant impact on the transportation network, while others will require significant transportation infrastructure investment. In the figure below, we list the 22 projects at an advanced stage of development, based on data available as of December 2012. We have included a summary of estimated transportation requirements which is based on consultations and industry research, and should be taken as an estimate of impact only. Major changes to transportation flows are presented in Figure 4‐18.
39 These timeframes were chosen to correspond with the MTO Commercial Vehicle Survey forecast timeframe of 2026.
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Figure 4‐16: CPCS Estimate of Transportation Impacts from Mining Projects Due to Come Onstream in Next 5‐10 Years (Information as of December 2012) Project Name Region Commodity Project Status Estimated Transportation Impacts (Company) (next 5 – 10 years)
Timmins West Mine Timmins Gold Exploration phase of two mine Not known, but expected existing Bell Creek Mill will (Lakeshore Gold sites adjacent to existing be used for refining, with existing road transportation Corp) operating mine, Timmins West, in Timmins area used to move inputs/outputs. which started production in www.lsgold.com January 2012.
Bending Lake Iron / Bending Iron ore Mature exploration phase. Volumes unknown, but iron ore mines typically Josephine Cone Lake (38 Environmental Assessment generate very large volumes of low value ore which Mine (Bending Lake km west of process underway. Permits still will require rail and/or marine transport, using the iron Group) Ignace) to be obtained. Subject to Port of Thunder Bay. The project site is located on receipt of permits, production Highway 622, and within 50 km of CN Rail mainline. targeted for 2016. www.bendinglakeiron.com
Cochenour Red Lake Gold Production expected 2015 Transport expected to be by existing road between (Goldcorp Inc) Vermillion Bay and Red Lake (Highway 105). In combination with Phoenix Gold and Madsen projects also in development, would involve significant increase in truck traffic. www.goldcorp.com
Cote Gold / Chester Between Gold Construction expected for Anticipated impacts not known, but mine site is Project (Iamgold Sudbury 2015 (subject to pre‐feasibility/ already located close to Highway 144, within 25 km of (formerly Trelawney and permitting) existing CN Rail siding in Gogama and 70 km to CP rail Mining & Timmins crossing. www.iamgold.com Exploration))
Detour Lake (Detour 150 km NE Gold Production started in spring Will be largest gold mine in Canada, with notable Gold) of 2013. Mine life of 20 years. impact on truck volumes in Detour Lake‐Cochrane Cochrane corridor (Local Road 652). Consultation suggests approximately 17 trucks/day to/from the site in peak production. www.detourgold.com
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Project Name Region Commodity Project Status Estimated Transportation Impacts (Company) (next 5 – 10 years)
Eagle’s Nest Ring of Nickel, Feasibility Study completed Expected to use the infrastructure developed for the (Noront Resources) Fire Copper, September 2012. Provincial Cliffs Natural Resources project which is larger and PGMs and federal Environmental expected to come on‐stream in 2016. Assessments underway. www.norontresources.com Estimated production 2016.
Errington‐Vermillion Sudbury Zinc, Pre‐feasibility Study Stage. Expected to use existing transportation network, with Project (Xstrata Copper, 2015 is potential start‐up year. concentrate moved primarily by rail towards southern Zinc) Lead Ontario/Quebec/Eastern Canada, with some products moving by rail or truck to Rouyn‐Noranda, QC. www.xstratazinc.com
Fraser Morgan Sudbury Nickel Production expected in 2013. Expected that existing transportation network will be (Xstrata Nickel) used, including nickel smelter in Sudbury. www.xstratanickel.com
Goliath Gold Project Dryden Gold Preliminary Economic Not known, but expectation is that Trans‐Canada (Treasury Metals Assessment completed in Highway will be used as mine site is located very Inc) 2012. Environmental Baseline close to Trans‐Canada ( Highway 17). studies ongoing. www.treasurymetals.com
Hammond Reef 30 km Gold Federal Environmental Not known. Mine site is 30 km from Atikokan and (Osisko Mining north of Assessment underway. Subject highway access. www.osisko.com Corp) Atikokan to permitting approvals, production could start in 2016.
Hollinger and Hoyle Timmins Gold Production from Hollinger No major change, as volumes from Hollinger/Hoyle Pond Mines anticipated for 2013.Hoyle (combined) will replace volume from closure of Dome (Goldcorp Inc) Pond being expanded. Mine. Ore will be transported by new road from Hollinger to Dome Mill (5 km distance). www.porcupinegoldmines.ca
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Project Name Region Commodity Project Status Estimated Transportation Impacts (Company) (next 5 – 10 years)
Kirkland Lake Kirkland Gold Studies ongoing. Project will access existing mill facility and use Project (Queenston Lake existing road network (in Kirkland Lake area). Mining – currently www.queenston.ca being taken over by Osisko Mining)
Madsen (Claude Red Lake Gold Studies ongoing. Accessible by all‐weather road, with mill on‐site. Resources Inc) Combined with Cochenour and Pheonix projects also under development, could increase volumes on Highway 105 from Red Lake to Vermillion Bay significantly. www.clauderesources.com
Marathon PGM‐Cu Marathon PGMs, Provincial and federal Located near existing road (Highway 17) and rail (CP) Project (Stillwater Copper Environmental Assessments network near town of Marathon. Transport volumes Canada Inc) underway. unknown. Ore to be processed (crushed, ground, concentrated) on‐site. Transport mode to Company’s project website smelter/refinery not yet confirmed. estimates commercial production to begin in 2015. www.stillwatercanadainc.com
McFauld Lake / Ring of Chromite Feasibility Study stage, New infrastructure required, as per text box below. Black Thor Chromite Fire undergoing federal and Cliffs estimates between 50‐100 trucks/day on new Project (Cliffs provincial Environmental all‐weather road between Ring of Fire and Nakina, Natural Resources) Assessment. Permitting and and between 3,000‐4,000 tonnes/day on rail from approvals still to be Nakina to Capreol (north of Sudbury). determined. Estimated start www.cliffsnaturalresources.com date 2016.
McGarry Mine Kirkland Gold Fully permitted with most Limited transportation impacts as mine is adjacent to (Armistice Lake infrastructure in place. former producing site and located within short Resources Corp) Production began in 2012, distance of Highway 66. Road expected to be increasing gradually in 2013 to transport mode for inputs and outputs. 350‐400 tons ore/day. www.armistice.ca
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Project Name Region Commodity Project Status Estimated Transportation Impacts (Company) (next 5 – 10 years)
Mishi (Wesdome Near Gold Production started in 2012. Expected to use existing road and infrastructure Gold Mines Ltd) Wawa network, including Eagle River Mill 2 km away, which is already used for company’s nearby Eagle River gold mine. www.wesdome.com
Phoenix Red Lake Gold Production expected 2013/14. Combined with Cochenour and Madsen Projects also Gold/McFinley under development, could increase volumes on road (Rubicon Minerals from Red Lake to Vermillion Bay significantly. Corp Inc) www.rubiconminerals.com
Rainy River (Rainy 65 km Gold Advanced exploration stage. Minimum new infrastructure anticipated. Site is River Resources west of within 500 metres of all‐weather Highway 600. CN Inc.) Fort Rail access within 25 km of mine site. Frances www.rainyriverresources.com
Totten (Vale) Sudbury Copper/Nic Production expected to Mine is already connected to transportation network. kel and commence in 2014. Not yet determined whether road or rail will be used. some www.vale.com precious metals
Victoria Project Sudbury Copper Engineering and permitting Limited incremental impacts as on existing (KGHM) processes underway. transportation network, as increased volumes from Victoria mine will replace decrease in volumes from nearby Podolsky mine which is closing down. www.quadrafnx.com
Young‐Davidson Southeast Gold Commercial production started Located on site of two past‐producing mines. (AuRico Gold Inc) of in 2012. Expected that existing road infrastructure will be Timmins used. www.auricogold.com
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Ring of Fire – Integrated Transport System
The Ring of Fire area is remote, with no power, road or rail access. In order to develop its mines and bring product to market, Cliffs is proposing an “Integrated Transportation System” (ITS) for movement of products and people to and from its Black Thor deposit in the McFauld Lakes area in the Ring of Fire region. The ITS consists of the following infrastructure: An all‐weather airstrip will be constructed adjacent to the mine to support construction of the mine and the all‐weather access road, as well as to provide long‐term access to the mine during operations.
An all‐weather access road will be constructed linking the mine to CN Rail’s mainline just west of Nakina, including approximately 260 km of new road, coupled with 60 km of upgrades to Anaconda Road, and approximately 20 km of upgrades to Highway 643. Cliffs intends to derive the aggregate for the road from local sources within proximity of the road, to the extent practical. Cliffs has submitted a number of applications for aggregate permits to the Ministry of Natural Resources, pursuant to the Aggregate Resources Act.
A new transload facility located adjacent to CN’s existing Cavell Rail siding to transfer concentrate from haul trucks to rail cars.
During the operation of the project, the ITS will be used to facilitate movement of approximately 1.3 to 2.3 million tonnes of chromite concentrate per year from the mine to CN’s existing rail network to the south. In addition, an estimated 100,000 tonnes of consumables and supplies (including fuel, food, explosives, lubricants and chemicals) will be transported to the mine annually. Each truck leaving the site will carry approximately 70 tonnes from the mine site to the transload facility west of Nakina. At full production, there will be 50‐100 trucks of concentrate leaving the mine site each day to the Nakina transload facility, and returning empty. From the transload facility at Nakina, concentrate would be transferred to railcars and transported to the Ferrochrome Processing Facility to be constructed near Capreol (outside Sudbury), or shipped to world markets directly by rail and marine mode. Of the maximum estimated 2.3 million tonnes of concentrate produced annually, the Capreol facility will process approximately 3,000 to 4,000 tonnes of concentrate daily (1‐1.5 million tonnes annually) to produce 1,250 to 1,750 tonnes of ferrochrome daily (450,000‐640,000 tonnes annually). The Ontario Ministry of Northern Development and Mines advised Noront Resources in August 2012 that the province intends to contribute financially to the development of Cliffs’ proposed all‐season road, subject to various environmental, regulatory and financial approvals. MNDM stated that the road “would be made available for use by industrial users other than Cliffs, with access fees generally based on proportional road usage” (Noront Resources, News Release: “Noront Releases Positive Feasibility Study for Eagle’s Nest Project”, Sept. 4, 2012). It is not yet clear whether the road will be open for public (non‐industrial) users.
Sources: Cliffs Natural Resources Inc., “Cliffs Chromite Project; Project Description Summary, Update #1”, pages 15 and 18. October 2011. Cliffs Ferroalloys, “Cliffs Chromite Project Environmental Assessment: Terms of Reference for Cliffs Chromite Project Individual Environmental Assessment”. July 2012. Chapter 5.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Impacts of Mining Growth on Air Sector Growth in the mining sector – particularly in the Far North – is expected to have a very large impact on the air industry in Northern Ontario.
The airline industry catering to Northern Ontario can be broken into first, second and third‐ tier carriers. The most significant impacts of growth in mining activities will be experienced by Canada’s charter air carriers, especially those capable of operating cargo and passenger services into remote areas. With the growth in mining in remote areas, third‐tier air carriers such as Bearskin Airlines, Wasaya Airlines and possibly Air Creebec will likely experience significant growth on certain routes depending on how individual mine companies choose to move their materiel to and from the various sites. Second‐level carriers such as Air Canada Jazz and WestJet’s new Encore regional airline may expect to capture passenger traffic moving to regional staging points such as Thunder Bay. First‐level carriers such as WestJet and Air Canada will only experience mine‐related traffic growth on their longer haul services, such as by transporting workers from other regions of Canada or abroad, into Thunder Bay or possibly Sudbury.
The key airports closest to the Ring of Fire and therefore the most likely to see expanded air cargo activity are Pickle Lake, Nakina and to a lesser extent Thunder Bay. The Municipality of Greenstone is currently undertaking a study of the economic opportunities available to the airports in their region from the Ring of Fire mine area, and specifically for Nakina Airport. The results should be known in the spring of 2013. Mine sites near the six First Nation communities will likely see expanded activity, especially Marten Falls and Webequie which are located at the end of the winter road system nearest to the Ring of Fire sites.
It is interesting to note that aircraft movements at Pickle Lake Airport have increased from 16,898 in 2007 to 22,522 in 2011 according to Statistics Canada reports, while movements at Nakina Airport have decreased from 5,641 in 2007 to 5,160 in 2011.40 Aircraft movements include many components and activities, but the reported statistics support the observation from consultations that the Nakina Airport has operational limitations with respect to supporting Ring of Fire development. Of note, Pickle Lake runway is 4,900 ft long, enabling larger planes (and heavier loads) to take off as compared to Nakina’s 3,500 ft runway.
Forecast Estimates for Truck Traffic CVS Data The average growth in truck traffic for mining products between 2011 and 2026 is summarized in Figure 4‐17 . The figure shows the average growth by sub‐sector based on MTO’s Commercial Vehicle Survey forecasts, with comments from the CPCS team in the final column. The methodology used by MTO to estimate growth is presented in Appendix D.
40 Statistics Canada, CANSIM Table 401‐0037, Aircraft movement statistics.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐17: Current and Forecast Mining Sector Daily Truck Trips, By Commodity, 2011 and 2026
2011 2026 Growth Key drivers of change in CVS Forecast CPCS Comment on Change between 2011‐ Commodity Trips Fore between (2011‐2026) 2026 cast 2011‐ Trips 2026 Aluminium, Largest increases due to 75% increase in No comment. Volumes remain relatively traffic from Southern Ontario and small. alumina, 8 14 71% Southeast U.S. to Northern Ontario (5 bauxite trips/day to 9 trips/day) 80% increase in shipments within Refers to nickel, zinc, copper and other Northern Ontario (39 trips/day to 70 base metals. Growth at this level would trips/day) require consistently high commodity Base metals 50% increase in trips from Southern prices. It is impossible to predict and articles 182 314 73% Ontario to Northern Ontario (38 whether or not this will happen. of base metal trips/day to 56 trips/day) 90% increase in traffic from Northern Ontario to Southern Ontario (39 trips/day to 75 trips/day) Primarily driven by traffic moving to and This sub‐sector primarily reflects the within Northern Ontario: aggregate sector. Overall, growth of 40% 37% increase in trips within Northern seems optimistic. While growth is Cement and Ontario (76 trips/day to 104 trips/day) anticipated in order to accommodate non‐metallic 39% increase in trips from Southern new mining projects – including for the 155 218 40% mineral Ontario to Northern Ontario (40 Ring of Fire – we believe 40% growth is high by 2026. products trips/day to 55 trips/day) 51% increase in trips from Central U.S. Consultations indicate aggregate growth to Northern Ontario (16 trips/day to 24 closer to 7% in medium term. trips/day)
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
2011 2026 Growth Key drivers of change in CVS Forecast CPCS Comment on Change between 2011‐ Commodity Trips Fore between (2011‐2026) 2026 cast 2011‐ Trips 2026 Over 200% growth expected for all Growth at this level would require opening movements, with dominant moves as of at least one of the iron ore mines follows: currently in development phase, the most Iron ore and Moves within Northern Ontario increase advanced of which is Bending Lake Iron 28 91 229% concentrates from 17 trips/day to 56 trips/day Group Limited’s property which may go Moves from Northern Ontario to into production in 2016. Southern Ontario increase from 4 to 13 trips/day Largest driver is 84% growth in trips Somewhat optimistic, but possible. With within Northern Ontario, from 165 to many new mining projects expected to 304 trips/day come on‐stream in the next 5‐10 years, Minerals, 68% increase in moves from Southern including Ring of Fire developments, strong ores and 250 460 84% Ontario to Northern Ontario (26 growth is expected. Levels this high will be concentrates trips/day to 43 trips/day) based on strong commodity prices for base 94% increase in trips from Quebec to metals. Northern Ontario (13 to 26 trips/day) Overall, growth seems realistic (if a little optimistic) considering strong new growth Total 624 1,097 76% in traditional mining regions, and expected growth from Ring of Fire area.
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The map below illustrates the forecast growth in truck traffic, based on MTO forecasts. Flows in red are illustrative and reflect CPCS estimates of the most significant new traffic flows that may affect the mining sector in the coming 5‐10 years from specific projects. The four surface transportation growth areas are associated with growth in gold mining in Red Lakes (affecting traffic on highway 105), new iron ore production from Bending Lake Iron (resulting in additional road and/or rail and marine traffic around Thunder Bay), significant new flows by road and rail from the Ring of Fire as far as the anticipated chromite processing facility in Capreol, and higher truck traffic levels associated with production at the new Detour Lake Gold project (secondary highway 652). Increased air mode use would start from Southern Ontario, using airports at Thunder Bay and Sudbury as launching points for flights further north.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
Figure 4‐18: Current and Forecast Transportation Flows, Mining Sector
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 4 | Mining Sector
4.7 Transportation Needs Identified by Stakeholders Significant growth in the mining sector is expected to generate an associated need for new and improved infrastructure and transportation services. The following Section provides a summary of the needs identified by stakeholders and arising from the discussion and analysis presented in this chapter. The needs are grouped into three categories: 1) investment in new infrastructure, 2) improvements in existing infrastructure and 3) “soft” regulatory or policy issues which affect transportation.
4.7.1 Investment in New Infrastructure
Plan and Construct Infrastructure to Link the Ring of Fire With The Rest of Northern Ontario and International Markets By far the most significant new transportation infrastructure investment required in Northern Ontario relates to the Ring of Fire mining area. The current strategy is to construct a road from the Ring of Fire to connect with the CN mainline near Nakina. The estimated costs of building this road range from $600 million41 to $1 billion42. Progressing with the project is subject to environmental and regulatory approvals.
Construction of a railway between the Ring of Fire and Nakina is another alternative and could be more appropriate from a commercial perspective given the large volumes of low‐ value concentrates which will be moving along the corridor (from Cliffs and other operations). A recent report commissioned by KWG Resources suggested the cost of building a rail would be approximately $1.5 billion, but would have lower operating costs than the road option.43
Review Options to Relieve Congestion on Sudbury Streets Related to Mining Truck Traffic The City of Greater Sudbury sees a lot of mining industry traffic moving through the city core. Trucks often cross between their mines and processing facilities, using city streets with heavy (40 tonne) vehicles. This takes a major toll on the roads, and is also an inconvenience for residents and drivers in the city core. Traffic is expected to increase to, from and within the city thanks to anticipated growth in the mining sector. Consideration should be given to planning and constructing a four‐lane ring road that would enable heavy goods vehicles to move on non‐core roads, such as the Maley Drive Extension/Lasalle Boulevard Widening project proposed in 2008.
41 Cliffs Natural Resources, News Release, January 19, 2012 (http://ir.cliffsnaturalresources.com/releasedetail.cfm?ReleaseID=641050) 42 Tetra Tech, for KWG Resources. “Canada Chrome Corporation Rail vs. Road Tradeoff Study”, 9 February 2013. 43 Tetra Tech, for KWG Resources. “Canada Chrome Corporation Rail vs. Road Tradeoff Study”, 9 February 2013.
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Review Economic and Business Case for Construction of All‐season Roads on Select Corridors to Replace Winter Roads The primary impact of a warming climate on mining is the effect of shortening the length of the winter road season. These roads are used by many remote communities and some mining companies to transport inputs and outputs to remote locations (exploration sites). A shorter season would mean more products would need to be stored on site over longer periods (not ideal) or transported by air, significantly increasing transportation costs. The Government of Ontario should monitor the impact of winter road season shortening and consider which winter roads could be selectively upgraded to all‐season roads. Justification would include consideration of the economic benefits based on the number of community‐members affected as well as the anticipated value of revenues from future mining projects who would use the road.
4.7.2 Improvements in Existing Infrastructure
Monitor Traffic Levels on highway 652 Between Detour Lake Gold Project and Cochrane The recently opened Detour Lake gold project will be the largest gold mine in Canada. The Government of Ontario should monitor traffic levels along the corridor and, if appropriate, consider enhancing the road maintenance program, notably in terms of increased snow clearing in the wintertime. One option would be for MTO to allocate and update road clearing and maintenance schedules based on revised estimates of road usage from mine sites which have significant traffic.
Monitor Traffic Levels on Highway 105 Between Red Lake and Vermillion Bay to Assess Infrastructure Improvement Requirements Three new gold projects are expected to begin production in Red Lake in the next five years: Madsen (Claude Resources Inc), Phoenix Gold (Rubicon Minerals Corp Inc) and Cochenour (Goldcorp Inc). All of these projects will increase truck traffic on Highway 105 between Red Lake and Vermillion Bay, currently a two‐lane highway with no passing lanes and many blind spots. Given the anticipated growth in traffic along Highway 105, the addition of passing lanes, widening and straightening of portions of the highway is considered a priority for the region.
Four‐Laning of Highway 11 Between Nipigon and Shabaqua Corners Northern Ontario’s two busiest highways (11 and 17) converge into one two‐lane highway (11/17) over 160 km between Nipigon and Shabaqua Corners. The most recent Northern Highway Program plans (2011‐2015) include 49 km of four‐laning on two sections of Highway 11/17 between Thunder Bay and Nipigon, with completion expected in 2016. Consideration should be given to full four‐laning of this section of highway to improve freight movements. In particular, when there are delays due snow clearing or the clearing of accidents which close or
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slow traffic in one of the lanes, traffic congestion occurs. When the road is closed, there are no alternatives routes in Northern Ontario and transport trucks must move their products through the U.S. as an alternative; this problem could potentially be alleviated by four‐laning if full closure of the road can be avoided.
Identify Areas for Additional Passing Lanes on Key Roads Traffic is generally slower moving on two‐lane roads, and on winding roads it can be challenging to overtake slower‐moving vehicles when there are no passing lanes. The following corridors, which are used to transport mining inputs and outputs, were noted as being priorities in terms of requiring more passing lanes:
The 270 km of Highway 144 between Timmins and Sudbury currently has no passing lanes. In particular, the hilly, winding section between Sudbury and Cartier (60 km north of Sudbury) would benefit from passing lanes at regular intervals.
The 60 km section of highway 11 connecting Timmins and Kirkland Lake which currently has only one passing lane in each direction
Upgrade Airport Infrastructure to Accommodate Mining Expansion The availability of adequate ground infrastructure was mentioned as a top priority by stakeholders when considering the air mode, as the lack of infrastructure limits aircraft operations, drives up costs to end users, and restricts access for business. Northern Ontario's airports are frequently inadequate for the boom economic cycles which occur with mining exploration and development. In particular, when air freight requirements increase, larger air carriers from across Canada will likely quickly appear in Northern Ontario skies, while local carriers may try to respond with use of larger aircraft, where available. Such growth requires larger airports, longer runways and more sophisticated navigational aids. The capability of northern airports should be selectively upgraded in two key areas, noted below.
Extend Runway Length and Upgrade Associated Navigational Equipment Runways are frequently too short to accommodate larger or higher‐performance aircraft types essential for efficient exploitation of resources. The runways in many of the remote airports are about 3,500 ft. in length. In warmer weather, reduced air density lowers the payload (cargo volumes) which can be transported on these shorter runways; in cold weather, payloads can be increased. Consultations suggest that a priority would be to extend runways at some of the key northern airports up to 4,000 ft.
Investment in Airport Warehousing Facilities
Another benefit for the movement of air cargo in the region would be for the construction of more trans‐shipment and warehousing facilities located at remote airports. MTO owns and operates the remote airports, but private airline or other companies are expected to invest in
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warehousing facilities as these are seen as commercial operations. Our consultations with industry have indicated that support in the capital outlays for building new warehousing facilities in the Far North would be beneficial. One option would be for MTO to build new infrastructure and then lease it to airline operators.
The immediate priority is for investment in airports which potentially could serve the Ring of Fire. The closest airport to the Ring of Fire on the southern road system is Pickle Lake; however it is reachable only by a circuitous road routing north from Thunder Bay. More conveniently located is Nakina Airport, which is the nearest permanent road‐head to serve the Ring of Fire. However, Nakina has operational and technical shortcomings, including a shorter runway than Pickle Lake. The Ontario Government should also consider selectively upgrading airports in up to six First Nation communities in the vicinity of the Ring of Fire, and specifically Marten Falls and Webequie which are closest to the mine site, at the end of the winter road system.
4.7.3 Soft Issues
Implement Programs to Address Shortage of Truck Drivers Across the Region All of the longer‐distance trucking companies serving the mining sector and other study sectors face a shortage of truck drivers. This is partly a result of a retiring population of baby boomer truck drivers, and partly due to the negative associations with truck driving, such as impacts on health and time away from family. It may be necessary for trucking companies to increase the attractiveness of the industry through higher wages and improved working conditions, which would ultimately result in higher shipping costs. The Government of Ontario may wish to work with trucking companies and industry associations (e.g. Ontario Trucking Association) to develop programs to encourage young workers to this sector, including the growing young Aboriginal population in Northern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
5 Forestry Sector
Key Highlights
Economic Outlook
• The forestry industry includes four important sectors: lumber production, manufactured wood products, pulp and paper products, and alternative / “niche” products, including new bioenergy and biofuel products.
• The traditional sectors of lumber, manufactured wood products and pulp and paper have all suffered from a decline in production in the past five to ten years. In the case of lumber and manufactured wood products, the decline is largely related to a slowing in the U.S. housing market – which is now in a phase of gradual recovery. In the case of pulp and paper, the ‘digital revolution’ has limited demand for traditional paper products and the outlook for such products remains weak.
• In part to replace former production opportunities, the forestry industry is diversifying into a number of new markets including production of textiles from wood fibre and development of biofuels from wood products. Regional companies are also looking to serve the growing market for wood pellets in bioenergy plants in Northern Ontario and Europe.
Current Use of Transportation System
• Road transport is the mode of transport used for moves between logging sites (Management Units) and forest resource processing facilities, with very few exceptions. Remote access roads are constructed and maintained in part with funding from the MNR Road Access Program.
• A combination of road and rail transport is used to move products from resource processing facilities to customers, depending on the location and requirements of the intermediate or final customer. Most large sawmills and processing facilities are located with rail access.
• The marine and air modes are largely not used by the forestry sector, although this may change in future for the marine mode, as new opportunities in the alternative forestry industry develop.
Priority Transportation Needs Identified by Stakeholders
• Selective construction of all-season roads to replace winter roads
• Additional passing lanes and/or four-laning on key roads
• Ensure continued funding for Road Access Program
• Implement programs to address shortage of truck drivers across the region
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
Contents 5 Forestry Sector ...... 5-1 Regional Context & Outlook ...... 5-3 5.1 Sector Profile ...... 5-3 5.2 Sector Developments and Trends ...... 5-11 5.3 Regional Competitiveness ...... 5-18 5.4 Outlook ...... 5-19 Forestry Sector Transportation Overview ...... 5-21 5.5 Forestry Sector Supply Chain Overview ...... 5-21 5.6 Northern Ontario Supply Chain Mapping ...... 5-25 5.7 Transportation Needs Identified by Stakeholders ...... 5-36
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
Regional Context & Outlook
5.1 Sector Profile
5.1.1 Overview The forestry sector has been a critical part of Northern Ontario’s development. The value of the industry in Ontario as a whole was $12 billion in 2009, consisting of wood pulp and paper ($7.2 billion), sawmill and wood product manufacturing ($3 billion), and value-added furniture and other manufacturing ($1.8 billion).1 Based on our team’s industry knowledge, we estimate that approximately 75% of these forestry activities take place in Northern Ontario2. From an employment perspective, the forestry sector in all of Ontario accounted for approximately 166,000 direct, indirect and induced jobs in the province in 2008/2009.3
5.1.2 Sectors Markets The forestry sector can be broken down into a number of sector markets:
• Lumber production
• Manufactured wood products, including oriented strandboard (OSB), plywood and veneer
• Pulp and paper products
• Alternative and “niche” products, including new bioenergy and biofuel products Before describing each of the sector markets above, it is useful to describe Ontario’s wood harvesting regime. Wood harvesting is carried out in Northern Ontario on 42 “Management Units” (MUs) as defined under the Crown Forest Sustainability Act. Most MUs are managed by individual forest companies or shareholder/co-operatives under a Sustainable Forest Licence (SFL), long-term licenses issued for a period of 20 years. The SFL holder is responsible for carrying out forest management planning, harvest, access road construction, forest renewal and maintenance, as well as monitoring and reporting on the management unit. An approved Forest Management Plan (FMP) must be in place on each management unit before any
1 Ontario Ministry of Resources, Forestry Industry at a Glance 2012, June 2012. 2 There are no value statistics available for Northern Ontario specifically, and it is hard to disaggregate such statistics from the rest of the province; while most lumber production occurs in Northern Ontario, there are important sawmills and pulp and paper facilities in Southern and Eastern Ontario. 3 Ontario Ministry of Natural Resources, Annual Report on Forest Management - 2008/09, November 2010.
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forestry activities can take place. The sustainable wood supply (amount which can be harvested sustainably) is identified in the FMP for each individual management unit.4
Figure 5-1 provides an illustration of the MUs in Northern Ontario (area and licensee), along with major million and paper operations and related processes.
Figure 5-2 illustrates the volume of wood produced at each MU in Northern Ontario in 2011/2012 (April 1, 2011 to March 31, 2012). Information is as of December 2012.
4 Ministry of Natural Resources. www.mnr.gov.on.ca/en/Business/Forests/2ColumnSubPage/STEL02_163522.html
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
Figure 5-1: Management Units, Licensees and Forest Resource Processing Facilities5 (as of December 2012)
5 Small sawmill produce less than 25 m3 of all products per eight-hour shift, medium facilities produce between 25 and 200 m3, and large facilities produce more than 200 m3.
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Figure 5-2: Management Unit Scale Date Volume Production6, m3 per year, 2011/12
6 The scale date is the date wood crosses a recognized government–approved weigh scale.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
Lumber The total production of lumber from Ontario can be seen in Figure 5-3, below. The vast majority of this lumber is harvested from Northern Ontario, though a number of sawmills are located in Southern and Eastern Ontario as well. These Southern mills are primarily speciality sawmills, and much smaller than Northern Ontario construction lumber mills.
Figure 5-3: Lumber Production, Shipments and Stocks, Ontario
Source: CPCS Analysis of Statistics Canada. CANSIM Table 303-0064 – Lumber production, shipments and stocks
The decline in production which started around 2007 can be largely attributed to the collapse of the U.S. housing market – the largest export market for Northern Ontario lumber. The declining trend in U.S. housing starts is presented in the figure below. Not only have U.S. housing starts been down, but the average footprint of new homes in the U.S. has also been decreasing. The average 2,500 square foot home of earlier housing booms is being replaced increasingly by smaller, less lumber-intensive homes. Urban densification will also increasingly mean more use of concrete and steel rather than lumber.
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Figure 5-4: Annual U.S Housing Starts
Source: CPCS Analysis. National Association of Homebuilders adapted from U.S. Census Bureau While lumber exporters in coastal British Columbia have been able to shift their focus somewhat to overseas markets in Asia, Ontario does not share the same geographical advantage given the relative distance to the Pacific Coast. Thus, very little Ontario lumber moves to markets beyond Canada and the U.S., except for occasional niche products (discussed further below).
Recent evidence suggests that U.S. housing starts are rebounding. According to the U.S. Census Bureau, there were an estimated 780,000 housing starts in 2012, a 28.1% increase above the 2011 figure of 608,000.7
The devastation of forests in Alberta and British Columbia by the Mountain Pine Beetle is also expected to buoy demand for Northern Ontario products somewhat in the medium term, with British Columbia likely continuing to ship some of its available volume to Asia.
Manufactured Wood Products Manufactured wood products include the panel products of plywood, veneer, oriented strand board (OSB), medium-density fibreboard and structural strand board. The demand for
7 U.S. Census Bureau, Joint News Release by U.S. Department of Housing and Urban Development. Released: Thursday, January 17, 2013.
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production of plywood, veneer, OSB, and the like is linked primarily to the U.S. housing market. However, our consultations with industry indicate that these products are somewhat less impacted than demand for lumber as they are still used in instances when lumber is not. As such, the slowdown has not been as dramatic and the recovery is expected to be stronger. Slow to moderate growth is expected.
Pulp and Paper Pulp is a fibrous material prepared by chemically or mechanically separating fibre from trees. Processed wood chips are converted at a pulp mill facility into a thicker fibreboard, which can then be further processed to make paper products.
Ontario produced more than $7 billion in pulp and paper products in 2010.8 Pulp and paper plants are large, capital-intensive operations; there are seven in Northern Ontario, including the recently sold operation in Terrace Bay.
Pulp and paper production levels illustrate a downward trend in the past decade, in large part because the digital revolution has led to a reduction in demand for paper products. The Conference Board of Canada recently reported that e-readers and tablet computers are now reaching a critical mass of saturation among consumers, leading to declines in the sales of paper books. Also, print advertisement spending has failed to recover since the recession in the U.S., also preventing a recovery of the pulp and paper industry.9 The following figure illustrates this trend clearly.
Figure 5-5: Ontario Pulp and Paper Exports
8Ministry of Natural Resources of Ontario. Forest Industry at a Glance, 2012.http://www.mnr.gov.on.ca/en/Business/Forests/2ColumnSubPage/STDPROD_091539.html 9Conference Board of Canada. Canada’s Paper Products Industry: Industrial Outlook Spring 2012, June 2012.
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Source: CPCS Analysis, Canadian International Merchandise Trade Database The U.S. makes up nearly 100% of Ontario’s newsprint exports. Consultations suggest there is no reason to expect pulp and paper production volumes to rebound, and in fact their continued decline is anticipated.
Other Forestry Products and Alternative “Niche” Markets As a result of the significant decline in demand for Ontario’s traditional lumber and pulp and paper products over the past 10 years, some parts of the forestry industry are diversifying into new value-added niche markets, such as biofuels, biomass and alternative textiles. These diversification approaches have been supported by a number of government programs, including the Centre for Research and Innovation in the Bio-Economy (CRIBE), a provincial initiative to transform the forest products industry in Northern Ontario. In the 2008 Budget, the Ontario Government announced an investment of $25 million over four years to move the province to the forefront of the commercialization of the forest products industry.
The most developed niche area today is development of biomass power plants using wood inputs as a power source. A recent example is the ongoing conversion of the Atitkokan coal plant to biomass, using wood pellets from new regional wood pellet production facilities.
Converting wood derivatives into textiles is another alternative product gaining ground. The most recent example of such an initiative is the purchase of the mothballed Terrace Bay pulp mill by Indian firm Aditya Birla Group. The mill is being converted into a dissolving-pulp operation, with the ultimate objective of producing rayon textile fabric.
On another positive note, rising petrochemical costs and consumer
preferences have created interest in Biomass grinding at logging site. Source: Litchfield Forestry Services development of biofuels from wood
fibres. For example, a new bio-jet fuel pilot plant is under development in White River.
Overall, the development and production from these alternative forest product industries are still in very early stages with relatively small production levels. The tonnage and associated transportation needs in the forestry sector continue to be driven by traditional products such as logs, lumber, manufactured wood products, pulp and paper products.
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5.2 Sector Developments and Trends In this section, we summarise a number of the economic and industry trends and developments which have and will continue to affect development of the forestry sector in Northern Ontario.
High Value of the Canadian Dollar Reduces Competitiveness of Products
The high value of the Canadian dollar has reduced demand for lumber for U.S. housing starts. The rise of the Canadian dollar may be an entrenched issue for some time to come given the resource-buoyed strength of Canada vis-à-vis the U.S. This will affect Ontario’s ability to competitively supply U.S. and other markets in the future.
Labour Shortages
Attracting and retaining new talent and labour to the forestry sector is a challenge. The Forest Products Association of Canada (FPAC) believes labour supply is hampered by a negative perception of the traditional view of the industry (felling trees and the ecological fallout) to replace what is generally an aging workforce. Also, as the industry further transforms itself into producing higher value-added products, there will be a need for a new cohort of biochemists and high-tech specialists. There is potential to involve the growing population of young Aboriginal people to the sector through targeted training programs.
Truck Driver Shortages
The supply of trained and experienced truck drivers, a major component of the industry, is also declining and aging. It was only 15-20 years ago that the bigger forestry companies had their own crews and trucks, but now they have since divested this and put in place multiple contractor arrangements to pit smaller contractors against each other under a competitive process. The labour shortage for trucking, which is common throughout North America, is exacerbated by systemic factors, but also the cyclical volatility that makes trucking for forestry less reliable than serving the mining industry, which is where many firms are turning.
Access to Necessary Tariffs for Biomass Projects
Wood biomass energy projects may be a commercial opportunity for investors, however their attractiveness rests on the tariff paid for this type of power. Wood biomass projects are eligible for the Government of Ontario’s Feed-in-Tariff (FIT) energy programme, which allows small energy producers to make electricity and sell it at a fixed rate to the government. The contract rates established by the FIT program for biomass are 13.0 – 13.8 cents per kWh produced.10 Industry stakeholders have indicated that while there is some progress in the
10 Ontario Power Authority FIT Price Schedule, http://fit.powerauthority.on.ca/fit-price-schedule
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sector, that this price is still less than the approximately 20 cents per kWh that is needed for commercial viability of wood biomass projects. Unless they receive a FIT-supported rate in the 20 cents per kWh range, wood-based energy projects cannot compete with traditional energy sources with costs that fall in the 6 to 11 cent per kWh range.11 Until tariffs reach this range, through the Ontario FIT program or otherwise, it is likely that further investment in biomass power projects will be somewhat limited. However, there are alternative options for wood pellet production, as discussed immediately below.
Wood Pellet Potential: European Union 20-20-20 Plan
During interviews with forestry sector stakeholders, a number of companies expressed interest in the development of wood pellets for industrial usage in the replacement of coal in energy development, for domestic and European demand. The interest in Europe is enhanced by the 2007 “EU 20-20-20” plan which promotes use of renewable energy. The EU plan is to reduce greenhouse gases by 20%, to reach 20% renewable energy in total EU energy consumption, and to increase EU energy efficiency by 20% - all by the year 2020. A number of companies in Northern Ontario are positioning themselves to meet demand in Europe. Rentech is the first large-scale producer targeting Europe and is developing pellet plants in Atikokan and Wawa. The Atikokan plant is expected to serve the Ontario Power Generation (OPG) plant in Atikokan with surplus volumes railed to Quebec City for shipping to Europe. The entire production of the Wawa plant is also expected to be railed to Quebec City for shipping to Europe. A new wood pellet storage facility is being built in Quebec City to handle the anticipated exports more efficiently. Other companies building wood pellet plants in the region include Resolute Forest Products (who also expect to supply the Atikokan OPG plant) and KD Pellets in New Liskeard.
Growth in Alternative Textile Potential The Aditya Birla Group of India has arranged the purchase of Terrace Bay Pulp Inc., and is expected to invest $250 million in expanding its capacities in the short term.12 Ultimately the plant will be brought back online producing kraft pulp (traditional paper uses) and will be gradually converted to dissolving pulp, an intermediate product which is exported internationally to textile plants, turning wood fibre into rayon. This practice is relatively new and may help counter the major decline of the industry, as well as serve as a potential example and catalyst for future investors in similar initiatives. Demand for textiles is currently strong, but some manufacturers are concerned about a limit in worldwide consumption demand. There are already a number of Canadian mills converting to dissolving pulp (Fortress Ottawa, Fortress Lebel-sur-Quevillon, AV Nackawick, AV Resigouche, etc).
11http://www.neb-one.gc.ca/clf-nsi/rnrgynfmtn/prcng/lctrct/crrntmrktcndtn-eng.html 12Thunder Bay Chronicle-Journal – October 3, 2012.
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Ontario Northland Railway Transformation The Government of Ontario’s transformation of Ontario Northern Transportation Commission – which includes the ONR freight railway – is underway. As part of transformation efforts, multiple options are being examined, including restructuring, alternative service delivery, new partnerships, and finding new owners for ONTC business lines. Shippers are concerned that if there is any loss of rail service a subsequent shift to trucking services could prove problematic. In particular, they are concerned that they will not be able to get enough trucks or truck drivers due to the existing shortage noted above.
Stability of Funding Forest Access Road Funding Program Access roads are an integral and critical infrastructure component for forestry companies to reach their logging sites. These were traditionally paid for exclusively by the forestry companies (except for a short period in the late 1980s), but in June 2005 the Minister’s Council Report on Forest Sector Competitiveness recommended that the provincial government assume a proportional share of the costs of building and maintaining forest access roads on Crown forests that serve multi-resource uses (e.g. forestry and mining, tourism, First Nation communities, utility and railway companies, hunters, anglers, etc). The result was the establishment of the provincial Forest Access Road Funding Program, as described in the text box below.
Ontario Forest Access Road. Source: Ministry of Natural Resources
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The Road Funding Program has proved highly successful and all forestry stakeholders consulted indicated the support to date has been critical in helping them harvest and transport their product in a safe and efficient manner. Three comments raised in consultations included that: 1) stakeholders wished to emphasize how critical the program is and ensure that it not get lost in any larger transportation infrastructure planning budgeting in future; 2) stakeholders noted concerns around uncertainty of the amount of funding provided each year as the past two years funds allocated were lower than the planned $75 million/year amount; and 3) because the allocated amounts form part of MNR’s annual budget, the amounts are only known a relatively short time ahead of disbursement, which does not leave much time for the forestry companies to plan their infrastructure investments accordingly.
Ontario Forest Access Roads Funding Program
Access roads linking municipal roads and highways to remote forestry harvesting areas are critical for the forestry sector. There are over 30,000 km of such roads, with more than 20,000 km actively maintained every year on Crown forest land (not all roads are maintained every year).
The forestry sector in Ontario benefits from an innovative and successful Roads Funding Program which is used to support construction and maintenance of these access roads. Each year, MNR allocates a maximum amount available from their budget to cover eligible costs for new access roads and year-round general maintenance associated with existing roads. The formula for allocating funds to individual companies is based on the average volume of wood harvested in the previous 5 years by the company. Between 2005 and 2011, approximately 27% of funds spent on roads by the forestry industry was spent on constructing new roads, with 73% on maintenance of existing roads.
To be eligible for funding, a road must: i) be identified in an approved Forest Management Plan and Annual Work Schedule; ii) be classified as a primary or branch road; iii) be on Crown land; and iv) must not be restricted to only forest industry use (i.e. as long as one other resource user can use the road then it is eligible). Access funding not only supports multiple uses of forest roads, but also provides additional environmental protection from erosion through improved road maintenance.
The amount allocated by MNR each year does not necessarily cover all of the costs incurred by companies to maintain and construct new roads each year. However, according to stakeholder consultations, it is an extremely important contribution and the program is seen to be well-run and a very effective model for partnership between the public and private sector.
The funds allocated since the programme started in 2005 are illustrated below:
Year 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13
$ Millions 28 75 75 75 75 75 59 60
Winter Roads Forestry companies operating in the more northerly MUs of Northern Ontario (around Kapuskasing, Iroquois Falls, Long Lac Mills) also rely on a network of winter roads accessible from the beginning of January to the end of March. Warmer weather attributed to climate
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change is gradually reducing the length of the winter road season. This trend could significantly affect production from more northerly sites, given the cost of building all-weather roads can be very expensive.
Ongoing Collaboration with First Nation Communities
The involvement of First Nation communities in traditional territories and claims range from seeking no wood harvesting to favouring a revenue-share formula. While there have been extensive consultations with First Nation communities as part of the Forest Management Planning process, there continue to be deferred areas and disputed harvest blocks. A number of First Nation communities are interested in economic opportunities for their members and securing Impact Benefit Agreements for their community. An Impact Benefit Agreement is an agreement between a First Nation community and a private company and usually involves a combination of royalty payments, infrastructure improvements and employment opportunities.
Pressures to Protect Wildlife May Increase Costs There is pressure from environmental groups to limit the activities of forestry and logging groups. Specifically, some groups are encouraging governments for more protected areas for Caribou habitat and other species at risk and creation of more parks which would erode harvesting areas in the forest. Industry stakeholders have indicated that the environmental and sustainability plans included in their Forest Management Plans are already very rigorous with respect to protecting flora and fauna, not only for the 10 year term of the FMP, but also projecting sustainability and ecological implications 160 years into the future. They feel that in terms of the regulatory framework, the application of untested and duplicative legislation, regulations and policy such as the Endangered Species Act would result in operational delays (additional road grading/maintenance) and increased costs (restrictions on existing roads, sometimes resulting in the need for new roads). Wood Supply Competitive Process Recently Completed
In 2012, the provincial government completed the Provincial Wood Supply Competitive Process which awarded 37 companies with approximately 5 million cubic metres of wood and is anticipated to create over 700 new jobs and maintain over 2,800 jobs (as of December 2012). The companies awarded wood supply (from wood produced on MUs) include the full range of forest resource processing facilities, such as sawmills, wood pellet plants, biofuel plants, veneer plants, etc. The process was launched in November 2009, with existing and new processing companies allowed to bid for wood supply contracts. The goal of the competitive
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process was to attract new investment to the forestry sector and to support new and innovative ventures to stimulate Ontario’s economy.13
Modernization of Forestry Tenure and Pricing The provincial government (Ministry of Natural Resources) initiated a review of the forest tenure and pricing system which is intended to create greater flexibility for forestry companies, enabling the industry to respond to a fast-changing economic environment. In the current system, most of the Sustainable Forest Licences are managed by individual forest companies or industry cooperatives. The tenure reform initiative developed two new options:
• Enhanced Sustainable Forest Licences (ESFL)
• Local Forest Management Corporations (LFMC) As the new ESFLs are developed, they will include more involvement from Aboriginal and non- Aboriginal communities as well as the various forest companies that may be consuming the wood. The other tenure option that is being developed is the concept of LFMCs. These new entities would conduct the forest planning, silviculture and organize the forest harvesting and then go further to the sale of products to various companies. The first LFMC developed is the “Nawiinginokiima Forest Management Corporation” which will manage the Crown forests in the Pic River Ojibway, Big Pic, Black River, Nagagami, and White River forests in the Marathon area. It will also sell and market timber and negotiate the price of wood.
This new tenure system provides more local community controls and provides better opportunities to respond to market changes. However, there are also risks that if timber products are developed and the market declines, the new corporations may lose money.
Intensive Forest Management Ontario has a comprehensive Forest Management Planning process that incorporates public involvement to develop a sustainable forestry program that balances the biological/ecological, social and economic values and demands on the sector. The sustainable wood supply for each MU is identified in a 10-year FMP which considers wood supply and wildlife habitat implications for a 160 year projection. The FMP identifies the required silvicultural/ forestry management investments. In recent years, there has been some discussion of adopting Intensive Forest Management (IFM) practices in Northern Ontario. Such IFM practices are typically associated more intensive silviculture practices to increase forest growth and productivity (including moving more value- added activities closer to logging sites), while at the same time leaving more land idle for parks
13 Ministry of Natural Resources website, “Stage II: Provincial Wood Supply Competitive Process”. www.mnr.gov.on.ca/en/Business/Forests/2ColumnSubPage/STDPROD_091578.html
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and protected areas. Consultations and research suggest the industry has not actively pursued any IFM investments for two reasons:
• The Ontario forest tenure system does not provide sufficient guarantees that a company investing in intensive forest management programs will actually realize the increased wood supply 30 to 60 years in the future.
• The public and market place actually prefer a balanced (ecological, social and economic) Sustainable Forest Management system rather than an economic intensive forest management system. In fact, Ontario is a leader in independent third party certification of its sustainable forestry practices to the three internationally recognized forest certification standards (Forest Stewardship Council, Sustainable Forestry Initiatives and the Canadian Standards Association). Consultations suggest that such certification standards meet consumer demand from people who want to know that the paper that they are reading comes from a sustainably managed forest, not from intensively cultivated tree farms.
U.S. – Canada Softwood Lumber Disputes For the past twenty years or so, there have been a range of trade disputes between the U.S. and Canada related to softwood lumber exports from Canada to the U.S.. At the heart of the dispute is the U.S. claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments resulting in Canadian timber from Crown lands being sold at below market prices. The U.S. position has been that such timber should be subject to a countervailing duty tariffs to offset the subsidy. Governments in Canada and industry stakeholders have always disputed the claims.
Multiple rounds of talks and arbitration have taken place in the past two decades, culminating in the mutually agreed Softwood Lumber Agreement in September 2006. In January 2011 the London Court of International Arbitration Tribunal ruled that an additional export tax on Ontario softwood lumber would be limited to 0.1% (dramatically lower than the 20% originally requested by the U.S.)14. At the present time, the softwood lumber debates are not a pressing issue for the Ontario forestry sector. Rather, industry is focused on a hopeful increase in U.S. softwood lumber demand and pricing as the economic recovery begins.
14 Ministry of Northern Development and Mines, News Release: “Ontario Satisfied with Softwood Lumber Decision; McGuinty Government Pleased with International Ruling on softwood exporters”, January 21, 2011.
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5.3 Regional Competitiveness
5.3.1 Strengths, Weaknesses, Opportunities and Threats The following SWOT analysis succinctly outlines the current state and future outlook for the forestry sector in Northern Ontario.
Figure 5-6: SWOT Analysis, Forestry Sector
Strengths Weaknesses
• Well-established and geographical advantage to • Ontario is not well-placed to access growing Asian access to U.S. markets. markets relative to Western Canada. • Wood is a sustainable, renewable resource • Northern Ontario is heavily reliant on strength of • There is ample production and processing capacity U.S. housing market, which is still slow and likely to in place in Northern Ontario change in terms of needs. • Transportation and energy prices are a large share of total landed costs, and both are rising, making Northern Ontario forestry products less competitive.
Opportunities Threats
• U.S. housing markets appears to be in a slow phase • Risk of Mountain Pine Beetle arrival in Northern of recovery after more than five years of decline Ontario, with unknown ecological threats and • Potential to renew communities facing economic damage to forestry stocks. downturn from loss of forestry through niche • Demand for housing materials changing with alternative products alternative house construction in terms of materials • Tenure Reform currently underway is creating and size. strong opportunities for better community and First • High fuel costs and transport costs expected in the Nation collaboration in management and marketing medium and long term. of forestry resources. • Continued decline in pulp and paper demand as • Strong potential for biofuels and bioenergy, to digital media increases worldwide. replace coal power • Growth in alternative products depends in some • New bioproducts and biomaterials (e.g. cases on government funding to incubate new nanocrystaline cellulose, rayon from wood products) sectors, as well as tariff subsidy for power plants are coming into the market • Continued decline in labour pool for workers in the • Growing Aboriginal youth demographic and forestry and trucking industries. associated increase in employment potential • Uncertainty surrounding the outcomes of the ONR transformation and how they might impact forestry sector shippers.
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5.4 Outlook On the basis of the preceding contextual review, the outlook for the forestry sector is moderate overall.
• Forestry products from Northern Ontario are expected to continue to remain competitive in markets in Central Canada and the U.S., particularly compared to the more limited forest products entering these markets from Western Canada. Asian markets are likely still going to be dominated by Western Canadian forestry products.
• The outlook for lumber demand in the medium to long term is considered to be positive relative to the current level, but will depend largely on a resurgence of demand from the U.S. housing market and the strength of the Canadian dollar. Moreover, the volume and timing of new housing starts must be considered.
• The pulp and paper and associated newsprint industry will continue to decline until it reaches a new steady-state, though it is still unclear what the steady-state demand for newsprint and printed books will be in a digital media society.
• The alternative growth opportunities mentioned above (biomass, biofuels, textiles) will see moderate growth. Such growth will depend on continued support from the public sector in terms of funding research, job training and/or supporting subsidized prices for bioenergy power plants.
• A continued decline in the forestry sector in Northern Ontario would have significant negative impacts on local communities that depend heavily on forestry sector jobs. This outcome is made less likely by the development of Local Forest Management Corporations and the Enhanced Sustainable Forest Licences which increase local decision-making for Northern Ontario communities. In addition, in order to support jobs in the forest industry in Northern Ontario, the provincial government is proposing to amend the Ontario Forest Tenure Modernization Act to give the Minister the authority to make loans to Ontario local forest management corporations, with the approval of the Minister of Finance.15 This may alleviate some of the risk and volatility in the industry today.
Overall Outlook The overall short, medium and long-term outlook for each sector is presented below.
15 Strong Action for Ontario, Ontario Budget 2012, budget papers series. p. 93.
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Figure 5-7: Outlook for Northern Ontario Forestry Sector (Growth from Current Context)
Sub-Sector Short Term Medium Term Long Term (2012-2016) (2017-2026) (2027-2036) Lumber Low Low to Moderate Moderate Manufactured Wood Products Moderate Moderate Moderate (OSB, veneer, plywood) Pulp and Paper Decline Decline Decline Alternative Products Low Moderate Moderate to High
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Forestry Sector Transportation Overview
5.5 Forestry Sector Supply Chain Overview
5.5.1 What Inputs and Outputs Generate Transportation Flows? The supply chain for the forestry sector is quite complex, with significant inter-linkages between and across stages in the chain.
• Management Units (MUs) are the start of the forestry supply chain. The sourcing of inputs for these areas (machinery, harvesting equipment, diesel fuel, nursery trees, etc.) enables each MU to produce a range of wood products used for a variety of downstream purposes.
• From each MU, wood outputs can be transported in a range of different forms (roundwood, chips, low-grade logs, sawdust, bark/branches/forest waste) to any number of forest resource processing facilities for further processing, including sawmills, Oriented Strand Board (OSB) mills, pulp and paper mills, fuelwood and biomass facilities, and Medium-Density Fibre (MDF) plants.
• MUs will typically transport products to multiple processing facilities, some close by, some far away. For example, in Northern Ontario, harvesters on the Timiskaming Forest ship their product to more than seven mills. Similarly, each processing facility will receive wood and wood product supplies from a range of MUs and/or by-products from other processing facilities.
• From the processing facilities, outputs are produced and shipped to market, or in some instances outputs are shipped to another processing facility for further processing. For example, wood chips that are a by-product of producing boards in a sawmill may be shipped to a pulp mill where they are used for production of pulp, which could in turn be used to make paper. These supply chain steps and the generators of input and output traffic are presented in the figure below.
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Figure 5-8: Forestry Sector Supply Chain
Management Unit (MU) Forest Resource Processing Facilities
OSB Mill Inputs: • Construction and Inputs: maintenance equipment • Roundwood logs Outputs and supplies • Labour Roundwood Market • Harvesting equipment • Facility equipment and • Nursery trees Outputs maintenance supplies • Diesel fuel • Fuel • Labour Sawlog and Outputs pulpwood roundwood Sawmill Lumber Market Inputs: Wood chips • Roundwood lumber Chips • Labour Low-grade logs • Facility equipment and Sawdust maintenance supplies • Fuel Bark, branches, Bark waste Other (Fuelwood, biomass, pellet plant)
Inputs: Outputs • Bark, branches, waste, sawmill residues Pellets, biofuel, Market • Facility equipment and power maintenance supplies • Fuel Inputs MDF Plant Outputs Inputs: MDF Boards Market • Sawdust / shavings
Pulpmill Market Inputs: • Chips Outputs Paper and Textile Mills Outputs • Low-grade logs Outputs Turpentine and tall oils • Facility equipment and Inputs: Pulp (by-product) maintenance supplies • Pulp Paper and • Chemicals (caustic soda, • Chemicals Textiles sodium chlorate) • Equipment, etc • Fuel Market
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The transportation requirements for key supply chain movements in Northern Ontario are summarised below.
Transportation Requirement for MU Sites MU sites are often remote and very rarely have direct access to rail. It is simply not economically feasible or worthwhile to build a rail spur to each MU site, especially as individual logging sites within an MU may change year on year (and so a truck would at a minimum be required to move the wood a short distance to a rail spur). MUs cover very large areas, and some have no or limited direct access to the highway network. Secondary and forest access roads are used to reach primary highways. Within an MU, the primary mode of transport is logging trucks on forest access roads. These access roads connect logging sites to larger roads and highways, enabling transport to manufacturing centres.
Primary inputs to the MU sites include fuel, equipment, seedlings and camp supplies. There are a number of nurseries in Northern Ontario that produce seedlings for the forestry sector, in Logging on MU in Ontario, Englehart, Kirkland Lake, Cochrane, Hearst, Source: Ministry of Natural Resources Thessalon, Timmins, Sault Ste. Marie, Thunder Bay, Wabigoon and Dryden. The trees are grown from seed for one to two years and shipped by truck to the forest locations for planting. Virtually all of the seedlings are grown locally in greenhouses. Many of these nurseries also produce flowers, shrubs and vegetables for the local markets (not for Southern Ontario large horticulture ventures).
Logging companies use a combination of on- and off-highway trucks to ship wood to manufacturing centres, although the vast majority of the logging transportation is by on- highway trucks. Of the processing companies consulted as part of this study, only two received wood fibre inputs by boxcar railcars and in both instances this represented less than 10% of their wood-fibre input. Third-party, independent contract trucking companies are typically used to move wood and wood-fibre products from MUs to manufacturing centres. Logging companies historically had their own fleets, but this is much less prevalent now and not expected to change.
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Transportation Requirements for Forestry Resource Processing Facilities Sawmills
At the end of 2012, there were 43 active sawmills in Northern Ontario. Historically (over 50 years ago), sawmills were located in the remote locations alongside the MU logging sites. However, the need for greater economies of scale and better access to labour forced many companies to consolidate their sawmills closer to larger communities.
Sawmills typically source their wood-fibre inputs by truck and ship their outputs through a combination of truck and rail, depending on the customer location. Rail is preferred wherever possible, particularly for longer hauls, given the bulky nature of outputs. Of the 43 sawmills in Northern Ontario, 25 are located within 2 km of a rail spur, siding or yard – a strong indication that they will be using the rail network.
Other Processing Facilities
The primary inputs for processing facilities are wood/wood-fibre products transported by truck from the MUs. Other input products include fuel, facility equipment and maintenance supplies, chemicals (caustic soda, sodium chlorate, etc.), labour and, in the case of OSB mills and MDF plants, glues.
While all processing facilities are at a minimum connected to the road network in order to receive wood-fibre inputs, most will also try to be located with rail access, generally using closed boxcars. Such rail access is critical from a cost-effectiveness perspective for transportation of the heavy and voluminous products moving to market. Examples of the various types of processing facilities with rail access in Northern Ontario include Domtar’s paper mill in Dryden, the Ainsworth OSB plant in Barwick, Columbia Forest Products’ veneer and plywood plant in Hearst, Tembec’s newsprint mill operation in Kapuskasing, and KD Pellets in New Liskeard.
The mode of transport used to source inputs and transport outputs varies according to producer, but the following trends are evident from consultation:
• Wood fibre is virtually always sourced by truck, even when the haul time is multiple hours
• Chemical inputs for pulp mills (chlorate, peroxide, acid, caustic) typically arrive by rail
• Other miscellaneous raw materials are typically sourced by truck
• Sawmill residual / intermediate products (wood chips, sawdust) typically move by truck from a sawmill and to a forest resource processing facility
• Most finished products (paper, MDF boards, OSB, etc.) will move by rail or truck, with the mode chosen depending on the distance and customer needs and logistics requirements
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• Pulpmill by-products (tall oil, turpentine) typically move to market by rail. The forestry industry is moving closer to “just-in-time” production, a manufacturing model whereby items are created to meet demand, rather than being created in surplus or in advance of need and stored as inventory. This approach promotes a greater use of trucks which are typically faster and have more service flexibility than rail. However, forest processing facilities must still retain significant inventories to compensate for adverse road weather conditions such as winter conditions, spring thaw and the fall wet season.
Transportation Requirements for Labour Road is the only means of transportation used to transport labour for the vast majority of activities related to the forestry sector.16
In the case of logging sites, depending on the distance, loggers will typically commute daily or, in more limited instances, set up small trailer camps where workers will look after their own food, and travel home on the weekends. Non-union logging workers (which make up the vast majority of loggers in Northern Ontario) drive their own vehicle or carpool with other workers to the logging site. In union operations, there is typically a marshalling point along the route where workers meet and the company will arrange for transportation to bring them to the logging site (in “crew cabs”, also known as “crummies”). There are no fly-in/fly-out logging camps in Ontario.
All sawmill, pulp and paper mill and other processing facility workers drive their own personal vehicles to work or, in more limited instances, use transport provided by the company or public transit where available.
5.6 Northern Ontario Supply Chain Mapping
5.6.1 Current Commodity Flows In this section we describe and quantify the volumes of forestry sector commodities currently moving on the transportation network in Northern Ontario, as well as identifying processing centres in the supply chain.
The map below shows traffic flows by rail and road for the forestry sector in Ontario. There are no significant flows by marine mode or air mode.
The truck flows are presented in daily truck trips based on MTO Commercial Vehicle Survey data for 2011, and include: lumber, newsprint, other raw and finished forest products (items
16 Helicopters are occasionally used for forestry replanting activities in remote locations, but this represents a very small percentage of the labour transport requirements.
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such as OSB, Composite, pellets, etc.), paper and paper products, and wood pulp. The map shows truck traffic with a start, end, or start and end, in Northern Ontario. It does not illustrate through traffic (discussed in Chapter 3).
The rail flows include the same products, although rail flows consist primarily of processed wood products, chemical inputs and by-product outputs (tall oils, etc), not lumber. Rail volumes are presented in daily tonnages with low, medium and high flows. The rail tonnage volumes have been presented such that the thickness of the flow lines represents comparable volumes with truck trips.17
17 This was done by assuming that approximately 28 tonnes of product moving by rail would be carried per truck trip.
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Figure 5-9: Transportation Flows, Forestry Sector
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The key points to note from the map above – and from consultations – are as follows:
• Almost all of the sawmills and other manufacturing centres are located near rail access.
• The railways carry significant volumes of forestry products from sawmills and manufacturing centres in Northeastern Ontario, around Hearst, Kapuskasing, Iroquois Falls, Cochrane and Englehart.
• Most of the forest resource-processing facilities are located near a large sawmill. Two notable facilities not located near a sawmill are on the north shore of Lake Superior – Terrace Bay Pulp Mill (being re-purposed for Aditya Birla) and Black Sturgeon Enterprises Ltd (producing fuelwood, which is for local Northern Ontario markets). Both see quite high truck flows, representing high volumes of product coming in/out by truck rather than rail.
• There is significant truck activity around the major processing facility hubs, notably Kenora, Dryden, Thunder Bay and Fort Frances in Northwestern Ontario; and Hearst Timmins, Kirkland Lake and Sudbury in Northeastern Ontario.
• The busiest corridor for truck traffic moving to and from other regions is between North Bay and Southern Ontario on Highway 11, with significant flows also moving from between Sudbury and Southern Ontario, and between Kenora and Winnipeg.
• All four U.S. border crossings see significant traffic, in the order of 20 – 30 trucks per day. This reflects the important role of the U.S. as an export destination for Northern Ontario forestry products (see Figure 5-10 below). The high volumes of traffic around Fort Frances/ International Falls border are likely from the Resolute Fort Frances Pulp and Paper Mill. This mill has since reduced its activities18, but previously shipped almost all of its pulp to the Boise Cascade plant just across the border in International Falls, MN.
Breakdown of Truck Traffic by Origin and Destination The graphic below illustrated the origin and destination of 1,154 daily forestry truck trips with an origin, destination or both in Northern Ontario.
Almost 60% (683) of the daily forestry truck trips in Northern Ontario are trips within the region. This would consist primarily of trucks carrying wood fibre from MUs to processing facilities centres, and between processing facilities.
Of the forestry traffic originating in Northern Ontario (258 trucks), almost half is destined to Southern Ontario, and based on consultations we understand much of this would travel onwards to the U.S. Just under a quarter is destined to Quebec and the Northeastern U.S. Of the forestry traffic destined to Northern Ontario (213 trucks), slightly over a quarter comes
18 In late 2012, Resolute Forest Products shut down one paper machine and the kraft mill at Fort Frances, but still has one operating paper machine, employing approximately 200 employees.
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from Southern Ontario, with more than 50% arriving from Central Canada (Prairie provinces) and the Central U.S. (this would capture the cross-border traffic between Fort Frances and International Falls between Resolute and Boise, noted above).
Figure 5-10: Origin and Destination of Daily Forestry Truck Traffic in Northern Ontario (excludes through traffic)
Source: CPCS Analysis of MTO Commercial Vehicle Survey 2011 data.
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A more detailed breakdown of which commodities account for the largest volumes of truck traffic, by region, is presented in the figures below. In terms of traffic destined to Northern Ontario (Figure 5-11), lumber (39%) and wood pulp (27%) account for the majority of truck flows, with Central Canada being the primary source region of both commodities. Our understanding is that the lumber referred to in the data is likely logs from forestry sites near the Eastern Manitoba border. There are limited market opportunities on the Eastern Manitoba border, and so some products are shipped to the Kenora and Dryden mills and manufacturing centres for processing. Lumber movements arriving from Southern Ontario are also important. As would be expected, given the relatively small population and ample local production capacity, little newsprint or paper from other regions is brought into Northern Ontario.
Figure 5-11: Daily Truck Trips Destined to Northern Ontario, By Origin by Commodity, Forestry Sector
Region / Commodity Lumber Newsprint Other Raw and Paper Wood Pulp Finished Forest Products Central Canada 26 1 3 6 34 Central U.S. 18 - 5 2 15 Northeastern U.S. - - 2 - - Quebec 13 - 21 5 - Southeastern U.S. 1 - 2 4 - Southern Ontario 25 1 14 7 8 Western Canada - - - - - Sub-total by Commodity 83 2 47 23 58 Commodity as % of total Traffic 39% 1% 22% 11% 27% Source: CPCS Analysis of CVS 2011 Data The breakdown of commodities carried by trucks leaving Northern Ontario (figure below) is spread more evenly across commodity types. Lumber still accounts for almost one-third of all trucks leaving the region, most of which is destined to Southern Ontario, Quebec and the U.S. (based on consultations, much of the lumber moving towards Southern Ontario would continue on to the U.S.). However, pulp and paper and other raw and finished products are also important.
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Figure 5-12: Daily Truck Trips Originated in Northern Ontario, By Destination of Commodity, Forestry Sector
Region/Commodity Lumber Newsprint Other Raw and Paper Wood Pulp Finished Forest Products Atlantic Provinces - - 0.4 - - Central Canada 7 0.4 - 4 0.2 Central U.S. 8 21 8 4 3 Northeastern U.S. 1 0.8 4 1 1 Quebec 18 - 17 1 4 Southeastern U.S. 6 5 3 5 8 Southern Ontario 43 30 19 20 15 Sub-total by Commodity 83 57 52 35 31 Commodity as a % of Total Traffic 32% 22% 20% 13% 12% Source: CPCS Analysis of CVS 2011 Data
5.6.2 Future Commodity Flows In this section we discuss the future use of the transportation network for the forestry sector. We look at a snapshot in 15 years from today (2026).19 Forecasts of rail traffic have not been presented, given the relative sensitivity and confidentiality of the data to each railway and the inability to obtain data for each specific corridor. We estimate that rail traffic will grow alongside general growth in the forestry sector, approximately 5%-10% growth over the next 15 years (by 2026).
Before illustrating the changes in truck traffic volumes on the transportation network, we first discuss two sets of supplementary information that affect future use of the system: anticipated industry changes, and forecast estimates for truck. The comments below should be taken in context that the forestry sector is in a continual state of change, and these comments reflect the position at the end of 2012.
Anticipated Industry Changes The following significant projects/changes are expected to impact transportation flows in the next few years (and are illustrated as “Anticipated Industry Changes” in the forecast map which follows).
1) Increased wood pellet production: A number of wood pellet firms are lining up to serve local and international (European) demand for wood biomass power projects: Rentech is developing wood pellet plants in Atikokan and Wawa; Resolute Forest Products is constructing a wood pellet facility next to its existing sawmill in Thunder Bay; KD Pellets is
19 These timeframes were primarily chosen to correspond with the MTO Commercial Vehicle Survey forecast timeframes.
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building a new wood pellet facility in New Liskeard; and Atitkokan Renewable Fuels is converting a former particleboard plant in Atikokan to produce wood pellets. Wood pellets not consumed by domestic sources are expected to be shipped to Europe. The anticipated transport supply chain for wood pellet producers from Northern Ontario is to rail products to a port on the St-Lawrence river (Quebec, Trois Rivières or Montreal), with onward shipping by marine mode to Europe. Shipping directly from the Great Lakes is currently considered uncompetitive due to the smaller size of vessels (for direct shipping) , the lack of efficient handling terminal, and the need for one additional handling (for transshipment options). Overall, these moves will increase rail flows in the direction of the St. Lawrence river from Northern Ontario. 2) Decreased production around Fort Frances: Resolute Forest Products has limited the operations of its Fort Frances Pulp and Paper mill, primarily because their most important customer – the Boise Cascades plant just across the border in International Falls, MN – is no longer accepting its products. The contract to ship its pulp to Boise Cascades accounted for about 60% of its kraft mill pulp outputs, and its in-house drying capacity is limited to about 40% of production capacity, making it impossible to continue operating in a profitable manner. It announced indefinite idling of the pulp and paper mill (production capacity of 200,000 metric tons of pulp) and the paper machine #5 (annual production capacity of 105,000 metric tons speciality papers) in late 2012. This will likely reduce traffic flows around and across the Fort Frances / International Falls border crossing. 3) Increased sawmill production in Northeastern Ontario: Tembec is upgrading (within the next five years) its Chapleau and Kapuskasing sawmills to accommodate an 8% increase in lumber production due to improved recovery, and an associated reduction in chip production. This will increase requirement for lumber transportation (rail and truck) and decrease requirement for chip transport (truck). The growth is equivalent to approximately 146 additional railcars or 308 B-trains per year. In the medium term (within the next 6-15 years) Tembec is also planning to upgrade its Cochrane and Hearst sawmills, which will increase lumber production by 5%, requiring more lumber transportation (rail and truck) and decreased requirement for chip transport (truck). The change is equivalent to approximately 86 railcars or 181 B-train trucks (per year). 4) Potential Shipments by Marine Mode: At the time of writing, very little forestry sector product was moving by marine mode, although prospects for growth are visible. One promising example is the output of the Terrace Bay Pulp Mill. In December 2012, the MV Edenborg ship arrived at the Port of Thunder Bay and loaded the port’s largest ever wood pulp shipment (8,800 tonnes) which originated from the Terrace Bay facility, about 200 km northeast of Thunder Bay, and destined to Antwerp in Belgium. Going forward, under the new ownership of Aditya Birla, the Terrace Bay mill is being re-purposed to produce dissolving pulp, which will all be shipped overseas to India for processing into rayon fabrics. The facility is expected to product approximately 290,000 tonnes of dissolving pulp
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per year. A range of transportation options is currently being considered, including potential for shipping by container from Thunder Bay by marine mode.20 5) Ontario Northland Transformation: The Government of Ontario is transforming the Ontario Northland Railway. As part of these efforts, multiple options are being examined, including restructuring, alternative service delivery, new partnerships, and finding new owners for ONTC business lines. The transformation process is underway and the specific implications, levels of service, and any changes to the cost of shipping by rail are not yet clear. If the rail service levels decrease and/or shipping rates increase significantly, it could result in a mode shift from rail to truck (for companies that can find trucking companies to carry their product), increased trucking rates, and potentially the closure of some of the plants on the ONR line. For example, Tembec’s Kapuskasing plant, which is exclusively served by ONR, would face challenges for input chemical requirements and the delivery of outputs. 6) New Flows Around White River: Rentech is developing its “Olympiad Renewable Energy Centre” in White River. The project is designed to produce 23 million gallons of renewable, low-carbon jet fuel and 13 million gallons of naphtha (a flammable liquid used as solvent) per year, using inputs of 1.3 million tons of timber allotted to Rentech by the province.21 The timber would arrive to the White River facility by road, although specific routings will depend on the MU which supplies the timber which are not known at this stage.
Forecast Estimates for Truck Traffic: CVS data The traffic forecasts for 2026 truck flows are based on MTO estimates of growth in traffic, which in turn are based on estimates calculated from economic and industry factors for each sector and road corridor. The methodology is described in Appendix D. The drivers behind the increases in traffic are presented in Figure 5-13 below. The figure show the average growth by sub-sector based on MTO’s Commercial Vehicle Survey forecasts, with comments from the CPCS team in the final column.
20 There are currently no container vessels moving on the Great Lakes. 21 Rentech website: http://www.rentechinc.com/olympiad.php
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Figure 5-13: Current and Forecast Forestry Sector Daily Truck Traffic Trips, By Commodity, 2011 and 2026
Commodity 2011 2026 Growth Key drivers of change (2011-2026) based on analysis of CPCS Comments on growth between 2011-2026 Trips Trips between CVS data 2011- 2026 • Lumber 492 541 9.9% 30% increase in lumber movements from Northern Growth of 9.9% seems reasonable and in line Ontario to areas outside Northern Ontario (83 trips to with our consultations. 108 trips) • 111% increase in trips from Central U.S. to Northern Ontario (18 to 39 trips) • Limited change in trip volumes within Northern Ontario (which account for over 60% of all trips) • Newsprint 62 96 55.8% 70% increase in moves from Northern Ontario to This is much higher than expected. Our Southern Ontario (30 to 51) consultation indicated a reduction in newsprint • 36% increase in moves from Northern Ontario to consumption with no expectation of growth in Central US (21.44 to 29.19) future. • Other raw 313 417 33.2% 33% increase in truck trips originating in Ontario (267 Growth of 33.2% seems reasonable, particularly and finished to 356), including 33% growth of trips within considering the likely growth in products Northern Ontario (215 to 286) biomass/renewable fuel technologies • Paper and 94 111 18.0% Slight decline of product originating in Northern This forecast appears high as demand for these paper Ontario, with Northern Ontario originated product products is declining. We anticipate limited products decreasing from 75% to 65% of all trips. Only slight growth in this sector, with best prospects for increase of exports from Northern Ontario to speciality papers. Northeast U.S. and Central Canada. • Double the volume of product coming to Northern Ontario from Southern Ontario (7 to 14 trips daily), and significant increases also from Central Canada and Southeast U.S. to Northern Ontario. • Wood pulp 192 193 0.2% Roughly 10%-20% increases in volumes of wood pulp Limited growth of 0.2% seems reasonable as moving into Northern Ontario from other regions consultations suggest very limited to no growth • Decline in trips from wood pulp originating in expected in pulp for paper, although there may Northern Ontario travelling to other areas, most be counter-growth for alternative use of pulp notably decline in trips to all parts of the U.S. (e.g. dissolving pulp used in fabrics). Forestry (all 1154 1358 17.7% Based on overall changes above Overall, growth of 17.7% appears reasonable. products) Although growth in newsprint and pulp and paper is higher than anticipated, truck trip volumes for both sub-sectors are relatively small and not expected to skew overall picture.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 5 | Forestry Sector
Figure 5-14: Current and Forecast Transportation Flows, Forestry Sector
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5.7 Transportation Needs Identified by Stakeholders The following section provides a summary of the transportation needs identified through our research and consultations, grouped into three categories: 1) investment in new infrastructure, 2) improvements in existing infrastructure and 3) “soft” regulatory or policy issues which affect transportation.
5.7.1 Investment in New Infrastructure
Review Economic and Business Case for Selective Construction of All-Season Roads on Select Corridors to Replace Winter Roads The primary impact of a warming climate on forestry is the effect on shortening the length of the winter road season. These roads are used by a number of companies operating in the more northerly MUs. The forestry industry will require significant innovation to design and deploy new technologies to respond to logging, road construction and trucking with a shorter winter. The Government of Ontario should monitor the impact of winter road season shortening and consider if and whether winter roads could be selectively upgraded to all- season roads. Justification would include consideration of the economic benefits based on the number of community-members and other sectors affected (e.g. mining) as well as the anticipated increase in revenues to forestry companies who would use the road.
5.7.2 Improvements in Existing Infrastructure
Identify Areas for Additional Passing Lanes and/or Four-Laning on Key Roads The existing highway and road network in Northern Ontario is able to accommodate the current number of forestry trucks; there are no capacity constraints in volume terms. However, challenges mentioned by virtually every stakeholder consulted in the forestry sector included: inadequate passing lanes and four-laning of the highways. These points are related. The vast majority of the road network is two lanes, crossing through remote locations with no alternative roads available. This means that any time there is maintenance on the highway which occupies one lane, an accident which needs to be cleared, or snow clearing, traffic comes to a standstill or slows significantly, increasing the time and cost of sourcing inputs and shipping outputs. Ideally, four-laning of the highway would enable one or two lanes to be closed while permitting two-way traffic. As a secondary option, passing lanes can increase the speed of traffic. Better maintenance of the highway and quicker clearing of accidents when they occur would lower the number and length of times trucks are not able to move at all.
According to consultations with forestry sector stakeholders, the specific sections of highway which would benefit from increased passing lanes and/or four-laning are as follows:
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• Highway 11 between Nipigon and Shabaqua corners, where Northern Ontario’s two busiest highways (11 and 17) converge into one two-lane highway (11/17) over 160 km. The most recent Northern Highway Program plans (2011-2015) include 49 km of four- laning on two sections of Highway 11/17 between Thunder Bay and Nipigon, with completion expected in 2016. Consideration should be given to full four-laning across the full 160 km.
• Highway 17 between Kenora and Winnipeg, of which 50km is in Ontario with only three passing lanes in each direction. This is the busiest road corridor in northwest Ontario. We understand that planning for the four-laning of Highway 17 between Manitoba border and Kenora is ongoing.
• Highway 11 between North Bay and Hearst (580 km), another very busy corridor for the forestry sector.
5.7.3 Soft Issues
Maintain Existing Funding for Road Access Program The MNR-funded program is seen to be working very well and making a positive and important contribution for the forestry sector for constructing new roads and maintaining existing ones. The program was originally designed at $75 million per year, which is seen as being adequate. In the past few years, however, the amount allocated has dropped below $75 million (for 2011/2012, $58.3 million was disbursed). Restoring this program to its initial funding level of $75 million is said to be vital to maintaining competitive wood costs and in promoting the supply of forest products from Northern Ontario. Industry also noted that it would be helpful for logging companies to know the amounts they will be allocated sooner than they currently do to enable better planning.
Implement Programs to Address Shortage of Truck Drivers Across the Region All of the longer-distance trucking companies serving the forestry sector and other study sectors face a shortage of truck drivers. As the demand for lumber and other wood products returns and with growth in alternative biomass products, the driver shortage is expected to compound. This will be made worse by growth in the mining sector. In Northeastern Ontario, stakeholders noted that if there is a reduction in rail service following divestiture of the ONR divestment (impacts are not known at this stage), there could be an increase in the requirement for trucking services which in turn would compound the existing shortage of truck drivers in Northern Ontario.
Consultations indicated a need for succession planning for truck drivers and development of programs to attract younger workers to replace an aging workforce in the transportation sector more generally. The Government of Ontario may wish to work with trucking companies and industry associations (e.g. Ontario Trucking Association) to develop programs to
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encourage young workers to this sector, including the growing young Aboriginal population in Northern Ontario.
Consider Reviewing Weight Restrictions in Spring Thaw Under the Highway Traffic Act, the province enforces reduced load restrictions on trucks on highways during the spring thaw, when road damage is most likely to occur. The primary concern is that when frost melts it can push culverts and other water crossings up, and if there is too much weight on the roads this type of supporting infrastructure will be damaged. With some exceptions, permits for heavy vehicle loads are not valid on specific sections of highway during the months of March, April and May in the northern portion of Ontario and March and April in the south.22 While stakeholders agreed on the need and benefits of the spring thaw weight restrictions, it was felt that the Government of Ontario needed to be more flexible, dynamic and somewhat less conservative with their weight restriction policies. Sometimes the weight restrictions are applied earlier than necessary and enforced longer in the season than deemed necessary by industry. It is worth noting that the lower weight allowances in the spring thaw are somewhat balanced by increased allowances during the winter freeze.
Support Shippers in Addressing Rail Service Issues Rail is considered by forestry sector stakeholders to be a more cost-effective mode of transportation for their bulky products over long distances, and an important means for processing facilities to reach customer markets beyond Northern Ontario. There is a general dissatisfaction with the rail service being provided in Northern Ontario, with stakeholders commenting on a lack of rail service being provided at a reasonable price, low car availability and quality issues, and very limited bargaining power in many instances (for example, few sawmills are served by more than one railway line). As noted previously, shippers also have concerns that rail service will deteriorate following the divestment of ONR. A recent positive signal for railway shippers across Canada is the passing of the federal Rail Freight Service Act in May 2013. The Act aims to encourage shippers and railways to negotiate service agreements, with recourse to an arbitration process to establish terms of service through the Canadian Transportation Agency if terms cannot be agreed. Prior to the passing of the Act, shippers could not gain compensation for a lack of on time delivery by rail companies. The Act gives rights to shippers to obtain compensation from railways for poor service, and is expected to improve the general service received by the major railways in the region. The Act would only apply to federally regulated railways (including in particular CN Rail
22 The specific highway segments subject to load restrictions vary year-by-year according to climate and are posted and updated regularly on the MTO website.
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and CP Rail) and sections of provincially regulated railways that cross provincial borders (e.g. Ontario Northland between Kirkland Lake and Rouyn-Noranda). As may be required, Ontario could promote greater awareness of rail shipper rights in line with the recent passing of Bill C-52 (Fair Rail Freight Services Act), and prepare to provide input for the next statutory review of the Canada Transportation Act, due to start in 2015.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
6Agriculture and Aquaculture Sectors
Key Highlights
Economic Outlook
• The agriculture sector includes a number of important sector markets, notably: dairy, cattle farming, field crop production and aquaculture. The sector is characterized by a large number of relatively small farms.
• The distances involved in sourcing inputs from and delivering outputs to markets beyond the region increase the transportation and production costs for regional farmers, somewhat limiting their ability to grow and compete with producers from elsewhere. This challenge is compounded by a lack of processing facilities in the region which means that many products originated in Northern Ontario must be transported over long distances and/or beyond the region for processing; milk, cattle, and field crops are the primary examples.
• The areas around New Liskeard in the fertile clay belt area are expected to see the most growth in coming years, notably through increased yields and use of new seed varieties in oilseed production.
Summary on Current Use of the Transportation System • Road is the dominant means used to transport agricultural products to, from and within Northern Ontario.
• Limited inputs arrive by rail into the region and are distributed by wholesale farm supply companies (fertilizers, chemicals), but the majority of transport is by truck, using primary highways wherever possible.
• The marine mode is used to move large volumes of western (prairie) grain through the port of Thunder Bay for export outside of Canada.
Priority Transportation Needs Identified by Stakeholders
• Identify areas for additional passing lanes / four-laning on key roads
• Support investment in rail infrastructure for grain shippers
• Review trucking regulations to gauge Impact on small-scale farmers
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Contents 6 Agriculture and Aquaculture Sectors ...... 6-1 Regional Context & Outlook ...... 6-3 6.1 Sector Profile ...... 6-3 6.2 Sector Developments and Trends ...... 6-14 6.3 Regional Competitiveness ...... 6-19 6.4 Outlook ...... 6-20 Agriculture Sector Transportation Overview ...... 6-22 6.5 Agriculture Sector Supply Chain Overview ...... 6-22 6.6 Northern Ontario Supply Chain Mapping ...... 6-30 6.7 Transportation Needs Identified by Stakeholders ...... 6-39
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Regional Context & Outlook
6.1 Sector Profile
6.1.1 Overview The agriculture sector in Northern Ontario plays an important role supplying communities in the region with fresh, local produce as well as supplying products to other parts of Canada (especially Southern Ontario). Agricultural activities are geographically concentrated in the southern parts of the region, with clusters around major population centres such as Thunder Bay, Sault Ste. Marie, Sudbury and North Bay, as well as to the east around New Liskeard and the Timiskaming district.
Figure 6-1 overleaf illustrates average farm income for the 2,587 farms in the region, and total farm income by district. Total gross cash receipts from farms in the Timiskaming and Thunder Bay districts are higher than any other district, in part because these two districts are also home to the highest concentration of dairy farms, strong generators of revenue. Timiskaming district, with the region’s highest average annual revenue per farm, lies in the southern portion of the so-called Clay Belt, a vast tract of fertile soil covering the parts of the Timiskaming district as well as portions of the Cochrane, Nipissing and Sudbury districts. Beyond the higher revenue farms in the districts of Timiskaming and Thunder Bay, agriculture in the rest of Northern Ontario is largely spread out amongst many smaller operations with annual average revenues of $54,000.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-1: Agriculture in Northern Ontario, Number of Farms and Agricultural Income by Census Division
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6.1.2 Sector Markets There are over 30 different types of farms present in Northern Ontario, representing nearly every type of agriculture industry in Ontario. Approximately one-third of all farms are focused on hay farming and 20% on beef cattle farming. In value terms, the dairy sector accounts for almost 35% of the region’s total agricultural cash receipts.1 Geographically, the different types of agriculture are distributed fairly evenly throughout the region, though concentrations occur in a number of areas and industries as can be seen from the map at Figure 6-2 overleaf. The map shows distribution of farm by farm type, as well as total area of farmland by district. Of note:
• The districts of Timiskaming, Manitoulin and Rainy River account for 54% of the region’s total farmland (by hectare). Cattle farming is concentrated in these three districts, which together account for over 50% of the region’s cattle farms.
• Timiskaming and Thunder Bay districts are home to the highest concentration of dairy farms.
• Timiskaming district has both diverse production outputs and larger farms than most other regions. Although not visible from the map, Timiskaming is home to the largest number of oilseed production farms (85%), other grain farming (50%), wheat farming (50%), sheep farming (33%), dairy (33%), and animal combination farming (22%) in Northern Ontario.
• Aquaculture is clustered around the North Channel of Lake Huron, near Manitoulin Island, and Parry Sound. The key sector markets discussed in the remainder of this chapter are as follows:
• Dairy
• Livestock and cattle farming
• Field crops, including hay and canola
• Aquaculture
1 CPCS Analysis of Statistics Canada Census of Agriculture, 2011 and Ontario Ministry of Agriculture, Food and Rural Affairs Statistics, County Profiles.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-2: Northern Ontario Distribution of Farms by Agricultural Commodity (2011) 2 and Aquaculture (2003)
2 Data from the Census of Agriculture is divided into information at the Census sub-division level. It is reported at the Consolidated Census Subdivision level.
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Dairy There were 138 dairy farms in Northern Ontario in 2011, with 40 in Northwest Ontario (Thunder Bay, Rainy River and Kenora census divisions) and the remainder in Northeast Ontario.3 The Timiskaming district has the largest concentration of dairy farms, at 46. The market trend over time has been consolidation of dairy farms from many smaller dairy farms to fewer, larger farms. For example, in the 1980s there were over 50 dairy farms in the Algoma area, while in 2011, there were only eight.
In value terms, the dairy industry in Northern Ontario generates the most revenue relative to all other sectors. In 2010, the dairy sector generated $54.36 million in cash receipts, or 34%, of all cash receipts by Northern Ontario farms, significantly more than any other sector.4
Raw milk production has declined over the last few years (Figure 6-3). Between 2007 and 2011, milk production in the region fell by 8%, with Rainy River being the sole area to resist the regional trend by marking an increase of 7%.
Figure 6-3: Northern Ontario Milk Shipments to Processing Plants, 2007-2010
Source: CPCS Analysis of Ontario Ministry of Agriculture, Food and Rural Affairs Statistics, Milk Production. Note: Other category includes Nipissing, Sudbury, Manitoulin, Kenora and Parry Sound. The decline in raw milk production can be explained primarily by a shift in milk production quotas from Northern Ontario farmers to farmers in other regions of the province. When a dairy farmer decides to get out of milk production, he or she can sell their valuable quotas on
3 Statistics Canada, Census of Agriculture Data, Farms Classified by Industry, 2011, for the ten Census Divisions within Statistics Canada definition of Northern Ontario, plus Parry Sound Census Division. 4 Ontario Ministry of Agriculture, Food and Rural Affairs Statistics.
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an exchange operated by the Dairy Farmers of Ontario (DFO) (value of $25,000 per kilogram of daily butterfat).5 The most significant shift in quotas from Northern Ontario has been to farms to south and southwestern Ontario, where milk shipments increased by 4% and 6%, respectively, between 2007 and 2011.6 The shift has occurred for a number of complex reasons, including that farms in other parts of the province are able to produce milk at lower costs than those in the north, primarily due to Northern Ontario’s relatively harsher climate, shorter growing season and higher input-supply costs such as transportation for animal feed.
Consultations indicate that approximately 75% of the raw milk produced in Northern Ontario is consumed in Northern Ontario.7 There has been a general decline in milk consumption across the province in recent years with fluid milk sales falling by 8.6% province-wide between 2006 and 2011.8 The main reasons for this decline are increasing milk prices, a higher availability of alternatives (such as soy milk, bottled water, soft drinks, calcium-fortified drinks), and a general shift in consumer preferences associated with an aging population (older consumers tend to drink less milk than children and young adults), amongst others.9 Milk production in Ontario, as in all provinces, is regulated by supply management. The DFO acts as single buyer for the output of all of Ontario’s dairy farms much the same way the Canadian Wheat Board once did for wheat and barley. Consequently, all dairy farmers in the province receive the same price for their raw milk at their farm gate. The DFO is responsible for picking up milk from the farm by certified milk transporters and delivering the raw milk to dairies or milk processing plants on behalf of farmers; raw milk from Northern Ontario farms is currently processed at dairies in Thunder Bay, Espanola, Sudbury and Thornloe, as well as, in limited quantities, at dairies in Manitoba and Quebec. The supply management approach means that the cost of moving milk from the farm to a dairy is shared by all milk producers and remote farmers receive the same net return per litre of milk produced as do farmers in Southern Ontario who are closer to milk-processing plants. This supply management system has increasingly come under pressure, as described in the text box below.
5 The volume of milk produced in Ontario is determined by a body called the P5 Supervisory Body (P5), which includes Ontario, Québec and the Maritime provinces. Within Ontario, the Dairy Farmers of Ontario allocates the province’s share of milk production among quota holders where quotas are expressed in terms of kilograms of daily butterfat. Each producer receives a price that reflects their quota as part of Ontario’s quota of total milk revenue generated by all the members of the P5. 6 http://www.omafra.gov.on.ca/english/stats/dairy/shipment.htm 7 Dairy Farmers of Ontario estimate. 8 Ontario Ministry of Agriculture, Food and Rural Affairs Statistics 9 Agriculture and Agri-Food Canada, Canadian Food Trends to 2020 – A Long Range Consumer Outlook, July 2005.
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Dairy Supply Management: Trans-Pacific Partnership Negotiations
The Trans-Pacific Partnership is a group of countries on both sides of the Pacific Ocean who are in the process of negotiation liberalised trade agreements. Currently, there is a great degree of uncertainty with respect to Canada’s commitments to the Trans-Pacific Partnership negotiations, which could potentially require the abolition or weakening of domestic marketing boards such as the DFO. Dairy producers who currently enjoy low transportation costs are, in essence, providing a subsidy to those who are located in more remote areas and whose product must traverse greater distances to reach a dairy. In addition, the DFO provides price stability and insulates dairy farmers from shocks, such as competition from imported dairy products.
If the DFO supply management system is abolished, location would become a much more important factor in cost-competitiveness of milk products, and would severely weaken many Northern Ontario dairy farmers as they would have to pay the cost of transporting milk to the nearest dairy which would typically be much higher than in other parts of the province. This could lead to either a number of dairy farm relocations or to their closure as they would no longer be in a position to compete with farms located closer to dairies and markets.
Livestock and Cattle Farming Cattle farming dominates livestock production in Northern Ontario, with 519 farms dedicated to beef production in Northern Ontario (in contrast to slightly more than 100 farms dedicated exclusively to other types of meat production, poultry, egg or other animal production).10 Of the $31.8 million generated in cash receipts from livestock farming in 2010, cattle farming accounts for the majority ($27 million). Cattle farming primarily occurs in the districts of Manitoulin, Rainy River, Timiskaming and Algoma, which together accounted for 81% of agriculture receipts from cattle farming in 2010.11
There are no commercial-scale laying, broiler chicken or turkey farms in Northern Ontario. These types of farms in Northern Ontario are too small to be regulated by the respective marketing boards (Chicken Farmers of Ontario, Ontario Broiler Hatching Egg and Chick Commission, Egg Farmers of Ontario, Turkey Farmers of Ontario) and the respective marketing boards will not sell quotas to Northern Ontario producers.
The demand for Northern Ontario beef is primarily driven by demand beyond the region, with cattle raised and processed in the region serving a limited niche market. This is because the majority of cattle must sell outside of region as calves or yearlings due to a limited number of feedlots and processing facilities in Northern Ontario. The costs of shipping calves or yearlings
10 Statistics Canada, Census of Agriculture, Farms Classified by Industry, 2011. “Northern Ontario” plus Parry Sound. 11 Manitoulin (52%), Rainy River (42%), and Algoma (25%).
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over long distances increases overall production costs relative to farmers located closer to production and processing facilities in other parts of Ontario.
Cattle herd numbers in Northern Ontario fell by 34% between 2005 and 2011 (Figure 6-4). Consultations indicate the decline is based on three factors. The first is the weak global demand for Canadian beef following the 2003 – 2008 bovine spongiform encephalopathy (BSE), or Mad Cow disease, outbreak in Canada.12 The second is a trend for cattle farmers to convert pasture into cash-crop land to take advantage of rising canola and wheat prices. The third is increased input costs which have made cattle farming less attractive. Beef production is not covered by a marketing board and as a result beef prices are more volatile to market demand. Beef farmers respond to lower prices by reducing the size of their herds. When prices recover it takes years to rebuild the herd sufficiently to increase beef production.
Figure 6-4: Northern Ontario Herd Sizes, 2005-2010
Source: CPCS Analysis of Ontario Ministry of Agriculture, Food and Rural Affairs Statistics, Livestock and Poultry
12 Despite a moderate recovery, total Canadian beef exports in 2011 were only 71% of exports in 2004. Data from Agriculture and Agri-Food Canada, Red Meat Market Information: http://www.agr.gc.ca/redmeat- vianderouge/tra-com_eng.htm
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There are some positive opportunities for cattle farming in Ontario. Additional demand for beef in Asia has recently put pressure on Western Canadian and U.S. beef producers to supply Asian rather than domestic markets. In turn, this has created an opportunity for Ontario cattle to fill the gap created by overseas shipping of Western beef. For example, one Northern Ontario entrepreneur consulted for the study is trying to increase the beef cattle herd in an area north of Sudbury. In the long-term, the objective is to sell the products from this enlarged herd into the central and western U.S. to replace U.S. beef exported to Asian markets.
Field Crops The production of field crops is on the rise in Northern Ontario, with cash crops such as canola, oats and barley growing in importance. Field crop farms are concentrated in Northeastern Ontario in the Clay Belt area, where the weather is slightly warmer (more Corn Heat Units) and more favourable to such crop production.
Field crops account for approximately 10% of the Northern Ontario’s cash receipts, 34% of its agricultural land, and are grown on 35% of Northern Ontario’s farms. 13 Perhaps more than any other agricultural sector, field crop production is dependent on weather. As such, climate change and yearly temperature or rainfall fluctuations have a strong effect on crop yields.
Northern Ontario’s field crop production fluctuated between 2005 and 2010, but has seen positive growth overall, with growth of 12% between 2005 and 2010 (Figure 6-5). Certain cash crops have become an increasingly larger component of the total output of the region.14 In particular, canola production grew fourfold and oats nearly threefold between 2005 and 2010.
13 This figure includes canola, hay, wheat, and oats. Exact numbers are unavailable as data granularity does not allow for a full division of the “Other” category. As such Field Crops may account for substantially more than 10%. 14 Crops grown exclusively (or near-exclusively) for sale to wider markets rather than use on-farm.
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Figure 6-5: Northern Ontario Field Crop Output, 2005-2010
Source: CPCS Analysis of Ontario Ministry of Agriculture, Food and Rural Affairs Statistics, Field Crops.
The category of “Other” field crops such as soybeans, mixed grains, winter wheat and grain corn, while only 3.3% of Northern Ontario production in 2005, saw a 39% increase in production between 2005 and 2010. According to stakeholders, the major drivers of this growth are local and global increases in field crop prices of up to 86% between 2000 and 2010, as well as genetic improvements in crop varieties that better suit the northern climate and crop disease profiles.15
Field crops (grains and oilseeds) are in demand by regional and non-regional consumers. Some grain is fed to local livestock, but the remainder is largely shipped beyond the region for processing (with notable moves to Southern Ontario and Quebec), primarily due to limited processing facilities in Northern Ontario. Hay produced in Northern Ontario is in demand from local farmers and animal keepers, and is also shipped beyond the region in more limited quantities. With increases in cash crop commodity prices and improving growing conditions, hay growers in Northern Ontario are becoming more innovative and some are gradually shifting from growing hay to higher value corn, canola and cereal grains for export.
15 Field crops have seen substantial increases when comparing 2010 with 2000. Canola 86%, oats 69%, barley 67%, hay 58%, spring wheat 54%, and fodder oats 22%.
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Aquaculture Sector There are 11 cage farms and one land-based aquaculture farm in Northern Ontario producing approximately 80% (3,400 tonnes) of all of the rainbow trout produced in Ontario.16 The cage based farms are primarily located on the banks of Lake Huron, primarily in the North Channel area near Manitoulin Island and Parry Sound, with the land-based farm located near Sudbury.17 Cage-based farming utilizes existing bodies of water and encloses fish in large cages, most often constructed of synthetic materials, which allow water to pass freely between the fish and the larger water source. Over the last 20 years, cage culture production has supplanted land-based production, which occurs primarily in Southern Ontario, as the dominant source of trout in the province, as illustrated in Figure 6-6.
Figure 6-6: Ontario Aquaculture Production, 1988-2009
5,000
4,000
3,000
2,000
Number of of Number Farms 1,000
0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Land-Based Cage Farm Combined
Source: CPCS Analysis of Northern Ontario Aquaculture Association, Economic Impact of the Cage Culture Industry in Ontario (2007). Data for 2007, 2008 and 2009 is not available broken down into land-based and cage-farm categories only total combined production (in green colour).
Output from aquaculture cage farms is destined for grocery stores or restaurants throughout Ontario, but not beyond, as provincial demand is greater than current industry production; there is no excess for export. Approximately 10% of Northern Ontario farmed fish is consumed as whole fresh fish, while 90% is processed prior to consumption. In spite of strong growth in the late 1990s, the rainbow trout aquaculture industry in Northern Ontario has not witnessed any growth for more than a decade, in spite of several production and location advantages relative to other parts of Canada, and in spite of a market where demand exceeds supply by a substantial margin. The main barrier to growth in supply is an uncertain regulatory environment. Although efforts have been made by all the agencies with a
16 Statistics Canada, Aquaculture Production and Value. Estimate of Northern Ontario production provided by the Northern Ontario Aquaculture Association and supported by latest available research data (2007). 17 There is also one land-based aquaculture farm in Northern Ontario, near Sudbury.
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role in aquaculture (there are many) to clarify and streamline the licensing process and environmental and monitoring conditions, this has not yet been substantially achieved. Overall, ongoing regulatory confusion regarding environmental conditions, both baseline and monitoring, have stalled the industry.
Other Sectors Fruits and Vegetables
There is a relatively small fruit and vegetable production sector in Northern Ontario which primarily serves the local market. There are some exceptions, for example, blueberries which are shipped from Northeastern Ontario to Southern Ontario. Population growth would be the primary driver of an increase in demand for fruits and vegetables. Overall, the population across Northern Ontario is expected to experience limited to no growth (depending on the region), as described in Chapter 2. However, two factors may buoy demand for local produce somewhat. First, there is a growing interest in an “eat local” culture which has encouraged farmers to both participate in local farmers markets as well as to invest in growing a wider variety of crops. Northern Ontario farmers are hoping to capitalize on this trend in order to achieve a premium price at local farmers markets and in local grocery stores for their in- season products versus those products imported from outside the region. Second, the anticipated expansion of mining sector activities will increase demand for food, some of which would hopefully be met through local production.
6.2 Sector Developments and Trends In this section, we summarise a number of the economic and industry trends and developments which have and will continue to affect development of the agriculture and aquacultures sectors in Northern Ontario in coming years.
Rising Cost of Agricultural Inputs The cost of doing business as an agricultural goods producer has risen substantially in the past decade due to the rising cost of agricultural inputs. Machinery fuel and fertilizer costs have more than doubled in the past 10 years (Figure 6-7).
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Figure 6-7: Farm Input Price Index, 2002-2012
Source: CPCS Analysis of Statistics Canada, Farm Input Price Index, Table 328-0015
Equipment maintenance costs have also shot up. A number of stakeholders noted that stricter environmental regulations have led to introduction of more advanced components in vehicles which, in turn, are more prone to breaking down and costlier to fix (notably affecting trucks and tractors). As a result of higher input and maintenance costs, some producers have shut down operations due to an inability to maintain revenues above costs while others have avoided modernizing their equipment out of fear of higher maintenance costs they would be unable to offset.
Demand for Land in Northern Ontario Growing Farmland in Southern Ontario is becoming increasingly valuable and scarcer as a result of higher population pressures, notably around the GTA. Stakeholders noted a visible increase in the number of farmers from Southern Ontario who are purchasing less expensive land in Northern Ontario to expand their operations and/or selling their existing land, relocating and investing in new capital equipment that they otherwise could not afford. While the impacts of this trend are still unclear, farmers moving from the south are more likely to be able to invest in both larger farms and new machinery. This trend indicates there may be potential for an increased agricultural production from Northern Ontario. The trend is particularly evident in New Liskeard, where competition between several large, well-financed farmers in the area has driven up land prices.
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High Production Costs Associated With Remoteness Of Northern Ontario Apart from lower land costs, the costs of farming in Northern Ontario are significantly higher than in Southern Ontario. Since much of the region’s crop and livestock inputs are imported from either the south or from outside Ontario through the west and south, livestock feed, fertilizers, agricultural chemicals and seeds are all more costly in Northern Ontario. Further, all outputs grown in the North that are surplus to regional needs must be priced on an “export basis”, meaning that farm gate prices must be lowered accordingly to account for higher transportation costs to more distant markets. Agricultural products that originate in Northern Ontario and move to Southern Ontario are currently moved exclusively by truck.18 Some grain dealers have tried using rail, but it is not cost competitive with trucks on a per-tonne basis. Overall, the further the market is from Northern Ontario, the more transportation costs rise, and the less incentive there is for the farmer or grain trader to sell his or her product given the need to discount their farm gate price.
Lack of Scale Affects Efficiency Based on stakeholder input, the North’s agricultural sector is at a disadvantage in terms of economies of scale when compared with the rest of the province. The relatively small size of Northern Ontario farms somewhat limits their ability to compete beyond the region. Large centralized processing plants in Southern Ontario such as dairies, slaughterhouses and flour mills are growing ever larger to take advantage of such economies of scale. However, farms and markets in Northern Ontario are relatively small and widely distributed, while large processing plants in the south are able to efficiently serve both southern and northern producers, further weakening the North’s agricultural sector.
Labour Shortage and Low Replacement of Retiring Farmers A notable trend across Northern Ontario (and Canada) is the general aging of farmers and a lack of willingness amongst younger individuals to enter farming. Between 2001 and 2011, the average age of farmers in Northern Ontario increased by 3.3 years, from 51 to 54.3 years. In the supply-managed dairy sector, the cost of purchasing a milk quota from a retiring farmer is usually larger than the price of the farm itself, and beyond the reach of most young farmers.
There is also a labour shortage across the region for young, able-bodied workers willing to take up farming. This shortage is expected to increase with the anticipated boom in mining activities in Northern Ontario, especially as the mining sector can typically pay higher wages. While larger agricultural producers may be able to offer higher wages or, as an alternative, afford to invest in machinery leading to less labour-intensive production, the nature of Northern Ontario’s multitude of small farms suggests that most producers will not have the capacity to expand on either front.
18 The Port of Thunder Bay handles very large volumes of grain, but this originates from the Prairie provinces.
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Warming Weather Likely to Improve Yields Another trend that will likely continue to affect the Northern Ontario agriculture sector is climate change. Currently, there is a general agreement that the frost-free period has grown longer and that summers are hotter with more heat falling on each unit of land per year (corn heat units) than in the past. Both of these trends will allow new crops to be grown and for existing crops to produce better yields. While this trend has been noted mainly in the southern parts of Northern Ontario, it is perhaps only a matter of time before conditions throughout the region change perceptibly. Of course, climate change is likely to also affect growing conditions in nearby regions, such as Southern Ontario, the Canadian prairies and the Northern U.S., potentially leading to greater competition.
Cuts in Funding for Agricultural Research Funding for Agriculture Research Stations in Northern Ontario has been on the decline in recent years. There have been cutbacks in agricultural research, including the Kapuskasing Agriculture Research Station closing (federal decision) and cutbacks at the Thunder Bay Agricultural Research Station. Consultations indicate that the province and University of Guelph are planning to reduce operations at New Liskeard and Emo research facilities, as well as the trial facility in Verner. This loss of research capacity is not a positive sign for agriculture in Northern Ontario and may dampen potential for growth in the sector. Examples of potential impacts include a loss of the important role in agricultural research for the evolution of new crops and seed varieties adapted to the changing Northern Ontario climate.
Concerns Regarding ONTC transformation and Impact on Truck Traffic Stakeholders in the primary growth areas around the Timiskaming district have expressed concerns that following the announcement on transformation of ONTC, existing service levels may deteriorate, which in turn could result in an increasing number of trucks on the road in the prime corridor between New Liskeard and North Bay. While agricultural producers are not significant users of the railway, the concern is that additional trucks on the road will simply add to traffic levels and result in delays and increased transportation costs.
Surge in Farming Activity Around New Liskeard – Especially Field Crops There has been a notable trend for increased and more intensive farming in the Timiskaming district, centred on the town of New Liskeard. Between 2001 and 2011, the number of farms in the district fell by 24%, but farm receipts increased by 37%. Over the same period, there was a shift away from cattle ranching (which accounted for 57% of farms in 2001 and only 30% in 2011) towards field crop production, notably oilseeds such as canola.19 This trend is likely driven by the relative richness of the local soil (clay belt), a warming climate, rising field crop prices and improved varieties of seeds suited to the Northern Ontario environment.
19 Statistics Canada, Census of Agriculture 2011
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Overall, the number of canola farms in Northern Ontario increased more than 6-fold between 2001 and 2011 (from 5 to 33 farms), with most of the growth in the Timiskaming district. This trend is likely fuelled by the more than 85% increase in canola prices between 2000 and 2010.20 Growth in farming of oats is also on the rise, alongside an increase in their price.
Use of Agricultural Products for Biofuels In recent years there has been interest in the potential of using agricultural products as a form of biomass for energy production. Stakeholder consultations suggest that using fast-growing trees, grasses or peat grown in Northern Ontario as a source of biofuels is a long-term project (10 years-plus) that requires a stable and committed local government, training of farmers and operators, and federal and provincial government funding support. Conditions to encourage agricultural biomass would include legislation either offering a subsidy for biomass production or carbon tax or a mandate to burn biomass. Biomass, in early tests, has proven to be cheaper than diesel to generate electricity, provides local jobs and is one viable alternative to the current situation (reliance on gasoline and diesel from the South) for sites that are not served by a natural gas pipeline.
Supermarket Purchasing Agreements Limit Opportunities for Local Produce Centralized purchasing programs of many large retail food stores within Northern Ontario dictate the source of food even though local Northern producers have the product in surplus. Thus, despite having a geographic advantage, local farmers may be unable to sell their products because larger chains sign multi-year contracts with large producers that can ensure year-round supply of products.
Entrepreneurship and Food Security Initiatives Show Potential Farmers and those servicing farmers in Northern Ontario have an independent mindset. They want to be self-sufficient in the North. In addition, most farmers operate relatively small farms that are somewhat more flexible and open to experimentation than larger capital-intensive farms. Consequently, entrepreneurs in agriculture in Northern Ontario keep trying new types of crops, new farming techniques, and new transportation and supply solutions for local and continent-wide markets. In addition, many are taking advantage of the expansion of mining development and its related development of transportation infrastructure in Northern Ontario. Agricultural activities in these areas have the flexibility to benefit from the improvement of roads that serve these mining projects.
There is a lot of potential which could be harnessed to encourage local agricultural food production for First Nation communities in Northern Ontario. The Aboriginal population is the fastest growing segment of the population in the region, and along with mining infrastructure expansion, remote and Far North First Nation communities are increasing farming and
20 Global Markets Research, Commodities: Agri Upgrates, 10 July 2012 (www,commbank.com.au)
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pursuing ‘grow local’ approaches associated with food security initiatives, including commercial opportunities. For example, Nishnawbe Aski Nation (NAN) – a political territorial organization representing 49 First Nation communities within Northern Ontario – is working with its First Nation communities to restore locally produced food that is integral to resilient ecosystems and development of sustainable economies.
6.3 Regional Competitiveness
6.3.1 Strengths, Weakness, Opportunities and Threats The following SWOT analysis succinctly outlines the current state and future outlook for the agriculture sector in Northern Ontario.
Figure 6-8: SWOT for Agriculture Sector
Strengths Weaknesses
• Northern Ontario has an abundance of • The relatively greater distances from both small local and more relatively affordable land when compared distant major markets create higher transportation costs for with Southern Ontario. regional producers, affecting input and product costs. • The growing local market and “eat local” • Small scale of production hinders economies of scale amongst culture act as a foundation for local farmers and food processors which create higher average costs vegetable and fruit production, helping to of production in Northern Ontario when compared to Southern shield regional producers against major shifts Ontario. in regional and international demand or • Fewer processing facilities in Northern Ontario limit the potential prices of their goods. to market value-added products in Northern Ontario (e.g. cattle • A culture of self-sufficiency amongst feedlots, dairies and oilseed processing facilities) producers motivates Northern Ontario • The North’s shorter growing season and long winters reduce farmers to take initiative and experiment annual yields of crops and restrict the region’s ability to supply with new crops and persevere in hard year-round products for local grocery chains economic times. • Lack of storage for locally grown crops and products depresses • The potential for increased aquaculture prices at harvest and forces surpluses to be moved from production is strong, given very high Northern Ontario at harvest time at discounted prices rather provincial demand. than stored locally and consumed locally later in the year. • Higher costs of inputs have put pressure on agricultural producers both in Northern Ontario and further afield. • Uncertainty around the regulatory regime for aquaculture has hindered any major investment in the sector for a number of years.
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Opportunities Threats
• Climate change has and is expected to • Cuts in agricultural research funding continue to improve growing conditions in • The potential abolition of DFO supply management would Northern Ontario by increasing both the severely weaken many Northern Ontario dairy farmers as they duration and warmth of the region’s growing would have to pay the cost of transporting milk to the nearest season. dairy, resulting in higher total transport costs as compared to • Potential biofuel demand could drive up their southern Ontario counterparts. certain field crop prices and allow for higher • While climate change is expected to improve growing conditions, profit margins for the region’s agricultural it is also inherently unpredictable. As such, it could potentially producers. This is seen as a medium to long- create greater variability between seasons and more term option. unpredictable conditions. Further, climate change is likely to also • Growth in short and medium-term local affect growing conditions in nearby regions, such as Southern demand and wealth around mining Ontario, the Canadian prairies and the Northern U.S., potentially development could increase demand for leading to greater competition. Northern Ontario agricultural production. • Northern Ontario’s aging labour force will put pressure on • Growth and agricultural research in the agriculture as farming is seen as a less desirable and less Timiskaming area could bring about a strong profitable occupation when compared to mining. The number of agriculture cluster in the area, which could people involved in agriculture production may dwindle create economies of scale not currently substantially, thereby driving up agriculture labour costs. Aging present in Northern Ontario. also affects dairy farming as older people tend to drink less milk. • Growing Aboriginal youth demographic and • In the long run, Northern Ontario’s local population is expected associated increase in employment potential to grow only slowly or decline depending on the region (the extent of decline will depend on how much growth in mining sector affects population growth overall). Any decline in population will lead to reduced agriculture demand for locally- produced products in the region. • Increases in fuel prices will continue to disproportionately affect Northern Ontario producers due to the relatively greater distances traversed by regional producers’ goods.
6.4 Outlook On the basis of the preceding contextual review, the outlook for the agriculture and aquaculture sectors is mixed overall. While the sector has a number of unique strengths and opportunities, it also suffers from a number of serious weaknesses and is exposed to a number of significant threats.
• We anticipate the dairy sector will decline overall. With the aging of the farm population, it is likely that productions quotas will shift to farmers beyond the region and that more liquid milk and specialty dairy products will come from Southern Ontario. Eventually this could cause one or more of the existing dairies in Northern Ontario to close.
• The cattle farming outlook is low to moderate, with the higher transportation costs for inputs and outputs to market likely to continue to affect growth potential.
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• The aquaculture sector remains somewhat stalled in its current state, with moderate growth in the medium term predicated on clarification of regulations around fish farming.
• There has been, and we expect there will continue to be, a rapid growth in cash cropping of field crops in the areas around New Liskeard and north of North Bay in the fertile clay belt, with a warming climate presenting opportunities for a longer planting season and new crop varieties. Overall Outlook
The overall short, medium and long-term outlook for each sector is presented below, based directly on consultations with industry and external research.
Figure 6-9: Outlook for Agriculture Sector, Growth from Current Context
Sector Short Term Medium Term Long Term (2012-2016) (2017-2026) (2027-2036) Dairy Decline Decline Decline Cattle Farming Low to Moderate Low to Moderate Low to Moderate Aquaculture Limited Moderate Moderate to High Field crops (canola, Low to High (range of Moderate to High Moderate to High soybeans, oats) responses) Hay Moderate Moderate Moderate Source: CPCS-conducted stakeholder consultations and research.
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Agriculture Sector Transportation Overview
6.5 Agriculture Sector Supply Chain Overview
6.5.1 What Inputs and Outputs Generate Transportation Flows? Dairy Sector Supply Chain
The graphic below illustrates the inputs and outputs that generate transportation flows in the dairy sector in Northern Ontario.
• Dairy farms receive a range of inputs to support ongoing operations, including equipment, fuel, animal feed (hay, forage and grain), and veterinary products (antibiotics, medicines, etc.).
• Raw milk is shipped to dairy processing plants for production into processed milk
• Processed milk is then shipped directly to market, or to further processing facilities for the production of ancillary products such as cheese, ice cream, etc.
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Figure 6-10: Dairy Sector Supply Chain
Transportation Requirements for Dairy Sector
All inputs to dairy farms in Northern Ontario arrive by truck. Locally grown feedgrains are supplemented where necessary by “imported” feedgrains from outside the region. In Northeast Ontario, imported feedgrain and inputs typically come from southwest Ontario, while in Northwest Ontario, inputs arrive more often from Western Canada. Inputs are typically consolidated at a local feed and agriculture product wholesaler (see text box below) and then transported by truck to the dairy farm. Some of these wholesalers receive inputs by rail, but truck is more common.
Regional Co-Operative Wholesalers: Key to Agriculture Supply Chain
Northern Ontario farmers are well-served by a series of co-operative wholesalers located across the region. These retail outlets purchase in bulk and provide a full range of inputs required by farmers and animal owners in the region. The co-ops will typically stock products for the general feed and upkeep of all types of animals including beef, dairy, alpaca, deer, bear farming, horses and domestic animals. They also provide wholesale petroleum products, crop inputs, grain marketing information activities and grocery stores. The Thunder Bay Farmers Co-op is the primary facility serving Northwest Ontario, with important Northeastern Ontario co-operatives located in St. Charles, Verner, Thornloe, New Liskeard, Val Gagné, Echo Bay and Noelville.
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Raw milk is shipped from farms to processing facilities in insulated tanker trucks by independent trucking companies contracted directly by DFO.21 Raw milk is generally picked up every second day from farms, a practice which has been unchanged for the past 30 years. Transport companies will pick up from multiple farms, combining milk in the tanker for delivery to the dairy processing plant. There are four dairy processing plants in Northern Ontario: Sudbury (Parmalat), Espanola (Farquhar’s Dairy), Thunder Bay (Parmalat) and Thornloe (Thornloe Cheese). Milk from the Rainy River district is transported to Grunthal, Manitoba for processing as there are no dairies in Ontario west of Thunder Bay.
From dairy processing plants, milk is transported by independent trucking Insulated milk truck. Source: istock companies in refrigerated trucks to either local or regional markets and retail stores for table milk (to drink), or to further processing facilities for production of butter, cheese, ice cream, yogurt, etc. The milk in Northern Ontario primarily goes into the table milk (drinking milk) market. According to the Dairy Farmers of Ontario, roughly 75% of the milk consumed in Northern Ontario is produced there. The remaining milk is brought in from outside of the region.
There are two cheese-making companies in Northern Ontario: Thornloe Cheese (north of New Liskeard) and Thunder Oak Cheese Farm in Neebing (near Thunder Bay). Farquhar’s dairy in Espanola also produces and distributes ice cream. According to consultations, however, the vast majority of non-liquid milk dairy products (butter, yogurt, ice cream, speciality products, etc.) consumed in Northern Ontario is shipped in from outside the region.
Cattle Farming Supply Chain The graphic below illustrates the inputs and outputs that generate transportation flows in the cattle farming sector in Northern Ontario.
• Inputs to a cattle farm include feed, equipment and nutrients for the animals
• From the farm, mature cattle are shipped directly to livestock auctions and/or abbatoirs, while calves and yearlings are moved to feedlots for fattening up prior to slaughter.
• Feedlots require inputs to fatten up calves and yearlings, including high energy feed and all of the associated farm equipment and supplies.
21 Dairy Farmers of Ontario website: www.milk.org/Corporate/View.aspx?Content=Students/Transportation
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• From feedlots, mature cattle are shipped to livestock auction markets or abbatoir / processing facilities
Figure 6-11: Cattle Farming Supply Chain
Transportation Requirements for Cattle Farming in Northern Ontario
Inputs are brought to a cattle farm by truck, in some cases feed grain is grown on the farm. As with dairy farms, in most cases in Northeast Ontario, feed grain and other inputs come from southwest Ontario, while in Northwest Ontario, inputs arrive more often from Western Canada. Smaller individual farmers purchase their inputs from the nearest agricultural wholesale supply co-operative and move product to farm gate by truck.
From a cattle farm, a range of options exist and they all involve truck transport. Live cattle may be shipped beyond the region as calves or yearlings, for sale at livestock auction markets. There are 26 provincially licensed Livestock Auction Markets in Ontario, including one in Northern Ontario (Temiskaming Livestock Exchange in New Liskeard).22 From an auction market, they would their either be slaughtered at an abattoir or brought to a feedlot for fattening up for three to four months prior to being slaughtered.
22 OMAFRA, Licensed Livestock Auction Markets in Ontario. http://www.omafra.gov.on.ca/english/food/inspection/meatinsp/lscsa_list.htm
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There are few feedlots in Northern Ontario and as a result, the majority of animals are shipped outside of the region as calves or yearlings to feedlots for the final stage of growth and slaughter. The main competition for space in Southern Ontario feedlots comes from the western provinces, meaning that producers in Northern Ontario are not at a transportation disadvantage based on distance.
Options for slaughter include provincial or federally regulated abattoirs. There are 13 provincially inspected abattoirs in Northern Ontario and one federally inspected facility in Nipissing (out of 45 federal facilities located in other parts of Ontario).23 The lack of federally inspected facilities (and a lack of feedlots) means that cattle farmers looking to sell their beef outside of the Ontario market must ship their live cattle either to Southern Ontario, Manitoba24 or Quebec. This is a major cost for Northern Ontario meat producers as moving live animals is costly, labour-intensive and stressful on the cattle.
Large-scale supermarkets do not usually source meats from provincially inspected plants. This reality, combined with the fact that there are few feedlots in Northern Ontario, means that very little beef is actually processed in Northern Ontario. What is raised and processed in Northern Ontario serves a limited, niche regional market.
Transport of cattle and meat products in Northern Ontario is done exclusively by road. Fresh or frozen processed meat is transported in refrigerated trucks. Federal requirements for transportation of livestock are covered under the Health of Animals Regulations, Part Xii, (made under the Health of Animals Act, 1990) which define the transportation practices to be used during loading, transit and unloading. This includes strict practices on the food, water and rest which must be given to animals in transit. The regulations are enforced by the Canadian Food Inspection Agency (CFIA) with the assistance of other federal, provincial and territorial authorities.
Field Crops Sector Supply Chain (excluding hay) The inputs and outputs that generate field crop transportation flows are presented in the figure below and are relatively straightforward. Unprocessed grain is either sold locally as animal feed or shipped to grain processing facilities for further refining before human consumption.
23 Provincially Licensed Meat Plants (for beef) are located in: Belle Valle, Bruce Mines, Emo, Gore Bay, Joques, Magnetawan, Murillo, Oxdrift (two plants), Ramore, Sprucedale, Trout Creek and Warren. Source: OMAFRA, http://www.omafra.gov.on.ca/english/food/inspection/meatinsp/licenced_operators_list.htm. A 14th provincially regulated and inspected plant is currently under construction on Manitoulin Island. 24 Manitoba’s four federally inspected facilities, located in Winnipeg, Winkler, Neepawa and Blumenort, are all closer to Rainy River and Thunder Bay than is the Nipissing-based facility.
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Figure 6-12: Field Crop Supply Chain
Transportation Requirements for Field Crops Sector
The inputs for field crop farms include seed, fertilizer, machinery and equipment, and fuel for operations. These inputs are typically sourced by truck from local wholesale co-operative retail outlets who buy in bulk from suppliers.
Grain and oilseed is harvested on the farm and is either stored temporarily in silos on farm (allowing the farmer to decide when to sell product) or moved directly to market. The options for farmers moving product beyond their farm include: sending product directly to local customers (e.g. for feedgrain at local farms), consolidating grain at regional grain elevators, or shipping grain directly to a processing facility (e.g. feed mills, oilseed crushing plants, flour mills or ethanol plants). Parrish & Heimbecker Koch Grain Elevators, As a requirement of the federal Canada Grain Act, Earlton, source: www.parrishandheimbecker.com grain elevators must be licensed by the Canadian
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Grain Commission (CGC). There are seven federally licensed grain elevators in Northern Ontario, all located in Thunder Bay, and catering primarily to grain moving from the prairies to export markets via the Port of Thunder Bay.25
At a provincial level, any person who operates a grain elevator and stores grain other than their own in Ontario must have a grain elevator operator licence under the provincial Grains Act.26 There are five provincially licensed grain elevators in Northern Ontario (all in Northeast Ontario), operated by three companies: Grant Reliable Elevators has two elevators in New Liskeard, Co-operative Regionale de Nipissing-Sudbury has two elevators in Verner, and Parrish & Heimbecker has an elevator in Earlton (operated by Koch Elevators). By way of comparison, there are over 200 other provincially licensed grain companies in other parts of Ontario.27
There is very limited grain processing capacity in Northern Ontario.28 The smaller processing facilities in Northern Ontario tend to produce small quantities of speciality oils (e.g. cold pressed, organic, etc.). This grain typically moves from farms and/or grain elevators in Northeastern Ontario to processing facilities in Southern Ontario and Quebec. Notable moves include oilseeds (canola, soybeans, flax) to large, commercial-scale facilities in Hamilton, Windsor and Montreal, and oats to the Quaker facility in Peterborough. The trucks which bring grains and oilseeds south return with backhaul of inputs to the agriculture industry, such as fertilizer.
Virtually all movement of grain is done by truck, with very little grain moved by rail (other than major moves from the Prairies to Thunder Bay or direct to eastern Canadian elevators). We understand from consultations that there are a few rail sidings accessible to existing grain elevators but that exporting grain by rail is currently more costly than moving it by truck. The only instance we are aware of is relatively small volumes (<10,000 tonnes) being moved annually from the Parrish & Heimbecker-owned Koch Grain Elevators in Earlton to Southern Ontario. This facility is connected to the Ontario Northland Railway.
25 Canada Malting Co. Ltd., Cargill, Mission Terminal, Parrish & Heimbecker, Richardson International, Viterra (2), and Western Grain By-Products Storage (certified organic grain). Information from Canadian Grain Commission, www.grainscanada.gc.ca 26 Agricorp website: www.agricorp.com 27 Source: Agricorp licence search: www.agricorp.com/en-ca/Programs/GFPP/Pages/CheckLicence.aspx 28 Of note, in spite of supplying the majority all of canola produced in Ontario, Northern Ontario has very limited canola crushing capacity. A German company is currently considering investing in a canola crushing facility in the New Liskeard area, which would accommodate some of the canola produced in the area. This is likely to be a small-scale specialised facility producing niche products.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Field Crops Supply Chain (Hay) The input process for hay production is similar to other field crops, but the output market for hay is somewhat distinct. Hay is the largest field crop output in volume terms, accounting for approximately 75% of total field crop tonnage in Northern Ontario.
Hay is in high demand by local and international farms for use in upkeep of horses as well as for feed of dairy and beef cattle in the winter. Hay is regularly moved between farms in the region, and is also exported to Southwest Ontario and the U.S.. All such moves are done by truck, with Northern Ontario farmers benefitting from backhaul rates to the U.S. after U.S. produce and other commodities are imported into Canada.
Aquaculture Sector Supply Chain The supply chain for the industry is presented in the figure below. In simple terms inputs such as fingerlings (young fish) and fish feed result in live fish production. Live fish are then either shipped directly to consumers or to fish processing facilities to make ancillary fish products.
Figure 6-13: Aquaculture Supply Chain
Transportation Requirements for Aquaculture
The largest input by far to aquaculture farms is fish feed. This is currently supplied by truck to Northern Ontario farms primarily by three companies, one located in Southern Ontario and two companies from the East Coast of Canada. Other inputs and supplies include trout
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
fingerlings (young fish), nets and rigging, cage components and shipping totes. These are primarily supplied by companies located outside of Northern Ontario, also by truck.
The outputs of the aquaculture farms are live fish, some of which are sent straight to market (less than 10%), with over 90% of production destined to the retail grocery sector or food service industry following processing at two Ontario food processors. One of these is in Southern Ontario (St. Thomas), the other is on Manitoulin Island. These products need to move by refrigerated truck and trailer. Demand for rainbow trout is higher than the Ontario industry can supply, so little product is directly exported to the U.S.
Overall, all inputs and outputs in the aquaculture sector move by road, primarily on the highways connecting Manitoulin Island (Highways 540 and 6) to Highway 17 and the south on Highway 69/400.
Transportation Requirements for Labour Road is the only means of transportation used for employees to reach production and processing sites in Northern Ontario, across all sectors.
Use of the Air Mode in the Agriculture Sector
The air mode is used extensively for the import of food to the region. There are many First Nation communities in Northern Ontario that have their own local food systems and traditional food economies. The remote First Nation communities receive food primarily by air mode. Although the grocery store model has moved deeply into these communities and much of the food in the communities is purchased through this model, there is also a strong traditional food system and food economies within these communities. We are not aware of any significant volumes of agriculture or fish products produced and exported by air from these remote communities to other parts of Northern Ontario or beyond.
6.6 Northern Ontario Supply Chain Mapping
6.6.1 Current Commodity Flows In this section we describe and quantify the volumes of agricultural commodities currently moving on the transportation network in Northern Ontario, as well as identifying points and processing centres in the supply chain.
The map below shows traffic flows by rail, road and marine for the agriculture sector in Ontario. There is no data available on the flows of food shipments by air to or from remote First Nation communities in the Far North.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
The commodities included in road flows are: wheat and other cereal grains, potatoes, meat, fish and seafood, and other agriculture and food products.29 Truck flows are presented in daily truck trips, based on MTO Commercial Vehicle Survey data from 2011. The map shows truck trips with a start, end, or start and end, in Northern Ontario.
Rail volumes are presented in tonnages with low, medium and high flows (specific data is considered confidential by rail companies). The rail tonnage volumes have been presented such that the thickness of the flow line represents comparable volumes with truck trips.30 The rail and marine flows originate from one source: Large volumes of grain are shipped from the Prairies to Thunder Bay by rail for onward transport by vessel on the Great Lakes. Some smaller volumes of grain are also moved by rail from Thunder Bay westwards, although this is likely a re-direct of western grain (not grain originating in Northern Ontario). CN and CP both ship grain product to and from Thunder Bay.
29 Based on MTO’s Commercial Vehicle Survey data, 2011. 30 This was done by assuming that approximately 28 metric tonnes of product moving by rail would be carried per truck trip.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-14: Transportation Flows, Agriculture Sector
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Key points to note from the map include the following:
• Rail flows of western grain through Thunder Bay dwarf all other agriculture flows
• The areas of Northeastern Ontario around New Liskeard, Sudbury and North Bay are host to the largest number of off-farm support and processing facilities, including co-operative warehousing stores, grain elevators, abattoirs and dairy processing facilities.
• The highway corridors between Southern Ontario and Subdury (400/69) and North Bay/ New Liskeard (11) are the busiest in the region.
• There are limited east-west truck movements between Northwest and Northeast Ontario, which confirms consultation findings that most inputs and outputs from Northwest and Northeast Ontario are from within the region, or move to/from Western Canada or Southern Ontario, respectively. Indeed, higher transportation costs are associated with moving items east-west versus north-south in the north because there are usually backhauls in the north-south axis, but not in the north-east/north-west route. The map above does not illustrate directionality of flows (origin or destination, or whether trucks are moving to, from, or within Northern Ontario). However, a more detailed analysis of origins and destinations is presented below. There were 459 daily truck trips with a start, end or both a start and end in Northern Ontario in 2011, with origin and destination broken down in Figure 6-15 below.
• Almost 50% of daily trucks trips (217) are trucks moving exclusively within Northern Ontario. This would consist of trucks moving products to and from the various farm sites, suppliers and consumer markets within Northern Ontario.
• 40% (183) of trucks are destined to Northern Ontario from other regions, of which 75% originate in Southern Ontario. This would likely primarily consist of food imported for local consumption. Highways 11 and 400/69 are the primary corridors for such moves.
• In contrast, only 13% (59) of all truck trips start in Northern Ontario and move product outside of the region. Of these ‘export’ trips, 50% are moving product to Southern Ontario. Highways 11 and 400/69 are the primary corridors for such moves.
• Very little product moves directly to or from the U.S.; moves to or from the U.S. account for 15 trucks/day, or 3% of all daily truck moves.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-15: Origin and Destination of Daily Agriculture Truck Traffic in Northern Ontario (excludes flow-through traffic)
500 Origin of Products Destined to Northern Ontario
450 13% Atlantic Provinces Central Canada 1% Central USA 400 9% North East USA
183 Quebec 350 South East USA Southern Ontario 75% Western Canada 300 Western USA
1% 250 2% 1% Destination Outside of Northern Ontario
200 14% Atlantic Provinces 217 Central Canada 150 Central USA North East USA 17% Quebec 100 50% South East USA
Daily Truck Trips with and/orStartin Northern End Ontario Trips Daily Truck Southern Ontario 0% Western Canada 50 15% Western USA 59 0% 0
Originating in Northern Ontario Within Northern Ontario Destined to Northern Ontario
Source: CPCS Analysis of MTO Commercial Vehicle Survey 2011 data.
A more detailed breakdown of commodity movements by region of origin and destination are presented in Figure 6-16 and Figure 6-17. In terms of traffic destined to Northern Ontario (Figure 6-16), the majority (83%) of trucks are carrying “other agriculture and food products”, of which the vast majority is coming from Southern Ontario. As noted above, we understand
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
this would be a range of food products for consumption by the local population and for use by farmers in Northern Ontario.
Figure 6-16: Daily Truck Trips Destined to Northern Ontario, By Origin of Commodity, Agriculture Sector
Region / Commodity Wheat and Potatoes Meat, Fish and Other Other Cereal Seafood Agriculture and Grains Food Products Atlantic Provinces - - - 0.3 Central Canada 0.9 - 5.5 17.5 Central U.S. 1.4 - - 0.9 Northeast U.S. - - - 0.3 Quebec 11.8 - - 5.1 Southeast U.S. 0.3 - - - Southern Ontario 1.1 1.6 8.8 124.1 Western Canada - - - 1.7 Sub-total by Commodity 15.4 1.6 14.3 151.3 Commodity as % of total Traffic 8% 1% 8% 83%
Of the 59 trucks leaving Northern Ontario daily (Figure below), the vast majority (78%) are carrying “other agriculture and food products”, with 11% carrying “wheat and other cereal grains” and another 11% carrying “meat, fish and seafood”.
Figure 6-17: Daily Truck Trips Originated in Northern Ontario, by Destination of Commodity, Agriculture Sector
Region / Commodity Wheat and Potatoes Meat, Fish and Other Other Cereal Seafood Agriculture and Grains Food Products Atlantic Provinces - - - 0.5 Central Canada - - 1 7.0 Central U.S. 1.1 - 1.5 7.6 Quebec - - 0.3 8.7 Southern Ontario 5.3 - 3.8 20.7 Western Canada - - - 1.1 Western U.S. - - - 0.4 Sub-total by Commodity 6.4 - 6.6 46 Commodity as % of total Traffic 11% 0% 11% 78%
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
6.6.2 Future Commodity Flows In this section we discuss the future use of the transportation network for the agriculture sector. We look at a snapshot in 15 years from today, based on traffic forecasts generated by MTO (see Appendix D for details).31 The focus is on truck transportation, given both its importance for the sector as well as the fact that no data exists for air flows, and rail and marine flows are dominated by product (western grain) not originating or destined to Northern Ontario.
Before visually illustrating the changes in traffic volumes on the transportation network, we first discuss two sets of supplementary information which may affect future use of the system: expected industry changes, and the drivers behind the forecasted truck traffic flows.
Anticipated Industry Changes that Could Affect Transportation Flows We expect three primary “qualitative” factors to affect the demand for transportation requirements in the agriculture sector in the next five to ten years.
• With the aging of the farm population particularly in the dairy sector, it is likely that more liquid milk as well as all the specialty dairy products will come from Southern Ontario. Eventually this could cause one or more of the existing dairies in Northern Ontario to close. Overall, this will result in slightly more south-north traffic and slight less north-north traffic.
• There has been, and we expect there will continue to be, a rapid growth in cash cropping in the areas around New Liskeard and north of North Bay along Highway 17. Growth in these areas will create a demand for more agriculture inputs to the region (higher south-north truck flows) and increased flows of grains south to processing facilities and markets (higher north-south flows).
• With the anticipated increase in mining activity in coming years, we expect there to be peaks in demand for food consumption in key regions of Northern Ontario, particularly around Sudbury, Timmins, Kirkland Lake and Red Lake. This will likely increase the flow of food products to Northern Ontario from outside of the region (south-north flows), as well as potential for increased supply from local farmers (north-north flows).
Forecast Estimates for Truck Traffic CVS Data The average growth in truck traffic for agricultural products between 2011 and 2026, is summarized in the table below. The forecasts are based on MTO’s Commercial Vehicle Survey forecasts (see Appendix D), with comments from the CPCS team in the final column.
A map of the changes is presented after the figure.
31 These timeframes were chosen to correspond with the forecast data available from the MTO Commercial Vehicle Survey forecast timeframes.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-18: Current and Forecast Agriculture Sector Daily Truck Trips, By Commodity, 2011 and 2026
Commodity 2011 2026 Growth Key Drivers of Change (2011-2026) CPCS Comments Based on Consultation Trips trips Between 2011-2026 • Meat, Fish 44 58 32% Majority of volumes associated with moves Optimistic, but possible, If aquaculture sector and Seafood within Northern Ontario, which are expected potential is realized and beef growth rises overall. to increase from 23 trips/day to 30 trips/day • Other 388 562 45% 42% increase in largest traffic (within Seems very optimistic, as any major growth in agriculture, Northern Ontario) from 190 trips/day to 270 agriculture sector is expected to be concentrated food trips/day in other sectors (cereal grains), and population products • 49% increase in moves from Central Canada growth is not expected to justify increased to Northern Ontario (18 trips/day to 26 demand for food or agricultural inputs to this trips/day) extent. • 47% increase in moves from Southern Ontario to Northern Ontario (124 trips/day to 183 trips/day) • Potatoes 6 8 33% Very small volumes overall and single No comment, volumes very small. commodity, with no underlying drivers. Majority of potatoes move locally within Northern Ontario. • Wheat and 22 29 32% 36% growth in moves from Quebec to Realistic, with potential for even larger growth. other cereal Northern Ontario (12 trips/day to 16 Change likely to be based on growth in grains, grains trips/day) oilseeds and cash crops in Northeastern Ontario. • 17% growth in moves from Northern Ontario to Southern Ontario (5 trips/day to 6 trips/day) Total (all 459 657 43% Level of growth forecasted seems high. sectors) Consultations suggest overall growth of 20%- 25% would be more realistic. Map (overleaf) appears to have applied growth in accurate geographic areas, around Northeastern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
Figure 6-19: Current and Forecast Transportation Flows, Agriculture Sector
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 6 | Agriculture and Aquaculture Sectors
6.7 Transportation Needs Identified by Stakeholders Our research indicates that the current infrastructure is largely sufficient to meet the future needs of the farming sector in Northern Ontario. Apart from the safety issues raised in locations where heavy laden trucks carrying agricultural products merge with or exit highways, we did not encounter any area in Northern Ontario where the needs of the agricultural community demanded extensive new transportation infrastructure. The primary challenges associated with growth in the sector are related to economic factors, rather than infrastructure factors.
The following section provides a summary of the transportation needs identified through our research and consultations, grouped into three categories: 1) investment in new infrastructure, 2) improvements in existing infrastructure and 3) “soft” regulatory or policy issues which affect transportation.
6.7.1 Investment in New Infrastructure
Support Investment in Rail Infrastructure for Grain Shippers Stakeholders in Northeast Ontario noted a need for better access to rail for movement of grain from the region to Southern Ontario, including through more rail sidings next to grain elevators. This would lower the need for trucks on the road. The primary growth areas would be for field crops in the New Liskeard and nearby areas located within service areas of the Ontario Northland Railway. It must be recognized, however, that the distances may not be sufficient to achieve the traditional economies of scale which make rail shipping cheaper over long distances (typically associated with trips of 800 km or more). For example, Earlton to Hamilton (a grain export port and home of an oilseed processor) is only 560 km, and Earlton to Prescott (an export grain terminal) is 600 km. Both trips fall short of the longer distance 800 km “benchmark”.
6.7.2 Improvements in Existing Infrastructure
Identify Areas for Additional Passing Lanes / Four-Laning on Key Roads As agriculture products are chiefly transported by truck and primarily within Northern Ontario itself, the region’s road infrastructure is especially important to the sectors’ viability. A common complaint amongst agriculture producers is how the lack of four-lane highways and passing lanes hurts the efficiency of product transportation in the region. The addition of more passing lanes and/or the four-laning of more sections of Northern Ontario’s highways, in addition to more regular maintenance of secondary roads, are seen as important steps in enabling the safer and more efficient transportation of agricultural products.
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According to consultations, the specific sections of highway used by the agriculture sector and which would benefit from increased passing lanes and/or four-laning are as follows:
• Four-laning of the 150 km Highway 11 from North Bay to New Liskeard. This corridor is the fastest-growing agricultural area in Northern Ontario, and though it has more passing lanes than most other areas of Northern Ontario (see Chapter 3), the traffic volumes are considered significant enough by local stakeholders to warrant four-laning, especially given heavy use of the road by the mining and forestry sectors.
• Add passing lanes on Highway 11 between Thunder Bay (Shabaqua Corners) and Rainy River (via Fort Frances). This 380 km stretch of highway has no passing lanes.
• Add passing lanes on Highway 71 between Emo and Kenora (180km). As can be seen from Figure 6-18, these are both relatively busy roads, and have virtually no passing lanes.
6.7.3 Soft Issues
Review Trucking Regulations to Gauge Impact on Small-Scale Farmers A number of smaller-scale farmers and producers noted challenges involved in meeting regulations and standards for trucking equipment. It was felt that the regulations associated with operating transport trucks were designed for large-scale producers and transporters (with better access to capital) and the costs of meeting such regulations were too onerous for small farmers. Examples included requirements to keep log books, carry out regular safety inspections even when a truck is hardly being used, special licence requirements, higher insurance requirements, and the costs associated with new trucks requiring higher environmental standards. Overall, it was felt that if farmers are simply moving their own product (not transporting for others), they have an inherent incentive to transport their product in a safe manner which is best for the product and should not face the same requirements as larger farmers and transport companies.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Manufacturing Sector 7
Key Highlights
Economic Outlook • The majority of firms associated with manufacturing in the region directly or indirectly serve the resource-driven mining and forestry industries. Growth for these typically smaller firms is predicated on the growth in regional mining and forestry activity, as the transportation costs associated with serving more distant markets are typically prohibitive.
• A number of large, independent manufacturers play an important role in the regional economy, notably Bombardier Transportation in Thunder Bay and Essar Steel Algoma and Tenaris Algoma Tubes in Sault Ste. Marie.
• The high-tech advanced manufacturing sector in the region is primarily associated with mining-related technology from companies located in the Sudbury area, the heart of Ontario’s base metals mining industry.
Summary on Current Use of the Transportation System • Road is by far the dominant mode used to source inputs and deliver outputs of manufactured products in Northern Ontario. Supply chains in the resource-focused industries typically work on a hub-and- spoke system with large deliveries to hub cities in the region, and subsequent deliveries to various spoke sites in the region (e.g. mine and forestry sites)
• The largest users of the rail and marine modes are producers associated with the steel and steel-tube producing industries based out of Sault Ste. Marie.
Priority Transportation Needs Identified by Stakeholders
• Investment in harbor expansion in Sault Ste. Marie
• Review options for support to establish intermodal facility(ies) in the region
• Identify areas for additional passing lanes / four-laning on key roads
• Review need for improvements at Sudbury Airport
• Implement programs to address shortage of truck drivers across the region
• Review procedures for oversize vehicle permits
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Contents 7 Manufacturing Sector ...... 7-1 Regional Context & Outlook ...... 7-3 7.1 Sector Profile ...... 7-3 7.2 Sector Developments and Trends ...... 7-9 7.3 Regional Competitiveness ...... 7-13 7.4 Outlook ...... 7-13 Manufacturing Sector Transportation Overview ...... 7-15 7.5 Manufacturing Sector Supply Chain Overview ...... 7-15 7.6 Northern Ontario Supply Chain Mapping ...... 7-21 7.7 Transportation Needs Identified by Stakeholders ...... 7-33
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Regional Context & Outlook
7.1 Sector Profile
7.1.1 Overview The manufacturing sector in Northern Ontario is a varied, diversified and large industry.
The structure of the manufacturing sector in Northern Ontario is presented in the figure below. The majority (consultations suggest upwards of 80%) of all manufacturing activity in the Northern Ontario is done by “resource-based manufacturing” companies catering directly to the forestry and mining sectors. This includes firms producing and manufacturing forest products, pulp and paper products, primary metal products and mining equipment. The remaining firms are grouped into “general manufacturing” and include: 1) Companies indirectly supporting resource-based manufacturing; 2) Independent (non-resource based) manufacturing companies; and 3) Advanced manufacturing companies.
Figure 7-1: Structure of Manufacturing Sector in Northern Ontario
The focus of this chapter is on the sub-set of companies within “General Manufacturing”. A description of resource-based manufacturing companies is presented in Chapter 4 (Mining) and 5 (Forestry) and not repeated here. The one exception is the supply chain analysis at the
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end of this chapter which does include mining service and supply companies who have very similar supply chains to general manufacturing.
7.1.2 Sector Markets (General Manufacturing) The location of manufacturing industries in Northern Ontario is concentrated close to the region’s larger population centres. Over 60% of the 820 firms identified in Northern Ontario are established in just four regions: Sudbury (28%) largely in support of the mining operations, Thunder Bay (15%), North Bay (10%) and Sault Ste. Marie (8%). The same regions account for 83% of firms employing 50 people or more.
Figure 7-2 overleaf illustrates a breakdown the 820 businesses that fall under the general manufacturing umbrella.1
A wide range of products are made, from plastics and rubber, through machinery, motor vehicles, electronics and textiles. Most companies are small or indeterminate in size, and very few have more than 100 employees.2 Wholesalers, distributors and supply companies account for almost 20% (156 companies) of all manufacturing companies in Northern Ontario.3 While some of these companies are simply wholesalers (not manufacturing any products) our consultations suggest that many small and medium-sized wholesalers and distributors also provide some custom fabrication, maintenance and repair services for the products they sell. This customization and tailored service may be more prevalent in Northern Ontario because of remote locations and the unique installations required by the mining and forestry sector.
1 Based on the NAICS industry codes established for the manufacturing sector in the study Terms of Reference (see Appendix C). 2 Establishments in the “Indeterminate” category can typically be assumed to be small business. The category includes the self-employed, i.e. those who do not maintain an employee payroll, but may have a workforce which consists of contracted workers, family members or business owners. This category also includes employers who did not have employees in the last 12 months. 3 Study NAICS code 417230: Industrial Machinery, Equipment and Supplies Wholesaler – Distributors.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Figure 7-2: General Manufacturing Businesses in Northern Ontario
Industrial Machinery, Equipment and Supplies Wholesaler Distributor
Other Miscellaneous Manufacturing
Metal and Metal Product Manufacturing
Other Machinery Manufacturing
Machine Shops
Textile Mills, Products and Clothing Manufacturing
Mining and Oil and Gas Field Machinery Manufacturing
Plastics and Rubber Products Manufacturing
Chemical Manufacturing
Motor Vehicles and Parts Manufacturing
Computer, Electrical, Electronics and Component Manufacturing
Ship and Boat Building and Repair
Aerospace Product and Parts Manufacturing
Petroleum and Coal Product Manufacturing
Construction Machinery Manufacturing
Railroad Rolling Stock Manufacturing
- 20 40 60 80 100 120 140 160 Total Firm Count, by Size of Company (# of Employees)
1-4 5-9 10-19 20-49 50-99 100-199 200-499 500+ Indeterminate Source: CPCS Analysis of Statistics Canada – Canadian Business Patterns data, 2011. See Appendix C for NAICS Codes included. Graphic excludes Essar Steel Algoma and Tenaris Algoma Tubes.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Resource-Based Manufacturing (indirect) Sector This category includes companies catering to the large natural resource industries that have also always needed an indirect supporting base of secondary equipment manufacturers, wholesalers and repair shops to support their operations. These primarily small firms are a backbone support network to the region, playing a critical role in providing customized, local and timely manufacturing, maintenance and repair services to the resource sector and associated industries. The companies have adapted to the needs of their resource-based surroundings. Their operational business model has evolved to take into account the shortages of skilled labour, increased inventories, transportation costs, product demand and many other factors that are greatly magnified in the vast region of Northern Ontario. Many are family-run and limit their expansion to known markets that they can service without major expansions to their production capabilities.
Since the largest market for indirect resource-based manufacturing is the resource sector in the region, and mining and forestry in particular, this type of manufacturing is largely a derived demand. For example, in the past decade, a number of firms have seen their share of work fall off proportionally to the decline in the forestry industry. Firms consulted explained that they have scaled back operations or found alternative markets to support, especially mining where possible, but many are still hoping for a major rebound in the U.S. housing market and, consequentially, forestry sector.
To the extent that the mining and forestry sector grows in the next 25 years, we expect the general manufacturing sector in Northern Ontario to grow alongside it based on two principal factors: 1) the pace of development and ongoing production from mining areas in Northern Ontario (which is currently quite high), and 2) activity in the forestry sector, which hinges largely on the U.S. housing market, which is currently in a gradual recovery stage.
Independent Manufacturing Sector Manufacturing companies in this sector operate fully independently of the resource industries of Northern Ontario, making relatively low-tech products for local and international markets. Important players include: Bombardier Transportation (transportation equipment) and ERCO Worldwide's sodium chlorite plant, both in Thunder Bay; PGI Fabrene Inc. (plastic fabric) in North Bay, and Main Filter Inc. (industrial filters) in Sault Ste. Marie. The region is also home to two very large independent manufacturing companies linked to the steel sector: Essar Steel Algoma Inc., an integrated steel mill, and Tenaris Algoma Tubes, which produces steel pipes
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primarily for the oil and gas energy sector. Both these companies are based in Sault Ste. Marie.4
The demand for products varies considerably depending on the market base. For small companies catering to the local population (e.g. house building, automotive mechanic shops, etc.), market demand is largely determined by the size of the population and relative levels of economic prosperity, which are in turn often linked to success of the forestry and mining industries. For companies which cater to markets internationally and beyond Northern Ontario, the demand profile is highly variable across companies depending on the product in question (e.g. steel vs. fabrics vs. transit equipment).
From a demand perspective, special attention should be paid to the case of Bombardier, as this manufacturer alone accounts for a very large share of those employed in the manufacturing sector in Northern Ontario (over 1,000 employees). Bombardier currently builds light railcars on contract for the Toronto Transit Commission (TTC) and Metrolinx, and competes with other sister plants for foreign-allowed content on U.S. orders. Demand for Bombardier’s products will depend on the extent to which its order book is filled and how the company plans beyond its current short-term fixed TTC contract. However, rising fuel costs should drive continued growth in light rail transit in North America, particularly the U.S., as the economy there recovers.
Essar Steel Algoma is also a major manufacturer in the region, and the only steel producer in Northern Ontario, with an annual output of approximately 2.6 million tonnes of steel. Demand for steel is derived from various end use markets including automotive, construction, energy and manufacturing. For Essar Steel Algoma, key markets are Southern Ontario and the U.S. mid-west. According to consultations, with the exception of automotive demand, which has been strong over the past year, demand growth in other steel intensive segments has been slow since the end of 2008. The figure below shows steel consumption in the U.S. and Canada since 2005. As can be seen, steel consumption declined between 2006 and 2009, but is on a slow recovery trend.
4 Essar Steel Algoma and Tenaris Algoma Tubes are companies carrying out “Primary Metal Manufacturing” (NAICS Code 331) which were included in the “mining sector” in the study Terms of Reference. However, we consider them primarily manufacturing companies and therefore discuss them in the text of this chapter, not the mining chapter.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Figure 7-3: Consumption of Finished Steel Products, Millions of Tonnes
Source: World Steel Association. World Steel in Figures, 2012. www.worldsteel.org Consultations suggest that demand for miscellaneous manufactured goods is expected to stay the same, catering primarily to the needs of the local population. As an example, cabinetry, countertops and staircases for the home construction and renovation industries are dependent on income levels, and population increases. An expansion of miscellaneous manufacturing to cater customers outside of the regional area in manufacturing is not anticipated due to prohibitive transportation costs for input and output materials, as well as a premium for energy. In addition, manufacturing in general has seen a shift away from Western countries to lower-cost jurisdictions over the past twenty years, a trend which is likely to continue (see section 7.2 - Sector Developments and Trends).
Advanced Manufacturing Sector This sector includes companies involved in highly technical, advanced production of items such as aerospace technology, computing equipment and robotics. The advanced manufacturing industry is a relatively small and niche industry in Northern Ontario. Aerospace products and parts and computer electrical, electronics and component manufacturing make up just over 5% (45 companies) of the 820 general manufacturing firms, of which two-thirds are very small (indeterminate or one to four employees). Within this category would be a number of companies producing high-tech equipment for mining sector clients in Northern Ontario and internationally, largely concentrated around Sudbury. While this advanced mining
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technology sector is a small share of general manufacturing, it is arguably one of the few major and growing native manufacturing production lines that reaches international markets.
As with miscellaneous manufacturing, advanced technology production has seen a major shift to Asian markets, where labour is cheaper, economies of scale can more easily be achieved, and transit costs are less consequential. This market reality has made it challenging for Northern Ontario to compete in the manufacturing of advanced technology beyond a few niche companies. A growth in the aviation industry in Northern Ontario, partly spurred on by major mining project exploration and transportation maintenance requirements, is being touted as a potential market for growth in advanced manufacturing going forward.
Overall, the development of the advanced manufacturing sector (aerospace, electronics, high- value- added mining technology) will likely continue to rest on provision of funding support from mining companies with deep pockets as well as public sector support provided through Northern Ontario’s many universities, colleges and research institutes.
7.2 Sector Developments and Trends In this section, we summarise a number of the economic and industry trends and developments which have and will continue to affect development of the manufacturing sector in Northern Ontario in coming years.
Emergence of Asia As Lower-Cost Manufacturing Hub Over the past two decades, Asia (China specifically) has captured a very large share of the growing global manufacturing market, as can be seen from Figure 7-4 below. The confluence of low-cost labour and economies of scale in emerging markets has shifted the global manufacturing centre away from G-7 countries, including Canada. With the exception of highly specialised manufacturing industries (e.g. mining equipment), it seems unlikely that new manufacturing industries producing low-value products for international markets will emerge in Northern Ontario given the relatively higher cost of labour and higher transportation costs for Northern Ontario producers to access inputs and reach international markets.
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Figure 7-4: Global Migration of Manufacturing
Source: CPCS Analysis of United Nations Statistics, National Accounts Main Aggregates Database
Labour Shortages Affect Growth Potential The population in Northern Ontario is aging, there is a low population density and relatively flat growth expected in future (see Chapter 2). Manufacturing employers seeking skilled and unskilled labourers continue to compete for workers with the mining sector and forestry sector. Although some skilled workers would prefer to stay local rather than travelling to mining camps, packages offered by mining companies may be significantly more attractive relative to manufacturing positions. There is also a youth drain taking place where some younger students that study outside of the area do not return due to lifestyle preferences or fear that the downturn in industry will diminish career prospects. On a more positive note, there is a large and growing young Aboriginal population in Northern Ontario, with strong roots in Northern Ontario. This growing segment of the population provides potential for increasing the skilled labour force, with support in the form of training considered critical. Small Companies Face Challenges in Expansion Consultations indicated that many of Northern Ontario’s small manufacturing companies do not have the economies of scale or experience to export beyond the regional market. Beyond the relatively high transportation costs, barriers include a lack of market information regarding trade opportunities domestically and the regulatory processes involved in exporting
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internationally. In some instances, small companies simply prefer to stay small and cater to the local market without thinking internationally. There are examples of areas where Northern Ontario entrepreneurs have found innovative ways to invest in alternative manufacturing. Examples includes the conversion of the Terrace Bay Pulp Mill to producing textiles (See Chapter 5: Forestry), and the partnership between the Centre for Research & Innovation in the Bio-Economy (CRIBE) and Magna International (auto parts) on a research project to make car parts using wood fibre.5 Developments such as this will likely continue to require public funding support during incubation periods, but will ultimately help to reverse the brain drain, anchor more capital to the region and buoy manufacturing indirectly.
“Just in Time Manufacturing” Challenging for Northern Ontario Manufacturing companies today operate as much as possible on a just-in-time basis, a production model whereby items are created to meet demand, rather than being created in surplus or in advance of need and stored as inventory. Inputs are ordered only when needed and there is no overstocking of parts or items. Working with minimum levels of stock, companies can achieve reductions in transportation, storage costs, inventory and financing costs.6 A just-in-time approach is the optimum strategy for manufacturers in Northern Ontario, and some larger companies can achieve this through supply chain optimization. For example, for production side inputs, Bombardier has a warehousing network of just-in-time production, with some facilities in Northern Ontario and some outside of the region. Overall, however, our consultations suggest that it is not always possible for producers to maintain an optimum level of inventory in Northern Ontario due to challenges associated with the transportation network. Specifically:
• Road users noted that they need to maintain higher levels of inventory to account for trucking delays associated with relatively few passing opportunities on two-lane highways, and slower transit times in winter when snow clearing is carried out.
• St. Lawrence Seaway users are unable to receive/load product onto vessels in the months when the Seaway is closed (late December to late March).
• Rail users note delays in rail service and a lack of competitive service levels by rail carriers in the region, including low availability of railcars.
5The Forest Products Association of Canada’s Future Bio-pathways Project, a joint venture with FPInnovation and Ministry of Natural Resources as well as other private and public stakeholders, explores the market for many new but promising technologies. 6 Companies prefer to limit the length of any borrowing to purchase inputs where possible.
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The result of these delays is that manufacturers typically hold higher than optimal inventories in the region. To give one example, a manufacturer based in Emo imports steel from Winnipeg through the U.S., crossing two border points – Sprague, MB/Warroad, MN and Baudette, MN)/Rainy River, ON. The manufacturer does not typically import through Highway 17 (Winnipeg-Kenora) and Highway 71 (Kenora-Emo) due to the challenges with using Highway 71, which is narrow and winding with no passing lanes for 160 km. To account for the distance and potential delays involved, the manufacturer must maintain higher than industry standard inventory levels. This means that significant fluctuations in interest rates, gas prices and steel costs can drive up the costs of goods and reduce profit margins.
Lack of Intermodal Facility Inhibits Greater Use of Containers Containerisation is more common in general manufacturing than across the mining and forestry sectors that deal more often in bulk freight. As noted in Chapter 3, a lack of intermodal facilities in Northern Ontario means that manufacturers must make more use of trucking for long distance moves than they otherwise would if an intermodal service was available (to access rail service). Manufacturing using containers to source inputs or ships outputs must use trucks to reach the nearest intermodal facilities in either Winnipeg or Toronto.
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7.3 Regional Competitiveness
7.3.1 Strengths, Weaknesses, Opportunities and Threats The following SWOT analysis succinctly outlines the current state and future outlook for the general manufacturing sector in Northern Ontario.
Figure 7-5: SWOT Analysis, General Manufacturing
Strengths Weaknesses
• Strong experience in mining industry • Reliance on resource sector • Strong experience in the forestry sector • Aging workforce • Manufacturers are well-placed to serve local • Skilled labour shortage market needs, with entrepreneurial initiative • Reluctance to stimulate immigration to the area and and resilience to cyclical economic times resistance of immigrants to settle in the area • Untapped resources in potential for alternative • Limited ability / appetite for exporting (other than manufacturing (rayon, bioenergy, natural handful of companies) products) • Remoteness relative to large markets increases transportation costs and production costs • Lack of private-sector capital investment for capital improvements for existing or new enterprises • Lack of hub facilities (including intermodal terminal) for all forms of transportation • Government subsidy can help create an artificial competitive advantage, and relying on long-term subsidies is not ideal or sustainable in the manufacturing sector. Opportunities Threats • Ring of Fire and other mineral development • Rising costs for fuel and electricity likely to result in new transportation and • Any downturn in mining or decline of forestry industry electrical infrastructure which would increase would negatively affect manufacturers local manufacturing opportunities • The brain drain of trained, educated workforce to • Industrial demand in Saskatchewan and other areas of the world may continue Alberta could spur demand for Northern Ontario products • “Bioenergy” potential in forestry sector shows potential for manufacturing innovation • Growing Aboriginal youth demographic and associated increase in employment potential
7.4 Outlook On the basis of the preceding contextual review, the outlook for the general manufacturing sector is moderate overall, and varies considerably by sub-sector.
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• Positive growth is expected for manufacturing companies catering indirectly to the resource-driven sectors. The development of the Ring of Fire and other mining projects, as well as a slow but anticipated recovery in U.S. housing starts should result in positive spin- offs for the manufacturing sector.
• Opportunities for companies looking at alternative manufacturing opportunities within the forestry sector are strong, although these will likely continue to require public funding support for project development and incubation.
• In the independent (non-resource) manufacturing sector, limited growth is expected across smaller companies, largely due to low population growth and increasingly prohibitive transportation costs which make Northern Ontario products uncompetitive beyond the region. Some of the larger specialised companies may counter this trend (Essar Steel Algoma and Tenaris Algoma Tubes both anticipate growth), while others are expected to reduce output somewhat due to natural market factors (Bombardier Transit).
• The outlook for advanced manufacturing is less clear; recent support from public funding for research activities in the area is a positive sign for growth in the short term, but longer term growth is still to be determined. High-tech mining supply companies in the Sudbury area are likely to remain the leader in this area for the foreseeable future.
Overall Outlook The overall short, medium and long-term outlook for each sector is presented below.
Figure 7-6: Outlook for Northern Ontario General Manufacturing (Growth from Current Context)
Sub-Sector Short Term Medium Term Long Term (2012-2016) (2017-2026) (2027-2036) Resource Manufacturing Moderate Moderate to High Unknown (direct and indirect) Non-Resource Manufacturing Limited growth Limited growth Unknown (with a few (with a few outliers) outliers) Advanced Manufacturing Low to Moderate Unknown Unknown
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Manufacturing Sector Transportation Overview
7.5 Manufacturing Sector Supply Chain Overview
The structure and content of this section is slightly different from other sector chapters. The manufacturing sector in Northern Ontario consists of companies supplying a wide range of products to a very geographically diverse set of clients. The supply chain for each company is different, and it is therefore not as meaningful to speak of a “typical” supply chain as was done for other sector chapters. The approach to describing the manufacturing supply chain in this chapter is therefore higher-level, and draws heavily on case studies of actual manufacturers in the region to illustrate the broad range of modes and transportation systems used.
7.5.1 What Inputs and Outputs Generate Transportation Flows
Supply Chain for Resource-Based Manufacturing (direct and indirect suppliers) Manufacturing companies that cater directly and indirectly to the resource-based sectors of forestry, mining and, to a lesser extent, agriculture typically work through a hub-and-spoke supply chain system. Inputs arrive by truck or rail to one of the primary hub cities in Northern Ontario (Sudbury, Timmins, North Bay, Thunder Bay, Sault Ste. Marie). From these hubs, inputs are then either supplied directly as inputs to resource sector companies (e.g. with limited to no value-added processing), or are used as inputs by regional manufacturing companies for a final product that is then shipped to clients across Northern Ontario (the spokes).
There are also resource-sector manufacturing companies – particularly in the mining supply hub around Sudbury – which ship products internationally using the same hub and spoke system. For example, Fuller Industrial in Lively (near Sudbury), manufactures carbon steel pipes with internal rubber linings; it receives inputs from Toronto (by truck) and from international sources (by rail, truck and marine vessel), and ships all outputs to mining customers outside of Northern Ontario. However, the hub for receiving inputs is still Sudbury.
Another common feature of the supply chain system for resource-based manufacturing companies is that companies will often supply products and services to clients across multiple sub-sectors. For example, Lopes Ltd in Coniston (near Sudbury) undertakes construction,
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maintenance and custom installation and manufacturing for clients in the mining, pulp and paper, industrial and construction industries, providing services in Northern Ontario and across North America.
Finally, manufacturers in resource-based industries often source inputs and move outputs on a less than truckload (LTL) basis. LTL trucking carriers collect freight from various shippers, consolidate that freight and move it to one or more destinations. For example, a trucking company will pick up inputs from a range of sites in the GTA, and then drop them off at a number of manufacturing or supply companies in the Sudbury area. The same LTL approach will be used to ship outputs to clients, with multiple companies often working together to ship outputs to a particular area. For example, multiple companies in the Timmins area might consolidate freight on an LTL basis to move up to Detour Lake where a large new gold mine recently began production. The main advantage of using LTL for shipment is that a shipment can be carried for a lower price than if a supplier needed to contract a partially empty vehicle. The downside is that transit times for LTL freight are typically longer and more expensive (per tonne) than if a full truckload could be contracted by one supplier given the need for multiple stops en route.
Supply Chain for Independent Manufacturing / Advanced Manufacturing The supply chain for independent manufacturing companies is more unique and distinct across companies when compared to resource-based manufacturers. These independent manufacturers in Northern Ontario supply products ranging from plastic fabrics (Fabrene), to granite countertops (Duracon Tile & Granite), to transport vehicles (Bombardier) to PV modules for solar panels (Heliene Inc), and beyond. For this reason, it is not possible to talk about “typical” generators of inputs and outputs across independent manufacturing companies in any detail.
To give some examples of the diverse range of supply chains, short case studies of five independent manufacturing companies in Northern Ontario are presented below. The use of LTL shipping is also common for smaller independent manufacturing companies.
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Bombardier Transit: Case Study
Bombardier manufactures passenger rail car equipment for commuter, subway and light rail vehicles at its site in Thunder Bay. The primary customers for current operations are all based in the GTA: the Toronto Transit Commission for metro (subway) cars and light rail vehicles, GO transit (a division of Metrolinx) for commuter cars, and Metrolinx for light rail vehicles. Bombardier also has customers based in the southern U.S., and has previously manufactured products for customers in Asia.
Road transportation is the principal means of transporting inputs to the site. Some more limited materials arrive at the Port of Thunder Bay and are trucked to the factory, while some large components manufactured in Mexico and/or Quebec arrive by rail. Intermodal containers are used to receive some overseas deliveries; these must be trucked to Thunder Bay from outside the region, as there are no intermodal container facilities in Northern Ontario.
Outgoing shipments of finished goods are moved via rail (for commuter and light rail vehicles) or by road (for subway cars) to Toronto, using “special transport” permits for oversize shipments.
Heliene Inc: Case Study
Heliene Inc manufactures photovoltaic solar modules from its factory in Sault Ste. Marie, for use in residential as well as commercial and utility scale projects. The company employs about 50 people. Approximately 90% of Heliene’s clients are based in Eastern, Southern and Southwestern Ontario, with 5% in in Western Canada and the U.S. Midwest.
The company’s inputs include: glass from China which arrives via intermodal container to Toronto and is then trucked to Sault Ste. Marie, solar cells from China and Taiwan which are flown into Toronto and then trucked to Sault Ste. Marie, and a range of other materials all arriving by truck from Southern Ontario, Michigan, North Carolina, Georgia and New Jersey.
All of the company’s outputs are shipped to customers by truck.
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Essar Steel Algoma: Case Study
Essar Steel Algoma Inc is a fully integrated steel producer based in Sault Ste. Marie. The steel plant manufactures hot and cold rolled steel sheets and plates, and is the only steel production facility in Northern Ontario.
Key inputs for the facility include coal, iron ore, scrap and ferroalloys, as well as supplies for ongoing maintenance and operations. These products are sourced from the U.S. and Canada. Approximately 6 million tonnes of inputs arrive at the Sault Ste. Marie facility by vessel (65%), railcar (25%) and truck (10%). Essar Steel Algoma owns and has priority access to their port facilities in Sault Ste. Marie. The only other major user of the port is Tenaris Algoma Tubes, with some very limited usage by aggregate and road salt suppliers.
The finished output – carbon and alloy steel sheet and plate products – is shipped to customers across Canada and the U.S. in the automotive, construction, mining, manufacturing, shipbuilding, energy and military industries. Approximately 2.6 million tonnes of product are shipped from the facility each year, moving by vessel (10%), rail (65%) and truck (25%). The majority of clients are in locations in Canada and the U.S., in areas outside Northern Ontario. Key markets are located in Chicago, Detroit and around the Great Lakes.
Figure 7-7: Ships in Slip, Essar Steel Algoma Sault Ste. Marie Port
Photo Source: Essar Steel Algoma
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Tenaris Algoma Tubes: Case Study
Tenaris Algoma Tubes produces a complete range of steel pipes at its Sault Ste. Marie facility for use in oil and gas energy development projects. Its key clients are currently based in Western Canada and the oil and gas producing regions of the U.S.
The company sources inputs (including steel) to its Sault Ste. Marie facility through three modes: by vessel (approximately 50% of inputs) through the St. Lawrence Seaway to a private berth owned by Essar Steel Algoma, by rail (40%) and by truck (10%). These inputs arrive from Europe, South America and Quebec suppliers. Manufactured steel pipes (outputs) are shipped to customers by rail (95%) with the remainder by truck (5%).
Duracon Tile & Concrete: Case Study
Based in Thunder Bay, Duracon Tile & Concrete employs about 25 people in the manufacturing, fabrication and installation of granite and other natural stone surfaces for the trade, construction and retail sectors. Approximately 80% of its customers are located in Northern Ontario, with another 10% in Western Canada and the Central U.S., respectively.
The company sources stone inputs by truck from Minneapolis (via Pigeon River border crossing), as well as stone and other inputs in intermodal containers from Italy, Brazil and China which arrive via vessel to Toronto or Vancouver and are then shipped via rail to Winnipeg. From Winnipeg, containers are loaded on a truck and moved to Thunder Bay, as there is no intermodal container terminal in Thunder Bay.
The company ships its outputs to customers using its own vehicles within the region, or through private LTL contractors when shipping over longer distances.
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Transportation Requirements for Manufacturing (By Mode) The descriptions above illustrate the variety of supply chains used across manufacturing companies in the region. Insofar as possible, the figure below summarizes how each transport mode is used in Northern Ontario.
Figure 7-8: Use of Transportation System by Manufacturing Sector, By Mode
Mode Use of Mode by Manufacturing Sector Road The vast majority of manufacturers in Northern Ontario use the road network as the only mode of transport to source inputs and ship outputs. The detailed traffic flows for the road sector are discussed in Section 7.6 below.
Rail As a general rule, railways prefer to deal with customers that have large volumes of product. This precludes many of the smaller manufacturing companies from accessing rail service at rates that are competitive with truck given the lack of volumes. Companies using rail that we are aware of include: • Tenaris Algoma Tubes in Sault Ste. Marie uses rail for some inputs (steel) and outputs (pipes)
• Bombardier in Thunder Bay uses rail for inputs and outputs (as well as other modes)
• ERCO Worldwide (a producer of inorganic chemicals) in Thunder Bay uses rail for inputs and outputs
• Fabrene, a specialized fabrics manufacturing company based in North Bay, uses railcars to source about 50% of its inputs (plastic pellets)
• Essar Steel Algoma in Sault Ste. Marie imports coal, iron ore, ferroalloys and other inputs by rail. Finished steel products are exported primarily by rail.
A number of manufacturing companies interviewed indicated they would try to use rail if an intermodal facility was accessible.
Marine The only significant moves of manufacturing-related products using the marine mode in Northern Ontario occur in Sault Ste. Marie and are associated with the production of steel and steel products at Essar Steel Algoma and Tenaris Algoma Tubes. These products include coal, iron ore, ferroalloys and steel.
Air There are some relatively small freight flows by air mode, although no public data source is available to confirm the volumes.
Transportation Requirements for Labour Road is the only means of transportation used for day-to-day labour activities related to the manufacturing sector, with all regular employees driving or using public transit to get to work. Air travel is also an important means of business development and developing and maintaining relationships between clients and suppliers within and beyond the region.
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7.6 Northern Ontario Supply Chain Mapping Before looking at the flows of freight associated with manufacturing, it is interesting to consider the locations in where manufacturing sector truck traffic is originating. The best data available for such an analysis is the MTO Commercial Vehicle Survey carried out in 2011.
Figure 7-9 below shows the origins, by number of daily truck trips, of trucks carrying manufacturing and machinery products within Northern Ontario and from Northern Ontario to other areas.7 Green circles indicate the location of origins of truck trips destined to areas outside of Northern Ontario, while blue circles indicate origins of trucks trips destined to stay within Northern Ontario. In addition to including the manufacturing origin sites in Northern Ontario, we have included active mine sites and forestry processing facilities, as these are also key users of manufacturing products.
Interesting points to note include:
• Manufacturing origin sites are primarily located along major highways, and to a lesser extent, the railway network. Many are located close or adjacent to active mines and forestry resource processing facilities (sawmills, pulp mills, etc.), illustrating the important support role that manufacturers play in the resource sectors.
• There are hubs of manufacturing in Thunder Bay (68 truck trips/day), Timmins (57 truck trips/day), Sudbury (44 trips/day), North Bay (40 truck trips/day), New Liskeard (36 truck trips/day) and Sault Ste. Marie (16 truck trips/day).
• For most of these hubs, manufacturing products are moving to destinations within Northern Ontario (blue circles), with the exception of Sudbury where the majority of trucks originating manufactured products are leaving Northern Ontario (green circle). This is a strong illustration of the role of “exporting” from Sudbury when compared to other regions.
• The sites beyond these hubs are primarily originating products for outside of Northern Ontario, albeit in relatively small volumes (small green circles). It should be noted that the origin does not guarantee that the product being shipped was physically manufactured in the area. For example, it is possible that shipments of manufactured products were consolidated at a “hub” in Northern Ontario and then moved by separate truck internally within the region to a “spoke” client in the region (with or without some value-added activity). In the case of products moving from Northern Ontario to areas
7 Products include machinery (electronic, electrical and office equipment, machinery, optical, medical, photographic, scientific and technical, telecommunications equipment, material) and manufacturing (other manufactures, miscellaneous goods). The figure excludes mail.
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outside of the region, it is more likely that origins represent products manufactured (or with some value-added) in Northern Ontario.
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Figure 7-9: Origins of Daily Manufacturing Trucks Trips for Trips Within Northern Ontario and Leaving Northern Ontario (excluding mail)
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7.6.1 Current Commodity Flows The map below (Figure 7-10) shows traffic flows by road, rail and marine mode for the manufacturing sector in Ontario.
Truck flows are presented in average daily truck trips, based on MTO Commercial Vehicle Survey data from 2011. The map shows truck traffic with a start, end, or start and end, in Northern Ontario. The truck volumes show two types of products:
• Machinery, consisting of electronic, electrical and office equipment, machinery, optical, medical, photographic, scientific and technical and telecommunications equipment
• Manufacturing, consisting of other manufactured miscellaneous goods and mail The marine flows represent annual tonnage loaded and unloaded at key ports in the region. Flows are dominated by volumes at Sault Ste. Marie, which are primarily inputs and outputs to/from the Essar Steel Algoma and to a lesser extent inputs for the Tenaris Algoma Tubes manufacturing operations. Specifically, of the 3.7 million tonnes of unloaded freight, 3.5 million tonnes is coal, non-agglomerated bituminous coal, and iron ores and concentrates, most of which is associated with the steel-making industry at Essar Steel Algoma.
Rail flows are based on information obtained from consultations, and consist of two primary flows. Iron ore moves from the U.S. (Michigan) to Sault Ste. Marie, associated with steel making, and steel products originating in Sault Ste. Marie, moving east and west to customer markets. Rail volumes are presented as low, medium and high volumes as specific tonnages are considered confidential by rail companies. The volumes have been presented such that the thickness of the flow lines is comparable to the volumes from truck trips.8
Key points to note from the map and supporting our consultations are as follows:
• Sault Ste. Marie receives and ships large volumes of freight by rail and marine modes, primarily associated with Essar Steel Algoma, and to a lesser extent, Tenaris Algoma Tubes.
• Road traffic is highest around population centres and also clustered around mining operations in Sudbury, forest resource processing facilities in Thunder Bay, and along the Highway 11 corridor from North Bay to Timmins.
• There are relatively low manufacturing flows on the most northerly stretches of Highway 11, between Kirkland Lake and Nipigon.
• There are very limited moves across U.S. border points by truck.
8 This was done by assuming that approximately 28 metric tonnes of product moving by rail would be carried per truck trip.
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Figure 7-10: Transportation Flows, Manufacturing Sector
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The map above illustrated the 770 daily truck trips with a start, end or both a start and end in Northern Ontario. The figure below illustrates the origin and destination of this daily truck traffic. Of the daily trips, 43% (331) are within the region. These internal trips within the region consist primarily of movements of machinery (37% of trips) and other manufactured and miscellaneous goods (45% of trips).
The remaining trips include 159 daily truck trips from Northern Ontario to other regions (21% of overall total), and 280 truck trips from other regions to Northern Ontario (36% of total). As can be seen from the figure, over half of all manufacturing products moving to or from Northern Ontario originate or are destined to Southern Ontario. These flows can clearly be seen in the large volumes of traffic on Highways 11 and 400/69 connecting to Southern Ontario. Central Canada is the next most important area in terms of traffic flows, accounting for 25% of products moving to Northern Ontario, and 35% of products moving from Northern Ontario. Such moves primarily make use of Highway 17 connecting Northwestern Ontario to Manitoba.
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Figure 7-11: Origin and Destination of Daily Manufacturing Truck Traffic in Northern Ontario (excl.through traffic)
Source: CPCS analysis of MTO Commercial Vehicle Survey 2011 data
A more detailed breakdown of commodities moving to and from Northern Ontario for truck traffic is presented in the two figures below.
Figure 7-12 below shows the origins of daily truck traffic destined to Northern Ontario by region and commodity. It is worth noting that it is probable that a large portion of the manufacturing products moving into Northern Ontario by truck are destined for general consumers, and therefore completely unrelated to the manufacturing sector in Northern Ontario (e.g. television sets for sale from retail stores to individual home owners). It is impossible to distinguish the volume of freight moving to manufacturing companies in Northern Ontario versus manufactured products for general consumers and businesses in the region.
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Figure 7-12: Daily Truck Trips Destined to Northern Ontario, By Origin of Commodity, Manufacturing Sector
Region / Commodity Electronic, Machinery Mail Other Telecommu Electrical and Manufactured, nications Office Miscellaneous Equipment, Equipment Goods Material Atlantic Provinces - 1 - 0.2 - Central Canada 3 8 5 53 - Central U.S, 2 7 - 15 - Northeast U.S. 0.2 1 - 1 - Quebec 2 5 - 17 - Southeast U.S. 1 2 - 2 - Southern Ontario 8 20 17 104 1 Western Canada - 1 - 3 - Western U.S. - 2 - - - Sub-total by Commodity 15 48 22 195 1 Commodity as % of Total 5% 17% 8% 70% 0.3% Traffic
Figure 7-13 below shows the destination of products leaving Northern Ontario for other regions. Note that no telecommunications equipment or material is currently registered as leaving Northern Ontario by truck (e.g. it is not included in the figure below). When mail is excluded, very few trucks leave the region with manufactured products (106 trucks/day).
Figure 7-13: Daily Truck Trips Originated in Northern Ontario by Destination of Commodity, Manufacturing Sector
Region / Commodity Electronic, Electrical Machinery Mail Other Manufactured, and Office Equip. Miscellaneous goods Atlantic Provinces 1 Central Canada 7 3 24 21 Central U.S. 3 Northeast U.S. 1 Quebec 2 0.2 6 Southeast U.S. 1 0.1 1 Southern Ontario 5 14 28 39 Western Canada 1 2 Sub-total by Commodity 13 20 53 73 Commodity as % Total Traffic 8% 13% 33% 46%
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7.6.2 Future Commodity Flows In this section we discuss the future use of the transportation network for the manufacturing sector. We look at a snapshot in 2026, based on forecasts provided by MTO. The methodology used for forecasting is described in Appendix D.
Before illustrating the changes in traffic volumes on the transportation network, we first summarize two sets of information that may affect future use of the system: anticipated industry changes, and the drivers behind forecasts for truck traffic increases.
Anticipated Industry Changes There are six anticipated industry changes which may affect the volume of freight moving on the transportation network in the short to medium term in Northern Ontario:
1) Bombardier’s current orders with clients in the GTA are sizeable and the company has grown rapidly to meet this demand over the past few years. The company expects manufacturing volumes to remain constant at 2011 volumes for another two to three years (until 2015), after which time a more typical level of activity is expected, closer to 65% of current peak activity. This will reduce truck traffic flows in the region. 2) Essar Steel Algoma is considering an expansion of its production from approximately 2.7 million tonnes to approximately 4 million tonnes per year, which will generate significant demand for transportation of inputs and outputs, particularly in the rail and marine modes.9 This growth is predicated on expansion of the port in Sault Ste. Marie, as well as strong market conditions for steel (demand and price). Port expansion is considered one of the transportation priorities for the manufacturing sector in the region. 3) Tenaris Algoma Tubes is anticipating expansion of up to 30% to cater to ongoing growth in the mining sector, particularly in the shale gas and oil sands markets outside of Northern Ontario. This would increase transport demand for inputs and outputs, and again would likely depend on expansion of the port at Sault Ste. Marie to receive inputs (albeit much smaller volumes than Essar Steel Algoma). This would result in a limited impact on the trucking sector, as more than 90% of outputs move by rail. 4) Significant growth is expected in the mining sector in Northern Ontario, both in traditional areas (e.g. base metal mines around Sudbury, Timmins) as well as large gold projects (in Detour Lake and Red Lake) and the very large projects in development around the Ring of Fire area in the James Bay Lowlands. These initiatives will invariably increase the volume of inputs required and outputs generated by mining service and supply companies in key hubs (notably Sudbury, North Bay, Timmins and Thunder Bay).
9 KPMG, “Regional Harbour Expansion Market and Business Analysis Final Report” produced for The Corporation of the City of Sault Ste. Marie. January 3, 2013
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5) The forestry sector has seen decline in the past five years or so. However, the outlook for the sector is positive with the sector showing a slow turnaround over the past year. Any improvement in the forestry sector would also likely increase demand for manufacturing support in Northern Ontario, and in turn increase transportation flows. 6) One of the impacts associated with climate change is a reduction in water levels in the Great Lakes and St. Lawrence Seaway. This has a significant impact on shippers moving bulk products on Great Lakes and Seaway vessels as lower water levels restrict loading capacity on vessels. Each additional inch of draft (the distance between the waterline and the bottom of the hull) for a typical Seaway vessel enables a ship to carry an additional 500 tonnes of cargo. If this trend continues, the relative efficiencies gained by using the marine mode (vs. rail or road) will decrease. In the longer term, thanks to a combination of warmer climate and technological innovation, the Seaway season may lengthen, enabling traffic to flow for more days of the year. However, year-round opening of the Seaway is not likely in the foreseeable future.
Forecast Estimates for Truck Traffic CVS Data (see table below) The figure below presents the volume and drivers behind anticipated growth in truck traffic on Northern Ontario roads for manufacturing products, showing current flows (2011) and estimated 2026 flows. The figures are based on average growth by sub-sector based on MTO’s Commercial Vehicle Survey forecasts, with comments from the CPCS team in the final right- hand column.
Overall, we believe the forecast estimates for increases in manufacturing truck traffic are much higher than anticipated, based on our consultations.
We have not included forecasts in traffic for rail or marine. The growth in traffic for both modes is contingent largely on growth/decline of the large manufacturing companies of Essar Steel Algoma and Tenaris Algoma Tubes.
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Figure 7-14: Current and Forecast Manufacturing Sector Daily Truck Trips, By Commodity, 2011 and 2026
Commodity 2011 2026 Growth Key Drivers of Change (2011-2026) Based on CPCS Comments on Growth Trips Between Analysis of CVS Data Between 2011-2026 Trips 2011-2026 • Electronic, electrical & 37 67 81% Primary contributor is movement within Growth is optimistic. Ontario, growing from 10 to 16 trips/day office equipment • 102% growth in moves from Southern Ontario to Northern Ontario (8 to 15 truck trips/day) • Machinery 189 359 90% 83% growth in movements within Strong growth is expected to Northern Ontario (121 to 221 trips/day) cater to mining development, • 100% increase in moves from Southern but 90% is higher than Ontario to Northern Ontario (20 to 40 estimated from consultations. trips/day) • Growth of over 100% for most other regions to and from Northern Ontario Mail 127 217 71% • Not relevant, as not strictly manufacturing Not directly relevant to manufacturing. Optical, medical, 0.4 1 150% • Only moves are within Northern Ontario No comment, small volume. photographic, scientific & technical • Other manufactured, 415 992 139% Primary driver is traffic within Northern Strong growth is expected for Ontario, which increases by 150% from new mining development, as miscellaneous goods 147 to 365 trips/day. well as potential for Essar Steel • Volumes from Southern Ontario to Algoma expansion. Overall Northern Ontario to increase by 116% 139% is higher than estimated from 104 to 225 trips/day. from consultations. • Telecommunications 0.9 2 122% All from Southern Ontario to Northern No comment, small volumes. Ontario equipment, material
Total 770 1638 113% - Although growth is expected to be high to cater to mining sector growth, and some independent manufacturers are expanding, given general population is not expected to grow significantly, 113% growth appears extremely optimistic.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 7 | Manufacturing Sector
Figure 7-15: Current and Forecast Transportation Flows, Manufacturing Sector
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7.7 Transportation Needs Identified by Stakeholders The following Section provides a summary of the transportation needs identified by stakeholders for economic growth. They are grouped into three categories: 1) investment in new infrastructure, 2) improvements in existing infrastructure and 3) “soft” regulatory or policy issues which affect transportation. Each recommendation indicates whether it is a short or longer term priority.
7.7.1 Investment in New Infrastructure
Investment in Harbour Expansion in Sault Ste. Marie With the anticipated growth in production from both Essar Steel Algoma and Tenaris Algoma Tubes, expansion of the port to accommodate increased volumes is critical for economic growth. A recent study completed for the Corporation of the City of Sault Ste. Marie10 recommended that that Essar Steel Algoma harbour be expanded to accommodate growth in production, as well as to provide improved and increased access to third party shippers who wish to use the marine mode. The report noted that without improvements to the harbour infrastructure, there is potential for significant adverse economic impacts to the community; this is because as Essar Steel Algoma carries out its planned production expansion, all other shippers will likely be displaced from the harbour and would need to find other shipping alternatives, most of which would lead to higher transportation costs.
Review Options for Support to Establish Intermodal Facility(ies) in the Region Access to intermodal facilities in Northern Ontario could help some manufacturers reduce their transportation costs for inputs and/or outputs, depending on their individual supply chain. As described in detail in Chapter 3, there are significant costs and risks associated with establishing and operating intermodal rail facilities which are typically borne by private railway companies. To this extent, establishing an intermodal facility is a commercial decision for railways, not government. One option would be for the Government of Ontario to work with the railways in the region to identify what their requirements are for establishment of intermodal facilities, and to assess if support from government would be helpful, if warranted based on economic benefits, for example.
10 KPMG, “Regional Harbour Expansion Market and Business Analysis Final Report” produced for The Corporation of the City of Sault Ste. Marie. January 3, 2013
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7.7.2 Improvements in Existing Infrastructure
Identify Areas for Additional Passing Lanes / Four-Laning on Key Roads As with other sectors in this study, the priorities identified by virtually all stakeholders were around upgrading of the highway network in Northern Ontario. The priority areas noted in consultations for adding passing lanes were:
• Highway 17 between the Manitoba border and Thunder Bay (540 km), which is the route along which many inputs for manufacturing in Northwest Ontario are sourced. We understand that planning for the four-laning of Highway 17 between the Manitoba border and Kenora is ongoing.
• Highway 71 between Emo and Kenora (180km), which currently has virtually no passing lanes.
• Highway 144 between Sudbury and Timmins (290km), which was noted as being particularly challenging in winter with inadequate shoulders.
Review Need for Improvements at Sudbury Airport A number of stakeholders, particularly in the mining service and supply sub-sector, noted a need to improve the existing facilities at Sudbury Airport in order to cater to more cargo movements. On the freight side, stakeholders noted that Sudbury does not have large enough planes to ship out heavy cargo direct via air. Comments included the need for longer airstrips and facilities for heavy-duty cargo planes that could handle large-size shipments. Stakeholders noted the depot facilities in Sudbury are not adequate for some shippers to move large cargo by air, due to a lack of mobile handling equipment. The only way to ship air freight from Sudbury is if it can be handled by people without the use of mobile equipment. As a result, large inputs and outputs must be trucked to/from Toronto for movement by air. It is worth noting that North Bay and Thunder Bay both offer larger air cargo handling capability and are viable alternatives to flying product from the region to remote mine sites in Northern Ontario.
7.7.3 Soft Issues Implement Programs to Address Shortage of Truck Drivers Across the Region
Some stakeholders noted a lack of competition in the trucking sector, particularly in the very busy areas around Sudbury where there is a lack of choice for truck carriers. The lack of competition and trucking carriers leads to increased prices for transportation, increased inventories and increased financing cost in servicing these inventories. According to trucking
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companies, this is a result of market forces whereby trucking companies themselves face challenges hiring enough truck drivers to meet demand. The Government of Ontario may wish to work with trucking companies and industry associations (e.g. Ontario Trucking Association) to develop programs to encourage young workers to this sector, including the growing young Aboriginal population in Northern Ontario.
Review Procedures for Oversize Vehicle Permits In addition to a general shortage of trucking companies available for work, there is a shortage of trucking companies to move large, oversize equipment in Northern Ontario. The province of Ontario issues special permits for overweight/oversize vehicles when the dimensions and/or weight exceed the limits set out in the Highway Traffic Act.
A number of stakeholders noted that MTO should review its regulations and procedures to make it easier for carriers to obtain permits for oversized vehicles. The shipment of finished goods using special “oversize/overweight” permits is considered restrictive and costly, and impacts delivery to customers. Some manufacturers felt they would be more competitive if MTO could review oversize permitting requirements to alleviate/reduce restrictions in Northern Ontario by allowing more travel on weekends and increasing travel time per day that vehicles are allowed to operate. This could be done in areas where traffic and population are at a lower level than in Southern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Tourism Sector 8
Key Highlights
Economic Outlook
• The tourism sector has been hit hard in the past five years by the global economic downturn, higher fuel prices, and the rising value of the Canadian dollar. However, recent tourism data indicates a turnaround with visitor numbers improving.
• Anticipated areas of growth are linked to significant investment in urban infrastructure and facilities, as well as emerging Aboriginal products experiences.
• The support of the newly established regional tourism organizations, especially Tourism Northern Ontario (RTO 13), is expected to result in improved tourism product development and marketing approaches across the region.
Current Use of Transportation System
• The vast majority of visitors undertaking tourisms activities in Northern Ontario use personal vehicles, making the quality of roadways, signing and other infrastructure particularly important.
• Airports are also used, including remote air services for fly-in tourism experiences
Priority Transportation Needs Identified by Stakeholders
• Investment in new and improved rest stops
• Identify areas for additional passing lanes and/or four-laning on key roads
• Improved signage and way-finding tools
• Review regulatory requirements and provide ongoing support to Great Lakes tourism
• Review potential for security upgrades to entice new international airline services
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Contents 8 Tourism Sector ...... 8-1 Regional Context & Outlook ...... 8-3 8.1 Sector Profile ...... 8-3 8.2 Sector Developments and Trends ...... 8-11 8.3 Regional Competitiveness ...... 8-19 8.4 Outlook ...... 8-20 Tourism Sector Transportation Overview...... 8-22 8.5 How Tourists Use the Transportation System ...... 8-22 8.6 Transportation Needs Identified by Stakeholders ...... 8-36
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Regional Context & Outlook
8.1 Sector Profile
8.1.1 Overview Northern Ontario’s natural beauty has historically been the primary draw for visitors to the region. Hunting and fishing have traditionally been the most prominent tourism industries, with growing importance in recent years in other recreational activities such as boating and canoeing, camping, visiting historic sites and attending cultural performances. The urban centres of Northern Ontario are increasingly marketing their own city attractions and facilities (including sports facilities1) as reasons to visit the north, in addition to serving as key gateways to access nature-based experiences.
In 2010, 7.9 million people visited Northern Ontario and with total spending generated by visitors of $1.4 billion.2 The sector supported over 20,000 jobs in Northern Ontario (representing approximately 6% of all jobs in the region), and also helped support an additional 1,484 jobs in the rest of Ontario.3
Figure 8-1 overleaf shows the number of visitors to Northern Ontario by census division, as well as average spending per visitor by census division, for 2010.4 The most popular destinations were concentrated in the southern parts of the region with visitors to the districts of Nipissing, Parry Sound, Greater Sudbury and Sudbury accounting for 52% of all visitors to Northern Ontario. Tourists visiting most parts of Northern Ontario originated predominantly from within Ontario. The exception was the most northwesterly regions of Kenora and Rainy River which receive relatively more visitors from the U.S. or from parts of Canada outside of Ontario. Average spending per visitor was highest in the Kenora, Timiskaming and Thunder Bay districts.
1 The recent Canadian Adult Recreation Hockey Association Hockey World Cup tournament in Sault Ste. Marie generated approximately $13.3 million in economic activity, involving 2,300 visitors from around the world, http://canadiansporttourism.com/news/2012-carha-hockey-world-cup-exceeds-expectations-133m-impact.html 2 CPCS Analysis of data provided by the Ministry of Tourism, Culture and Sport, based on Statistics Canada microdata. 3 Ministry of Tourism, Culture and Sport, Northern Ontario Regional Tourism Profiles Data; Ontario's Tourism Regional Economic Impact Model (TREIM). Such figures are not available at a disaggregated level exclusively for the Study Area. 4 Data provided by Ministry of Tourism, Culture and Sport, based on MTCS analysis of Statistics Canada microdata which contain anonymised data collected in the Travel Survey of Residents of Canada and the International Travel Survey.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Figure 8-1: Northern Ontario Tourism by Census Division, 2010
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
In 2010, there was a fundamental policy shift in the management of tourism in Ontario with the establishment of 13 new tourism regions in the Province called “Regional Tourism Organizations” or RTOs. The delimitations of these regions are based on common experiences and common visitor markets. The Northern Ontario RTO, called “Tourism Northern Ontario” (formerly known as RTO 13) covers most of the geographic area for this study. The study area also straddles RTO 12, which has Algonquin Park, the Almaguin Highlands, Muskoka and Parry Sound within its borders. Unless noted otherwise, all figures in this chapter refer specifically to the study area, as defined in Chapter 1.
8.1.2 Sector Markets The tourism sector in Northern Ontario includes a number of important sectors, not all of which are mutually exclusive; many tourists partake in more than one type of tourism activity while visiting Northern Ontario.5 For this reason, it is not as meaningful to distinguish sector markets as clearly as was done in other chapters of this report.
The key activities experienced by tourists in the region are primarily associated with the outdoors and dominated by water-based activities such as boating and fishing (Figure 8-2).
Figure 8-2: Activities Participated in By Person Visits, 2010
Source: CPCS Analysis of data provided by the Ministry of Tourism, Culture and Sport, based on Statistics Canada microdata.
5 Ontario Ministry of Tourism, Rediscovering Northern Ontario: Partnerships for a Strong Tourism Industry, Northern Ontario Tourism Marketing Strategy 2012-2017.
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Consultations with industry highlighted the following additional sector information:
• Angling and hunting products take place across the region, with the importance of that sector increasing relative to other tourism experiences as you move west. More remote and “authentic” experiences (e.g. fly-in lodges) tend to increase revenue and profitability.
• Soft or broader outdoor products (e.g. campgrounds, provincial and national parks, private cottages) are common across Northern Ontario and draw in many visitors, but also tend to be a lower-revenue product.
• Aboriginal experiences products primarily take place on Manitoulin Island, with the Great Spirit Circle Trail development being the most active. This tourism activity sees 10,000 – 12,000 visitors/year.6 There are also new investments in these products, including the Wasaya Group in the northwest and on James Bay with the new Moose River Heritage & Tourism Association in Moosonee. An increase in such Aboriginal experiences products is expected in coming years.
• Touring products tend to take place along designated touring routes such as the Lake Superior Circle Tour, Georgian Bay Coastal Route, the Deer Trail and along major highway corridors. Motorcycle touring – a new niche product – has benefitted from development of the bi-national “Ride Lake Superior Route”. Great Lakes commercial water cruises are also present, with operators most active around the fall season.
• Attractions close to cities are an important sub-sector, with the largest impact attractions (in visitor numbers) including Science North (Sudbury), Agawa Canyon Tour (Sault Ste. Marie) and Fort William Historic Park (Thunder Bay). Smaller attractions include Cochrane’s Polar Bear Habitat and the Bushplane Heritage Centre (Sault Ste. Marie).
• Significant investments in urban centres are underway throughout Northern Ontario, including in terms of waterfront developments, hotel investments, sports and concert venues, and online reservation Motorcycle touring along Lake Superior. Source: Algoma - Virgil Knapp systems to attract consumers.
6 Consultation with Great Spirit Circle Trail, August 2012.
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• Winter tourism is important (sledding, snowmobiling), however it faces a number of challenges such as milder winters and lack of trail infrastructure (discussed further below). Figure 8-3 overleaf illustrates the location of some of the key tourism sites in Northern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Figure 8-3: Key Tourism Sites, Northern Ontario
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Visitation Trends Tourism in Northern Ontario declined between 2006 and 2008 (from 8.2 million visitors to 7.2 million visitors per year), and then increased in 2009 and 2010 up to 7.9 million visitors in 2010. Throughout this timeframe, over 95% of the visitors reported a purpose of visit other than business (pleasure, visiting friends and family, personal). As can be seen from the figure below, visitor numbers from Ontario residents were almost the same in 2006 and 2010, with visitation from other parts of Canada remaining more or less steady over the same period. In contrast, visitors from the U.S. and overseas declined most years between 2006 and 2010. Stakeholders have attributed this decline to recessions in the U.S. and the European Union, the high value of the Canadian dollar and rising fuel prices. Although tourism data for 2011 and 2012 is not yet available, consultations indicate the region is still suffering from an overall decline as compared to 10 years ago (performance varies across regions).
Figure 8-4: Total Number of Northern Ontario Visitors by Origin, 2006 – 2010
Source: CPCS Analysis, Data received from the Ministry of Tourism, Culture and Sport, based on Statistics Canada micro-data. The total spending generated by visitors to Northern Ontario declined from $1.6 billion in 2006 to $1.4 billion in 2010. As can be seen from the figure below, overseas visitors spend on average the most per visit, followed by U.S. and Canadians outside Ontario. This disparity may simply have to do with the length of stay, with visitors from within Ontario making shorter trips to the region. In addition, visitors from Southern Ontario are more likely to be staying in private (non-paying) accommodation as compared to overseas visitors. While average spending from U.S. and overseas visitors increased between 2006 and 2010, their numbers
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declined over the same period (see Figure 8-4). Conversely, while visitors from within Ontario increased between 2008 and 2010, average spending decreased.
Figure 8-5: Average Tourism Spending per Visitor by Origin, 2006 - 2010
Source: CPCS Analysis of data provided by the Ministry of Tourism, Culture and Sport, based on Statistics Canada microdata. As further evidence of the decline in U.S. visitors, the number of U.S. automobiles entering Northern Ontario decreased, both seasonally and annually between 2005 and 2010 (Figure 8-6). While nearly 488,000 cars entered in 2005, by 2010 that had dropped to just over 346,0007, a decrease of 28.9%. From a peak of approximately 200,000 in July 2005, the number of international visitors entering Northern Canada by land (automobile or bus), over 99% of which originate from the U.S., dropped to 133,0008 visitors in July 2010, constituting a decline of 33.5%.
7 Statistics Canada, Table 427-0002: Number of vehicles travelling between Canada and the United States. 8 Statistics Canada, Table 427-0001: Number of international travellers entering or returning to Canada, by type of transport (monthly)
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Figure 8-6: U.S. Automobile Border Crossings into Northern Ontario9, 2005-2010
Source: CPCS Analysis, Statistics Canada, Table 427-0002: Number of vehicles travelling between Canada and the United States As can be seen from the figure above, U.S.-based traffic through Northern Ontario’s border points is quite seasonal with summers seeing an influx of visitors staying for “two or more nights” (accounting for 43.6% of all automobiles entering in 2010). Their relative share of the total traffic remained steady between 2005 and 2010, suggesting that the cause of the decline in traffic has had a similar effect on all types of visitors.
8.2 Sector Developments and Trends In this section, we summarise a number of the economic and industry trends and developments which have and will continue to affect development of the tourism sector in Northern Ontario.
High Value of the Canadian Dollar One of the most significant influencers of demand for Northern Ontario tourism is the strength of the Canadian dollar, which has gained considerably against the U.S. dollar since 2006 (as noted in Chapter 2). Many of the stakeholders consulted noted that U.S. visitors are extremely sensitive to the high Canadian dollar and tend to stay away from Canada even when the U.S. dollar appreciates in value. The drop in U.S. demand has had a particularly
9 Includes the border crossings of Fort Frances (on average, 33% of traffic between 2000 and 2010), Pigeon River/Thunder Bay (10%), Rainy River (9%), and Sault Ste. Marie (48%).
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strong impact on westerly regions of Northern Ontario where the proportion of visitors from the U.S. is highest.
Compounding the decline of U.S.-based visitors is the fact that as the Canadian dollar gains in value relative to the U.S. dollar, Canadian visitors are better able to afford vacations in the U.S. and other parts of the world. For example, residents from north central and eastern parts of Northern Ontario will visit Michigan more often, while Thunder Bay and northwestern residents visit Minnesota.
Relatively High Airfare Prices Airfare prices to and within Northern Ontario are relatively high compared to other regions.
Until recently, Air Canada held a virtual monopoly for travel from Sault Ste. Marie, Timmins, Sudbury and North Bay with airfares to and from Toronto typically in excess of $1,000. The arrival of Porter Airlines in Northern Ontario in 2011 opened the market to these destinations to competition.10 While airfares between Toronto and these hubs have dropped dramatically in the past year, airfares for intra-regional flights are still considered extremely expensive and a barrier consistently raised by tourism operators and visitors alike. To give an example, a one-way direct flight from Toronto to Thunder Bay (two hours) is currently under $200,11 but a 45-minute flight from Thunder Bay to Sioux Lookout is between $350 and $500.12 The high costs of interregional flights lead tourists to switch from air travel to road for part of their journey, which may be frustrating for travellers, especially with challenging highways to more remote areas. As WestJet launches its new regional airline, there will likely be positive spin-off effects in terms of lower airfares; however, impacts are uncertain as Thunder Bay is currently the only northern city served by this carrier.
Increased Global Competition Another trend affecting Northern Ontario is the decrease in airfare costs in the U.S. (15.2% between 1995 and 201113) and a “world is shrinking” phenomenon perceived by many tourists. These trends have exposed Northern Ontario to increased competition from both U.S. and international destinations, providing both Canadian and U.S.-based travellers with more options for affordable get-away vacations which would have been much more limited in the past. Thus, Northern Ontario increasingly has had to compete with non-traditional competitors such as Las Vegas, Florida cruises and even some international adventure destinations.
10 Out of Toronto, Porter operates four daily flights to Sault Ste Marie and Sudbury, five daily flights to Thunder Bay, and three daily flights to Timmins (schedule for Friday, January 18, 2013, www.flyporter.com). 11 Porter and Air Canada, February 2013. 12 Wasaya Airways and Bearskin 13U.S. Bureau of Transportation Statistics.
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Increasing Gasoline Prices Gasoline prices have increased substantially over the past decade. These prices have a particularly strong impact in the tourism sector given that road vehicles are the primary means to traverse Northern Ontario’s expanses.
Impacts of Economic Downturn The global recession, starting in late 2007, has been very much reflected in the bottom line of Northern Ontario’s tourism operators. With higher unemployment rates in both Canada and the U.S., and record highs in Michigan, Illinois, Indiana, Wisconsin and Minnesota (the states nearest to Northern Ontario), the demand for tourism in general has fallen. Although the economic downturn has also affected Ontario (albeit to a lesser extent than the U.S.), a number of stakeholders in the southern part of the region noted a strong uptake in daytrip visitors from Southern Ontario.
Administrative Challenges Associated with Border Crossing As of June 2009, U.S. citizens entering the U.S. from Canada by land or sea are required to have valid passports for re-entry (a U.S. requirement). Prior to this, U.S. citizens could re-enter with only a driver’s licence or birth certificate. In 2008, just over 30.2% of the U.S. population had valid passports. While this number climbed to 35.5% by 2011, with over 17 million new valid passports entering circulation, the need for such documentation created a substantial barrier for casual travelers wishing to visit Ontario. Heightened border security measures since Sept. 11, 2001, have created both an actual and psychological barrier for travellers crossing the border.
Technology and Infrastructure Stakeholders have indicated that a notable shortfall in Northern Ontario’s tourism industry is a perceived gap between tourism providers, local infrastructure and the changing expectations of visitors. Four examples of this are growing demands for:
• Efficient border crossings with modern services and amenities
• Online booking and reservation systems for even the smallest of tourism operators (many of whom still only have dial-up internet access)
• More tourism information points, highway signage and highway rest-stops
• Greater and more reliable mobile network and Internet access coverage In short, there is a demand for both higher technology in the industry and a greater investment in tourism-related public and private infrastructure.
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Aging and Changing Demographic and Tastes The typical demographic of Northern Ontario’s tourism audience is gradually changing which is altering demand for the region’s products. There has been an aging demographic with respect to the traditional and avid angler/hunter, with younger and new tourist audiences (e.g. new immigrants) less inclined to be attracted to this type of activity. Some operators of angling/hunting facilities have made investments to mitigate this trend by altering their products. Related to a point raised above, younger generations of tourists also seek to research, plan and book their holidays online, an option which is not broadly available across Northern Ontario, particularly in terms of smaller operators and integrated planning facilities (e.g. booking your flight, transport and experience as one package).
Inability to Invest in Upgrades A number of stakeholders expressed the view that their operations have hit rock bottom due to the slump in demand over the last decade, with some reporting as much as a 75% decline in U.S.-based visitors. This is especially the case in northwestern Ontario. This lack of demand has hurt local providers by starving them of funds needed to maintain and expand their operations. As such, some have forgone the investment they believe is needed to maintain and modernize their lodges, attractions and other equipment.
Overall, tourism operators in Northern Ontario noted challenges associated with accessing bank financing or funding for expansion or for the development of new products, or for installation of updated technology. This was particularly challenging for smaller operators. Some operators have historically relied on funding from federal and provincial agencies for support including Northern Ontario Heritage Fund Corporation (NOHFC) and Fednor. While there was a positive outlook regarding the increased marketing support from the establishment of the new tourism strategies and associated support from RTOs, there is also some concern that marketing support is only as good as the product being marketed. Without additional funds / financing to develop new and improved products tourism operators in the region will continue to face challenges.
Labour Shortage As noted in Chapter 2, the population of Northern Ontario is aging, the labour supply in Northern Ontario is diminishing and wages are likely to experience upward pressure from mining development projects. Some stakeholders in the hospitality sector have already experienced such a labour shortage and have begun participating in worker placement programs involving seasonal foreign workers to shore up staff shortages. The Canadian Tourism Human Resource Council noted in 2010 that “Canada’s tourism sector is facing a potentially severe shortage of labour over the next 15 years. Canada’s population is aging, causing labour-force growth to decelerate over the long term. The consequences of labour shortages, such as missed opportunities for investment in the sector, and the inability to meet
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potential demand, could cost Canadian tourism businesses billions of dollars.”14 Thus, Northern Ontario’s tourism sector is not alone in experiencing a labour shortage, though likely it will experience it more acutely than elsewhere.
On a more positive note, the Aboriginal population in Northern Ontario is the fastest growing segment of the population in the region, providing increased opportunities for potential growth in participation and development of Aboriginal experiences products.
Snowmobiling/Winter Trails Maintenance Challenging Snowmobiling is an important and unique tourism opportunity for Northern Ontario, to the extent that many other “adventure” destinations worldwide do not benefit from snow covering. Consultations indicate that this tourism product offering is suffering from a decline for two reasons. First, with a warmer climate, the snowmobiling season is getting shorter. Second, there are challenges among local communities and smaller snowmobiling clubs in affording maintenance costs for their long trails.
New Tourism Strategy is Illustrating Strong Momentum In February 2009, Discovering Ontario: A Report on the Future of Tourism was released (also known as the Sorbara Report). The report outlines a goal, four strategies and 20 recommendations to support the growth and long-term viability of tourism in Ontario. The first recommendation to be implemented from the report was the establishment of 13 new RTOs based on grouping geographic regions around common experiences and common visitor markets. This report led to the re-organization of Tourism Northern Ontario (formerly known as RTO 13) into three separate sub-regions due to its geographic size and the difference in tourism offerings across differing travel corridors (see map below).15
14 Canadian Tourism Human Resources Council (2010), The Future of Canada’s Tourism Sector: Economic Recession Only a Temporary Reprieve from Labour Shortages. 15 As noted in the overview, the Northern Ontario region for this study includes Tourism Northern Ontario (formerly known as RTO 13) and only some parts of RTO 12.
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Figure 8-7: Tourism Regions: Tourism Northern Ontario (13a,b,c) and RTO 12
Source: Ministry of Tourism, Culture and Sport. http://www.mtc.gov.on.ca/en/images/regions_maps/North_lam.pdf
The new strategy is widely regarded as a positive step toward ensuring that Northern Ontario remains on the radar of increasingly more global-looking visitors, both in Canada and beyond. The new RTOs are expected to coordinate, align and invest in sub-regional programs and Tourism Northern Ontario has become the lead organization for the identified pan-northern management functions (i.e. co-ordination of marketing, product development, workforce and industry training, and investment attraction). Coordination efforts include working with broader provincial and federal agencies such as Ontario Tourism Marketing Partnership Corporation (OTMPC), NOHFC and FedNor to refine and promote northern tourism experiences. The OTMPC works with all RTOs but has a direct tie to Northern Ontario through its Northern Office staff who lead several provincial advertisement programs that are important for the Region (e.g. angling, motorsports, soft outdoors and hunting).
Tourism Northern Ontario’s development of a Northern Ontario Destination Development Strategy is currently underway. It will assess Northern Ontario’s tourism product, identify gaps and new opportunities, develop and align programs with Northern funding bodies, and deliver programs to Northern Ontario’s tourism industry to address these realities.
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Fort William Historical Park Expansion Fort William Historical Park in Thunder Bay is currently undergoing major expansion of its facilities, including the recent opening of the David Thompson Astronomical Observatory on December 5th, 2012. This is one of the largest public observatory telescopes in Canada. Additionally, the park is in the advanced planning stages of developing one of the world’s largest Aboriginal experiences product attractions, including a heritage-themed Recreation Vehicle (RV) park, outdoor adventure campground and yurts, multi-media large screen theatre, and festival infrastructure. This combined facility, valued at over $55 million, would represent a significant new attraction in the region and is projected to attract 100,000 visitors per year. Full development is predicated on accessing public funds.
Agawa Canyon Tour Train Reservation and Coach Upgrade Systems The Agawa Canyon Tour Train is a 180-km tourist train running north from Sault Ste. Marie, offering one-day wilderness excursions. The company recently completed an $11 million investment project focused on obtaining new locomotives, cars and related infrastructure. It also recently launched a new online reservation system managed by Tourism Sault Ste. Marie, which has boosted ridership. It is hoped that these upgrades will offer a higher-value experience and act as a draw for tourists looking to experience Northern Ontario’s wilderness using a mode other than automobile.
Figure 8-8: Agawa Canyon Tour Train
Source: Tourism Sault Ste. Marie
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Delta Hotel (Thunder Bay) and Urban Regeneration Another major project is the recently announced Delta Hotel to be constructed on Thunder Bay’s waterfront. This $20 million project is in addition to the City of Thunder Bay’s $68 million investment in urban tourism infrastructure, including waterfront and trail development, attractions, sport facilities and accommodation (upgrades and new facilities). These and other similar urban regeneration projects across Northern Ontario cities are intended to increase tourism and overnight trips in the area by offering a new accommodation option for visitors looking to spend time in the region ($237 million is being invested in total across Sault Ste. Marie, Thunder Bay, Timmins, Sudbury and North Bay).16
Chi-Cheemaun Ferry The Chi-Cheemaun Ferry operated by the Owen Sound Transportation Company provides services for passengers, cars and freight between Tobermory and Baymouth on Manitoulin Island. In 2013, a market assessment and corresponding marketing strategy for the ferry service was prepared following several years of declining traffic numbers. The study suggested various measures to improve the sailing experience, including partnerships with regional tourism stakeholders and enhanced communications with a target audience.17
Lake Huron North Channel Bike Trail
Tourism Sault Ste. Marie is leading (with funds from the Tourism Northern Ontario) a recently completed a study identifying opportunities for a cycling link between Sault Ste. Marie and Sudbury. The concept is based on keeping cyclists off the main highway, and also connecting with other Ontario cycling routes. One of the requirements of success of this initiative would be creating bike lanes where required, as well as appropriate signage.
Great Lakes Cruise Industry The Great Lakes cruise industry is small, but has seen some growth in the past decade. Further growth remains somewhat constrained by a number of challenges. First, it has been challenging to attract the largely European owners and operators of smaller vessels which can navigate the St. Lawrence Seaway to the Great Lakes region. Second, there are a range provincial and federal regulatory requirements and associated costs which deter operators interested in Great Lakes cruising opportunities. These challenges are discussed in further detail in section 8.6.3 of this chapter. Despite these challenges, there appears to be potential to turn the situation around and grow passenger cruising with regulatory changes. Many expedition size ships which are Seaway compliant and mega yachts are seeking new destinations which match the tourism experiences offered in Northern Ontario.
16 Northern Cities Presentation to Ontario Tourism Marketing Partnership Corporation Northern Tourism Marketing Committee, May 1, 2012. 17 CPCS, “Market Feasibility Study for the MS Chi-Cheemaun”, prepared for the Owen Sound Transportation Company, January 2013. The study can be downloaded here: http://www.chicheemaunmarketstudy.com/
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8.3 Regional Competitiveness
8.3.1 Strengths, Weaknesses, Opportunities and Threats The following SWOT analysis succinctly outlines the current state and future outlook for the tourism sector in Northern Ontario.
Figure 8-9: Tourism Sector SWOT
Strengths Weaknesses
• Northern Ontario still has many abundant, • The costs associated with traversing the distances unspoiled wilderness attractions which are between major urban centres remain high, unavailable in many parts of the world. The region especially given high cost of fuel and intra-regional still offers a wide variety of relatively unique flights. products and experiences. • Decline in tourism receipts and visitors over the • Strong demand from Ontario residents underpins past 10 years (with some recovery in recent years) tourism in the region. has limited operators’ ability to invest in new • New airline routes from Toronto have created opportunities and expansion plans. more opportunities for tourism and business • Smaller operators face challenges in accessing development more generally. capital and bank financing for technological and • Highway improvements have increased safety and infrastructure upgrades and new product highway capacity (notably four-laning of Highway development. 11 south of North Bay, on-going four-laning of • Access to and adoption of technology by local Highway 69/400, and four-laning of parts of operators is low relative to competitors Highway 11/17 between Thunder Bay and • Relatively low awareness of Northern Ontario Nipigon). products Opportunities Threats
• The new Tourism Northern Ontario marketing • Gasoline prices are expected to continue to rise, strategy has the potential to attract more making independent car travel less attractive international tourists who spend considerably (more costly). more than Ontario residents (per person). • Global competition in the form of alternative • “Rock-bottom” perception that things can only get tourism options internationally, particularly for better from current state has created incentives older generation (e.g. cultural tours, cruising) will for undertaking new strategies and providing new continue to create stiff competition for the region. tourism offerings. • The strength (and the ongoing perception of • Mining development will boost the local economy strength) of the Canadian dollar vis-à-vis the U.S. and may lead to greater spending on local tourism. dollar may continue to deter U.S. visitors. • There is considerable room to for tourism • Challenges in maintaining product and operators and local/provincial governments to infrastructure may hurt industry competitiveness. improve the region’s product offering through • Increased mining development may place investment in infrastructure, technology and additional pressure on local ecosystems, existing multi-product packaging. infrastructure and existing labour shortages • There is a potential for development of multi- (increasing labour cost). destination flight and car rental packages to reduce cost and driving time. • A growing population of new immigrants in the
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Toronto and Winnipeg areas present a large target audience to experience the Canadian wilderness. • Increased and more affordable air transportation infrastructure places Northern cities in stronger position to host major sporting events. • Growing interest in and opportunities for Aboriginal experiences product development • Growing Aboriginal youth demographic and associated increase in employment potential
8.4 Outlook On the basis of the preceding contextual review, the outlook for the forestry sector is mixed.
• Much of the industry’s fate relies on an economic turnaround in both Ontario and Northern U.S. markets, as well as relief in the form of lower gasoline and/or airfare prices or a weaker Canadian dollar. Given the continued weakness of both the U.S. and European economies, a strong turnaround in demand from the U.S. and from overseas appears unlikely in the short term.
• There is upside potential from regional and provincial demand as illustrated by the relative growth of visits from within the North and from the rest of Ontario. This “local” appetite presents a number of opportunities that the hospitality industry could harness through development of “fresh” tourism ideas and opportunities. A large and growing population - including new immigrants – to Ontario’s GTA area as well as Winnipeg could be targeted for true Canadian wilderness experiences.
• Many further initiatives are needed by both private and public parties to make the region truly competitive in a global marketplace. In particular, private investment and coordination is needed to reduce transportation time and costs related to mode switching. For example, consultations highlighted that fees for rental car repositioning greatly increase the cost (in either time or money) of visiting the region via any mode other than private automobile. Additionally, visitor-support infrastructure is needed to keep up with growing demand amongst consumers for more accessible tourism destinations, including higher availability of tourist rest stops along the highways and better Internet connectivity. Without such investments in local infrastructure and the overall tourism product offered, it is likely that the tourism outlook, especially in regions not directly adjacent to Southern Ontario, will continue to decline over the medium and long term.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Overall Outlook The figure below summarizes the short, medium, and long-term outlooks for each of Northern Ontario’s main tourism sub-sectors as well as general visitation trends, based directly on consultations with tourism operators and stakeholders.
Figure 8-10: Outlook for Tourism Sector, Growth from Current Context
Sub-Sector Short Term Medium Term Long Term (2012-2016) (2017 - 2026) (2027 - 2036) Local Visitation (within Moderate Linked to population Linked to population Northern Ontario) growth (steady state) growth (steady state) Domestic Visitation Low to Moderate Moderate Moderate to High (Southern Ontario / (Primarily in central (Primarily in central (Primarily in central Rest of Canada) and eastern areas) and eastern areas) and eastern areas) U.S. Visitation Low Low to Moderate Unknown International Low Low to Moderate Unknown
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Tourism Sector Transportation Overview
The structure of this transportation overview section is different from other sector chapters. This is because the transportation of people is distinct from the transportation of freight. Our focus is on providing an overview of how each transport mode is used by tourist, followed by recommendations on how to improve transportation –related aspects of the tourism sector.
8.5 How Tourists Use the Transportation System Tourists to Northern Ontario benefit from a full range of transport options to access and visit sites within the region. In this section we summarize the transportation infrastructure available in the region and provide an indication of their relative importance to the tourism sector.
8.5.1 Road Travel The tourism sector in Northern Ontario is predominantly a “rubber tire” (road-based) market. The vast majority of tourists to and within the region travel by road, primarily in personal vehicles.
Origin and Destination Patterns of Tourist Vehicles in Northern Ontario Figure 8-11 and Figure 8-12 below illustrate the origins and destinations of passenger vehicles destined to tourism activities either in Northern Ontario, or passing through Northern Ontario to reach tourism activities in other regions. The figures are based on surveys carried out at points in Northern Ontario to illustrate a “typical” 24-hour period in the summer (Figure 8-11) and fall (Figure 8-12).18 They are based on data received from responses to MTO licence-plate
18 Surveys were sent to vehicles which crossed one (or more) of four survey points in Northern Ontario, over two days in September 2011 (fall) and one to two days in July 2012 (summer). The survey points were: 1) Highway 17 at the Ontario-Manitoba Border (fall only); 2) Highway 69 north of Parry Sound; 3) Highway 11 south of North Bay; 4) Highway 17 west of Mattawa (fall only) 5) Highway 11/17 west of Nipigon (summer only); and 6) Highway 17 west of Sudbury. The data received were factored up to a 24-hour period, and adjusted based on an average two-week traffic counts. Data illustrated in the figure has been re-adjusted to show typical traffic for one day only. The data has not been adjusted to reflect any duplicates which may have been received from passenger vehicles crossing more than one survey site on the same journey.
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trace mail-back surveys, sent to Ontario licence-plate holders only. They therefore exclude travellers driving vehicles registered outside of Ontario. The results include passenger vehicles which are destined to the following tourism activities (as per survey response options): fishing, hunting or recreation/vacation (in the fall), or cottage/family camp, campground, or recreation/vacation (in the summer).
In the case of primary destinations for summer road trips (Figure 8-11), the areas of Northern Ontario closest to Southern Ontario see the most visitors, with Parry Sound, Nipissing, Manitoulin, Algoma and Sudbury receiving 66% of tourism-related passenger vehicles. A significant proportion (22%) of all tourism-related passenger vehicles crossing survey points were passing through Northern Ontario to reach tourism destinations beyond the region. Of the tourism-related passenger vehicles destined to or passing through Northern Ontario, 35% originate from Central and Southwestern Ontario.
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Figure 8-11: Origin and Destination Region of Passenger Vehicles Destined to Tourism Activities In Northern Ontario or Passing Through Northern Ontario (Summer 2012)
Summer (2012) Destination Area Total % of Total Other regions of Thunder from from Kenora - Thunder Algoma - Sudbury - Canada and US Kenora - Rainy Bay - Algoma - Sudbury - Manitouli Cochrane - Cochrane - Timiskami Nipissing - Parry Origin Origin Origin Area Kenora Bay - Sault Ste. Greater Nipissing - Other (via Northern Other River Thunder Other Other n Timmins Other ng North Bay Sound (City) Other Marie Sudbury Ontario survey Bay (City) points) Central Ontario 13 10 9 85 138 160 214 250 20 22 98 118 300 150 97 1685 24% Sudbury - Greater Sudbury 1 18 89 181 299 327 86 380 1380 20% Southwestern Ontario 26 6 15 17 57 83 146 88 6 10 22 22 101 92 58 748 11% Parry Sound 6 4 19 21 33 22 24 148 52 147 51 526 8% Nipissing - North Bay 9 1 2 9 11 237 231 500 7% Eastern Ontario 2 22 35 36 15 31 32 10 11 67 262 4% Thunder Bay - Other 11 62 111 1 11 33 229 3% Sudbury - Other 76 5 65 83 229 3% Thunder Bay - Thunder Bay (City) 122 27 20 12 29 210 3% Muskoka 6 7 6 4 14 13 7 31 66 13 17 1 184 3% Manitoulin 83 4 1 4 22 68 183 3% Algoma - Other 12 4 46 2 11 3 13 4 77 172 2% Algoma - Sault Ste. Marie 4 13 13 28 4 7 96 164 2% Nipissing - Other 2 1 9 6 41 74 132 2% Timiskaming 4 11 101 117 2% Cochrane - Timmins 38 38 1% Kenora - Other 24 2 4 5 35 1% Western Canada 5 4 23 31 0.5% Haliburton 7 6 4 8 0 25 0.4% Manitoba 7 5 8 21 0.3% Cochrane - Other 11 0 11 0.2% Kenora - Kenora (City) 4 4 8 0.1% Minnesota - Cook 6 0 6 0.1% Rainy River 4 0 4 0.1% Michigan - Other 3 0 3 0.1% Michigan - Chippewa 3 0 3 0.04% Eastern Canada 2 0 2 0.03% Total to Destination 4 64 2 109 346 222 361 712 764 746 33 49 186 359 508 919 1526 6908 % of Total from Destination 0.1% 0.9% 0.0% 1.6% 5.0% 3.2% 5.2% 10.3% 11.1% 10.8% 0.5% 0.7% 2.7% 5.2% 7.4% 13.3% 22.1%
Source: MTO Passenger Vehicle Surveys, Summer 2012
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Figure 8-12 shows the origins and destinations of passenger vehicles destined to or passing through Northern Ontario to reach tourism activities. Based on the survey points, the areas in the southeastern parts of Northern Ontario see the most visitors to Northern Ontario; Parry Sound, Nipissing, Manitoulin, Sudbury and Algoma combines are the destination of 58% of visitors. As with the summer survey results, a significant proportion (33%) of all tourism- related passenger vehicles crossing survey points were passing through Northern Ontario to reach tourism destinations beyond the region.
Given the different locations of surveys between seasons it is difficult to make comparisons across seasons, with the exception of areas around the most southeastern parts of Northern Ontario where surveys were carried out in both summer and fall. For example, no summer vehicle survey was done in the Kenora area and there are likely gaps in important summer traffic to the Kenora / Lake of the Woods area from Manitoba. In areas where summer and fall surveys were carried out, it is clear that summer traffic is considerably larger than fall traffic.
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Figure 8-12: Origin and Destination Region of Passenger Vehicles to Destined to Tourism Activities In Northern Ontario, or Passing Through Northern Ontario (Fall 2011)
Fall (2011) Destination Area Other regions of Total % of Thunder Algoma - Sudbury - Canada and US from Total Kenora - Rainy Algoma - Sudbury - Manitouli Cochrane - Cochrane - Timiskami Nipissing - Nipissing - Parry Origin Area Bay - Sault Ste. Greater (via Northern Origin from Other River Other Other n Timmins Other ng North Bay Other Sound Other Marie Sudbury Ontario survey Origin points) Central Ontario 2 12 97 9 68 103 30 35 4 33 38 58 94 25 609 23% Nipissing - North Bay 63 157 160 379 14% Parry Sound 16 10 15 13 65 16 156 71 362 14% Southwestern Ontario 9 4 12 5 37 32 10 5 27 8 7 70 9 235 9% Sudbury - Greater Sudbury 5 19 202 227 9% Eastern Ontario 10 15 32 9 14 3 25 13 18 29 37 205 8% Nipissing - Other 21 27 41 67 156 6% Muskoka 4 16 4 8 4 5 3 6 8 3 60 2% Algoma - Other 57 57 2% Timiskaming 3 44 47 2% Manitoba 24 15 0 40 2% Sudbury - Other 38 38 1% Kenora - Other 35 35 1% Manitoulin 24 9 34 1% Thunder Bay - Thunder Bay (City) 28 28 1% Western Canada 2 9 15 0 27 1% Kenora - Kenora (City) 21 21 1% Algoma - Sault Ste. Marie 20 20 1% Cochrane - Other 4 15 19 1% Haliburton 4 5 4 0 13 0.5% Thunder Bay - Other 12 12 0.5% Eastern Canada 3 4 7 0.3% Other USA 5 0 5 0.2% Cochrane - Timmins 4 4 0.1% Total to Destination 28 25 20 140 54 170 167 62 38 38 88 161 217 570 860 2638 % of Total from Destination 1% 1% 1% 5% 2% 6% 6% 2% 1% 1% 3% 6% 8% 22% 33%
Source: MTO Passenger Vehicle Surveys, Fall 2011
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Border Crossing Patterns Figure 8-13 shows the origins and destinations of tourism-related passenger vehicles entering Northern Ontario by U.S. border points in the region. The information is based on surveys carried out over two days each at the four border points in fall 2011 (over September and early October) and at Sault Ste. Marie only in summer 2012 (July).19 Only origin and destination points were available from the survey results; CPCS used GIS software to assign the most efficient (shortest, fastest) route possible between origin and destination always passing through the relevant border crossing.
Key points to note from the figure include the following:
• More vehicles cross into Northern Ontario at the Sault Ste. Marie border crossing on a typical summer day (739)20, than cross all other border points, combined, on a typical fall day (479). This simply confirms the fact that tourism to Northern Ontario is typically much higher in the summer than in other seasons.
• In the fall, Sault Ste. Marie is still the busiest border crossing (223 vehicles), followed by Fort Frances (103 vehicles), Pigeon River (103 vehicles) and Rainy River (30 vehicles). In the case of Sault Ste. Marie, 65% of tourism-related passenger vehicle crossings at Sault Ste. Marie originate from Michigan, 29% from areas of the U.S. other than Michigan or Minnesota, and 6% from Southwestern Ontario21. In contrast, the majority of tourism- related passenger vehicles arriving at Fort Frances, Pigeon River and Rainy River originate from places in Minnesota or parts of the U.S. other than Michigan or Minnesota.
• In the summer, vehicles arriving at the Sault Ste. Marie border come from Michigan (68%), Minnesota (5%), other U.S. (22%), with the remaining 5% from elsewhere in Canada.
19 The data includes passenger vehicles whose survey respondents indicated they were entering Northern Ontario for the following destination activities: campground (summer only), cottage/family camp (summer only), fishing (fall only), golf (summer only), hunting (fall only), sports event, theatre/show (fall only), tourist attraction, or vacation. The flows presented show typical flows over one day only (by dividing two-day survey results in half). 20 Only the Sault Ste. Marie border crossing was surveyed in summer 2012. 21 To reach Sault Ste. Marie, it is shorter for travellers in Southwestern Ontario to cross the border at Detroit and then again at Sault Ste. Marie, MI, than to travel through Ontario.
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Figure 8-13: Routes Used by Passenger Vehicles Destined to Tourisms Activities in Northern Ontario via Border Crossings
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The primary activities and destinations of the 739 passenger vehicles crossing into Northern Ontario at the Sault Ste. Marie border in the summer are broken down in Figure 8-14. As can be seen, most of the tourists crossing into Northern Ontario at Sault Ste. Marie in the summer stay within the Algoma, Sudbury and Manitoulin Regions. Their use of the Northern Ontario transportation system is therefore relatively low.
Figure 8-14: Destination Activities and Regions for Tourists Arriving Into Northern Ontario at Sault Ste. Marie (Summer, 2012)
Destination Activities Destination Region
Source: MTO Passenger Vehicle Surveys, Summer 2012
The primary activities and destinations of the 479 vehicles arriving for tourism in Northern Ontario in the fall are presented in Figure 8-15 and Figure 8-16. Again, most visitors are not travelling extensively by road beyond the regions adjacent to border crossings.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Figure 8-15: Destination Regions of Tourism-Related Vehicles Arriving at Border Crossings in Northern Ontario (Fall, 2011)
Source: MTO Passenger Vehicle Surveys, Fall 2011
Figure 8-16: Destination Activities for Tourists Arriving Into Northern Ontario at Northern Ontario Border Crossings (Fall, 2011)
Source: MTO Passenger Vehicle Surveys, Fall 2011
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As noted above, only the Sault Ste. Marie border crossing is surveyed by MTO in the summer. In an attempt to illustrate the relative importance of international passenger traffic at each border crossing over the course of a full year Figure 8-17 presents the number of non-resident travellers (U.S. residents and residents of other countries) entering Canada via border points in Northern Ontario by road (bus or automobile). The graphic highlights the importance of Fort Frances as an important border crossing. However, it is important to point out that the figure includes all visitors (not just tourists) and as such it is not as accurate a representation of tourist traffic when compared to the previous figures.
Figure 8-17: International Travellers Entering Northern Ontario Land Border Points, 2005 - 2011
Source: CPCS Analysis, Statistics Canada CANSIM Table 427-0001: Number of international travelers entering or returning to Canada, by type of transport.
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8.5.2 Passenger Rail There is currently one passenger rail service available to tourists wishing to travel to or from Northern Ontario from outside of the region.22 VIA Rail’s Toronto-Vancouver (“The Canadian”) train makes a regular service stop in Sudbury on the way to and from Vancouver. Additional (non-station) stops can be requested by passengers with 48 hours’ notice, between Capreol (north of Sudbury) and Winnipeg. We understand such stops are used for visitors to disembark to reach remote hunting and fishing lodges, although not extensively.
Once in the region, the following rail services are offered for tourists wishing to visit Northern Ontario:
• The Agawa Canyon Tour Train (operated by CN) offers a popular day trip taking passengers 180 km out of Sault Ste. Marie northwards to Canyon Park and then returning to Sault Ste. Marie in the evening. In summer, passengers can disembark at Canyon Park. The summer service operates daily from late June until mid-October. The winter service operates Saturdays only from early February to mid-March. After a number of years of declining ridership, the train has seen an increase in uptake in the past year, following a $11.02 million coach upgrade investment in spring 2011 (with support from Northern Ontario Heritage Fund and CN Rail). Consideration is also being given to building a Visitors Centre in the Canyon Park. The hope is that ridership will increase from approximately 29,000 riders/year in 2012 to 50,000 by 2015.23
• Algoma Central Railway (a division of CN Rail) operates a passenger service between Sault Ste. Marie and Hearst (475 km) running on CN track. The service provides access to a variety of remote lodges and snowmobiling trails along the way, which are also the sectors where the railway sees the strongest potential for growth (as opposed to carrying local residents). The service also includes a tourism-focused option to stay overnight in Hearst, returning to Sault Ste. Marie the following day.
• VIA Rail offers a tourism-focused train between Sudbury and White River, with three departures weekly from Sudbury (Tuesday, Thursdays and Saturdays) and three departures from White River (Wednesdays, Fridays and Sundays).24 The train stops in Cartier, Chapleau, Franz and a few other places. A stop between two stations can be requested by a passenger en route with 48 hours advanced notice (for example, to reach a remote
22 The Ontario Northland Transportation Commission’s Northlander Passenger train from Toronto to Hearst stopped operating in September 2012. Every community that was served by the Northlander train is served by ONTC motor coach services, which continue to run as usual.
23 Based on consultations with Tourism Sault Ste. Marie. 24 This service is mandated by the Government of Canada to operate in order to meet essential transportation needs. VIA Rail receives financial support from the federal government for operations.
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outdoor site). We understand this service is heavily used in the summer to access fishing and hunting lodges in remote areas.
• The Ontario Northland “Polar Bear Express” operates between Cochrane and Moosonee every weekday. The train is an important link for the local community, with ridership of over 35,000 per year. However, we understand from ONTC that the majority of passengers are local to the area and not tourists visiting from outside the region.25
8.5.3 Marine Transportation The following options exist for marine tourism (in addition to extensive smaller-scale boating / canoeing activities).
• Owen Sound Transportation Company (OSTC) operates the Chi-Cheemaun Ferry between Tobermory and South Baymouth (Manitoulin Island), as well as a ferry between Moosonee and Moose Factory. The Chi-Cheemaun Ferry primarily caters to Southern Ontario and U.S. tourists wishing to reach Northern Ontario, and has experienced a slow decline in passengers due in part to an increase in available alternatives (better highways). The ferry operates from May to October, with annual passengers of approximately 200,000.26 The OSTC completed a market assessment in spring 2013 looking at options for improving ridership on the Chi-Cheemaun. The study concluded that there are opportunities for OSTC to increase ridership by the improving marketing to reach new customers and offering enhanced experiences for travelers on the ferry (e.g. ferry tours, live music, local food experiences, etc).27
• The OSTC Moosonee Ferry is used primarily for transportation of freight, with some limited tourism in July/August (when passengers arrive by rail to Moosonnee from Cochrane on the Ontario Northland “Polar Bear Express”). We understand from consultations that the vast majority of tourists arriving to the region use the freighter canoe taxis from the Moosonee river front to reach Moose Factory Island, rather than the ferry.
• Cruising on the Great Lakes is a small tourism market with growing potential. We understand from consultations there are a handful of cruise ships which make calls at ports in the region over the summer and fall months, with the busiest ports (in order of visitors)
25 Interview with ONTC staff, August 2012. 26 Ferry passengers using the OSTC ferry have commented on a lack of hotel facilities on Manitoulin Island, which has an impact on their decisions regarding where they will vacation. Because many tourists using the ferry are going further north, a number opt to drive Highway 400/69 instead and bypass Manitoulin Island altogether. The Great Spirit Circle Trail investment plans to build a hotel on Manitoulin Island in the near future will hopefully help increase tourism numbers on the ferry. 27 CPCS, “Market Feasibility Study for the MS Chi-Cheemaun”, prepared for the Owen Sound Transportation Companies, January 8, 2013. Available for download here: www.chicheemaunmarketstudy.com
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being Little Current, Thunder Bay, Parry Sound, Sault Ste. Marie and Red Rock (near Nipigon). Examples of cruise companies calling at these ports include:
- Travel Dynamics based out of New York, which operates the U.S.-flagged Yorktown (the ship is not expected to stop in Northern Ontario in 2013)
- Blount Small Ship Cruises from the U.S. which uses the Grand Mariner (not expected to operate in Ontario waters in 2013)
- Plantours of Germany operates The Hamburg (formerly Columbus) and has indicated verbally they may make on Great Lakes sailing in 2014, although the number of Canadian ports of call remains to be confirmed. The challenges associated with growth in the cruising industry were summarised in section 8.2.
There is also important boating and sailing taking place in the North Channel (the waterway between Manitoulin Island and the mainland, leading to Sault Ste. Marie). Meldrum Bay, on the northwest tip of Manitoulin Island, is the first port of call for clearing customs in Canada when cruising the southern shore of the North Channel, and therefore registers a relatively large number of U.S. tourists arriving by boat into Canada (see Figure 8-18). 28
Figure 8-18: International Travellers Entering Northern Ontario by Boat, 2005-2011
Source: CPCS Analysis, Statistics Canada CANSIM Table 427-0001: Number of international travelers entering or returning to Canada, by type of transport.
28 http://thenorthchannel.ca/meldrum.html
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8.5.4 Air Travel There are 69 public airports in Northern Ontario. The majority of tourists using the air mode arrive to the region at one of the primary hub airports in the region (Thunder Bay, Sudbury, Timmins, Sault Ste. Marie and North Bay) where connections to a city beyond Northern Ontario are available. From these hub airports, flights on regional carriers are available to smaller centres, or in some instances small charter aircraft fly tourists to remote sites using floatplanes.
The primary scheduled service airlines serving Northern Ontario are: Air Canada, Porter, Bearskin, Wasaya and Air Creebec. Charter services are available across Northern Ontario with Bearskin, Wasaya and Air Creebec, and are used extensively by the mining and tourism sectors, as well as key links for many remote First Nation communities. The hunting, fishing and lodge tourism sector relies heavily on floatplanes to reach remote lakes and tourism sites.
Figure 8-19: International Travellers Entering Northern Ontario by Air/Plane, 2005-2011
6,000
5,000
4,000
3,000
2,000
1,000 Number of International Travellers International of Number - Thunder Fort Kenora Saulte North Bay Greater Rainy Meldrum Timmins Bay Frances Ste. Marie Sudbury/ River Bay Grand Sudbury
2005 2006 2007 2008 2009 2010 2011
Source: CPCS Analysis, Statistics Canada CANSIM Table 427-0001: Number of international travelers entering or returning to Canada, by type of transport.
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8.6 Transportation Needs Identified by Stakeholders The following section provides a summary of transportation needs identified by stakeholders and research (including the Ontario Tourism Infrastructure Research Study29). These are grouped into three categories: 1) investment in new infrastructure, 2) improvements in existing infrastructure and 3) “soft” regulatory or policy issues which affect transportation.
Overall, the priority sector for investment to improve tourism in Northern Ontario is the roads sector. This is largely because the majority of tourists in Northern Ontario travel by car, making the quality of roadways, signing and other infrastructure particularly important. Furthermore, the journey is an integral and critical part of a tourism experience, meaning that quality infrastructure which facilitates tourism is necessary to entice new tourists and keep tourists returning to the region.
8.6.1 Investment in New Infrastructure
Investment in New and Improved Rest Stops Stakeholders noted the need for more wayside tourist centres and rest stops (with restrooms) for travellers to the region. The rest areas need to be larger and better able to accommodate recreational vehicle (RV) traffic, as well as providing facilities where food is available. A shortage of gas stations was also cited as a common frustration expressed by travellers.
It was also noted that tourism information centres should operate year-round and be staffed with people who can answer questions and help tourists learn about opportunities in the area.
8.6.2 Improvements in Existing Infrastructure
Identify Areas for Additional Passing Lanes and/or Four-Laning on Key Roads The highways in Northern Ontario are primarily two lane (see Chapter 3) and dotted with rock cuts and winding, isolated sections, in part due to the topography of the region. While these geographic conditions contribute to the visual attractiveness for tourists, the driving conditions on these roads are also seen as a major shortfall. Two lane highways require tourists to share the road with heavy commercial vehicles, often over long stretches of winding highway with few opportunities for passing. This leads to delays for tourists and an increased risk of accidents. These challenges are even higher in winter when icy conditions, lake-effect snow and poorer visibility deter tourists from travelling on roads where they must follow or pass transport trucks on two lane roads.
29 Notably, Malone Given Parsons and HDR Decision Economics, “Ontario Tourism Infrastructure Research Study”, prepared for the Ministry of Tourism as one component of the Ontario Tourism Competitiveness Study, February 2009.
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The capacity of roadways is particularly important in “Winter road travel in Northwestern attracting U.S. visitors, or long-distance Canadian Ontario is considered by many to be travellers who are considering road holidays outside perilous at the best of times and any of Northern Ontario. Our consultations indicated a developments on the key access corridors key barrier to attracting U.S. tourists that there are that could alleviate travellers’ concerns fewer four-lane highways in comparison to U.S. would be beneficial and show positive highways. For example, Highway I-75 in the U.S. is impacts on tourism volumes” – Sergio four-laned all the way from Detroit to Sault Ste. Buonocore, Fort William Historical Park Marie, MI (550km), but travellers who cross into Sault Ste. Marie in Canada immediately face two- lane highways across all of Northern Ontario (with some four-laned highways south of Sudbury and North Bay).
Finally, motorcycle tourism is a growing niche tourism attraction, with increased interest especially along the Lake Superior Coastline. Motorcyclists look to travel only on fully paved roads and tourism operators consistently hear that this market segment considers many of the secondary highways in Northern Ontario to be in very bad shape, resulting in dangerous driving conditions for motorcyclists and deterring interest in the sector.
According to consultations, the specific sections of highway which would benefit from increased passing lanes and/or four-laning are as follows:
• More passing lanes or four-laning of Highway 11 from North Bay to Hearst (580 km), where there is a lot of commercial traffic (including agriculture, mining, forestry) which seriously deters tourists from coming to the region (particularly for RV and motorcycle touring).
• Four-laning of Highway 17 from Sudbury to Sault Ste. Marie (300 km), a stretch of highway heavily used by tourists.
• Add passing lanes and wider shoulders on Highway 71 between Emo and Kenora, which connects U.S. tourists arriving through the border crossings of Rainy River and Fort Frances with Kenora.
Improved Signage and Way-Finding Tools Signage along highways is regulated by the province and must conform to the specific visual look and feel required by the province; commercial signage is constrained along certain highway corridors. The province of Ontario currently supports the Tourism-Oriented Directional Signing (TODS) and Logo programs (Figure 8-20). Under the program, the provincial government is responsible for signs on provincial highways, with rural or municipal roads handled separately. However, the same private contractor which delivers the provincial
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
signs has contracts with over 100 municipalities for municipal roads.30 This helps municipalities have signs with a similar “look and feel” of TODS. The TODS and logo programs are user-pay, with tourist attractions paying fees to have their attraction included on a TODS sign (between $60 - $4,500/year, depending on the type of business or road).
Figure 8-20: TODS and Logo Program Signage Examples
TODS Logo (Food, Fuel and Accommodation)
Source: Tourism-Oriented Directional Signage, Tourism Summit, October 2012 The following changes are seen by stakeholders as having potential to improve the impact of the TODS and Logo programs:
• Stakeholders felt the TODS signs were very helpful, but that they need to be increased in number and also extended to roads beyond provincial control, including roads linking to some of the more remote, drive-by access to trails and waterways. Each signpost allows a fixed number of signs, and once this number is reached a waiting list is created for those wanting to obtain a sign on that particular site. The province also limits the number of TODS signs which can be put up along highways (partly due to driving safety considerations). Combined, this means that new tourism operators can face challenges ensuring their attraction is signposted. We understand that expansion is somewhat constrained by the fact that significant space is reserved by MTO for future signage use. This results in areas appearing as though they could accommodate additional signs but space is already spoken for by MTO. Roadway widening and improvements are also removing space for signs.31
• The TODS signs are compact and consistent in look and feel across Ontario. This is in contrast to much of the commercial signage used across the United States. Some stakeholders felt it would be more effective in catching visitor’s eyes to use commercial signage and that regulations constraining commercial signage along certain highway corridors should be revised. However, there was no consensus on this point; other stakeholders felt that a consistent look and feel was helpful for tourists.
30 TODS and Logo signs are delivered by a private company, “Canadian TODS Limited”, through a competitively procured contract with the provincial government. 31 Tourism-Oriented Directional Signage, Tourism Summit, October 2012
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
A joint MTO-MTCS committee is reviewing the TODS program over the course of 2013. During the review process, input will be sought from tourism stakeholders across Ontario (including from RTOs) to determine their measure of satisfaction with the program and identify suggestions for improvements.
In terms of way-finding, stakeholders noted a need to improve tools available to travellers when planning and undertaking their trips, including travel aids such as online maps, Global Positioning System (GPS) programs and smartphone apps focused on tourism in Northern Ontario.
8.6.3 Soft Issues
Review Regulatory Requirements and Provide Ongoing Support to Great Lakes Tourism There are two areas of support which would likely serve to improve growth potential for the Great Lakes cruising industry.
First, the type of vessels which can navigate the St. Lawrence Seaway lock system to reach Northern Ontario are relatively small in size, typically carrying less than 100 passengers, in comparison to the huge cruise ships active in international waters. These vessels are very common in European markets, and significant marketing efforts are needed to entice them to the Northern Ontario market. We understand that the primary body leading such initiatives, the Great Lakes Cruising Coalition, needs additional funds and support to continue their efforts in attracting international marine tourism companies to put their vessels in the Great Lakes. The Ministry of Tourism, Culture and Sport should continue to support the Coalition and provide ongoing support through other efforts; for example, the Investment and Development office of the MTCS is involved in active outreach to Seaway compliant cruise lines and attended Cruise Shipping in Miami in March 2013 to further these efforts.
Second, there are a range of regulatory requirements (and associated costs) which affect tourism operators in the Great Lakes, including regulations across a range of jurisdictions, notably provincial and federal. Notable examples include the requirements of the federal Coasting Trade Act prohibiting foreign-flag vessels from transporting passengers between Canadian ports without a special licence; similar regulations exist in U.S. waters. There is also the requirement to use (and pay) federally-regulated pilots in certain sections of the St. Lawrence River and in selective areas in the Great Lakes where navigation is challenging; this is not problematic in and of itself, but consultations suggest the fee cost-structure and ability to dictate where pilots are needed is in need of review.32 These types of regulatory requirements are not always necessary or beneficial to the cruise industry, but they add significant costs that must be spread across a relatively small number of passengers.
32 The requirement for double pilotage in some areas is particularly concerning for some stakeholders.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 8 | Tourism Sector
Review Potential for Security Upgrades to Entice New International Airline Services The greater availability and lower cost of flights between Toronto and key cities in the region has improved tourist traffic in the past four years, largely thanks to the entry of Porter Airlines into Northern Ontario (challenging the virtual monopoly previously held by Air Canada). However, for visitors arriving from areas other than Toronto, flights are still relatively limited and typically require at least one transfer. The only airport offering international services in the region is Thunder Bay.
The airline industry is operated privately and is highly commercial; flights availability, connections and airfares are set based on the laws of supply, demand and competition. To this extent, there is a limit to public policy interventions which could directly improve the service offerings available for the air mode in Northern Ontario. Airports within the region which wish to attract international airline carriers (for example, Kenora) would require security upgrades to Canada Border Services Agency (CBSA) and U.S. Federal Aviation Authority (FAA) standards. This would open up significant opportunities for foreign markets, but is ultimately within the regulatory sphere of the federal – not municipal or provincial – government.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 9 | Conclusions
Conclusions 9
9.1 Northern Ontario Poised for Growth The industries of Northern Ontario have played a vital role in the economic development of the region and of Ontario as a whole. For over one hundred years, mining of base and precious metals, and forestry production have been central to the growth of Northern Ontario and been key contributors to regional and provincial employment and GDP. In more recent years, the manufacturing, tourism and agriculture sectors have also had an important economic role for the region and the province.
The mining sector is in expansionary phase, with more than $1 billion spent on exploration in 2011, more than any other province in Canada. The Ring of Fire is the largest mining discovery in a generation, and expected to result in significant job creation and revenue generation for the province. More than ten other base metal and gold mining projects are expected to begin production in the next five to ten years.
The traditional forestry markets of lumber and manufactured wood products are in a phase of gradual recovery following the U.S. housing market downturn, and the forestry industry is diversifying into a number of new markets, including bioenergy, biofuels, and alternative textiles. The end customers for many of these new products are located in markets in and beyond Northern Ontario, including in Europe and Asia.
The large manufacturers in the region are also important drivers of economic growth, with expansion of production from the Essar Steel Algoma facility in Sault Ste. Marie, among others, expected to generate significant benefits to the regional and provincial economy in coming years. Agriculture around New Liskeard is also growing, with an ongoing shift to cash crops such as canola and oats expected to provide an economic boost to the region.
Finally, the tourism sector is also in a phase of moderate growth, with Tourism Northern Ontario (formerly RTO 13) providing critical support to local operators in identifying ways to improve and market their product offerings.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 9 | Conclusions
9.2 Strategic Transportation Priorities Northern Ontario’s continuing prosperity depends on active participation by regional producers and operators in local, national and international markets. Such participation hinges on access to efficient transportation systems to source inputs and deliver outputs to market. As can be seen from the table below, each sector makes use of the transportation system to different extents (the darkness of the shading represents relative importance to the sector). A full summary of modal use, by sector is presented in Appendix E.
Figure 9-1: Modal Usage Across Study Sectors
Mode Mining Forestry Agriculture Manufacturing Tourism Primary roads Winter roads Forest Access Roads Rail (freight) Rail (passenger) Marine (freight) Marine (passenger) Air (freight) Air (passenger)
Road is the most important transportation mode for all of the study sectors, linking regional producers to suppliers and customers across Northern Ontario and beyond. In the case of forestry and mining, Forest Access Roads and winter roads also play a critical role. The strategic priority areas for investment in the road sector are development of more passing lanes and four-laning across the region. This includes a need to monitor traffic on some of the roads expected to see significant mining related growth in coming years, such as highway 652 connecting Cochrane with the major new Detour Lake gold mine, and highway 105 connecting Highway 17 to Red Lake, where three major gold mine projects are in development. Another strategic priority is to find ways to address the shortage of truck drivers which increases the transportation and production costs for local industries.
The rail mode is used extensively by local mining, forestry and manufacturing industries (as well as for western grain being exported through Thunder Bay). The strategic priorities for shippers using the rail mode are new access to rail services where none exist (where volumes justify investment), and improvements in rail service levels. The latter is particularly challenging for shippers whose only commercially viable shipping option is rail and where only one rail service provider exists (for example, in the forestry sector around Hearst).
Northern Ontario is connected to Eastern Canada and the rest of the world through the Great Lakes St. Lawrence Seaway system. The largest local users of marine infrastructure in
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 9 | Conclusions
Northern Ontario’s Great Lakes are manufacturers associated with the steel industry served by Essar Steel Algoma’s port at Sault Ste. Marie. There are also a number of important aggregate handling ports concentrated on the north shores of Lake Huron. The most immediate strategic priority going forward is expansion of the port of Sault Ste. Marie to accommodate production growth at Essar Steel Algoma and to serve a larger number of regional shippers by marine mode.
The air mode is used extensively by the metallic minerals mining sector to move cargo and passengers to remote mine sites, during exploration as well as operations (where no road or rail connection is warranted from a commercial perspective). Strategic investment priorities rest on enhancing the capabilities of select airports to accommodate the anticipated growth in mining in coming years, including through extending runway lengths to 4,000 feet, and supporting investment in airport warehousing facilities.
The Ring of Fire is one of the most important infrastructure priorities for the region, presenting an incredible opportunity for economic growth for the region and province. The approach to development of connecting infrastructure there is one example where a long- term strategic view driven by the public objectives of the province (rather than shorter-term needs of individual mining companies) could be particularly beneficial. One approach would be for the Province to effectively plan for a range of potential longer-term options for the entire corridor by reserving land for, or otherwise designating, a “utilities corridor”, which could in time accommodate road, rail, electricity transmission, communications and other infrastructure, as and when appropriate. In addition to protecting a strategic trunk corridor for future development, the utilities corridor approach could also facilitate the development and connection of infrastructure to support remote communities along the corridor. This concept would require significant additional approvals, likely including a formal environmental assessment.
A summary of all of the priority transportation needs identified by stakeholders across all sectors is presented in Appendix F.
9.3 Moving Forward with the Growth Plan Developing transportation infrastructure in Northern Ontario is a complex process involving and requiring consensus across a number of important stakeholders and partners. This study has involved tremendous partnership across and consultation with provincial, municipal and federal governments, Aboriginal partners, private sector companies and industry associations. Just as they led the initial effort, these partners will have to maintain the current momentum to translate the findings of this study into actions in the same spirit of collaboration. Among other things, the findings will be an important input for development of the Northern Ontario
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario CHAPTER 9 | Conclusions
Multimodal Transportation Strategy, a key component of the Growth Plan for Northern Ontario.
In taking the findings of the report forward, it must be recognised that the five sectors reviewed represent only a portion of traffic on the regional transportation system. This system is also used extensively by other regional industries and by shippers transiting through Northern Ontario, with road, rail and marine networks providing critical links to markets across Canada and the world. Any improvements to the transportation system in Northern Ontario will therefore serve a dual purpose: improving services to Northern Ontario’s industries and communities – including but not limited to the five study sectors – while also improving the transportation experience for transiting traffic through the region to other parts of Canada, the U.S. and beyond.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX A | Literature Review
Appendix A Literature Review
Altus Group Economic Consulting (for the Ontario Ministry of Natural Resources), “State of the Aggregate Resource in Ontario Study: Paper 1 – Aggregate Consumption and Demand”, December 18, 2009.
Bahram, D., S. Garofalo, N. Gradojevic, C. Lento, K. Peterson, Small Business Consulting Services, “Mining in Northwestern Ontario: Opportunities and Challenges” (commissioned by Ambassador’s Northwest), September 27, 2012.
Bain and Company, “The Global Diamond Industry: Lifting the Veil of Mystery”, 2011.
Canadian Business Journal (special issue), “Forest and Lumber, Key Sector of Our National Economy”, July 2012, Volume 5, Issue 7.www.cbj.ca
Canadian Chamber of Commerce, “Mining Capital: How Canada has Transformed Its Resource Endowment into a Global Competitive Advantage”, January 2013.
Canadian Manufacturing, “Coal-to-Biomass conversion will support 200 forestry jobs”, Canadian Manufacturing Magazine, July 2012.
Canadian Tourism Human Resource Council, “The Future of Canada’s Tourism Sector: Economic Recession Only a Temporary Reprieve from Labour Shortages”, 2010.
Caplice, Dr. Chris. Presentation on “Future Freight Flows: Using Scenario Planning to Assist in Long-Term Planning” Massachusetts Institute of Technology, 11 July 2012.
Citigroup Global Markets, “CARBS Make You Strong: The Impact of the Cycle on the World Key Commodity Markets”, 21November 2011.
Cliffs Ferroalloys, “Cliffs Chromite Project Environmental Assessment: Terms of Reference for Cliffs Chromite Project Individual Environmental Assessment” (Report Number GAL-095 Rev.00), July 2012.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX A | Literature Review
Conference Board of Canada, “Northern Assets: Transportation Infrastructure in Remote Communities”, December 2011.
Conference Board of Canada, “Provincial Outlook 2012 Long-Term Economic Forecast”, 2012.
Conference Board of Canada, “The Future of Mining in Canada’s North”, January 2013.
CPCS Transcom, “Market Feasibility Study for the MS Chi-Cheemaun”, prepared for the Owen Sound Transportation Companies, January 8, 2013.
Doyletech Corporation, “Northern Ontario Mining Supply and Services Study: Executive Summary” (prepared for the Ontario North Economic Development Corporation), April 2010.
Earth Tech (Canada) Inc., “Maley Drive Extension / Lasalle Boulevard Widening Municipal Class EA Addendum”, for the City of Greater Sudbury, May 15, 2008.
FedNor, “Tourism Volume, Value, and Characteristics in Northern Ontario 2008”, March 2010.
Forest Products Association of Canada and FPInnovations, “The New Face of the Canadian Forest Industry: The Emerging Bio-revolution, The Bio-pathways Project”, February 2011.
Gleeson, J., A. Zeller and J.W. McLaughlin, “Peat as a Fuel Source in Ontario: A Preliminary Literature Review”, for the Ontario Forest Research Institute at the Ministry of Natural Resources, 2006.
Global Markets Research, Commodities: Agri Updates, 10 July 2012, www.commbank.com.au.
Harry Cummings and Associates, “Farmers Markets in Ontario and Their Economic Impact”, for the School of Rural Planning & Development, University of Guelph, 1998.
Harry Cummings and Associates, “Ontario’s Agricultural and Rural Economy: Today and Tomorrow? A Qualitative and Quantitative Perspective”, for Agriculture Canada, 2005.
Harry Cummings and Associates, “Overview of the Agriculture Sector in the Ontario Greenbelt and Comparison to the Rest of Ontario”, with support from Ontario Ministry of Food and Rural Affairs, 2001 – 2006.
Harry Cummings and Associates. Preparation of series of papers between 1998 and 2010 entitled “Economic Impact of Agriculture on the Economy of [Relevant County]. The counties individually reviewed included: Algoma, Manitoulin, Cochrane, Kenora, Rainy River, Temiskaming, Thunder Bay.
Harry Cummings, Sarah Megan and Don Murray, “Economic Impact of Case Culture Industry in Ontario”, FedNor and Northern Ontario Aquaculture Association, March 2007.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX A | Literature Review
International Stainless Steel Forum, “Stainless Steel in Figures”, 2012.
Jaromir Benes, Chauvet, M., Kamenik, O. et al. “The Future of Oil: Geology vs. Technology”, IMF Working Paper WP 12/109. May 2012.
Kharas, H. “The Emerging Middle Class in Developing Countries”, Working Paper No. 825 for the OECD Development Centre, January 2010.
KPMG, Marshall Macklin Monaghan, and RGF Consultants, “Sault Ste. Marie Multi-Modal Initiative: Phase I Market Assessment Final Report”, January 10, 2007.
KPMG, Marshall Macklin Monaghan, and RGF Consultants, “Sault Ste. Marie Multi-Modal Initiative: Phase II Infrastructure and Feasibility Assessment Final Report”, June 18, 2007.
KPMG, Marshall Macklin Monaghan, and RGF Consultants, “Sault Ste. Marie Multi-Modal Initiative: Phase III Business Case and Implementation Analysis”, February 19, 2008.
Malone Given Parsons and HDR Decision Economics, “Ontario Tourism Infrastructure Research Study”, prepared for the Ministry of Tourism as one component of the Ontario Tourism Competitiveness Study, February 2009.
McKinsey Global Institute, “Resource Revolution: Meeting the world’s energy, materials, food and water needs”, November 2011.
Mining Industry Human Resource Council, “Ontario Labour Market Demand Projections”, August 2009.
Ministry of Northern Development and Mines, “Annual Report 2010-2011”.
Natural Resources Canada, “The State of Canada’s Forests: Annual Report 2011”, 2011.
North Superior Training Board, “Trends Opportunities and Priorities Top Report”, 2008.
Northern Ontario Regional Tourism Organization 13, “A Guide to Moving Forward with the Northern Ontario Tourism Marketing Strategy 2012 – 2017”, November 2011.
Northern Ontario Regional Tourism Organization 13, “Rediscovering Northern Ontario: Partnerships for a Strong Tourism Industry – Northern Ontario Tourism Market Strategy 2012- 2017”, 2011.
Northern Ontario Regional Tourism Organization, “Northern Ontario Tourism Marketing Strategy 2012-2017 – Northern Ontario Regional Tourism Organization Implementation Plan”, January 2012.
Ontario Government. “Strong Action for Ontario” Ontario Budget 2012, budget papers series.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX A | Literature Review
Ontario Mining Association, “Ontario Mining Profile”, www.oma.on.ca
Ontario Ministry of Infrastructure and Ministry of Northern Development and Mines, “Growth Plan for Northern Ontario, 2011”, 2011.
Ontario Ministry of Natural Resources, “Annual Report on Forest Management 2008/9”, November 2010.
Ontario Ministry of Natural Resources, “Forestry Industry at a Glance” (map and web), 2012.http://www.mnr.gov.on.ca/en/Business/Forests/2ColumnSubPage/STDPROD_091539.ht ml
Ontario Ministry of Natural Resources, “State of the Aggregate Resource in Ontario Study: Consolidated Report”, February 2010.
Ontario Ministry of Northern Development and Mines, “A Guide to Staking Mining Claims”, http://www.mndm.gov.on.ca/sites/mndmweb/files/a_guide_to_staking_claims.pdf
Ontario Ministry of Northern Development and Mines, “Exploration Facts – 2012”.
Ontario Ministry of Northern Development and Mines, “Ontario’s Mineral Wealth: A Bright Future”, presentation by Ray Mantha, Assistant Deputy Minister, at the 2012 FONOM/MMAH Northeastern Municipal Conference, May 10, 2012.
Ontario Ministry of Northern Development and Mines, “Production Facts – 2012”.
Ontario Ministry of Northern Development and Mines, “Sector Profiles – Northern Tourism”.
Ontario Ministry of Northern Development and Mines, “Sector Profiles – Mining and Minerals Industry”.
Ontario Ministry of Northern Development and Mines, “Sector Profiles – Advanced Manufacturing”.
Ontario Ministry of Northern Development and Mines, “Sector Profiles – Forestry Products”.
Ontario Ministry of Northern Development and Mines, “Sector Profiles – Agriculture, Aquaculture and Food Industries”.
Ontario Ministry of Northern Development and Mines, Ontario Geological Survey Mines and Minerals Division, “Presentation: Mineral Exploration and Development in Ontario”, 2012.
Ontario Prospectors Association, “Ontario Mining and Exploration Directory [Annual]”, available annually from 2005 through to 2012.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX A | Literature Review
Patricia Mohr, Scotiabank Global Economic Research, “Scotiabank Commodity Price Index”, August 30, 2012.
Peter Dungan and Steve Murphy (University of Toronto, Institute for Policy Analysis), “Ontario Mining: A Partner in Prosperity Building; the Economic Impacts of a ‘Representative Mine’ in Ontario”, December 2007.
Peter Dungan and Steve Murphy (University of Toronto, Policy and Economic Analysis Program), “Mining: Dynamic and Dependable for Ontario’s Future”, December 2012.
SNC-Lavalin, Edward Hoshizaki Development Consulting, One World Brand, Marvin Pelletier and Generator, “Advantage Northwest Mining Readiness Strategy: An Integrated Regional Economic Development Plan, Final Report”, April 2013, commissioned by the City of Thunder Bay, Thunder Bay Community Economic Development Commission, and the Fort William First Nation (FWFN).
Tetratech, “Canada Chrome Corporation Rail v/s Road Tradeoff Study”, completed for KWG Resources Ltd, 9 February 2013.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX B | Stakeholders Consulted
Appendix B Stakeholders Consulted
The following 116 companies and organizations were consulted as part of the study. In some instances more than one person from each company was consulted, as we needed to understand different aspects of operations. An additional 64 organizations were contacted for input, but either declined to participate or did not respond to multiple attempts to solicit input (by email and phone).
Agriculture (23 organizations)
Agrium agroEnergie Algoma Milk Tranport Coop. Scattered Acres Farms Brule Creek Farms - Kakabecka Falls Central Canada Feeding Station Coop Regionale - Northern Feed and Supplies - New Liskeard Coop Regionale - VernerAgrigultural Center Dairy Farmers of Ontario Emo Agricultural Research Station Emo Feed Service Ltd. Farquhar’s Dairy Food Security Research Network – Thunder Bay Grant Farms Jasper's Dairy Farm Koch Grain Elevators (Earlton) Inc, Koch Farms Trucking Lock City Dairies, Diamond J Farms Northern Ontario Aquaculture Association Parmalat Purity Seeds Limited Sault Ste. Marie Innovation Centre Sudbury West Nipissing Meat Producers Thunder Bay Coop Farm Supplies Thunder Bay Milk Transport
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX B | Stakeholders Consulted
Forestry (17 organizations)
Ainsworth OSB Atikokan Renewable Fuels Columbia Forest Products Domtar, Dryden Domtar, Espanola EACOM, Nairn Forest Products Association of Canada KD Quality Pellets Lahaie Lumber, Alban Lecours Lumber Manitou Forest Products Ontario Forest Industry Association Quality Hardwood, North Bay Tembec (Cochrane) Tembec (Montreal) Tembec (Toronto) Weyerhaeuser, Kenora
Manufacturing (16 organizations)
Bombardier Transportation Brunos Contracting (Thunder Bay) Ltd. Duracon Tile & Concrete Ltd Erco Worldwide Essar Steel Algoma Inc. Gingrich Woodcraft, Inc. GRK Canada Ltd. Heliene Inc. John Gavel Custom Manufacturing Company PGI-Fabrene Inc. R.L.P. Machine & Steel Fabrication Rahn Plastics Rezplast TenarisAlgoma Tubes Venshore Mechanical Ltd. Wabi Iron & Steel Corp.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX B | Stakeholders Consulted
Mining (23 organizations)
Boart Longyear Cementation Cliffs Natural Resources Inc. Department of Economic Development and Tourism, Kirkland Lake Detour Gold Corporation Fuller Industrial Goldcorp - Musselwhite Gold Mine Goldcorp - Porcupine Goldmines Canada Goldcorp - Red Lake Gold Mines KGHM International Ltd. Lafarge North America Lopes Limited Marathon Economic Development Corporation Norfalco (Xstrata) Ontario Mining Association Ontario Stone, Sand & Gravel Association (OSSGA) Red Lake Economic Development Office Ring of Fire Secretariat Sudbury Area Mining Supply and Services Association Vale Xstrata Copper Xstrata Nickel Xstrata Zinc
Tourism (18 organizations)
Algoma Kinniwabi Travel Association Bear Claw Tours Carolyn Beach Motel Chief Commanda II Fort William Historical Park Georgian Bay Country Great Spirit Circle Trail Ignace Outposts M&M Hospitality Naturally Superior Adventures Nature & Outdoor Tourism Ontario
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX B | Stakeholders Consulted
Northern Ontario Regional Tourism Organization (RTO 13) Owen Sound Transportation Company Rainbow Country Travel Association Sunset Country Travel Association Totem Resorts Tourism Sault Ste. Marie Watson's Algoma Vacations
Cross-Sector (20 organizations)
Bearskin Airlines City of Greater Sudbury CN Railway CP Railway Grant's Transport Limited Huron Central Railway Kelner / Cargo North / Investor Group Manitoulin Group of Companies Ministry of Tourism, Culture & Sport Ontario Northland Transportation Commission (ONTC) Ontario Trucking Association Ottawa Valley Railway Porter Airlines Purvis Marine Robert Rubino Trucking, Timmins Sales Barn Saint Lawrence Seaway Corporation Sault Ste Marie Economic Development Thunder Bay Airport Authority Thunder Bay Port Authority Wasaya Airlines
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX C | NAICS Codes Included in Study
Appendix C NAICS Codes Included in Study The Request for Proposal defined the North American Industry Classification System (NAICS) codes of primary relevance for this study, by sector. These are listed below.
Agriculture and Aquaculture Sector NAICS Code Description 111 Crop production 112 Animal production and aquaculture 114 Fishing, hunting and trapping 1151 Support activities for crop production 1152 Support activities for animal production 311 Food manufacturing 312 Beverage and tobacco product manufacturing 411 Farm product merchant wholesaler 413 Food, beverage and tobacco merchant wholesalers 4171 Farm, lawn and garden machinery and equipment merchant wholesalers 4183 Agricultural supplies merchant wholesalers
Forestry Sector NAICS Code Description 113 Forestry and Logging 1153 Support activities for forestry 321 Wood product manufacturing 322 Paper manufacturing 323 Printing and related support activities 337 Furniture and related product manufacturing 4163 Lumber, millwork, hardware and other building supplies merchant wholesalers 41721 Construction and forestry machinery, equipment and supplies merchant wholesaler 41891 Log and wood chip merchant wholesalers
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DRAFT FINAL REPORT | Transportation Requirements for Economic Development in Northern Ontario APPENDIX C | SNAICS Codes Included in Study
Mining Sector NAICS Code Description 211 Oil and gas extraction 212 Mining and quarrying (except oil and gas) 213 Support activities for mining, oil and gas extraction 327 Non-metallic mineral product manufacturing 331 Primary Metal Manufacturing 41722 Mining and oil and gas well machinery, equipment and supplies merchant wholesaler 41892 Mineral, ore and precious metal merchant wholesalers
General Manufacturing NAICS Code Description 313 Textile mills 314 Textile product mills 315 Clothing manufacturing 316 Leather and allied product manufacturing 324 Petroleum and coal product manufacturing 325 Chemical manufacturing 326 Plastics and rubber products manufacturing 332 Fabricated metal product manufacturing 333 Machinery manufacturing 334 Computer and electronic product manufacturing 335 Electrical equipment, appliance and component manufacturing 336 Transportation equipment manufacturing 339 Miscellaneous manufacturing 41723 Industrial machinery, equipment and supplies merchant wholesalers
Tourism NAICS Code Description 4811 Scheduled air transportation 4812 Non-scheduled air transportation 482114 Passenger rail transportation 4831 Deep sea, coastal and Great Lakes water transportation 4832 Inland water transportation 4852 Interurban and rural bus transportation 4855 Charter bus industry 487 Scenic and sightseeing transportation 5321 Automotive equipment rental and leasing 5615 Travel arrangement and reservation services 71 Arts, entertainment and recreation 72 Accommodation and food services
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX D | Truck Traffic Forecasting Methodology
Appendix D Truck Traffic Forecasting Methodology GENERALIZED METHODOLOGY USED TO DEVELOP THE NATIONAL COMMODITY FLOW FORECASTS The trucking forecasts used in this "Transportation Requirements for Economic Development in Northern Ontario" study were provided to CPCS by the Ministry of Transportation for Ontario (MTO). The forecasts are derived from the National Commodity Flow, Trade and Traffic Forecast Study, a joint federal/provincial freight transportation demand study completed in 2011. Current and future freight demand for the National Commodity Flow, Trade and Traffic Forecast Study was assumed using a three-step process, described below. First, a series of global, national, provincial, and industry level GDP forecasts were developed to estimate the current and future trade demand within various regions of Canada, and with their national and global trading partners. This base demand was converted into an estimate of production and consumption of goods, using economic input-output models. For example, production of a thousand dollars’ worth of beer requires a variety of inputs:
• Grain ($37); • Gas, oil, or electric power ($15); • Other food products (yeast) ($10); • Water ($7); • Bottles ($1) • Labour and Service Inputs
The input-output models tie the trade demand for beer in each region of a province to the amounts and locations of the inputs used to create the beer (in dollars), based on trade accounts and past practice. Similarly, the input-output models are used to estimate the locations for final sale of the finished beer based on trade patterns.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX D | Truck Traffic Forecasting Methodology
In the second step, the study determined the tonnage of goods needed to support all of the production inputs and outputs, by using detailed commodity information to tie the production and consumption information from the input-output modelling to detailed freight traffic surveys in the rail, marine, air, and road mode. To continue the beer example above, the study would determine the volume of grain that can be bought for $37 using the price per tonne of grain at its production location. This tonnage information is then tied to the mode of transportation used to move it using detailed rail, marine, air, and road commodity flow surveys, for the movement of grain between the production location and the location of the brewery. Very detailed commodity information was needed to support the first two steps of this process. For example, instead of the "grain" example used above, the study would have used the specific types of malt, hops, barley, and other grains used to produce beer in the region of that brewery. Finally, the GDP forecasts were used to develop an estimated growth rate for each commodity and origin-destination pair. For example, grain from Manitoba to Northern Ontario would have its own growth rate, which would be different from the growth rate between Manitoba and Central Ontario. The GDP forecasts were calibrated to a national base-case economic forecast, and "high" and "low" forecast boundaries were created for each commodity to reflect the historic volatility of prices for that commodity over time. The "high" and "low" boundaries are not forecast scenarios in the traditional sense. They were adopted in the National Commodity Flow, Trade and Traffic Forecast Study because variability in provincial economies would mean that traditional optimistic economic scenario for one region of the province could, in fact be lower than the base scenario in another. For example, an "optimistic" scenario based on high oil prices would have a positive economic impact on oil producing provinces like Alberta and Saskatchewan, but could have a negative overall impact on provinces like Ontario and Quebec, with a large manufacturing base. The final outputs of the National Commodity Flow, Trade and Traffic Forecast Study, were annual commodity flow matrices covering the period 2006-2026 for 33 commodity groups and 51 North American regions (including seven regions in Ontario). All matrices were produced for each of the rail, marine, and truck mode, for a base forecast scenario, as well as high and low forecast boundaries.
Further refinement of trucking forecasts An additional enhancement was introduced by MTO in the development of the trucking forecasts used in the Transportation Requirements for Economic Development in Northern Ontario study. Truck Commodity flow information was tied to MTO's Commercial Vehicle Survey (CVS). Because the matrices from the National Commodity Flow, Trade and Traffic Forecast Study, were based on economic input-output models, they do a very good job estimating trade flows between centres of production and consumption, but do not capture
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX D | Truck Traffic Forecasting Methodology
any intermediate moves (for example moves between a factory and a distribution centre for staging, before the product is moved to a store), which are a significant portion of truck traffic. MTO tied the forecast truck growth rates for each commodity origin-destination pair to observed trucking activity for these pairs from its CVS. In addition to correcting for intermediate moves, this allowed MTO to refine the data from the seven Ontario regions provided by the National Commodity Flow, Trade and Traffic Forecast Study, into very detailed geographical assignments from the CVS. However it limits the applicability of the truck forecast results to traffic on the provincial highway system.
In its final assessment of the base economic forecasts in the National Commodity Flow, Trade and Traffic Forecast Study, MTO found that “base” forecasts for certain economic sectors were consistently lower than Ontario-specific medium- and long-term economic forecasts from a range of publicly-available private sector forecasts.
For the purposes of this Transportation Requirements for Economic Development in Northern Ontario study, the “high” forecast boundary was used by CPCS for truck forecasts between 2011- 2026. While this approach may slightly overestimate growth in truck traffic in some sectors, it represents an optimistic view of potential growth and ensures a conservative approach to identifying the requirements for investments in transportation infrastructure in the region.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Appendix E: Transportation System Use by Mode and Sector
Road Mode The primary roads system is the most important mode of transportation for all of the study sectors. The current use of the road mode across sectors is summarized below.
Sector Use of Road Mode Mining • Base metal mining companies use the road systems extensively to bring inputs to mine, concentrator, smelter and refinery facilities from beyond the region. They use a mixture of road and rail to move outputs from mine sites (ore) to processing facilities located in the region and beyond. • In the case of gold mining operations, road is used to move virtually all inputs and outputs to and from mining sites, unless the mine is remote in which case air freight is also used (in some cases extensively). This is because more processing of gold takes place at the mine site, resulting in few outputs which might warrant investment in rail infrastructure. • Both base metal and gold mining operations make extensive use of the province’s winter road system, and to a lesser extent the access roads largely in place to serve the forestry industry. • In the case of aggregate extraction, over 90% of aggregate produced in the region is moved by road, typically to a job site within 100 km of a pit or quarry. Forestry • Forest access roads, in conjunction with primary roads, are used to link forest Management Unit wood harvesting sites to forestry processing facilities. Winter roads are used in limited instances for some of the more northerly Management Units. • Most forest resource processing facilities are located on the primary highway network, which – in combination with rail– is the primary means to move partially or fully finished products to downstream processing facilities or consumer markets.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Sector Use of Road Mode Agriculture • All agricultural outputs currently produced in Northern Ontario move to market by road. In some cases, inputs are brought into the region by rail in bulk to local co-operative supply facilities (e.g. fuel, feed), but these are then transferred to farm gate by truck. • All aquaculture inputs and outputs move by truck on the road network. Manufacturing • Most manufacturers in Northern Ontario are small and therefore do not have the volumes to warrant a rail service. These smaller manufacturers overwhelmingly receive inputs and ship outputs by road mode, using the most efficient (quickest) route possible. • The larger manufacturers of the region (Bombardier, Essar Steel Algoma, Tenaris Algoma Tubes, etc) use a combination of road, rail and marine modes. Tourism • The tourism sector in Northern Ontario is predominantly a “rubber tire” (road- based) market. The vast majority of tourists to and within the region travel by road, primarily in personal vehicles.
The figure overleaf illustrates the flows of road traffic across all study sectors, excluding tourism (for which no equivalent data exists). Key points to note include the following:
• By far the busiest corridors across Northern Ontario are the sections of Highway 69/400 and Highway 11 between Southern Ontario and Sudbury and North Bay, respectively. The section of Highway 17 between Kenora and Winnipeg is also busy.
• Forestry sector flows are visibly important, relative to other study sectors, in Northeastern Ontario and around Thunder Bay, Kenora and Fort Frances.
• Mining truck traffic is also concentrated in Northeastern Ontario, with significant flows of metals and minerals around Sudbury, North Bay and Sault Ste. Marie.
• Agriculture (food) flows are significant, relative to the local population, in the fertile farming areas around the Clay Belt area, Timiskaming District and New Liskeard.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Figure E-1: Daily Truck Traffic, All Study Sectors (excluding tourism)
Anticipated Growth in Road Mode The road mode is expected to continue to dominate freight flows for the study sectors in Northern Ontario in the near and distant future. The figure below shows the daily truck traffic with an origin and/or destination in Northern Ontario for 2011 and forecast truck traffic for 2026 for the four study sectors (excluding tourism). Key points to note are as follows:
• The corridors expected to see the largest increases in daily truck traffic are: i) between Southern Ontario and Sudbury and North Bay (Highways 400/69 and 11), ii) between North Bay and New Liskeard (Highway 11), and iii) between Thunder Bay and points west of Kenora going into Manitoba (Highway 17).
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
• Not shown on the map is the significant growth expected to cater to new mining projects under development, most notably mining projects in the Ring of Fire area, as well as gold mining development projects at the Detour Lake site and around Red Lake.
Figure E-2: Daily Truck Traffic, All Sectors (excluding tourism), 2011 and 2026 (forecast)
Rail Mode The current use of the rail mode across sectors is summarized below.
Sector Use of Rail Mode Mining • Base metal mining operations make extensive use of the rail system to move mine outputs to nearby concentrators and to near or distant smelter / refinery facilities. Rail is critical for movement of such high-volume, low-value ores. • Some western coal is also moved through the port of Thunder Bay for export outside of Northern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Sector Use of Rail Mode Forestry • Forestry sector flows are significant across the full rail network, and are associated with the movement of manufactured products (OSB, veneer, pulp and paper, etc.) from forest resource processing facilities (sawmills, pulpmills, etc.) to customers across North America. Agriculture • Agriculture sector flows are overwhelmingly dominated by grain movements from the prairies to Thunder Bay, which are then transferred to vessel for export beyond the region. The agriculture-related flows on the rest of the network are insignificant in comparison. Manufacturing • Manufacturing sector rail flows are dominated by movements of freight to and from Sault Ste. Marie, largely associated with the steel industry there. Tourism • Tourists use the rail mode in Northern Ontario to access remote lodges and wilderness activities, as well as through tourist train activities, the most well- known of which is the Agawa Canyon Tour Train operating out of Sault Ste. Marie.
The figure overleaf illustrated the flows of rail traffic across all study sectors, excluding tourism (for which no equivalent data exists). Key points to note include the following:
• Mining flows are associated with the following primary sources: base metal mining and associated smelter/refinery facilities around Sudbury and Rouyn-Noranda, phosphate rock movements from Kapuskasing to Alberta (closing in 2013), and coal moving from western regions to Thunder Bay for export.
• Forestry sector flows occur across the region, including extensively in northeastern parts of the region.
• Agriculture flows are all associated with western grain being exported by rail and then vessel from the port of Thunder Bay.
• Manufacturing flows are associated primarily with movement of inputs and outputs to the steel and steel tube manufacturing industries in Sault Ste. Marie
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Figure E-3: Rail Flows, All Sectors (Except tourism)
Anticipated Growth in Rail Mode Anticipated growth areas in the rail mode are presented below.
Study Sector Anticipated Growth Mining • The mining mode is expected to continue to generate significant volumes of freight, largely associated with base metal mining industry around the Kirkland Lake, North Bay and Rouyn-Noranda areas. These areas are currently served by Ontario Northland which is under divestment. • Significant volumes of freight are expected to be generated from the export of chromite concentrate from the Ring of Fire area. The final routing for such flows is still not confirmed, but current plans (from Cliffs Natural Resources) are expected to result in significant additional traffic on a new road from mine site to Nakina, from by rail from Nakina to Sudbury (CN Rail), and then from Sudbury to market by rail.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Study Sector Anticipated Growth Forestry • We expect growth in use of the rail mode in the forestry sector to be more or less in line with growth across the sector overall. Based on our consultations, we anticipate this to be approximately 5%-10% growth from today in the next 15 years (by 2026). Agriculture • Rail use in the agriculture sector is overwhelmingly dominated by movement of grain from the Prairies to the Port of Thunder Bay, a pattern expected to continue in the short, medium and long term. • Continued growth in grain output from the regions around New Liskeard could potentially generate volumes that would warrant additional rail services for the agriculture sector in the region. However, given the relative proximity to primary processing facilities in Southern Ontario and Quebec – the road mode is likely to remain the most economical unless significant new volumes are generated. Manufacturing • Any growth in rail use in the manufacturing sector is predicated on increases in traffic from the large manufacturers able to generate enough freight volume to warrant a rail service. Over the next 15 years, such traffic growth is likely still going to be predicated on growth in the steel industry in Sault Ste. Marie, as well as to a lesser extent on growth in the mining service and supply sector around Sudbury and Thunder Bay. Tourism • We expect that tourism opportunities using the rail mode in Northern Ontario will continue in terms of “local” experiences within Northern Ontario, such as the Agawa Canyon Tour Train and VIA’s Sudbury-White River train.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Marine Mode The current use of the marine mode across sectors is summarized below.
Sector Use of Marine Mode Mining • Marine flows in the mining sector are largely associated with movement of aggregate products from the region (stone, sand, gravel) as well as aggregate inputs for regional cement plants. • Western coal is also moved through the port of Thunder Bay (over 1 million tonnes/year) Forestry • Not currently used to any significant degree Agriculture • Not currently used to any significant degree Manufacturing • Manufacturing sector marine flows are dominated by movements of freight to and from Sault Ste. Marie, largely associated with the steel industry there. Tourism • Tourists use the Chi-Cheemaun ferry connecting Manitoulin Island to the mainland, and tourism-focused cruising also takes place from the ports of Little Current, Thunder Bay, Parry Sound, Sault Ste. Marie and Red Rock.
The figure overleaf illustrated the flows of marine traffic across all study sectors, excluding tourism (for which no equivalent data exists). Key points to note include the following:
• The largest generator of marine traffic of all study sectors is from the agriculture sector - western grain arriving at the port of Thunder Bay by rail for export beyond the region.
• Mining flows in Thunder Bay are primarily associated with the movement of coal, and to a lesser extent aggregate facilities.
• Marine flows around Sault Ste. Marie consist largely of inputs for the steel industry there
• All of the ports east of Sault Ste. Marie specialize in aggregate handling.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Figure E-4: Marine Flows, All Study Sectors (Excluding Tourism)
Growth in Marine Mode Overall, diminishing water levels in the Great Lakes as well as the reality that the Seaway is closed for about three months of every year, will influence the extent of growth in freight traffic in the marine mode in the medium to long term. The anticipated growth in marine traffic by study sector is summarized in the figure below.
Study Sector Anticipated Growth Mining • Growth largely in line with growth in the aggregate sector, which is moderate overall. As described in Chapter 4, there are market forces which limit the viability of shipping significantly more volumes of low-value aggregate over long distances by marine (and rail) mode. • There may also be potential to bring in equipment and bulk supplies for major developments in the Far North (e.g. Ring of Fire) through the Port of Thunder Bay.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Study Sector Anticipated Growth Forestry • Very little forestry sector product currently moves by marine mode, although prospects are improving. For example, in December 2012, 8,800 tonnes of wood pulp was moved from the Port of Thunder Bay to Europe, originated at the Terrace Bay Pulp Mill. Medium-term growth potential is linked to related product movements from Thunder Bay. Agriculture • No growth foreseen (any growth would be linked to increases from Western grain) Manufacturing • Growth predicated on higher volumes being shipped through the port of Sault Ste. Marie, largely associated with steel-related industries there. Recent feasibility studies have indicated an expansion of the harbor facilities at Sault Ste. Marie are necessary to accommodate anticipated growth and cater to new customers. Tourism • Limited growth expected, pending removal of some market and regulatory barriers which deter current cruise ship operators (see Chapter 8).
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX E| Transportation System Use by Mode and Sector
Air Mode The current use of the air mode across sectors is summarized below.
Sector Use of Air Mode Mining • Used extensively for freight and passengers (employees) for access during development and exploration phases for sites with no existing infrastructure, as well as for ongoing operations at remote mine sites. • Remote airports in the Far North provide critical access for food and supply inputs for local First Nation communities, as well as sometimes being the launch point for cargo supplies to reach remote mining sites. Forestry • Not used Agriculture • Not used Manufacturing • Used in limited instances for movement of higher value inputs and production components, for example in the high-tech mining supply industry Tourism • Used extensively by tourists to the region
Air cargo volumes are not publicly available and therefore cannot be visually represented.
The key growth areas in the air sector are linked to expansion of the base metal and gold mining sectors in Northern Ontario, and to the charter air carriers who operate cargo and passenger services into remote areas. The key airports closest to the Ring of Fire and therefore the most likely to see expanded air cargo activity are Pickle Lake, Nakina and to a lesser extent Thunder Bay.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Development in Northern Ontario APPENDIX F| Summary of Findings By Sector and Mode
Appendix F: Summary of Findings by Sector and Mode
The sector chapters of this report (Chapters 4 – 8) identified a series of transportation-related needs, as identified by regional stakeholders, broken down into: 1) New infrastructure requirements, 2) Improvements to infrastructure and 3) ‘Soft issues’ covering regulatory or policy related topics. In this appendix we provide a summary of the needs by sector, type of need and mode.
It is worth re-stating that the needs represent the views and priorities of stakeholders in the region and are for the most part sector specific. They do not necessarily reflect the transportation needs of the region as a whole, which will be assessed in the Northern Ontario Multimodal Transportation Strategy.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Figure F-1: Transportation Needs by Mode, Type of Need and Sector
Type of Need Sector
Need
New Improvements Soft Mining Forestry Agriculture Manufacturing Tourism Road Mode Plan and Construct the Infrastructure to Link the Ring of Fire (Road/Rail/Utility Corridor) Review Economic and Business Case for Selective Construction of All- Season Roads on Select Corridors to Replace Winter Roads Review Options to Relieve Congestion on Sudbury Streets Related to Mining Truck Traffic Investment in New and Improved Rest Stops Identify Areas for Additional Passing Lanes / Four-Laning on Key Roads Monitor Traffic Levels on Secondary Road 652 between Detour Lake gold project and Cochrane, and Road 105 between Red Lake and Vermillion Bay Monitor Traffic Levels on Highway 105 Between Red Lake and Vermillion Bay to Assess Infrastructure Improvement Requirements Improved Signage and Way-Finding Tools
Implement Programs to Address Shortage of Truck Drivers
Maintain Existing Funding for Road Access Program
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DRAFT FINAL REPORT | Transportation Requirements for Economic Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Type of Need Sector
Need
New Improvements Soft Mining Forestry Agriculture Manufacturing Tourism
Review Trucking Regulations to Gauge Impact on Small-Scale Farmers
Consider Reviewing Weight Restrictions in Spring Thaw Review Procedures for Oversize Vehicle Permits Rail Mode Support Investment in Rail Infrastructure for Grain Shippers Review Options for Support to Establish Intermodal Facility(ies) Support Shippers in Addressing Rail Service Issues Marine Mode Investment in Harbour Expansion in Sault Ste. Marie Review Regulatory Requirements and Provide Ongoing Support to Great Lakes Tourism Air Mode Upgrade Airport Infrastructure to Accommodate Mining Expansion Review Need for Improvements at Sudbury Airport Review Potential for Security Upgrades to Entice New International Airline Services
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Road Mode Needs
Plan and Construct the Infrastructure to Link the Ring of Fire The most significant new transportation infrastructure investment required in Northern Ontario relates to the Ring of Fire mining area. The current strategy is to construct a road from the Ring of Fire to connect with the CN mainline near Nakina. The estimated costs of building this road range from $600 million1 to $1 billion2. Construction of a railway between the Ring of Fire and Nakina is another alternative; a recent report suggested the cost of building a rail would be approximately $1.5 billion, but would have lower operating costs than the road option.3 Investment in transport infrastructure would benefit the mining community, as well as providing potential to connect remote First Nation communities to improved economic development opportunities.
Review Economic and Business Case for Selective Construction of All-Season Roads on Select Corridors to Replace Winter Roads Winter roads are used extensively by the mining sector and to a lesser extent by the forestry sector. They are also critical links for remote First Nation communities. A warming climate is impacting the length that these roads can be open, resulting in more products needing to be stored on site over longer periods or transported by air, which significantly increasing transportation costs. The Government of Ontario should monitor the impact of winter road season shortening and consider which winter roads could be selectively upgraded to all- season roads. Justification for investment would include consideration of the economic benefits based on the number of community-members affected as well as the anticipated value of revenues from future mining projects who would use the road.
Review Options to Relieve Congestion on Sudbury Streets Related to Mining Truck Traffic The City of Greater Sudbury sees a lot of mining sector traffic moving through the city core, including heavy (40 tonne) trucks associated with the mining industry in the city. This takes a major toll on the roads, and is also an inconvenience for residents and drivers in the city core. Traffic is expected to increase to, from and within the city thanks to anticipated growth in the mining sector. Consideration should be given to planning and constructing a ring road that would enable heavy goods vehicles to move on non-core roads, such as the Maley Drive Extension/Lasalle Boulevard Widening project proposed in 2008.
1 Cliffs Natural Resources, News Release, January 19, 2012 (http://ir.cliffsnaturalresources.com/releasedetail.cfm?ReleaseID=641050) 2 Tetra Tech, for KWG Resources. “Canada Chrome Corporation Rail vs. Road Tradeoff Study”, 9 February 2013. 3 Tetra Tech, for KWG Resources. “Canada Chrome Corporation Rail vs. Road Tradeoff Study”, 9 February 2013.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Investment in New and Improved Rest Stops Tourism sector stakeholders noted the need for more wayside tourist centres and rest stops (with restrooms) for travellers to the region. The rest areas need to be larger and better able to accommodate recreational vehicle (RV) traffic, as well as providing facilities where food is available. A shortage of gas stations was also cited as a common frustration expressed by travellers. It was also noted that tourism information centres should operate year-round and be staffed with knowledgeable people who can answer questions and help tourists learn about opportunities in the area.
Identify Areas for Additional Passing Lanes / Four-Laning on Key Roads A priority echoed across all sectors was for improvements to the capacity of the road networks in Northern Ontario. The priority areas for improvements are summarised below:
• Complete four-laning of Highway 11/17 between Nipigon and Shabaqua Corners, a busy stretch where Highways 11 and 17 merge over 160km.
• Assess need for passing lanes on the 270 km of Highway 144 between Timmins and Sudbury. In particular, the hilly, winding section between Sudbury and Cartier (60 km north of Sudbury) would benefit from passing lanes at regular intervals, especially in challenging winter conditions.
• Assess need for more passing lanes on Highway 17 between Winnipeg and Thunder, and especially between the Manitoba border and Kenora (50km with three passing lanes in each direction). We understand that planning for the four-laning of Highway 17 between Manitoba border and Kenora is ongoing.
• Assess need for four-laning of Highway 11 between North Bay and Hearst (580 km), a busy corridor for all of the study sectors. Mining sector stakeholders identified the 60 km section between Timmins and Kirkland Lake as a priority, while agriculture stakeholders identified the 150km section between North Bay and New Liskeard as a priority. Tourism sector stakeholders noted that the lack of passing lanes and four-laning on this stretch of highway deters tourists from visiting the region.
• Assess need passing lanes on Highway 11 between Shabaqua Corners and Fort Frances. This 280 km stretch of highway currently has no passing lanes.
• Assess need for more passing lanes on Highway 71 between Emo and Kenora (180km), an area with very few passing lanes.
• Consider four-laning of Highway 17 from Sudbury to Sault Ste. Marie (300 km), a stretch of highway heavily used all study sectors, and especially important for tourism.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Monitor Traffic Levels on Secondary Road 652 Between Detour Lake Gold Project and Cochrane The recently opened Detour Lake gold project is set to become the largest gold mine in Canada. The Government of Ontario should monitor traffic levels along the Route 652 corridor and, if appropriate, consider enhancing the road maintenance program, notably in terms of increased snow clearing in the wintertime. One option would be for MTO to allocate and update road clearing and maintenance schedules based on revised estimates of road usage from mine sites which have significant traffic.
Monitor Traffic Levels on Highway 105 Between Red Lake and Vermillion Bay to Assess Infrastructure Improvement Requirements Three new gold projects are expected to begin production in Red Lake in the next five years: Madsen (Claude Resources Inc), Phoenix Gold (Rubicon Minerals Corp Inc) and Cochenour (Goldcorp Inc). All of these projects will increase truck traffic on Highway 105 between Red Lake and Vermillion Bay, currently a two-lane highway with no passing lanes and many blind spots. Given the anticipated growth in traffic along Highway 105, the addition of passing lanes, widening and straightening of portions of the highway is considered a priority for the region.
Improved Signage and Way-Finding Tools Signage along highways is regulated by the province and must conform to the specific visual look and feel required by the province. Tourism stakeholders felt that the province’s Tourism- Oriented Directional Signing (TODS) and Logo programs were helpful but that the number of signs needs to be increased, and also extended to roads beyond provincial control. In terms of way-finding, stakeholders noted a need to improve tools available to travellers when planning and undertaking their trips, including travel aids such as online maps, Global Positioning System (GPS) programs and smartphone apps focused on tourism in Northern Ontario.
Implement Programs to Address Shortage of Truck Drivers
There is a shortage of long-distance truck drivers in Northern Ontario (and across Canada) which affects all of the study sectors. This is partly a result of a retiring population of baby boomer truck drivers, and partly due to the challenges in hiring new workers due to negative associations with truck driving, such as impacts on health and time away from family. Consultations indicated a need for succession planning for truck drivers and development of programs to attract younger workers to replace an aging workforce in the transportation sector more generally. The Government of Ontario may wish to work with trucking companies and industry associations (e.g. Ontario Trucking Association) to develop programs to encourage young workers to this sector, including the growing young Aboriginal population in Northern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Maintain Existing Funding for Road Access Program The MNR-funded Forest Road Access program is seen to be working very well and making a positive and important contribution for the forestry sector for constructing new roads and maintaining existing ones. The program was originally designed at $75 million per year, which is seen as being adequate. In the past few years, however, the amount allocated has dropped below this level and restoring this program to its initial funding level of $75 million is said to be vital to maintaining competitive wood costs and in promoting the supply of forest products from Northern Ontario.
Review Trucking Regulations to Gauge Impact on Small-Scale Farmers Agriculture sector stakeholders noted that increasingly stringent regulations associated with operating transport trucks were designed for large-scale producers and transporters (with better access to capital) and the costs of meeting such regulations were too onerous for small farmers. Examples included requirements to keep log books, carry out regular safety inspections even when a truck is hardly being used, special licence requirements, higher insurance requirements, and the costs associated with new trucks requiring higher environmental standards. Overall, it was felt that if farmers are simply moving their own product (not transporting for others), they have an inherent incentive to transport their product in a safe manner which is best for the product and should not face the same requirements as larger farmers and transport companies.
Consider Reviewing Weight Restrictions in Spring Thaw Under the Highway Traffic Act, the province enforces reduced load restrictions on trucks on highways during the spring thaw, when road damage is most likely to occur. While stakeholders agreed on the need and benefits of the spring thaw weight restrictions, it was felt that the Government of Ontario needed to be more flexible, dynamic and somewhat less conservative with their weight restriction policies. Sometimes the weight restrictions are applied earlier than necessary and enforced longer in the season than deemed necessary by industry. It is worth noting that the lower weight allowances in the spring thaw are somewhat balanced by increased allowances during the winter freeze.
Review Procedures for Oversize Vehicle Permits In addition to a general shortage of trucking companies available for work, there is a shortage of trucking companies to move large, oversize equipment in Northern Ontario. The shipment of finished goods using special “oversize/overweight” permits is considered restrictive and costly, and impacts delivery to customers. Some manufacturers felt they would be more competitive if MTO could review oversize permitting requirements to alleviate/reduce restrictions in Northern Ontario by allowing more travel on weekends and increasing travel time per day that vehicles are allowed to operate. This could be done in areas where traffic and population are at lower levels than in Southern Ontario.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
Rail Mode Needs
Support Investment in Rail Infrastructure for Grain Shippers Stakeholders in Northeast Ontario (especially around New Liskeard) noted a need for better access to rail for movement of grain from the region to Southern Ontario, including through more rail sidings next to grain elevators. This would lower the need for trucks on the road. An assessment could be made to determine the business case for development of more sidings for shipment of grain by rail from the region, bearing in mind that the distance to Southern Ontario may not be sufficient to achieve the traditional economies of scale which make rail shipping cheaper over long distances (typically associated with trips of 800 km or more).
Review Options for Establishment of Intermodal Facility(ies) in the Region Access to intermodal facilities in Northern Ontario could help some manufacturers (including mining supply companies) reduce their transportation costs for inputs and/or outputs. As described in detail in Chapter 3, there are significant costs and risks associated with establishing and operating intermodal rail facilities which are typically borne by private railway companies. To this extent, establishing an intermodal facility is a commercial decision for railways, not government. One option would be for the Government of Ontario to work with the railways in the region to identify what their requirements are for establishment of intermodal facilities, and to assess if support from government would be helpful, if warranted based on economic benefits, for example.
Support Shippers in Addressing Rail Service Issues Forestry and mining sector shippers using the rail option in Northern Ontario noted perception of high prices, poor service and low railcar ability as a challenge to doing business in the region. This was compounded for shippers who only have the rail option available for moving their products. Shippers also have concerns that rail services will deteriorate following the divestment of ONR. As may be required, Ontario could promote greater awareness of rail shipper rights in line with the recent passing of Bill C-52 (Fair Rail Freight Services Act), which aims to encourage shippers and railways to negotiate service agreements, with recourse to an arbitration process if terms cannot be agreed.
Marine Mode Needs Investment in Harbour Expansion in Sault Ste. Marie
With the anticipated growth in production from both Essar Steel Algoma and Tenaris Algoma Tubes, expansion of the Sault Ste. Marie port facilities owned by Essar Steel Algoma is critical to facilitate economic growth in the region. A recent study completed for the Corporation of
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
the City of Sault Ste. Marie4 recommended that that Essar Steel Algoma harbour be expanded to accommodate growth in production, as well as to provide improved and increased access to third party shippers who wish to use the marine mode.
Review Regulatory Requirements and Provide Ongoing Support to Great Lakes Tourism
There are two areas of support which would help encourage growth in the Great Lakes cruising industry. First, support is required to engage with the owners of the smaller vessels which are appropriate for cruising the Great Lakes region and to encourage them to serve the region. The Ministry of Tourism, Culture and Sport should continue to support the Great Lakes Cruising Coalition in these efforts. Second, the Government of Ontario should work with the federal Government to review the impacts of the federal Coasting Trade Act on cruising (e.g. prohibiting foreign-flag vessels from transporting passengers between Canadian ports without a special licence) as well as the costs associated with the mandatory pilotage regime in the Great Lakes. These regulatory requirements are not always necessary or beneficial to the cruise industry, but they add significant costs that must be spread across a relatively small number of passengers.
Air Mode Needs
Upgrade Airport Infrastructure to Accommodate Mining Expansion Northern Ontario's airports are frequently inadequate for the boom economic cycles which occur with mining exploration and development. The capabilities of Northern Ontario airports should be improved in two priority areas to accommodate the anticipated growth in mining in coming years, particularly with respect to the Ring of Fire area. First, the runway length at select airports should be extended to 4,000 feet to enable larger planes to land and take off all year round. Navigational equipment would also need to be upgraded. Second, the Government of Ontario should support investment in airport warehousing facilities, which in some instances may mean partnering with private airlines to support them in initial capital outlay. The immediate priority is for investment in airports which potentially could serve the Ring of Fire.
Review Need for Improvements at Sudbury Airport A number of stakeholders, particularly in the mining supply sector, noted a need to improve the existing facilities at Sudbury Airport in order to cater to more cargo movements. On the freight side, stakeholders noted that Sudbury does not have large enough planes to ship out heavy cargo direct via air. Comments included the need for longer airstrips and facilities for heavy-duty cargo planes that could handle large-size shipments. Stakeholders noted the depot
4 KPMG, “Regional Harbour Expansion Market and Business Analysis Final Report” produced for The Corporation of the City of Sault Ste. Marie. January 3, 2013
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX F | Summary of Findings by Sector and Mode
facilities in Sudbury are not adequate for some shippers to move large cargo by air, due to a lack of mobile handling equipment. It is worth noting that North Bay and Thunder Bay both offer larger air cargo handling capability and are viable alternatives to flying product from the region to remote mine sites in Northern Ontario.
Review Potential for Security Upgrades to Entice New International Airline Services The only airport offering international air services in Northern Ontario is Thunder Bay. This means that international travellers wishing to reach other parts of Northern Ontario by plane must make stop-overs in Toronto, Thunder Bay or another airport, adding time and cost to their journey. Some tourism stakeholders indicated it would be helpful to have another airport in the region which could receive international flights. Airports within the region which wish to attract international airline carriers (for example, Kenora) would require security upgrades to Canada Border Services Agency (CBSA) and U.S. Federal Aviation Authority (FAA) standards. This would open up significant opportunities for foreign markets, but is ultimately within the regulatory sphere of the federal – not municipal or provincial – government.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
Appendix G: Interview Questionnaire – Sample
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
Transportation Requirements for Economic Sector Development in Northern Ontario Consultation Questionnaire: Forestry Sector
The Growth Plan for Northern Ontario provides a strategic framework that will guide decision-making and investment planning in Northern Ontario over the next 25 years. Guided by the policy directions in the Growth Plan, the Ministry of Transportation of Ontario (MTO) in partnership with the Ministry of Northern Development and Mines (MNDM) and with funding from Northern Ontario Heritage Funding Corporation (NOHFC) is developing a Northern Ontario Multimodal Strategy (the Strategy). The Strategy will bring integrated planning for air, rail, marine and highway transportation for Northern Ontario for the next 25 years.
MTO is developing the Strategy through three separate studies and extensive consultations with stakeholders. One of the key studies is to identify the present and future transportation needs of key industries in Northern Ontario. This study, entitled “Transportation Requirements for Economic Development in Northern Ontario”, focuses on the transportation requirements relating to the mining, forestry, agriculture and aquaculture, general manufacturing, and tourism sectors. It will provide knowledge, strategic directions and recommendations that will help guide development of a transportation system to support the economic development of Northern Ontario.
CPCS, a transport sector-focused management consulting firm, has been retained to undertake this study for MTO. Input from generators of economic activity and users of the transportation system in Northern Ontario is essential to inform the study and members of the CPCS consulting team are contacting you to provide this valuable input.
Inputs from stakeholders will be solicited based on the questions outlined in this Consultation Questionnaire, which is divided into the following sections:
• Part A: Consultation Record • Part B: Overview of Operations in Northern Ontario • Part C: Sector Developments, Drivers & Trends • Part D: Transportation and Supply Chain Overview
The text boxes for responses will expand as they are completed.
All responses will remain confidential and cited anonymously, unless permission is granted otherwise. Please provide your responses to the CPCS Team Member who contacted you personally.
If you have any questions on the consultation process more generally, please contact one of the individuals below:
Ministry of Transportation of Ontario (MTO) CPCS Caroline de Groot, Project Manager Elizabeth Drake, Project Manager Tel: 416 585 7193 Tel: 613 237 2500 ext. 316 Email: [email protected] Email: [email protected] www.mto.gov.on.ca www.cpcstrans.com
The CPCS Team will be carrying out consultations throughout the summer of 2012. It is expected that our final analysis will be presented to the MTO in early 2013.
Thank you for your time.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
PART A : CONSULTATION RECORD
A.1 Company / Organization Name / Location (if applicable):
A.2 Contact Name, Title and Contact Details (telephone and email)
A.3 Do we have permission to quote your opinions with attribution in the body of the study? (Yes / No): ______
A.4 Do we have permission to acknowledge (without quoting opinions directly) your organization’s participation in the study? (Yes / No): ______
A.5 Date of Consultation: ______
A.6 Consultation Completed by (CPCS Team Member): ______
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
PART B: OVERVIEW OF OPERATIONS IN NORTHERN ONTARIO
The following questions aim to provide us with background on the industry and place your comments in context.
B.1 Please describe the general nature of your operations in Northern Ontario, including the type of company and location of operations / sites.
B.2 Please describe your key customer(s) (type of customer) and where they are located (e.g. key geographic markets)? Is this expected to change in future?
B.3 Would you describe your operations in Northern Ontario as growing, steady, or in decline? Please explain.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
PART C: SECTOR DEVELOPMENTS, DRIVERS AND TRENDS
The following questions seek to assess the anticipated growth/decline of your industry in the short, medium and long term, in order to gauge the associated impact on the transportation network in Northern Ontario.
C.1 On the demand side, what are the factors that affect or are expected to affect demand for Northern Ontario products in major destination markets going forward? What are the major related drivers and trends?
C.2 On the supply side, what are the factors that affect or are expected to affect supply of these products in Northern Ontario? What are the major related drivers and trends?
C.3 What is the outlook for your industry (e.g. forestry) or sub-industry (e.g. logging, pulp and paper, sawmill, etc) or products (e.g. paper, wood pellets) in the short, medium and long-term in terms of growth / decline? Please use the table below to illustrate the percentage % change from todays’ market for each relevant industry / sub-industry / product in your sector.
Industry + or - % change from Current Market / Sub- Industry % change 5 % change 15 / % change 25 years years years Product
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
C.4 What is the outlook for your operations in Northern Ontario in the short, medium and long term? Please use the table below to note any major developments/projects, and their expected timing, volumes and specific transportation requirements, as appropriate. Where relevant, please complete more than one table per operation/product.
Short Term (1-5 years) Major Project (s):
Anticipated Volumes:
Transportation Requirements:
Medium Term (6 – 15 years) Major Project (s):
Anticipated Volumes:
Transportation Requirements:
Long Term (16 – 25 years) Major Project (s):
Anticipated Volumes:
Transportation Requirements:
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
PART D: TRANSPORTATION AND SUPPLY CHAINS
The objective of the following questions is to understand the transportation and supply chain systems used in your industry to source production inputs, meet ongoing operational needs and deliver your end products to market. This information will help to develop transportation and supply chain maps for each sector, including key infrastructure bottlenecks.
D.1 Please describe your operation’s key transportation and supply chain requirements for sourcing inputs and delivering output products to market (high level).
D.2 For each key input or output noted above, please provide details on the transportation and supply chain systems used, including: • Origin and Destination of product • Routing used to deliver product • Mode of transport and reason for choice (rail, road, air, marine, multimodal)
As appropriate, please provide related annual volumes,
D.3 Approximately what proportion of the value of your outputs is made up of transportation costs? (please tick as appropriate)
< 5% 5% - 16% - 26% - > 40% 15% 25% 40%
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
D.4 Please describe your transportation needs for labour and employment (e.g. mode of transportation used by employees to reach work; seasonality of labour; transportation challenges, as applicable).
D.5 Please summarise (high level) if and how you believe your industry may be affected by climate change, including the associated impacts on transportation requirements. Please summarise any plans you have to address these changes.
D.6 What are the major constraints and issues in terms of transportation in Northern Ontario at the moment for your supply chain?
D.7 What investments or changes would help improve the efficiency of transportation flows in your sector? Please explain, differentiating as appropriate between hard (infrastructure) and soft (regulations / operations) factors.
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DRAFT FINAL REPORT | Transportation Requirements for Economic Sector Development in Northern Ontario APPENDIX G | Interview Questionnaire
D.8 Please note any comments or information you feel would be relevant to the study which may not have been captured above, including references to other sources (data, reports, individuals) that could provide additional information.
Thank you very much for your time.
If you have any questions about the questionnaire, please contact the CPCS Team Member who sent it to you. If you have any questions about the Study more generally, please contact Caroline DeGroot at MTO, or Elizabeth Drake at CPCS, using the details on page 1 of this questionnaire.
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