OT: Sault Ste. Marie is the linchpin of the US economy, who knew?
So apparently the single most important asset in the US economy is the 48 year old Poe Lock in Sault Ste. Marie. If it has to shut down for any significant amount of time, the entire economy, especially in the midwest, is basically fucked.
I'm not usually a fear-monger, but I had no idea that lock was so damn important, and I've lived in Michigan my entire life.
It's a freep article so I'll just copy the most important bits.
A U.S. Department of Homeland Security report indicates a 6-month shutdown of the Poe Lock in Sault Ste. Marie, if one occurred, would plunge the nation into recession, closing factories and mines, halting auto and appliance production in the U.S. for most of a year and result in the loss of some 11 million jobs across the nation.
Even the Army Corps, which operates and maintains the Soo Locks, has acknowledged that the 48-year-old Poe is in need of major upgrades, which have been limited by funding constraints. The Corps is “slowly overhauling components” of the lock each year, but, as Corps spokeswoman Lynn Rose told the Free Press some months ago, “As the lock ages, the probabilities of failure increase.”
Previous studies done by the Corps have concluded that a 30-day closure of the Poe could have an economic impact of $160 million. But the Homeland Security report — which had been previously available to some industry insiders in draft form, but kept secret from the public — went much further, outlining economic and employment impacts across the country, and even into Canada and Mexico, calling the Poe, “the Achilles’ heel of the North American industrial economy.”
Such a long-term event, the report said, would send an economic tidal wave crashing across U.S. manufacturing. Iron ore mining would virtually stop and production of steel-related items — from cars and construction and equipment, to railcars and appliances — would halt, with millions losing work until the problem was resolved and work recommenced, which would likely that months more.
“In terms of an impact to the North American economy,” the authors wrote, “it is hard to conceive of a single asset more consequential than the Poe Lock.”
EDIT: Added content...
More ominously, for even any short-term closure, it concluded that any plans to react — by using trucks or rail, for instance, to move iron ore — would almost certainly fail.
In past studies, there have been suggestions that the iron ore might be moved by truck or by rail, but the Homeland Security report makes clear that each of the thousand-footers carries the equivalent of seven trains with 100 rail cars each or about 3,000 trucks — a volume that would be impossible to ship overland, even if steel mills were equipped to take the iron ore by road or by rail, which they are not.
Costs would go up but this is no different than moving oil by trains because of inadequate pipelines. Obviously a different kind of car. But this is what our economy is moving to which is just in time solutions. The age of "well that happened were screwed for eight months is over"
What train lines would they use?
Let's run some numbers.
The Trans-Alaska pipelines' maximum discharge is about 2MM barrels per day. A DOT-111 rail tank car carries about 34,500 gallons. So to replace the product passing through TAPS in a day one would need 2MMx42/34,500 ~ 2450 tank cars or about 1% of the US DOT-111 fleet. Can this be done? Absolutely. But should it be? One might want to talk to Lac-Megantic folks.
“Moving iron ore from the mines to the mills is not a viable mitigation,” the report said. “(As) one industry executive put it, ‘it’s not even in the realm of the possible.’ … Even if the steel mills could accept iron ore from rail transportation, congested rail lines and the lack of equipment would make the use of rail impractical.”
We have dedicated rail lines (well, part of the route anyway) to feed two facilities with coal, but we own much of the infrastructure at key points in the entire chain, which is pretty key to making that end of the business work as then you don't have to necessarily rely on what is an underdeveloped rail network at various points. Of course, the utility industry is not the steel industry or the automobile, appliance or any other industry - we can do it, but a lot of companies couldn't and probably shouldn't anyway.
I worked there for a summer years ago, and would eat down by the locks when the weather was nice. The locks themselves were much less interesting to me than when I was a kid - it's like watch a bath tub fill and drain - but the ships were interesting.
Would I have guessed that the locks were the linchpin of the U.S. economy? No. Do I believe that the locks are the linchpin of the U.S. economy? No.
It's important and oft-ignored, no doubt. But if disabled, an imperfect rail solution could work as a (more expensive) patch to get commodities across the St. Mary's River.
It's about getting ore from the upper Great Lake to the lower ones. I'm guessing half the cost of iron ore at a mill in Detroit, Cleveland, or Pittsburgh is shipping. If you double or triple or quadruple that cost you're probably pricing American steel completely out of an already very competitive market.
I meant "crossing the river" in the sense of traversing along it.
I'm well-aware the St. Mary's drains Lake Superior into Lake Huron. It's not like Lake Michigan and Lake Huron which connect at the Straits of Mackinac. The reason the locks are necessary is that there are natural rapids that no tanker/freighter ship could navigate.
You make a valid economic point regarding shipping costs (one I acknowledged in my comment). That stated, the way you get "ore from the upper Great Lake to the lower ones" is by traversing along the St. Mary's River.
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The Soo Locks have been one of the most critical assets to the United States manufacturing and national security since the Civil War. Security during WWII was intense (and I think it has been ever since).
My understanding is that the real problem is that while there used to be four American locks, at this point (and for quite some time) only the Poe Lock (which was built in the late 60s replacing another lock by the same name) is wide enough to accomodate the large ore carriers that were built after it was opened. (They were built BECAUSE it was opened.) So, there is no redundancy.
Someone mentioned that the lock is fine. It may be. But it is the only one and any disruption shuts everything down. Building another lock at the Soo is long overdue.
Here's a good article in the Detroit News from last summer about the impact of a shutdown.
http://www.detroitnews.com/story/news/local/michigan/2015/08/03/soo-loc…
The MacArthur Lock was shut down for maintenance last year and the Poe had to take on smaller ships in addition to the freighters. Backups happened which is where the cost to the economy begins.
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I trade commodities for a North American commodity trading company. Few points:
1. Rail roads are NOT working at capacity. The CN and CP are actually cutting people, trains, putting railcars into "long term storage" and are absolutely not running at capacity.
2. 2 years ago when Canada had the largest crop they had ever had, with peak oil and rail completely at capacity the railroads in Canada (CN and CP) focused on the ports (Vancouver, thunder bay) so that they could load out vessels to cut down on vessel demurrage. They did not supply railcars to go down to the US or Eastern Canada and so if you were Quaker Oats in Cedar Rapids (for example) and 90% of the oats that you buy are from Canada but the railroad won't ship you cars to your facility what do you do? You figure out a way to blow your brains out with trucks to keep your facility going. Did we have an oat shortage in the country? No the trade figured out a way to make it work.
3. If it did shut down for an extended period of time the trade would figure out a way to make it not a complete and utter shit show because that is the job of commodities traders.
If the locks shut down the market would set a price for rail transport of iron ore (moving ore cross country by truck is a non starter). The market would then determine this cost would cause the price of American steel to be non-competitive. Therefore, American ore would have no market and would be worth nearly as much in the ground as it is on the docks - at least until it can be delivered to mills in a cost effective manner. Ain't a damn thing a commodities trader can do about it. It will require lots of time, lots of money, lots of engineers, and lots of dudes who shower after work rather than before.
Over 7,000 troops stationed there in WWII, anti-aircraft batteries, anti-torpedo nets, civil defense formed. The Army Corps of Engineers still has a presence there. Every once in a while people bring up how important it is to national defense when we can rely only on our own industry to build our arsenal. You can't buy steel from China to make weapons to fight China, for example. I don't understand why people keep missing the point that even if we had the excess truck and train capacity, we would have all the trucks and trains sitting at the steel mills waiting until we built a means to get the taconite and coal from the trucks and trains to the furnaces.
30 years ago Congress authorized construction of a new lock replacing 2 of the small, unused locks. Construction started, funding stopped and only relatively small amounts have been approved from time to time. Coffer dams and drilling started and stopped just a few years back and now we are at the cost-benefit analysis stage again. Oh, well. Ther is a water main break in America every 2 minutes on average. I drive under bridges with plywood structures to deflect and delay concrete falling on me. This is just one more problem for politicians to ignore.
Matty Moroun Ambassador Bridge that held such importance.
if I ever met him... the rest of the current 10 you ask?
Ted Cruz, Mike Valenti, Bill Kristol, John Podhoretz, Drew Sharp, John Edwards, Barry Switzer, John Calipari, Justin Beiber, and Jim Tressel.
Yes. Also appliance companies and any other industries that use significant amounts of steel.
Sure, the steel companies will be driven into bankruptcy by all of the short selling, but hey, you'll make a nice buck,
Most of the mills are located directly adjacent to deep water.
Yes. It's taken by rail directly from the mine to the ship then directly from the ship to the mill.
No surprise in this report at all, given familarity with the ore mining industry. For those who are saying "oh no big deal, they can just truck it or rail car it to the mills" that's just not an option. For starters, it would take longer to build the rail infrastructure to get the ore out of the UP (let alone out of the mine itself) and to the the mills than it would to rebuild the lock. There is no short-term fix there. The rail infrastructure that removes the ore from the Tilden, for example, goes exactly one place: the upper harbor ore dock in Marquette (where they load it onto ships). Heck, when they built the Eagle they were forced to truck it to the processing plant (straight line about 15 miles, but about 70 miles by the path they were required to take) rather than rail because of environmental concerns, then it's taken by rail out of the processing plant, but that infrastructure retrofit took several months (and that was an existing facility with existing rail infrastructure). That doesn't even account for the fact that the mills are fitted to receive ore one way (by ship) and all of that infrastructre would have to be rebuilt. Building track and converting plants isn't, remotely, an overnight process.
Our commodity trader above can fix this shit from his laptop.
Then again, I don't know a damn bit about what the potential costs/economic benefits might be.
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Wasn't Escanaba an ore port? Does it still have an ore dock? That could be a short-term solution to Marquette's ore shipments, but railroading everything from Duluth is probably not optimal.
It's an interesting thought. I don't know whether the rails from Minny to Escanaba are adequate, but at least it shortens the rail time.
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because it's perfect.
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Before the lock. The Poe one.