Port of Montreal - Economy

Economy

The Port of Montreal’s economic perspective reveals its success in the maritime transportation industry. There are many concepts of this discipline that are useful for understanding the port such as the type of service it provides, the elasticity of demand, and the industrial structure. These concepts reinforce how the innovation and technology at the Port of Montreal have provided significant economic spinoffs for the island, province, and country. Studying the port in terms of business and economics supports this notion by demonstrating the port’s qualified management, abundant revenues, and competitive advantage. This chapter is divided into the port’s business profile and industry profile.

The Port of Montreal is an autonomous federal agency created under the terms of the Canada Maritime Act whose company’s legal name is the Montreal Port Authority. Its location stretches from Bickerdike downtown to Tétreaultville in the east-end (Port of Montreal, 2011). The port provides first rate facilities to sea and land carriers, terminal operators, and shippers. Its main clients are international shipping lines such as Mediterranean Shipping Company, MEARSK, Hapag Lloyd and OOCL, and terminal operators such as Montreal Gateway Terminals, Termont, and Empire Stevedoring (Port of Montreal, 2011).

Its export markets include Europe, the Middle-East, Africa, the United States and Asia (Port of Montreal, 2011). The port also creates directly and indirectly 18, 000 jobs. More specifically, Montreal Port Authority has 320 employees who account for 33 million dollars in salaries and employee benefits. The total revenues from operations at the port in 2010 were 88.5 million dollars and its net loss totaled at 8.6 million dollars which included a one time restructuring expense of 17.9 million dollars (Port of Montreal, 2011). Evidently, the port’s contribution to Montreal’s economic prosperity is very high in terms of employment and revenues.

News about the port revolves around two themes: capital investments and community-building projects. For example, the port signed a deal with Viterra, Canada’s largest grain handler, to lease and operate the grain terminal. Viterra will bring added volume, through marketing and technical expertise (Port of Montreal, 2011). The port also signed an agreement with the railways (CN and CP), to improve collaboration and overall performance for the supply chain (Port of Montreal, 2011). Moreover, the city of Montreal and the government of Canada have implemented plans in regard to the port.

The city officially recognizes the importance of the port to the local economy and pledges to collaborate in improving its key access points. For example, they will build a beltway for trucking companies to access the port which will improve transit times. The government of Canada, through job creation programs and the economic stimulus program, plans to invest close to thirty million dollars to expand capacity, lengthen berths, modernize electrical grid, construct a common truck entrance, and invest in environmentally friendly locomotives (Port of Montreal, 2011). In addition, the port was given a mandate in 2011 by the CMM (Communauté Métropolitaine de Montréal) and the government of Quebec to create a transportation and logistics cluster. This will allow the port to offer added value services such as distribution centers and warehousing, and provide different levels of government with positions on regulatory matters (Port of Montreal, 2011).

The port has a senior management committee and a board of directors recognized for their various levels of expertise and experience in the industry. Sylvie Vachon is the president and chief executive officer, Tony Boemi is the vice-president of growth and development, Jean-Luc Bédard is the vice-president of operations, Réal Couture is the vice-president of finance and administration, and Jean Mongeau is the vice-president of legal affairs. The board of directors includes Anik Trudel who is the deputy general manager, Jean Depelteau who is an engineer and corporate director, Yves Filion who is a certified corporate director and vice-chairman of the board, Michel M. Lessard who is a corporate director and chairman of the board, Normand Morin who is a corporate director, Marc Y. Bruneau who is a corporate director, and Diane Provost who is a notary (Port of Montreal, 2011).

The port’s board of directors act autonomously to ensure that the port’s mission and mandate are effectively executed by senior management. The board of directors are appointed by the federal, provincial, and municipal governments, as well as the private sector. The board has full authority to appoint and dismiss the chief executive officer and in 2007, it is alleged that the conservative government tried to influence the board in appointing a crony with no relevant experience or knowledge in the industry. The board of directors did not let itself be influenced by government meddling and ultimately, appointed the chief executive officer with correct qualifications to lead the port (Denis, 2011). After a year of working for the port, he ended his career and is now a chief executive officer in Toronto earning an annual salary of one million dollars.

The port provides a service that allows and facilitates international trade. It is considered a normal service since an increase in income will typically raise the demand for imported goods. This demand is inelastic because there are few other substitutes to transport goods. The only options to bring in products from overseas are by air or water. Among these two possibilities, ocean freight transportation is considerably less expensive. Although high value and time sensitive cargo is more likely to move by air, these products are very uncommon compared to the rest of the merchandise that arrives in and leaves Montreal (TWI Group, 2011).

The port provides a public service because port lands belong to the federal government. Ports are part of government assets and they are maintained and administered by government agencies (Port of Montreal, 2011). Although it is not open to the general public, shipping lines that desire calling at the port can do so if they follow policies and procedures that have been established by the port authority.

The general public indirectly has access to the port through these shipping lines. The port is part of a competitive oligopoly because shipping lines have several port options along the St. Lawrence river whereby their ships can be discharged or loaded. Ports compete for cargo by providing cost competitive services, modern infrastructures, efficient operations, and productive labour. Montreal’s niche is containerized cargo whereas ports like Sorel, Trois-Rivières, Saguenay, Sept-Îles, and Quebec focus on handling general, and liquid and solid bulk cargos (Port of Montreal, 2011). For instance, the port of Sept-Îles specializes in bulk cargo that generally has a low value such as metals which are extracted from the mines in that region. The port of Sept-Îles focuses mainly on raw materials, compared to Montreal which handles containers filled with finished products (Port Sept-Îles, 2011).

Although the tonnage at the Port of Montreal is lower, the value of cargo carried through Montreal is exponentially higher than that of Sept-Îles. Therefore, the revenues generated at the Port of Montreal are much greater. In reference to the Port of Quebec, their specialty is liquid bulk such as oil and petroleum products. They also specialize in minerals, metals, grain, and other specialty crops which are lower revenue generating cargoes.

Furthermore, it is a port that handles considerably more cruise business than Montreal. This is mainly because of its unrestricted water depths whereby the larger cruise ships can call Quebec at any time, while Montreal’s eleven meter draft restricts the size of ships that can call the city (Port of Quebec, 2011).