Duluth port adapts as wheat lags

The port of Duluth-Superior's performance this year has been a tale of a ship half-full and a ship half-empty.

The port's important grain trade seems likely to hit a historic low this year, the confluence of several agricultural economic trends. But coal exports have been a bright spot, ore shipments have been strong and overall tonnage is up about 1 percent over a year ago.

The Twin Ports of Duluth and Superior don't handle the sexy stuff at stake in the just-settled East Coast port dispute -- containers full of everything from Italian shoes to Irish whiskey. But Duluth-Superior is by far the biggest U.S. port on the Great Lakes, hosting around 900 ships this year.

Indeed, it's a bigger port than such prime U.S. seaports as Seattle, Oakland and Charleston, S.C. -- at least when cargo is measured in tons, not container volume.

Big container ports are the glamour kings of the world's maritime business. There, giant freighters load and unload metal boxes full of "general cargo" -- the stuff needed to stock the world's retail outlets and keep its assembly lines humming.

The container trade bypassed the Great Lakes a long time ago, a product of unfavorable economics and the St. Lawrence Seaway's shallow shipping lanes. But the Joe Lunchbucket bulk cargo trade hangs on.

Through November, the Twin Ports handled 32.5 million tons, according to the Duluth Seaway Port Authority. Grain made up only about 1 million tons of that, but it is one of the port's most economically valuable cargoes. And grain shipments were down 28 percent from a year ago.

The grain drain's causes are manifold. Duluth-Superior primarily channels U.S. wheat to Europe and the Middle East. But this year, a key U.S. wheat competitor, the Ukraine and Russia, had a strong crop with lower cash prices than did U.S. wheat producers, Hilleren said.

Also, the U.S. drought dried up corn and soybean fields, thus diverting some wheat supply away from human consumption to feed U.S. livestock, he said.

Wheat transported through Duluth-Superior is a high-grade, more expensive variety used in pasta, couscous and bread. But "the recession in Europe is impacting the purchase of high-quality wheats," said Adolph Ojard, head of the Duluth Seaway Port Authority.

The Twin Ports' traditional heavyweight cargo is iron ore bound for Great Lakes steel mills. It will make up almost half of the port's tonnage this year, and through November, ore shipments were up 7 percent over 2011.

Coal is No. 2, and shipments through November tallied at 12.2 million tons, up 2.7 percent over a year ago. The increase stems from a more-than-threefold boost in exports to 1.3 million tons.

Midwest's big coal dock was doing 22 million tons annually just four years ago. But then a major customer in Ontario dropped coal, switching to non-fossil fuels. "That was a big loss for us," about 8 million tons, said Midwest Energy President Fred Shusterich.

Midwest is owned by DTE Energy, a big U.S. coal marketer and owner of Detroit Edison, southeastern Michigan's largest electric utility. For years, Superior has been a vital transshipment point for coal headed from Wyoming to southeastern Michigan.

But coal has come under increasing pressure in recent years. The price of natural gas -- a rival fuel for power plants -- has plummeted. And the U.S. government has beefed up implementation of long-delayed emission rules on coal-fired plants.

"Long-term coal [demand] trends are flat to declining," Shusterich said.