Even big companies hunt for bargains on China's version of eBay. Algoma Central Corp. in January bought a brand-new ship from Alibaba's Taobao.com for about $14-million (U.S.), half the price it paid for similar freighters from the same builder and a record sale for the auction site.
It wasn't as if Algoma was bidding blind. The company knew the vessel was to be part of Algoma's pool when it was first ordered by the Canadian Wheat Board in 2010, and the company knew it well.
But the Chinese builder, Nantong Mingde Heavy Industries Co. Ltd., went bust in 2015 and the vessel sat at the shipyard's dock before being auctioned off by the bankruptcy administrator last winter.
"We did pick it up at a bargain price," said Ken Bloch Soerensen, chief executive officer of St. Catharines, Ont.-based Algoma Central.
Still, it's not a vessel procurement strategy the company recommends, Algoma's vice-president of engineering Gregg Ruhl says, given the seven-year wait included enduring lengthy Chinese liquidation procedures and negotiations to get refunds on four other vessels that were never delivered.
Named the Algoma Strongfield after a variety of wheat, the new ship is one of four bigger, more efficient ships Algoma has added. She made her first trip up the St. Lawrence Seaway this month to the ArcelorMittal Dofasco steel plant in Hamilton with 29,000 tonnes of iron ore pellets.
A lot is riding on the vessel's 225-metre hull.
The bulk carrier is one of several new vessels at the centre of Algoma Central's 10-year plan to quadruple earnings in a persistent global shipping crisis. The new tack, launched two years ago, includes exiting the real estate business, and an aggressive international expansion in partnership with Switzerland-based shipowner Nova Marine Carriers SA.
Algoma Central, whose roots date to 1899 and the steel making, mining, railway and ship empire of Francis Clergue, is the biggest Canadian-flagged shipowner on the Great Lakes-St. Lawrence Seaway with 26 ships. But until recently, its presence in international waters was limited.
The company last year announced a nine-vessel partnership with Nova that serves global cement companies, NovaAlgoma Cement Carriers. This year, the two companies launched a second joint venture called NovaAlgoma Short-Sea Carriers. The partnership owns or manages 72 ships that service the ports of Europe and the Mediterranean and Baltic seas, and elsewhere.
"Our plan is to expand with Nova into a global presence," Mr. Bloch Soerensen says, standing on the bridge of the Algoma Strongfield as it sits moored in Hamilton. "The [Great] Lakes market is not a growing market."
Currently, 80 per cent of Algoma Central's business comes from the domestic market, moving grain, steel-making commodities and petroleum products on the waterway between Lake Superior and the Atlantic Ocean. In seven to 10 years, the company aims to earn 50 per cent to 60 per cent of its business in international markets, without surrendering any domestic share.
The amount of tonnage carried by all vessels on the Seaway is down by 25 per cent in the past 10 years and down by 6 per cent since 1999. Bulk commodities for energy and steel making have led the decline, as power plants switched from coal to cleaner-burning natural gas, and two of the region's three major steel makers sought court protection from creditors.
It's a slump that has played out on the world's oceans, leading to shipowner bankruptcies and shipping alliances formed at the insistence of lenders looking to rescue their capital.
The worldwide shipping industry is still emerging from the crisis, caused by an economic slowdown that coincided with a large number of new freighters entering the global fleet.
With too many vessels chasing dwindling freight volumes, the Baltic Dry Index, a global gauge of shipping rates for industrial commodities, hit a 30-year low in 2016. The gauge has risen by more than 40 per cent in the past 12 months, but is still down by 60 per cent from the recent peak in late 2013.
"Definitely, there's an improvement since last year, but the market is barely profitable," said Basil Karatzas of New York-based Karatzas Marine Advisors and Co.
Mr. Karatzas said Algoma Central's joint ventures will provide Algoma with greater economies of scale and lower costs, in addition to broadening the company's exposure to a range of markets and regions. He noted Algoma Central is small by world standards, but gains heft by partnering with Nova, which has expertise in new markets. "When I contact a charterer, the charterer takes me more seriously because I have more ships, I have more business, I know more about the markets," Mr. Karatzas said.
Mr. Bloch Soerensen says the plunge in asset values provided an entry point for the company to make its move into new waters. "Nova and us are both financially very strong and we are also well renowned," he says.
Many of the domestic companies Algoma Central serves – ArcelorMittal, Lafarge, Heidelberg Cement Group among them – have global operations, making Algoma's move abroad more smooth. For Algoma, it's new territory, but well-known territory, Mr. Bloch Soerensen said.
Algoma's cargo volume fell by 19 per cent in 2016, and net profit fell by 65 per cent, excluding the discontinued real estate business.
But 2016 is also the year the company's lengthy battle with the failed Chinese shipyard was resolved. Algoma received about $40-million in refunds for other ships it had on order. The money will go toward another seven new ships expected to be sailing by 2019, arriving from shipyards in Croatia and China.