BC Ferries' Four-Ship Contract With Chinese Yard Comes Under Fire

 

BC Ferries' plan to buy four vessels from a Chinese shipyard - instead of keeping the contract inside Canada - has drawn an increasing volume of fire in Ottawa. The order itself troubles advocates for Canadian shipbuilding, but the financing is an added controversy: Canada's policy bank provided a CA$1 billion loan to help pay for the overseas purchase, contrary to the intent of federal policies to strengthen domestic yards. The head of the Conservative Party has called for the cancellation of the loan, not just to redirect the project to Canadian yards, but also to retaliate against China for new tariffs on Canada's exports.

"While the federal government says it will stand up for Canadian farmers and industry, it continues to underwrite a $1 billion loan for BC Ferries to buy ships from a state-backed Chinese shipyard that undercuts Canadian companies on environmental standards, worker safety and wages," Conservative leader Pierre Poilievre said. "This makes no sense. Canadian workers are capable of building world-class ships, with Canadian steel, aluminum and technology, here at home."

B.C. Conservative leader John Rustad made a similar call this week, demanding that the province cancel B.C. Ferries' contract. "You don’t reward a country that is quite frankly attacking other sectors of our economy," Rustad told Global News Canada. "I think there probably would be a penalty and quite frankly I think the board of BC Ferries should be fired for incompetence for actually putting us in this position in the first place."

Canadian shipbuilders have also slammed the purchase. In a letter to a Quebecois member of parliament earlier this month, Chantier Davie CEO James Davies said that the commercial terms of BC Ferries' tender made it impossible for Canadians to bid - despite attempts to engage with the ferry operator on the merits of buying domestic. (No Canadian yards submitted a bid, but B.C. Ferries said that a European-built series would have cost CA$1.2 billion more, implying that Canadian construction costs would also be higher.)

"Unfortunately, the [BC Ferries] procurement criteria were heavily weighted toward the lowest price, effectively favoring Chinese shipyards," he said. "Due to inherent price disadvantage caused by massive state subsidies for Chinese shipyards, coupled with low wages, weak environmental standards and minimal labor protections, no Canadian or Western shipyard could reasonably compete, leaving us with no choice but to withdraw."

BC Ferries says that it selected shipbuilder China Merchants Industries Weihai (CMI Weihai) for its technical capabilities, quality, dependable delivery record, and overall cost. The ferry agency is far from alone: most commercial vessel operators order from China, including Canadian operators. China's state-subsidized shipyards compete on price, speed and quality, and today they hold the majority of the global orderbook, with South Korea and Japan as distant runners-up. Beijing has taken an intense interest in the shipbuilding sector, and has spent 25 years building it up. Today, the Chinese government owns the world's biggest commercial shipbuilding group, CSSC, as well as many smaller shipyard enterprises like CMI Weihai.