Paterson a casualty in shipping industry.

Recognizable for 87 years for the distinctive 'P' affixed to their black smoke stacks, the bulk freighter fleet of N. M. Paterson and Sons Ltd. of Thunder Bay has sailed into history.

The last two ships of the family-run business the Vandoc and Quedoc - were towed from their berths in Thunder Bay in late June, after being sold. to Purvis Marine when the grain-handling conglomerate folded its marine division.

The entire seven-vessel grain and iron ore carrying fleet, both operating and mothballed, were sold off over the spring, and will either continue sailing under different colours, or be sent away for dismantling.

A number of economic pressures, combined with a devastating collision between one of their more prized ships and a Weiland Canal lift bridge last summer, spelled doom for the shipping company.

The accident forced the company, with only three active vessels, to re-assess its reduced position in the market.

So when the right purchase offer came along from a larger competitor Canada Steamship Lines (CSL), it was too good to pass up, says marine division chief executive officer Robert Paterson.

"We were concerned about our customers and our ability to maintain our economy of scale and continue to deliver reliable service," Paterson says.

"The package of the three ships was more palatable to a potential buyer, so the right offer came along and we accepted it."

The elimination of the marine division affects 10 full- and part-time staff in the Thunder Bay office.

The crews, junior maintenance engineers and unlicensed personnel will be transferred with their vessels to the new owners, while ship masters and chief engineers will either enter full retirement, or find work with CSL, says Paterson.

The absence of their marine assets will not affect their other operations in grain handling, marketing, agricultural-chemical sales, and feed-grain manufacturing, he says.

A number of natural and economic pressures have hurt small ship operators like N. M. Paterson for years.

Low water levels in the Great Lakes have forced operators to light-load ships. This, combined with other factors that have led to reduced grain cargoes out of Thunder Bay, upheaval in the North American steel market from foreign dumped steel, consolidation by larger shipping competitors, federally imposed port and ice-breaking fees, fuel costs, onerous insurance premiums and static freight rates on grain and vessel over-capacity have made it tougher for smaller fleets to survive.

But the final straw sealing the company's fate was a devastating accident on Aug. 11, 2001. The Windoc collided with the Allanburg lift bridge, which resulted in the shearing off of the ship's pilot house and smokestack and caused an onboard fire.

The St. Lawrence Seaway Corp. is not admitting liability for the accident and the matter is now before a federally appointed judge to investigate Paterson's claim for damages against the corporation.

Paterson is seeking $16.9 million in damages from the seaway operator.

The damaged ship has since been sold to a Quebec tug and barge operator.

Paterson denies the company was effectively squeezed out of their traditional bread-and-butter cargoes of grain and iron ore by larger, more aggressive competitors.

"There's been over-capacity for a long time, and that's why we kept some ships tied to the wall for as long as we did.

"We've always had a relationship with the wheat board. What changed was a recommitment (by companies such as Canada Steamship Lines) to the (grain) bulker business, and their timing fit well with the misfortune of the Windoc.

"We found some level of stability when dealing with the wheat board, but they dictate the (freight) rate. We've been going on for years without any effective freight increases."

Paterson was optimistic things were beginning to turn around in 2001. They were maintaining their position with iron-ore customers despite bankruptcies of U.S. steel mills, and grain customers were also offering commitments of more than one year.

"We were comfortable in our business plan and the way we were operating, but with the way things go today in this business, everything you do is debt financed.

"We just got tripped up on Aug. 11."

Three of its active vessels - Paterson, Cartierdoc and Mantadoc - were sold to Canada Steamship Lines, while a fourth, the Comeaudoc, was in the process of being sold in early July to an American towing company.

The Quedoc and Vandoc, which were laid up on the Kaministiqua River in Thunder Bay since 1991, are now moored at Algoma Steel's port in the Sault for possible scrapping.

The damaged Windoc was sold to a Quebec tug company for potential conversion to a barge.

The shipping division's demise came as no shock to Dennis Johnson, CEO and harbourmaster of the Thunder Bay Port Authority, who is quite familiar with the fleet's ongoing struggles.

"You look around and this is just another casualty," Johnson says. "It's the big players who own the business.

"The biggest impact on Thunder Bay is the professional (marine officers) and lower deck hands that lived here and liked to work for the Paterson's," says Johnson, who is friends with one shipmaster now out of work.

The days of sentimentality are over, he says, and the shipping industry is very much a bottom-line business.

"Paterson has a very significant agri-business and grain business and it's just priorities...they're concentrating on what they feel is important for them."

The Port of Thunder Bay's grain volumes have experienced a 50 per cent drop in the last 10 years as Canada's position as a world grain exporter shrunk.

With new emerging international players in Russia, the Ukraine and India, Johnson says there is huge over-capacity at grain terminals in Thunder Bay, as well as Vancouver and Prince Rupert, B. C.

Complicating matters is the fact that significant government money is being funnelled into re-establishing Churchill, Man. on Hudson Bay as a grain-handing port. To date, 300,000 tonnes to 500,000 tonnes have been diverted from the Thunder Bay port to the Manitoba-based port, Johnson says.