Breakbulk Issue 4 2020 by Breakbulk Events & Media

Issue 4 / 2020

The Publication for the Industrial Project Supply Chain Industry

Air Freighters Step up to Pandemic Plate

NAVIGATING FUEL TUMULT

RECRUITMENT U-TURN

HOPES FOR ASIA RECOVERY

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IN THIS ISSUE

Cover Story

10 HIGH FLYING SECTOR

Air Freighters Step up to Pandemic Plate

16 RULES & REGS

NAVIGATING FUEL TUMULT

46 CASE STUDY

20 REGIONAL REVIEW

Staying One Step Ahead of the Pandemic

Pandemic Prompts Bunker Confusion

ALL EYES ON 2021 Tentative Hopes for Asia’s Sharp Recovery

24 REGIONAL REVIEW

ASIA’S WIND RACE

MOVE PLANNING PUZZLE

48 EXECUTIVE SUMMARY

BUILD BACK BETTER

Europe’s Infrastructure Works Promise Project Tonic

Positive Outlook for Offshore Installations JOIN THE ONLINE COMMUNITY

BREAKBULKONE PAGE 32

28 ENERGY UPDATE

TAKE MY OIL, PLEASE Crippling Impact of Crude Glut

38 LOGISTICS PERSPECTIVE

Also in this issue

From Famine to Feast as Unemployment Spikes

04 EDITORIAL

RECRUITMENT U-TURN

42 MARKET SPOTLIGHT

‘I WANT IT YESTERDAY’

Revising the Meaning of Time Sensitivity

06 C ONVERSATION 08 THOUGHT LEADERS 32 BREAKBULKONE www.breakbulk.com BREAKBULK MAGAZINE 3

EDITORIAL

DIAGNOSING THE PANDEMIC As we continue to try to navigate through the world under Covid-19, the pandemic’s impact weaves intrinsically through our coverage, as we look at the impacts throughout our industry. We begin with our cover story (“High Flying Sector,” page 10), an industry vertical that has become nearly as essential a service in combating the pandemic as front-line health Gary Burrows care. As the pandemic has grounded most commercial flights, an historic reliance on belly space in passenger airlines for freight has shifted to a reliance on freighters and, ironically, an increasing use of passenger jets with removed seats or simply placing cargo in seats and overhead storage. In “Navigating Fuel Tumult” (page 16), News Editor Carly Fields looks at how the pandemic has handcuffed enforcement of the International Maritime Organization’s low-sulfur fuel regulations, as Covid-19 has disrupted compliance inspections. Cratering fuel prices have further complicated matters, as those who chose to invest to retrofit ships with scrubbers are facing longer payback time versus competitors who did not invest in installing them. Lori Musser further explores the impact of the crude oil glut on the industry in “Take My Oil,” Please,” (page 28). What was expected to be a year of recruitment and recovery as the industry began to recover from its most recent downturn, has switched to a “Recruitment U-turn”, as Amy McLellan reports on page 39, due to the spike in unemployment following the mass shutdowns and delayed and cancelled projects. As we approach the opening of Breakbulk Asia in Shanghai, Aug. 3-4, Thomas Timlen takes a look at Southeast Asia’s recovery from the pandemic, in “All Eyes on 2021,” page 20. 4 BREAKBULK MAGAZINE www.breakbulk.com

Infrastructure and investment in renewables will be key strategies for ASEAN nations, as well as other global regions as they attempt to re-energize their economics as the pandemic hopefully eases. In “Asia’s Wind Race,” Felix Schoeller, general manager at AAL Shipping, further elaborates on the impact of wind energy on China and the Asia-Pacific. Namrata Nadkarni details how Europe is addressing infrastructure investment as a means to inject life back into flailing economies (“Build Back Better,” page 48). In “I Want it Yesterday” (page 42), Michael King analyzes how Covid-19 revised perceptions of time-sensitive breakbulk and heavy-lift shipments are handled, yet another facet facing a “new normal.” Cargo is moving during the pandemic, as Malcolm Ramsay notes in “Move Planning Puzzle,” which details Abnormal Load Services’ successful move of an industrial press from northern Italy to a factory in the Netherlands under tight deadlines and as the pandemic was bearing down on one of the globe’s hardest hit regions. With this issue, we once again include selected coverage from BreakbulkONE, the weekly newsletter and breakbulk.com feature that provides important industry information and insights. As part of that, Breakbulk365 kicked off in May a continuing series of webinars, bringing industry leaders together to discuss operating in this new environment while plotting a way forward. BreakbulkONE touches on several of the webinars, including “Women in Breakbulk Europe on Crisis Leadership,” “View from the Boardroom: What Lies Ahead,” “How to Prepare Now for a Possible Job Search Ahead,” “Launching Your Breakbulk Career,” and “Impact of Covid-19 on Future Shipping Demand.” Coverage may be found on page 7 and pages 32-27. At Breakbulk we continue to strive to bring you vital news and analysis to pilot through these difficult times. Be safe and well!

EDITORIAL DIRECTOR Gary G. Burrows / +1 904 535 5460 gary.burrows@hyve.group NEWS EDITOR Carly Fields carly.fields@hyve.group DESIGNER Mark Clubb REPORTERS Michael King Felicity Landon Amy McLellan Lori Musser Namrata Nadkarni Malcolm Ramsay Thomas Timlen BREAKBULK EDITORIAL BOARD John Amos Amos Logistics

Ed Bastian

BBC Chartering

Murray Cooper

LV Shipping Group of Cos.

Dennis Devlin Maersk

John Hark

Bertling Project Logistics

Dennis Mottola

Global Logistics Consultant

William Moyersoen

ArcelorMittal Antwerp Logistics

Albert Pegg

Atlas Breakbulk Alliance

Dirk Visser

Dynamar D.V.

Grant Wattman

Jade Management Group

PORTFOLIO DIRECTOR Nick Davison nick.davison@hyve.group ACCOUNT MANAGER Dee Cariglino / +1 251 408 2308 dee.cariglino@hyve.group SUBSCRIPTIONS To subscribe, email gary.burrows@hyve.group, or call from inside the U.S. +1 904 535 5460 between 8:00 am and 5:00 pm EST. A publication of Hyve Group plc. The Studios, 2 Kingdom Street Paddington, London W2 6JG, UK

ISSUE 4 / 2020

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Membership Available in Selective Markets! Application: info@gpln.net / www.gpln.net

CONVERSATION Conversation is a forum of thought leaders, commentaries, letters, editors’ notes and noteworthy social media from Breakbulk’s audience and staff. Join in the conversation – submit your views to gary.burrows@breakbulk.com, or through Breakbulk’s social media channels on LinkedIn, Facebook or Twitter.

ARE WE ON THE CUSP OF SOMETHING BIG? By Stephen Spoljaric In our new world of social distancing and working from home, I’ve been constantly impressed with how quickly our engineering, procurement and construction industry has adapted. The coronavirus pandemic has accelerated the development of new ideas and methodology. What motivated Malcom McLean in 1956 to invent the first standard shipping container? What inspired Tim Berners-Lee to invent the World Wide Web in 1990? Today, it is hard to imagine how people around the world would have dealt with the effects of Covid-19 without the Internet or without a modern supply chain that allows information and material to continue to flow. Technology allows for containers to be handled through automation with limited human interaction, ensuring business continuity. Amazingly, most ports around the world continue to operate without disruption, and transportation industry workers have continued to Stephen work. Now, as disSpoljaric cussions increase about trying to Bechtel regain normalcy, what other major changes will naturally fast-track? Is this the time for the next major revolution within our industry? From my perspective, although there has been increasing development of the technology, more recently there has been an acceleration of how we use cameras and remote visualization tools. In 2000, the world’s first digital camera phone was introduced in Japan and today almost all smartphones have a 6 BREAKBULK MAGAZINE www.breakbulk.com

“There has been an acceleration of how we use cameras and remote visualization tools.“

CREDIT: SHUTTERSTOCK.

camera, as well as the capability to do more. The word “camera” comes from the Latin phrase that means “dark chamber.” This technology is how many of us continue to hold face-to-face meetings from our “dark chambers” at home. As many of us return to our offices, visualization technology will continue to advance because its use was proven in a time of need. From safely monitoring body temperatures and performing virtual cargo surveys, to aiding marine navigation and seeing new perspectives from drones, cameras are everywhere. The data that can be collected by the “eye in the sky” will change how ports, vendor facilities, and logistics companies operate. The ability to implement algorithms in data collected through digital recognition is remarkable. Airlines have implemented individual scanning of boarding passes from your smartphone to avoid physically handling paper boarding passes. In today’s new sense for caution, shipping documentation will quickly evolve from paper to digital streams out of necessity. The use of sensory technology with intelligent recognition functionality will introduce new ways to inspect material while in

transit. This will further ensure planning can be done in advance of shipment arrival to improve productivity. Terms like digital scanning, augmented reality, holographic representation, and lidar will no longer sound like the words from the script of a Star Wars movie. The Bechtel Innovate team has supported development of new ideas, many of which will have a profound impact on the supply chain. Ultimately, visualization advancements will transform logistics, moving the traditional into the modern at a much faster pace. The safety of people will significantly improve because of visualization technology. In the words of Albert Einstein, “in the midst of every crisis, lies great opportunity.” With this challenge, we become better.

Stephen Spoljaric is corporate manager of global logistics, Bechtel Corp. He recently was selected as a Bechtel Distinguished Technical Specialist, the first for Logistics in Bechtel’s more than 120-year history. Spoljaric’s thought piece was initially distributed in BreakbulkONE’s weekly newsletter. Subscribe to BreakbulkONE at www.breakbulk.com/page/one.

ISSUE 4 / 2020

ROLLING WITH THE PROJECT HITS According to a rolling survey conducted by Independent Project Analysis and reported on in the consultant’s Newsletter June 2020: • Owners are reporting average annual CapEx cuts of 34 percent. • About 76 percent of companies surveyed in April 2020 say they are planning to delay projects due to the Covid-19 pandemic’s effects. • On average, companies say they have suspended about 15 percent to 20 percent of their projects; the anticipated suspension times vary, but a majority are postponed for at least 10 to 20 weeks. Neeraj Nandurdikar, director of IPA’s Oil & Gas Practice, commented:

34%

“Although in the short narrative will not yield run canceling a project much effect. Yes, some may appear to be a ratiosuppliers can ostensibly CAPEX CUTS nal move to manage cash provide some savings to flow, in the long run it is owners in the short-term, a detrimental decision but given the oligopolistic (assuming companies nature of many supply PROJECT DELAYS chain elements, these still actually care about replacing reserves and prosavings will be short lived duction). Some of the more and may, in fact, become sophisticated companies, premiums as soon as the and certainly the ones with activity rebounds. FurSUSPENDED stronger balance sheets, thermore, project delays PROJECTS may recognize the longare already going to make term nature of certain opportunities and some suppliers and vendors vulnerable. continue moving those projects along. If any more of them go bankrupt or leave “Challenging suppliers to cut costs the sector, it will make an already-weak under the ‘we are all in this together’ supply chain situation dire.”

76%

15%

BIMCO: EXPECT NEGATIVE DEMAND GROWTH By Carly Fields In the first of a series of Breakbulk365 webinars, BIMCO’s chief shipping analyst delivered a sobering message for multipurpose vessel, or MPV, operators: “Unfortunately, breakbulk is surely set for negative demand growth across every project cargo, multipurpose or heavy-lift sector.” A live poll run alongside the webinar recorded that a clear majority (62 percent) of attendees expected a slow and gradual recovery against a “swoosh”-shaped (17 percent), V-shaped (15 percent) and L-shaped (6 percent) recovery. Sand said that this reflected BIMCO’s own expectations on the pace of recovery. He explained that while projections from the International Monetary Fund resemble a sharp V-shaped recovery, Sand cautioned against reading too much into growth rates as “they can be deceiving as the base rates change from one year to the next.” In a second poll, attendees were asked when they expected the breakbulk supply chain to be fully functional

again. The majority (58 percent) believed 2021 or beyond; 32 percent believed in the late third quarter; 8 percent believed over the summer and 3 percent said in the coming month. Peter Sand Looking at BIMCO the main shipping sectors, Sand said that while the oil tanker sector has had two “fantastic months” this will not translate into better business for breakbulk operators. “I’m afraid that this time around it is different because of the fact that oil prices have come down significantly,” he said. Oil prices need to be at least US$60 per barrel to support confidence in the project cargo sector, he added. Oil prices were around the US$40 per barrel mark in mid-June. Sand acknowledged the “truly dramatic times for oil demand,” but said that the hype for the tanker market is now behind us. “We are looking at a

scenario that will see us return to fundamental realities somewhere in late 2021.” Looking at the container ship market, Sand recognized that this sector has been cannibalizing the breakbulk market for many years. This trend looks set to increase as demand remains depressed for container trade in 2020. “Our expectation is for container shipping to be down by 10 percent of demand this year.” The outlook for the bulk carrier sector – another recognized cannibal of breakbulk cargo – is no better. In May, Sand said, a capesize bulk carrier could be chartered for an average of $2,082 per day. While panamaxes and capesizes freight rates had been somewhat shielded by growth in first quarter coal imports in China, the Eastern powerhouse cannot “lift the market out of the doldrums by itself,” he said. “You have to question the resilience of such strong growth rates throughout the year as there isn’t really solid underlying demand.” BIMCO expects negative growth rates across the board on a global scale for all dry bulk commodities for 2020. www.breakbulk.com BREAKBULK MAGAZINE 7

CONVERSATION

Lessons from the Past

‘Reevaluate and Reinvent’ to Raise Performance

BY MARGARET VAUGHAN

Houston has a unidimensional focus on oil and gas.

hilosopher Jorge Agustín Nicolás Ruiz de Santayana y Borrás (aka George Santayana) said: “Those who do not remember the past are condemned to repeat it.” How often have you heard that phrase, agreed with it, then continued to act the same way, in the same manner, and ended with the same outcome? In 1984 the price of a barrel of oil cratered and the bottom dropped out of the oil industry. For Houston, a city that had a unidimensional business focus, this was catastrophic. Unemployment soared, foreclosures skyrocketed, savings accounts emptied, and the city and its citizenry struggled to keep afloat. Companies that survived did so by reinventing their business models. They were more cautious in hiring, making sure that new hires could perform multiple roles well. They kept smaller offices, doubling the occupancy of each office. They paid down debt and kept a tight eye on the balance sheet. Companies learned to be lean and efficient. It was a time of great worry. Competition was fierce so clients were treated like priceless and only children, which in some cases they were. Slowly we dug ourselves out of the hole. We asked God to send us another oil boom, promising that this time we wouldn’t screw it up. Then things got better. As they did, we slowly drifted back to the old ways: lavish spending, bigger offices, empire building with layers upon layers of useless management,

Margaret J. Vaughan has more than 30 years’ experience in all facets of supply chain management.

CREDIT: SHUTTERSTOCK.

8 BREAKBULK MAGAZINE

hiring and promoting incompetence, all the while genuflecting at the feet of the client. Don’t get me wrong; I love my clients; always have, always will. But I worked in retail for many years and lived with the credo: “The customer is always right. Even when the customer is wrong, the customer is always right.” It was my job to steer the customer away from a pair of shoes that made her feet look like Fred Flintstone’s, even if she really loved them, to a more flattering pair, and do it in a way that made it seem like her idea. That isn’t easy. Clients hire our services. They hire our expertise, our knowledge. We shouldn’t allow them to hurt themselves by buying the wrong pair of shoes. I understand that clients want to have a say in things because they are paying the bills and they may have had some previous experience. But they hired us. We know what is right, what is needed, and how to get it done. The client needs to learn how to let go, trust their suppliers, and suppliers need to earn that trust. We need to listen to each other. It is a partnership. The Covid-19 pandemic, combined with the sudden and unprecedented drop in the price of oil, has set the oil and gas industry back to where it was in the mid-1980s. It’s going to force companies to reevaluate and reinvent because the business model is changing. Again. We and our clients can learn from the past to elevate performance. Or we can repeat our mistakes. Choose wisely. BB

www.breakbulk.com

ISSUE 4 / 2020

Changing Risk Landscape Adapting to New Normality

he impact to international shipping caused by Covid-19 seems doomed to be unprecedented, destructive and profound. As I write this, many nations are scrambling to keep a balance between life and livelihood. Although it is hard to predict when the virus will be gone, one thing is for sure: we have made – and we are making – adaptations to our job and life. In the post Covid-19 this “new normality” will matter a great deal to our industry, not least in the area of risk management. The difficulty of undertaking crew change and the hardship stemming from that is clearly the worst of the storm. The whole crewing industry is suffering from this international thrombus, not least the outspoken shipowners and managers. When the world erects a great wall to block our seafarers, it means our crew are unable to disembark, buy an air ticket back home, embark to continue their sea career and even seek urgent medical assistance. We must recognize it is our seafarers who take the risk to carry all essential goods to a world in lockdown and safety is as important for them as it is for us all. How do we ensure that they are provided with proper personal protective equipment, that their mental health is protected and that they are able to maintain ship operations regardless of different port restrictions? I suggest that it would be sensible to revisit the International Maritime Organization’s Seafarers’ Training, Certification and Watchkeeping Convention in terms of its training requirement and seafarer welfare content after the Covid-19 crisis. No doubt, Covid-19 will spur digitalization progress in the shipping industry, especially the “ABCD” (AI, blockchain, cloud and data) movement. After being forced by the pandemic to experiment with different

operations, many shipping companies will continue to benefit from their contingency plans, which have ranged from workforce shift plans, video conferencing, less travel, switches to remote survey and more. Think, too, of the safety gains that are possible through, for example, digitalizing ship certificates onboard, optimizing the connection between ships and shore, and encouraging world ports to share data of ships, cargo and crew to avoid unnecessary trade hindrance. Ask yourself if you feel comfortable to add your digital signature on those contracts? Think also on how we can promote the greenhouse gas strategy for shipping going forward? Many new changes lie ahead of us. Standard contracts and clauses are the foundations of the shipping industry when it comes to safeguarding commercial risk. BIMCO is well-known for its standard contracts and clauses for the breakbulk business, including Gencon, Nype, Heavyliftvoy, Heavycon, Supplytime, Towcon, Towhire, Piracy clause, and War clause. The success of these rests on the fact that these standards truly reflect industry practice and balance the allocating of risks and costs – making them more easily accepted than contracts with homemade wording. Covid-19 has proved the importance of industry standard contracts and clauses, with a number of relevant contractual areas. These include BIMCO’s Infectious or Contagious Diseases Clauses to regulate responsibilities and delays; BIMCO’s Liberty and Deviation Clauses for the purpose of crew change; shipbuilding contracts and force majeure clause and so on. At this period of great change, now is the time to recalibrate your contracts. BB

BY WEI ZHUANG, BIMCO

MAIN PICTURE CREDIT: SHUTTERSTOCK

Wei Zhuang is regional manager of Asia at BIMCO. He can be contacted on zw@bimco.org.

PORTRAIT CREDIT:

HELLE MOOS / BIMCO

www.breakbulk.com BREAKBULK MAGAZINE 9

COVER STORY

BY FELICITY LANDON

n the midst of the Covid-19 pandemic, we have become used to superlatives. But for the air cargo industry, the impact really has been off the scale. “We have offered to the market everything we have,” said Konstantin Vekshin, executive president, charter cargo operations, at Volga-Dnepr UK. “Since the pandemic started, we have been really, really busy, flying very sensitive cargo – saving people’s lives, essentially, not just in Europe but all 10 BREAKBULK MAGAZINE www.breakbulk.com

over the world. We have committed all of our fleet to that effort.” The airline has been transporting personal protective equipment, or PPE – up to 8 million masks per flight, ventilators, other lifesaving equipment and even modular/collapsible hospital buildings. For aircraft chartering specialist Air Partner, 2020 started well, but was by no means outstanding, according to Mike Hill, group freight director. The usual verticals were ticking over: automotive, aerospace,

oil and gas movements, all mostly time critical, with the market a little suppressed. But from mid-March, activity shifted up gears to “astronomical, the likes of which I have not seen in my 20 years in this industry,” Hill said. Announced at an early stage of the pandemic, President Trump’s mid-March U.S. flight ban was a precursor of what was to come. Large amounts of belly-hold freight capacity were stripped away from the ISSUE 3 / 2020

CREDIT: SHUTTERSTOCK/.

Air Freighters Step up to Pandemic Plate

market virtually overnight, bringing immediate demand for charters for transatlantic routes. “Around 70 percent of airfreight volumes move on passenger aircraft as belly cargo, the remaining 30 percent on full freighters, so following the global grounding of passenger air services, this massive amount of capacity was suddenly gone,” Hill said. When Covid-19 peaked in China, production reduced significantly and demand for capacity dropped away. “We were during this time even operating flights with PPE into China from Europe,” Hill said. However this proved to be the calm before the storm. Following the lockdown in the rest of the world and the gradual restart of production in China, the demand for PPE in Europe began to increase rapidly, but without the scheduled capacity to transport it. Demand spiked from mid-April with what Hill describes as “unprecedented demand” for charters for PPE, mainly from China into Europe and the U.S.

PASSENGER CRAFT PARTNERSHIPS

Already feeling the lack of capacity, Air Partner started talking to passenger operators in mid-March about the possibility of using their aircraft as freighters. The response was mixed, with much uncertainty, Hill recalled: “Some airlines were simply not interested in moving cargo, and seem to have been more keen to park up and hold out for state aid. During April, however, many governments reached out with their demands for vast volumes of PPE to be imported, and thus the passenger airlines sped up their “soft” conversion of their aircraft into freighters. Originally this involved only the belly holds, which offered poor value. This then increased to baggage bins and loading on seats.” IATA released guidance for cabin loading in midApril and many airlines have now removed seats on some of their aircraft.

“As soon as everyone was back in the factories in China and they opened up the airports, essentially it was the signal for everyone. Governments lined up for capacity.” – Konstantin Vekshin, Volga-Dnepr

Konstantin Vekshin Volga-Dnepr

Pavel Kuznetsov deugro

Dan Morgan-Evans, head of cargo at Air Charter Service, also described “an incredibly busy few months.” However he pointed out that while the company had gained in Covid-19 related charters and moving PPE and ventilators, it had also lost on normal commercial movements. “In a normal year we have a mixture of wide-bodied big project moves and consolidated moves, and small aircraft doing intra-Europe – automotive etc. – and that sort of just-in-time business has disappeared as the factories have closed.” In a two-month period, Air Charter Service organized between 350 and 400 flights just for PPE, MorganEvans said. “Governments around the world are desperate to ensure they have enough PPE. They are putting in orders with factories and as soon as they have secured their orders, they look to secure the transport. In March and April, there was a real capacity crunch and prices skyrocketed for charters and aircraft in general – it was all hands to the pump to find solutions and availability.”

Volga-Dnepr’s Vekshin told a similar story. “As soon as everyone was back in the factories in China and they opened up the airports, essentially it was the signal for everyone. Governments lined up for capacity, understanding the urgency of the situation.” He added: “In a way, the airfreight industry and dedicated freighters have been neglected [for many years]. Passenger airlines have been adding belly capacity and everyone has been happy – then Covid-19 happens and all of a sudden we don’t have so many possibilities; we need to fly as much cargo as possible, and our own flexibility and expertise has come in handy.” That is how it should be, he said. “Freighters are necessary, it is a strategic message for the entire world.” Competing with belly hold for cargo capacity has been a challenge in the past, something that the pandemic has inadvertently rectified. Now, pure air freighters are able to charge fair prices in a more balanced market, Vekshin said.

SHIFTING ROLES

With the landscape of pricing and aircraft availability changing very quickly, duegro found it was working day and night to keep its finger on the pulse of the rapidly changing situation, according to Pavel Kuznetsov, head of air chartering at the forwarder. “We have seen things that you don’t experience in normal times: massive AN-225s – usually used for ultra-heavy cargo – started moving general cargo like PPE; the heavy-lift workhorse AN-124 that usually has comparatively high operational costs was operating at price levels lower than most B-747 and even B-777 freighters; and passenger aircraft being used for cargo-only charters to move not only PPE, but also oil and gas equipment and machinery parts.” In terms of pure project cargo demand, it has been a mix of ups and downs, he adds. There was a reduction in demand caused by a general economic slowdown, lockdowns affected production plans and many www.breakbulk.com BREAKBULK MAGAZINE 11

COVER STORY

A challenge has been ensuring the protective measures for employees, cargo and aircraft. CREDIT: VOLGA-DNEPR.

projects were put on hold, delayed or canceled. At the same time, there has been increased interest for urgent air freight to minimize disruption to production schedules and traditional supply chains. Kuznetsov said: “While deugro has always been known as a leading service provider for heavy industries such as oil and gas, energy, power generation, mining and infrastructure projects, during the Covid-19 crisis our strong competence in air chartering has also attracted a lot of clients seeking solutions to move their medical and relief supplies.” As well as investing in PPE for employees, air freight specialists have also been faced with the challenge of moving people around the world. “For example, we need to pre-stage crew and ensure we have enough crew in place. Passenger flights are few and far between and, of course, expensive. We have even come close to using business jets,” Vekshin said. 12 BREAKBULK MAGAZINE www.breakbulk.com

OVERCOMING AIRPORT CHALLENGES

Despite the difficulties, airports have on the whole been very flexible and understanding, according to the breakbulk air freight community. “They know we are flying sensitive cargo which is very important, and they have been willing to extend their hours and mitigate their curfew restrictions,” Vekshin said. “We have had to manage so many moving parts at the same time and have had to be flexible in shifting from airport to airport.” As well as congestion and delays in customs clearance, loading of cargo has been a pinch point. While its 747s can be loaded with masks, ready prepared on pallets, in three to four hours, Volga-Dnepr’s Antonov-124 aircraft are not configured for palletized cargo. “So for these it is manual labor, 11 to 12 hours on the ground while the cargo is loaded [in boxes] by people wearing masks and gloves and protective suits. It isn’t a quick turnaround,

but a very painstaking effort.” Volga-Dnepr has been flying into China via Russia, where aircraft stop for crew rest purposes and to wait to ensure the cargo in China is ready and the airport slot confirmed before completing the journey. “It is absolutely out of the question to fly in and sit there and wait – first there is no room, second, no one will let us. So in this sense, it is a precision type of operation.” Air Partner’s Hill said that the quarantine requirements of numerous countries mean crew duty times and crew rest have been an issue. “Crews in general do not exit the aircraft in China, and no night stop is made, as would usually be the case in pre-Covid times.” Obtaining permits has been complicated in some cases, he added. One positive for Volga-Dnepr has been the rebooting of its subsidiary, CargoLogicAir. At the start of 2020, the airline had suspended operations because of a downturn in demand. By April it was back in operation, with its ISSUE 4 / 2020

747s described as “a timely addition to the effort.”

LOOKING TO THE FUTURE

Having coped with the spike in demand caused by Covid-19, carriers are now reporting that supply-side pressure seems to be easing. In part, this has been due to the additional influx of capacity from passenger airlines offering their aircraft for cargo-only flights. “The price-surge peak seems to be behind us and the capacity shortage is easing up slowly, so the situation is showing signs of improvement,” Kuznetsov noted at the end of May. “The next couple of months are looking better in terms of freighter availability.” However, he does not expect the market to return to normal quickly. deugro is therefore recommending that its clients take care of transport arrangements for time-sensitive cargoes as early as possible. Air Charter Service has strong bookings through the end of July, and while Morgan-Evans believes that prices will start to come down, capacity will stay tight for some time with strong demand for cargo space throughout 2020. Air Partner’s Hill expects that the slow return of passenger services will again impact freight capacity, allowing the air charter boom to continue. “Maybe not at the same intensity as currently, but far higher than preCovid levels,” he said. One interesting development has been the increase in competitiveness of passenger craft in carrying air freight. This may, according to Hill, encourage some passenger operators to remain in the cargo business until the passenger market has fully recovered. While they cannot compete with the ultraheavy-lifts, breakbulk cargoes are an inviting prospect in an otherwise bleak outlook for passenger aircraft. What bearing this will have on the balance of business available to traditional air freighters in the future remains to be seen. Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.

Covid-19 supplies have been competing for air freight space alongside traditional breakbulk cargoes. CREDIT: deugro.

CHALLENGES ON THE GROUND While air cargo capacity crunches have captured the headlines, Covid19 has brought less publicized operational challenges on the ground. Firstly, as with so many industries, employees switched to home working with little time for planning. That meant that important functions such as load planning, route planning, and scheduling needed to be undertaken remotely, but still securely. Air Charter Services’ Dan MorganEvans said: “When Covid-19 kicked off in China in January, we realized there was a possibility this would happen everywhere else, and we moved quickly to having working from home solutions for the rest of our offices.” The firm had a couple of practice days, with its IT team making sure everything ran smoothly. “In fact, we have spent a lot of money on our IT solutions over the past couple of years, so it wasn’t a massive step and we were able to seamlessly move into this. But it is a big mentality change.” Air Partner has actually found home working to be beneficial. With no time lost traveling to and from

work, it has been easier to cope with the higher workload and to maintain contacts with clients, suppliers and work colleagues. Volga-Dnepr has about 3,000 personnel working from home and has also found that productivity is up. “We have become more organized,” Volga-Dnepr’s Konstantin Vekshin said. “Will there be more working from home in the future? Absolutely, this kind of working has been beneficial in many ways. While there may be lack of direct contact, it has made us even more solid as an organization, seeing each other more often than we normally do, across continents and across the globe.” Another challenge for air freight carriers has been ensuring the protective measures needed to maintain the health and safety of employees, cargo and aircraft, according to deugro’s Pavel Kuznetsov. This has included the use of PPE, the sanitation of aircraft, limited physical interaction between crew and ground support staff, and limitation on crew rest in more impacted areas.

www.breakbulk.com BREAKBULK MAGAZINE 13

COVER STORY

WALL-TO-WALL CARGO America’s Air Cargo Capacity Scramble

ir cargo isn’t taking the back seat anymore; it is taking virtually every seat, and every inch of hold space on every available plane in the Americas. Millions of cases of the novel coronavirus have seen to that. For the time being, there isn’t quite enough cargo room to go around. The suspension of passenger flights around the world immediately reduced belly airfreight capacity and delivery frequency, muddling up supply chains for pandemic-propelled healthcare cargo. Shannon Davis Ford, communications advisor for FedEx Services, told Breakbulk: “Air cargo capacity is [now] limited, and we’ve had to make adjustments so that our international networks can best deliver muchneeded goods and services in this constrained environment.” Jan Krems, president of United Airlines cargo, confirmed the surge in United’s demand for Covid-19 breakbulk cargo – especially medical supplies and personal protective equipment.

BY LORI MUSSER

“We are proud to partner with our customers to support the healthcare heroes on the front lines by transporting the commodities required for their crucial role,” Krems said. “The biggest challenge we faced in meeting our customers’ needs as the pandemic began to spread was that passenger demand fell quickly while the need for cargo capacity was growing,” he added. Adam Rod, Chicago Department of Aviation’s assistant commissioner of planning, described this year’s “meteoric rise” of the cargo airline. “O’Hare already had two-dozen of them from all over the world. If they do not have a passenger side of the house, business is ironically as strong as ever in serving the most valuable, vital end of the supply chain,” he told Breakbulk. “Airlines with both passenger and freighter operations are a bit of a different story, though, experiencing a temporary loss of revenue from passenger flights and belly cargo,” Rod added.

O’Hare Airport is one of the world’s leading cargo gateways. Its high-value medical and technology imports are surging. “O’Hare has seen a boost in year-to-date freighter volumes due to its gateway capabilities and recent expansion in capacity. However, since O’Hare also receives significant cargo tonnage in the belly of passenger planes – particularly international flights – the slowdown in operations means overall net tonnage is about even to slightly down year-to-date.”

FAST-MOVING WORLD

The roller coaster ride from exponential cargo demand, idling passenger aircraft, and reintroducing capacity on passenger and other aircraft, has made the fate of air cargo in 2020 anyone’s guess. Foundering with most of their customer base under isolation orders, passenger airlines’ improbable solution to the global crisis has been to reinvent passenger aircraft as freight planes, stuffing bags and boxes into holds and seats and overhead bins.

TOP: United ground staff unload PPE in SFO for transportation to hospitals. CREDIT: UNITED AIRLINES. 14 BREAKBULK MAGAZINE www.breakbulk.com

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COVER STORY

This reassignment of passenger capacity to freight may help keep some heads above water. In its May 6 testimony before a U.S. Senate committee, industry association Airlines for America, or A4A, noted that 49 percent of the U.S. active fleet was idled, and US$100 billion in revenue had been lost. Katherine Estep, communications director for A4A, shared a roundup of some cargo-only flights being offered by U.S. passenger carriers: “United Airlines flew its first cargoonly flight on March 19 and will continue to fly 40 cargo-only flights from U.S. hubs to key international cities per week. American Airlines flew its first cargo-only flight in more than 36 years on March 20 at full capacity; [it] carried 14 pallets of medical supplies, mail for active U.S. military, electronics, and e-commerce packages.” On April 29, Alaska Airlines said it would fly passenger jets as cargo-only flights to carry essential goods like mail, medical equipment, e-commerce packages and food throughout its domestic network. In addition to Alaska Airline’s three dedicated cargo freighters, six Boeing 737-900 aircraft are being utilized as cargo-only aircraft. “In total, each flight will carry up to 30,000 pounds,” said Estep. That is 13,500 pounds more than usual. “Combined, America, Delta, United and Hawaiian Airlines are operating more than 80 percent of [their] international flights in a cargo-only configuration,” Estep said.

MORE FREQUENCY, MORE CAPACITY

But there is a wrinkle: staggering demand by the healthcare industry may inconvenience some customary air cargo. And when there are no more planes to be had, they have to fly more often, or carry more. Consequently, not all industries are finding the air capacity they need. Cargo charters have come to the rescue of some companies, including those in the oil and gas sector, that wouldn’t normally need to charter. Forwarders are reporting significant delays and high prices for air, and some sectors have turned to sea-air

Six of Alaska Airlines’ Boeing 737-900 aircraft have been utilized as cargo-only aircraft. CREDIT: ALASKA AIRLINES.

combinations, or even sea-truck. In April, Air Canada and Quebec-based Delmar International teamed up to deliver 25 million pieces of PPE from China to healthcare workers across Canada. Seeing a broader need, Delmar formulated “cost-efficient alternatives” that complement its air services. Delmar integrates guaranteed booking and space confirmation, late gate cut-offs, 10-day transit to the West Coast, prioritized vessel unloading, and less-than-three-day delivery across the U.S. The U.S. Federal Emergency Management Agency’s public-private partnership, Project Airbridge, is also bringing in more breakbulk air freight focused on the fight against the pandemic. In delivering critical relief during the crisis, Fedex’s Davis Ford said, “We are continually working to provide the best experience for our customers, while also keeping team member and customer health and safety our No. 1 priority.” Because pandemic rules and restrictions vary from place to place, air crew safety – including simply identifying crew transit accommodations – has been a particular challenge.

Chicago Department of Aviation’s Rod said to Breakbulk: “The safety and security of our airport and those who earn their living here is our top priority, and we work closely with our cargo tenants and airlines to safeguard their personnel in every way possible.” While additional airspace for cargo flights isn’t a problem with so many passenger aircraft grounded, some airports have been struggling to find space on the ground. “As volume has increased, we have also helped some of our cargo tenants and airlines who need additional aircraft parking spaces or truck staging areas,” Rod said. Change has been fast and unforgiving for the breakbulk air freight sector in the U.S. While the expectation is for conventional cargo demand to recover quickly, a new level of agility driven by data may be the future of air cargo. Whatever happens next, sustainable air freight will certainly look different going forward. BB Based in the U.S., Lori Musser is a veteran shipping industry writer. www.breakbulk.com BREAKBULK MAGAZINE 15

RULES & REGS

NAVIGATING FUEL TUMULT BY CARLY FIELDS

ould Jan. 1, 2020 go down in history as shipping’s Y2K moment? Twenty years earlier at the start of the millennium there was hysteria at the prospect of computers across the globe becoming useless at the stroke of midnight because their programmers had not factored the switch to 2000 in their date formatting. It turned out to be a damp squib, which was anticlimactic after the mass hype in the lead up to the event.

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Pandemic Prompts Bunker Confusion

The buildup to and the entry into force of the International Maritime Organization’s, or IMO, Regulation 14.1.13 of MARPOL Annex VI followed a disturbingly similar track. Many a conference panel tackled the thorny issues of who would pay the significant price tag for ensuring compliance, whether that be through installing scrubbers to clean exhaust gases of heavy fuel oil, or factoring in the predicted hefty premium for buying very low-sulfur fuel oil. Then there was the “will they, won’t they”

debate of whether to install scrubbers. It was a fraught time. When the clock rolled over into Jan. 1, 2020, the world did not end. Shipping did not fall on its sword. The entry-into-force passed by without much fanfare and carriers simply got on with the job of moving cargo. Sure, there were gray areas, namely the spread between the cost for lowand high-sulfur fuels and whether those that had installed scrubbers would feel vindicated in their decision. ISSUE 4 / 2020

Fast-forward a few months and as BIMCO’s Peter Sand so aptly put it: “The sulfur cap already seems like ancient history. It’s the tale from the past.” When the Covid19 pandemic Peter Sand took hold, all that planning BIMCO for IMO2020 became redundant as oil prices crashed. As of May 31, West Texas Intermediate was US$32 per barrel, down from US$57.80 per barrel at the start of the year. Marine fuel rates have tracked down, too. At the key bunkering hub of Singapore, higher sulfur intermediate fuel oil 380, or IFO380, was at US$205 per ton on May 29, down US$161.50 from the start of the year. But more important to IMO2020 has been the narrowing spread between high- and low-sulfur fuels. On Jan. 1, 2020 the spread between IFO380 and very low-sulfur fuel oil was US$367.50 per ton. By May 29 that spread had contracted to US$59.50 per ton. That, said Sand, might be the only silver lining for the shipping industry. “Who foresaw that [the fall in oil prices]? This was by no means forecasted,” he said in a Breakbulk365 webinar. The price decline encompasses the Covid-19 challenges, the breakdown of the OPEC+ alliance, the subsequent production cuts and the evaporation of global oil demand to the extent of some 20 million barrels of oil in April. “These are quite staggering numbers,” he said, “but from the shipping industry perspective, if you look at the decline in marine gasoil low-sulfur prices from Singapore you see the peak on Jan. 8 coming all the way down. This pandemic has been swift, harsh and dramatic on the way it has brought down prices for key commodities.”

Charting the Switch to Low Sulphur Bunker Sales in Singapore (in ‘000 tonnes) 4000 3500 3000

Total Low Sulfur Total High Sulfur

2500 2000 1500 1000 500 0

Jan Feb Mar Apr May Jun

2019

Jul

Aug Sep Oct Nov Dec Jan Feb Mar Apr* 2020

*Preliminary Estimates

Source: Data from Maritime and Port Authority of Singapore

TO SCRUB OR NOT TO SCRUB

The scrubber debate is a particularly interesting wrinkle of the pandemic. David Jordan, regional director, Asia for MSI, pointed out that Covid-19 has inadvertently shone a spotlight on the ongoing economic viability of scrubbers, which is dictated by payback time, which in turn is dictated by the price differential between heavy fuel oil, or HFO, and very low-sulfur fuel oil, VLSFO. Speaking in a webinar for the Baltic Exchange, Jordan noted that the collapse in the oil prices has severely impacted that spread. “The question is how is this price gap differential going to develop going forward. Our forecast is for US$100 per ton for full year 2020. This gap will widen moving forward, but at these levels it really does complicate the economic argument for scrubbers as a long-term viable solution.” Add to this that retrofitting a scrubber has become more complicated because of Covid-19. Beth Bradley, a partner with law firm Hill Dickinson, noted that the pandemic has led to serious delays to existing orders for the retrofit of exhaust gas

Beth Bradley

Ulrich Ulrichs

Hill Dickinson

BBC Chartering

cleaning systems. This is particularly true for those vessels where the work was scheduled to take place in Chinese shipyards. There have also been cancellations as owners and operators seek to cut costs. Combine this with the narrower price differential between the two fuels and the immediate prospect of a larger uptake of exhaust gas cleaning systems seems “doubtful,” she said, especially if prices remain low for a significant period of time. Given the lower VLSFO prices, it would be easy for multipurpose ship operators that opted not to fit www.breakbulk.com BREAKBULK MAGAZINE 17

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scrubbers to feel smug. Speaking to Breakbulk, BBC Chartering CEO Ulrich Ulrichs said that is true, but for him the “final verdict is still out there. Nobody could foresee the Covid-19 crisis, which has an impact on oil prices this year, maybe even next year. So, the evaluation can still change in the coming years.” BBC took the decision to order scrubber-ready ships when uncertainty on the fuel price spread was at its height. The first of the six-strong newbuild series of F500 MPVs, the 12,400 deadweight-tonne BBC St. Petersburg, was delivered in May 2020. Ulrichs said that the option to make the remaining ships scrubber-ready is under review and will depend on costs. That said, he points out that the world economy will recover eventually, pulling oil prices back up, at which point the spread between low- and high-sulfur fuels could widen once again. “And then scrubbers might still make sense for ‘young’ tonnage,” he said.

QUALITY CONCERNS

Speaking at an IMO2020 panel discussion at Breakbulk Middle East in February 2020, Ulrichs said that the carrier had, at that time, seen issues with fuel quality. Speaking in May, he confirmed that while quality problems continue to dog the industry they are less dramatic now. These, he pointed out, are not relative to sulfur content but are instead related to the pour point and flash point of fuels. Issues often stem from the blending process. Hill Dickinson’s Bradley agreed with Ulrichs’ assessment, citing issues related to blended fuels that have a propensity to sediment. But that niggle aside, she said that implementation of the global sulfur limit in marine fuels had been progressing smoothly at the start of the year with reports of high levels of compliance until the Covid-19 pandemic hit. “Three months on and the disruption to international shipping caused by Covid-19 has pushed sulfur cap issues well and truly from the headlines.”

The Covid-19 pandemic and the ensuing recession is also expected to seriously suppress newbuilding activity over the coming 18 months, viewed as another silver lining by some. Not only will this give the multipurpose fleet a chance to recover, it will also give many shipowners some breathing space to assess the feasibility of a number of fuels, according to MSI’s Jordan. Additionally, “those promoting alternative fuels are likely to step up their efforts to get their solutions into shipowners’ consciousness in readiness for the next wave of serious newbuilding which we believe is likely to emerge after 2025,” he said.

COSTS OF COMPLIANCE

Compliance checks have also been hit. In the buildup to the Jan. 1, 2020 entry into force deadline, there was much talk of suitable penalties for non-compliance with IMO2020. In one example, the Maritime and Port Authority of Singapore stated that “captains and owners of vessels

The BBC St Petersburg was the first of a series of ships to be delivered scrubber-ready for BBC Chartering. CREDIT: BBC CHARTERING

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that burn overly sulfurous fuel could face as long as two years in prison from the start of 2020.” Then there are the harder-to-quantify costs of reputational damage and time delays for ships caught burning high sulfur fuels. But Covid-19 has disrupted compliance inspections. The UK’s Maritime and Coastguard Agency, or MCA, in charge of implementing British and international maritime law and safety policy, announced in March that it had suspended sulfur cap compliance checks in all UK ports as part of its Covid-19 containment measures. Checks to enforce the International Maritime Organization’s global sulfur limit in marine fuels outlined in MARPOL Annex VI requirements fall under suspended routine Port State Control, or PSC, inspections. These include routine inspections of compliance in the sulfur-capped Emission Control Areas of the North Sea and English Channel. Speaking to Breakbulk, Simon Graves, assistant director – technical performance at the MCA, confirmed the restrictions were still in place in late May. However, he clarified that as a responsible regulator, the MCA was continuing to monitor vessels that call at UK ports. “If, as a result of reviewing information sent to us, we think it’s appropriate, we will inspect those vessels,” he said. Graves added that the MCA will follow a risk-based approach to surveys and inspections when the phased releases of lockdown in the UK allows for a resumption of its activities. The Paris Memorandum of Understanding, an organization that brings together 27 participating maritime administrations and covers the waters of the European coastal states and the North Atlantic basin from North America to Europe, confirmed that the trend is not restricted to the UK. Secretary-General Luc Smulders told Breakbulk that the number of PSC inspections in the Paris MoU region had decreased significantly as a result of Covid-19. As a result, he says it is not possible to provide substantiated statements regarding ships’ compliance with IMO sulfur requirements. That said, he did concede that some member authorities within the Paris MoU might still have the ability to

Low-sulfur compliance checks have stalled. CREDIT: SHUTTERSTOCK.

detect those who may be in breach of regulations by using drones or other technologies. “But verification on board the ships themselves remains a challenge under the current circumstances,” he added. The decision to gradually increase the number of inspections as lockdowns are eased at varying pace throughout the region is a matter for the individual states to decide. Port states such as the UK have the right to inspect vessels in their own coastal waters, which stretch 200 nautical miles out from their coasts. Beyond that, flag states are responsible for ensuring compliance with the sulfur regulations.

A YEAR TO FORGET

With port states rightly focused on Covid-19 containment and recovery, the requirement to meet IMO2020 has fallen largely off the radar. If there were concerns of an uneven playing field before, those have now been magnified. Responsible carriers that invested heavily in preparations to be ready for the Jan. 1, 2020 deadline could now find themselves in a market where those that haven’t are able to undercut freight rates in what is already a difficult market. Hill Dickinson’s Bradley said that the reduced risk of enforcement makes it difficult to “ascertain a full picture relating to compliance and

enforcement until sometime after the pandemic has receded.” And ship operators continue to feel the financial pinch, despite the narrower spread between the high- and low-sulfur fuel. Despite refusing to sign any contracts that did not include a bunker clause prior to the Jan. 1, 2020 deadline, BBC Chartering was still “far away from covering cost” on spot earlier in the year. While this situation has improved, that is largely a result of reduced exposure as bunker prices have dropped as a result of Covid-19 pandemic and the impact it has had on global economies. “Unfortunately, at this stage Covid-19-related issues like market uncertainties, confusions, quarantines, and health and safety concerns need much more attention than IMO2020 related issues,” Ulrichs said. So, while the Jan. 1, 2020 deadline rolled over without too much fuss, compliance questions, pricing puzzles and pandemic planning may see the shipping sector live up to its Y2K-esque hype before 2020 comes to an end. BB Carly Fields has reported on the shipping industry for the past 20 years, covering bunkers and broking and much in between. www.breakbulk.com BREAKBULK MAGAZINE 19

REGIONAL REVIEW

ALL EYES ON 2021 Tentative Hopes for Asia’s Sharp Recovery BY THOMAS TIMLEN

rowth in the Association of Southeast Asian National, or ASEAN, region is expected to slow sharply to 2.2 percent in 2020 as a direct reaction to the pressure of Covid-19 on global economies, according to the Asian Development Bank, or ADB. With that somber 2020 projection in mind, project cargo and breakbulk players in the region may find solace in the ADB’s forecast of 6.2 percent growth rebound in 2021. But will that 2021 growth materialize? Not all stakeholders agree with the bank’s optimistic forecast. “The Covid-19 pandemic is causing volatility and uncertainty all over the world. Under the assumption that the various countries manage to restart their economies while handling the virus in a controlled manner, it should be realistic to expect a rebound of the regional and 20 BREAKBULK MAGAZINE www.breakbulk.com

global economy in the second half of 2020 and during 2021,” G2 Ocean’s vice president of project cargo, Leif Arne Strømmen told Breakbulk. He adds, however, that it is important to distinguish between project cargo belonging to capital investment projects and regular breakbulk, as the Covid-19 impact differs. Project cargo for capital investment projects are not directly linked to the changes in the ADB predictions. “These volumes will be directly linked to ongoing, planned and future capital investment projects, and are, in a greater extent, related to pricing of commodities like oil, gas, electricity and various minerals, in addition to planned investments into governmental infrastructure. For breakbulk not linked to capital investments projects, such as steel or aluminum to the automobile industry and other consumer-driven industries, there certainly are more direct implications reflected in the ADB predictions,” Strømmen said.

SLOW RECOVERY PROJECTED

For breakbulk, excluding project cargo, Strømmen expects to see a slow recovery in the market during the third and fourth quarters of 2020. “We are also expecting this to continue into 2021, depending on how the next three to four months develop.” In addition, he anticipates increased governmental capital investments into infrastructure to create new jobs, and new governmental capital investments into renewable energy to utilize the crisis to speed up decarbonization. As an example, the European Union has reshaped its Green Deal into a recovery package, with huge support for renewables, green hydrogen and electric vehicles. This is expected to have a positive impact on Asia and the involved manufacturing companies. Charles Zhang, marketing manISSUE 4 / 2020

G2 Ocean recently shipped six brewery tanks (43 tonnes each) from Changshu, China, to Guaymas, Mexico. The company operates 13 trade routes to and from China. CREDIT: R.H. SHIPPING & CHARTERING

ager at Winning Shipping in Qingdao, agrees with the ADB’s prediction of an economic slowdown in 2020, but believes there is still a question mark on whether the 2021 recovery will be as the bank predicts. “It very much depends on the measures the different governments are taking and the development of medical means, for instance when the vaccine will be developed successfully. Personally, I think it is still too early to say whether the expansion of Covid-19 is under control globally.” Teik Poh Goh, managing director of Global Maritime Talent, cautions that ADB’s projections for 2020 may actually be too conservative – he expects full-year figures to be below 2.2 percent. “In my view, it is just a handful of countries that can generate growth within their domestic markets, specifically China and India. For the rest of the countries, they will remain hamstrung by their export-focused economies.”

The transshipment of a steel structure at Boke, Guinea, during transport from Yantai to Nouakchott by Winning Logistics in March 2020. CREDIT: WINNING LOGISTICS

Apart from a handful of key industries that have continued to function such as healthcare, food, and the supply chain, he sees that the rest of the sectors are in the doldrums. Teik Poh Goh Therefore, even Global Maritime if borders reopen Talent from the middle of the year, the accruing job losses will “curtail any semblance of a return to normalcy in buying and consumption patterns, for quite some time to come,” he said. Covid-19 has also expedited structural changes in how employees and companies work and in the future of the workplace. “This is a double whammy that we don’t need,” Goh said. “The outcome of this is that

we may end up seeing a jobless recovery even as things get back to normal. I don’t think that the trade rebound of 6.2 percent in 2021 is likely to take place. My guess is that it would be more in the 4 percent region if all goes well.” Strømmen agrees with that stance, describing the ADB 2021 projection as “over-optimistic.” “It is hard to say if projects will boom in 2021 since investors will be more conservative or say the government investors will be short of money. And if the restructure of the global supply chain that is claimed by developed countries such as the U.S. and France comes true, the situation might be even worse for the automobile manufacturers, mobile phone factories, and similar plants located in China, Vietnam and Malaysia back to Japan, the U.S. and Europe. From the opposite point of view, this may bring some business for breakbulk and project cargo transportation.” www.breakbulk.com BREAKBULK MAGAZINE 21

REGIONAL REVIEW

WEIGHT OF INFRASTRUCTURE DEMANDS While the Asian Development Bank projects an overall decline in growth this year before a sizable recovery in 2021, China’s ongoing Belt and Road Initiative, or BRI, stands to offer welcome respite to the Covid-19 struck breakbulk sector. Werner Pascha, chair of East Asian Economic Studies/ Japan and Korea at the Mercator School of Management, part of the Institute of East Asian Studies at the University of Duisburg-Essen, feels that the BRI certainly has the potential to drive a degree of economic activity in the Asian region, serving as a facilitator of trade. “One motive behind the BRI, but also Japan’s similar effort, was and is infrastructure export,” he said. “It will be important to watch who profits from the direct trade effects during infrastructure construction and the trade in services, during the operation phase.” As the BRI expands, those transporting breakbulk and project cargo will continue to be involved with the construcWerner Pascha tion as well as the transport of the equipment and materials University of required. “As for the benefits derived from this complex Duisburg-Essen involvement, much depends on the types of contracts being used. Infrastructure projects are notoriously complex, so adequate contracts are extremely important to distribute the potential profits, costs, duties and risks. Potential partners also need legal advice in order to benefit from the involvement,” he said. Chris Devonshire-Ellis, chairman of Dezan Shira & Associates, believes that now is the right time to look at auxiliary requirements related to the BRI and the project cargo work associated with those. His company specializes in handling foreign investment into China’s BRI. “A lot of the infrastructure build that China is involved with other foreign governments is already underway. In fact there is a backlog of projects to complete, with some under construction and some, such as the Budapest-Belgrade rail, having just had the financing agreed.” While critics might suggest that there is a BRI slowdown taking place or that China has run out of cash, Devonshire-Ellis sees the current phase of the BRI as just the natural cycle of project implementation to completion. Investors, he adds, should be closely studying what infrastructure build is taking place where and what additional facilities will be required on top of the basic facilities. That will include warehousing, cold storage, distribution, repackaging, relabeling, and all other component parts of the logistics software on top of the new infrastructure. “Putting in the research and learning where those are will uncover multiple investment opportunities,” he said. The BRI is not the only infrastructure initiative that can generate demand for the transport of breakbulk and project cargo: Japan is pursuing a similar regional program with the Partnership for Quality Infrastructure, allocating US$200 billion to support a number of infrastructure development projects in the region, Pascha notes. Meanwhile, an element of the European Union’s Global Strategy is aimed at the promotion of a “Connected Asia” to be achieved in part via engagement with China together with the benefits achieved by the establishment of a recently finalized free trade agreement with Japan. Furthermore, China has not limited BRI participation to national governments, as seen with the Australian state of Victoria’s recent deal with China that enables Victorian infrastructure experts to get access to the hundreds of billions of dollars of projects slated for the BRI, while encouraging Chinese infrastructure firms to establish a presence in Victoria and to bid for major projects. The deal could lead to increased demand for the transport of materials and equipment required not only in Victoria but anywhere along the vast BRI network. Clearly the BRI and similar initiatives have the potential to provide light at the end of the tunnel while economies react to the challenges of the Covid-19 pandemic.

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COMMODITY PRICE FREEFALL

In its forecast, the ADB also forecast sharp and protracted declines in commodity prices, a factor that will have a direct impact on the breakbulk sector. But while Winning’s Zhang expects that dropping commodity prices could affect the confidence of investors in resource development, he notes that investments in resources are dependent on long-term demand. “As long as investment remains steady, the dropping commodity prices won’t affect the transportation sector very much,” he said. The project cargo sector, however, may not escape unscathed. The record low oil and gas prices over the past few months have already resulted in major cuts in both operating and capital expenditure among the larger oil and gas producing companies, delaying and postponing final investment decision of upcoming and future capital investment projects. “Governmental investments into infrastructure will help the situation,” Strømmen said. “However, the project cargo/breakbulk industry will heavily depend on increased commodity prices to see new capital investment projects being developed.” There are, he adds, reasons to believe that oil prices will stabilize and continue to increase, with massive cuts in oil production currently taking place and increased demand expected during the second half of 2020 and into 2021. “Still, there will be a time frame where new investment projects are delayed or postponed, leading to temporarily lower project cargo volumes than expected a few months ago.” Record-low electricity prices in Europe could also spell trouble for the renewables sector. Strømmen said that prolonged low electricity prices might, in the short-term, delay investment decisions of new onshore wind turbine projects, due to reduced cash flow among the energy producers.

BETTER PROTECTED?

The fact that consignments moved in the project cargo sector require longer-term planning compared with cargoes transported by other sectors means that they might be somewhat insulated from the volatility that ISSUE 4 / 2020

REGIONAL REVIEW

other sectors are more exposed to. This is borne out by G2 Ocean’s experience: the carrier has seen a “steady to strong volume” of project cargo throughout the pandemic. These were for capital investments decided before the outbreak. Strømmen expects volumes to remain strong for the rest of 2020 into the beginning of 2021. “After that, we assume to see the consequences of delayed investment decisions for new projects into oil, gas, power and renewable, mining, as well other segments impacted by reduced demand and reduced commodity prices.” There are potential opportunities for the breakbulk and project cargo sector if governments initiate publicworks and infrastructure projects as a means to address surging unemployment, another driver that could result in sustained if not increasing demand for project cargo transport of components needed for such initiatives. However, this will depend on the determination of governments and their financial capabilities, Zhang notes. Some governments in Asia may turn to new or expanded infrastructure projects as a means of limiting unwelcome declines in GDP, with related benefits for the breakbulk and project cargo sector. So what do the next 18 months hold for the breakbulk and project cargo sector to and from Asia? “Unless we see closures like we have seen in India lately, we expect project cargo volumes from Asia to the Middle East, Europe, North and South America to remain stable for the remaining of 2020 and beginning of 2021,” Strømmen said. “The situation will, certainly, depend on the development of Covid-19, and potential new outbreaks. For breakbulk, we see a decline in volumes of certain commodities related to manufacturing, due to reduced demand and closed or reduced production in the receiving countries.” Goh brings the focus back to ADB’s report. “I think that the Asian region will fare better than the Americas, Europe and Africa in terms of its ability to resume manufacturing activity earlier than other regions which are now grappling with the

G2 Ocean’s Star Istind delivering 75 wind tower sections to the Port of Gdynia. With high international demand and promises to drastically reduce CO2 emissions, wind power is becoming an increasingly important part of G2 Ocean’s business. CREDIT: PIOTR LEWANDOWSKI.

Winning Logistics’ loading operations of a 52-tonne locomotive Yantai, China, destined for Boke, Guinea. CREDIT: WINNING LOGISTICS.

onset of Covid-19.” There could, he adds, still be opportunities in 2020 as governments rebuild infrastructure to spur jobs growth. But with more and more governments turning to the International Monetary Fund for financial support, the number of governments with the funds available to prop up infrastructure growth is dwindling, and with it

the available forward support for the project cargo and breakbulk sector. BB Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry. www.breakbulk.com BREAKBULK MAGAZINE 23

REGIONAL REVIEW

ASIA’S WIND RACE Positive Outlook for Offshore Installations BY FELIX SCHOELLER

n 2019, the wind vertical achieved its second-best year ever for new wind capacity. Globally, about 60.4 gigawatts, or GW, of new wind energy was installed, of which 54.2 GW was onshore and 6.1 GW was offshore, according to the Global Wind Energy Council, or GWEC. Among the new onshore capacity, the Asia-Pacific region continued to lead in terms of wind power

development, accounting for 50.7 percent of new wind capacity. Europe was in second position with 25.5 percent, followed by North America with 16.1 percent, Latin America with 6.1 percent and Africa and Middle East at 1.6 percent. Driving the Asia-Pacific performance, China took the lion’s share of new wind capacity with 23.76 GW. Trailing were India at 2.37 GW, Australia at 830 megawatts, or MW, Thailand at 320 MW, Japan at 270 MW and the rest of Asia at 520 MW.

At 6.1 GW of new offshore wind capacity, 2019 was the best year ever for the offshore wind vertical. China led here, too, with more than 2.39 GW of new offshore wind capacity, followed by the UK at 1.76 GW, Germany at 1.11 GW and the rest of the world at 870 MW. According to the latest study by the GWEC, the outlook for the wind vertical remains positive over the next few years. GWEC expects the culminative annual growth rate, or CAGR, for the next five years to be 4 percent.

The 31,000 dwt A-Class AAL Newcastle discharging 45 meter to 63 meter long windmill blades in Adelaide, from European production facilities. CREDIT: AAL SHIPPING.

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ISSUE 4 / 2020

This outlook mirrors Wood Mackenzie’s 2020 study on the global wind turbine supply chain. In that forecast, Wood Mackenzie expected the annual average wind turbine supply to hit US$60 billion between 2020 and 2028 – an increase of 8 percent compared with 2019.

PRESSURE ON THE PIPELINE But there are challenges to note, most prominently Covid-19 which is expected to lead to a dip in the forecast 76.1 GW of global wind installation. Wood Mackenzie expects Covid-19 to trim back new wind capacity by 6.5 percent for 2020. On the other hand, supportive policy moves are likely to shift the intended capacity of 2020 to 2021, which will bring benefits to stakeholders. For the Asia-Pacific, China’s new wind installations are expected to remain high until 2022 as projects previously approved under the FeedIn-Tariff (FIT) scheme take shape. India, as the next biggest player in the region, is expected to install around 13.1 GW over the next three years. However, issues over land clearances and delays in planned grid augmentation means that installations will be on an incremental basis, with most expected in 2022. In Australia, there is a substantial pipeline of projects poised for completion in 2020-2021. But in 2019, there was a 60 percent slump in Australia’s solar and wind investment. The impact of this investment slump is likely to be felt from 2022 if nothing is done to address that shortfall. While the recent spate of bushfires across the country heightened the need to combat climate change, that is still to be converted into political will to encourage an uptake in renewable investment again. Going deeper into Southeast Asia, Vietnam is a market to watch. In the next five years, Vietnam is expected to install about 2.3 GW of wind capacity by end of 2024. This surge in new wind capacity is powered by the government’s FIT scheme, which expires in November 2021. In the absence of any forms of extension or a new FIT, future wind projects in Vietnam will

face an uphill climb. This is a watershed moment for Vietnam’s renewable sector, with the Ministry of Industry and Trade proposing in April to extend the deadline for its wind FIT by two years. Any positive decision will offer Vietnam the prospect of a cheaper, cleaner and more secure energy future. For the offshore wind vertical, the wind is expected to blow towards the Asia market in the years to come. According to a projection by Wood Mackenzie, new offshore wind capacity growth (from 2019 to 2028) for Asia will be about 59.6 GW, surpassing Europe’s new capacity of 51.3 GW. North America is also projected to add 13.2 GW of offshore wind capacity. China will lead the world in terms of new capacity at 39.94 GW, followed by the UK at 17.29 GW and the U.S. at 12.91 GW. Within the Asia-Pacific region – aside from China – Taiwan, Japan, and South Korea will be significant markets for offshore wind in the next decade. In recent years, major OEMs have set up production facilities in Taiwan and China. These moves serve to expand production capacities as well as to capture the booming offshore wind market in Asia-Pacific region.

This will, in turn, reduce the potential cargo movement from Europe to Asia.

UPSIZING OF TURBINES

Over the years, the levelized cost of wind energy has been on a substantial downward trend partially due to increasing turbine ratings. As more countries move away from various government support on their wind sectors towards open market mechanisms, it is imperative that wind OEMs further drive down capital expenditure costs. The most direct and fastest method to achieve this is to increase wind turbine ratings. A turbine trends projection prepared by Wood Mackenzie forecasts mainstream wind turbine ratings will still be 2.X to 3.X MW for 2019 to 2023. Then from 2024 to 2028, wind turbine ratings are expected to jump to 4.X MW and above. In the North America market, after the Production Tax Credit is phased out, larger rated turbines will gain market share due to lower capital expenditure and unexplored medium wind speed sites. In Latin America, Brazil will transit directly from 2.X MW to 4.X/5.X MW turbines due to the cost and sites condition. The 33,00 dwt W-Class Warnow Jupiter transporting a cargo of wind towers from China to Pitea, for a wind farm project in Northern Sweden. CREDIT: AAL SHIPPING.

www.breakbulk.com BREAKBULK MAGAZINE 25

The 31,000 dwt A-Class AAL Melbourne passing Cape Town on her way to delivering a cargo of wind towers and blades to Coega. CREDIT: AAL SHIPPING.

In Europe, as merchant wind power deals gain momentum, 4.X/5.X MW turbines will be deployed in most markets. In the Asia-Pacific, China and India are

expected to transit from the ultralow turbine ratings to the 3.X MW turbines. Australia is likely to be one of the key targets to launch nextgeneration platforms due to minimal

tip height restrictions and acceptance of larger turbines. However, compared with the Americas and Europe, the main bulk of turbines in the Asia-Pacific will still be 4.X MW and below instead of the 5.X MW and above turbines. Over the years, the mix of increased adoption of higher rating turbines and a greater number of projects in suboptimal wind sites have driven an increase in wind rotor diameters. Wood Mackenzie notes that the market share of rotor diameters that are below 100 meters has drastically reduced from 66.29 percent in 2014 to 14.72 percent in 2018. Only the larger multipurpose vessels will be able to handle wind blades and towers as that transition to larger size turbines becomes more prominent.

Equipped to handle our customers’ needs Horizon Auto Logistics is an International Marine Terminal, Processor and Logistics Operator. We provide tailor made solutions to the equipment and project cargo industry. Our solutions build on first class technology and long expertise within terminal and logistics management.

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26 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 4 / 2020

REGIONAL REVIEW

OEM CONSOLIDATION

This year has seen the wind vertical face a new set of challengers. Solar power is increasingly emerging as an alternative solution to wind energy in the decarbonization journey. Here, zero subsidy is the new norm and that results in internal rates of returns routinely running at mid-high single digits. With the low-hanging fruit picked in the last decade, the tools available to the wind sector to counteract this solar threat are diminishing. Consolidation of OEMs in the wind sector has helped, and the final round of consolidation might well be upon us. In 2013, Vestas merged with Mitsubishi Heavy to form MHI Vestas. In 2017, Siemens acquired Gamesa. And in 2019, Senvion declared insolvency. Could Nordex and Enercon be the next merger? According to Wood MacKenzie, the top five wind OEMs – other than the Chinese OEMs – are Vestas, GE,

SGRE, Nordex and Enercon. With the North America market coming back down to earth in 2022, Nordex might find itself in a pinch as the North America market accounts for a significant portion of its sales. Enercon, on the other hand, is suffering from the collapse of the German onshore market. To survive this decade, wind turbine OEMs need to constantly innovate and achieve massive cost reductions in strategic components. However, these two factors cannot be achieved without strong financial backing and a huge backlog of projects for scalability in cost. With this in mind, Wood Mackenzie projects that by 2028, the market share of the top three wind turbine OEMs (excluding China) will increase from the current share of 62 percent to 86 percent. As a parting thought, there is one last trend to watch. Since the start of the U.S.-Sino trade war, several

countries in Asia have benefited from the spat. As well as Vietnam, India has also emerged to play a more prominent role in the global wind supply chain. According to Wood MacKenzie, wind manufacturing capacity in China controlled by foreign firms is 24 percent as compared with India at 74 percent. Given the rising tension between the U.S. and China, the shock to wind supply chains due to Covid-19, India’s favorable trade relationships with numerous key wind markets and lower manufacturing costs with skilled locals, India could expedite itself into a wind powerhouse. Good news for those in the breakbulk industry that position themselves to serve this burgeoning sector. BB Felix Schoeller is general manager at AAL Shipping.

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www.breakbulk.com BREAKBULK MAGAZINE 27

ENERGY UPDATE

TAKE MY OIL, PLEASE BY LORI MUSSER

Crippling Impact of Crude Glut

few short months ago, a world in which the price of oil could drop into the negative was unimaginable. Then came Covid-19, and history was made. On Apr. 20, 2020, the May delivery price for U.S. benchmark crude, West Texas Intermediate, plummeted to minus US$37.63 a barrel. The economics were simple: the Covid-19 fallout was decimating consumption, and the amount of oil in storage was rising. Storage facilities – tanks, ships and pipelines – were reportedly full to bursting. The oil companies had to pay buyers to take their product. Garrett Golding is a business economist in the research department at the Federal Reserve Bank of Dallas. Golding noted that the 2015-2016 downturn, while powerful enough to encourage many exploration and

production companies to look for cost savings within and along the supply chain, was nothing like this. Speaking at the end of May, Golding said to Breakbulk: “It has been an unprecedented Garrett Golding two months. We Federal Reserve Bank haven’t seen a of Dallas price collapse like this before. In a lot of ways, it is new ground.” The energy industry is still righting itself, with many companies shutting in production, curtailing capital expenditures, racking up debt and facing bankruptcy. Golding said, going forward, per

Heavy Impact of Oil Downturn U.S. oil and gas will drag down U.S. business fixed investment in second quarter 2020 by about 6.1 percentage points 10

Contribution of other sectors to non-residential ﬁxed investment growth

8 6 4 2

AN OVERCORRECTION?

0 -2 -4 -6

Contribution of upstream oil and gas to non-residential ﬁxed investment growth

-8 -10

barrel pricing will be an issue. “Even given a relatively optimistic outlook, the prices [forecasted] are below the level at which many companies will be profitable. This is a meteor that has hit the industry.” Oil and gas produced by hydraulic fracturing operations, or fracking, has tumbled even more than that produced by drilling, according to Jarand Rystad, CEO of Rystad Energy. Rystad said that a May scan by satellite of 30,000 different well coordinates saw only 92 active fracking crews. “In terms of fracking levels in the U.S. – it collapsed.” In February, Rystad Energy ShaleWellCube reported 1,238 working shale wells, and in May it anticipated 308 for the month, a dip of roughly 75 percent. In the U.S. onshore market segment, production in June will drop from almost 12.9 million barrels to 11.8 million barrels, said Rystad. Offshore production is being slashed as well. On the other side of the coin, there will be an 880-million barrel drop in total oil demand in the U.S. in 2020, as calculated by Rystad Energy; that includes year-over-year drops of 11 percent for road fuel, 33 percent for jet fuel, and 33 percent for all other fossil fuels.

2014

2015

2016

2017

2018

2019

2020

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2

Source: Federal Reserve Bank of Dallas

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The level of U.S. well closures may be high, but a lack of storage is an ongoing issue. Rystad Energy OilMarketCube has revised its June 2020 global market outlook for non-OPEC+ oil production downward by almost 4 million barrels per day (since its midMarch estimate) with the greatest reductions coming from the U.S., at 2.2 million barrels per day, and from Canada, at 1.4 million. ISSUE 4 / 2020

Project cargoes are continuing to move through Port Houston, but steel tonnage is down 50 percent on 2019. CREDIT: PORT HOUSTON

Global energy was already at a crossroads in the lead-up to the pandemic, with a Saudi ArabiaRussia price war. In the U.S., industry observers noticed a move toward lower levels of longer-term capital expenditure. Some companies, like Apache, were pulling rigs out of West Texas’ Permian Basin. Others, like Chevron, were promising shareholders a mix of cost-cutting and measured production growth. In early February, according to Bloomberg, private equity firm Kimmeridge Energy Management called the shale sector “uninvestable” and in need of radical action to combat heavy overhead costs and unsustainable expansion. Wall Street was beginning to foretell that global oil demand would contract in 2020 for only the fourth time in nearly four decades. The Covid-19 demand plunge then

pushed OPEC and its oil producing allies, including Mexico, to agree in April to cut production by 9.7 million barrels per day – the largest cut in history. In the U.S., when the market signaled there was no room left in Cushing (Oklahoma’s massive energy storage hub), well shut-ins and curtailed production began. Golding cautioned that the U.S. may not have seen the last of the storage issue. “That’s a possibility to be wary of. It is likely that we will see another price drop if too much production comes back too quickly.”

RECOVERY, EVENTUALLY

All may not be lost for the populations and service providers that rely on the oil and gas industry for their livelihoods. There will be a recovery. In fact, it has already begun.

Golding said: “We’ve definitely seen a large slash in spending. We’re going to be down at this new level for at least the next few quarters. But if oil goes above US$30, the industry might start redeploying frack crews, etc.” When per barrel prices rise to US$40, US$50 or more, and there is a more certain outlook on the public health side, Golding said demand will be more sustainable, although even at that level there aren’t a lot of companies that are going to be profitable. “It will be several quarters before we get back spending at the 2019 level, if we get back to it again,” Golding said. Data from Dallas Fed forecasts that the decline of U.S. oil and gas will drag down U.S. business fixed investment in second quarter 2020 by about 6.1 percentage points. “From a low of 72 million barrels per day, [global] oil demand will recover www.breakbulk.com BREAKBULK MAGAZINE 29

ENERGY UPDATE

at 6 million barrels per day every month from May through July,” Rystad said. Future peak oil demand will be impacted significantly by Covid-19 due to wide-ranging factors impacting demand, such as a lower GDP for a longer time, decreased road miles – due to less public commuting, more home office use, less business and vacation travel and so on, and greater electric vehicle use. But by 2025 global demand should be back to higher levels than in 2019. “We think that peak oil is still in front of us rather than behind us, but still, of course, many things can happen that are not transparent as we speak,” Rystad said.

OIL AND GAS PROJECT CARGO SUFFERS

The energy industry has long been an important project cargo client for ocean and inland carriers, forwarders, risk insurers, and other companies along the supply chain. For those that specialize in oil and gas, troubles are at hand. Port Houston is a top U.S. project cargo hub. Executive Director Roger Guenther said that, while total cargo was down in the first four months of the year by 3 percent, steel tonnage continues to lag 2019 by 50 percent. This downturn was under way prior to the Covid-19 pandemic, as oil production was already beginning to taper off

DRIVING SUPPLY CHAIN SURVIVAL STRATEGIES

Three energy industry experts from global law firm Norton Rose Fulbright put their heads together to disentangle details of the oil and gas industry disruption for Breakbulk’s transportation and logistics industry readers. Global Head of Energy John G. Mauel; U.S. Co-Head of Energy and Infrastructure Disputes Melanie Rother; and Utsav Mathur, Shipping and Offshore Energy Disputes, outline their thoughts: “The energy industry faces disruption and uncertainty. We have seen an unprecedented drop in energy demand … [which] forced energy players to curtail production and significantly reduce capital investment budgets. “Logistics companies, who were already operating in a challenging environment pre-Covid-19, should expect further difficulties and greater competition. The fundamental challenge that logistics providers face is a lack of demand. Energy companies are responding to a major John G. Mauel drop in demand for oil by canceling or deferring capital Norton Rose projects and, consequently, the logistics service providers Fulbright are seeing a drop in demand for their services. “These fundamental demand problems are not resolved by careful negotiations or clever contracting. Rather, we see logistics providers adopting short-term survival strategies focused on innovative cost reduction and long-term strategies focused on diversification. “In the short term, service providers are analyzing how they can participate in a more concentrated market where there are fewer energy companies each with a lower number of capital projects. The service providers who invest in disruptive technologies, develop novel environmentally friendly logistics solutions, leverage economies of scale, and innovate other cost reduction measures likely will sur- Melanie Rother vive. Over the long term, the need for energy will continue Norton Rose to grow, but the technology behind the development of Fulbright energy will evolve. Accordingly, service providers will likely keep an eye on alternative energy developments and begin diversifying capabilities to capture market share of the coming clean energy revolution.”

30 BREAKBULK MAGAZINE www.breakbulk.com

and tariffs were beginning to impact import steel supporting the energy industry. At the port, “landside and waterside expansion projects have continued uninterrupted. We must ensure that the necessary infrastructure and capacity is in place to help the economy bounce back once this global pandemic has been controlled,” Guenther said. But while capital expenditures have taken a dive, not all energy projects have been postponed or cancelled, especially offshore. “We are only seeing a 26 percent destruction of [global exploration and production] investments because there are a lot of things already locked in … the biggest cuts are in shale; we are seeing an almost 50 percent cut in shale investments in 2020 versus 2019, and also oil sands [-42 percent], while deep water is more robust,” Rystad said. Total global final investment decisions in new petroleum projects worldwide, which surged in 2019 and were expected to surpass US$200 billion in 2020, are now expected to come in closer to US$30 billion. “In terms of new sanctioning activity, of course in 2020 we will see an extreme drop versus the levels we expected … now basically every company is trying to postpone everything they can,” Rystad said. “You have to go back to the 1950s to see levels as low as we are seeing in 2020.” Golding believes that this will have a significant impact on the future. “There are going to be fewer companies out there. The U.S. [oil and gas] industry was already having a difficult time and cutting spending. It is hard to see how it can return to where it was before with respect to the CapEx levels,” he said. The biggest wildcard for the industry is how consumer behavior will change after the pandemic. If fewer people are driving to work or flying, there are massive implications for energy demand. “This is an extremely uncertain time,” Golding succinctly summarized. BB Based in the U.S., Lori Musser is a veteran shipping industry writer. ISSUE 4 / 2020

As the entire world hunkered down to ‘flatten the curve’ and slow the spread of Covid-19, we at Breakbulk Events & Media launched BreakbulkONE, a new way to help the project cargo and breakbulk community stay connected and informed. Here’s a selection of interviews from the last few months.

EMPATHY GUIDES LEADERS THROUGH COVID-19 Panelists: ‘We’re All Human After All’ A Women in Breakbulk webinar held May 28 agreed that “trust” and “empathy” have taken on new meaning during the Covid-19 pandemic. Nikola Hagleitner, executive vice president marketing and sales, DHL Global Forwarding, boiled down her leadership focus during the pandemic to three key points: empathy and motivation, communication, and collaboration and agility. “It comes down to empathy. We’re all human before anything else,” she said. For employers with a sales and marketing focus, such as Hagleitner, and Ekaterina Andreeva, commercial director for Volga Dnepr UK Ltd., the shift to home officing has been a profound disruption. “I’ve personally traveled for 15 years, every single week,” Hagleitner said. “It was really a very strange experience to suddenly be at a standstill … We started working from home, then I started living at work and now I’m back working

at home because I realized you have to have clear boundaries.” It was the same jarring exercise for the 2,500 salespeople under her management. Her solution from the start was motivation, and to be “personal and very empathetic. “Every call I will start with ‘how are you doing?’ My personal mantra is, you won’t remember what someone said to you, but you will remember how they make you feel,” she said. “Everyone is struggling with the personal and professional leadership.” “The role of every employer now is to create a sense of stability and confidence with their employees,” Andreeva agreed. “While physical health is very important, it’s easy to forget and even neglect mental health. Covid-19 is scary and many people are scared and struggle with anxiety and fear.” Andreeva said regular conferences are held with cameras on, so employees can see each other’s faces. “It’s important to make a personal connection with the people during these difficult times. “Sometimes it’s more important to laugh and share a funny story than talk about KPIs, because we’re all humans Clockwise from top left: Leslie Meredith, Sylvia Boer, Ekaterina Andreeva, after all.” Nikola Hagleitner and Claudia Ohlmeier 32 BREAKBULK MAGAZINE www.breakbulk.com

‘COMMUNICATE AND OVERCOMMUNICATE’

Along with empathy and motivating staff, Hagleitner said she initially set out to “communicate and over-communicate, internally and externally. “We wanted to be very transparent and honest with our customers,” she said. “Every Monday we send a customized advisory to all of our customers where we clearly say, ‘these are the hot spots, these are the issues, these are our mitigation actions and this is what we have advised you to do.’ It has been very well received.” Internally, along with regular meetings, Hagleitner holds Zoom coffee hours every Friday with her direct reports, as much on the personal side as on business content. Andreeva said Volga-Dnepr has begun holding regular company-wide seminars “for all employees, with top management involved, on different and important topics. For instance, they’ve held seminars on personal health and company strategy, and invite external professionals as speakers, such as a doctor to explain Covid-19 from a medical perspective and answering staff questions. For Sylvia Boer, director of Amsterdam Ijmuiden Offshore Ports, a member organization active in the offshore energy business for the North Sea canal region, the pandemic handcuffed their chief functions. “To add value to our members we organize participations, exhibition, company visits, lectures and network drinks, all initiatives that nowadays are no longer possible,” she said. ISSUE 4 / 2020

The organization quickly ramped up regular calls with members to stay in contact and weekly meeting calls. She said members appreciated the attention, and that it was also an opportunity to share valuable information, not only with members, but for members to interact among themselves. One benefit derived from this were companies coming together to work out opportunities to share technical personnel, and also to develop online training to retrain technicians among new verticals. “A lot of synergy came from these business calls,” noted Boer, who is also president of the Women’s International Shipping & Trading Association – Netherlands. While for most companies, developing home office procedures required implementing digitization and IT systems and abilities to communicate, DNV GL, the classification society, already had those systems in place. “We were lucky to implement a few years ago an access system to allow customers to log in online and get 24/7 response,” said Claudia Ohlmeier, group leader, Port State Control for DNV GL, and president, WISTA – Germany. Like Boer, the pandemic eliminated DNV GL’s ability to perform its chief function, which is to board vessels and ensure their compliance with classification rules as well as international rules and regulations. “This has had a huge impact on the regulatory setup of the maritime industry, because all of the governments involved in these regulations had to adapt to the situation.” While many focus on a “new normal” in which there is no going back, she believes that, for the classification society, “it’s not a new normal, we’re in a parallel universe.” DNV GL and regulatory agencies have had to be flexible in their standards to account for the lack of contact. Once contact restrictions begin to loosen, everyone will have to return to the important regulations that have been in existence for decades.

BREAKBULKONE SHOW: HOW TO PREPARE NOW FOR A POSSIBLE JOB SEARCH AHEAD

Description: With a continuing stream of layoffs and furloughs, job security is at an all-time low for many. The time to take action is now. This episode of BreakbulkONE Show will help you prepare for a possible job search in the future – or jumpstart your current search. Speakers: Susan Shey Dvonch, managing partner, Shey-Harding Executive Search “My recommendation is to build your reputation as somebody that your company wants to keep and that others want to hire. “The breakbulk space will continue on the upward trend. Continued employment recovery during the last half of 2020 is what we can probably expect.” Alex Strogen Alex StroPort of Vancouver, USA gen, chief “We will shift back not to old standards from before, but to a new standard that will be close to what we had before rather than what we have now,” she said. “I think that will be difficult. Customers will challenge us for what was possible (under Covid-19 protections) but not now.”

COLLABORATION

While acknowledging “collaboration” as “a great buzzword,” Hagleitner said it has been vital in breaking some barriers that developed during the start of the pandemic. “As soon as we hit panic mode and crisis mode, a lot of the people who have been more traditional forwarders,

commercial officer, Port of Vancouver USA “Recession proof your career. Inherently, this business is global in nature, so having the ability and willingness Samuel Holmes to relocate is Wood Group so, so important. “The more diversification you can get in your career, across both geographies and industrial segments, the more value you bring to your employer. “I’ve always been passionate about getting exposure to the operational side of this business. These clicks of a mouse and phone calls you make put into motion incredible amounts of money and assets.” Samuel Holmes, logistics and trade compliance, Wood Group “Take the uncomfortable projects others don’t want because they may be the ones to advance your career and diversify your career portfolio.” Watch the replay: https://www. breakbulk.com/page/how-to-findyour-first-breakbulk-job they kind of shut up and focused on their own area and suddenly we’re dealing with silos again,” she said. Hagleitner said DHL marketing took the lead and began to bring all its products – air freight, ocean freight and project, together on twice-weekly meetings to “create a platform that will be the single source of truth.” Information from all areas is shared collectively and the result has been that decision-making is quicker and more effective. “We’re a large company and we’re not known to make fast decisions. But if you have everybody together, everyone knows we have one hour to iron everything out for the next week. This was really fantastic.” BBONE www.breakbulk.com BREAKBULK MAGAZINE 33

COVID-19’S SILVER LININGS PLAYBOOK Positive Messages from the Boardroom With a steady torrent of doom and gloom during the Covid-19 pandemic, several executives gathered digitally from home offices for a Breakbulk webinar in search of silver linings for the industry. In a “View from the Boardroom: What Lies Ahead” Breakbulk365 webinar on May 28, participants looked at the positive changes that have come from dealing with the pandemic, while thinking about how business will change and develop once the world begins to come out from under the incessant onslaught, which dovetailed with crashing oil prices and global trade unrest before the start of the year. One important step is supply chain and shipping services becoming recognized as essential operations, executives agreed. “Over the last few months the supply chain and logistics, two pretty extremely underappreciated streams where all of us belong, have suddenly been thrust into the limelight along with medical professionals and the front-end fight against Covid-19,” said Cyril Varghese, global logistics director – strategy and commercial, Fluor. “I think one of the good takeaways from this crisis – as few as there are – was governments have come to realize just how important supply chain logistics is to the proper functioning of their economies and their societies,” agreed James Hookham, secretary general, Global Shippers Forum. His organization of national shipper associations reached out to governments to ensure they “received essential status for workers, to get critical infrastructure protected and to allow it to continue functioning and to get some obvious remedies to cash flow addressed, such as the deferment of customs duties.” For an industry that, with Breakbulk events and extensive travel, has developed quite fraternally, the response to the pandemic has brought deeper unity, the executives agreed. 34 BREAKBULK MAGAZINE www.breakbulk.com

“I’ve been having multiple conversations with industry colleagues ever since the travel restrictions started kicking in, and I’ve found it absolutely insightful and enjoyable to have these virtual meetings,” Varghese said. As an industry I believe we’ve adapted and will continue to find workarounds for activities that we’re constrained to do now and in the future.” Those conversations include frank discussions among freight forwarders, ship owners and heavy-haulers about preservation of cash, and protection of balance sheets, Varghese said. Project owners and oil companies have announced capital expenditure reductions of from 20 percent to 40 percent. “There is genuine concern in the industry about certain FIDs (final investment decisions) either moving toward the right or the owners not making a decision about when FID can be expected,” Varghese said. “I guess overall these concerns are legitimate, because the deferment of FIDs will certainly have an impact on our industry in terms of what cargoes are out there for the market to perform.”

BRIGHT SPOTS

However, Varghese also said there are positive signs in the market when you look closely. “Some of the freight forwarders when they speak to me they talk about the positive aspects of the business, the new insight which they’ve received working from home, how they’re supporting governments and hospitals fight the pandemic, and finding new solutions to minimize supply chain disruptions. There are shipping lines taking delivery of new more fuel-efficient ships and heavy haulers are getting ready to expand into new territories on the back of order books,” he said. A number of projects and expansions were announced in May, and he listed several: • Shell and Petro China going forward with the US$6.3 billion Australian gas project in Queensland.

• Commitments to heavy haulers on Arctic LNG. • The Federal Energy Regulatory Commission authorized Alaskan Gasline Development Corp.’s US$43 billion Alaska LNG project. • Shell announced FID for Train 7 of Nigeria LNG (US$4 billion). • Exxon broke ground for a US$10 billion petrochemical project in Guangzhou. • Total announced they intend to continue their Mozambique LNG plant. They also announced US$15 billion of financing, of which about US$4.3 billion came from the U.S. Export-Import Bank. • Despite Qatar Petroleum announcing a 30 percent reduction in capex, it is still continuing with its North Field LNG Expansion Project. • On the mining side, he noted some commodities are improving in value, which should boost confidence in capital investment, including iron ore, gold and copper. • Renewables continue to show a positive outlook, as well as development in hydrogen energy and carbon capture and storage projects in Norway and the U.S. Marco Poisler, COO – global energy and capital projects for UTC Overseas Inc., said government spending has been a positive development during the pandemic. “The OECD (Organization for Economic Cooperation and Development), which represents 37 countries and 67 percent of the world GDP, is expected to be pumping in this year US$17 trillion. We hope, once the vaccine is around, that that money will eventually move some cargo.”

DIGITIZATION, EVOLUTION

Speakers touched on several areas in which the industry will evolve and develop following the pandemic, and perhaps the most noted was the push to digitization, which accelerated during the switch to remote working. “There’s a push for digitalization, and I think it’s a very logical one,” ISSUE 4 / 2020

Clockwise from top left: Ulrich Ulrichs, BBC Chartering; James Hookham, Global Shippers Forum; Elizabeth Rankin, Breakbulk; Marco Poisler, UTC Overseas; Juergen Osmers, industry expert; Cyril Varghese, Fluor.

Varghese said. “Whatever we can do during this period to make these supply chains leaner and more agile, it would be upon us to make sure we do so.” Hookham echoed Varghese’s point. “This crisis presents a real chance to go back into your supply chains and your processes and start to take costs out – and digitization of all that paperwork is a great place to start. Physical exchange of paperwork is something we should be avoiding during the crisis anyway because of the risk of contamination. But in the longer term now is a great opportunity to really start tackling that digitization opportunity and removing costs from your supply chain.” There are issues that will return to more prominence, Hookham said, such as greenhouse gas emissions, enforcement of International Maritime Organization low-sulfur rules, and the global trade war, led by the U.S. and China. “We can talk at length about how individual businesses have reacted to the situation. But I think the consensus among a lot of shippers is to look to the future. Factors that will be vital in assessing the shape of future market, levels of demand, and the kinds of service that shippers will be looking for from logistics service providers once we are through this immediate crisis,” he said.

Cargo owners will need to conduct “serious reviews of their sourcing policies, and some major exercises by the major buyers of goods and commodities around the world about derisking their whole supply chains,” Hookham said. “We have already started to see attempts to resource stock away from China and away from suppliers that have been affected by tariffs and other trade sanctions.” For multipurpose carrier BBC Chartering, “cargo readiness” was a primary issue during the lockdown. “It started first in China, but then expanded to also India, South America, Europe and so on,” said Ulrich Ulrichs, CEO of BBC Chartering. “There were also decision delays. A lot of our clients couldn’t make any decisions, because they couldn’t reach their partners, their customers or they were uncertain about the situation either at the loading port or at the destination of the cargo.” Travel restrictions held their obvious impacts. “A lot of our clients couldn’t get their surveyors and their experts to the cargo, to the factory or ports to make sure the cargo is OK before it is loaded. So that also had created quite a few issues worldwide to make sure we had proper attendance.” Ulrichs also noted the broad issue of vessel crews stuck onboard ships during the pandemic, and unable to

make it home. “But that’s not a problem unique to BBC,” he added.

MARATHON, NOT A SPRINT

While isolating restrictions are reducing in some countries, and economies are attempting to chug back to life, the timing of recovery will likely be measured more by calendar than a stopwatch. “The key first understanding we need to have is that we’re in for a marathon as far as the crisis is concerned. It will not be a sprint to recovery,” Ulrichs said. We have to prepare for a long drain, a slow recovery. But I also believe that recovery will come eventually, that oil prices will also increase, that also investments will increase, and that government spending will definitely increase. I do not believe that globalization will stop overnight. It will still be a global market and there will still be a need for transportation and shipping.” “I think a lot of cargo buyers, a lot of importers have found that they are vulnerable, they’re exposed,” Hookham said. “The geopolitical situation should have been enough to perhaps suggest some vulnerability and risk there. But as we’ve mentioned, we’re not out of this crisis yet. And who’s to say there won’t be a Covid-20 or Covid 21? Never mind a Covid-19.” BBONE www.breakbulk.com BREAKBULK MAGAZINE 35

THE DA VINCI CRANE

When Basic Logistics Discovered Brilliance

It all started when I was invited to a kick-off meeting with an Italian vessel fabrication company based in Treviso, a town north of Venice. They were supplying a reactor column for a project in the Middle East on which I was the logistics manager for a major engineering, procurement and construction company. The weight was 450 tonnes, dimensions were 37 meters long and a diameter of 7 meters. The delivery terms were FAS Venice. In discussing delivery FAS, I discovered they intended to place the column into a river next to their plant north of Venice, then use two small tugs to push and tow the reactor down the river and into Venice Lagoon to cross to the port. So far, so good.

THE DEVIL IN THE DETAIL

However, more detailed conversation took place to get clarity on their methodology, and this created a series of significant concerns and potential problems. The tow tug would secure a chain to the main nozzle on the head of the column, though they had not calculated potential loads and stress. In looking at the general arrangement (GA) drawing, I pointed out that the column had a 12-meter long skirt so it would fill with water and the head of the column was bulbous so would be full of air, and therefore it could not float level – they stated it would. I asked if they had obtained authority/permits to use the river and cross the lagoon to Porto Maghera? Their response was, “This will not be a problem.” They did not have details of the river, its depth, breadth and the route across the lagoon, or a map showing the whole route. When I asked how they would lift the reactor and place it in the river, they said: “We have a dock and will use our special crane,” though they could not provide details. 36 BREAKBULK MAGAZINE www.breakbulk.com

By Peter Jessup

TIME TO MEET FACE-TO-FACE

After the meeting, I advised the team of the problems I had identified related to the reactor delivery FAS Venice. It was agreed that I would fly to Venice to conduct a logistics survey of the river, transit across the lagoon and meet the port authorities to discuss this. Then I would visit the fabricator’s facility and review their plan in more detail. The port authority advised they would need details of how the tow would take place, including the route through the lagoon to Porto Maghera. As I anticipated, permits would be required. They would also need the assumptions and calculations from the heavy-lift/load on-load off ship owner related to the lift from the water. They provided me with a simple map of the river Sile which flowed through Treviso, then into the Adriatic. Prior to meeting at the fabricator’s, I began the logistics survey to be more informed on the feasibility of their transportation plan. The fabricator’s facility was situated alongside the river, which was primarily used for pleasure boating. The facility and river were visible from the road, there was a small inlet creek between the fabricator and a vineyard. There was no dock, quayside, or crane.

MY SEARCH FOR ACCESS

At one point as the river meandered south, a pedestrian pontoon bridge made of boats strapped together with wood planks on top crossed the river. South of this, the map identified an entry into the lagoon at Portegrandi that had lock gates. I checked them and they were only 6.6 meters wide, not enough space for the 7-meter diameter column to pass through. Following the river, I passed through the town of Jesolo. There was swing bridge over the river which bisected the town. Due to the diameter of the column, it would have to be opened to allow transit on the river through Jesolo – this would need a permit.

I found a tributary branching off the river that entered the lagoon. The tributary was essential, otherwise the reactor would have to be towed from the river mouth into the Adriatic, down the coast and then into the lagoon. Unfortunately, the tugs identified for the river tow would be inadequate for sea transportation and the alternative of using ocean tugs up-river or to transfer to these downstream was unlikely. Details of the tributary depth and breadth were not available. And to further complicate the logistics, tides from the Adriatic Sea affected both the tributary and the lagoon. Towing the column through the tributary required a high tide to ensure it did not ground on the riverbed. This information was critical.

A SIMPLY EXTRAORDINARY INVENTION

I then met with the fabricator at his facility and asked him to show me the dock and crane he had mentioned during our original meeting. He took me to the inlet creek I had seen and said the dock and crane would be constructed there in time for the shipment. I pointed out that this would require a civil construction activity to ensure the dock could cope with the stress loads relating to the combined weight of the crane and column. I was curious about this crane. I saw a scale model that looked like something from Leonardo da Vinci’s sketch book! It would be a vertical cylindrical column with a cross beam on top. At each end, an orb. They would pump water from the river up into the larger orb to lift the column and then transfer the water into the smaller orb to lower the column into the creek. I pointed out we would require the crane proof load test results. My report was passed to our engineers who then visited the fabricator to calculate the load on the nozzle and how the column would float. Their findings were passed to our marine surveyors along with a GA drawing. ISSUE 4 / 2020

“The Da Vinci Crane worked perfectly and the delivery went smoothly,” Peter Jessup said.

The surveyors said the calculations were wrong and the column would not float level. If it did not float level, or near to level, it could be damaged and get stuck.

TO EVERY PROBLEM, A SOLUTION

Solutions to all of these risks and potential problems were as follows: • Place a member of our team at the fabricator to liaise and validate progress on the column and crane fabrication, construction of the dock and quayside, witness testing of the proof load tests. This person would also ensure all permits were obtained. • Engineering checked the loads on the nozzle being used as the tow connection and confirmed these were acceptable. They agreed with the marine surveyor’s recommendation to have the fabricator tack weld a plate on the base of the skirt to help it float semi-level. • Charter the heavy-lift ship for an extra day to allow for lifting and washing the column quayside. Details of the column were provided to the owner and they undertook calculations on the lift from the sea onto the quayside and subsequent reloading onto the ship. These were reviewed by the port authorities and marine surveyor and were deemed acceptable. The Da Vinci Crane worked perfectly and the delivery went smoothly as you can see from the photo above. This simple invention was used for many years by the fabricator. The two lifts by the heavy-lift ship in the port also went smoothly. Conclusion: Whenever a heavylift cargo of abnormal size is going to be procured by your client, the EPC’s logistics team should be involved in the bid evaluation to validate the feasibility of the supplier’s proposed method of delivery. BBONE Peter Jessup, a 35-year industry veteran, is a consultancy specialist in procurement, logistics and project execution. He has held vice president global procurement and supply chain management roles in major EPC companies. He may be reached at peter@ proactivechanges.com.

BREAKBULKONE SHOW: LAUNCHING YOUR BREAKBULK CAREER

Description: Designed for new graduates and those looking to enter a project cargo-related field, this BreakbulkONE webinar revealed what it takes to stand out in a tight job market and provided an overview of five key sectors to help you decide which one is right for you. Marco Poisler, COO – global energy and capital projects, UTC Overseas Inc. “Breakbulk is an exciting career and I’ve traveled to 82 countries around the world. There’s not a day that I don’t come home having learned something new.” Margaret Kidd, program director, Supply Chain and Logistics Technology, and instructional assistant professor, Construction Management Department, College of Technology at the University of Houston “As you start your career, the most important thing you can do is to become known as the person that’s going to get the job done. Don’t complain about working late or working weekends – that’s the real world.” Sergio Savoy, principal logistics and trade compliance specialist, McDermott International Inc.

“Technically, logistics falls under the procurement function at an EPC (engineering, procurement and construction company), but the most important thing to realize is that logistics is involved throughout the whole process. You have to be able to organize all of the disciplines so that they work with each other effectively.” Jake Swanson, global head, EPC project sector, DHL Global Forwarding – Industrial Projects “To be a freight forwarder, you have to be able connect different actors – cargo owner, trucker, air freight company – and come up with a solution that works.” Ernest Bezdek, director of trade development, Port of Beaumont “I cannot tell you how important relationships are to your career moving forward. You really need to get involved in our industry organizations like International Transportation Management Association, Transportation Club of Houston and Houston Transportation Professionals Organization.” Phillip Brown, vice president, projects, SAL Heavy Lift Inc. Pierre Mille, Tendering/Estimating Manager, Mammoet USA South Inc. Watch the replay: http:// breakbulk.com/page/launching-yourbreakbulk-career

Be a Part of BreakbulkONE

We invite you to share news and information from your own company that could benefit your colleagues around the world. Visit http://breakbulk.com/page/one to submit your story. Stay safe and know you are part of an industry that feels more like a family than a business.

www.breakbulk.com BREAKBULK MAGAZINE 37

LOGISTICS PERSPECTIVE

38 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 4 / 2020

BY AMY MCLELLAN

RECRUITMENT U-TURN

From Famine to Feast as Unemployment Spikes

t has become something of a 2020 cliché, but no one can dispute we live in unprecedented times. The oil, gas and construction sectors are no strangers to boom-and-bust cycles, yet the Covid-19 pandemic has delivered a scale of demand-side destruction and economic pain not seen before in peace time. The resulting plunge in the oil price means dark days loom for oil companies and the contractors they employ. Even the biggest companies are cutting costs and shedding staff. Royal Dutch Shell has slashed its dividend by twothirds, the first time since World War II. Major projects are being shelved until brighter times, with ExxonMobil pushing back the expected final investment decision, or FID, on its Rovuma LNG project in Mozambique until next year. BP has issued a force majeure notice to Golar LNG for the floating LNG facility for its Tortue Ahmeyim project in northwest Africa and there’s no update from Husky Oil on when work will resume on the massive concrete gravity structure for its West White Rose field offshore Nova Scotia. Smaller projects have also hit the brakes: Neptune Energy’s Seagull development in the North Sea will now be pushed back by 12 to 15 months and marginal fields may well be hastened on their way to decommissioning. This was due to be a year of recruitment and recovery as the industry gathered steam following the last price slump. From East Africa to South America, companies were stepping on the gas with new exploration projects and taking FID on major new developments. But, with the arrival of Covid-19, companies are not looking at recruitment, but rather a period of serious and prolonged retrenchment. Rather than human resource experts seeking out talent for far-flung

projects, they are instead helping companies downsize as they seek to weather the storm. Instead of signing off on expat contracts, they are negotiating safe passage home for staff and arranging furlough packages – or worse – as workflows shrink. Already, industry lobby groups are warning of up to 30,000 job losses in the North Sea while the global oilfield services toll could be one million jobs, according to analysis by Oslo-based consultancy Rystad Energy.

“We are already planning for what we call in the Netherlands, ‘the new normal life.’ How to do business in the coming 18 months, when lockdown is over but there’s no vaccine ready yet.” – Johan Wulder, Jumbo Maritime

OFFSHORE DRILLERS UNDER PRESSURE

Rystad points out that oilfield services stocks have collectively lost half their value since the start of 2020. The most affected stocks are in offshore drilling, a segment that has nosedived by about 80 percent since the beginning of this year. Diamond Offshore has already delisted from the New York Stock Exchange and entered Chapter 11 bankruptcy protection while it restructures its balance sheet to find a more sustainable debt level. UK-based Valaris, formerly EnscoRowan, has warned of losses and negative cash flows through the remainder of the year, and is mulling alternatives to address its capital

structure given its debt pile of US$6.8 billion. “The result of this crisis will likely be more financial restructuring and consolidation to right-size the capital base across the service segments,” said Rystad Energy analyst Binny Bagga. “Additionally, we will see more companies cancelling dividend payments and Binny Bagga resorting to poison Rystad Energy pills and reverse stock splits as the time goes by.” The best performers were in the engineering, procurement, construction and installation, or EPCI, sector, which only saw market capitalization drop by 27 percent, largely because a significant proportion of these companies are more diversified, with exposure in multiple geographies or have revenues from non-oil-and-gas industries. Large EPCI companies also tend to have longer average contract cycles, which means they remain busy on existing contracts even if new sanctioning activity is low. This diversity is already playing in Wood Group’s favor, with the global engineering and consulting company picking up more work from one industry that is booming during the crisis: big pharma. The Aberdeen-headquartered group has won a three-year contract as the capital delivery partner by GlaxoSmithKline (GSK) for its Ware site in Hertfordshire, building on a previous decade-long relationship providing engineering and design services to GSK’s global sites. Dave Stewart, CEO of Wood’s asset solutions business in Europe, www.breakbulk.com BREAKBULK MAGAZINE 39

Dutch shipping and heavy-lift company Jumbo Maritime set up a Corona Crisis Team, or CCT, in the early days of the pandemic in order to monitor the situation and find proactive solutions. CREDIT: JUMBO.

Africa, Asia and Australia, said the contract was “another significant step in leveraging our global engineering capability and cross-sector experience to diversify our portfolio in the UK, specifically in the life sciences sector.” Major EPCI companies are continuing to pick up work throughout the crisis, some of which are the result of deals signed in 2019, some of which are new and result from these companies having the resources and processes to continue operating safely during the pandemic. Italy’s Saipem, for example, has in April and May alone announced contracts that include a two-year engineering services agreement with Equinor, a US$150 million contract in Egypt’s petrochemicals sector, the transportation and installation of the Baltic Pipe Project between Poland and Denmark and the US$2.7 billion EPC deal for Nigeria LNG Train 7. The group’s early response to Covid-19 meant it has been able to maintain its ongoing project activities. “Our construction sites and vessels have remained operative thanks to our resilience – proven over the years – to the flexibility of our organizational model and the practice of our people to work remotely,” said a spokesperson.

KEEPING CREWS SAFE

While office workers have had to adapt to home working, there have been additional challenges for those at sea or on site. In the U.S., the situation has been complicated by a 40 BREAKBULK MAGAZINE www.breakbulk.com

myriad of rules in different states. “It has been complicated with the travel restrictions in some states, where you have to go through checkpoints and have to have the right paperwork to travel,” explained Danny Cain, director of safety/risk management at specialist haulage and rigging company Edwards Moving & Rigging, which has been kept busy throughout the crisis as a designated essential business. “Then, all the hotels and restaurants might be closed when we need to find accommodation and nourishment for our crews. It’s changing all the time.” Like many other companies, Kentucky-based Edwards Moving & Rigging quickly reorganized crews into separate five-man pods to ensure business continuity in the case of infection and has applied strict infection control and sanitation methods to protect workers and clients. “We also have to make sure we’re compliant with rules on customer sites,” Cain said. Even with many states in the U.S. now lifting lockdowns, Cain sees no immediate return to normal. “This will be a watershed like 9/11,” he said. “Life will change with ongoing social distancing and sanitizing.” Dutch shipping and heavy-lift company Jumbo Maritime set up a Corona Crisis Team, or CCT, in the early days of the pandemic in order to monitor the situation and find proactive solutions. The CCT brings together members from health, safety and environment; crewing; human relations; operations; and the captain

of the different vessels to ensure there’s daily contact between the crisis team and the vessel. Additional personal protective equipment, or PPE, including oxygen and disinfectant gels, has been purchased for vessels to give crew maximum protection, while new ways of working have been found to remove operational bottlenecks, such as finding ways for remote auditing for vessel certification or minimizing the number of ports used. “Crew changes are one of the biggest challenges and can be a real puzzle for the crewing department,” said Johan Wulder, manager QHSE, at Jumbo Maritime. The company had already been investing in digital processes, which made the transition to home-working relatively easy for office staff. “For the vessels, it is a daily reinventing what is possible in a changing world on a changing location: each port, has different expectations, which changes over time,” Mulder said. This has involved detailed advanced planning with Jumbo, crew, local agents and authorities, which is taking a lot of effort, but so far there has been nothing they haven’t been able to overcome.

STAFF AWARENESS

Managing staff during this crisis isn’t just a matter of having the right PPE and processes in place. “We are doing regular staff surveys to monitor the mood of all our staff, and check that people have all the information, tools and equipment they need to do their job,” Mulder said. “It’s also about care, having regular personal letter and daily Zoom coffee-time (bring your own coffee) to catch up on the gossip. It’s about trust, giving people freedom to plan their work the way it best fits, and understanding it is OK to be less effective than in the office.” This is echoed by Dan Leach, projects team manager at Hemisphere Freight Services, which ISSUE 4 / 2020

LOGISTICS PERSPECTIVE

provides freight forwarding, logistics and specialist shipping. “We’re definitely spending more time on the phone with one another, not just talking about work but also checking up Dan Leach on one another,” Hemisphere Freight Leach said, addServices ing the company had already been in the process of updating systems to allow more flexible working which helped with the sudden transition to home working. “In general people have reacted really well, but we are mindful of how different this is so we’re keeping an eye on people and their state of mind.” Hemisphere has stayed busy throughout the period. “Our diversity has been our strength,” Leach said, “because as one area has been quiet others have kept going. And we’re now seeing factories in China reopening, and projects there that were postponed are coming back again.” Already the company has its eye on what the future holds. “People will have been away from the office for a long time and we will only bring them back in a phased manner to make sure it’s safe,” he said. “I think people will need more support when they come back, and it will take some time to adapt and we’re going to have to be mindful of that.” Jumbo’s Wulder agrees. “We are already planning for what we call in the Netherlands, ‘the new normal life,’” he said. “How to do business in the coming 18 months, when lockdown is over but there’s no vaccine ready yet.” Companies are clear that the current crisis is going to accelerate the ongoing digitization of the industry and the uptake of new technologies, such as AI and automation. “Our first overview of this novel work phenomena highlights that new operating protocols are needed, to integrate with the innovative technologies that we were already developing before the pandemic,”

In the U.S., the situation has been complicated by a myriad of rules in different states. CREDIT: KAHL.

said the Saipem spokesperson, highlighting the increased role of digital and robotic technology, punctual reading and management of digital data, development of digital models and replicas to manage remote working and service provision. “The use of smart working is a formidable and now essential solution for doing business in a flexible and dynamic way.”

CHINA BACK ONLINE

Companies are unwilling to discuss what impact the growing role of digitization, AI and automation will have on jobs. For now, they are still in crisis mode, focused on keeping employees safe and their businesses afloat in a turbulent world. There are glimmers of hope: China, one of the engines of global GDP growth and the first to be hit by Covid-19, is coming back online, with analysts at Wood Mackenzie expecting oil demand there to recover to 13 million barrels per day in the second quarter of 2020, a 16 percent jump compared with the catastrophic first quarter. “Since April, the Chinese government has gradually lifted the coronavirus containment measures,” said Yuwei Pei, Wood Mackenzie research associate. “Specifically, China is now easing restrictions on

social, commercial and travel activities. More people are returning to the office after a period of telecommuting. In addition, private car use is now seen as the safest mode of mobility, shifting passengers from public transport to private cars.” This is generating a quick recovery in gasoline and diesel demand. Jet fuel demand, however, is expected to continue to fall as passengers remain wary of international travel. According to Fitch Ratings, bulk cargo and container throughput handled by Chinese ports fell by 2.4 percent and 5 percent, respectively, in March and could worsen as a result of recession in the U.S. and Eurozone. Analysts will be watching China closely in the coming months as the litmus test of demand-side recovery and whether similar upticks in activity are seen in Europe and the U.S. as lockdowns are relaxed. In the meantime, companies will continue to operate safely in the “new normal” but it’s clear recruitment will be on hold until the future looks more certain. BB Freelance journalist Amy McLellan has been reporting on the highs and lows of the upstream oil and gas and maritime industries for 20 years. www.breakbulk.com BREAKBULK MAGAZINE 41

MARKET SPOTLIGHT

‘I WANT IT YESTERDAY’ Revising the Meaning of Time Sensitivity

hose in the business of transport, shipping and forwarding know that for many customers “now” is often not deemed quick enough. Many want their cargo “yesterday,” if not sooner. For those planning time-sensitive breakbulk and heavy-lift shipments, the pressure is intense even in a normal operating environment. Yet with economies around the globe shut down for extended periods in a bid to limit the spread of Covid-19, there has been nothing normal about 2020. The reliability of all modes of transport has decreased enormously as a result of lockdowns and new working restrictions. Social distancing policies have limited handling and stevedoring options at ports and storage sites. Customs and immigration restrictions have tightened world42 BREAKBULK MAGAZINE www.breakbulk.com

BY MICHAEL KING

wide, including even at the European Union’s internal borders. With so many people working from home, new communications challenges (and opportunities) have emerged. And the inconvenience and fear of handling paper documents, which can transfer germs, has prompted a rapid – and long overdue – shift to digital, although it is a shift that has not been without its teething problems.

‘NEW NORMAL’ OPERATIONS

However, even against the backdrop of this “new normal” working environment, leading forwarders contacted by Breakbulk attest that the challenges of moving time-sensitive cargoes in the age of Covid-19 require more or less the same skills as prepandemic, although with some key differences.

Social distancing, transit and customs restrictions have put more emphasis on planning ahead, for example. Keeping abreast of the rapidly evolving operational landscape, which in some regions has seen scarcities of ship, storage, terminal and truck options, and overnight regulatory changes, has never been more important. Darren Wright, founder and managing director of UK-headquartered Allseas Global Logistics, believes that when it comes to complex cargo three major factors make or break a shipment, factors that remain as critical now as they were pre-Covid-19. The first is thorough planning and close project management. This, he said, entails working closely with the customer, port management, shipping lines, road freight companies and any associated third parties “to join the ISSUE 4 / 2020

dots for a smooth operation.” The second key element, according to Wright, is access to the right equipment, both for loading and transporting oversized and complex cargoes. Darren Wright “This is where the detailed planning Allseas Global Logistics comes in,” he told Breakbulk. He said that Allseas, which was established more than 16 years ago and offers breakbulk, out-of-gauge and heavy-lift shipping services, and factory relocations and decommissions, uses its own in-house specialist equipment to ensure rapid deployment. “We believe this is a key advantage we offer our customers as it’s common for other forwarders to rent equipment on a project-by-project basis,” he said. “This can often cause delays when the necessary equipment is out of stock and not readily available. By having our equipment in-house, we’re ready to mobilize this instantly.” Ensuring all documentation is prepared correctly is also crucial to timely shipment. “From bills of lading and EUR1 (movement) certificates, to export licenses and a T2L (community status certificate), there is an abundance of documentation that needs to be considered and properly completed ahead of any successful shipment,” Wright said. “Failure to complete the necessary documents could cause problems and delays, even leading to goods being lost either due to ever-increasing destination charges or customs seizure.”

focused on oil and gas; countries such as Turkey, Egypt and South Africa, which are export-import countries; and sub-Saharan Africa and North Africa, which are predominantly importing countries. “We are mostly focusing on infrastructure, engineering, manufacturing and the energy sector, which includes power generation and other areas of infrastructural development,” he told Breakbulk. “So mainly if we talk about out-of-gauge shipments, it comes from the oil and gas sector. This is where we excel. I think we are now the largest operator for oil and gas projects in the Gulf.” Elbanhawi said most of DHL’s contracts in the MEA region were end-to-end due to the complexities of customs clearance and the difficulties clients report when dealing with multiple supply chain contractors. “Most of our customers prefer to have one operator handling the shipment endto-end to mitigate any risks or friction handing the cargo over from one forwarder to another forwarder, especially for big moves,” he said. “Then there are other complexities, especially for engineering and execution. So the party that starts loading prefers to be the party that does the receiving, handling and delivery at destination. More than 90 percent of our contracts are end-to-end.”

Such contracts, he added, incorporate everything including arranging equipment, managing documentation and chartering vessels as required. “It starts with the communication with the cargo supplier and then we arrange for the inspections if needed at the origin [right through] until we deliver direct or to warehouses or storage yard destinations,” Elbanhawi said. “The less parties involved, the more efficient the execution of the shipment from origin to destination. “Our carrier agreements with the big bulk, container and breakbulk carriers are very important. We have long-term agreements with first-class carriers who have regular services from the main origins to the main destinations. “Most of the countries that we are delivering to or receiving cargo at are countries where there are challenges in the execution at the port itself. So we have agreements with the terminals also.”

INCREASING TIME SENSITIVITY

Andy Thorne, CEO of the Kestrel Group, noted that out-of-gauge shipments have a tendency to become more time sensitive due to the nature of the projects business. “Breakbulk and heavy-lift cargo tends to start off not critical, but

DHL sees benefits in limiting the number of parties involved in the supply chain. CREDIT: DHL.

ONE-STOP-SHOP APPROACH

DHL’s approach to ensuring cargo is delivered as quickly as possible involves limiting the number of parties involved in the supply chain, according to Moustafa Elbanhawi, industrial projects regional head, MEA (Middle East and Africa). Elbanhawi’s division covers three markets: the Middle East Gulf region, which is primarily www.breakbulk.com BREAKBULK MAGAZINE 43

MARKET SPOTLIGHT

then becomes critical by its very nature,” he explained. “For example, we are moving wind farms into north Scotland and Ireland. The shipment deadlines come forward all the time because Andy Thorne there might be a Kestrel Group big storm in the North Atlantic that causes a delay and suddenly it’s very urgent.” Further illustrating Thorne’s point, Kestrel is managing a major project moving large cargo from Shanghai, China, into the Caribbean. “It’s a large kit that has suddenly become urgent because of design changes as they were built,” he said. With increased urgency comes higher costs, Thorne said. “When you have a customer who says ‘[the cargo] absolutely, categorically has to be here,’ we’ll look at a full vessel charter,” he said. “The man who pays the most gets the service.”

The Kestrel Group is a nonvessel-operating common carrier, or NVOCC, and liner agent with a strong presence in the Caribbean. It also offers a full portfolio of breakbulk and heavy-lift services supported by multiple offices across the Caribbean, five in the UK and a string of offices in the Americas, Africa and Asia.

SOCIAL DISTANCING CHALLENGES

In the age of Covid-19, managing shipments has become increasingly complex due to the range of highly variable and rapidly evolving restrictions on operations. According to Thorne, although some Caribbean ports have closed and there are social distancing restrictions in place for stevedores at those that remain open, the requirement that crew stay onboard ship has been the biggest headache to overcome. “We make sure the vessel and the crew are not only safe, but also that we are not going to fall foul of any regulations where a ship would go to a port and they would say, ‘Sorry, you’ve been to a port in Africa that has coronavirus, you will now have to wait for

14 days to quarantine the vessel.’ So we are very careful about which vessels we work with.” All of the forwarders contacted by Breakbulk said the downturn in shipping demand because of Covid19 lockdowns had made it easier in some cases to secure space or charters. However, the flipside is that, overall, the shipping market has become more challenging, not least because liner frequencies have fallen, making services less reliable, and because finding the right ship has become more difficult, with owners reluctant to foot repositioning bills and struggling to find return cargoes. “Some ships have been laid up or slowed down,” Thorne said. “Also we need specialist ships, as some of the places we go to are difficult to get to and there’s no point getting a vessel that can lift 300 tons and needs 15 meters of draft when the destination has 8 meters of draft. You need the right vessel with the right capability.” Elbanhawi, who said Covid-19 shutdowns had changed the operating environment and hit demand, said there were now fewer vessel options available. “We don’t see the same

Allseas’ movement of five large-scale construction pipes from Malaysia to the UK was delayed by movement restrictions and roadblocks in Malaysia. CREDIT: ALLSEAS.

44 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 4 / 2020

MARKET SPOTLIGHT

number of vessels that are available and the consolidation requirements are very high,” he added. However, as lockdowns are eased, he predicts a quick bounce back in demand. While it will be different from one country to another, he expects the UAE and Turkey to pick up very fast, and countries like Kuwait, Saudi, Qatar to face some difficulties. “We are very optimistic that things are going to pick up even for the oil and gas sector. We expect 2021 to be better,” Elbanhawi said.

SHIPPING FLEXIBILITY REQUIRED

Wright said Allseas is coping with Covid-19 lockdowns by finding flexible ocean options to overcome the increased lack of reliability. “Where possible we have used container or ro-ro (roll-on, roll-off) vessels for breakbulk cargoes, mainly due to the regularity and flexibility of the services,” he said. “With the inevitable delays caused by the lockdowns and the subsequent reduction in labor, drivers, crane crew, stevedores, cargo handlers, marine surveyors etc. to handle such cargoes, pinpointing vessels with 100 percent accuracy has been almost impossible. “Missing a container/ro-ro vessel with a regular weekly call naturally has much less consequence than booking space on a conventional breakbulk carrier, which might only be coming to a port to pick up your cargo.” Allseas recently shipped five largescale construction pipes from Malaysia to the UK. Some measured more than 15 meters long, 1.3 meters in diameter and weighed 18 tons. “Ordinarily a conventional liner might have been the best approach, but given the situation it was fairly easy to predict we would need the flexibility and speed of a container vessel to make up for the delays brought about by Covid-19,” Wright said. The shipment was further complicated by a “Movement Control Order” in Malaysia, which stated that only essential/perishable cargo services could go ahead, and by police roadblocks that restricted all but essential travel unless specific government clearance had been obtained. As a result, getting all the required authorizations was a painful process.

FLOURISHING IN IRAQ Despite political and social unrest, DHL Industrial Projects has seen its business in Iraq thrive in recent months, as some rivals have faded into insolvency and shippers have turned to established players with strong financial records. “We managed to grow our market share through the last eight months by continuing to deliver the service promised despite the challenges,” said Moustafa Elbanhawi, industrial projects regional head, Middle East and Africa. One recent shipment completed for a major oil and gas customer involved multiple movements from China and Egypt. “We got huge help from the government in Iraq and from the port authority and Customs at Umm Qasr,” Elbanhawi said. “The modules shipped from China ranged from 110 tons per module up to 140 tons with variable lengths of 16 Moustafa to 22 meters. The Local Electric Rooms were delivered to Elbanhawi Iraq from Egypt. “We moved 12 vessels in total and one of the vessels DHL Industrial was 220 tons lifting capacity,” he said. Projects

“This Movement Order was reviewed weekly as was our transport planning,” Wright said. “We were forced to postpone our logistics plans and roll the vessel booking four times before we were actually allowed to mobilize the trucks, people and equipment to get the cargo shipped.” Allseas had to collaborate closely with the manufacturer and contractors, especially because the latter were operating with minimal personnel working shorter hours than usual.

“Coupled with abiding by the government social distancing regulations, this made an awkward cargo even more complex,” Wright said. “But in all honesty this kind of meticulous planning is required for each and every complex movement undertaken in this sector, otherwise the results do not end well.” BB Michael King is a multi-award winning journalist as well as a shipping and logistics consultant. www.breakbulk.com BREAKBULK MAGAZINE 45

CASE STUDY

BY MALCOLM RAMSAY

MOVE PLANNING PUZZLE Staying One Step Ahead of the Pandemic

s one of the regions worst hit by Covid-19, northern Italy has faced massive disruptions to its transport infrastructure since the pandemic took hold at the start of the year. Despite these disruptions, however, breakbulk has had to keep moving and heavy-lift operators in the region have responded to the challenge with ingenuity and resolve. More than ever, the need for clear communication and collaboration between team members has been of prime importance for breakbulk transport as a recent project for logistics provider Abnormal Load Services, or ALS, exemplified. The firm was tasked with collecting and transporting a 70-ton industrial press from near Bologna, the capital of the Emilia-Romagna region, in northern Italy, and delivering it to a factory in the Netherlands. With a total cargo value of about €1 million the project was of high priority for ALS and it was imperative that border disruptions did not hold up transportation or impact the delivery schedule. The client, a fuel tank specialist, requested delivery of the giant press to its facility in the Netherlands long before the emergence of Covid-19. 46 BREAKBULK MAGAZINE www.breakbulk.com

But as the virus took hold and swept through Italy, ALS found itself under increased pressure to meet deadlines. “Transport date (after getting permits) would be approximately early March, so as time progressed and the Covid-19 virus expanded heavily in Italy at the time, we had to stay on top of the situation in order to be able to act accordingly,” said Toon Fokkema, operations manager at ALS Moerdijk.

MOUNTING DISRUPTION

Initially viewed as no more than a minor health scare, the virus took hold in Italy on Jan. 31 with the arrival of two Chinese tourists to Rome who tested positive for Covid-19. Following the first handful of cases, the virus spread at a rapid rate throughout the course of February, quickly becoming a national crisis as the death toll mounted. In early March, Italian authorities announced that the epicenter of the pandemic, the Lombardy region, was to enter total lockdown as well as 14 provinces across four other regions. Having grown from a few cases a day in early February, Lombardy fast emerged as one of the worst affected regions in the country, with hundreds of new cases being reported every day and chaos ensuing in many areas as

uncertainty about the transmission of the virus grew. Lying directly to the north of the Emilia-Romagna region, delivery via Lombardy was a natural choice for the transport of the press. In the end, and despite the impending threat of road closures, a route was secured that avoided delays or impediments. “The route was selected by the transporter – they have access to all the heavy load routes and can check for the best routes,” Fokkema explained. “There was a small challenge with a part of the route on which there were road works, but it proved to be no problem to pass, so we did not encounter any problems.”

FUEL TANK FABRICATION

Measuring 6.9 meters long, 3.9 meters wide and 3.1 meters high, the industrial press was a key component for a manufacturing facility, set up to fabricate fuel tanks for heavy-duty trucks. Due to its dimensions the cargo required heavy-lift cranes to load out upon collection at the manufacturer’s site in the Bologna region. Alongside the main breakbulk item, ALS was also tasked with collecting and transporting an array of spare parts from multiple origins in Italy to the client’s factory in the ISSUE 4 / 2020

The ALS team had to stay one step ahead of Covid-19 as it moved an industrial press across Europe. CREDIT: ALS.

Netherlands. Given the uncertainty that surrounded the development of the pandemic in Italy at the time, the need to maintain close control over project schedule was paramount, as ALS not only had to ensure that the cargo arrived in the Netherlands on time, but was also required to complete installation at the site upon arrival, in preparation for factory start-up. Headquartered in Hull in the north of England, ALS operates across Europe. Its Moerdijk office in the south of the Netherlands acts as a center for operations in the region. A subsidiary of Norwegian shipping line Wallenius Wilhelmsen, ALS provides specialist logistics with a focus on oversized, abnormal, exceptional and heavy-lift projects in the rail, construction, mining, tunneling, oil and gas, offshore, and renewable energy sectors. “We contracted ALS Moerdijk [as] they have offices throughout Europe and with their offices in both Italy and Holland combined they were the perfect partner,” the client said.

CLOSE COMMUNICATION

Based in Moerdijk, Fokkema was responsible for ensuring the safe and timely delivery of the package. To

achieve this, and because many road and rail routes were closing or under threat of closure, Fokkema coordinated closely with his colleagues at ALS, liaising directly with his counterpart at ALS Italia throughout. “[We] kept a continuous communications line with regards to any known limitations and threats, in order to get the transport done safely under the given circumstance,” Fokkema explained. After detailed planning the team managed to arrange a route by road for the cargo, transferring the industrial press to a self-propelled modular trailer at the load-out site. “Cargo was loaded at the production facility, and the best route was chosen based on the available routes for heavy cargoes,” Fokkema said. With the cargo underway, ALS maintained a close watch on transport broadcasts to ensure the chosen route remained open and stood ready to redirect the cargo should any disruptions present themselves. “As the preparations for the transport and installation progressed, so did the Covid-19 virus in Italy. The handover of the press and the subsequent transport were under stress due to the virus’ behavior and its effects on society,” the client explained.

But due to the team’s vigilance the press arrived at the client’s site in Holland on time in late March, undamaged and ready for installation. Given the size and weight of the press, ALS’s client required specialized lifting equipment to position and install the unit, and opted to utilize a tower lift and set system from heavy-lift Dutch manufacturer Hydrospex. Fokkema stated that the equipment was “the most suitable system” for the installation. “ALS Moerdijk and ALS Italy were very helpful in guiding the whole transport, to ensure there would not be any logistical hiccups that would prevent a successful installation. Happy to say that working together on this job, we got everything done timely and to great satisfaction,” the client said. Despite the tight deadline, the project was completed on time and the equipment was installed successfully within the fuel tank facility, just ahead of lockdown measures being introduced across the Netherlands. BB Based in the UK, Malcolm Ramsay has a background in business analysis and technology writing, with an emphasis on transportation and ports. www.breakbulk.com BREAKBULK MAGAZINE 47

MARKET SPOTLIGHT

BUILD BACK BETTER Europe’s Infrastructure Works Promise Project Tonic

ovid-19 might have thrown a pandemic-sized spanner in the works for global economies, but there is one sector that continues to lean heavily on the breakbulk and project cargo industries. Many civil engineering projects continued through national lockdowns, and with governments expected to invest in public infrastructure work to inject life back into flailing economies, those serving the built environment sector look set to benefit. Statistics on the UK from data provider Glenigan and cited by The British International Freight Association, or BIFA, estimate that some 43 percent of UK construction sites stopped work during the first six weeks of the coronavirus crisis, amounting to 3,636 projects between March 23, when the UK-wide lockdown was announced, and May 12, the day after firms in

the sector were actively encouraged to return to work. The flipside of this is that more than half of construction sites in the UK alone continued to operate during the peak of the lockdown. During the pandemic, construction has emerged as a sector that the UK government is keen to keep moving. Some of the major infrastructure projects were halted, according to Robert Keen, director general of BIFA – including HS2 and Tideway – but many sites have now reopened. However, Keen points out that progress has not been uniform. He cites figures from Build UK that show that although output in London was running at 68 percent in May and 86 percent of infrastructure and construction sites in England and Wales were open, this compared with just 19 percent in Scotland.

BY NAMRATA NADKARNI

GOVERNMENT SPENDING ENCOURAGED

The combination of low oil prices, stock markets in crisis, reduced world economic output and a predicted deep global recession have set the scene for a very challenging year ahead. This puts the onus on governments to keep the infrastructure sector busy. “The government has been clear many times that it wants housebuilding and construction activity to continue, so we can anticipate public sector spending to drive construction activity through infrastructure and also added incentives for housing,” Keen said. Engineering professional services consultancy WSP representatives echoed the view that government support and a focus on critical infrastructure will keep many companies busy over the coming months, particularly for projects that were green lit

TOP: Mammoet was involved in two railway bridge installations at the Port of Rotterdam as part of the new €300 million Theemswegtracé branch of the port’s railway line. CREDIT: DANNY CORNELISSEN.

48 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 4 / 2020

prior to the pandemic. “Globally, if there is a development plan that has become necessary because of capacity constraints, then those plans will go ahead on a pragmatic basis that if we need the capacity now, we will need it 10 or 20 years from now as well,” explains Steve Wray, associate director for maritime – advisory at WSP, adding that there is plenty of work available for companies in the coming months. In fact, social distancing measures are likely to lead to longer timelines for projects than initially anticipated, points out Charles Haine, WSP technical director, maritime. Haine believes that the proven resilience of the supply chain, as evidenced in the continuing flow of project cargo and ongoing activity at ports, will mean that workers will have the resources needed to continue their work. However, new projects may struggle to get approved, Wray warns, although this is down more to financial confidence than logistical hurdles. “Approving a project will require companies to pay money out and there is nervousness about the state of the economy and when it is going to recover,” he said. Keen added that forecasting project prospects further than a year out is risky. “It would seem that the pipeline of projects that are financed and ready to go are most probably going to proceed, but the picture for 12 months hence is very negative,” he said.

BRIDGING THE GAP

One sector that continues to provide steady civil engineering work to the breakbulk and project cargo sector is bridge installations. Mammoet, which acquired ALE in January this year and will be debuting its new Focus 30 crane later this year, reports that it has had a relatively busy year in Europe so far. “We executed quite a few jobs in the last months within the infrastructure market, such as the installation of bridges in the Netherlands,” a spokesperson said. Mammoet was involved in two railway bridge installations at the Port of Rotterdam as part of the new €300

TOP: Mammoet’s new Focus 30 is quick to assemble and designed for working on congested sites. CREDIT: MAMMOET ABOVE: Gustav Seeland performed a bridge installation project in Hamburg, supporting the rapid replacement of a railroad bridge across the river Bille on Bullerdeich. CREDIT: GUSTAV SEELAND

million Theemswegtracé branch of the port’s railway line. The new line is four kilometers in length and is expected to increase connectivity with the hinterland and prevent bottlenecks in rail capacity as cargo throughput at the port increases. The first bridge was installed on April 4, 2020 and spans the Rozenburgsesluis lock. The second, installed on May 31, spans the Thomassentunnel and the A15 and N15 motorways. The latter bridge, which has a steel structure weighing 4,100 tonnes, is 269 meters long, 13.7 meters wide and 28 meters tall. The new railway line is expected to be operational in late 2021. Gustav Seeland, one of Germany’s largest providers of heavy goods logistics services, also recently performed a bridge installation project

in its hometown of Hamburg in early March. The company supported the rapid replacement of a railroad bridge across the river Bille on Bullerdeich by demolishing the existing infrastructure within an extremely tight schedule of just three days. The old bridge was broken down into three parts that were transported for scrapping via floating pontoons. For the project, Gustav Seeland employed two 220-tonne capacity cranes, a 500-ton crane anchored on a pontoon and secured with hydraulic support pillars and also a 60-ton brake wagon with a tractive force of 80 tons. Meanwhile, Germany’s Schmidbauer completed a significant project in early May, assisting with the installation of the Streitgrabenbrücke bridge over a highway near Stuttgart. The www.breakbulk.com BREAKBULK MAGAZINE 49

MARKET SPOTLIGHT

bridge, which weighed 1,600 tonnes and was 130 meters long, was transported to the site using four heavy-duty self-propelled modular trailers with 2,000 horsepower and 224 tires. The transfer was conducted at “a snail’s pace” and represents the heaviest weight that the Munich-headquartered company has ever transported.

NEW TECHNOLOGY COMMITMENTS

Many engineering companies are using the economic slowdown as an opportunity to invest in their technical solutions for civil engineering projects.

While digital rejuvenation is popular at the moment, Mammoet is focused on the development of its new Focus 30 crane, which is scheduled to be market-ready by the end of this year. “The Focus 30 has been designed in direct response to client demand for a better heavy lifting solution when working on congested sites,” the spokesperson said. “It will be quick to assemble on site, in as little as 10 days, and capable of operating at ground bearing pressures as low as 6t/m2. This makes it a highly appealing asset for shutdown, turnaround and expansion work in the

Mammoet transported three 94-meter-long turbine blades for Siemens Gamesa. CREDIT: MAMMOET.

OFFSHORE INFRASTRUCTURE BOOM The offshore and renewables sectors are expected to benefit from significant engineering-related investment in coming years as countries increase their focus on green energy. WSP’s Charles Haine expects an increase in the number of wind-based power generation facilities and servicing facilities in the UK. “The majority of wind projects are going to be placed around the UK, and ports will have to innovate to service these,” he said, adding that breakbulk operators will not only transport a lot of out-of-gauge cargoes to set up the wind farms themselves, but also facilities required by offshore service vessels including charge stations if the OSVs are electric. Other European countries have also opted to invest in renewables infrastructure. Mammoet recently completed a project for Siemens Gamesa to transport three 94-meter long blades for a wind turbine from a storage area at the company’s factory in Aalborg, Denmark, directly onto a vessel docked at the nearby quayside. The transportation was performed using a custom trailer consisting of 2 x 6 Nicolas MDEL axle lines combined with a four-axle truck. Mammoet made the decision to transport the trailer, which measured more than 100 meters, with the blade in place, in one piece to the storage area in Aalborg. This not only saved time in comparison to other industry solutions that Siemens Gamesa was considering, but also reduced emissions as only a single truck was used for transportation.

50 BREAKBULK MAGAZINE www.breakbulk.com

petrochemical and power generation sectors, as well as for civil construction work in busy urban areas.” Other engineering firms are opting to beef up their green credentials as environmentally focused projects are likely to be classed as critical in the coming months, making them more financially stable. “There are a slew of projects coming to the table in the next decade that are carbon zero at their heart,” explains WSP’s Haine, adding that the consultancy has seen more demand for advice on how to manage embodied carbon and reduce greenhouse gases and emissions. He anticipates greater public appetite for greener civil engineering projects as a by-product of the lower pollution levels experienced as a result of the Covid-19 factory and trade shutdowns. “You’ll see this growing pressure on traditional civil engineering projects as well as critical infrastructure,” he predicted. Haine said that WSP is already involved in multiple green projects, including the HyNet hydrogen and carbon capture, utilization and storage project in the UK. The project has been identified by the UK’s Committee on Climate Change as vital technology for achieving the ambitious emissions savings needed to meet the 2050 carbon reduction targets. It is designed to include up to three plants, with an annual production capacity of 18 terawatt-hours of low carbon hydrogen. Work is underway to have construction kick off on the project by spring 2021. While some sectors, most noticeably the oil and gas sector, have been dealt a swift and decisive blow by the pandemic, the civil engineering sector could provide a safety net for breakbulk and project cargo companies. If governments follow through on infrastructure promises, civil engineering might well serve as a ray of light in an otherwise murky project cargo outlook. BB Namrata Nadkarni is a Londonbased freelance journalist with 17 years of experience covering maritime, offshore, ports and the logistics sector. ISSUE 4 / 2020

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